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Nicholas Campbell: All right. Let's get started. Once again, thank you. Good morning, and thank you for joining us. Earlier this morning, Adcore released its Q3 2025 financial results. Today, we will be walking you through those results and provide an update on ongoing company initiatives. You might see some familiar faces on the call today. You'll see myself. I'm Nick Campbell, Head of Investor Relations here at Adcore. Joining me is Omri Brill, Adcore's CEO and Founder; and Amit Konforty, Adcore's CFO. The agenda for today, before we begin, we'll go some forward-looking statements, you should be aware of while listening to this call, followed by the CEO opening remarks and then the CFO financial highlights. And finally, we will conclude with Q&A. If you do have a question during this call, please use the submit a question feature in Zoom, and we will get to those at the end of the call. Before we begin, I will give everyone a moment to review these statements. Just please bear in mind when you're listening to the call today, the management team might be using forward-looking statements, which are inherently uncertain in nature. All right. Very good. And with that, I will pass the floor to Omri for the CEO opening remarks. Omri, the floor is yours. Omri Brill: Thank you, Nick, and good morning, everyone. It's our pleasure to be here today to discuss the company results for Q3 2025 and obviously, the 9 months of 2025 as well. So we have some high-level management, I would say, comments regarding the results, also some new initiatives that I would like to share with our shareholders regarding what's new during the quarter. And I think there's a lot to discuss. So let's dive into it and start reviewing the results. Okay. So high level, when we look at Q3 2025 results, I would say a few things that are jumping to everyone's eye. A, we saw like good growth coming from the EMEA region, up 25% year-on-year. APAC continued to grow 7% year-on-year. And basically, we see tremendous momentum coming from this region. This is actually been offsetting some of the softness we saw in North America. So 2 regions that are moving up, one region that basically is moving down. But all in all, I would say we are more or less doing okay. And another thing that worth mentioning during this quarter that we saw like a significant improvement in the cost line items. R&D down 10% year-on-year, SG&A down 12% year-on-year and actually adjusted EBITDA improved 56% year-to-date. In general, I would say, when you look at the 9 months results, they are looking far sharper and like give us like looking ahead of 2025, like with more optimistic. I would say one more thing that investors need to take into consideration that the big quarter Q4 is literally happening right now. So we still have a lot to show up in 2025. So I think like 9 months looking good, 2025 compared to '24, especially in the bottom line, adjusted EBITDA grew a lot, 56% in the 9 months compared to the previous 9 months in 2024, and this is a lot to expect from Q4 this year. So just high-level numbers. Obviously, Amit will discuss it in more detail. Top line revenue, 7.6% compared to 7.8% -- sorry, $7.6 million in Q3 2025 compared to $7.8 million in Q3 2024. It's a slight decrease, but I would say more or less the same. Gross profit, $3.1 million in Q3 2025 compared to $3.7 million in the previous year. Again, a slight decrease, but because of cost went down, so adjusted EBITDA is actually not too bad. And when we look at quarterly gross KPIs, this is something we take into mind and say gross profit, $3.1 million. Again, you can see that is in line with the previous quarter in 2025 and Q4 should be far stronger. Cash and cash equivalents actually grew by 8% year-on-year. So all in all, I would say, more or less a solid quarter. Just to sum up quarterly highlights, EMEA revenue grew by 25% year-on-year. APAC revenue grew by 7% year-on-year. Cash and cash equivalents grew by 8%. R&D expenses actually down 10% represent now 6% of total revenues, 7% in the previous year. SG&A down 12% or $376,000. And again, that's 12% decrease year-on-year. If you look at the 9 months in 2025, then we can see adjusted EBITDA almost $0.5 million compared to $310,000 in the previous year, again, up 56% year-on-year. That's a big improvement. We have a reduction in net loss in 2025 compared to 2021 from $1.26 million in 2024 -- sorry, 2022 to $1.075 million in 2025. Gross margin are more or less the same, 44% this 9 months 2025 compared to 45%. And again, R&D expenses are actually down, representing 7% of total revenue compared to 8% of total revenue. And trust me, we continue to invest heavily in technology. So it's not like we took our foot from the gas. We're just doing stuff more efficiently, and I think Amit will talk about it in more detail as we move along. And we talk about some goals that we would like to achieve. And I can say, definitely, we are on track for 6 straight quarters with positive adjusted EBITDA, definitely on track to AI-driven and innovation. And basically, the other growth, it's TBD, but we need to see that we have a good finishing of Q4 in order to see if we can meet these goals or not. So -- but I would say the results telling the story, telling the story of, I would say, the future of the current present of Adcore and maybe even the past because it's already happened in Q3 2025, but definitely it doesn't tell the story of the full story of the future of Adcore. And I think a lot of the future of Adcore is about technology and about innovation and Proposaly, I would say, is the spearhead of this effort. And there's a lot going on in Proposaly, and we would like to share some of it with you. And obviously, this was a big launch in Q3 2024 of 2 initiatives that are Proposaly related. We have all new marketing website for Proposaly and all new blog for Proposaly as well. So if you go to Proposaly.io, you can see the marketing website. We can visit it in a second and have a first glimpse of it and also the all new blog, a lot of interesting article about Proposaly. And let's see some examples. So let me start from the beginning. So that's the new marketing website. You see this is also a different brand identity for Proposaly. It's much more modern, much more, I would say, cheerful and young and basically a new slogan, work less, win more. Win more is basically the main slogan of Proposaly. This is the goal. This is the mission to help businesses win more clients. So this is what Proposaly is all about. So that's obviously the banner. We can go down and see what within -- like what you get within Proposaly. So obviously, you get engaging presentation. You will get tailored proposals. You will get an add-on and upsell feature built in within the application. You can do online signatures like you can do online payments as well from within the app and obviously, ongoing project update. So a single link sent to the client. Your client will get all of that. So the presentation, the price quote, being able to select or change their price quote and add add-ons, make an online signature, approve the agreement, making a payment and get the project, everything within what we call the client portal. So it's much more than just, let's say, a price quote or nice PDF sent to the client. Basically, it's everything that the clients need in order to close the deal and basically support the deal, not only closing the deal is within this client portal. And that's a game changer. There's no other app on planet that offering the same value proposition. And that's something that is important to know about Proposaly. We look at, let's say, an existing problem, which is one of the biggest problems of, let's say, traditional sales workflow, but come up with an all-new solution. And this is like a game changer of like our business should do workflow or sales workflow in 2025, 2026 and beyond in the era of AI. So we listed some of the AI capabilities of the system as well. You can see like we mentioned, Proposaly like the team workspace, which is the business portal, more like a CRM and the client, this is the proposal sent to the client, but actually online website. And like the different teams that can benefit from Proposaly, whether it's leadership team, sales team, marketing team, legal team, HR, finance, all different team types that can benefit from Proposaly. And also, we listed like some sample proposal made in Proposaly sent to clients. And you can see like an example proposal for vacation house in Greece, for example, a construction, a roofing installation in California, for example, for a family, whether it's a clinic treatment plan, aesthetic clinic, a marketing agency offering or whether it's Alpine ski vacation. And actually, if we have time, we can view one presentation like this not a presentation, a proposal sent to a client. So this is like when we send it, we send a link to the client, the client get a link, click on it, and this is what you're going to see. We can also decide whether you need to log in in order to see it or can you just view it like that or maybe log in on action. But basically, this is the intro, I would say, slide looking very nice, like who don't like ski in slope. So it looks nice by definition, I would say. And then when you scroll down into the presentation, you can see on the right side, you can see a summary bar with the current cost, some kind of what's including in the package, for example. And you see some, let's say, gallery, image gallery from the resort itself, for example, look very nice. Again, about the resort, maybe the location of the hotel, the specific location of the hotel, how far away is it from the slopes and everything you need to know about your package, also the agenda, for example. All of this being customized from Proposaly back end. So it's not like a template you need to go and basically just put the data or images or text, like everything is customizable. You can decide which slide you want to use, what slide type, what content to create and it's like creating this type of proposal would like for somebody that know the system can take minutes, not hours or anything like that. It's pretty easy. We have AI to help you to do it. This is like a countdown slide. So you see you have 92 days before the vacation started. So it's pretty exciting, like it's less than 100 days. So there's a lot to wait for some other supporting slide. And this is where it's getting interesting. We can see like you can select the best package, for example. So you can select whether you want it for 4 guests, 5 guests or for 6 guests and different price per guest, for example. And then there is an upgrade options that you can choose whether you want to upgrade your room, health insurance maybe to add, equipment rental. So it is a lot of, let's say, or maybe ski lessons as well. So everything is baked into the system. I don't need to go out. I don't need to try to go now to rent the car from different places, the rent the car or rent the gear from a different location. Everything is within the system. There is a payment summary, how much are going to end up paying. Obviously, this agreement, I need to accept it, so I can see the agreement. You know like for the vacation, for example, everything done online and obviously make the payment, paying now, pay in 30 days, I can pay in installments, for example. Again, everything baked into this client portal. Q&A, for example. So all of that look like million dollar, but trust me, it didn't cost the business that just prepared this presentation million dollar and send to the clients. So also think from the business side, think from the client perspective as well, this has looked nothing less than astonishing. And this is being done with proposing and ready to send to the client and for him to sign to view it, to sign it, to pay, to choose the upgrade and to continue basically any relationships that he would like to continue with the company can be done from this client portal. So if in the future, you need another addition, I can add it to the client portal and I can go ahead and pay for it, for example. Okay. Second thing that I would like to discuss is the new blog. So you can go online to blog.proposaly.io. And basically, there's a lot of new content, a lot of articles that our staff wrote about Proposaly. I think what should be interesting to shareholders is basically there's a lot of articles that compare Proposaly to potential competitors, let's say, for example, Proposaly best sales any book or Proposaly reference wheeler, for example. So you can see our Proposaly is positioned, our competitors are positioned within the market and what is the value proposition that we bring to the market as well. Very interesting. I encourage everyone to go online and start surfing the blog and see which articles they like and would like to be more educated about Proposaly. So I think between the marketing website, Proposaly.io and the blog website blog.proposaly.io, you have a lot to be -- to learn about Proposaly, and I think that's a game changer because we talk about it up until now, but now we can actually learn about it, see to yourself, see different proposal and you get a different or better understanding about what is the true value proposition of the system. So next topic or next thing that is new in Q3 2025. We discussed in detail in the last earnings call, the magic that our studio can create using AI for motion videos, right? So we can create motion videos that look like commercial grade. They are ready for Super Bowl, but actually cost $3,000 for example -- sorry $300,000 to produce them. And that's a big change. That's a game changer. And what we did right now, we opened an all new AI studio page under our adcore.com website. So you can go to adcore.com, go to marketing solution, click on AI creative studio, and you can see the different videos that we created for our clients, for potential clients, and we continue to update this page and adding more amazing video as we move along. But it doesn't matter almost which video you selected, trust me, there are nothing less than amazing. So that's a big, big game changer and all of them you can find online in adcore.com as well. Last but not least of what's new in Q3 2024. Actually, 2 weeks ago, we had an event to open a community bicycle park in the South of Israel, what we call field park that's in Kibbutz Ruhama in the South of Israel. And Adcore was one of the initiators of this park. We donated money to this project. We've been part of this project. And basically, we are very proud for what this project is all about. You can see this project construction undergoing in the bottom image and how beautiful it looks now that everything is ready over here on the left side, you can see a farm track where you can ride bicycle. On the right side, you can see an area for skateboarding. This is ready to use for the kids of this specific Kibbutz and the entire area. And again, this is part of who we are, our committed to our communities, and this is something we are very proud of. So again, it's a moment to be proud, to be thankful that we can be part of such an amazing project as well. And I know it's a big transition between talking about all this new and exciting stuff and what basically the comparables look like. And again, like if you look at the comparable and the current share price $0.24 as of yesterday, then I think there's a lot of upside, right? 450% almost if you look to gross profit -- sorry, EBIT to EBITDA, almost 100% upside. So I think I didn't sell a single shares up until now from the time we went public, and I'm still the biggest believer. I mean Adcore is doing good and we're doing great in the future. And I think like you will see that this company is not about just talking. Every day, we work very hard in building the future of this company, a future for ourselves and for our shareholders to be one of the most successful technology company out there, especially in Canada, there's not a lot of technology company, and I think Adcore can shine in this specific market as well and be like a big or a success story about the technology company like operating from Tel Aviv, Israel, from Canada, from Toronto, Canada as well and be very successful, very big success story. I think that concluded my part, my remarks. We covered some remarks regarding the results, like I mentioned, Q3, there's like some very positive things like the growth that we saw in, for example, the EMEA region and APAC region, like the reduced cost as well. 9 months, if you look at 9 months, it's even stronger, 56% adjusted EBITDA growth. And I think that tell you even a better story about 2025 and the way the company is positioned. But I think maybe the most important thing is to understand it's not about what's happening now or even a bit in the past because it's already Q3 like was a quarter ago. It's about the future of the company and the future of the company is bright. There's a lot of new technology development going on. I think there's a lot to be excited about in 2026. With that, I will move it to Amit. Amit Konforty: So thank you, and good morning, everyone. Before beginning the financial overview, I would like to remind you that the following discussion will include GAAP financial measures as well as non-GAAP results. All amounts will be presented in Canadian dollars. In the third quarter of 2025, strong growth in EMEA balance softer results in North America. Operational expenses were lower than last year and cash level increased year-over-year. The company continues to maintain a solid debt-free balance sheet. Let's review in more detail. For the 3 months ended September 30, 2025, we delivered revenue of $7.6 million compared to $7.8 million in the same period of 2024, a decrease of $0.2 million or 2%. Gross profit for the 3 months ended September 30, 2025, was $3.1 million compared to $3.7 million in the prior year, a decrease of $0.6 million or 16%. Gross margin for the 3 months ended September 30, 2025, were 40% compared to 47% in the same period last year. As for operational expenses, R&D expenses for the quarter were $0.5 million compared to $0.6 million in the prior year. SG&A expenses for the quarter were $2.9 million compared to $3.2 million in the prior year, a decrease of $0.3 million or 12%. Operating loss for the 3 months ended September 30, 2025, was $0.3 million compared to $0.1 million in the same period last year, an increase of $0.2 million or 128%. This is mainly due to the decrease in gross profit. Net loss for the 3 months ended September 30, 2025, was $0.4 million compared to $0.2 million in the same period last year, an increase of $0.2 million or 160%. Revenues and gross profit. Looking at the slide, we can see quarterly results showed a decline. But over the 9 months, we see a stabilizing trend. We anticipate that the fourth quarter and full year results will maintain the positive trend observed in prior years. In terms of geographical breakdown, as you can see from the slide, the company saw different trends across its main regions with strong growth in EMEA, offsetting a decline in North America. This shows the value of the company's strategy and global presence, which continues to support stability and resilience across the different markets. Selling, general and administrative expenses. SG&A expenses for the quarter were $2.2 million compared to $3.2 million in the same period last year, a 12% decrease year-over-year. For the 9 months ended September 30, 2025, SG&A expenses totaled $8.7 million compared to $9 million in the same period of 2024. The decrease was mainly driven by lower sales and marketing expenses, including reduced referral fees. The company also continues to focus on building teams in lower cost regions to improve overall efficiency. In terms of financial position, we had cash and cash equivalents of $7.3 million as of September 30, 2025, compared to $10.8 million at December 31, 2024. Cash and cash equivalents as of September 30, 2024, were $6.7 million, showing an increase of 8% year-over-year. Total working capital amounted to $5.9 million compared to $7.3 million at December 31, 2024, a decrease of $1.4 million or 20%. As for the liability side of the financial position, we can see that the company is still debt free. Adjusted EBITDA. The quarterly non-GAAP results reflect adjustments for the following items: depreciation and amortization, share-based payment and other nonoperational items. Adjusted EBITDA for the 3 months decreased by $160,000 compared to the same period last year. But when looking on the 9 months results, adjusted EBITDA increased by $175,000, mainly due to a decrease in operating losses. With that, I will turn the call back to Nick. Nicholas Campbell: Thank you, Amit. At this time, we will move to the Q&A portion. Nicholas Campbell: And the first question submitted here is about APAC, which continues to post strong growth. Can you just provide some color on what's working in APAC and if you expect that to continue? Omri Brill: Absolutely. So we are very encouraging about the growth that we saw in APAC in 2025. I think that's definitely the biggest market for us today, together with EMEA. Both of these markets are showing tremendous strength. I think like what we -- bear in mind that outside of Israel in terms of headcount, this is the biggest market for us. We have a big team in Australia, another team that we have in Hong Kong and in Shanghai as well. So like 3 different teams, and we continue to see growth in this specific region. I would say mainly reason for this growth is client acquisition, new client acquisition that almost goes without saying that, I would say, a critical component of any growth for any company. But equally important, what we call same-store growth. It's been existing clients that are expanding, expanding in terms of how much they're willing to spend, but equally important, if not even more important, expanding the services that are required from Adcore, whether it's like not just performance marketing, but also full funnel marketing, branding and awareness type of campaigns as well, studio, SEO affiliate marketing. So it's a much more holistic solution that we are now being able to supply in this specific region, and we can see it definitely in the numbers. So client acquisition, more holistic solutions. So this means more budgets that we are managing and controlling all of that are reflecting in the Q3 results that you see. Nicholas Campbell: Thank you, Omri. The next question is about SG&A, which dropped significantly from $3.2 million to $2.85 million in the quarter. Can you provide some color on how you were able to achieve those cost savings? Omri Brill: Yes. I think -- Amit, maybe you want to answer this one? Amit Konforty: Yes, sure. So as I mentioned in the presentation, these cost savings are mainly due to reducing sales and marketing expenses, including referral fees. Also, in general, the company puts much more emphasis on cost savings, including hiring teams in lower-cost regions. These are the main factors. Nicholas Campbell: Thank you, Amit. The next question is about gross margins. In Q3, they're at 40%, down from 47% in Q2. Can you help investors understand the reason for the change and if you expect that to continue into Q4 and onwards? Omri Brill: Absolutely. So a few remarks. So when you look at quarterly metrics, usually, they can fluctuate, right, because some maybe revenue can be shifted from quarter to quarter. But I think like as long as it's within the norms that we -- the company talked about 40% to 50%, that we are still comfortable with it. And equally important, when you look at the 9 months result, you can see it's exactly in the middle, 44% gross margin. So I think like we are pretty comfortable with the result overall. Like we're not too alert or alert at all with the specific quarter metrics. And I think, again, we need to be somewhere in the middle between 40% to 50%. This is where we're aiming for. And if any time when technology revenue is going to grow, actually, we can start discussing even better gross margin, like 50% and above and maybe ideally even more than 60%. But this is once we have more robust revenue stream from technology, pure technology. Nicholas Campbell: Thank you, Omri. A question regarding North America revenue. It was down 50% from the prior Q3. Can you just elaborate on the headwinds you're seeing in the region? Omri Brill: Yes. I would say it's mainly due to stop activity, but it's also a bit misleading because some of the stop activity actually shifted to EMEA. So the same partners that we work that were based in North America, we are now choose to work with partners that are located in the EMEA region. So I would say -- and this is part of the reason that you see a big growth coming from EMEA and a decline in North America. So I think part of it is about shifting revenue from one region to another region, which is fine. It's part of doing business another thing that I think it's worth saying that we believe Q4 2025 is going to mark the button. So after Q4 2025, we can start seeing this specific region, it's an important region for us, is actually recovering, and we expect to see actually more revenue coming from this specific region in 2026 and an uptick, not a downtick for this specific region. Nicholas Campbell: Very good. Thank you, Omri. The next question is with the rise of AI drawing user traffic away from traditional search platforms like Google or Microsoft, are you seeing that in your clients expressing concerns about how to adapt their advertising strategies? And how do you see opportunities to help them capitalize on the AI revolution? Omri Brill: Absolutely. That's a fair and good question, I would say. I would say the following. In the beginning, when OpenAI almost 2 years ago introduced ChatGPT in the beginning, there was an alert mode for all, let's say, Google, for example, Meta and everyone and see it as a big, I would say, risk to their business model. But if you look at, let's say, Google latest report, it just showed the most robust report ever in the company history. And actually, AI nowadays represent to Google more opportunities than risk. And the same concept is applied to Adcore and to Adcore clients as well. I think AI can make the campaigns -- is already making the campaigns more efficient. So this means every dollar spending online is actually making more revenue increase like doing better ROI, for example. You can see the nature of, let's say, ad and creative we can generate with AI. That's a game changing. If before, we used to spend $50,000, $100,000 to produce like to produce video nowadays, we can spend $2,000, $3,000 and do it in a day or 2. So that's a game changer. And I think like if I need to put everything into one formula, then I would say from one end risk. So for every risk factors that maybe AI represent, now we understand there's like 2 to 3 things that are actually opportunities. So the formula is working for us and not against us. And I think AI currently is definitely something that has a lot of positive effect, both on Adcore. Adcore clients, our ability to run advertisement more efficiently. And I think like, again, AI is definitely more opportunities than a risk. Nicholas Campbell: Thank you, Omri. Moving on to Proposaly. Can you share your road map or the commercialization plan for Proposaly in 2026? And how you expect that to contribute to Adcore's recurring revenue base? Omri Brill: So that's actually a good question, and I would answer the following: a, the road map says that we need to start monetize from Proposaly as early as beginning of 2026. So we expect to see the real paying clients by then. This is one, I would say, like if you look at Media Blast, that I would say it's at least 2 years more advanced than Proposaly, then Media Blast been able to achieve an ARR of $1 million in the first year. So -- and we expect nothing less from Proposaly. So I think like it's still a bit too early. We need to see that everything is working as planned. There's good market fit. The product is, I would say, mature enough in order to do what is supposed to do. But I think like at least if Media Blast is the base, this is what we want to do as a bare minimum. And ideally, we want to even to be a bigger success story, we built Proposaly to be the biggest success story, like overseeing Media Blast and all the rest of the apps we ever developed. So we have a lot of expectation from this app and 2026 definitely will be an interesting year for us. Nicholas Campbell: Thank you, Omri. That dovetails nicely into the next question about how the company is prioritizing investments between organic initiatives like Proposaly or your geographic expansion and potential M&A opportunities as you look forward to 2026? Omri Brill: Absolutely. So I think we touched a bit of that before in the previous earnings calls, and I mentioned that we are pretty pleased with the current geographical setup that the company have. So we don't see at least not in 2026, the company needs to expand into new markets, like we are well positioned within the EMEA region. We are well positioned within the APAC region with actually 2 different outputs of teams, well positioned in North America, both in Canada and in the U.S. as well. So I think that gives us a good coverage of the entire world. So this with regard to geo expansion. With regards to continue investment in R&D, I would say the following. And again, I would use Media Blast as an example because we can definitely see that after 2 years as Media Blast was fully deployed and launched, then we can definitely see that investment in terms of pure R&D is going down, maybe 50%, maybe even a bit more. But actually operational costs going up because there's more clients is more need to serve them or stuff like that. So -- but this is offsetting a bit by earnings coming from the application as well. So I think if I need to look at Proposaly maybe not 1 year, but maybe 2 years ago, that probably we can start looking at reducing some R&D-related costs. But again, probably we're going to -- should have more operational related costs as well, but also they come with earnings as well and MRR and ARR, which is the best type of earnings we can make. So I think all in all, a lot to look for in the future, 2026 and beyond coming from the technology pipeline that the company currently have. Nicholas Campbell: Very good. Thank you, Omri. And with that, that concludes our Q&A session. I want to take a moment to thank Omri and Amit for your comments, but of course, you, our investors and guests for attending the call. Omri, I'm going to pass it back to you for any parting thoughts. Omri Brill: No. So again, we want to thank everyone that participated in the earnings call. It was our pleasure to discuss the numbers for Q3 2025 and the 9 months for 2025. I think all in all, like Amit showed in this graph, if you look at the 9 months, numbers look solid, top line, midline, even bottom line that improved a lot in 2025 compared to 2024. And bear in mind that the best quarter is still in front of us, which is Q4. So again, solid start, I would say, of 2025 compared to 2024 and the biggest quarter. So we should definitely look optimistic about what is ahead of us. But I think equally important, quarterly results only tell you the story about what we have been right now, what was the present. But it doesn't tell you about the future. And I think the future of the company is bright. There's a lot going on in the technology side of the company. Proposaly should go big in 2026, maybe not mega big because we're still launching. So I don't want to overblow the expectation. But we should still definitely monetize Proposaly in 2026. And I think like you can see it for yourself, see what we build, see how we are investing in the company future and investing in the company future is investing in our own future and shareholder future as well. And that's the most important thing. We just not dream just for the sake of investing as an investment. We do it in order to make our life better and the investor life more happy about the value they can get from having or holding Adcore shares as well. So that concludes my part of today's remarks. Nicholas Campbell: Thank you again, Omri, and thank you all to our guests who have joined the call today. We look forward to providing you an update after Q4. So thank you all again, and be well. Omri Brill: Thank you. Amit Konforty: Thank you.
Operator: Greetings. Welcome to the Tecogen Third Quarter 2025 Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Jack Whiting, General Counsel. Thank you, sir. You may begin. John Whiting: Good morning. This is Jack Whiting, General Counsel and Secretary of Tecogen. This call is being recorded and will be archived on our website at tecogen.com. The press release regarding our third quarter 2025 earnings and the presentation provided this morning are available in the Investors section of our website. I'd like to direct your attention to our safe harbor statement included in our earnings press release and presentation. Various remarks that we make about the company's 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 forward-looking statements as a result of various factors, including those discussed in the company's most recent annual and quarterly reports on Forms 10-K and 10-Q under the caption Risk Factors filed with the Securities and Exchange Commission and available in the Investors section of our website under the heading SEC Filings. While we may elect to update forward-looking statements, we specifically disclaim any obligation to do so, so you should not rely on any forward-looking statements as representing our views as of any future date. During this call, we will refer to certain financial measures not prepared in accordance with generally accepted accounting principles or GAAP. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP measures is provided in the press release regarding our Q3 2025 earnings and on our website. I will now turn the call over to Abinand Rangesh, Tecogen's CEO, who will provide an overview of third-quarter 2025 activity and results; and Roger Deschenes, Tecogen's CFO, who will provide additional information regarding Q3 2025 financial results. Abinand? Abinand Rangesh: Thank you, Jack. Welcome to our Q3 2025 earnings presentation. In the last 3 months, we have seen significant forward momentum on our data center strategy. A year ago, when we started this pivot into data center cooling, most of the leads were from independent developers. Now the level of interest has ramped up substantially. We're getting interest from well-known colocation data center developers. We have now presented our solution to NVIDIA, AMD, and hyperscale developers. Across the board, the feedback has been positive. Given the level of interest, I'm now very confident that Tecogen will be successful in this market. During this call, I'll explain what some of the bigger developers are asking of us, the validation steps, and give some clarity on the path forward. The Vertiv relationship is a key part of this strategy, so I'll explain how this fits in as well. Our initial leads in data centers were from independent developers. For example, companies in conventional real estate pivoting into data centers or former data center executives who had started their own companies. These developers were initially more open to new ideas, such as our chillers. One of these developers gave us the LOI for 6 STX chillers I mentioned last quarter. Over the last 3 months, the developer has come to visit Tecogen, see our customer sites, and as a result, is now looking to include us on 3 of their projects as part of their main AI cooling work. This could mean more sales of many more chillers than contemplated by the LOI. The total combined IT capacity in the initial phase of the build-out is likely to exceed 200 megawatts and substantially more than that over time. The developer is in active discussions with potential tenants. And given the power constraints across the country, we believe this developer is likely to be successful. The other projects I mentioned last quarter are also at various stages of either obtaining financing or tenants, but are moving along. What is more exciting is that we have started to attract the attention of big-name developers who are well-established in the industry, including those with multiple AI data centers already constructed or in construction. As we presented and listened to developers, hyperscalers, and chip companies, it has become clear that the current methods of cooling a data center create numerous problems that we can solve. For those of you who are new shareholders, I'd like to reiterate the value proposition that Tecogen offers to data centers. As chips have become more powerful, they need more cooling, and cooling systems must be designed for the worst case. So how to stay with full AI load? In some parts of the country, this can be 120 degrees Fahrenheit or more. When you design for the peak, you tie up a lot of power since you don't know when you'll need to turn on the cooling system. In the past, this wasn't a big problem, but with the latest AI chips, electric cooling could require -- consume 25% to 35% of a data center's total power, and the power requirements are only increasing. If you move all for part of the cooling to natural gas, data centers have more power for IT, increasing their potential revenue. I know that many of you may have heard of data center cooling technologies such as liquid cooling, immersion cooling, et cetera. All of these technologies are targeted at what happens inside the data centers. All these technologies still connect to chillers like ours to reject the heat, which today are powered by electric chillers requiring substantial amounts of power. Our chillers can interface with any of these liquid cooling or immersion cooling options. The graph on the left shows how much power allocated to cooling nearly doubles based on the hottest design day. This means that in Texas, a 100-megawatt data center today is allocating 35 megawatts to cooling. There's also a secondary problem for some of the bigger data centers. One of the reasons we've started to get interest from hyperscale developers is that some of them are using on-site power generation. They tell us that due to their cooling requirements, they add additional power generation capacity that sits idle for much of the year. Because gas turbines are in short supply, data center developers would rather redeploy these idle gas turbines at the next data center. These developers have also told us that the cost of adding our chillers is less than half the cost of adding an equivalent amount of power generation. The reason for this is because significant additional infrastructure is required to support gas turbines, whereas our chillers can be a direct replacement for electric chillers, reducing the need for electric power for cooling. Most data center developers we have spoken to are considering using our chillers for 30% to 50% of the data center cooling. Our chillers will operate on natural gas above a certain temperature threshold, so the data center can cap the power allocated for cooling. In order for these established developers to use our chillers, there is a validation process. This requires providing test data, computer modeling of performance at various parameters, and other information. Although many of these developers understand that we are a smaller company and will need time to ramp up, manufacturing capacity is a key parameter that we need to satisfy. To address manufacturing capacity, we have already been making factory layout changes to increase throughput. We have begun working with contract manufacturers and expect to get the first articles for sheet metal assemblies for the dual power source chiller before year-end. However, this is only one pathway to manufacturing capacity. Concurrently, we have been working with Vertiv as a secondary pathway for increasing manufacturing. I understand that shareholders may be concerned that the Vertiv Tecogen relationship has been slow to date. This has changed substantially in the last month. Vertiv has tasked the head of their U.S. chilled water Group to lead the partnership. As a result, we have seen significant forward momentum. Although I can't get into specifics, we are working on multiple avenues to jointly sell and scale up our natural gas solutions to these larger developers and satisfy their validation requirements. Based on conversations with these larger developers, the AI chip companies, and hyperscalers, I'm now confident on the scale of the opportunity and the value our chillers bring. Many of these developers need hundreds of chillers a year, and all of them have confirmed the benefits. Our current backlog is approximately $4 million and is predominantly cannabis cultivation and the Las Vegas Convention Center 10-year service contract. We're expecting some multifamily projects and some other projects in cannabis to close later this quarter or early next year. But given that we are now getting interest from some of the well-known developers in data centers, our focus needs to go on securing initial projects from them. If we can do that, more projects from other developers will follow suit. From there, there are multiple strategic options to turn our opportunities in the data center market into value for Tecogen shareholders. As a technology company of our size, we also don't need the broader AI market to grow at billions of dollars a year to generate value for our shareholders. A single 200-megawatt data center uses 100 to 200 electric chillers. To put that into context, the Las Vegas Convention Center order was just 7 of our bigger chillers. We're working on technology improvements that provide test data and engineering support and building chiller inventory for potential data center projects. We've also made several improvements to our engine platform so that we can double our service intervals and provide better performance and higher engine time. To get essential data for continued product improvement and to reduce the impact of higher labor costs in certain territories like New York City, we invested $700,000 into new engines for the service fleet. This disproportionately reduced our service margin because we expense engines, but will have a beneficial effect on profitability medium and long term. It also provided much-needed data for continued R&D. Our current cash position is approximately $14 million, but we're expecting to collect $2.5 million in the next few weeks. We also repaid the related party note, so we have no debt on the balance sheet. I'll now hand over to Roger to take us through the financials. Roger Deschenes: Thank you, Abinand, and good morning. Our third quarter results, total revenues increased $1.6 million in the third quarter to $7.2 million, which compares to $5.6 million in the third quarter of 2024. And this is due entirely to the 115% increase in the products revenue during this period. Our net loss increased in the third quarter to $2.13 million, which compares to $0.93 million in the third quarter of 2024. And this is due to a decrease in our service margin resulting from increased material and labor costs incurred, as Abinand explained earlier, as we invested capital in engine replacements. And in addition, our operating expenses increased during the most recent quarter. Our gross profit decreased 12% due to increased costs incurred in our Services segment. Gross margin for the third quarter decreased 13.7% to 30.4% from 44.1% in 2024. We will discuss the gross margin further in the segment performance slide. Our operating expenses increased just under 28% quarter-over-quarter to $4.28 million from $3.35 million, and this is due to increases in administrative and R&D payroll and increased benefits, recruitment costs, and general increases in our business insurance premiums, depreciation, stock-based compensation, and higher sales commissions. Moving on to the EBITDA and adjusted EBITDA. For the third quarter, our EBITDA loss was $1.94 million, and the adjusted EBITDA loss was $1.7 million, which compares to an EBITDA loss of $0.77 million and an adjusted EBITDA loss of $0.75 million in the third quarter of 2024. And the increases in both the EBITDA and adjusted EBITDA losses in the current period are due to the decreased gross margins in the Services segment and our higher operating costs. Moving next to performance by segment. Our product revenues increased in the third quarter to $2.98 million from $1.39 million in 2024, which is due to increases in chiller and engineered accessory shipments, and it's offset by a decrease in cogeneration shipments. We delivered an additional hybrid drive air-cooled chiller in the current quarter. Our products margin decreased to 36.8% quarter-over-quarter from 42.7% in the comparable period in 2024, and this is due to higher material and labor costs, and also the RA cool chillers are sold at a slightly lower margin due to their initial shipments of the product. The services revenue increased 2.4% quarter-over-quarter to $3.94 million in the third quarter of 2025 from $3.85 million in the comparable period in 2024. The gross profit margin decreased 19.1% to 25.3% from 44.4%, and this is due to the increased labor and material costs in our New York territory, I should say, New York City, as we invested capital in engine replacements. Our energy production revenue decreased by 34.2% quarter-over-quarter to $25.60 in 2025 compared to $389,000 in the comparable period of 2024. And this is due, as it was in the past quarter, the expiration of contracts at certain sites late in 2024, and also to the temporary shutdown of a couple of sites for repairs during the current period. Gross margin decreased 10.8% to 34.4% in 2025 compared to 45.2% in 2024, and this is due to the temporary shutdown of the sites we previously mentioned and the additional costs we've incurred to bring the sites back online. Overall, gross profit margin decreased 13.7% quarter-over-quarter to 30.4% from 41.1%. And again, this is due to a reduction in our services' gross margins. This concludes our review of the third quarter 2025 financials. And I'll now turn the call back over to Abinand. Abinand Rangesh: Thank you, Roger. I'd like to summarize by saying that as a technology company of our size, we don't need the broader AI market to grow at hundreds of billions of dollars to generate tremendous value for our shareholders. To put the opportunity into context, a single 200-megawatt data center uses 100 to 200 electric chillers. The Las Vegas Convention Center, as I mentioned earlier, was only 7 of our chillers. Therefore, as a company, we need to stay focused on satisfying the needs of data centers, including delivery and performance. And from here, we can convert this into value for shareholders, either through scale-up of manufacturing or other strategic options. Given the level of interest that we're seeing from some of the biggest names in the industry, my confidence level for our strategy continues to increase. I look forward to updating investors on progress. I'll open the floor for questions. Operator: [Operator Instructions] Our first question is from Chip Moore with ROTH Capital Partners. Alfred Moore: I wanted to maybe ask first on the initial pilot for the 6 units. Maybe just any update on how you're thinking about potential timing for that? And then the follow-on, maybe expand on -- it sounds like that opportunity is growing. Are these additional sites in planning? Or how to think about those additional opportunities, as well as I think you mentioned they're interested in doing a greater portion of their load. Just any sense of scale there as well. Abinand Rangesh: Yes. So that's a great question, Jeff. So it's -- the way we are seeing it, all 3 projects are at around the same stage in terms of planning because there -- that developer is trying to essentially get a tenant for all 3 about the same time. What seems to be the case is that some of the larger entities that are willing to lease these kind of data centers would try to take up all the capacity in one shop. So it's possible that a portion might be leased separately. So the timing could be very minute, or it might take a few months, depending on how long it takes them to get a tenant. It might even take -- it's because a lot of those things are outside our control, I would say that from what we understand, the developer is in very active discussions with tenants right now. We have been included as part of the engineering design stage. So our odds are very good, but the tenants do have a say in what gets included as part of the project. That's really where the Vertiv relationship will come in handy, because if you end up with a hyperscale tenant and you need an approved vendor type relationship, Vertiv is an approved vendor for most big companies. So we can always sell through there. So there's a few nuances that comes to that. But having said that, that's not the only opportunity that we've got on the table right now. There's multiple opportunities today that have come up. I can't speak about specifics on a number of them because we're under NDA with a number of companies. But I think this is just one of the many that are moving in sort of parallel paths right now. Alfred Moore: And to your point on Vertiv, it sounds like things are progressing at a faster clip now. Maybe just any more you can give us on that? And then just around validation and test data that you mentioned, obviously, you're a smaller company, just a sense of what you need and timing there on some of the more detailed stuff. Abinand Rangesh: Sure. So let me start with the Vertiv side of things. So I think that one of the reasons that the Vertiv relationship was a little slow to get going was because we were either dealing at too high a level in terms of seniority at Vertiv or at more of a junior level. So what Vertiv ended up doing was restructuring who our point of contact was in their company and who was going to lead the effort forward. So now we have their Head of U.S. chiller operations, who has both the authority and the ability to move this forward quickly. So that started accelerating things now. The other thing that we are working on is we're starting to see interest directly from large-scale data centers, where for both companies, there'll be a big benefit in terms of this relationship is really also if Vertiv can help us scale up supply chain manufacturing. So a lot of our discussions have also been around that area because -- and of course, providing a way for us to -- or for end customers to feel more comfortable working with a smaller company like us. So it's the nature of the relationship is not purely just Vertiv is going to do the marketing and we sell to them. Now there's multiple other avenues that are being worked on right now. With regards to the second question on validation, so part of that -- and that's one of the reasons why, as we're starting to see this real level of interest, as a company, we're focusing significantly on that, whatever it takes to provide the data. So we've got units in our test cells here. We -- our engineering team, we've expanded that a little bit to really be able to support some of this effort. And then we have -- we just run test data. I mean we have some of that data as a standard just because every -- even in other industries, the same, some of that requirement is the same. But with data centers, there's -- it's a little more expanded because they operate in different conditions. And depending on which part of the country they're in, it varies. So we have to provide a lot of that. And that -- part of that is we've got units in test cells in our factory, just running that data as needed as people ask for it. Alfred Moore: And on the manufacturing side, Abinand, I thought I heard you say you're working on the contract manufacturing piece. Was that on the dual-source power unit? And how are you approaching the contract manufacturing side? Abinand Rangesh: So we believe both from a margin standpoint as well as scalability standpoint, the pieces that are better outsourced are things like the -- especially on the air-cooled chiller, where there's a lot of sheet metal assemblies associated with that. So we're going to look to outsource that sheet metal assembly and then have the -- do the power train and the final assembly in our factory, test it, ship it. So that sheet metal portion and all of the refrigeration systems associated with that sort of the piping, we're working with a company that does a lot of overflow capacity for some of the bigger chiller manufacturers. So they have significant ability to scale up. But what we need to do is to get the first article, validate that, which we're expecting to have the first article in the next month, 1.5 months or so, so that we can verify that it meets our design and it fits with all the other pieces that we will assemble in our factory. Once that happens, scaling that up is relatively straightforward because you're just using that same -- you're using the same plant. So that is an avenue for us to really improve throughput out of our existing factory. The other piece we have done in our existing factory is to have a more flexible layout. So it doesn't matter which chiller variety we get an order for, we can respond to that. Alfred Moore: And if I could ask one more, just on service margins and the new engines you introduced, just how to think about that, maybe more near term, when we start to see some benefits. And obviously, I imagine that should help you as you get some bigger deployments in data center, but just strategically, what that could do as well? Abinand Rangesh: Yes. So if we look back at service margin over the last year, 1.5 years or so, they've sort of been inconsistent. There have been some quarters where we've had them right around the 50% mark, and some points have been in the sort of low 40s or so. And as we mentioned last quarter, the cost of operating in New York, in particular, has gone way up, especially travel time between sites. So when you look at the service like a single engine in, let's say, New York, the -- some of your biggest costs, right, tend to be the engine. If you can basically avoid any engine work, or you can avoid having -- if you can double your oil intervals, then you don't have to go back to a site anywhere near as often. And you can do this -- you can -- the delta in putting a new engine with all the approved -- like the updated systems versus maybe making some repairs or making small increments, that's -- it's relatively small. But if you could double your engine life or even increase it by 25%, 30%, that will disproportionately improve your margin. So I would say in the next couple of quarters, we're not yet sure where the service margin is going to land, just because we might choose, depending on how the initial results from this and how we're seeing things start to look. We remotely monitor every unit. So just looking at the data, looking at short-term data and saying, okay, everything is working really well. We're seeing this decline in terms of having to actually go to sites as often, then we might roll out more across the fleet. Because, as I mentioned on the engine side of things, it's a combination of not only improving the actual engine system, but it's also things like oil change intervals, where you can almost -- you can increase it 50% or even double it, which is what we've seen in the initial sites. If we can see this across this broader range of units, then we might apply it to more units because, again, it will help us get to that 50% or higher gross profit margin much sooner if we do that. So for the next 2 quarters, it's a little hard to predict until we see our own data from that. But past that point, I would say this is -- this will definitely improve overall margins on service and get us to the point where we're generating healthy cash from that, and we can really focus on growing the data center business instead. Alfred Moore: Maybe -- sorry, one last one. Just your tone and confidence sounds like it's picked up. And obviously, getting in front of names like NVIDIA and AMD and hyperscalers quite impressive. Just any more you can expand on that feedback and what you're hearing from some of those bigger names and receptivity? Abinand Rangesh: So again, I can give you broad information here. A lot of these ones, they're -- especially the bigger names, as we look at the bigger developers, we have NDAs with them. But more broadly, I think across the industry, the things that we're seeing are the power constraints are getting substantial. I mean, people are finding that utility power is, I wouldn't say nonexistent, but getting the full utility power is becoming more and more difficult. The cooling load is definitely getting higher with the current generation of chips, right, especially when you're designing data centers down in Texas or Virginia, where your hottest day because you're actually not designing just for the hottest day in 1 year, you're designing it for the hottest day in the last 20 years. So that delta, the amount of power needed, is so much higher. And as I mentioned, the feedback on the alternative, which is, okay, what if you do on-site power generation? On-site power generation is actually -- this is where I feel like our assumptions have been validated in terms of the cost delta. We're definitely getting told across the board that on-site power generation is substantially more expensive than choosing our chiller option. I think the real hurdles for us as a company to get traction in this space is going to be to figure out ways to derisk somebody choosing a natural gas chiller, right? Because you -- and that's really where that dual power source chiller is particularly attractive, because you've got 2 power sources. So you can max that chiller up with a generator if you needed to, you can run on natural gas, you can choose to switch over to natural gas part of the time. You don't -- you have many different ways to run that. But it's still going to be -- we have to work our way through these steps. But we're not getting any pushback in terms of the underlying value proposition, the cost benefits. It's really a matter at this point of figuring out ways to get projects, even if it's smaller projects with some of these bigger names, to really get people comfortable with the technology. And then from there, I think it will grow. Operator: Our next question is from Alexander Blanton with Clear Harbor Asset Management. Alexander Blanton: I'd like you to give us an idea of what the dollar volume would be of the example that you gave, a data center with 200 chillers. Abinand Rangesh: So I'm going to give you broad ballpark numbers here, right? So the -- let's just say out of the 200, about half of them went to our type of chiller, right? That would be anywhere from $30 million to $50 or more, depending on how big each of those. Alexander Blanton: $30 million to $50 million for 100 chillers? Abinand Rangesh: Well, it depends on how -- so there's a lot of pieces here, right? You've got the size of the chiller, the I guess, to a certain extent, Alex, I'm giving you a very broad range here just purely because there are other people that sell this and each -- it depends on -- our pricing is a little different depending on whether it's the dual power source or whether it's a standard DTX chiller or so. Alexander Blanton: Why would you -- why did you say 1/2 of them would be yours, who would have the other half? Abinand Rangesh: So typically, at least based on the early conversations that we've had with some of the bigger developers, they would typically keep standard electric chillers for part of it and use us for part of it. Some of that may be just having dual supply chains for any data center. I think in many cases, having splitting those kind of systems seems to be standard practice. But again, there's a lot of moving pieces when it comes to those bigger projects. Alexander Blanton: Well, if the savings using the gas chiller is so great, why would they have any electric chillers? Abinand Rangesh: So I think over time, and this is really part of the earlier comment that I made. I think the issue on right now is very little to do with the benefits of the product. I think a lot of it is really comfort level because we're doing something different in a data center, right? Even though we might have these chillers in many critical cooling applications like hospitals and ice shrinks, this is still a new industry for us. So I think over time, you might see the full system go this way, but-- Alexander Blanton: Okay. So it's a matter of having confidence in the company and the product. Abinand Rangesh: I think so. I think that's really the -- at least in terms of the feedback and the ways that people are looking at it, doing a portion of the AI load initially or a portion of it or using it for things like turbine cooling, which again allows people to try it out without taking too much risk initially. And then if things work well, then I think you'll start seeing much bigger portion of the load that move over to systems like ours. Alexander Blanton: Just to shift topics for a minute. What is the status of the renovation of the Las Vegas Convention Center with your chillers? Abinand Rangesh: So we have shipped our chillers to the convention center. I would estimate that, that site will probably come online early next year. So they're in construction. They're installing our chillers right now. And I would say that, yes, we're expecting that site to start up sometime early next year. Alexander Blanton: And what percentage completion is it at the moment? You shipped some, but not complete, right? Abinand Rangesh: No, the chillers -- we've shipped the chillers to them now. So that project is complete. The bit that isn't complete is the service contract, which will, of course, carry on for -- like it's a prepaid contract. So we'll recognize that over the next 10 years. Alexander Blanton: Okay. So you recognize the revenue from those products? Abinand Rangesh: Correct. Correct. Alexander Blanton: And as to the -- going back to the data centers, what would you estimate would be the timing of the orders in that space? Abinand Rangesh: That unfortunately, is the hardest piece to predict. At this stage, I cannot make even reads. It's the one that we have an LOI for, that could move very quickly as soon as they get a tenant, right? That would be that -- but the other projects there, a lot of the ones from the independent developers that I initially -- like we started working with, those projects, they're hoping to be online by 2027, which means they'll have to take deliveries in 2026. But with a lot of those entities, again, there's pieces that are outside our control, like lining up the tenants. With regards to the bigger-name developers, it's really a matter of how long it takes to get through the validation process, what it takes because they might start using chillers earlier on. It might be smaller chunks just to try it out. But they don't have tenant problems. They don't have financing issues. So those things might move much faster. I think this is one of those cases where we'll -- I'll try to keep people updated between now and when we report next as soon as we have any traction on any of these projects in terms of getting those projects over the line. Alexander Blanton: Now these are projects that haven't started yet. What kind of an opportunity is there for you to retrofit or to participate in the expansion of existing centers? I mean you're talking to larger hyperscalers or people in the business that are already operating these centers. Do you have an opportunity to sell anything to them? Abinand Rangesh: So in terms of retrofits, we're not seeing as much -- we've seen a few projects in that in terms of retrofits. But majority of the ones right now are being built ground up for the latest chips. A lot of the retrofit opportunities are with the previous generation of chips that -- I think the industry as a whole, we're not seeing -- at least from what we've seen there, we're not seeing as much activity in the retrofit market. But I think that is going to change pretty soon, given the power constraints. In the very small-sized data centers, we might see some retrofit opportunities. Some of the cloud-type data centers that are being converted to have some AI component or some computing component, that might happen. But it's -- in terms of the bigger AI data centers right now, it tends to be new builds, built ground up for the latest chips with liquid cooling and all of the other pieces associated with it. Operator: Our next question is from Barry Hymes with Sage Asset Management. Barry Hymes: I had 2 questions. One, just back on the Vertiv relationship. When -- how long ago was the change in that point of contact? And are you generally making joint sales calls with them? Or did you have to do teach-ins for their sales force? Or just kind of how is that process working? And if you do get an order through them, do they do the service, or do you do the service? And then second question, just quick, could you remind us what percent cost savings on average, or what's the range that you would typically quote on your system versus traditional? Abinand Rangesh: So with regards to the Vertiv relationship, I'd say the change in point of contact was probably about 3 to 4 weeks ago. So it's pretty recent. Although we've been dealing at the higher levels with Vertiv since the agreement was signed, it was just trying to get things to move faster on their side and make sure that there was authority to really drive this relationship forward. So that change happened more, yes, 3 to 4 weeks ago. We have done teach-ins for their sales force already. We have done a few joint sales calls, but a lot of them have been more in terms of identifying what are the key pain points that data centers are identifying beyond purely like what is the power that's freed up there. Other things like, for example, one of those calls with the stakeholders, identify things like uninterrupted cooling. So for example, in an electric chiller, if you lose power, what needs to happen is the electric chiller will shut down, diesel generator will come on and then you will turn on the -- like the chiller will come back online. With natural gas, you could potentially keep running through an outage. You just move some of the pumps onto backup power, and you could run through an outage. So there are benefits like that, that are not necessarily initially obvious unless you talk to end customers. So those are the kind of things that we've done with the Vertiv sales team to really identify what those pieces are. Now it will start to ramp like -- and Vertiv does -- has been doing some initial quoting to potential customers. So -- but exactly where those projects are, some of that is not as clear to us. Most of these bigger opportunities that we're talking about today came from Tecogen's direct marketing. So us reaching out directly or being big data centers at trade shows, or yes, direct outreach to some of them. So I think the Vertiv side of things is spinning up. I think the right things are happening. But that change, I think the acceleration really started, I think, in the last month or so. With regards to your question regarding savings, really, you have to think about it in terms of power available, right? So when you've allocated power to cooling, that power is not available for those IT chips anymore. So it's really a reduction in revenue for data center. So let's say, 30 megawatts goes to cooling, that -- today's numbers, like if you're a colocation data center owner that's essentially having a hyperscale tenant there, that hyperscale tenant is paying anything from $150 to $200 per kilowatt per month. So for every additional megawatt, you're talking more than $2 million of additional revenue a data center can make if you're a colocation data center owner. If you're a hyperscaler, right, it's the difference between having your data center that's 70 megawatts versus -- or having 70 megawatts of computing versus having 100 megawatts of computing available. So it's really what it allows you to do in that data center. How much additional computing you can have on-site? So it's really an increase in revenue rather than purely a reduction in operating cost, which there is a reduction in operating cost, but that's actually small compared to the increase in revenue. Operator: There are no further questions at this time. We will be concluding today's conference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Zealand Pharma Interim Report Q3 2025 Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, [ Adam Langer ], Investor Relations of Zealand Pharma. Please go ahead. Unknown Executive: Thank you, operator, and thank you to everyone for joining us today to discuss Zealand Pharma's results for the first 9 months of 2025. You can find the related company announcement on our website at zealandpharma.com. As described on Slide 2, we caution listeners that during this call, we will be making forward-looking statements that are subject to risks and uncertainties. Turning to Slide 3 and today's agenda. With me today are the following members of Zealand Pharma's management team; Adam Steensberg, President and Chief Executive Officer; Henriette Wennicke, Chief Financial Officer; and David Kendall, Chief Medical Officer. All speakers will be available for the subsequent Q&A session. Moving to Slide 4. I will now turn the call over to Adam Steensberg, President and CEO. Adam Steensberg: Thank you, Adam, and welcome, everyone. The third quarter of 2025 has been a quarter of strong execution and continued momentum in our partnership with Roche. We achieved a key milestone in the petrelintide Phase II ZUPREME-1 trial in people with overweight and obesity, which put us well on track to report 42-week top line data in the first half of 2026. We are also rapidly approaching data from several Phase III trials with survodutide in obesity, starting with top line results from this 76-week SYNCHRONIZE-1 trial in the first half of 2026. Meanwhile, we are gearing up to outline our path towards becoming a generational biotech company at our Capital Markets Day next month. Moving to Slide 5. 2 years ago, we laid out our vision to become a key player in the management of obesity through innovation that address one of the greatest health care challenges of our time. Central to this vision was developing an alternative to GLP-1 therapies and to end the weight loss Olympics by focusing on the most important unmet medical need, a therapy that patients can and will accept to stay on. What excites me today is that Zealand and Roche has the potential to lead in the next class of drugs for weight management. We are very confident in the profile of the petrelintide as a potential best-in-class amylin analog, supported by the clinical data to date and the last robust Phase II program currently underway. We are rapidly approaching Phase II data with petrelintide and Phase III obesity data with survodutide alongside an impressive Phase III MASH program that is well underway. I look forward to this next catalyst-rich chapter and to sharing more from these programs at our upcoming Capital Markets Day, where we will also discuss our intensified early-stage efforts to build a generational biotech company. Let's turn to Slide 6. 6 months have passed since we kicked off our alliance with Roche. And I'm highly encouraged by the energy and commitment we have seen from both sides of the partnership. The agreement with Roche is more than just a deal. It's a shared commitment to redefine the future of weight management and to establish leadership in what could become the next foundational class of therapies. Last month, Zealand Pharma had the pleasure of welcoming Teresa Graham, CEO of Roche Pharmaceuticals to our offices for an engaging fireside chat about exactly this. I was also pleased to see Roche at their Pharma Day in September, conveyed to you their strong commitment to become a top 3 player in obesity. This is the reason why through a highly competitive partnership process, we identified Roche as the ideal partner for Zealand Pharma and petrelintide. Turning to Slide 7. Survodutide is licensed to Boehringer Ingelheim, a leading family-owned biopharmaceutical company with a strong legacy in cardiovascular, renal and metabolic diseases and a global presence across more than 130 markets. We're excited to see Boehringer Ingelheim potentially becoming the next major pharma company to enter the obesity market with a truly differentiated GLP-1-based therapy co-invented with Zealand Pharma. We were also highly encouraged by their strong presence at ObesityWeek in Atlanta last week. This leads me to Slide 8. The scale and complexity of obesity make it a distinct and complex disease area in which we identify different segments. In the prescriber-driven segment, a key motivation for prescription is focused on comorbidity risk reduction, improving health outcomes and relative weight loss. We believe survodutide has the potential to be uniquely positioned within this segment. The largest segment, however, is patient-driven. A significant focus here is personal weight loss goals and how individuals achieve them with potential to deliver the weight loss that the vast majority of people with overweight and obesity desire, combined with an acceptable tolerability profile and an excellent patient experience, we believe petrelintide is ideally positioned to lead in such a segment. I'm highly encouraged by the potential of both of our leading obesity programs, which holds potential to redefine the near-term future of weight management in key segments. And with that, let's move to Slide 9 as I turn over the call to our Chief Medical Officer, David Kendall, to discuss our R&D pipeline. David? David Kendall: Thank you, Adam. Today, I'll focus my remarks on the continued advancement of our 2 leading programs, petrelintide and survodutide. Before doing so, I would like to begin by providing a brief update on our 2 late-stage rare disease programs and dapiglutide, our GLP-1/GLP-2 receptor dual agonist program. For dasiglucagon in congenital hyperinsulinism, our third-party manufacturers facility has not yet received the anticipated classification upgrade. And as shared previously, we have implemented a supply contingency plan, including the qualification of an alternative supplier to ensure we can bring this important therapy to patients in need as quickly as possible. For glepaglutide, our GLP-2 receptor agonist in development for the treatment of short bowel syndrome and intestinal failure, the Phase III EASE-5 trial remains on track to initiate before the end of the year with the purpose of supporting regulatory submission in the U.S. We remain encouraged and excited by the clinical profile of glepaglutide as a potential best-in-class long-acting treatment for patients living with short bowel syndrome and intestinal failure and look forward to confirming the positive findings of the previously completed EASE-1 trial. We have made the decision to pause the current development of dapiglutide. This decision is a result of a disciplined portfolio review and prioritization, seeking to focus our obesity portfolio investment on programs with the greatest potential for clinical differentiation and those offering the greatest potential for long-term impact for patients living with overweight, obesity and related comorbidities. Although dapiglutide has demonstrated the potential for a competitive weight loss profile based on the results of clinical trials completed to date, the GLP-1-based therapeutic space has become increasingly crowded, requiring even greater and clinically meaningful differentiation for assets which would be launched in the 2030s and beyond. While there is compelling scientific rationale for GLP-1/GLP-2 dual agonism to modulate low-grade inflammation more effectively than GLP-1 alone, the clinical requirements needed to demonstrate this differentiation in a dedicated obesity-related comorbidity would be long, complex and expensive. We have significant opportunities in both the amylin and incretin-based therapeutic space with our leading programs, including petrelintide, the fixed-dose combination of petrelintide and Roche's GLP-1/GIP dual agonist, CT-388 and survodutide as well as an early stage pipeline that includes novel mechanisms targeting obesity and inflammation with the ultimate goal of restoring and maintaining metabolic health. Please turn to Slide 10 and beginning with petrelintide. Our strong confidence in petrelintide is grounded in its overall efficacy, safety and tolerability profile. While amylin-based therapeutics can deliver clinically meaningful weight loss, we are not seeking to deliver the highest possible weight loss with petrelintide, but rather seek to target the weight loss that the vast majority of people with overweight and obesity desire and to do so with an excellent patient experience. We remain fully confident in the potential of petrelintide to deliver 15% to 20% weight loss in Phase III clinical trial and also remain highly confident in petrelintide's consistent clinical efficacy, safety and tolerability, underscoring its unique value proposition and the potential to become the leading amylin-based treatment and a foundational therapy for weight management. I'm extremely pleased with the strong execution in advancing the petrelintide clinical program at full speed. In late September, we reached a key milestone in the large Phase II ZUPREME-1 trial, which evaluates the efficacy and safety of petrelintide in people with overweight or obesity without type 2 diabetes, with the last randomized participant having now completed the 28-week primary endpoint visit. Additionally, earlier in the month, we completed participant enrollment in the Phase II ZUPREME-2 trial, which evaluates the efficacy and safety of petrelintide in people with overweight or obesity and coexisting type 2 diabetes. These achievements put us well on track to report 42-week top line results in the first half of 2026, report top line results from the ZUPREME-2 trial in the second half of 2026 and to initiate the Phase III program with petrelintide monotherapy also in the second half of 2026, together with our partner, Roche. Let's move to Slide 11. We also look forward to exploring the potential of petrelintide as a backbone for future combination therapies, unlocking its full value potential. Petrelintide/CT-388 is the first combination product under our alliance with Roche. This program will target individuals who seek even greater weight loss and/or improved glycemic control while optimizing the dose of each component. We anticipate that use of higher doses of petrelintide and optimized doses of the incretin-based therapy CT-388, a potential best-in-class GLP-1/GIP receptor dual agonist, can provide both robust efficacy while maintaining excellent tolerability. Zealand and Roche remain on track to initiate the Phase II trial with petrelintide/CT-388 combination in the first half of 2026. Now turning to Slide 12 and survodutide, a potential best-in-class glucagon/GLP-1 receptor dual agonist in late-stage development for the treatment of obesity and MASH. The Phase III SYNCHRONIZE program of survodutide in obesity consists of 6 clinical trials, all of which are expected to complete in 2026. In the Phase II obesity trial, survodutide demonstrated the potential to deliver highly competitive weight loss with doses of up to 4.8 milligrams. Notably, the Phase III trials are evaluating a higher maximum maintenance dose of 6 milligrams. This leads me to Slide 13. Following the last participant's last visit in the 76-week SYNCHRONIZE-1 trial, which evaluates the efficacy and safety of survodutide in people with overweight or obesity but without type 2 diabetes, we are rapidly approaching top line results from this trial in the first half of 2026. At the Obesity Society Annual Meeting in Atlanta last week, Dr. Carel Le Roux presented the baseline characteristics of participants in this trial, which are also shown on this slide. We are very pleased that Dr. Le Roux has agreed to join us at our upcoming Capital Markets Day next month, where he will share more insights on the potential of survodutide to represent the next frontier in the management of obesity and MASH. Now turning to Slide 14. We remain exceedingly optimistic and are very excited about the ongoing Phase III program with survodutide in people with metabolic dysfunction associated steatohepatitis or MASH, a serious obesity-related comorbidity with significant unmet medical need. Shown in this slide is an indirect cross-trial assessment of the registrational clinical trials for the 2 approved therapies in the U.S. for MASH today. The thyroid hormone receptor beta agonist, resmetirom and the GLP-1 receptor agonist, semaglutide. In the Phase II trial with survodutide in people with MASH and liver fibrosis, 38.6% of adults with moderate to advanced [ scarring ] achieved a placebo-adjusted biopsy-confirmed improvement in fibrosis without worsening of MASH after 48 weeks of treatment. We believe this represents the most compelling and strongest clinical data set to date on the critical endpoint of improvement in liver fibrosis. With these groundbreaking Phase II data and a comprehensive ambitious Phase III program now underway, the so-called LIVERAGE program, which includes 2 large trials, 1 in people with moderate to advanced fibrosis, F2 and F3 and 1 in people with cirrhosis, F4. We believe survodutide has the potential to become the therapy of choice in this large and growing market segment, offering a much-needed treatment option for people living with MASH and obesity. With that, thank you very much for your attention. I would now like to turn the call over to our Chief Financial Officer, Henriette Wennicke, who will review our financial results for the first 9 months of 2025. Henriette? Henriette Wennicke: Thanks, David, and hello, everyone. Let's turn to Slide 15 and the income statement. Revenue for the first 9 months of 2025 was DKK 9.1 billion, driven primarily by the initial upfront payment received under our collaboration and license agreement with Roche. Of the DKK 9.2 billion in upfront payment received in the second quarter, DKK 124 million was deferred as of September 30 as it relates to the progression and completion of the Phase II trial with petrelintide. Net operating expenses totaled DKK 1.5 billion for the first 9 months of 2025, with 73% of that amount dedicated to research and development. R&D expenses were mainly driven by the ongoing development of petrelintide, including the large Phase II trials and preparation for Phase III. Net financial items amounted to negative DKK 62 million for the period, primarily reflecting exchange rate adjustments related to the U.S. dollar deposits and currency devaluation. This was partly offset by interest income from investments in marketable securities. Moving to Slide 16 and the financial position. As of September 30, 2025, our cash position totaled DKK 16.2 billion, a significant increase from the DKK 9 billion at the beginning of the year. This increase was, of course, driven by the initial upfront payment of DKK 9.2 billion from Roche, partly offset by operating expenses during the period and the purchase of treasury shares to support Zealand Pharma's long-term incentive programs. I would like to remind everyone that in addition to this very solid financial position, we are entitled to receive a total of USD 250 million in anniversary payments over the next 2 years under the Roche collaboration as well as potential development milestones of up to USD 1.2 billion. As I stated in our last quarterly earnings call, I am very pleased with our capital preparedness. We are fully able to honor all obligations under the comprehensive Roche collaboration for petrelintide, while at the same time, accelerating investments in our early-stage pipeline to build the next wave of innovation. Finally, let's turn to Slide 17 and the outlook for the year. Net operating expenses for the year are now expected to be between DKK 2 billion and DKK 2.3 billion, excluding other operating items. The financial guidance has been narrowed from the DKK 2 billion to DKK 2.5 billion, reflecting the decision to pause the development of dapiglutide, previously planned to advance into Phase IIb development in 2025. This decision, as David also mentioned, reflects our active portfolio management and our sharp focus on investing in assets with the highest potential for clinical differentiation, commercial impact and long-term value creation. And with that, I will move to Slide 18 and turn the call back to Adam for concluding remarks. Adam Steensberg: Thank you, Henriette. We are now at the cusp of the most catalyst-rich period in Zealand Pharma's history. In just the first half of 2026, we expect to see Phase III enabling data for petrelintide, Phase III data for survodutide and Phase I data for what could become one pillar in the next wave of innovation from Zealand Pharma, our highly potent and specific Kv1.3 ion channel blocker. Moving to Slide 19. I can only encourage you to join us at our Capital Markets Day on December 11, where we will set the stage for the rapidly approaching data readouts. We will also share more about our ambitious research strategy, which builds on Zealand Pharma's unique expertise in peptide R&D and our strong foundation to lead the next wave of innovation in obesity and related diseases and to continue our journey towards becoming a generational biotech company. I'm excited that we will be joined by Jonathan Roth, a pioneer in amylin-leptin biology as well as Carel Le Roux and Louis Aronne, recognized thought leaders in the field of obesity. They will join us on stage to share their valuable insights. I will now turn over the call to the operator, and we'll be happy to address your questions. Operator: [Operator Instructions] We will take our first question, and the question comes from the line of Kirsty Ross-Stewart from BNP Paribas. Kirsty Ross-Stewart: So 2 on petrelintide, please. So with the eloralintide trial now published, I think interested to hear your thoughts on kind of the differences in the setup of the 2 trials in terms of baseline characteristics, titration, doses being explored and how your -- or how you would encourage us to look at your own dataset in the context of Lilly's data to kind of make a fair comparison there? And then also, David, you highlighted in your opening remarks that you're not targeting the highest possible weight loss with petrelintide, which seem quite in contrast to what Lilly have tried to do with their eloralintide trial. I think there are some people that have sympathy with that message, but maybe you could argue as well that there's still some way to go to convince the market of the validity or the strength of that message. So I guess my question is, can you provide some feedback from your discussions with regulators or takeaways from market research with physicians and patients that may help to convince this move away from, as you call it, the weight loss Olympics. Adam Steensberg: Thanks for your question. And then maybe I can start and then hand over to David. We were extremely encouraged to see the eloralintide data last week, which we really see building on what we already saw with petrelintide last year. Remember, Novo demonstrated that petrelintide can deliver 12% weight loss and we consider with a 2.4-milligram dose, which we consider a very low dose. And it really, you can say, underscores the potential that we have been communicating all the time around the amylin class that with amylins, we have the potential to actually develop a new class of medicines that will provide patients with likely a 15% to 20% weight loss and thus a true alternative to the GLP-1s. And very importantly, we expect this weight loss to be a more pleasant weight loss experience with significant less side effects, but also the nature in which the patients would reduce their food intake, we think would be superior in the amylin class in the sense of feeling full faster versus having loss of appetite. So we are extremely pleased, and you can say it actually increases our excitement around the upcoming Phase II data with petrelintide and our efforts to prepare for the Phase III trial conduct, really underscoring what we have been moving towards for a very long time. And David, maybe you want to touch a little bit upon important trials and design specifics there. David Kendall: Yes. Thanks, Kirsty. And trial design specifics, I'll reiterate what Adam said. I think 15% to 20% weight loss when we came forth with petrelintide's potential to achieve this. I think at first, there were actually some skeptics that looked at this and said that can't be possibly achieved. We've seen early [ Cagri ] data. But I think the data we saw recently from another compound in this class clearly demonstrate that GLP-1-like weight loss percentages are achievable. And we think, as Adam referred to, that higher milligram dose exposure, higher bioavailability and the excellent tolerability profile we've seen to date with petrelintide up to 9 milligrams once weekly can certainly hit that sweet spot. You also mentioned what does the market seek. One simply needs to do some math. If somebody weighs 150 kilos, a 30-kilogram weight loss for 65 pounds of weight reduction is substantial. And I think 5 years ago, the world would have thought that's unachievable with what we've seen to date, including with [ liraglutide ]. So both in speaking with clinicians and in speaking with the vast majority of patients who seek weight management therapy, that's 10% to 20% weight loss figure comes up repeatedly. They may not say 10% to 20%, but they will give you a number -- a desired number of pounds or an end target weight that generally reflects that. I think some of the data from GGG high-dose GLP-1-based therapies, which we believe suffer from challenges with tolerability can get you to the 20-plus percent range, but that serves a vast minority of the patient seeking this. And finally, to your question about the baseline characteristics, just recall that with petrelintide Phase Ib predominantly male participants, predominantly or a leaner mean population with a BMI just under 30 kilograms per meter squared. Both of those factors, we believe, could have significantly muted the response we saw in Phase Ib. We will have a much more balanced gender distribution in Phase II, a much higher baseline BMI as we reported in last quarter's call. And the likely contribution of predominantly female, very high BMI population, I think, is well worth considering it may amplify the observed results rather than mute as a predominantly male and leaner population. I think it's also important to read the details of both diet and exercise instruction in the trial. We achieved our results in Phase Ib with limited to no other intervention. So I encourage you and others to look at the full construct of all of these trials before jumping to just top line numbers. So I'll stop there. Operator: We will take our next question. Your next question comes from the line of Hakon Hemme Jørgensen from Danske Bank. Hakon Hemme Jørgensen: Hakon Hemme, Danske Bank. Also a question regarding petrelintide study design. The [ eloralintide ] data from last week demonstrated that patients did not experience weight loss -- a weight loss plateau like we see with the GLP-1 treatments, likely due to the restoration of leptin sensitivity by amylin. So how does this influence your consideration on the trial duration for petrelintide in Phase III? And how do you see the trade-off between potentially achieving greater weight loss with a longer study compared to bringing petrelintide to the market sooner? Adam Steensberg: Thanks for that question. We're going -- I'll let David answer. David Kendall: Thank you, Hakon. I think 2 very important observations. The absence of plateau, which I think was readily evident both in our short Phase Ib studies with petrelintide, but certainly offers that potential where longer exposure, some of it required for regulatory review and approval out to beyond 68 to 72 weeks will allow us to assess whether this is a continued effect. And I think importantly, speaking back to the mechanisms that Adam discussed a satiety or fullness where one feels full faster and stops prospective food intake as opposed to a food aversive signal that hit suddenly and may be consistent at least in theory, could contribute to a continued gradual weight loss over longer periods of time. So in both our own visual extrapolations and I think now looking at the elora high-dose data, noting that the higher doses were perhaps less well tolerated than the 3-milligram dose, you see not only progressive weight loss, but GLP-1-like effects, something we've been talking about for most of the past 2 or 3 years. So I think it will be important to observe what we pull out of our 42-week Phase I trial. And then the design for the longer Phase III trials will directly answer your question, but would expect the potential for progressive weight loss out beyond 1 year of treatment. Operator: We will take our next question. Your next question comes from the line of Lucy Codrington from Jefferies. Lucy-Emma Codrington-Bartlett: Sorry, sticking with the elora data from last week. So in light of that data, do you have any updated thoughts on the importance of the receptor activity that has previously been discussed? And you mentioned that you're confident it will still be best-in-class. I just wanted to know what drives that confidence given the data we've seen so far for elora. Then secondly, just following up on the trial design. Just to confirm, this trial will have no lifestyle interventions, is that correct? And then secondly, related to the trial, did you specify to have a balanced sex ratio in the trial? Or is that just happenstance? And then on dapiglutide and the decision there, I just wonder, you're obviously not short of cash. So kind of what was the thought process in terms of stopping this study? Was there any discussion with Roche about this? I appreciate you're not partnered, but did you discuss it with Roche? And also, any thoughts on potential combination with petrelintide down the line? And what studies would be need to be done in order to enable that? Adam Steensberg: Thank you for the questions. I will start with the first one on the pause on dapi. I think it's very evident and it will be even more so at the Capital Markets Day that we have what we believe really a leading opportunity in the GLP-1 space with survodutide, which [indiscernible], which do not only have a huge potential for weight loss, but actually also addressing liver health and in particular, MASH and potentially other organ damages by activating lipolysis. So it actually has a strong profile towards managing comorbidities of obesity. And now with the Roche partnership, we also, as you know, got shared economics on the combination product with CT-388, their GLP-1/GIP, meaning that's going to be the combination opportunity we are going to focus on. And thus, that became less relevant for combinations with amylin. What we have been exploring over the summer was addressing segments of the obese patients, which were suffering from specific comorbidities. And in doing those in-depth evaluations, it's very clear that it will require, as David also said, very large investments and long commitments before getting to understand the full potential for differentiation. And if you then consider the GLP-1 marketplace in 5, 6 years from now, you will see that it's a very crowded place. And we came to the conclusion that the level of clinical differentiation we would have to show by coming that late into a GLP-1 market was not worth the efforts, in particular not because we have such a rich early pipeline and fantastic ideas, which you will hear more about that we want to invest in and apply our capital. So we basically believe we can apply our capital better in those early programs. So I would say it's a very, you can say, considered decision and one which allows us to invest even more in our early-stage pipeline as we mature the company towards a generational biotech. When thinking about the upcoming data for petrelintide, we remain and we are even more confident in the potential to deliver the 15% to 20% weight loss, which we know will address by far the vast majority of the weight loss that patients are desired. And as I said before, the data that came out last week underscores the potential that we also saw with cagrilintide last year. Remember, cagrilintide was only 2.4 milligram, which is a very low dose compared to where we take petrelintide today. And so the confidence in the best-in-class potential comes from -- when we look at the consistency of the data we have seen across our early-stage clinical trial readout, the balance between efficacy and tolerability has been outstanding in our minds and then the potential to dose high and continue into the longer-term study that we are soon to report gives us that confidence in the Phase II study that we will report ZUPREME-1. We have applied diet and exercise, and we do have a gender balance of around 50-50 as opposed to the 80% females that were reported in the study last week. But again, that has been done from a very firm development perspective that you want to have exposures in those gender to make the best possible decisions for your Phase III design. You actually introduce a lot of risk by having very few of one gender because you don't get to learn about your molecule in those genders if you skew too much in Phase II. David Kendall: And Lucy, I'll take the question about the receptor biology and receptor differentiation. I think [ Thomas Lutz ] said it quite well in his introductory talk saying there's still quite a bit to understand elora based on data reported by Lilly has about a 12-fold higher affinity for the amylin receptors than calcitonin. But I think it's important to note that the proposed or the hypothesized improvement in tolerability was clearly not demonstrated. There was significant nausea, I think, up to 64% in one of the treatment groups at relatively moderate doses. Similarly, if one looks in the appendix, there's not just a transient, but a small decrease in serum calcium, which is also indicative of some calcitonin effect. So our own conclusions are that with balanced agonism as we have seen with petrelintide, we have seen one of the best, if not the best, tolerability and safety profile and that it does not sacrifice tolerability, particularly around GI side effects. I think the other comments that Thomas Lutz made, which is all of this receptor biology work and knockout activity in animal really requires confirmation in clinical testing. And to our end with a predominantly female, higher BMI population treated with high doses, there was no substantial difference, I think, based on the author's conclusions in tolerability versus historic GLP-1 programs. And we would at least posit that some of the changes, including the drop in serum calcium indicates some and perhaps significant calcitonin receptor activity in clinical treatment. So we will continue to explore how these may differ. But I think as Thomas Lutz concluded, the answers will come from the clinical trials. Operator: We will take our next question. The next question comes from the line of Andy Hsieh from William Blair. Tsan-Yu Hsieh: So it's about the patient experience that you comment frequently about. So in the context of co-formulation with CT-388, I'm curious about your take on how important it is to harmonize the number of step-ups between, let's say, petrelintide and CT-388 in the titration step, especially given the tolerability profile, incretins will likely need a more prolonged titration period. So that's question number one. Question number 2 has to do with another adverse event profile that was raised during the conference, which is fatigue. Based on our KOL discussions, I think this is probably one of the overlooked adverse events affecting patients' quality of life. That number appeared to be numerically higher than what we've seen. So I'm just curious about your take on this and also what you've seen with petrelintide clinical trial experience. Adam Steensberg: Thanks for the question. Maybe I can just start and hand over to you again, David. I think as we have also said all the time, it is about time to move beyond the weight loss Olympics, not only because it's not what patients are looking for, but it's also a clear observation on our end at least. And I would also say maybe you see that in some of these dataset, if you go too aggressive with very potent biology as we have today, especially in the start, you might actually introduce situations you're not looking for. And our observation, and you will also see that in earlier study data from several [ amylin ], you don't want to push this too much in the start. Could that be driving some of the fatigue that you're seeing? Maybe if you have a, let's say, 4% weight loss over 1 week, that's probably not that, that could be a fluid that you lose and how would that make the patients behave. So recognizing that we work with extremely potent biology, as David also mentioned before, who would have thought that you could achieve a 20% weight loss with a pharmacological intervention just a few years back. And here we are, but you have to be careful and otherwise, you may see things you don't like. So that is a key observation. When we look at our studies, we have not seen it in our programs thus far, signs of fatigue. So -- but again, let's see, we, as you know, apply actually titration throughout our entire phase of all cohorts in our Phase II study, something that was -- has not always been done with other programs. So -- and so far, we have not seen it. On the titration steps, before handing over to you, David, I also just want to mention, I mean, what we have seen thus far is that amylin actually deliver weight loss even at the initial doses. And it's, of course, clear that ultimately, when we titrate together with the GLP-1, it will be the GLP-1 that determines how to titrate because those are the ones that really need titration from a GI tolerability approach. David? David Kendall: Yes, I'll reemphasize that, Andy, and harmonizing those, I think, gives us the opportunity, as I said, to find what is the most applicable dose escalation scheme for petrelintide to get to what we hope is maximal dose with very good tolerability. As Adam said, we've seen less fatigue than in our placebo-treated subjects in the Phase I trial and very limited GI tolerability issues, that would allow you to either simplify the addition of very low dose incretin-based therapy. So it would further slowdown to get to not a maximal dose as is often done in Phase III trials or Phase III to see the maximum weight loss. But an optimized dose, let's say, dose 3 of the 388 compound and dose 5 of the petrelintide compound is what the alignment looks like. We would base that on the petrelintide dose escalation scheme monthly as what we're testing in Phase II and Phase III. So the question is then how do you formulate a fixed-dose combo to get to the optimize, not maximal dose of 388. So this is not simple math. I think we have our manufacturing team on edge for the types of combinations that are possible. But this work is well underway, and I think will allow us to do exactly what we set out to do, which is to find a very effective therapy that optimizes tolerability while still leveraging the efficacy of both components. Operator: We will take our next question. Your next question comes from the line of Kerry Holford from Berenberg. Kerry Holford: Mine is more bigger picture with regard to the market and your expectations here. So clearly, since the last update, we've had Lilly Trump deal. We now have clarity on pricing in the U.S. [indiscernible] cash pay in the Medicare channel. So I would just be interested to hear how that deal and the details that we have so far may be impacting yours and Roche's forecast and the opportunity for your next-gen obesity pipeline assets? Will it essentially now be more difficult for you to unlock the value and deliver strong returns in this market? Just your thoughts from that big picture perspective. Adam Steensberg: Thank you for that question. And we will -- actually at our Capital Markets Day in December 11, address our considerations about the current market dynamics in more detail. But maybe just to share a few considerations. I think it's a very dynamic market right now. We have already seen that a very large part of the uptake has been in the direct-to-consumer space where prices have been lower than the list prices. And we've also seen rebating in this space when it comes to the commercial channel. So it's actually a blessing to be where we are right now where we can learn from these dynamics and then design our programs and go-to-market strategy together with Roche according to those dynamics and how we think they will play out in the future. That allows us to actually define the future instead of just trying to tap into something that work. On the value opportunity, I think the key single most important parameter to unlock the value in this market and actually truly address the obesity pandemic, that is to develop therapies that patients will stay on and thus increase the volume of patients who get to these therapies. It's a huge problem that in today's market, many patients would use the GLP-1-based offerings as a little bit of an [ event-based ] therapy with the majority of patients being off therapy within a year. And a lot of that has to do with side effects we know from IQVIA data. So we focus to unlock the value of this market and to change -- to get excitement into this space again, I truly believe is by making sure you develop therapies that people can stay on and thus, you will see the volumes go up. And then the pricing part that people like to discuss so much is less of an issue as long as people stay on therapy. It's only an issue if you only stay on therapy for 1 to 3 months, and then you need to go out and find a new patient to capture that value you lose by the patient stop taking it. So we actually like the clarity that we see more and more clarity. We understand that it's still a very dynamic market. We would expect to see a significant number of changes in the coming years. And together with Roche, we would build our go-to-market models accordingly. Operator: We will take our next question, and the question comes from the line of Prakhar Agrawal from Cantor Fitzgerald. Prakhar Agrawal: Congrats on the quarter. So I had a few. Maybe firstly, going back to receptor biology. [indiscernible] is having elora as a more selective amylin, especially on amylin 1 receptor and seems to be balanced on amylin 3 and calcitonin. So maybe if you could talk about whether potently targeting amylin 1 versus amylin 3 receptor has any clinical implications in obesity and beyond. And if you can remind us about petrelintide's activity on amylin 1 versus 3 receptors? And secondly, on the trial for Phase IIb ZUPREME-1, if can you talk about how the discontinuation rates are trending as it has been an issue with some of the recent trials? And when you disclose the data next year, whether you will disclose both efficacy and treatment regimen demand when the data disclosed? Adam Steensberg: I'll start and hand over to you, David. And we do expect to disclose the top line efficacy data from both estimates, I would expect, including the relevant safety observations when we disclose the data. On the receptor profile, if you look into preclinical data, I remind you that both we and Novo had a firm effort for many, many years and came out with balanced profiles towards these receptors. And as David just alluded to, probably quite a few of the molecules we're looking at right now have some receptor activation on all 3. We have one which is quite similar, we believe, to the one that petrelintide has. Ultimately, we need, as David also said, to see clinical data. When we look at the early clinical exposure for which we have -- actually have among the different amylin molecules, that is where we see -- get a lot of confidence in our approach if you start to compare, let's say, the single ascending dose studies across the different molecules where we have data now available and published both from us, but also the competing programs. And if you then account for female to male, BMI and other aspects. But the single ascending dose data, probably some of the more honest datasets here where there's less bias, that gives us a lot of confidence and the robustness of our observations where we have not seen some side effects in one study and then others in another one, the first one disappearing, we have a very robust dataset, which suggests that we have a profile of a drug that has found the right balance between efficacy and safety tolerability. So -- and we will review more of this at our Capital Markets Day, which will answer probably in more detail some of these questions. And David, I don't know if you have more to... David Kendall: Thanks, Prakhar. And I think as you and we are learning this receptor biology, when it's assessed in vitro, looking at receptor occupancy and activation doesn't necessarily provide the entire clinical picture. And as Adam said, cagri and petrelintide are clearly balanced receptor agonists activate all 3 receptors in our hands with equal potency. [ The Gubra now AbbVie ] asset is similar in our hands, slightly greater predilection for the amylin than the calcitonin receptor. And the Lilly molecule, eloralintide while touted to be amylin more specific, it clearly had GI tolerability issues associated with it, something that calcitonin receptor dialing back has been touted to improve, but hasn't been demonstrated clinically to demonstrate. I think the other point that Adam makes that's critically important is regardless of this, how does the clinical safety and tolerability and efficacy profile lineup using the elora data as an example. There were in the early phase trials, an increase in the number of headaches, whereas with petrelintide, we've seen less headache than with placebo. The newly reported adverse effect of bradycardia, bradyarrhythmia and syncope reported in the elora trial is unique amongst this class to my knowledge. I have no idea if that's related to receptor biology or other mechanisms. Again, the clean profile and the balanced agonism of both cagrilintide now through Phase III and our Phase Ib data and beyond for petrelintide give us great confidence that, that is not only an acceptable receptor profile, it is an incredibly effective and well-tolerated profile. Operator: We will take our next question. Your next question comes from the line of Yihan Li from Barclays. Yihan Li: Yihan Li from Barclays. So we have 2. So the first one is the petrelintide Phase III timing. So it seems like you have already completed the end of Phase II meeting with the FDA. So just curious if you could walk us through what remains before initiating the Phase III monotherapy trial, which is now planned in the second half of next year, especially given your competitor, Eli Lilly, actually, they moved very fast for the Phase III will start by year-end. And the second question actually is on eloralintide, the MASH data. So again, like they showed 60% to 70% of the MASH reduction from [indiscernible] and also the other 30% from the [indiscernible]. However, an interesting thing is that it doesn't seem to have a continued decline in the lean MASH from the week 24 to week 48. So suggesting the lean MASH loss could potentially stabilize after 24 weeks. I'm just like curious, does this suggest maybe amylin-based therapy could inherently preserve lean MASH better over time? Like any thoughts will be appreciated because I'm just thinking like amylin could be used as a post GLP-1. So just curious what your thoughts there. Adam Steensberg: Thank you for that question. And I can reassure you that we are moving as fast as possible forward to Phase III initiation with petrelintide. Right now, our expectation would be second half of next year and as we have communicated today, we have reached the primary endpoint of the study. And we are, of course, also anticipating a meeting with FDA as fast as possible once these data has been analyzed and progressing as fast as possible. So -- and top line data will be available first half next year. So it's a shared commitment from Roche and us to accelerate as much as possible to get these treatments to patients ultimately and help achieve their health goals. So this is progressing with a high sense of urgency, but the Phase III start is set for second half next year. I think we need to actually wait for our Phase II data with petrelintide before we will comment more on the balance between muscle and fat preservation. Remember, we use MRI as an assessment of body composition, which is a much more precise mechanism than the [ DEXA ] scans that have been utilized by other companies. We, as everyone know, have seen extremely strong preclinical evidence for muscle preservation with the amylin class, and we need to now see human evidence before addressing this more, and we think we will get some, at least high-quality data from our Phase II study, which will be able to address this in more detail. Operator: We will take our next question. Your next question comes from the line of Theodora Rowe Beadle from GS. Theodora Beadle: Thank you very for taking my questions based on dapiglutide, if that's okay. So firstly, why did you take the decision now to pause the development of the dapiglutide rather than further exploring the potential anti-inflammatory benefits? Has there been some data generated internally, for example, that could drive that decision? And then secondly, could there be developments elsewhere in the space that change your thinking on dapiglutide? So specifically thinking about if Novo show a benefit in Alzheimer's in the evoke trial? Adam Steensberg: Thank you for that question. And as we have indicated today, we have decided to pause the program because we do recognize that it's a very attractive profile, both with the clinical profile we have seen thus far and also its potential to lower inflammation even further than the existing GLP-1s. We actually think it's probably the most differentiated GLP-1 containing mid-stage development candidate. The decision has been reached now partly, as I explained, due to the fact that we have CT-388 where we can -- as we will combine with amylin, also, of course, very much because we see now -- we see survodutide approaching, but then also just realizing that the investments needed to show the clinical differentiation and then the need for clinical -- the amount of clinical differentiation you would have to demonstrate if you launch a GLP-1-based therapy in the [ '30s ], it's a very, very high bar to pass due to the competitiveness within the GLP-1 class of medicines. And that's coming back to why we are so excited about the amylin class because it's an alternative. And if you think about how you manage chronic therapies, normally, if you cannot achieve your goal with one class, then you move on to the next. And if you need more, then you start to combine. So -- and if you then -- and we'll talk much more about that at our Capital Markets Day, consider the rich pipeline we have of early-stage assets, we have really taken a view that there's significant higher value creation opportunities by investing in these next opportunities for which we have some -- we consider at least very good ideas for how to drive the next wave of innovation and differentiation in this space. So for us, it was not, as you can imagine, an easy decision since the molecule actually looks very strong, but we also think we have so much exciting opportunities in our pipeline that the money are actually more wisely spent there. Operator: We will take our next question. Your next question comes from the line of [indiscernible] from UBS. Unknown Analyst: Just on survodutide. So you'll probably cover this more at your CMD, but in terms of the Phase III readout in the first half of next year, where do you expect tolerability will likely land considering that in the Phase II data we've seen so far, there's a pretty high level of GI toxicity? Adam Steensberg: Thank you for that question. And we, of course, soon will have the data. And please also remember that the Phase II study design, if you compare the safety or tolerability profile with the Phase II studies of -- of some of the marketed products, you will actually see a quite similar profile of tolerability. So we, of course, what we expect with survodutide is a comparable tolerability profile to the existing molecules and also a comparable weight loss. The true opportunity for differentiation is the activation of lipolysis with glucagon and thus providing better liver health as we saw with the MASH program. Also remember that Boehringer is actually pursuing higher doses in the Phase II than what they -- in the Phase III than what they did in Phase II. And that gives us a lot of confidence that by using -- applying the right titration being flexible around how you titrate as you have to be with GLP-1 allows them to go much higher. They have already tested that higher dose in the MASH population in Phase II, which is applied in the Phase III program for obesity. So we have a lot of confidence that the profile will come across as a very strong and effective GLP-1-based therapy with a tolerability profile that is comparable to what's on the market today and a clear edge towards their health. Operator: We will take our final question, and your final question comes from the line of Mohit Bansal from Wells Fargo. Mohit Bansal: So a couple of questions from my side. First of all, so given that with CagriSema, we saw a little bit of tolerability when you combine GLP-1 with amylin. And I fully appreciate the sentiment that combining GLP-1 and amylin could be interesting. But at the same time, do you -- given that amylin does have some GI tolerability issues, and it could compound with the GLP-1. So do you think the better use of amylin could be more of an immunotherapy versus a combo therapy, maybe in post-GLP setting or maybe as a monotherapy in the frontline setting? So that's first question. And second question is, we saw with eloralintide that, I mean, Phase I was -- tolerability was better versus Phase II, we saw a little bit higher GI issues. So in that context, I mean, what do you expect with petrelintide in terms of tolerability in Phase II trial as you see data in more patients? Adam Steensberg: Thank you for your question. And we definitely see amylins in particular, petrelintide having the potential to become a foundational and first-line therapy, a first choice therapy. I think what many have not really thought deeply about today is that, and we've -- yes, I think we all recognize that GLP-1 for many patients are difficult to tolerate. Many patients accept these therapies today because there's no alternative. What will the conversation be if there is a more tolerable approach to weight loss? Then you don't talk about will you tolerate it, then you will start to have a conversation, will you accept the tolerability profile of a GLP-1 if you can actually experience a more pleasant weight loss on a different modality. I think that's what we have to think about now. So that -- and that's what excites us and why we believe we have the potential to drive first choice and foundation therapy. So we definitely see, as we have said all the time, the biggest opportunity for monotherapy as an alternative and a first choice treatment for obese individuals who want to lose weight and importantly, maintain that weight loss because that is the key to unlock the value of this market is to make patients stay on therapy so they don't regain weight, and it's also the key then to achieve the health benefit. If people don't stay on therapy and they regain weight, they will not achieve the health benefit. There's also significant potential for combination therapy, but that would be for the most [indiscernible] patients living, for instance, with type 2 diabetes. As David also alluded to before, we have a different approach to the combination where we want to max out, if you will, on the amylin component, which we consider the more tolerable part of the combination and then just add a teaspoon of the GLP-1 component. And thus, we expect to have a more tolerable approach to that combination that maybe has been seen with other approaches to combination. So again, on the expectation for our Phase II study, we have -- as you can hear, we have a high level of excitement and high expectations for the profile that we will see with our upcoming 42-week data with petrelintide. Thank you. Operator: This concludes today's question-and-answer session. I will now hand back for closing remarks. Adam Steensberg: Thank you all for attending and for your questions. We look forward to future announcements and updates and to connecting in the coming weeks and months. Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Rajeev Sethi: Sure. Thank you, Christopher, and good afternoon, everyone. And thank you all of you for joining in today. Today is an important day. It's the first full quarter of XLSMART's journey. Just to remind you, our merger happened 15th of April -- 16th of April. So the last quarter was 2.5 months of combined operations. This time, it's the first full quarter, and the numbers which we are reporting are a result of that. And I'm pleased to share that the momentum continues to build across our businesses. We've delivered a strong performance. Revenue -- reported revenue is up 38% year-on-year, 9% quarter-on-quarter, underpinned by very strong subscriber quality, improving ARPU and good progress which we are making on the integration. Network integration specifically is progressing well. As you would know, national roaming for Smartfren customers was completed in record time. The MOCN rollout continues to expand, improving both coverage and quality for all our customers. Financially, we are seeing a very healthy growth, underlying growth. Normalized EBITDA and PAT reflect the strength of our core businesses, though the reported results still include temporary one-offs, which are normal for a merger, and they are related to integration and asset optimization. Synergies are taking shape. We'll speak a bit more about that in the next few slides. And we are accelerating value creation across operations, procurement and infrastructure. These initiatives are moving us steadily towards our ambition to become the industry's most efficient and agile service provider. Overall, I believe this quarter demonstrates resilience and strong execution as XLSMART continues to unlock long-term value from the merger. If I move to the next slide, post-merger, our integration engine is running at full speed. One example of that is our Customer Experience and Service Operations Center, CESOC, which was launched in July, a major milestone that allows us to centralize network monitoring, service quality and field operations across all the 3 brands we have. On the network side, we've started and progressed significantly towards consolidating overlapping sites, streamlining our vendor ecosystem and optimizing the tower utilization. All these efforts are resulting in tangible cost savings. I'm happy to report that we are on track to deliver between $150 million to $200 million synergies for this financial year 2025, largely coming from operational efficiencies and vendor rationalization. Full benefits, what we spoke about earlier, $300 million to $400 million run rate pretax. That will come from -- after the integration is complete, but good, solid start towards that direction. Obviously, the next in pipeline would be the IT system unification, which again would be a significant value generator, office integration and expanding our partnerships on the roaming side. And we'll also further align the organization to operate as one unified XLSMART. If I move to the next slide, please, which is talking about the customer experience. As we said earlier, customers and employees will remain at the forefront of whatever we do. Both quality and coverage of our network would be super important in this regard. And through MOCN integration, all 3 brand users, XL, AXIS and Smartfren, are experiencing much better download speed. They have gone up by as much as 70%. And the population coverage, specifically for Smartfren, has gone up by 38%. These network improvements translate directly to a better quality of service, which is a very key differentiator in today's competitive network telecom operations. We also celebrated our National Customer Day in September with nationwide campaigns through XL Point and SmartPoint, reinforcing our commitment to customer loyalty and engagement. We received significant positive feedback, and which is a clear sign that our investments are making a real impact on the ground. If I move to the next, which is on the network update. We have now integrated over 15,000 sites, which is close to 1/3 of the number of sites which we have to integrate, and extended network access for Smartfren users to 192 cities through national roaming. Our total BTS count reached more than 209,000 sites, up 27% year-on-year, with majority being on 4G. MOCN integration is on track to complete by the first half 2026, which is within the 4 quarters of the start of this project. And the results are already visible, as I spoke about earlier, better coverage, higher speeds and more consistent services across geographies. If I have to cite an example, this was the 2025 MotoGP event in Mandalika, where our network handled massive traffic volumes very easily, proving our readiness to deliver world-class connectivity across the country. If I move to the next slide, which talks about the 3 growth pillars. And this is something we've been talking about and we are very excited about. The 3 growth pillars, Mobile, Enterprise and Home. And each pillar by itself represents a focused growth engine, and it has a distinct strategic focus. But collectively, all of these will contribute to company's mission of connecting every Indonesian to a better life. If I talk about the first pillar, which is Mobile, it is represented by our 3 brands, XL, AXIS and Smartfren. I strongly believe that the multi-brand approach enables us to effectively target different customer segments, and it's a unique strength we have as compared to other operators in the market. And post integration, we have seen encouraging momentum driven by a simplified starter pack strategy and optimized product offerings, which is supporting a stronger market recovery and I'm sure will help sustain future ARPU growth also. We're also driving digital engagement through all the apps we have on XLSMART, MyXL, AXISNet, mySmartfren, which is now reaching more than 39 million active users on a monthly basis, which is up 21% year-on-year. This, of course, helps in improving customer stickiness and monetization. The second pillar is Enterprise, which we work under the brand XLSMART for Business. Here, our focus is to become a trusted partner for Indonesia's digital transformation for both private sector and also the government clients. A key milestone in this journey was the launch of ESTA Enterprise Smart Technology and Automation, which was launched in July '25. ESTA provides a full suite of industry solutions across connectivity, IoT, cloud, cybersecurity and automation. This will help position XLSMART not just as a telco, but as a strategic ecosystem partner, enabling digital transformation beyond connectivity. The third pillar is Home, anchored by our brand XL SATU, which continues to gain strong traction in Indonesia's fixed broadband market. We are reinforcing our position as one of the leading fixed broadband providers by focusing on user experience, flexibility and family-oriented solutions with the effort to stabilize the ARPU. XL SATU continues to drive deeper household penetration and strengthen customer loyalty, which is a key differentiator in this competitive market. So if I have to summarize, XLSMART's growth is fueled by these 3 complementary pillars, Mobile, Enterprise and Home, each targeting a unique opportunity while collectively driving sustainable long-term growth for the company. If I move to the next slide, Slide #9. It's talking a bit more about the enterprise business. And as I said, this is expanding rapidly, powered by the launch of ESTA. And it's a comprehensive digital suite, as I spoke about earlier. We also hosted BRAVO 500 Summit in collaboration with Ministry of Digital and Information, bringing together 500 of Indonesia's leading corporations. Our enterprise solutions now reach key verticals such as financial services, manufacturing, logistics, health care and natural resources, combining ICT services and big data analytics to deliver smarter and more integrated outcomes. We believe momentum is strong, and we see continued opportunities and more industries accelerate digital adoption. I'll take a pause now and hand over to my colleague, Pak Antony, to walk us through the financial results. Antony Susilo: Okay. Thank you, Pak Rajeev. I think the next topic will be the financial and operational highlights. Let me start with the operational performance first. So at the end of the quarter 3, our consolidated subscriber base already around 79.6 million customer base, reflecting a normalization following to our starter pack price adjustment, which is, I think, last -- the latest one that we did for Smartfren brand in the month of July or August. So all the 3 product brands starter pack already now, already adjusted. That's the situation on the starter pack price. Then on the -- what we call on the data traffic, I think despite of the decline in the subscriber count, the data traffic continued to grow, reaching to 3.9 exabyte or 3,900 petabytes, up to 53% year-on-year and 2% quarter-on-quarter. The ARPU improved to become IDR 38.9, blended ARPU, this one, from IDR 35,500 last quarter. This is a double-digit growth, which is around 10% Q-on-Q, highlighting our focus on -- focusing on the quality growth as well as the customer value. Okay. Moving to the next slide to the financials. The revenue grew by 38% year-on-year and 9% quarter-on-quarter to IDR 11.5 trillion, driven by the full quarter consolidation of Smartfren and higher mobile ARPU. The normalized EBITDA reached to IDR 5.4 trillion, up to -- increased 9% Q-on-Q and 24% year-on-year. This is reflecting the underlying strength despite of the ongoing integration costs. The reported PAT improved to a loss of IDR 1.38 trillion, while if you look at the normalized PAT, the normalized PAT already turned positive at IDR 1.15 trillion. This is, of course, after the adjustment of the one-off expenses, which is the accelerated depreciation, noncash item and also the one-off integration costs. The margins are stable, with the normalized EBITDA margin at around 47%. These trends actually confirms that the integration is progressing smoothly and the synergy already captured starting -- is already starting to flow through our financial numbers. Okay. Move on. This is maybe to give another explanation how do we calculate the normalized PAT, normalized profit after tax. In here, we are presenting both reported as well as the normalized EBITDA and PAT to provide a clear picture of the underlying performance during the integration period. The normalized figure already exclude one-off items such as integration costs. Number two is the accelerated depreciation, which is related, of course, to network consolidation. And then in Q3 2025, you can see that the reported EBITDA was IDR 4.9 trillion, with the normalization adding from IDR 554 billion in integration expenses. So it brings to the normalized EBITDA to around IDR 5.4 trillion. The reported PAT stood at a loss of IDR 1.38 trillion. But after adjusting all these integration costs, accelerated depreciation and asset impairment, the normalized PAT become positive at IDR 1.15 trillion. This approach basically to ensure we want -- if we want to compare with the previous year. So this is to show a better comparability and better to reflect the company operational performance. Okay. Move on to the next slide. So let me now walk through on the cost structure, our operating expenses. So OpEx increased by 10% quarter-on-quarter and 66% year-on-year, reaching to IDR 6.6 trillion in the third quarter 2025. This increase reflects the enlarged scale of our business because it's a consolidation of Smartfren and XL. So this is already including the -- including a higher infrastructure as well as the regulatory costs, as well as all the integration related activities. Of course, we remain disciplined on the cost management, ensuring that all the expenditures are tightly linked to the synergy realization and also creating long-term values. So that's the end of my presentation. I shall now hand over back to Pak Rajeev to provide the full year 2025 guidance, as well as the closing remarks. Rajeev Sethi: Sure. And thank you, Pak Antony. As Pak Antony mentioned, I'll talk about what's our guidance for 2025 full year. Revenue is expected to grow broadly in line with the market. On a reported basis, growth is expected to be between 20% to 25% year-on-year. EBITDA margin will remain between low to mid-40s range, mid- to 40% range. On CapEx, the capitalized CapEx is projected to be around IDR 10 trillion. And I think it requires a bit of a clarification. This is not a reduction in the investment. If you remember, when we spoke last time, we spoke about a number close to IDR 20 trillion. The orders which we'll be releasing to our vendors would be still close to that number. But what we'll be able to capitalize, which is put on air and start using, and therefore capitalized, would be a number which is close to IDR 10 trillion. And that's the number which we are stating here. The capitalized CapEx would be around IDR 10 trillion for this year. Synergy guidance, last time when we spoke, we gave a guidance of between $100 million to $200 million for this year. This year, we are revising it to the upward part of that guidance between USD 150 million to USD 200 million. It's driven by stronger-than-expected network and vendor efficiencies. We also remain on track to achieve our full synergy potential of $300 million to $400 million annually pretax once the integration is fully completed. And with this, our summary for the third quarter '25 ends, and I hand it back to Chris to take it further. Christopher Kusumowidagdo: Thank you, Pak Rajeev and Pak Antony for the presentations. [Operator Instructions] The first question comes from the line of Piyush Choudhary from HSBC. There are two questions. The first one is -- sorry, there are three questions. The first one is what is the like-for-like -- like-to-like mobile service revenue growth Q-on-Q in third quarter 2025, as 2Q does not have the full impact of merger? I think -- then second question, what is the breakdown of revenue in 3Q into your 3 segments, Mobile, Enterprise and Home? And the third one is normalized EBITDA margin is 47%. Where do you expect normalized margin to be, post-merger integration? For these questions, I would like to invite Pak David to answer the first question. David Oses: Okay. I'll take the first one, Piyush. So the like-to-like mobile service revenue growth quarter-on-quarter will be at 5%. Like-to-like will be at 5%. To the second part of your question about the initiatives taken to increase the mobile ARPU, I can share that, as you can see, we had a double-digit ARPU growth quarter-on-quarter. This has been done by many things, but we have taken out a lot of freebies. We have increased prices by taking discounts out. We have also increased minimum prices, especially in our personalized offers. So we have done a bunch of things in our very clear strategy to focus on quality subscribers. Now you can see, I think you can calculate as well that the yield, the revenue per gigabyte has increased high single digit, well, around 6% quarter-on-quarter. So the yield increased 6% quarter-on-quarter. This means that the revenue that we are getting for each of the gigabytes is increasing, that our prices per gigabyte have increased. So out of the ARPU double-digit growth, from 10%, we can say that more than half is due to the price increases. The other comes from more usage per subscriber. And again, how did we increase the prices? As I was saying, taking freebies out, increasing prices literally nominally, taking some discounts out, increasing minimum prices in personalized offers, et cetera, et cetera. For the second question, I will pass it to our CFO. Antony Susilo: Okay. The second question is about the breakdown of the revenues into 3 segments, Mobile, Enterprise and Home. I think just to give rough figures on the Mobile segment, it contributes around 80% to 82% contribution of revenue. And then Enterprise is around 10%. And Home is the smallest one. It's around, I think, around 6% -- 5% to 6%. So I think that's the breakdown of the revenues. And then number three, the question is about the normalized EBITDA margin, which is 47%. Where do you expect normalized margin after post-merger integration? Okay. So I think we know that this normalized EBITDA margin is already taking out the integration costs, which is, I think, what contributes a significant amount. But I think post-integration, which is after the next 2 years, 2028, I believe, because our plan to do the integration, everything to be completed within 8 quarters. So we are hoping that, of course, this EBITDA margin, 47% will even further improve because the company management always trying to do the cost efficiencies program, trying to make sure that we are aligned with the plan that we have, which is, of course, it's a cost efficiency program. So we are expecting a higher EBITDA margin similar to the other telco players. Christopher Kusumowidagdo: Thank you, Antony. Can you [indiscernible]. Hi Piyush. Piyush Choudhary: Could you also be able to share what's the breakup of your EBITDA margin among the 3 segments, Mobile, Enterprise and Home, at the moment? And one more, like David, are there any kind of incremental initiatives being taken in fourth quarter to further kind of enhance the mobile ARPU? And how are the kind of economic trends at the moment? If you can throw some light on October trends? Antony Susilo: Okay. On the breakdown of the EBITDA per business segment, I think, unfortunately, we don't really make that specific analysis because most of the cost is a common cost. So I think we only measure the -- what we call the direct EBITDA -- the direct gross profit. But I think from EBITDA point of view, I think we prefer to do it as a total basis rather than doing it for 3 segments. David Oses: Okay. So regarding this fourth quarter, yes, we have additional initiatives planned in order to increase the ARPU, one of them being price increases. So we are going to have, I would say, significant price increases in the different portfolios of our 3 brands in the coming weeks. As I was mentioning in our strategy of focusing on value customers, so far, it's looking good. So we are happy with the results. So we are going to continue in that direction. And the next step will be to increment prices of our value propositions, specifically in certain specific products. There was any other question? Piyush Choudhary: Thanks, David. So have these price initiatives already been done in October, or it's something which is planned for future? David Oses: So we are on it. So some small things have been done, some will be done almost -- I won't say as we speak, but relatively soon. Christopher Kusumowidagdo: Let's move on to the next question from [ Irwin Vijaya ] from [ Adana ]. Two questions. First one is, are you going to distribute 100% of the proceeds from treasury share as dividend? And then second one is how much restructuring costs do you have left? Or when will things normalize? I think for both questions, we can -- Pak Antony can answer. Antony Susilo: Okay. Thank you, Pak Irwin. I think -- yes, I think in terms of dividend, I think I forgot to mention it earlier on that one. So like this. I think there is no such relation in terms of the treasury shares that we sold, I think, last month with the dividend amount that we want to distribute. Yes, indeed, that the company was like to do a dividend distribution, which is I think we would like to seek approval from the shareholders where the EGMS will be done next week on Friday. So why the company would like to give the dividend distribution, I think as you can see in our Q3 performance results that it shows that actually, we are -- we can reach to a normalized PAT positive around IDR 1.8 trillion. So this is a healthier -- healthy indicators actually for the company because we can see that some of the performance, the costs, as well as the revenues is improving. So with that reason, then the company would like to distribute the dividends. In terms of cash flow, I think the cash -- how to fund these dividends, it's going to be done through our internal cash from the operations. Today, the company is sitting at a cash balance around more than IDR 4 trillion. So with that one, I think we are able to do a dividend distribution. So all in all, I think the dividends will be approved by the shareholders next week, waiting for the news for this to everybody on this subject. And then on the second question about the restructuring cost, actually, this is not a restructuring cost. I think if you are referring to integration costs because we are not doing any restructuring. It's only integrations. In terms of integration costs, I think you saw it from the slides that total integration cost that we have incurred this year until September 2025 is IDR 1 trillion. The target -- our budget for integration cost for this year is around IDR 1.5 trillion. So the remaining is around IDR 500 billion that maybe this one will be materializing in the next quarter, in the Q4. And when the things will be normalized, I think like I mentioned that the integration period will happen in the next 8 quarters. So I think this is the first -- the fourth quarter, 3 quarters already, Q2, Q3, actually second -- 2 quarters, actually. And then Q4, 3 quarters, hopefully, everything will be normalized starting 2027. Okay. So that's the answer, Pak Irwin. Christopher Kusumowidagdo: Thank you, Antony. Pak Irwin, do you have any follow-up questions? Unknown Analyst: No, thank you. Everything's clear. Christopher Kusumowidagdo: Let's move on now to the next question. This comes from the line of Ranjan Sharma from JPMorgan. What is the -- there is one question. What is the difference between CapEx guidance in 3Q to the one in given in 2Q? And what is the capitalized CapEx for this year? I think for this question, I would like to invite Pak Antony again to address the question. Antony Susilo: Okay. The -- yes, indeed, that the CapEx guidance for second quarter and third quarters, if you look at the figures, was different. I think the difference was because that initially in the second quarter, when we give the guidance around IDR 20 trillion to IDR 25 trillion, that one was on the early post-merger indication, where at that time, we use a PO issuance amount at around IDR 20 trillion to IDR 25 trillion that we want to spend for integration. However, I think we understand that we may want to use a capitalized CapEx instead of PO issuance. So in terms of capitalized CapEx, if we make some estimation this year, this year, approximately around IDR 10 trillion. So we are not changing the -- or making a revision on the CapEx amount. It's -- the amount is still the same in terms of PO issuance around that, IDR 20 trillion to IDR 25 trillion. However, capitalized CapEx is around IDR 10 trillion. For -- I think for Q3, I think we already booked capitalized CapEx around IDR 4 trillion to IDR 5 trillion. So the remaining IDR 5 trillion maybe comes in the Q4 2025. That's the answer Pak Sachin. Christopher Kusumowidagdo: Thank you, Pak Antony. Sachin -- sorry, Ranjan, do you have any follow-up question? Ranjan Sharma: Can I just check one more thing? Did you say you're looking to pay a dividend? Because in the last quarter, you were saying you will not pay dividend for 2 years. Antony Susilo: Yes, indeed, indeed. I think -- correct, I mean, we -- I think I remember last quarter, we think that we will not be able to pay dividends next year actually. Because the company, if you look at the PAT numbers is negative, right? So we will not be able to give a dividend next year. However, we see that there is an opportunity for us to give the dividend distribution this year. Because our -- basically, dividend normally is following the previous year profit, right? So I think if you look at the -- also following the OJK regulations, that we are allowed to give a dividend within this year. So with that consideration from the OJK regulations, from the company performance, the cash situations, so we decided that to give distribution -- dividend distribution to the shareholders. So -- but of course, this is subject to approval from the shareholders here next week. Ranjan Sharma: Sorry. So you're not looking to pay a dividend next year, but you want to pay a dividend for this year? Antony Susilo: Next year, unfortunately, looking at the numbers, we are not allowed to. Because it's a negative retained earnings. At this moment, Q3, I think we see that PAT is negative, right? So we will do it this year. So it's like maybe we can say as an acceleration. Ranjan Sharma: Okay. It's interesting because if I look at your balance sheet and your cash flows, they don't seem in the best position, right? So I'm just surprised to hear you're looking to pay a dividend. Antony Susilo: Well, from our point of view, when we look at our balance sheet cash flow also, I think we are still in the safe position. Like, for example, the gearing ratio, I think we are still below 4. So I think there is -- I mean, by giving this dividend distribution, we are not impacting to any -- to the ratios of the company. So with that one, I think we can -- we are able -- we have some capacity -- we have capability to pay dividend. Christopher Kusumowidagdo: The next question comes from Sachin, Sachin Mittal from DBS. So does revised lower CapEx include integration CapEx? I think this has -- yes, I think Pak Antony has already addressed on CapEx, but you might want to clarify whether this includes integration CapEx, Pak Antony? Antony Susilo: This CapEx, yes, includes integration CapEx. But again, like I mentioned, we don't make any revision on the CapEx amount. It's only that we -- now we are using capitalized CapEx instead of the PO issuance. I hope that one can answer, Sachin. Christopher Kusumowidagdo: Thank you, Pak Antony. Sachin, do you have any follow-up questions to the management? Sachin Mittal: Can you hear me now? Christopher Kusumowidagdo: Yes. Sachin Mittal: Okay. So I understand that you're taking now, longer time to basically to incur the CapEx. Again, I want to understand a little bit of what is the normalized level of CapEx because there is some integration CapEx involved, right? So how much is -- how do we think of the normalized CapEx? Because it seems like you're talking of now, 10 and 10, right, each year, FY '25 and FY '26. Is that the right way to think about it? Antony Susilo: For the integration CapEx, yes, we can say that. Although actually, the IDR 20 trillion, IDR 25 trillion over there is also consists of BAU CapEx. Some of them, yes. Rajeev Sethi: If I may just jump in here, Pak Antony. I would not want to classify this as integration CapEx because the -- as I think we spoke about last time also, it's just not about combining the two networks together where we are spending most of the money. It's readying the network for future, i.e., 5G, for example. So whatever network we are readying, it's readying for future. So it's very difficult to classify and say this is because of integration or this is for modernizing the network. The outcome would be a brand-new network ready for future. So that's one point. The second part is there is no change in the CapEx plan. It's just the way we were stating it earlier. When we spoke about CapEx earlier, IDR 20 trillion, IDR 25 trillion in 2025, it was largely the ordering amount. And that quantum of orders will go out during the course of this year. What we'll be able to put on here and capitalize, there is a process of getting the material in-house, putting it on our site, doing those acceptance tests, that will be around IDR 10 trillion, which again is as per the plan. It's only that earlier when we spoke about, we did not clarify that this is the ordering amount, the capitalization amount would be lower. So that's the second part. And I think one more part of your question was how much will this normalize into. I think after the integration phase is over, after the entire modernization is over, which should be done by -- largely by 2026, I think it will go back to a regular mid-teens level. That's the number which we anticipate in the long term. Christopher Kusumowidagdo: Thank you, Pak Rajeev. Let's move on to the next question. Sorry, Sachin, do you have any follow-up question before we move on? I think you have one question, follow-up on ARPU, please? Sachin Mittal: I mean, it's -- how are you seeing -- your subscriber decline was noteworthy, while other -- your peers did not see the subscriber decline. Was it too much sharp hike? And what does it mean for you in the current quarter? David Oses: Yes, correct. So -- and if you take a look to the subscriber changes, yes, with competitors and also ARPU changes, I think our ARPU growth, it's significantly higher than our competitors. Also, our subs decreased. As I was mentioning before, our ARPU increase comes mostly -- more than 50% from the yield increase. So we are able to monetize better the gigabytes and part also from the usage increase. Is it too much? No, it is not. Actually, again, you can see in the results that it's going in the correct direction. So those subscribers that we lost are -- I don't want to call them a user because they were using the portfolio that we have given to them, right, but are subscribers that were very low ARPU and/or very low yield. So those are subscribers that in our newer strategy don't have a fit in our company. Probably, they found somewhere better where they can -- at those low yields, et cetera, they can fulfill their needs. But I think our strategy is very clear, go for value subscribers. Having said that, again, in quarter 4, we expect -- we hope that the ARPU will keep increasing and that our strategy will keep moving in the same direction. As I was mentioning before, we already have aligned many price changes increases that we are going to implement in the coming days, and that some of which we have already been doing also in the personalized tiers, et cetera. Christopher Kusumowidagdo: Thank you, Pak David, for the clarification. Any follow-up questions? Sachin Mittal: No. Christopher Kusumowidagdo: Now let's move on to the next question from Henry Tedja from Mandiri Sekuritas. There are two questions. The first one, what is the -- what are the three drivers of purchase of bundled device and the software increase under the interconnection and other direct expenses? I think this is under the COGS. And second question is, could you share more details regarding the accelerated depreciation expenses increase? What kind of assets that drive the increase? I would like to invite Pak Antony to address the questions. Antony Susilo: Pak Henry, I think on the first question about the -- what are the key drivers for the increase on the COGS specific to the bundled device, I think as we explained, I think Pak Rajeev already explained that the company now focusing to the Enterprise segment. So like again, I explained, Enterprise segment contributes around 10% of the total XLSMART revenues. So because of this focus expanding this business segment, so we are sort of like have to purchase this device as well as the software to one of our enterprise clients. So of course, this, of course, is along with the increase of the revenue from the Enterprise as well. So I think that's on the explanation for number one. And number two, regarding the accelerated depreciation expense. Yes, I think this accelerated depreciation expense was -- resulted from the -- one of the example is the 900 megahertz spectrum. Because as we know that the company have to return the 900 megahertz spectrum to the government by end of 2026. So with that one, all the assets or the -- any equipment which is associated to 900 megahertz, we have to sort of like making an accelerated depreciation. And also another example also, we know that the company already choose the vendors to do the integration as well as the modernize the network, so -- which is the vendor is ZTE as well as Huawei. So the vendors that currently the existing equipment, which is not this ZTE or Huawei vendor, we have to do some dismantling. So we will not use this asset anymore. So with that one, we have -- also have to do some accelerated depreciation. So I hope that one can explain to you the nature of accelerated depreciation, yes. Why is it increased? Because we have to do it earlier, faster than the -- let's say it's supposed to be another 6 years, but now we have to do it within by end of 2026. Is that answering the question, Pak Henry? Henry Tedja: Perhaps if I can have two or more -- three questions. The first one, I guess, regarding the integration costs. I think you mentioned earlier that this year, the budget or the target will be IDR 1.5 trillion. So I'm just curious, how about next year? What will be the target for the integration cost next year and also for the accelerated expenses? And then the second question, I think regarding the CapEx, just to want to clarify. So does that mean out of IDR 20 trillion to IDR 25 trillion that was guided like the previous quarter, IDR 10 trillion will be capitalized and the rest will be expensed for this year? So that will be booked under the cash OpEx? And then perhaps the third one to Pak David. I think earlier, Piyush has asked about the latest economic trends. So I'm just curious how do we see the purchasing power in the last few weeks or in the last few months? So I think those are my three questions. Antony Susilo: Okay. Let me answer first on the question on the integration cost for the next year, yes. I think like I mentioned that I think the integration cost still continue until end of 2026 or maybe first quarter '27. So the amount of the integration cost, I will say that we don't have the numbers at this moment because we are still calculating the BP for 2026. But I think let's assume the same similar number, what we project. If let's say, this year is IDR 1.5 trillion, maybe approximately the same numbers, integration cost for next year. So that's on the integration cost. And then the second question is about -- second question, Pak Henry? Henry Tedja: Yes. The second question regarding the CapEx, you mentioned that some of the all capitalized. So I just want to clarify on that. Antony Susilo: Yes. So the PO amount, yes, it is around 20 to 25, but the capitalized CapEx is 10. But the remaining actually will not be -- we will not expense this. Or we call it as cash OpEx, no. But the remaining, I think, will happen -- will be materialized next year. So next year will be -- this sort of like will be carry over to next year, the remaining instead of OpEx. Still capitalized CapEx. Okay? So the next question. David Oses: Regarding the economic situation on the consumer side, to be honest, I mean, you can see the results. So for us, the last few months have been positive. I think we see a little bit more of confidence in the consumers, a little bit of [ reparation ], in that sense. Christopher Kusumowidagdo: Thank you, Pak David. Pak Henry, any follow-up questions? Henry Tedja: No. Thank you, Pak Chris. I think everything is clear. All the best for the management. Christopher Kusumowidagdo: All right. Now let's move on to the next question. I think we have the question from Arthur Pineda from Citi. There are one question. There is one question. Can you please remind us about your dividend policy? And do you pay this out of retained earnings or reported earnings? I think maybe, Pak Antony, you can clarify this later on. In addition, what are the considerations for paying for the dividend given that the company is targeting IDR 20 billion to IDR 25 trillion, which is above the operating cash flow? Pak Antony, maybe you would like to address this question. Antony Susilo: Okay. I think we know that our long-term goal is to deliver sustainable shareholders' returns. So I think looking -- as I already explained that the company show a negative PAT, not normalized PAT and the negative bottom line. So with that one, we expect that I think next year, there will be no dividend. So we think that we want to give the dividend within this year while we still can, still following the regulations. So I think with that one, with that consideration and also, of course, looking at our free cash flow and everything, balance sheet, I think it's doable from our side. I think when you mentioned about the IDR 20 trillion to IDR 25 trillion is above PCF. I think, again, like I mentioned, this IDR 20 trillion to IDR 25 trillion is a PO amount that we issued. But again, capitalized CapEx is only like half of it that we booked to our CapEx. This -- what you call, this year will be around IDR 10 trillion. And then from that one, actually, what I would like to say that we get soft payment terms from the vendor itself. So the IDR 10 trillion, although we separately capitalize it this year, we may not need to pay IDR 10 trillion to the vendors. So I think there are some agreement already from the -- from the vendor on the payment terms. So I think with that one, I think we are hoping that all of the shareholders agree for us to give the dividend distribution this year. Christopher Kusumowidagdo: Thank you, Pak Antony. Arthur, any follow-up question? Arthur Pineda: Just wanted to clarify with regard to the cash flow implications on CapEx. I know you mentioned IDR 10 trillion will be booked for this year and the PO is IDR 20 trillion to IDR 25 trillion. I'm just trying to figure out from a cash flow standpoint, how do we view this? The balance of around IDR 15 trillion, is that paid '26, '27? I'm just trying to figure out what it looks like from a cash flow standpoint. Antony Susilo: Yes. I think more or less, the payment will be done next year. But I think from the next year point of view, if I look at the capability from our side, let's say, we can generate like IDR 20 trillion cash flow from operation next year. So I think we are able to pay this CapEx PO. So I think well, maybe we may need to do -- bank some of the borrowings from the banks, but the amount may be not as big as like this CapEx because the plan to fund this PO from this CapEx will be funded majorly coming from our internal cash operations because we are able to generate like IDR 20 trillion per year. Arthur Pineda: Understood. I was just wondering in terms of the decision to pay the dividend now, given that I think there will be spectrum auctions coming up as well. How do you balance the deleveraging of the company and having the cash available for items like spectrum versus paying dividends upfront? I'm just wondering what the philosophy is and why pay now, given that there's still auctions coming? Antony Susilo: It's now or never. I think like I mentioned, next year, it will be difficult for us to give dividends. So the chance, the window of opportunity to give dividend only this year. And looking at the -- again, for me, I reemphasize that looking at our balance sheet, our P&L, our cash flow, it's doable. We can do it this year because like I mentioned also maybe the cash balance at this moment today, we have -- we are sitting like around IDR 4 million, almost IDR 5 trillion. This is our cash balance. So we are able to distribute the dividend. And the gearing ratio, I think, yes, we are still in the reasonable amount. We -- of course, we still monitor this, make sure it is not going to be beyond 4x, the gearing ratio. So with that consideration, that's why we are -- our intention, I think we can give dividend to the shareholders. Christopher Kusumowidagdo: Now let's move on to the next question From Bob Setiadi from CGS. Can you discuss about the accelerated depreciations? Are we going to see depreciation run rate in third Q for the next 6 quarters? Pak Antony, yes. Antony Susilo: Yes. I think, Bob, the accelerated depreciation, as I explained earlier, that this is related to the asset that we have to -- we will not use in the next -- after the integration, which is maybe one of the example, the 900 megahertz and also the other vendors, which is not being chosen one. So we have to do this accelerated depreciation because we will not use it. So are we going to see the depreciation run rate in the third quarter -- in the next 6 quarters? The answer is yes. By the end, I think until the integration period is over, expect hopefully, by -- hopefully, I would say by end of the December '26, next year, it's over. Then starting 2027, everything will be normal -- back to normal. Christopher Kusumowidagdo: Okay. Bob, any follow-up question for us? All right. Next question comes from [ Andy Kurniawan ]. So there are two questions. The first one is, can you share about the ARPU increase in average from your 3 brands, respectively? Was Smartfren increasing more by ARPU compared to your other brands in third quarter? And second one, has your subscriber decline Q-on-Q due to focus on quality subs? Can you share which brand that gave the contribution to the subscriber decline? Pak David, I'd like to invite to address. David Oses: Yes. So it's going to sound like a normalized answer, but to be honest, no. So Smartfren was not the one increasing more, the ARPU, and all the 3 brands have been in the same direction, both in the ARPU increase as well as in the subscriber rationalization. So we will have one of the brands with more or much higher percentage of the subscribers that left or the low-value subscribers. So it's been quite -- let me put it this way, democratic, both the ARPU increase as well the ARPU increase, the yield increase as well as the subscriber rationalization. Christopher Kusumowidagdo: Andy, do you have any follow-up question? Unknown Analyst: No, thank you. Christopher Kusumowidagdo: Let's move on to the question from Norman from CLSA. Congrats on strong ARPU uplift. First one on accelerated depreciation and impairment. Will we see more being booked in 4Q 2025? Second one is on OpEx. 10% Q-on-Q increase is quite significant. Is this a normalized quarterly run rate? Or we should expect some increase? For these two questions, I would like to Pak Antony again to address. Antony Susilo: Okay. Thank you. So Norman, I think on the first question on the accelerated depreciation, a similar question with the Bob Setiadi question. I already explained that, yes, I think in the next quarter, Q4 2025, the accelerated depreciation still continue even further until next year. Because, again, integration period is 8 quarters. That's why please expect that there is an accelerated depreciation until the end of the integration exercise is completed. And then on the second question on the OpEx, I think, yes, but the increase of the OpEx is mainly because of the, number one, that recall in the last quarter was only like 0.5 month's of Smartfren expenses was not there. And the second one, of course, this quarter-on-quarter because of -- mainly because of the integration costs that we have to book in the Q3 2025. But of course, once this integration cost is over, which is -- I think we can see that the integration costs in the previous -- in the slides that it was around IDR 800 billion already booked by September 2025. So by the time that this is -- integration cost is no more -- is already over, then our OpEx amount will become stable and our EBITDA margin hopefully can increase from time to time. So I think that's the explanation, Pak Norman. Norman Choong: I think on the first question, where I'm coming from is mainly because I saw the accelerated depreciation run rate was like IDR 700 billion last quarter. Now it's IDR 1.8 trillion this quarter. I'm just wondering, the first is why don't you just book everything within the short term? Or is it not doable because you are still removing asset? Second thing is I'm just trying to figure out when you say there's more coming, would we get a sense of like roughly how much? Or profit is really not a priority during the integration period? Antony Susilo: Yes. I think, yes, it was quite a surprise maybe to look at the first quarter, IDR 739 billion and then second quarter, IDR 1.8 trillion, I think. But I think my estimation that -- if you look at the numbers, I think more or less, this IDR 1.8 trillion already represent, what you call, represent the numbers for a quarter. But I don't want to say that this IDR 1.8 trillion can go up further. But actually, as a matter of fact, these numbers will go down. Because if there is a site -- there is an equipment where we dismantle faster, then we actually have to write off the assets immediately. I mean, we have to stop the depreciation. So that's the reason I think in Q3 was quite high because actually some of the assets, some of the equipment already dismantled, already turn off, and we cannot make depreciation. So we have got -- so from the 6 years immediately, only like 6 months, for example, that's the accelerating depreciation. So what I'm saying that in the next quarter, I'm hoping that these numbers -- of course, at this -- maybe next quarter still remain the same, but I think the following quarter, hopefully, because the equipment already -- most of them already dismantled, so it will be tapering down to a smaller amount. So to give you rough figures, maybe this year, maybe we will end up like IDR 4 trillion, plus/minus. And I think just to give you an emphasize that this accelerated depreciation is a noncash item. Christopher Kusumowidagdo: I think we still have time for one more question. I think one last question, we'll just address from John Te from UBS. That will be the final question. John, do you want to have your question to the management? John Te: Yes. I have two questions, if you don't mind. First is, I just want to understand maybe where we are in terms of site dismantling. So you mentioned 15,000 already done, and that's 1/3 of the base. Firstly, what is that base? Is this the -- is the 45,000, give or take, an end figure of the combined sites that you have? Or is this pertaining to another number? Second question is, perhaps we can clarify the IDR 500 billion. In terms of integration costs, how much of that would be for personnel and how much of that would be for site dismantling? Because I understand these two are the largest cost drivers for integration charges. The third one being personnel costs, I think the run rate has stayed at IDR 1 trillion, unchanged from the second quarter despite, I guess, some integration. Any comments on how you think of personnel costs as a percentage of sales or maybe the absolute number itself? Christopher Kusumowidagdo: Thank you, John. I think I would like to invite Pak Rajeev to address the first question on site dismantling. Rajeev Sethi: Sure. Just to refresh the memory, when we started this journey, XL Axiata legacy had around 43,000 sites and Smart's sites were around 22,000. Put together, around 65,000 sites, 65,000, 66,000. As we said, between 15,000 to 20,000 of those sites will not be required, which will feed into our synergy savings, which will mean that the end number of sites based on this part of integration would be closer to 50,000 sites. And against that, we are talking about 15,000 sites, which is just short of 1/3 of that number. So that's the number of 15,000. Ending number would be around 50,000 for this space. The second question was about the integration cost of IDR 1 trillion which has been incurred so far. And I think Pak Antony mentioned, we expect another IDR 0.5 trillion for the remaining part of the year. And this is a number which we shared earlier, IDR 1.5 trillion would be the integration cost for 2025. You're right. Most of this is people and the network integration. Unfortunately, I don't have the details to share further. But as you would know that the people integration project would be over hopefully by the first half of next year. We are running that process now, and then this will be a regular run rate. We do not try and drive the people cost as a percentage of revenue as a big driver. I think as management, we believe that people are -- good people are really important for -- in our line of business, in our consumer business. And we'll have an appropriate cost as we move forward. We really not want to benchmark that with other players, but we'll pay the right amount of money for the best quality talent which you can acquire. This was the second part. What was the third one, please? John, was there a third question? John Te: Yes. Well, that was related to the IDR 1 trillion in personnel costs quarterly run rate, but I think you managed to answer that in the previous question. If you don't mind me clarifying just one point that someone raised earlier, it's mid-teens CapEx as a target after the integration. By mid-teens, is this mid-teens CapEx to sales or mid-teens in absolute trillion rupiah? Rajeev Sethi: No, I think mid-teens absolute rupiah would be a bit too high. It will be mid-teens as a percentage to the revenue. Christopher Kusumowidagdo: All right. Thank you. Thank you, John. Thank you, Pak Rajeev. And ladies and gentlemen, that concludes our today's conference call. Thank you once again for joining us today. If you have any follow-up questions, please reach out to our Investor Relations. Stay safe and healthy, and we look forward to speaking with you next quarter. Thank you. Rajeev Sethi: Thank you.
Operator: Ladies and gentlemen, welcome to the Aquafil Group Q3 and 9 Months 2025 Results Conference Call. [Operator instructions] I will now hand the conference over to Giulia Rossi, Investor Relator. Please, Giulia, go ahead. Giulia Rossi: Thank you, operator. Good evening, everyone, and welcome to Aquafil investor conference call. Today, we will update you on company's 9 months 2025 results. Before going ahead, let me remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on Aquafil's current expectation about future events and are subject to risks and uncertainties that could cause results to differ from those expressed by the statement. For a discussion of these risks and uncertainties, you should review the disclaimer in the presentation we issued today. I will now leave the floor to Mr. Giulio Bonazzi, for his remarks. Giulio Bonazzi: Thank you, Giulia. Good evening to all, and thank you again for attending our video conference. The first 9 months of 2025 marked a solid performance compared to the previous year, especially in terms of profitability. The slight downturn in revenues is largely due to the adjustment of selling prices to the raw material trend, in addition to foreign currency translation effect. Volumes showed a positive trend compared to last year, with different dynamics at a geographical level. The United States reconfirmed the strong growth seen in the first half of the year related to the fibers for carpets. Europe and Asia Pacific observed a slower market, which was not fully supported by the expected volume increase in the fibers markets. The Engineering Plastics business continues its growth trajectory, delivering positive performance in terms of both volumes and margins. The cost rationalization project is progressing in line with expectations, generating the first savings already in 2025, with most of the effects becoming visible starting from 2026. The net result for the year was positive despite the impact of the extraordinary items concerning the various reorganization projects, which amounted to over EUR 8 million. The positive trend will consequently be even more pronounced next year. The change in net financial position is mainly attributable to planned strategic decisions. The inclusion of new European suppliers has temporarily led to a change in payment terms. Furthermore, the need for non-EU imports to adapt to the changing raw materials market has lengthened our cash cycle, which will be normalized in the coming periods. We look forward to next quarter with determination, focused on consolidating our position and maximizing operational efficiency. We are now welcoming your questions about our first 9 months results. Operator: [Operator instructions]. The first question is coming from Tommaso Nieddu from Kepler Cheuvreux. Tommaso Nieddu: The first one is on the update of the industrial plan. So volume expectations for both BCF and NTF have been revised from growth to being substantially stable, while polymers were cut from 45% to 15%. So could you elaborate on whether this softness in volumes is due to weaker appetite for your products? Or is it more market driven? The second question is on the timing of CapEx, which has been revised down by roughly EUR 12 million, EUR 13 million versus the previous guidance. So could you clarify what you now expect for the next year, and specifically, if this reduction is mainly deferral of the planned investment in 2025, or just a structural downsizing of the investment plan? Giulio Bonazzi: About volumes, as I have already said during my first presentation, we are seeing a very strong momentum in United States, while Europe and Asia are unfortunately not showing the growth we were expecting. This is not because of a lower appetite on our product -- it is exactly the contrary -- but it's a market situation, which unfortunately is not delivering what was, let's say, hoped at the end of last year, partially because of the uncertainty driven by the U.S. tariffs, partially because in Europe also a strong import coming from China that has deviated from exporting to United States and has started to be more active in our market for certain products. About the polymer, I always remember you that we have two business lines inside this, let's say, larger area of business. One, which is considered more a commodity, where volumes are not of great importance, which is so-called basic polymer business. And it consists in buying raw material, the monomer, caprolactam, transforming it into polymer and selling it to the market. This activity is mostly an activity which is driven by the idea of filling up capacity, utilizing our utilities at a level which is considered cost competitive and of course, trying to strike a contribution margin for covering our fixed cost. But the unit margins of this activity is not so important. On the contrary, the activity that we denominate engineering plastic, it's a different matter. This activity is the strategic activity that Aquafil is targeting and is having an intrinsic marginality, which is definitely much more interesting than the one of the basic polymer. In this second activity, we are also comprehending the activity of the sale of ECONYL polymer in the plastic or engineering plastic market. This second business line is behaving or has behaved in the first 9 months of the year very strongly in comparison with last year and also in comparison with our budget expectation. And this is the activity that we are considering, let's say, very important for our future growth in the European market in the coming years. In this activity, we will also try to push stronger and stronger the sales of our ECONYL polymer for the plastic applications. BCF and NTF, they have shown a very similar trajectory, but with very different moments during the course of the third quarter. We have seen a very slow July and August. On the contrary, the month of September has shown a very interesting demand and sales, and quantities have partially recovered from the downturn of July and August. In fact, the month of September also for NTF was higher than our expectation and close to our, let's say, financial plan that we have delivered to the market last year. Unfortunately, there is a big uncertainty, which is not helping us to give reliable forecast. But for sure, during the coming weeks, we will come out also with, let's say, our idea, not only obviously, for 2026, where we are now currently in our budget activity, but also for the year to come -- '27. About CapEx, as you remember, we have partially anticipated [Technical Difficulty] for the Chinese project, which was the most important project of our business plan, already at the end of '24. So this is partially revising our CapEx for 2025. And in 2025, if you remember, we have also communicated to the market that we were for the time being suspending and postponing the project of automation in our Italian operation because we were starting more interesting projects in the field of energy savings, which are about to come during 2026. In any case, our, let's say, future projections are bringing capital expenditures in a very cautious way. So we will certainly keep investing less than what we have, let's say, foreseen in the previous plan. Also because if volumes are not recovering, clearly, we need less capital expenditures for fulfilling our future demand. Operator: The next question is coming from Dave Storms from Stonegate. David Joseph Storms: The first one I wanted to ask about was in terms of margin defense. How much more room is there for the reorganization projects looking into 2026? My second question is -- thinking upstream, is there more work to be done in terms of further diversifying to European suppliers? And then will that also correlate to further change in payment terms and resetting the clock on cash generation? Giulio Bonazzi: Thank you, Dave, for the question. When we entered into the summer, we have seen that, unfortunately, the market was likely not to respond as strongly as we were forecasting. And so we went strongly to reconsider our organization in order to reconcile direct and indirect labor and all, let's say, the costs that are related to our activity. We have targeted a very strong cost reduction activity for the year '25 and '26, which is amounting to more or less EUR 20 million. Currently, we have already, let's say, agreed between layoff of personnel plus revision of purchasing contracts, a number which is exceeding the EUR 10 million, of course, without considering inflation of '25 and '26. So we are still seeing an inflation trend, in particular for the labor cost in certain areas of the world that will diminish the cost reduction activity that I have just spoken. Nevertheless, let's say, we are very confident that during 2026, between the completion of the reorganization project regarding our carpet collection and carpet recycling activity, and the completion of the energy saving project that is showing very interesting numbers during '26, we will strike the EUR 20 million of cost reduction. So there is still room as well as there is still further room in operational efficiency through, of course, even higher production yield and lower certain grade production in our operations, and we will continuously act in order to reach this better efficiency levels. About the upstream and the supplier side, we are experiencing, in our opinion, a structural modification of the market. We are in presence everywhere in the world, but in the United States with a strong importation of Chinese commodities and raw materials in our industry in the form of monomer, caprolactam, and nylon-6 polymer. The Chinese industry has set up an incredible capacity, and it is now after fulfilling completely the local demand, acting very strongly in exporting this product first to the neighborhood countries and they have already, let's say, closed the shutdown of the caprolactam plant in the nylon industry or the bulk of the nylon industry in Korea. Thailand will close its caprolactam plant in March of '27. And Japan has already announced that they will close another caprolactam plant in March -- Thailand in March of '26, and Japan in March of '27. We, of course, have suffered what the disappearance of our European suppliers. In fact, during '24, we have seen one producer in Poland shutting down during '23, one plant in Germany shutting down. During the first quarter of '25, another plant in Czech Republic shutting down. And at the end of October, an important strategic producer in Holland has announced that they are going to temporarily shut down production capacity. But they have not said in the local newspapers, the news was not temporary, but let's say, full shutdown of the operation in this important plant. And this is, of course, how can I say, an alarm that is sounding on our brain, our head. At the same time, in the month of October, BASF, which is the largest caprolactam producer in Europe, was in its planned turnaround. And when they return from the turnaround and they tried to start up the plant, gosh, they have got a technical problem and they entered in force majeure. So to cut the story short, 50% of capacity of our suppliers has disappeared or is currently not operating in Europe during the last 24 months and today. Is this going to be a contingent situation or a structural situation? Well, thanks God, Aquafil has the fortune of having a very flexible, let's say, operation. So we are capable of importing and using raw materials coming from overseas as well as, of course, we have our ECONYL production capacity that is producing at the very same month. So we have partially reoriented purchasing from different caprolactam suppliers in Europe. Partially, we have increased our import of caprolactam, particularly during this current financial year. And very likely, we will further increase during '26 as well as, of course, we are always careful to see how much ECONYL we can produce eventually. If it is becoming cheaper than the purchasing price, we could also produce ECONYL caprolactam instead of buying, if the marginal incremental cost is lower than the purchasing market price. So in terms of raw material availability, we are confident that we have solved our problem, which is not the case for all our competitors. Clearly, temporary, we have very aggressive, let's say, knock the door to other suppliers, and this has temporarily impacted our net financial position and our cash flow. But of course, with the time, we will be able to adjust also in terms of payment with our suppliers returning somewhat similar to what was before this problem that has strongly impacted our net financial position. Operator: The next question is coming from Gianluca Pediconi from MOMentum Alternative Investment. Gianluca Pediconi: I understand that the visibility is very poor. But I have a question which you can answer also in a qualitative way. There is a EUR 10 million shortfall in EBITDA compared to the previous guidance, and there is also a lower volume growth compared to what you were expecting at the beginning of the year. How the combination of these 2 facts is going to impact 2026? I mean do you expect that thanks to the cost saving program, you will be able to partially offset the lower enter into 2026, or this shortfall will not be recovered because the market conditions are actually worse than expected? Giulio Bonazzi: The cost reduction program will certainly positively impact our EBITDA during 2026, has already positively impacted our EBITDA during 2025. And so clearly, it will be showing even stronger effect during '26. Clearly, the final result will be, let's say, also impacted by the forecast on volumes. And this is now a little more challenging to forecast clearly. Now everybody is very prudent and tend to repeat, or being very close to the volumes that we have seen during 2025. We will see. As I said, and as you have wisely said, it is not easy now to make a forecast. This not only in our industry, but in every industry, if not in AI and in the military sector, at least for the time being. Hopefully, this will come soon. Let's say that we are seeing already the first orders of the new production programs like the maritime, the aviation, the transportation, and also the technical yarns for circular fishing nets and ropes and for the area rugs systems. We are seeing also positive impact on our actions of targeting new customers in the NTF. Of course, we must understand what is the net effect, considering also our traditional customers that are suffering the current crisis of the fashion industry and the sportswear industry. So we are all very positive about 2026. But mostly because our cost reduction program, which we have already, let's say, realized and the one which is under realization for next year are quite tangible and visible. And so this of course will permit us, while reducing cost also, to become more aggressive in the market for gaining market shares and orders instead of import of our, let's say, local competitors. Operator: [Operator Instructions]. There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks. Giulio Bonazzi: Well, I want to thank you all for attending our 9 month financial results for 2025. And we will come back soon, hopefully, with good news for the next quarter and for the next financial year and the next business plan. Thank you all, and see you next time. Operator: Thank you for joining today's call. You may now disconnect.
Operator: Greetings. Welcome to Palatin's First Quarter Fiscal Year 2026 Operating Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin our remarks, I'd like to remind you that statements made by Palatin are not historical facts and may be forward-looking statements. These statements are based on assumptions that may or may not prove accurate and that the actual results may differ materially from those anticipated due to the variety of risks and uncertainties discussed in the company's most recent filings with the Securities and Exchange Commission. Please consider such risks and uncertainties carefully in evaluating these forward-looking statements by Palatin's prospects. Now I'd like to turn the call over to your host, Dr. Carl Spana, President and Chief Executive Officer of Palatin. Please go ahead. Carl Spana: Thank you. Good morning, and welcome to the Palatin's First Quarter Fiscal Year 2026 Call. I'm Dr. Carl Spana, CEO and President of Palatin. With me on the call today is Steve Wills, Palatin's Chief Financial Officer and Chief Operating Officer. I'll now turn the call over to Steve, and he'll give the financial update and also include several corporate items as well. Steve? Steve Wills: Thank you, Carl. Good morning, good afternoon, and good evening, everyone. Regarding out-licensing programs update, in August 2025, we executed a research collaboration, license and patent assignment agreement with Boehringer Ingelheim for the treatment of retinal diseases, wherein we received an upfront payment of EUR 2 million or approximately $2.3 million in August of 2025, and we achieved a EUR 5.5 million, approximately $6.5 million research milestone in September 2025. In addition, we are eligible to receive up to EUR 12.5 million or approximately $14.5 million in additional near-term research milestones and up to EUR 260 million or approximately EUR 307 million in development, regulatory and commercial milestones, plus tiered royalties on future net sales. Regarding corporate update, public offering and NYSE American, on November 12, 2025, Palatin announced the closing of its upsized $18.2 million underwritten public offering, including the full exercise of the overallotment option consisting of approximately 2.8 million shares of common stock or prefunded warrants, together with Series J warrants to purchase up to approximately 2.8 million shares of common stock or prefunded warrants and Series K warrants to purchase up to approximately 2.8 million shares of common stock or prefunded warrants at a combined public offering price of $6.50 per share of common stock and accompanying Series J and Series K warrants. Each Series J warrant will have an exercise price of $6.50 per share and will be immediately exercisable. The Series J warrants will expire on the earlier of the 18-month anniversary of the original issuance date or the 31st calendar day following the date that Palatin receives FDA acceptance of an investigational new drug for an in-house obesity treatment compound, albeit a long-acting peptide or oral small molecule. Each Series K warrant will have an exercise price of $8.125 per share and be immediately exercisable. The Series K warrants will expire on the 5-year anniversary of the original issuance date. However, and importantly, if a holder of Series J warrants have not been terminated in accordance with their terms prior to the expiration of the FDA exercise period, such holders Series K warrants will terminate automatically upon the earlier of the 18-month anniversary of the original issuance date of the Series J warrant or the expiration of the FDA exercise period and prior to the 5-year anniversary of the issuance of the Series K warrant. In nonlegal speak, that means if Palatin hits the IND acceptance in, say, the first half of 2026, which is what we're anticipating, if the warrants are not exercised by the holder, the Series J warrant expires and the Series K warrant expires. Our expectation is that we would receive full exercise of the Series A warrants at that performance criteria. Moving over to the actual offering. The gross proceeds from the offering before deducting the underwriting discounts, commissions and offering expenses are expected to be approximately $16.9 million. Plus Palatin may receive additional proceeds of up to $18.2 million upon the cash exercise of the milestone-related Series J warrants that I just referenced. However, there is no guarantee that such warrants will be exercised and accordingly, Palatin will receive any proceeds from such exercise. Palatin intends to use the net proceeds from the offering to support the development of its obesity program and for working capital and general corporate purposes. Regarding NYSE American, we are very pleased with the result here of the offering and some of the other operating activities. But specifically, as a result of the closing of the offering, Palatin regained compliance with NYSE American continued listing standards. So effective November 12, yesterday, 2025, Palatin's common stock resumed trading on the NYSE American under the symbol PTN, which was our old symbol when we were on the NYSE American Exchange. Moving over to the financial results for the quarter ended September 30, 2025. Regarding revenue, for the quarter ended September 30, 2025, Palatin recognized approximately $8.8 million in collaboration license revenue compared to 0 for the comparable quarter last year. The increase in collaboration license revenue is all related to the Boehringer Ingelheim, the BI agreement, which consisted of the upfront payment and the achievement of a research milestone and certain cost-related reimbursements. Regarding operating expenses, total operating expenses were $4.2 million for the first quarter ended September 30, 2025, compared to $7.8 million for the comparable quarter last year. The decrease was mainly related to a decrease in spending on our MCR development programs, melanocortin receptor system related development programs. Cash flows. Palatin's net cash used in operations for the quarter ended September 30, 2025, was $1.6 million compared to net cash used in operations of $7 million for the comparable quarter last year. The decrease in net cash used in operations was mainly due to the recognition of license and contract revenue related to our BI agreement recognized during the quarter. Now moving over to net income and loss. Palatin reported net income for the quarter ended September 30, 2025, of $4.7 million compared to a net loss of $7.8 million for the comparable quarter last year. The increase in net income for the quarter ended September 30, 2025, was, again, mainly due to the revenue recognized pursuant to the BI agreement and partially for the decrease in operating expenses. Regarding cash position. As of September 30, 2025, Palatin's cash and cash equivalents were $1.3 million, a bit low compared to cash and cash equivalents of $2.6 million as of June 30, 2025. The $1.3 million of cash and cash equivalents as of September 30, 2025, does not include approximately $6.5 million milestone payment pursuant to our BI agreement for retinal diseases, which was received in October 2025 and importantly, the net proceeds from our underwritten public offering, again, the net proceeds of $16.9 million, which closed on November 12, 2025. As a result of the offering, net proceeds of $16.9 million and projected operating expenses, the going concern provision has been removed. Palatin currently expects a cash runway beyond the quarter ending December 31, 2026. Now I'll turn it back over to Dr. Spana. Carl? Carl Spana: Thank you, Steve. As we move forward into 2026, our research and development efforts will be focused on the development of highly selective melanocortin-4 receptor agents for the treatment of various forms of syndromic and genetic obesity, such as hypothalamic obesity. Melanocortin receptor system, especially the melanocortin-4 receptor, is essential in regulating energy balance and food intake and is a well-validated target for obesity treatment. Using our technology and extensive experience in the design and development of melanocortin agonist, we have developed a proprietary portfolio of highly selective melanocortin-4 receptor agonist that includes both orally active small molecules and long-acting peptides. Our novel selective melanocortin 4 receptor compounds have reduced activity at the melanocortin-1 receptor and therefore, reduced potential to cause skin darkening. The lack of activity at the melanocortin-1 receptor and the once-weekly oral dosing are significant improvements over current FDA-approved melanocortin treatments for obesity. PL-7737 is our melanocortin-4 receptor selective orally active small molecule. In multiple preclinical obesity models, PL-7737 has demonstrated significant reductions in food intake and weight loss. PL-7737 is currently undergoing the various activities required to open up an investigational new drug application with the FDA, such as animal toxicity testing and cGMP manufacturing. PL-7737 is on track for an IND filing in the first half of calendar 2026. And the initial PL-7737 clinical studies will include single ascending and multiple ascending studies in healthy obese and hypothalamic patients. Data is expected in the second half of 2026. Melanocortin-4 receptor extended duration peptides are highly selective for the melanocortin-4 receptor and have demonstrated pharmacokinetic properties consistent with either once a week or once every 2-week dosing. We expect to initiate IND-enabling studies in the first half of calendar '26 and first-in-human studies are anticipated in the second half of calendar 2026 as well. In addition to our melanocortin-4 receptor obesity programs, we have multiple programs designed to take advantage of the role that the melanocortin system plays in regulating stress responses and resolution of inflammation. Based on this approach, we have development candidates for multiple ocular indications, inflammatory bowel diseases and kidney diseases that we are expecting to out-license. We recently entered into a collaboration agreement with Boehringer Ingelheim for the development of candidates for the treatment of various types of retinal diseases such as diabetic retinopathy or diabetic macular edema. As part of the collaboration agreement, we received an upfront payment and are entitled to receive additional development, clinical and regulatory milestones as well as royalties on net sales. Our agreement with Boehringer Ingelheim validates the potential of targeting melanocortin system, and we believe we will be focusing our business development efforts on licensing our other melanocortin receptor system programs. These include PL-9643, a Phase III development candidate for dry eye disease; PL-8177, a clinical stage development candidate for ulcerative colitis and our preclinical candidates for kidney disease. Additional highlights for the quarter include the execution of an $18.2 million equity offering, which Steve talked about, and the resumption of our stock trading on the NYSE American under the PTN ticker symbol. Thank you for participating in the Palatin First Quarter Fiscal Year 2026 Conference Call. As a reminder, you can find additional information on our programs on our website. We will now open the call to questions. Operator: [Operator Instructions] Your first question is coming from Scott Henry from AGP. Scott Henry: Congratulations on the considerable progress. If I could just talk a little bit about the pipeline. Could you highlight the ideal target profile for use to treat HO patients for PL-7737 as well as the long-acting peptides? Carl Spana: Sure, Scott. Thanks for the question. So we'll focus first on 7737, which is an oral compound. What we'd like to see in that comp is one, we really want to see a significant diminishment of activity at the melanocortin 1 receptor, which we actually -- we know we have accomplished that. And we also like to see in dealing with obesity, we want to avoid our spikes in exposure and rapid drops in exposure. So we want compounds that have essentially a very slow absorption and a very flat pharmacokinetic curve. So one that will be indicative of once-a-day dosing and one that would allow us to essentially keep the patients for a prolonged period of time in the therapeutic window of where the drug is active. So we don't see dips. We want that drug to stay for as long as possible where it's active because we know that once we can fall out of that range, we see that with other obesity treatments, patients start to eat again. So you really want to keep them up there. And that's really what we've accomplished with 7737. It has a very long half-life in both rats, mouse and dogs, and we suspect that will be the same in humans as well. And we can -- therefore, you'll keep it dosing to a steady state and allow these patients for a prolonged period of time to stay in that therapeutic window and really maximize efficacy. And that's very similar to what we're trying to accomplish with the long-acting peptides as well. Again, these are absorbed. They very quickly bind to plasma proteins, and they have a very flat, long extended pharmacokinetic profile. And these are the profiles that are ideal for treating obesity patients. We avoid spikes. We don't want a rapid spike, a very high C Max, for example, because that can lead to side effects such as GI side effects. I don't want to avoid those. You want to keep it essentially steady absorption, slow, steady and flat. Those really, I think, are the ideal parameters. And we see that for both our peptides and we see that for the oral active small molecule. So we think we really have a very nice profile that's going to play very well, both from a reduction of side effects and increased efficacy. Scott Henry: Okay. And these are next-generation compounds. So I know one of the issues was hyperpigmentation. Can you talk about how these next-generation compounds address some of those side effects in that adverse profile? Carl Spana: Sure. So the pigmentation or hyperpigmentation is driven through activity at the melanocortin-1 receptor. So we spent a lot of time -- we've been in this field for a long time, and we've been able to develop selective agonists for the various receptors and we really understand the structure function relationships that have allowed us to really drop down that MCR1 receptor activity. So we're talking about hundreds of thousand fold selectivity for 4 over 1 that will really allow us to either dramatically reduce or potentially eliminate the potential for skin darkening. So that's how we accomplished it. Scott Henry: Okay. Great. Final question on the HO program. There's a big player out there that you will be competing with. How do you see yourself positioned in that landscape? Carl Spana: Well in any drug market, we believe there's going to be a multibillion-dollar market, and there's going to be room for multiple players. I think it's all going to come down to the quality of the compounds that you bring forward. And I'm not going to comment on the compounds that they have and -- clearly, their first compound that should be approved will be first generation. We know that it has MCR1 activity, and it has once-a-day dosing. We have some other compounds that are further back in development. I don't -- there's not a lot of information on those, so I won't comment on them. What I will say is the way to be a player in that marketplace is to have the type of compounds that we have in both our long-acting peptide and early active small molecule, which are reduction of MCR1, so the elimination of potential hyperpigmentation and really an efficacy profile that -- an exposure profile that limits the potential for GI side effects and maximize the potential for activity. So speaking of where we are, we're very confident and very comfortable with our compounds. We think they have really excellent properties to be successful. And as we get to the clinic, we're going to prove that. Scott Henry: Okay. Great. Final question. The BI collaboration brought in a considerable amount of nondilutive capital. Do you have any guidance when we may see the next collaboration from some of the other pipeline compounds? Steve Wills: Scott, this is Steve. Yes, we were extremely pleased with not just the execution of the BI, Boehringer Ingelheim collaboration but the actual partnership. We -- the dating was quite significant before we executed with BI. And since we've executed, it's been fabulous, really great group to work with. So notwithstanding the initial upfront payment of $2.3 million and the $6.5 million for the milestone achievement, we have stated that we anticipate near-term resource development milestones of approximately $15 million. And the guidance I can give you that my definition of near term is within the next 12 months. So hopefully, that's helpful. Operator: That concludes our Q&A session. I'll now hand the conference back to Dr. Spana for closing remarks. Please go ahead. Carl Spana: Thank you. It's been a really tremendous quarter for us with the Boehringer Ingelheim collaboration, which took quite an extensive period of time to accomplish but we're very proud of that and very happy to be working with them. We think they're going to be a phenomenal partner for our retinal program. The execution of the financing with some very excellent investors and really the hard work that was done by Steve and others to really get us relisted on the NYSE Amex and get off the pink sheets was really another great accomplishment. So really very pleased with where we are and the opportunity in front of us and have the capital to really execute. So we really look forward to keeping you guys informed on our progress and getting out there and meeting with various investors inter-quarter period. So with that being said, really the rest of 2020 -- or as we look at 2026 from a calendar perspective, we expect a lot of great things to be going on at Palatin and really excited here and working hard and look forward to keeping you updated. So have a great day, be safe. Enjoy the holidays. Thanks. Operator: Thank you. Everyone, this concludes today's event. You may disconnect at this time, and have a wonderful day. Thank you for your participation.
Operator: Ladies and gentlemen, welcome to Colonial SFL 2025 Third Quarter Results. The management of the company will run you through the presentation that will be followed by a question-and-answer session. [Operator Instructions] I would now like to introduce Mr. Pere Vinolas, CEO of Inmobiliaria Colonial SFL. Please, sir, go ahead. Pere Serra: Thank you. Good afternoon. Good evening to everyone, and thank you very much for joining us today in this presentation of our results for the third quarter of 2025. I'm going to start with some introductory remarks, and then I ask, as usual, Carmina Ganyet, Chief Corporate Officer; and Carlos Krohmer, Chief Corporate Development Officer; to step in with additional comments and insights. The introductory remarks, I think that we are presenting again a good set of results. As you will see, the operational performance remains strong. Many different KPIs show very strong numbers associated to them. And this in the end shows that our strategic positioning in prime is set to deliver earnings and value growth. Our strategic positioning, as you know, is based in the prime asset class segment. I think that it's now a few years where we have been improving pricing power. Pricing power coming from high demand from best-in-class clients, where we are able to capture above-average rental growth. And as a consequence of this, strong earning growth as a result of our activity. There are 2 things that we can share that you will see. One is that we are proving superior growth capabilities. It's a 9% CAGR for the last 3 years that has been delivered. And it's not only looking at ourselves and other history is that regularly, you could see how our GRI like-for-like growth, it's relevant, but moreover, it's higher than those of our peers in the sector. So this positioning -- unique positioning of Colonial creates a difference. I'm going to start by looking at the main KPIs for this quarter. We could talk about cash flow. We could talk about operational performance. We could talk about capital structure. Just let me share a few numbers. This quarter, gross rental income ends at EUR 296 million. The revenue number here is a 5% like-for-like, well above inflation, showing strong rental growth. The EPRA earnings 6% year-on-year, EUR 156 million. The EPRA EPS, EUR 0.25 in line with the guidance for full year. Second layer operational performance, rental growth, 6%, measured as our growth in terms of signed rents compared to December '24 ERV, 6%, may be highlighting 9% in Paris, which again, is pretty strong and pretty ahead of inflation. Release spread 9%, 17% in Paris and occupancy 91%. As you know, we are just delivering some assets that create a difference without Madnum & Haussmann, our occupancy, which was -- were just delivered this year, our occupancy would be 95%. Finally, from a capital structure point of view, we keep our strong credit rating, BBB+, S&P, Baa1, Moody's, the rating confirmed in that particular case, September this year, loan-to-value 38%; financial cost, 1.9% for the whole of our debt. In Page 6, an overview that in my view, it speaks for itself about our core markets. Where are we in terms of individual occupancy. You can see how high it is. You can see also the number for rental growth 9% Paris, 6% Madrid, 3% Barcelona. And this is a result of beautiful signatures, EUR 1,200 per square meter maximum rent sign in Paris, EUR 43 per square meter per month in Madrid, maximum rent sign, EUR 30 in the case of Barcelona. So fantastic KPIs. Now as usual, we will enter into details, first, the financial performance, later on portfolio management that provides more insight about the future. And finally, some remarks from myself on future growth. So let's skip into section #2, financial performance. Carmina, welcome. Carmina Cirera: Thank you, Pere. So the first main KPI is the rental income, which as you can see here, it's growing through the core portfolio and the project deliveries. This is true drivers. The core portfolio shows a like-for-like growth of 5% and project deliveries of 3%. These 2 main drivers has been overcompensated the fact that on Condorcet & Haussmann have entered into refurbishment. If we look at the different components of this strong gross rental income in Page 9, mainly, you can see out of this 5%, 2% comes from the indexation impact, as you know, inflation in Spain and ILAT index in France, in our Paris portfolio. Another 2% comes from the rental growth premium, this pricing power from all our operational portfolio, an additional 1% from additional occupancy. So this 5%, as Pere has mentioned previously, it's outperforming our main peers in the European zone as usual. So this is another quarter that we are delivering a solid rental growth like-for-like both our peers in the European zone. If we look at the last bottom line in the EPRA earnings, Page 10. You can see how a strong operation are impacting positively in the EPRA earnings growth. 6% growing in a yearly basis. But basically, I would like to highlight this 18% coming from the operational portfolio. Additional EUR 5 million coming from the project deliveries that we have been able to do in the last year and additional positive EUR 9 million, basically the fact that we have converted into the Sika status, the remaining subsidiaries that we had -- we have in France, thanks to the merger. So this means that we are saving tax this year and for the future. This would be a structural positive EPS coming from this new conversion of the last subsidiaries that we had in Paris, thanks to the merger. All this positive impact has been, as you can see here, over compensating the negative impact coming from the Condorcet & Haussmann that has been entering into refurbishment. In terms of EPRA EPS, we delivered almost EUR 0.25 per share, considering the new shares in place after the capital increase that we did in July 2024. If we go to the balance sheet on Page 11, as you can see here. So we continue to deliver a very strong liquidity position. Our loan-to-value is in this quarter, 38.1%, but is -- I would like to highlight again. This level of loan-to-value is temporary. We are making progress in some disposals and capital recycling that has been not impacted yet in this loan-to-value ratio at the end of September 2025. In terms of liquidity, between cash and undrawn lines, we have a very strong position, EUR 2.8 billion, which is almost 2x covering the debt maturities for the following 3 years. And as you see, our cost of debt remains in a very competitive level. So we are taking advantage of the accurate hedge policy that we did in 2021 when the rates were very low. And in the appendix, you would see in more details the hedge and -- the hedge -- the existing hedge as of today, 93% of our existing debt are hedged with a fixed cost. And in the future, the profile of the future hedge, thanks to this pre-hedged position remains in a very solid position with above 50% of our future debt. Consequently, thanks to this strong position and thanks to this robust liquidity management and operational performance and forward-looking hedge strategy, Moody's has been confirmed our rating with Baa1 with a stable outlook. And as you know, this year, we have been tapping the market 2x, 1 in January, EUR 500 million 8x oversubscribed with a very competitive yield, 3.25%, but resulting an effective yield of 2.75% after the hedging that we took previously. And recently, in September '25, who have been gone again to the market with a placement of EUR 800 million. 6-year green bond, all of them has been a green bond issuance with 3.12% coupon, but rent, thanks to the effective -- the hedging attached to this debt, our effective yields are at the levels of 2.73%. So very strong liquidity position, very strong competitive cost of debt and confirming the rating by S&P and recently by Moody's again. Carlos? Carlos Krohmer: Thank you very much, Carmina. Now we're going to step to Page 14 on portfolio performance. First of all, we've signed year-to-date on 25,000 square meters that are equivalent to EUR 54 million of annualized spread. So we are signing a lot, and we are signing with high prices. This EUR 54 million are an increase of 26% in total contracts secured in economic value compared with the same period of 9 months of the year before. We go a little bit into the breakdown out of this EUR 54 million, EUR 20 million, close to 40%, has been signed in Paris and this EUR 20 million are equivalent to 14,000 square meters. At the end, this means that we've signed on average at a rent of EUR 1,400 square meter a year. So absolutely at the high end. If we go further analyzing the breakdown. We've seen that the Spanish markets are also -- our portfolio in Spain is progressing very, very well, close to 60,000 square meters signed in Madrid and more than 50,000 square meters signed in Barcelona. We go a little bit more into detail on Page 15. Here, you can see out of the EUR 20 million, EUR 13 million have been in 3 super prime premises. On Champs Élysées, we signed a contract at a retail rent of -- in excess of EUR 3,700 per square meter a year. This is 11% increase of rental growth increase versus the ERV of December 2024 and the 16% release spread. On Louvre Saint Honore office or the part that is the upper part of the Cartier premise, we've signed at levels well above EUR 1,000, EUR 1,100, EUR 1,200, 18% of growth versus the office ERV of this asset as of December '24, and quite a lot of rents, EUR 3 million in 2 contracts. And then we are progressing also on Haussmann, signing above EUR 1,000, 11% ERV growth, 16% release spread in terms of what the rents were of the previous tenant pre the refurb. If we now step on Page 16 to Spain, 57,000 square meters signed in Madrid, more than 20,000 signed in Madnum in one of the most relevant urban prime campuses in the city of Madrid. In Barcelona, 54,000, interesting highlight 40,000 square meters 22@. So momentum in 22@ is getting better. We are positive on Barcelona. We see this as a big opportunity. If we then go on Page 17, you can see one of the main flagship projects and assets that have been recently released to be delivered, that is Madnum. It is a large asset, close to 60,000 square meters. As of today, we have already close to 40,000 square meters signed with top-tier tenants, most relevant recent news just some weeks ago with 1 global leading telecommunication firms letting up 13,000 square meters for 1,800 employees. We have remaining space to be let of roughly 19,000 square meters. As of today, we have already visibility for close to 40%, 3,500 square meters already signed in October. So after this results cutoff, but already today at home secured and conversations for additional 5,000 square meters. This asset, just to remind you, has a yield on cost of 8% and we are signing rents at levels of EUR 27. This is well above the initial underwriting of ERV for this asset. It was around levels of EUR 23. If we go further, here we see a very important point of our recurring earnings and revenue growth is the pricing power that our prime asset class portfolio has. We have signed a release spread of 9%, strongly driven by Paris with plus 7% in Madrid plus 4%. Barcelona is slightly negative, but this is basically due to a secondary activity in the Q2. We would look isolated only at the Q3 numbers, the last 3 months, release spread has been positive of 1%. So it's a cumulative effect from previous quarters. So we are seeing there also a change in the trend. On the ERV growth, we have signed on average, 6% growth versus the December ERV. So in 9 months, 6% growth. This is beating the average indexation that we had in the portfolio in more than 300 basis points. So really our prime asset class is delivering an extra chunk of growth due to the benefit and the polarization impact of prime asset class assets, again, strongest market. Paris and Madrid, very strong and Barcelona, getting slowly but steady back to momentum. On occupancy, you can see it on the next page. Basically, we are at -- the portfolio is at a stable level of 95%. We had the entry into operation in terms of like-for-like comparison with the entry into operation of the full project of Méndez Álvaro and Haussmann. And this has put down temporarily the total occupancy at 91%. In these assets, as I told you, the 4.4% is concentrated in these assets with the contract signed already today in Madnum is 4.4% is already down to 3.2%. And if we look at the rest of the breakdown, as you see, our prime portfolio, Madrid, Barcelona and Paris, the super-prime assets have almost no vacancy, Barcelona 22@ at 1.7% and then we have a small -- very small procedural part of secondary exposure that explains 1%. Last word on sustainability. We had recently just rankings on GRESB and Sustainalytics. We are really absolutely at the high end at Sustainalytics for the third year in a row, the best company rating at total Ibex and we are the best globally across every sector among the best 22 among 14,000 companies. At the end, this is also a proxy of the high-quality assets that we have. Only if you have a high-quality asset with the best amenities, you really have an efficient energy consumption and therefore, low carbon emissions. So sustainability is a good proxy for high-quality assets in terms of features. Pere Serra: Thank You, Carlos. I think that if I had to summarize what we've heard from Carlos and from Carmina, well, first of all, this last point about ESG, I think that is an impressive leadership, the one that we have been showing regularly and again in this quarter. But if I had to summarize the presentation up to now, I will say 2 things. It's an outstanding letting volume activity, number one, which means that despite any views on the Paris market, not in our case. Then moreover, when you think about our volume in Barcelona and in Madrid, it's been impressive. In the case of Madrid, this year was the year of the test of Madnum, and we are approaching the end of the year and the homework is done with very high standards of rents. So number one, in emphasis is on volume. Number 2 is on rental growth. Again, you see these numbers on like-for-like, and we beat inflation. We beat our peers. We beat, obviously, the year before in terms of rental level. It's -- I think it's an outstanding number, the one-off rental growth. So I would summarize basically these 2 main features. And now let me enter into some thoughts about the future. On Page 22, we are reminding that our focus is on earnings growth that we've been delivering already this earnings growth at a path of a 9% CAGR in the last 3 years. And this coming from several sources from rental growth itself, from prime factory projects from capital recycling. This is the main focus of our strategy. And the conviction that I would like to share with you is that we are very well prepared to deliver additional EPS growth with double-digit IRRs in the next few years. Coming as we see on Page 23 from 4 different sources: From urban transformation projects, which have a significant impact in the EPS going forward; from the prime asset reversion that adds cash flow growth on top of previous one; from third-party capital initiatives that we started this year; and finally from capital recycling. Let me be more specific about each one of them. Page 24, driver #1, Urban Transformation. We expect EUR 100 million of rents coming up from these projects, year '25, year '28. The first column, which is the one regarding 2025, you can see that we already are delivering mainly in Madnum, which was the most relevant challenge for this year. Let me share you again that throughout 2026 to 2028, we expect additional rents that would mean that compared to 2024 EPRA EPS, EUR 0.11 would be added. That is a 33% on our EPRA EPS expected. I think that certainly, when anyone is looking at us is looking at Colonial, this has to be a headline. It's not so much about the current EPS, but what is expecting -- what we are expecting, what is waiting for us out there in the next 3 years. We have also a very good potential coming from the second driver. The reversion that we expect for a number of selected assets. If we add what we could expect from Prime Paris to what we would expect from Madrid and Barcelona, we see EUR 47 million that would come simply for the fact that we put -- signed contracts that come to maturity at today's ERVs. And so that's another source of cash flow growth. The third one is on our third-party capital initiative on science and innovation. Here, the comments that we'd like to share is that this is going on track. First of all, the seed portfolio is going through the expected milestones of occupancy and growth. We are today above 80% occupancies as expected. But on top of that, we are looking at additional pipeline and additional fundraising progress. Our assessment today would be that we have short-term visibility -- high short-term visibility to grow the assets under management from EUR 400 million to more than EUR 600 million at the same time that we have very interesting conversations for more than EUR 200 million. So in a way, this confirms a little bit the path that we were expecting for this particular track that would mean if we deliver what we expect would mean EUR 0.02 to EUR 0.03 additional of EPRA EPS in the midterm. And finally, another source of value is through active capital recycling. Maybe here, the message that I would like to share is in the first half of the year, we put the focus on the available opportunistic investment opportunities, mainly the one that we saw just a moment ago, the size and innovation portfolio. We would like to enhance and go further in the direction of capture opportunities in the European real estate cycle. But maybe at this time, what I would like to share is more the visibility and the focus that we are putting on the capital recycling in terms of disposals. We have a view that the disposals to navigate this capital recycling process with some fundamentals today could mean EUR 0.5 billion of disposals to come in the next 18 to 24 months. Maybe I would like to highlight that almost 2/3 of this would be based more on the short term with high visibility. So our view on capital recycling is that interesting opportunities may come. First half was about investment. Second half, it's more about divestment and initial of next year. And then we follow up with an opportunistic capture of activities in the market. Everything put together in terms of strategy and outlook. As I said, Colonial is focused in EPRA earnings growth, 9% CAGR in the last 3 years. We remain, by the way, with a full year guidance on track. We are a little bit more specific. We expect a range EUR 0.33, EUR 0.34 for this year. We remain on a strong business model that is generating a 5% like-for-like growth so far. And most of all, we have additional cash flow and value coming on the back of project deliveries and pricing power on the existing portfolio. This means a growth profile that can generate more than EUR 150 million of future rents through this new pipeline and reversion. And all of this focus in a strategy of relying our fantastic positioning on our core markets but together with enhanced urban transformation growth strategy with a certain example in the science and innovation field and based in the support of third-party capital. This is the message for today. We think that is a good set of results. Now we are available for any questions. Thank you. Operator: [Operator Instructions] And we shall start with the first question by Ignacio Romero from Banco Sabadell. Ignacio Romero: Thank you for the presentation. So I have a question regarding loan-to-value at 47% on an EPRA basis, you are now near the same level that you had when you announced the deal with criteria a year ago. So how do you see a loan-to-value evolving in the future? Would you expect to lower it by this capital rotation that you have just mentioned? Or do you expect asset revaluation to lower the ratio, maybe even a new capital equity capital injection. I would like to know your thoughts on that issue, please. Carmina Cirera: Okay. Carmina speaking, thanks, Ignacio, for the question. As you know, we look at the leverage in a very holistic approach, which means that different KPIs which are included in the rating. So our commitment is to maintain the rating, the investment grade. And it means solid ICR. It means that solid EBITDA, net EBITDA, it means liquidity and it means, of course, loan to value. These levels, as we said, are temporary because we are making progress on the capital recycling, but it's not a way of settle exactly a percentage of loan-to-value. It's a more, I would say, approach in the rating agency methodology. So it's true that after the capital recycling strategies and of course, still, this is based on the last price evaluation, which was in June and in the end it will be updated, we believe that the levels would remain as they were in the previous year. But as I repeat, after the capital recycling, we believe that these levels, this is why the rating agencies has keep and maintain the rating. Operator: Next question comes from Valerie Jacob from Bernstein SG. Valerie Jacob Guezi: I've got a couple of questions. The first one is -- maybe a follow-up on the question that's been asked on the LTV. I mean, you mentioned that you've got EUR 0.11 coming from the projects. Can you remind us how much you need to spend to deliver this EUR 0.11 and how is it going to be funded? Or what is the impact going to be on your LTV? That's my first question. And my second question is just looking at your earnings. I think in H1, it was EUR 0.17, and it's EUR 0.25 for 9 months. So there is a slowdown in your earnings growth. And I was wondering if there is any reason for that? And what does that mean for the guidance? Because I think at H1, you said you are likely to be towards the top of the guidance. So are you still there? Or are we more sort of in the middle or lower part of the guidance now? Carmina Cirera: Okay. So on the CapEx related to this 200,000 square meters in Page 24, you know you can see the details of the pending CapEx attached to this project pipeline, which would add this EUR 0.11 per share. So this is funded through disposals and through maintaining as well the ratings and the levels of the metrics for the rating that we have in place in the investment-grade BBB+ by S&P and Baa1 by Moody's. So considering that the valuation on the pipeline will -- it's not factor for value today. So it will be factor the full value after completion. And so when you consider this IRR expecting for this CapEx plus the pending CapEx plus the capital recycling, this is the reason why, as I said before, the rating agencies, maintaining with a stable outlook our rating and -- our credit metrics and our rating. Pere Serra: On the second part of your question, look, I think that we are more or less in line on what we -- with the vision we delivered throughout the year. We started with a wider spread because of the logical uncertainty on a business that just -- sometimes just for timing issues, you can go a little bit after or a little bit ahead of what you would expect. Where we see the earnings today, it's more focused on the 33%, 34% range. maybe still more biased towards the high end at the lower end, but this is too precise, not for us to give visibility at this moment. That's the number we can share today. Valerie Jacob Guezi: Okay. And is there any reason why it was lower in Q3? Pere Serra: That's just timing issues. I mean there are -- in the end, you don't have a stable perimeter throughout the year and we cannot be mathematically equivalent in all quarters. So just normal timing issues on the ordinary course of business, nothing exceptional happening. Valerie Jacob Guezi: Okay. May I ask a last question. Looking at the supply coming in Paris, if I look at what the brokers are expecting, they're expecting the vacancy rate in Central Paris to go up. And I was just wondering, what is your view on what effect it's going to have on rent? Do you think that prime rents can continue to grow in Central Paris? Or do you think that will put a halt to the growth? Pere Serra: Yes. Good question. No, we insist on the increasing polarization in the market. We are happy to be in a particular segment where there's so limited supply that is not enhanced with additional assets that come to the market that in our market, the fundamentals of supply and demand remain the same. We understand that the rest of Paris maybe more cyclical subject to a specific situation of each year in terms of supply and demand, but this is not affecting us and I think that the results that we are presenting today try to support this view. It's this vision that you're saying about the market is something it's been around for a while and look at our numbers. So we believe that no relevant difference should be happening in the markets that we are relying on. Operator: Next question comes from Ana Escalante from Morgan Stanley. Ana Taborga: I have two questions, please. The first one is on occupancy. I understand that this might be as, Pere, you said some temporary thing, but looking to your previous reporting and even going back to 2015, I think this is the quarter with the highest occupancy rate you've ever reported. Discounts at the time when the indexation impact is slowing down, particularly in France. So looking into 2026, are you expecting to sustain this strong like-for-like rental growth? Or how are you expecting both the lower impacts on indexation and the temporary albeit maybe significant occupancy decline to impact the like-for-like in 2026? Carlos Krohmer: Look, obviously, there is a general theme of indexation that is a general playing field for everybody, and it is what it is, and it's basically factual and then the contracts that go through indexation have the indexation level that is done in the market. However, having said this, and I think these results show very clearly, we've signed super strong retail contracts at super high levels, office contract at super high levels, progressing very well, a lot of square meters and moreover, economic value. And tying this to what Pere said, when you look today, the Grade A availability in Paris is below 1%, is 0.9%. So the segment where we are, that is really no product available. And for this type of segment, at least what we are seeing in our daily operations, the take-up is healthy, and we are signing with very strong release spread and very strong rental growth. And this is a very high component in our like-for-like growth. We have more than -- close to 500 basis points of extra chunk of growth in the portfolio that have been signed now and that are not part of the profit and loss accounts today because things that we signed today will flow into future quarter's profit. So we have part of the future like-for-like for the Paris site secured. Paris is strong, and Madrid is having quite significant acceleration and also in CPI, a little bit higher than expected as you know. So we think we can -- nobody knows the future, but we have the feeling that we can maintain these strong levels of like-for-like growth. And we have then also some occupancy spare capacity to be filled that also creates additional like-for-like. So we are positive. We don't know the future, but we are positive. We think our product really can achieve and maintain these levels. Ana Taborga: Okay. Very, very helpful. And then another question maybe on disposals and any other assets that you expect that will go under refurbishment in the next year? How dilutive you think that could be into EPS? Because when I look at consensus, we are anticipating, as you guided strong EPS growth in '26 and '27. But how dilutive these disposals are expected to be into that guidance? And to what extent that strong EPS CAGR for the next years is something that we will start to see maybe a bit later than we are expecting? Carmina Cirera: Ana, I think -- thank you, but you need as well to consider the future pipeline that will come into operation in the following year. So the 87,000 square meters from Madnum, Diagonal 197 and Haussmann that has been delivered this year. will be impacted, of course, in the due course after resell letting activity during 2026 and 2027. And then the scope, which is going to be delivered next year at 20,000, 22,000 square meters, again, will be impacting partially 2026 and 2027. So all in, it's what you can see the potential disposals, which we are disposing and valuation yields will be compensated. And of course, with the P&L with a positive impact on the -- coming from the program, the pipeline program that the yield on cost is much higher. This is the beauty of our business, this trade-off on yields and maintaining and keeping the EPS growth. Carlos Krohmer: Maybe just a last comment. We do not expect any major projects coming up in our portfolio. Everything that we had to reposition and that has really a value creation perspective is what we have today on the page where we show that EUR 100 million of rents on Page 24. And the rest of the portfolio is basically a stabilized portfolio. Here and there, sometimes a little bit of floor to be repositioned, but nothing really big. I understand your question because many people have asked me this also in one-on-ones because there are some other people in the market that have quite relevant things coming up. We have nothing. We have just to deliver what we have. This is EUR 100 million, and the other is business as usual, managing the stabilized [indiscernible]. Operator: Next question, Michael Finn from Green Street. Michael Finn: My first question, if I may, is on Slide 27. And I'm just curious if you could tell me, please, a bit more about the right-hand side of the slide. In terms of what you actually plan to do to capture the recoveries? Do you plan, for example, to stay in the same cities? Or are you looking at other cities? And if so, where? And then also maybe kind of connected to that also, I'm curious on the EUR 0.5 billion that you plan to sell, how do you balance the other uses of that cash in terms of the current debt level that you have in other things. So that's my first question. Pere Serra: Yes, Michael, it's -- I think that we -- what we are trying to do with this particular slide is to be a little bit illustrative, but it's -- maybe it's difficult not to pass the message in a very strict way. My view. My view is, look, on the disposals side, we know that we want to do this level of disposal because we know the kind of assets that we're talking about that we know how dry they may be and the opportunities that may be out there. So this is -- there's a level of certainty attached to that. At the other side, we have knowledge that the market is offering opportunities because the supply and demand of money is a little bit disrupted everywhere, but particularly in France or in Germany, not so much in Spain. And you don't see many people capable of coming not only with money, but with know-how to be involved in opportunistic investment opportunities that may come with very interesting IRRs associated to this. On top of that, we believe that not only the alpha, but the beta in certain markets may help. So what we're just trying to say is that our goal as a listed company is to recycle capital to divest to keep the KPIs on the -- at the balance sheet level strong. And then to invest, but this it will be based more opportunistically on the back of the beta opportunities that the market may give us plus the alpha that we see. That was -- that is what we're trying to illustrate here that we believe that is an interesting moment of the market if you are investing on a 5-year horizon. But that's what we just wanted to illustrate with this kind of chart. Michael Finn: Okay. Yes. And then maybe just in terms of the type of assets that you plan to buy. Do you think you would prefer to buy an asset that needs quite a lot of work or a standing asset that would yield from the first day? Pere Serra: Yes. The ones we like the most is the ones that with a little bit of creativity, you extract extra rents with very limited or nonexisting CapEx. In other words, we do not see ourselves investing in heavy CapEx in pipeline of things that have to be developed from the spread, totally refurbished. I think that the opportunity cost of capital is not exciting. On the other hand, when you are more kind of a professional player and you go out there, you see sometimes assets that you believe that just with a little bit of creativity with your goodwill in the know-how that you have with your clients, you could improve. You simply -- you see something that has rent of EUR 30 and you see with a little bit of ideas, I would put this on EUR 35. So it's more this kind of real estate expertise oriented investment, the one that we would favor, of course, leveraging a little bit on the fact that there's not a lot of, let's say, plain Manila money out there in the market. That would be more our focus in terms of investment. Michael Finn: Okay. Okay. Yes. And then a final question, if I may, on scope. I'm just curious over the course of the year, if your view on the effective rent there has changed. So that's the rent after all the rent freeze that you'll have to give to the tenant. I'm just curious if that has changed. Pere Serra: Yes. No, I think it's early stages. Yes, I understand it's -- in the same way that Madnum for us was the great adventure and challenge for this year, and we are super happy about the outcome. We see this more '26 kind of focused. And yes, I'm also curious about the answer as you. I totally share. But too much early stages, we don't have visibility. We remain with the same kind of underwriting note that we had on this asset by now. Michael Finn: Interesting, yes. Yes. And then sorry, maybe just to clarify on that, do you think at the moment, rent about EUR 720 and incentives probably in the high teens. Would you say that's fair in the current market? Pere Serra: We did not follow you completely, the quality of the sound -- can you repeat, please, Michael? Michael Finn: Yes, yes, sure. I just said, is it fair that the rent at the moment will be about EUR 720 and incentives would be in the probably upper teens. Is that fair in the current market? Pere Serra: I don't have enough visibility to provide with an answer. That doesn't sound illogical to me what you're saying, but I wouldn't like to come now with a specific assessment that I cannot provide right now. Operator: Next question, Celine Huynh from Barclays. Celine Huynh: My first question is on the guidance, please. Like Valerie, we also noticed a slowdown in earnings growth in Q3. So can you elaborate what led you to narrow that guidance? Because initially, you were guiding to the upper end on the previous call. And then my second question is on the disposal you've just announced. You're sounding quite confident to achieve those EUR 500 million. Can you tell us in which country you're planning to sell? What kind of assets? Is that offices, residential and what kind of yield. And my third question is on the opportunity you're seeing currently in the market. We've heard you mention Brussels, Germany, Italy before. Is that still the case? Are these still markets that you're looking at for acquisitions? Pere Serra: Yes. On the EPS, I think it's just as the year goes by and we are approaching the final end, we can be more precise. And in narrowing this from [indiscernible], what we see is just that we can be more precise. And we don't see anything similar to a slowdown in -- you've seen all of the KPIs. So if anything, some timing issues in certain specific things, but nothing specifically in terms of a slowdown. In terms of the disposals. Yes, normally, if we say high visibility is because we are working on specific assets with specific bidders. We always take some risk in saying this because high visibility means that you cannot announce certain transaction but you have good grounds. And you know in this sector that you cannot say that something is done till is done. But basically, as I said, in 2/3 out of what I said, maybe between half and 2/3. There are specific names of assets and names of bidders will give us that kind of confidence in delivering this. I cannot provide more visibility, maybe except that we are maybe taking advantage of the interest that the residential sector is having us showing in Spain. So one of the components of this may be residential. Besides this, I would not exclude anything. Spain, France, any kind of assets, but we cannot be more specific as of today based on where we are. And I think you said third thing or -- yes, opportunities. No, what we always say is that the main point -- main focus about our approach is to be opportunistic. And we don't work in a way of, let's say, preempting or having views about where we want to be or where we don't want to be to a level that we would be so specific, and we will be here, we'll not be there. We see opportunities a little bit everywhere. We see opportunities in France. We are looking at other countries, maybe Germany is the one with higher visibility as of today. But we cannot be more specific than this as of today because, as I said before, short-term focus, it's mainly on the capital recycling on the divestment side more than on the acquisition side. Celine Huynh: Okay. Can I ask you one last question, please? Pere Serra: Sure. Celine Huynh: I mean, you've heard a lot of the questions on the call being about LTV too high. You're saying that you've got EUR 500 million of disposals very likely to come through. So why is deleveraging not an option for you? Pere Serra: Why, sorry? Celine Huynh: Deleveraging, reducing your debt? Pere Serra: No. I think that we have been, let's say, confident traditionally that the level of our debt is a good one and based on several grounds. One is the kind of support we have been having on the debt markets. You've seen how we have placed the bonds in the past. You can see how the bonds are trading. You can see the level of support of rating agencies. So we've been traditionally confident on the level of debt that we've had. We are also committed to keep this and that means that if there is a temporary increase in LTV, we take the necessary measures to keep it in the safe zone on the zone where we want it to be. And -- so as of today, we see this more as a time issues, you cannot choose to invest and divest precisely everything at the same time, all of the time. So sometimes when you see that you've been able to divest and then you put focus in the investing, sometimes it's the opposite like now, and that's where we are. But coming back to the original point, if we are strong regarding debt markets, then the other question is what's the concern on the equity side, that the LTV, the concern can be because you think that you have a risk insolvency, let me put it this way. And I think that would be far away of anyone's concern. The other thing is from the point of view of providing the nicest returns to shareholders. Are you -- there is a common sense that is really ground to think that deleveraging you are working for your shareholders. While at the same time, you don't need to work for debt market based on the kind of support they are showing. What I want to say with all of this is that we are confident with our level of debt. We are also engaged in rebalancing the situation to remain strong. And we are confident in the fact that we will remain in this strong level as we have been in the past. Operator: Next question comes from Jonathan Kownator from Goldman Sachs. Jonathan Kownator: Two questions on my end, please. The first question, I wanted to come back to the topic again, I'm not entirely clear still. So the disposals that you're introducing now, is it the aim of disposing to reinvest the same volume? Or is it new disposals? And what is the impact you expect positive or negative, obviously, on the sort of EPS trajectory that you had announced earlier. So that's the first question, please. And the second question was on the science and innovation portfolio. You're now highlighting 80% occupancy. So can you help us understand a bit how this portfolio is going? Do you have more assets to be delivered? Or is that the full portfolio and then you just have to fill these? What are the prospects from tenants? I mean it's a space where we have seen some -- in some areas in respect, better lettings from the innovation space that the science area has been perhaps a bit tougher at European level. So if you can help us understand this, that would be great. Pere Serra: Yes. Thanks, Jonathan. On the first question, we are, let's say, certain about the goal on disposals because we want to have the deleveraging FX coming from this on the second half of the year after the leveraging company on the first half. We don't have the same degree of being specific regarding acquisitions. This is more opportunity-driven. When an opportunity comes, we balance everything. One is the return coming from the investment. The other is the risk -- the risk associated to this including spillover kind of effects on our balance sheet. So we have a much more restrictive view. So I understand that this is not an answer that is yes or no, what are we doing with the money? And do we want to spend it all of them? Do we want to spend nothing on them? There's no specific answer for this. What we are focusing is high priority on the divestment side and then being very opportunistic on the investment side. On the second question on seed, Carmina, you want to step in? Carmina Cirera: Yes. On the seed, it's -- today, we have 80% occupancy, but we have a small refurbishment that has been already pre-let. The kind -- Jonathan, the kind of tenants we have here, as you know, there are some kind of buyer as one of the big ones. We have as well innovation divisions from certain hospitals, innovation divisions from certain pharma companies. And the [indiscernible] world of today, it's almost 9 years, but we are recycling some tenants in a more, I would say, corporate tenants with more long-term contracts. So the expected stabilized yields are in the range of 6.5% stabilized. As of today, we are now in this recycling tenants, enhancing brands, increasing maturities and the profile of these 2 big campus are the ones that are more very exposed in the innovation and life science fields attached to the big pharma names. Jonathan Kownator: Okay. Very clear. So if I can just, sorry, resummarize the first question. So if I understand correctly, the EUR 500 million of disposals is now incremental to what you had previously said in terms of earnings growth trajectory. And obviously, your aim at some point is potentially to compensate for that, but there's a bit less visibility and it's more the capacity to remain flexible. Is that a fair summary? Pere Serra: Yes. I think that, yes, in a way, there's more certainty attached to divestments, there's more opportunistic approach to future investments, which means that any scenario is likely to happen, but the probability is more with the profile that you just mentioned. Operator: Now there are no further questions. I then give back the floor to Mr. Pere Vinolas. Pere Serra: Well, thank you. It's been a very interesting session, not only because of the results that we shared that I think that were very interesting, as I said, also because of your interest, support and interesting questions. Thank you very much for your time and looking forward to seeing you soon again. Thank you, and have a good day. Thank you. Bye-bye.
Operator: Ladies and gentlemen, thank you for standing by. I'm Vassilios, your Chorus Call operator. Welcome, and thank you for joining the HELLENiQ ENERGY Holdings conference call and live webcast to present and discuss the third quarter and 9 months 2025 financial results. [Operator Instructions] The conference is being recorded. [Operator Instructions] At this time, I would like to turn the conference over to HELLENiQ ENERGY Holdings management team. Gentlemen, you may now proceed. Andreas Shiamishis: Thank you very much. Good afternoon to everybody. We're going to be talking a little bit about our third quarter performance over the next half an hour to an hour. And at the end, try and see if there are any questions that we can answer and maybe give you a bit of an insight into how we see the rest of the year closing. The backdrop, first of all, we have a market which is positive for the downstream business, relatively low level of absolute prices, low levels both in terms of the commodity price, but also in terms of the euro-dollar exchange rate because that effectively translates into lower euro prices in the domestic market. That, combined with a regional mostly supply-led shortage of products, especially middle distillates have led to very healthy refining margins, which we have been enjoying for the last few months. If you add to that increased demand not only from the Greek market, but also from the regional markets for a number of reasons. Most of it is supply side led, it gives a very good backdrop for downstream businesses. In terms of operations, we have a very good refining performance after the Elefsina shutdown earlier in the year, revamped and updated refinery is running with very high availability. Aspropyrgos, which is nearing the end of run cycle. It's scheduled for a refinery shutdown and maintenance shutdown in the next few months is also doing very well. And this helps us to capitalize on the strong margins, the increased footprint on the international markets. And of course, the increasing demand that we have, as I mentioned, in pretty much all markets that we operate in. The other businesses have delivered record results, especially on the marketing side, both in Greece and international. And for the first time, we also have the full consolidation of the Enerwave. I'll make sure that I don't call it ELPEDISON I can because that would be sold off by my colleagues here. So Enerwave is the new name of ELPEDISON, which is included in our financials on a fully consolidated basis for the first time this quarter. As a result of that, we have an adjusted EBITDA, which is close to EUR 0.75 billion for the 9 months with EUR 365 million for the quarter. That puts us on a relatively safe trajectory to overshoot the EUR 1 billion, which is something of an internal benchmark for us, given it's going to be the fourth year which we managed to achieve that. And it is helping to deliver strong operating cash flows. Some of it were used to pay the one-off solidarity tax and others for the acquisition of the 50% of the old ELPEDISON, which was partly financed by our own cash flows and also by the disposal on the DEPA commercial business. But still, it leaves a healthy room for an interim dividend of EUR 0.20 per share, which is in line with what we paid last year. And this is effectively a strong signal of how we see the outlook as well. Now on the outlook, we have a number of developments. It's going to take us quite a long time to go through all of these. In summary, positive outlook. The quarter-to-date has been very strong. In fact, it has actually been even stronger than the third quarter. We've started the new business model on the supply and trading with the activities from our Geneva subsidiary, which is gradually picking up speed. And it is coordinating even better with the refining and the Supply & Trading team here in Athens [indiscernible]. Marketing is improving, mostly as a result of improved market, but mostly from the efforts that we put behind our networks and our performance in the pedal stations. Soon, we should be able to announce the commencement of the Thessaloniki-Skopje pipeline. I hope that by the end of the year, we'll be able to do that, which will give us an even better operating model and a better footprint into the West Balkans. And from them -- from there, we could actually think about reaching other markets as well. The green utility, which is effectively the combination of Enerwave and the renewables. It's coming together. It's going to take some time for this to blend into a seamless operation. We know that we're patient, and we'll work diligently to get to the results. The high-level plan is to double the size of Enerwave on a number of fronts and also to double the size of the green utility in the next few years. Now whether that takes 2 or 3 years, I don't know. We're still in the phase where we are relaunching the whole business. But there is definitely room for improvement there. Finally, on E&P, which is part of our business, which attracted a lot of publicity over the last few weeks. The latest one has been the signing of a farming agreement by ExxonMobil into Block 2. I remind people that we were effectively a 25% minority stakeholder there in the joint venture. 25% was owned by Energean, and they were the operator. The discussions with Exxon were led by Energean, and we participated in those discussions as well. I think we're all happy that we have the participation of a company like Exxon, which will not only cover some of the past costs and the well -- the exploratory well that will take place. But more importantly, it's providing the credibility and the experience and knowledge required in difficult explorations. A few weeks ago, we also announced that the joint venture with Chevron is a preferred bidder. And we hope that over the next few weeks, we should be signing that concession agreement as well. Which means that we'll be closing all the areas that might be of interest to us in the Greek [E&P]. Overall, a very good quarter, a good 9 months, not only in terms of results, but in terms of operations, in terms of safety and also in terms of steps in our strategic plan to grow this company even more. So with that, I will turn over to Dinos Panas, who is heading our Supply and Trading and he's also the Deputy CEO for the HELLENiQ Petroleum team to walk us through the environment and maybe shed some light on what he expects things to look like in the next few months. Dinos? Konstantinos Panas: Okay. Thank you, Andreas. Good afternoon, everybody. I have 3 slides on the environment. First slide, Page #6. We see that we had a weak Brent during the last 2 quarters of the year, second and third. We still see, let's say, a global crude [overhang], mostly driven, let's say, by the increased production from the United States and Guyana, but also from the lower, let's say, refining utilization in Russia following the drone attacks from Ukraine, which actually obliged the country to export more crude since they could not run the refineries. We see this type of trend continuing into the fourth quarter of the year. So most probably we will see weakness in crude, let's say, continuing in 4Q. And of course, a quite strong euro versus the USD, plus 6% compared to the last year's same quarter. Now the product cracks were quite strong in Urals gasoline in the third quarter. We see the same trend continuing in the fourth quarter, actually much stronger yesterday, as you all know, let's say, from the prices we had the USD crack of $38 a barrel, and the gasoline crack of $25 per barrel. And we had a refinery benchmark margin of $8.5 a barrel in the third quarter, significantly higher than the third quarter of 2024. We have seen October margins much higher than this number. And of course, November [advance] of the quite high numbers. Most probably, we will see that the middle distillate crack will stay strong during the remaining part of the year. And also remain strong when we have the U.S. sanctions in place in the 26th of January, if I remember correctly, which will make, let's say, imports of middle distillates into Europe more difficult because everybody will have to prove where the origin of this material comes from. Now on Page 7, we can see that natural gas prices were down by 7%. Electricity prices down by 3% and the EUA is higher by 7%. EUAs now are trading a little bit higher than [EUR 81 per metric ton]. And finally, on the gas market, we can see that the third quarter remained strong. We had a 2% increase in gasoline, flat quarter-over- diesel so in 0.5% increase overall. Aviation sales up 7% and the bunker sales 5%. We believe that the lower prices will support further growth in the domestic demand. And of course, with the economic growth that [indiscernible] increase, we expect that this will be the case in the third -- and in the fourth quarter of the year. And with this, we will pass to Vasileios Tsaitas for the group performance. Vasilis Tsaitas: Thank you, Dino. Good afternoon. So moving on to Page 10 to have an overview of our key numbers. So the refining sales up 4.3 million tons, it's an all-time record, driven by the very high production that we'll discuss further on at our system of refineries. Marketing also very strong sales, 4% higher. In terms of power generation, we have the addition of Enerwave that is mainly driving the quadrupling of the production. And similarly, it is also having an impact on the turnover, which otherwise without Enerwave would be lower driven by the lower commodity prices. An adjusted EBITDA of EUR 365 million, double the one of the third quarter '24, driven mainly by refining, the very strong refining margin that we discussed earlier on. Similarly, a very strong performance from marketing and the presentation of our green utility business, which combines Enerwave and renewables becoming a meaningful contribution to the group numbers at just over EUR 30 million for the quarter. In terms of our sources numbers, this number is now less relevant that [indiscernible] now Enerwave is fully consolidated. Finance costs lower than last year. And overall, we're moving a bit further down total capital employed of over EUR 5 billion as we have now fully consolidated Enerwave and total investments for the 9 months exceeding EUR 0.5 billion. Moving on to Page 11. So the doubling of our adjusted EBITDA profitability comes mainly from the very good refining environment comparing with refining margins in the similar period of last year. FX is having an impact given the strengthening of the euro, especially in the third quarter with retreating in the last few weeks. And performance-wise, certainly, our refining operations with Elefsina fresh from the turnaround and yielding very good performance in the third quarter, our marketing contribution as well as the addition of Enerwave. On Page 12, I think it's important to discuss a bit our CapEx and our cash flow for the 9 months. So our CapEx is driven on the downstream side, mainly by stay in business and largely by them and the turnaround at the [indiscernible] turnaround at our Elefsina refinery that happened during the second quarter, which is maintenance CapEx on the one side, but on the other side, it significantly enhances the ability of the refinery to capture the very good refining environment that we're experiencing in the second half. And on our green utility, we have the growth in Romania mainly. So the implementation of one of the wind projects and the acquisition of the hydro project in Bulgaria and the acquisition and the equity consideration of Enerwave. On the top right, effectively, we present how the adjusted cash flow, including normal operations, normal stay in business CapEx as well as accrual-based taxes. So excluding the effect of differences in taxable earnings in prepayments of taxes or any one-off windfall taxes. So that leaves us around EUR 450 million for the 9 months to be able to remunerate our capital providers, both on the debt as well as on the equity side, pursue our growth CapEx, and that should be just enough to have a net debt virtually flat compared to the beginning of the year -- but we have 3 items. One has to do obviously with the acquisition, including the debt consolidation of Enerwave. Obviously, this -- we don't make this level of this size of acquisitions every year. And if we do, it will enhance, obviously, their profitability base of the company. We have the Solidarity contribution in the beginning of the year that you are very well aware of, again, a one-off item. And as a result of the supply chain disruptions in the Red Sea and the increase of offtake of Iraqi crude, it has an impact on our working capital as long as we -- we have to ferry the cargoes around the Cape. So it's a temporary -- just over EUR 200 million of impact on our inventories, again, not recurring. So that brings the net debt to the total of EUR 2.5 billion. Moving on to the next page, a higher net and gross debt similarly due to the reason that we presented just now. The debt servicing cost has escalated significantly. This is driven by the decline in base rates, which we're able to take advantage given our floating exposure. The decline in spreads that we were able to negotiate with all our credit providers during the year and certainly a better cash utilization that eliminates or minimizes to be exact the cost of [indiscernible]. Our maturity curve well has -- I mean, properly amortized. We have a maturity coming up in the next few weeks, which is at the final stages of refinanced for 5 years. So that will move to the end of 2030. On Page 14, Andreas mentioned before, the decision about a flat interim dividend versus last year. We're certainly going to revisit our full year dividend at fourth quarter results as we do every year. I guess, always good to remind combined almost 40% of dividend yield in the last 3 years. That is compounding the total shareholder return over the last 4, 4.5 years to 1.5x of the share price. Now we'll move on to discuss a bit the business segment performance starting from Downstream. So our Refining Supply and Trading business, as we mentioned before, delivered very strong results on the back of good refining margins as well as a record production and record sales. So very good ability to capture refining margins, especially following the completion of the full turnaround at Elefsina refinery. And total sales for the 9 months around 11 million tonnes. On the next slide, we reiterate on the very good operational performance with exports close to 50%, yielding very strong returns, something that is driving -- moving on to the next page, something that is driving the very good overperformance. So as you can see, the $8.7 per barrel on the far right is the highest that we've seen in the last several quarters. That is partially driven by an improvement in the crude spreads given the availability of crude that also Dinos highlighted before as well as the very strong export premia that we are enjoying in the neighboring markets. Moving on to our Petrochemicals business on Page -- sorry, on Page 21. Certainly, we're experiencing a difficult cycle in this business in Europe and globally driven by overcapacity. It looks like that it's going to take some time to clear the overhang. So the returns are going to be much, much lower than the mid-cycle that we are -- would be used in the past. Important to say that our business is almost -- is to a large extent integrated with refining with Aspropyrgos refinery producing polymer-grade propylene, which is then converted to polypropylene at [indiscernible] complex. So that helps manage our position across the supply chain in order to be able to be much more resilient in the downturn and avoid losing money effectively in this business. So still considering the environment, a positive EBITDA of EUR 3 million for the third quarter. Now moving on to our fuel marketing business, starting from our domestic market in Greece. So as we discussed before, a very good result of EUR 38 million for the third quarter and over EUR 6 million of adjusted EBITDA for the year. This is driven by the increasing strength of our brands, especially Eco in Greece, the consistent increase in market shares in all products, in all auto fuel products, increased penetration of differentiated fuels, both in gasoline and diesel, increasing volumes while we continue with the rationalization of our network, so higher ATPs and much higher contribution at the point of sale and much higher profitability. And certainly, as a reminder, ECO is very well placed to take advantage of a very good tourist season in Greece, both on the retail side as well as on the aviation. In the international business, again, another record-breaking quarter and year-to-date with [EUR 30 million ] and EUR 70 million of adjusted EBITDA, respectively, close to 15% higher versus last year, increased volumes, increased profitability. Again, some of the drivers that referred to the Greek market like the very strong NFR contribution to our numbers and the differentiated fuels penetration are the key trends that have helped drive this result. On that note, I'll pass you on to George Alexopoulos, who's going to discuss our Green utility business. George? Georgios Alexopoulos: Thank you, Vasily. Good afternoon, everybody. We're very pleased to be consolidating Enerwave and thus being able to report our green utility segment. And turning to Page 26, I will not repeat the information on natural gas electricity price. I will note that prices were lower and continue to normalize natural gas and electricity. It was a quarter of low consumption in Greece, the third quarter. And also, we continue to have high participation of renewables in the mix, namely 57% versus 44% in the same quarter of last year. Turning to Page 27 and looking at the Green Utility segment with Enerwave on a pro-forma basis for the quarter, we -- it was a weaker quarter in terms of market fundamentals. On the conventional power side, spark spreads were lower. On the renewables side, we saw high curtailments. And given the lower demand, we also saw lower thermal production. So all in all, this translates into lower power generation and lower adjusted EBITDA overall, higher for renewables, but lower for Enerwave, and we will be discussing those separately as well. If we turn to Page 28, we see for the renewables higher capacity. We are at 494 megawatts installed capacity. Of course, higher production as a result of that, better weather conditions on the wind side. And thus getting better performance despite facing more pronounced curtailments versus last year. Quarterly EBITDA at EUR 15 million and 9-month. EBITDA at EUR 37 million, respectively. Turning to Page 29. I think we've discussed this graph before, but I wanted to stress that we are continuing our expansion plans. We focus on Southeastern Europe. We are diversifying both geographically and technologically. We are currently present in 5 countries, including a small participation in North Macedonia, which is not shown in the numbers of the renewables business is shown as part of the international business. We are progressing our installed capacity. And we have secured the path to 1.5 gigawatts by 2028. We currently have over 300 megawatts under construction, and we expect to complete about 1/3 of those within the current year or around the end of the current year. Turning to Page 30, the Enerwave page. I keep repeating it so I don't get it wrong. As we said, weaker market conditions. There was also grid unavailability at one of our sites, which did affect production. So all in all, lower adjusted EBITDA versus last year for the quarter, slightly higher for the 9 months. Yesterday, we relaunched the company under the new brand Enerwave, and we are pushing ahead our strategic transformation, which has several elements, 2 of which are important enough that I will mention here. We have already redesigned our commercial policy, and this is starting to show results. We expect to be launching new products following the relaunch of the company, improve customer service and, of course, targeting a higher market share. On the energy management side, now we have a combined portfolio of almost 1.4 gigawatts if we look at conventional assets and renewables assets. We are managing this portfolio on an integrated basis from Enerwave, and we expect to see better realization and better results for our renewables assets, but also for the combined green utility as well. And with this, I think we've reached the end of the presentation, and I think we will open it for questions. Operator: [Operator Instructions] The first question comes from the line of Grigoriou George with Wood & Co. George Grigoriou: A few questions, if I may. The one regards your production now in the third quarter. If I'm not mistaken, this was a record for your refining output. Just wanted to hear your thoughts on how much more you could actually produce. And my other questions are, I've noticed on your slide that in the third quarter, diesel sales of diesel, all the diesel here in Greece were actually 0, flat year-on-year. I wanted to hear your thoughts on that and how you see it evolving after the third quarter. And my last question goes to what was Dinos discussing before about the refining margins. You obviously mentioned the middle distillate cracks, but I wanted to hear your thoughts on the gasoline cracks as well. Andreas Shiamishis: Okay. Good afternoon George. I would ask Dinos to comment on the production and the cracks. Before doing that on the diesel sales, Well, we are seeing some increase. The market is not growing as fast as it was growing in the previous few years, but it's still growing. If you will, our market shares are growing. And also we're seeing a premiumization of our portfolio. So we're getting more of the premium auto fuels, which has diesel and gasoline 98 and 100 octane gasoline and the diesel, [biofuel] which are growing. Now on the cracks in the production, I will turn over to Dinos, who will answer. Konstantinos Panas: I think that we had a very high utilization in the third quarter. So the target is to keep that level, which is exceptional for -- was exceptional for the quarter and most probably if we keep it, we'll have a very good quarter in the fourth quarter of the year. So what I'm saying is that there is not a lot of space to increase production in the refineries. Now coming in the fourth quarter of the year, I mean diesel has been growing by roughly 2% in the 9 months of this year. We see signs of remaining strong in the fourth quarter as well. And additionally, on top of that, we will be selling gasoline, hitting gasoline in the year. So quite a few qualities of diesel will be shown in our sales in the fourth quarter. And we do have, let's say, a strong demand for diesel around the area. So I think it's going to be a good quarter for the diesel overall in the fourth one. Now regarding, let's say, gasoline, we have this ongoing issues with [RCC], which combined, let's say, with the Russian disruption and the low U.S. inventories makes us feel that the market -- the gasoline market will remain strong despite it's the weaker seasonality, but definitely not as strong as the distillate ones in the fourth quarter. Operator: [Operator Instructions] There are no further audio questions. I will now pass the floor to Mr. Katsenos to accommodate any written questions from the webcast participants. Mr. Katsenos, please proceed. Nikos Katsenos: Thank you, operator. We have 3 questions from Sylvia Richards from Morgan Stanley. The first one is third quarter was very strong on volumes. How do you see volumes for the fourth quarter? The second question is, what would be the CapEx needed to double anyway size? And the third one on your refinancing, do you expect to have lower finance costs? Andreas Shiamishis: Dinos, do you want to take the first question? Konstantinos Panas: Yes, I will take the first question. Q4 until now, we have the refiners operating at capacity. So the volumes are as high as I can get the production volumes. The second one on the CapEx. Vasilis Tsaitas: I'll take the CapEx. Just to be -- just to clarify, Enerwave is the utility business. It includes conventional generation, energy management, commercial business, retail business. So it's not -- it does not include the renewables. The CapEx required to double its size is fairly limited because the improvement in the profitability comes through performance improvements and growth in commercial and energy management and trading. So it's a limited investment. It's not a major CapEx. But as I said, this does not include renewables, which is tracked and reported separately. Andreas Shiamishis: Vasileios, one on the financing? Vasilis Tsaitas: Sure. On the refinancing, by [virtue] of refinancing, there won't be a significant impact on the finance cost. Over the year, we've been repricing all our facilities. So I would say that around 2/3 have already been repriced and we've seen the impact in the second and third quarter. And the last, let's say, 1/3 of our facilities, including the one that will be refinanced, will be repriced in the fourth quarter. So there is some positive impact left, but not as significant, I would say. Nikos Katsenos: We have another question from [Nicholas Payton] from Edison Group. Nicholas asked with regards to renewables are you still confident that you can hit your medium and long-term targets in terms of capacity for the renewables business? Second question, can we have an update on the office that has been set up in Switzerland? Is everything going to plan? And the third one, is there any update on the Suez situation any time that you might be able to resume that? Georgios Alexopoulos: Okay. Nicholas, on the first question, I mean, the short answer is yes. As you saw from the presentation, we have a secure path to -- we are at 0.5 gigawatt today. We have a secure path to 1.5 gigawatts in the next 3 years. And we have a pipeline of approximately 6 gigawatts out of which we can certainly find the rest to the 2 gigawatt target. Of course, every investment is subject to scrutiny and it proceeds when our return goals are met. But the answer clearly is yes, we can. Andreas Shiamishis: Okay. On Suez and the trading office, Dinos, do you want to take it? Konstantinos Panas: Yes. The trading office in Geneva is up and running for quite a few months now. We have the key, let's say, trading team front office in place. We have the middle office also in place, and we have the back office set up here in Athens. So the team is working well. We are looking to start buying and selling a little bit more outside of tenders. And of course, trade some third-party volumes, which will help us to increase our overall volumes above the system ones that we are producing the refineries. Now on the fifth Suez situation, there was an announcement from the Houthis leadership that they will stop the tax, but most of the majors are looking to the situation very carefully. We are monitoring the vessels that are passing through the Suez, and we've seen a little bit of an increase there. As soon as we are confident that the risks are very limited, we will start using the Suez route again, and this will help us both on the cost and on our working capital requirements because currently, it takes 45 days to go around the Cape, while through Suez, now it takes 16 days. Nikos Katsenos: Thank you. And we have another question from Christian Are from Eurobank Equities. Is there a turnaround scheduled for 2026? Konstantinos Panas: Yes. The answer is there is one for Aspropyrgos was scheduled to start at the beginning of next year in the first quarter. So February, March, we're going to have the maintenance turnaround of Aspropyrgos. Nikos Katsenos: Thank you. Operator, we don't have any other questions through the webcast. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to management for any closing comments. Thank you. Andreas Shiamishis: Thank you very much for your attendance. As we said, it has been a very good quarter. Our financial performance has been very good. The market backdrop has been very favorable. And in terms of operations, we've been able to make the most of it. From a strategic point of view, we have the upstream announcements over the last few days. We had the Enerwave launch, which effectively repositions and relaunches our power sector ambitions. As we've said, we're not buying to be the #1 electricity company and utility in Greece. We are aspiring to be a decent size, much bigger than we are today, Green Utility centered around our operations in Greece, but also looking to capitalize on opportunities in other markets as well. From a downstream point of view, we have a good setup of the refineries. The trading is doing very well. The international trading office has started picking up speed, and we are gradually seeing the benefits of this model change. The retail business in Greece and outside of Greece is doing very well. And in fact, it is an area where we think we can grow even more. But as you can appreciate, the pace of additional business and profitability is of a different scale between the 3 different businesses, the refining, supply and trading, the marketing and the utility. So we need to make sure that we maintain a balance between the 3 on the capital allocation policy, if you will, and continue our operational improvements irrespective of which business they relate to. So with that, we thank you for your time. And I am sure we will be able to touch base with you again in a few months when we do the full year presentation, which I expect to be and hope to be even better than what we have presented now. Thank you very much. Operator: Ladies and gentlemen, the conference has now concluded, and you may disconnect your telephone. Thank you for calling, and have a pleasant evening.
Lluc Sas: Good morning, and welcome to Sabadell's results presentation for the third quarter and first 9 months of 2025. Today, we are joined by our CEO, Cesar Gonzalez-Bueno; and our CFO, Sergio Palavecino. The presentation will follow a similar structure to previous quarters. Our CEO will start by sharing strategic priorities and then discuss the key developments of the quarter. Next, our CFO will provide a detailed review of financial performance and the balance sheet before our CEO concludes with closing remarks. Finally, we will open the floor for a live Q&A session to address your questions. So Cesar, over to you. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Lluc. Good morning, everyone. Before sharing the results of the third quarter, I will start my presentation today with a reflection on Sabadell's evolution since '21 as well as the prospects for the upcoming years. In Slide 4, in early '21, we launched a strategic plan focused on transforming each one of our businesses through specific levers for each one. This transformation would support the financial turnaround of the group. Since then, we have executed the strategy in a decisive and accelerated manner. We have talked about this many times. I won't elaborate into the details now. As a result of our transformation, a solid financial turnaround has been delivered. Return on tangible equity has jumped from 0% in 2020 to the current double-digit figures, which are above our cost of capital. By the way, our transformation process and financial turnaround has not been affected by the hostile takeover bid, and we have been dealing, which we have been dealing with over the last 1.5 years. In July 25, we presented our new strategic plan. An important milestone is the sale of TSB at very attractive multiples, which crystallizes the value created since we acquired TSB in 2015. The sale was signed with Santander and approved by our shareholders last August, and we expect the closing early next year. The new strategic plan is focused on growth and shareholder remuneration as Sabadell has not reached its potential. In terms of profitability, we expect return on tangible equity to keep growing and reach 16% by 2027. We reaffirm all the objectives of the strategic plans in terms of return on tangible equity, growth and shareholder remuneration. On Slide 5, we have a quick reminder of the key elements that underpin our equity story. First, Spain. Following the sale of TSB, the vast majority of our businesses is now in Spain, one of the fastest-growing economies in Europe. Second, growth. Our approach is clear: prudent market share gains while preserving asset quality and pricing. Third, execution. We have a solid track record of delivering results since 2021. We are confident we will deliver on our current targets. And fourth, shareholder remuneration. We have a proved and strong ability to generate capital while growing our lending book. We will leverage on this to offer an attractive shareholder remuneration in the upcoming years. In Slide 6, we are reminding the financial guidance for 2027, which we announced in July and we confirm today. To summarize, our return on tangible equity for '27 is 16%. We also announced cumulative shareholder remuneration between '25 and '27 and we expect it to amount to EUR 6.3 billion. And in September, we actually improved our expectations on shareholder remuneration from this EUR 6.3 billion to EUR 6.45 billion. In Slide 7, we provide more color on shareholder remuneration. The expected EUR 6.45 billion includes recurring distribution based on a 60% payout ratio. This is executed through two interim cash dividends per year plus one final cash dividend. On top of the 60% payout, we are planning to distribute excess capital above the 13% core Tier 1 threshold. Finally, we will distribute the extraordinary dividend from the sale of TSB once the deal is closed. As you can read in the bottom right-hand slide -- of the slide, we reaffirm that yearly cash dividends per share in '25, '26 and '27 will be higher than cash dividends per share paid in 2024, which was EUR 0.2044. And now let's move to the third quarter results highlights. In Slide 9, the key messages of the quarter. Third quarter results are on track to meet 2025 guidance. Our recurrent return on tangible equity, that is excluding one-offs, and extraordinary items stood at 14.1%. Core Tier 1 reached 13.7%. We kept generating capital in the quarter and in line with our strategy. I will later elaborate on this. Commercial activity continued to accelerate, both performing loans and customer funds grew by around 8%, excluding TSB. Core revenues remained in line with expectations. NII is on track to meet the EUR 3.6 billion target for 2025. Fees grew by 3.7% year-on-year. Asset quality continues to improve. Total cost of risk stands at 37 basis points, decreasing by 18 basis points year-on-year. Finally, we are pleased to confirm a second interim cash dividend of EUR 0.07 per share payable on December 29. Let me remind you that 2025 shareholder distribution amounts to a total of EUR 1.45 billion. On Slide 10, we turn to volumes. One more quarter, we delivered strong growth, both in loans and customer funds. Performing loans ex-TSB grew by 1.2% quarter-on-quarter, even with expected third quarter seasonality. On a year-on-year basis, loans ex-TSB grew by above 8%. On the right-hand side of the slide, total customer funds ex-TSB grew by 1.5% in the quarter and by 7.8% year-on-year. This is mainly driven by off-balance sheet funds, which grew by more than 15% year-on-year. Regarding TSB, volumes in euros were impacted by sterling depreciation, but remained fairly stable at constant FX, both quarter-on-quarter and year-on-year. All in all, at constant FX, group performing loans grew by 5.9% and customer funds increased by 6.4%. If we move to slide origination, and we talk now about loan origination in Spain, let me start with new mortgages. Origination in the first 9 months of the year increased by 26% compared to 24. Mortgage origination in Q3 decreased by 12% quarter-on-quarter, driven by seasonality. Our volumes of new mortgage origination remain reasonable. Our new lending market share is in line with our stock market share. Furthermore, we keep managing risk-adjusted return on capital rigorously for new mortgages to make sure growth is delivered in a profitable manner. Moving to new customer consumer loans. We continue to perform well, growing origination by 19% in the first 9 months of the year versus previous year. In new loans and credit facilities to SMEs and corporates, there was the expected quarterly seasonality. Year-on-year, evolution has been broadly stable. Finally, Third quarter origination of working capital finance declined slightly compared to Q2. However, it increased 3% year-on-year. Yearly cumulative origination in SMEs and corporates remains broadly stable compared to '24. All in all, current levels of new lending in all products allow for growth of the loan book. On Slide 12, performance of Payment systems remains strong. On the first 9 months, cards turnover increased by 6% and point-of-sale turnover rose by 2%. We can see a slower growth in point-of-sale turnover. Taking into account our already strong market share in this business, we are now focused on pricing and profitability. This approach has resulted in a reduction of certain exposures with very low margins, but we have increased total fees coming from this business. In the bottom half of the slide, you can see the evolution of savings and investment products. They grew by EUR 4.8 billion in the year, driven by an increase of EUR 6.8 billion in off-balance sheet products. On Slide 13, we show the breakdown of performing loan book ex-TSB across segments and geographies. In Spain, our performing loans were up by 0.9% quarter-on-quarter and by 7.6% year-on-year. All segments and products keep growing. The stock of mortgages grew by 5.6% year-on-year, consumer loans by 19% and SMEs and corporates grew by 6.2%. International operations were equally strong with performing loans by -- up by 11% year-on-year. In sum, performing loans ex-TSB grew by 8.1%. In Slide 14, I will elaborate on our strategy to enhance capital generation while growing loan book. I think this is a crucial element of our strategy, which we have shared before. We keep growing our book significantly, yes. But on the left-hand side of the slide, you can see that the probabilities of default of new lending originated in '25 are much lower than those of new lending originated in previous years. These are the result of our approach to credit growth, as we explained in the presentation of our strategic plan in July. In the last few years, we have been working very significantly on improving our risk models and processes. We have done this on a portfolio-by-portfolio basis. Once the risk origination capabilities of a given portfolio were improved, we fostered lending growth in that particular portfolio. Furthermore, the quality of the risk we are granting after improving our models and processes is much better as we are able to skew new lending towards lower-risk segments in each portfolio. On the right-hand side of the slide, you can see a simplification of the implications of our strategy. In each portfolio, we might be obtaining lower loan yields, but at a lower cost of risk as the resilience of our franchise improves and we generate more capital. As a matter of fact, we have already generated a very handsome figure of 176 basis points of capital year-to-date. This is fully in line with guidance that we shared in our Capital Markets Day of 175 basis points per year. And this is for the first 9 months of the year, the 176 basis points. Let's turn now on Slide 15 for the U.K. business. As expected, volumes remained broadly stable in the quarter. Net profit of TSB reached GBP 59 million in the quarter, which translates into almost GBP 200 million in the year. That brings its contribution to Sabadell to EUR 242 million year-to-date, up by 44% year-on-year. Stand-alone return on tangible equity was 13.8% despite having a high solvency that remained strong with a core Tier 1 of 16.3%. Finally, the TNAV increased by GBP 104 million between April and September. This will be included in the final proceeds coming from the sale of TSB to Santander, ensuring TSB continues to contribute to Sabadell until the transaction closes. On Slide 16, we can see a summary of our Q3 results. Net profit ex TSB amounted to more than EUR 1.1 billion in the first 9 months of the year. Net profit of the group reached almost EUR 1.4 billion. This implies a recurring return on tangible equity of 14.1%. This level of profitability allows us to grow our loan book while accruing a 60% dividend payout and still generate capital. We have already, as I said before, generated 176 basis points of capital year-to-date. And indeed, this is a high capacity to generate capital and it is a key factor supporting our high shareholder remuneration. And with this, I will now pass the floor to Sergio, who will provide a more detailed overview of the bank's financial performance. Sergio Palavecino: Thank you, Cesar, and good morning, everyone. Let me start by showing the detailed P&L for the quarter and for the first 9 months of the year. As always, we have prepared the full group P&L as well as the P&L ex TSB, which will be the relevant perimeter going forward once we close the TSB sale. The performance of the different lines of the P&L is aligned with our year-end guidance, and we will review them in a minute. Whilst we are on this slide and before going into the detail of each of the lines, I'd like to point out that on the trading income line, this quarter, we recorded an extraordinary gross expense of EUR 23 million. This reflects mainly two items, minus EUR 8 million one-off related to liability management and minus EUR 15 million related to FX hedging on the entire proceeds from the sale of TSB, which will be quarterly incurred until the transaction is closed. We will now go through the different P&L items in more detail, focusing on Sabadell's performance, excluding TSB. Starting with NII on Slide 19, I'd like to highlight that the net interest income is broadly stable this quarter and future growth will be primarily driven by volumes. Excluding TSB, NII closed at EUR 899 million in Q3, reflecting a marginal quarter-on-quarter decline of 0.8%. Now let's look at the top right-hand side of the slide to understand the drivers behind this quarterly evolution. Moving from left to right. Customer NII had a negative impact of minus EUR 5 million. Within this, the customer margin decreased by EUR 24 million, mainly due to lower loan yield. However, quarterly average volumes of both loans and deposits had a very positive impact in the quarter, contributing EUR 8 million and EUR 12 million positively, respectively. The FX effect was marginally negative, subtracting EUR 1 million due to the depreciation of the U.S. dollar. The excess liquidity and other items had a combined impact of EUR 19 million adverse. This reflects the combination of reduced excess liquidity used to finance volume growth invested at a lower ECB deposit facility rate. Wholesale funding costs contributed positively with EUR 14 million, supported by lower funding needs, the maturity of early amortization of expensive instruments and the benefits of the floating rate hedges. And finally, one additional business day in the quarter had a marginally positive impact of EUR 3 million. Overall, we can see that the positive contributions from larger volumes and lower wholesale funding costs helped to offset the drag from lower customer margins and reduced liquidity contribution. TSB added EUR 303 million, in line with Q2 as the higher contribution from the structural hedge was fully offset by the depreciation of the sterling. All in all, we are on track to meet our 2025 NII ex TSB guidance of EUR 3.6 billion. Let's now move on to the fees on the next slide. For Sabadell, excluding TSB, the quarter saw a decrease of 4%. This was mainly due to the usual seasonality in the quarter, particularly in credit risk as well as service banking fees, which were lower during the summer season. However, year-on-year performance remains positive with fees growing by 3.7%. This growth reflects strong contributions from asset management and insurance products, which continue to support fee income. Based on this going forward, we confirm that we remain on track to meet our guidance of mid-single-digit fee growth in 2025, excluding TSB. Now moving on to costs on Slide 21. Total group costs remained contained, reflecting disciplined cost control and supported by depreciation of the British pound. On a year-on-year basis, costs remained broadly stable, increasing by just 0.5% year-on-year. In this context, we confirm again our guidance of low single-digit growth in cost, excluding TSB. On the next slide, we cover cost of risk and provisions. The cost of risk continues to evolve in line with our year-end targets or even better, reflecting prudent credit risk management. Looking at the bridge on the top right-hand side of the slide from left to right, we booked EUR 88 million of loan loss provisions, excluding TSB, during the quarter, which leads to a credit cost of risk of 21 basis points in the year. Next, a positive of EUR 5 million in provisions driven by foreclosed asset provision releases, along with capital gains on real estate assets. NPA management costs and other provisions, mainly related to litigation and other asset impairments in line with the usual run rate. Finally, TSB provisions contributed EUR 16 million this quarter. All in all, total provisions equate to a cost of risk of 37 basis points when excluding TSB. And looking ahead, we expect the total cost of risk, again, excluding TSB, to remain in line with our full year guidance or a touch better. Slide 24 provides a closer look at nonperforming loans, which continued to improve both quarter-on-quarter and year-on-year. The NPL ratio for the ex TSB perimeter declined further to 2.75%, representing a quarter-on-quarter reduction of 6 basis points and a year-on-year reduction of 96 basis points. Meanwhile, the coverage ratio remained broadly stable during the quarter and increased by 5% points over the year, reaching almost 70%. This once again confirms that our cost of risk is improving, but not at the expense of our coverage ratio. Looking at the exposures and coverage level by stage on the right-hand side, we can see that Stage 2 and Stage 3 exposures at ex-TSB level decreased by circa EUR 1.8 billion and EUR 1 billion, respectively, over the last 12 months, which I believe are remarkable figures. Moving on to the next slide. We can see that the stock of foreclosed assets continued to decline quarter-on-quarter, quarter after quarter. This is virtually a runoff portfolio with very limited entries and sales over the last 12 months of 20% of the stock at an average premium of 11%. Total NPAs, which include both NPLs and foreclosed assets, decreased by 19% year-on-year. To sum up, over the past 12 months, we have seen a strong improvement across all the 3 pillars of asset quality. Firstly, NPAs are down by around 20%. Secondly, the coverage ratio has improved by 4 percentage points. And all this has been done provisioning less. Turning now to liquidity and credit ratings. All indicators show that we ended the quarter with a very solid liquidity position, as you can see from this slide, with the loan-to-deposit ratio ex TSB showing a slight increase to 94%. Moving on to the credit ratings. Moody's upgraded Banco Sabadell's long-term rating to Baa1. This upgrade reflects the bank's improved solvency supported by the continued enhancement of both asset quality and profitability compared to past performance. Also, Fitch affirmed our long-term rating at BBB+, giving it a stable outlook once the hostile takeover bid is over. On the next slide, we present our current MREL position. We are comfortably meeting our MREL requirements in terms of both risk-weighted assets and leverage ratio exposure. In addition, we have built a solid management buffer across all requirements, which is our funding plan needs and will help to reduce wholesale funding costs in the coming quarters. For the last quarter -- sorry, in the last quarter, we issued one senior nonpreferred and one SRT transaction. And for this fourth quarter, the last one of the year, we expect one more SRT transaction to take place. Turning now to capital. At the end of September, our CET1 ratio reached 13.74%, reflecting an increase of 18 basis points during this quarter. Looking more closely at the quarterly evolution, we recorded 49 basis points of capital generation per dividend accrual. This includes 60 basis points from organic CET1 generation after deducting AT1 coupons. Zero impact from fair value reserve adjustments, minus 11 basis points from risk-weighted assets growth. Then the accrual of a 60% dividend payout represents an impact of minus 31 basis points. Now looking at the right-hand side of the slide, in terms of available capital to meet the announced shareholder remuneration, we already have EUR 3.7 billion of accrued and unpaid dividends plus excess capital above the 13% CET1 ratio on a pro forma basis. This means after the sale of TSB. This capital has already been generated. Now let's talk about the expected distributions on the next slide. We expect to distribute EUR 3.6 billion in the next 6 months, which is equivalent to more than 20% of our current market cap. This amount is the result of a second interim dividend of EUR 350 million already agreed by the Board, and that is EUR 0.07 per share in cash, which will be paid on December 29. This will be followed by the final dividend plus the excess capital of 13% CET1 to be paid after the Annual General Meeting. The estimated amount is around EUR 750 million and its composition, which may combine a cash dividend and a share buyback still needs to be defined by the Board of Directors. Finally, the extraordinary cash dividend of EUR 2.5 billion that will be paid on the last day of the month following the closing of the TSB sale. As we have seen in the previous slide, the capital required for this remuneration has already been generated. I will now conclude my part of the presentation by highlighting our shareholder value creation and the impact of TSB sale on Sabadell's multiple -- current valuation multiples. Sabadell continues to deliver strong value creation for its shareholders. This is reflected in a 17% year-on-year growth in tangible book value per share plus the dividends distributed over the last 12 months. And finally, given the importance of the extraordinary dividend related to the sale of TSV, let me share one aspect about the valuation. When we look at the 2027 consensus estimates, the Sabadell perimeter obviously already excludes TSB. Therefore, in order to accurately compare that figure with the current market cap, this extraordinary dividend for the sale of TSB must be adjusted for. So when adjusting for the EUR 2.5 billion extraordinary dividend, the market cap is EUR 14.5 billion. This adjustment obviously does affect the valuation metrics, particularly price to earnings ratio. When using the adjusted market cap as of November 11, Sabadell's P/E is below 9x and compares to an average of more than 10x for Spanish peers. And with this, I'll hand over to Cesar, who will conclude today's presentation. Cesar Gonzalez-Bueno Wittgenstein: Thank you, Sergio. To conclude, I would like to review our financial targets ex TSB for '25. We are on track to delivering these yearly targets. Starting with NII, we have delivered EUR 2.7 billion in the first 9 months of '25. So we are well positioned to achieve the full year target of EUR 3.6 billion. Fees and commissions have grown by 3.7% year-on-year consistent with our mid-single-digit expectations. On the cost side, total expenses remained under tight control. We are well within the low single-digit range. Risk metrics remain robust with total cost of risk at 37 basis points, in line with our guidance and close to -- that is close to 40 basis points. In summary, all P&L lines, ex TSB, are on track to meet the year-end guidance and we remain confident in delivering a group return on tangible equity of 14.5% by year-end. Finally, let me highlight that shareholder remuneration is projected at EUR 145 billion for 2025. reflecting an improved outlook. And with this, I will hand over to Lluc for Q&A. Lluc Sas: Perfect. Thank you, Cesar. We will now begin the Q&A session. As we have a limited amount of time, I would kindly ask you to limit the number of questions to no more than 2. Operator, could you open the line for the first question, please? Operator: First question is coming from Maks Mishyn from JB Capital. Please go ahead. Maksym Mishyn: Thank you very much for the presentation and taking our questions. Two questions for me. The first one is on cost. Could you confirm if all the costs related to the tender offer have been booked already? Or is there anything else left for the first quarter? And if so, in what line? And then on medium-term growth, do you expect the strong trend to continue in 2026 if the loan book grows faster than the mid-single digits you have put in the plant, can this have any implications for the capital distribution? Cesar Gonzalez-Bueno Wittgenstein: Okay. The cost related to the tender offer have all been booked provisioned and paid or paid, except the new that will come on Q4, which is related to the shares to be granted to employees. And as you know, it's 300 shares per employee. And this will come as extraordinary in Q4. All the rest are already taken care of. In terms of the medium-term growth, I think we remain exactly on the guidance that we give -- that we gave and therefore, for sure, no implication, and we see no risk in terms of our capital distribution versus the guidance. Anything to add? Operator: Next question is coming from Francisco Riquel from Alantra. Francisco Riquel: My first one is on NII. I would like to refer to Slide 19 of your presentation. So here, the quarterly bridge of NII, I see that new volumes are contributing with EUR 20 million NII in the quarter, loans and deposits. But then there is the column liquidity, which are negative of EUR 19 billion, so most largely offsetting the new volume growth. So it seems to me that redeploying liquidity positions out of the ECB or elsewhere is not accretive to the group with the new volumes. So I wonder how can you reassure us that you are not chasing volumes at the expense of pricing? So that's my first question. And my second question is regarding NII also. So you are targeting NII of EUR 3.6 billion in '25 and EUR 3.9 billion in '27. So that was based on mid-single-digit growth in volumes, but you are growing high single digit in Tier 1. However, the guidance for '25 probably anticipate flattish NII again in Q4. So what shall we expect going forward? If you can share with us some color for NII in '26 that you can share with us at this point? Do you think that there is upside risk to your '27 guidance, assuming you keep on growing mid-single digit for the remaining of the plan? Or do you see margin headwinds. Cesar Gonzalez-Bueno Wittgenstein: Okay. Let me start. I will give you some color, but certainly, Sergio will complete the explanation. I think you're spot on. I think Slide 19, which reflects that there is a EUR 19 million negative in liquidity and others. This is mainly driven by the fact that although we have grown significantly in customer liabilities, the deposits part and is lower than the growth of the asset part. And this is very clearly explained by a very simple reason. We are -- we have been below and we will continue probably being slightly below our expectations for new customer acquisition on all fronts, because of the result of the hostile takeover. We have delivered approximately 75% of our target in terms of growth of new customers and volumes on the -- on-balance sheet deposits and liabilities, which is below our target. If I look at it at face value, what is quite extraordinary is that we did the 75%, given the uncertainty and the difficulty for new customers to join the bank in such a period. But this going forward should improve, and we should again rebalance the growth of our on-balance sheet growth of deposits with the growth of assets. And therefore, that would affect positively that EUR 19 million that you're seeing there. I think I'll leave it at that and pass it on to Sergio. Sergio Palavecino: Yes. Thank you, Cesar. Paco, I think you need also to take into account that the liquidity part is affected by rates as still looking at the third quarter, rates at the ECB were invested at a lower rate than in the second quarter. So that does affect. Then on that part of the breakdown is also the others, which includes some hedges related to the fixed income -- sorry, to the fixed rate mortgages that have been brought to floating because the amount of fixed rate mortgages that we have is a lot and part of them are hedged. So the rates part is also affecting that component. So going forward, we -- as rates stabilize, we will expect not an adverse -- not so big adverse contribution from that portion. And then the volume component to be present during 2026. So we expect NII to start growing during 2026. With this, we will basically reconfirming our expectation that this year, we will end that NII at EUR 3.6 billion. NII will start growing during 2026. And for 2027, our estimate is that this EUR 3.9 billion that comes with -- after mid-single-digit growth of both loans and customer funds. Related to your mention of high [ yield ] on the loan book, that's at the end of the -- that's at the very end of the period, which typically has a peak in terms of loan demand. When you look at the average volumes for the loan book, we are rather on the mid-single digit that we expected. So far on volumes, I think things are progressing in line with our expectations. And if anything, we're lagging a bit in customer acquisition, as Cesar described, which, for sure, I'm sure that the hostile tender offer affected a little bit in that part of the business. Now luckily, the hostile tender offer is over, so we don't have that going forward. Cesar Gonzalez-Bueno Wittgenstein: Although we will have it for the beginning of the next quarter because, of course, the tender offer ended mid-October. If I may make a general comment on the NII. And I think although we've said this many, many times, I think it's important to repeat it, because it's at the core of our strategy. First, the NII is in line with our guidance. And the improvement of the credit quality of new lending, of course, partially dilutes also loan yields. We are growing with lower yields but with better credit quality. And this is a strategy. Because it means lower cost of risk and higher capital generation and it furthermore makes the franchise significantly more resilient. So when you look at line per line, sometimes it's difficult not to realize this underlying shift in strategy, which I think is very positive and at the core of our endeavors. Sergio Palavecino: Yes. So I think that answers also, Paco your comment that if we make sure that growth is not done at the expense of margins. And that's not the case, Cesar explained that we focus on returns, and we have a very strong discipline of allocating all cost, cost of risk and capital to all the lending. So we will only grow as long as it makes sense to do it. Operator: Next question is coming from Alvaro Serrano from Morgan Stanley. Alvaro de Tejada: The kind of follow-ups from the previous questions on loan spreads. So we've seen in the press and it looks like some of your competitors repricing mortgages up and repricing loans up last few weeks. Are you -- can you comment on what you're doing on new production? Do you recognize those comments? And I know you're also repricing up. And related to that, Seth, you mentioned that contrary to some of your competitors, you do hedge and you do swap those mortgages. Can you give us a feel of what the spread is post once the mortgage are swapped, what the spread is at the moment? . And I guess sort of related to that, in your 2027 NII target 3.9, what spread on loans, does that have factored in, what should we think about on the loan spread when we put everything in, where should it stabilize? I realize in the short term. Obviously, there's some repricing to lower Euribor still going on. But once during 2026, where do you think the loan spread can stabilize? Cesar Gonzalez-Bueno Wittgenstein: I'll take just the first part of the mortgage question. I think we are following very closely all the comments also from our competitors and following the market. And it's very clear that we are growing in mortgages at our market share. And that means that, of course, the market is competitive, has always been. But what has transformed dramatically the way we look at mortgages is that we are now fully rail rock-based. The average rate rock of new mortgages is around 20%. And that means that we price correctly, but we also include -- it's based on the segmentation approach, and we are aiming and attracting high-value clients. And the pricing includes and the RaRoC, the impact of cross-selling. That is, if a mortgage offer discounts when customers are also purchasing other products that increase their overall contribution. What has changed also is that before that was only set at the time of the issuance of the mortgage. Now that is a condition. So for example, if there's an insurance attached to a mortgage, it has an improved pricing. But if that insurance is canceled, then the price is automatically adjusted as per agreement with the client. So I think it is very clear we are all focusing very carefully. The market is growing. There's a lot of demand for mortgages, but we are all focusing on and certainly, we are on not increasing our market share on this segment growing with -- and that is our strategy, and that's what we have executed and measuring very carefully what is the value generation. Sergio Palavecino: Yes. And Alvaro to your question related mortgages and its ALM related mortgage, the origination of mortgages is fixed rate in the vast majority, more than 80% of our origination is coming in fixed. And it's been the case now for, I think, the last maybe 7 or 8 years. So the book is definitely turning very much on to the fixed rate. That is also combined with the fact that in the last quarters, the origination volumes are higher. So it's a pretty good amount of fixed rate loans. So yes, we do swap of that part connected with our ALM policy. We're swapping between 30% to 50% of the new entrants. And after swap, it depends on the different portfolios, but the final spread after swapping stays at 30 to 50 basis points. But please take into account that all the business we do, we do with customers. So the mortgage profitability is assigned in connection with other products that the customers take. So we make sure that the RaRoC all in all, makes full sense. Alvaro de Tejada: And as for the total loan book, where do you think the spread could stabilize consistent with that EUR 3.9 billion? Sergio Palavecino: Yes. The spread for the asset -- the loan yield currently in the ex TSB perimeter is at 3.68%. So when compared to ECB or Euribor, it means that in average spread is at above 150 basis points. We think that, that kind of spring is sustainable over time. So when I see maybe a little bit of additional reduction, maybe but then the mix and the rates we think that spread is sustainable over time. Operator: Next question is coming from Borja Ramirez from Citi. Borja Ramirez Segura: Can you hear me? . Cesar Gonzalez-Bueno Wittgenstein: Yes. Borja Ramirez Segura: I have to two. Firstly, on the capital distribution. I would like to ask if you could provide more details on the cash dividend growth. if that applies every year, the EPS will be higher year-over-year. And also, I think your capital distribution target does not include the potential capital from the payments JV. So that could be upside to your target? And then my second question would be on the NII, I would like to ask if the customer NII has bottomed in Q3. And also, I think you have a competitive advantage compared to domestic peers because I think you still have tailwinds from lower cost of hostile funding to come. I think you quoted EUR 200 million of upside after 2027. I'm not sure that, that's in consensus. Cesar Gonzalez-Bueno Wittgenstein: Okay. In terms of the capital distribution, I think that what we are guiding and we are guiding with confidence is that the cash dividend per share and that includes also numerator and denominator. So the number of shares will be higher in '25, '26 and '27 or equal than the one of '24. and that is what that's how we are guiding. And of course, it does not include Nexi. Sergio Palavecino: Precisely, exactly. And regarding your question on NII, I think the third quarter might be the bottom or sort of a valley as we expect the last quarter of this year to have similar levels of NII. And then as mentioned before, we expect NII to start growing in 2026. When you discussed the -- when you mentioned Borja, the wholesale funding savings that we expect, and we touched on them in our Capital Markets Day, we were comparing, I think, 2027 to 2024, there were meaningful expenses. But that was a combination of 2 things. The lower -- maybe 3 lower rates, lower spreads in the market for us in connection with our ratings. That's clear. That's structural. That's a strength going forward for sure. But there's another component, which is that the sale of TSB is going to reduce our wholesale funding needs. But that is connected to some income that we get in the ex-TSB ALCO book because in the ex-TSB ALCO book in the asset side, we also have the MREL from TSB. So I think it's not fully that sort of benefit that goes into NII, because it will be somewhat offset by the MREL bonds in the ex-TSB ALCO book. Cesar Gonzalez-Bueno Wittgenstein: That will be sold to Santander. Operator: Next question is coming from Carlos Peixoto from CaixaBank. Carlos Peixoto: A couple of questions from my side as well. There was a small decline in the... Cesar Gonzalez-Bueno Wittgenstein: Carlos, sorry to interrupt you, but could you -- Yes, much better. Thank you. Carlos Peixoto: So as I was saying, there was a 3% to 4% decline in deposits and overall balance sheet customer funds in the first Q stand-alone in -- excluding TSP. I just wondering whether you see that mainly related with the impact that you mentioned before or whether there's something else that explains this decline? And then on trading gains, well, you have the Tier 2 impact in the quarter and the hedge cost, still underlying trading would actually be slightly negative. I was just wondering whether you see this as being the trend for upcoming quarters in trading as well. And then sorry, just to overstep, but if I may, just on other provisions, if you could also give us a on how sustainable these levels are? Should we look at this adjusted by the EUR 5 million that I believe it was EUR 5 million from a recovery write-back in terms of provisions. If you adjust for that, should we see there more or less a recurrent level of provisions or just your outlook on this? Cesar Gonzalez-Bueno Wittgenstein: I'm going to try to answer the first question, but I'm not 100% sure. I understood that fully. So if I missed the answer, please come back. I think you were referring to customer funds growing less than our asset side and if that was perturable over time. And I think that what we already tried to explain is that, that difference in growth between assets and liabilities on balance sheet from clients, it's mainly due to a weaker acquisition of new customers versus our expectations due mainly to the tender offer. Therefore, we expect that to be reverted over time and to come back to our original plans with the new ones that would not happen fully during Q4, because the transaction ended at mid-October. I don't know if that was your first question, and if I answered it to your satisfaction. Carlos Peixoto: Well, actually was between June and September, you had a decline in overall stock of deposits, but I guess... Cesar Gonzalez-Bueno Wittgenstein: Deposits, you mean. Carlos, or just are you... Carlos Peixoto: Overall stock of deposits. Cesar Gonzalez-Bueno Wittgenstein: Term deposit. Carlos Peixoto: Excluding TSB. Sergio Palavecino: Term deposits. Cesar Gonzalez-Bueno Wittgenstein: Yes, yes, the EUR 2.5 billion, yes, that is a mix, and that's a shift. If you see the growth in the slide, I think it's more than EUR 5 billion growth, excluding capital appreciation on mutual funds. I think we have always pursued a greater growth in our mutual fund strategy in our off balance sheet. And part of that is cannibalization so that minus 2.5 of term deposits is also a significant shift towards mutual funds. And that's overall, what yields the growth of close to circa of 8% year-on-year on our overall funds from customers, both on balance sheet and off balance sheet. And it is the mix of the on balance sheet that I was explaining previously that has had some impact on our NII together with all the other elements that we already commented. Sergio Palavecino: Yes. Despite that -- let me also highlight the very -- the remarkable growth in the off-balance sheet products growing at a very nice double digits. So very successful, I think, part of the business. And then Carlos, your other questions, the second one was related to trading. In the trading line, the way we see things are, of course, it's probably the most volatile line. However, if we were to say a recurrent path, could maybe be between EUR 5 million to EUR 10 million per quarter. And as we have explained, we are hedging the entire proceeds coming from the sale of TSB, and that is going to have a cost of EUR 15 million every quarter during this process. And this is up to, as in our expectation, the first quarter of next year included. So those are the numbers, and we will be, I think, in that range. And regarding provisions, yes, we think that this is sustainable. This is in line with our longer-term expectations that we shared with you in the Capital Markets Day. We guided to also 40 basis points cost of risk in 2027. When we look at all the portfolios are doing a little bit better than expected, that's why we are actually below 40 basis points of cost of risk this year. And I think it's important to take that in connection with the important transformation that Cesar has described it, where we focus all the organization in originating better quality portfolios that might have not such a big spread, but it comes with lower cost of risk. And at the end of the day, we are seeing that the capital generation is actually higher. So quite happy with the transformation and the story. Cesar Gonzalez-Bueno Wittgenstein: And at risk of becoming too repetitive. I think the probability of default reduction is very, very significant. It's around 50% the first 9 months of the year versus '23 new lending. That flows through the balance sheet over time because it's the new production that improves. But after that comes the book improvement overall, depending on the maturity, term maturity of every product, and then the models in which you calculate risk also are adjusted. It all takes time, but it is in the right path. But immediately, it is producing exactly as Sergio was saying the improvement in capital generation. Loan growth is not at the expense of credit quality. On the contrary, it is based on 3 pillars. The first is risk, the preapproved loans by limiting the probabilities of default, both on average and taking away the queues. The second one is pricing. And sometimes, it yields to lower NII, but it is with higher RaRoC considering everything. So the quality of the metrics has improved dramatically. And third, it also comes at the expense of processes. I think one thing that is undervalued usually in banking is that the way you conduct your processes in the sales have a significant impact in your growth or the rest being constant. It is what we call the funnel. The focus on funnels. There's now an obsession around funnels here. And that means that chatter is parable all the rest being constant, you can have with the same pricing or equivalent pricing, the same risk, you can have higher growth. These are the 3 pillars of growth, and we are focusing very much on the execution of the 3 of them. Operator: Next question is coming from Ignacio Cerezo from UBS. Ignacio Cerezo Olmos: So I've got one actually on the mortgage yield discussion. So if you can tell us on your standard mortgages, if you on how much yield you're adding on cross-selling? And how is that broken down between different products. And then the second one, if you can remind us the breakdown of your Miami book, and if you're seeing any deterioration based on, I mean, the developments on private credit, U.S. credit quality in general. Cesar Gonzalez-Bueno Wittgenstein: Unfortunately, I don't think we are able to respond to the first question. I don't think we have that breakdown or that we are sharing that breakdown. And it's changing game continuously, and we would show you averages, but that would also not mean a lot, because it's based on every mortgage one by one and the pricing is based on a RaRoC product. It basically only includes the RaRoC the elements that are contractual. On top of that, you have an additional tailwind, which comes with higher liabilities, higher payrolls and a number of things. But that's as much as we can share. And on the breakdown on Miami. . Sergio Palavecino: No deterioration at all in our Miami book, is not in the activities that might be more affected, but we are seeing no deterioration at all. It's a very high-credit quality book. Operator: Next question is coming from [indiscernible] from Autonomous. Unknown Analyst: The first one is on the Nexi deal. If you could provide any update on the negotiations with Nexi, if this is still a priority by management? And when shall we expect any news on this? And then my second question is on the customer spread. So on the loan side, you commented that 150 basis points is sort of sustainable. Now I wanted to ask you about the deposit spread ex-TSB, -- where do you see this landing once repricing stabilizes? And just one final clarification on the CET1. You mentioned that there should be another SRT in Q4. If you could provide any expected basis points impact from that? And if you also expect any operational risk inflation in the last quarter? Cesar Gonzalez-Bueno Wittgenstein: Okay. On the Nexi deal, I think both sides have been very, very clear that has been a very long time lapse and the market has changed significantly since the prior agreement. So what we have engaged is that on first that there is more ongoing obligation. And second, we are both engaged in continuing exploring if there's a way to come to a new agreement or not. We haven't given us each other a fixed date or we haven't given each other fixed commitment. We just have mutually agreed approach to continue to exploring opportunities. Certainly, if that happens, it will be in probably very different terms and scopes than the original one. And we'll see how this evolves in the following months. Sergio Palavecino: Yes. And regarding customer spread, we are now not expecting major movements as mentioned before, maybe some basis points less in customer yield, but also some basis points less in customer funds, in the cost of customer funds. And overall, customer spread that should get stable or very close to these levels and very soon. And then relating to your last question on... Cesar Gonzalez-Bueno Wittgenstein: On a general view on the capital solution for Q4 and certainly, you can be much more explicit on the SRT. But I think for capital evolution in Q4, you should expect, as you know, we have shown already that we have covered already more than covered our commitments for the year in the first 3 quarters. But nevertheless, we expect a positive contribution to capital in Q4, although it will be more moderate than the one that we have seen in the previous quarters. And the headwinds are seasonality of the quarter because we should expect volume growth and also an impact on operational risk, maybe around 7 basis points or something of the sort. But the tailwinds will be the retained earnings and certainly the SRT now 230. Sergio Palavecino: No, I think you answered perfectly. I think the -- it's going to be in all the moving parts of the last quarter, which typically is not the strongest in capital generation, but still we expect some capital generation, because you're spot on Luis with the risk-weighted asset inflation coming from operational risk in the quarter, but the SRT will offset this. SRT benefit in the quarter will probably around 8 basis points, 8% to 7%, so offsetting that risk-weighted asset inflation and the conclusion is what Cesar said, that we expect another quarter of capital generation, probably not as strong as this one, but some of that. Operator: Next question is coming from Hugo Da Cruz from KBW. Hugo Moniz Marques Da Cruz: I just wanted to ask, so the TSB dividend, the one-off dividend I think you have a slide where you say that so far already generating $2.65 billion, and the target for the dividend is EUR 2.5 billion. So if you end up generating more capital than the dividend that's been promised so far. Will we get that with a one-off dividend? Or would it be later in the year with as you kind of excess capital. Cesar Gonzalez-Bueno Wittgenstein: That's one of those -- sorry, that's one of those mysterious questions because it is for the Board to decide. At this point in time, what we are just saying is that we have already replenished in terms of capital generation to fulfill 100% and even a little bit more of our commitments to the market. What the decisions of the Board will be in the future remains to be seen, and it's for their capabilities to address that in due course. Lluc Sas: Yes. I think we've -- a couple of analysts have just raised their hands. So operator, if we could include them in the list. So let's jump to the next question. Operator: Next question is coming from [ Tetra Romero ] from [indiscernible]. Cesar Gonzalez-Bueno Wittgenstein: Can you hear us? Please check that you are not on mute. If not, we can jump to the next analyst. Unknown Analyst: Can you hear me now? Cesar Gonzalez-Bueno Wittgenstein: Yes, yes. Yes, we can. Unknown Analyst: So my question is related to the last 1 on the dividend related to TSB. I was just wondering, you were mentioning that TNAV has already improved by EUR 100 million. You were targeting around EUR 200 million for the period up to April. So if this progressing according to better than planned and could this represent upside risk to your distribution? And also wanted to know if the timing of the closing of the transaction is on track for April? And then my second question is regarding the SRT that you were mentioning that it's going to be 8 to 7 basis points, where is the cost of that SRT showing up? Is that NII, is that included in your guidance? Sergio Palavecino: The TNAF, as you have seen, has increased by EUR 104 million. And as we guided for roughly EUR 200 million increase of TNAF in 1 year. So it is progressing absolutely in line with our expectation. That TNAF is basically the increase in the book value coming from the net income in the period, and that is flowing into the group results, where the extraordinary dividend is connected with the capital gain and the risk-weighted assets release, which is basically the sort of picture that we had when we cut off as of March 31. So the TNAF is not affecting the capital release, the -- and therefore, the extraordinary dividend is well connected with that. And then for your second question regarding the SRT cost. SRT are done in 2 different ways, synthetic on cash. In the third quarter, we closed a cash transaction. There was a securitization of consumer loans, auto, in particular, auto. So those -- that transaction is SRT and that is a cash bond, so that is going through NII. The synthetic SRT transactions, the cost is going into the fee line, because it's a fee that we pay for the guarantee. So it's going into the fee. And all of that is taken -- is considered in the guidance. Lluc Sas: Okay. So we can now jump to the final question. So operator, please? Operator: Last question is coming from Fernando Gil from Intesa Sanpaolo. Fernando Gil de Santivañes d´Ornellas: So my question is regarding the asset management business and the Amundi deal. Can you just remind us of the main terms of a deal, I think it was 2020 to 2013 -- sorry, '30, so has there been any voluntary breakup clause from Sabadell? And if so, what are the cost to notice periods and some details that you can share, please? . Cesar Gonzalez-Bueno Wittgenstein: Fernando, yes, it was a 10-year agreement for distribution in 2020 where we sold our asset management company to Amundi. That period, therefore, ends in 2030. And we're very pleased with the agreement. We're very happy. The business is done. It's working very well. So there is nothing that we can add at this moment on this. It's going well. Lluc Sas: Perfect. So that concludes our presentation today. Thank you, Cesar and Sergio. As always, the Investor Relations team remains available for any additional questions or follow-ups. Thank you, everyone, for participating and for joining us this morning. Have a nice day. Cesar Gonzalez-Bueno Wittgenstein: Have a nice day. Sergio Palavecino: Thank you.
Operator: Good evening. This is the Chorus Call conference operator. Welcome, and thank you for joining the Geox First 9 Months 2025 Financial Results Conference Call. [Operator Instructions] Let me introduce you to today's call speakers, the Geox Group CEO, Mr. Francesco Giovanni; and the CFO, Mr. Andrea Maldi. Geox would like to remind that any forward-looking statements disclosed during this call involve risks, uncertainties and other factors that may cause actual results to differ significantly from what is expressed or implied. Many of these factors are behind the group's control. At this time, I would like to turn the conference over to Mr. Francesco Giovanni, CEO of Geox. Please go ahead, sir. Francesco Di Giovanni: Good evening. Thank you very much. Good evening, and thank you all for joining us. Let me summarize in a few statements what has happened over the last 9 months. We report a 3.8% decline in sales compared to the same period of last year on a like-for-like basis, as market conditions and overall consumer dynamics continue to affect sector demand, which remains in significant contraction. However, I believe it is important to notice that despite such market dynamics, our direct retail channel delivered sales substantially in line with the previous year, in line with our most recently adopted strategy, but also taking into account such challenging market conditions. We focused with strong determination on cost rationalization and efficiency measures, which enabled us to achieve a higher adjusted EBIT than the first 9 months of 2024, the previous year. For the full year 2025, thanks to the aforementioned cost containment measures, we forecast an adjusted EBIT margin in line with the previous -- with previous plan expectations and the bank debt in the range of EUR 100 million, EUR 110 million despite the aforementioned high single-digit weakness in sales. The challenging market we live in is further confirmed by the wholesale channel sales campaign for the Spring/Summer 2026 collection, which has been concluded in September, which has recorded a slight decrease in volumes compared to the Spring/Summer 2025 season. Overall, we can say that the company is fostering a change process, as we indicated in the past. A lot of things are happening in the company. We will strive to move on with our turnaround measures. And I'm happy to turn the floor now to Andrea Maldi to talk about the 9 months that has gone by. Thank you very much. Andrea Maldi: Thank you, Francesco, for your introduction, and good evening, everybody. I will try to give you highlights of the 9 months 2025 sales. And just as overall assumption, we can say that the wholesale business remained under pressure, mainly reflecting the softer sell-in for the 2025 Spring/Summer and Fall/Winter '25 campaign across all the geographies. If we talk about retail, we can see a minor decline, which is mainly driven by a perimeter reduction. And instead, if we look at the web, e-commerce in general, we can register a weak performance in the wholesale and marketplace platforms, which has been only partially offset by the very good performance of our own web DOS distribution. Having said that, if you look at the numbers, we set -- we reached the target of net sales to EUR 492 million, which is a 6.2% decrease compared to last year. But if we compare on a like-for-like basis in terms of perimeter, the decline is much lower and is set at 3.8%. The EBITDA adjusted margin is higher than the 9 months 2024. And the bank net debt, as mentioned by Francesco, is in the range of EUR 106 million compared to EUR 103 million of the period December 2024 and EUR 138.4 million as of September '24, if we look at just 9 months. If we try to have a look again more in detail into the sales by channel, we say that we started from a last year of 9 months '24 at EUR 525 million. We are impacted by a perimeter reduction. As you remember, we closed last year 2 important markets, China and U.S. for a total value of EUR 13.4 million. And having restated the perimeter, we can say that the wholesale is declining by EUR 9 million compared to the same period of last year. And this decline is mainly driven by the softer sell-in, as we said, of the Spring/Summer and Fall/Winter 2025 campaign. And the negative performance has been mainly driven, we will see later in France, Iberia region and Russia. At the same time, we have a retail, which is almost flat, as we said. Like-for-like as just said at minus 0.6%, we can say flat, while we have been impacted by a perimeter effect by the reduction of our distribution of EUR 1.3 million. If we look at, again, e-commerce to different speed of pace. Clearly, the -- our own DOS website is performing strongly, is positive and it is growing with a significant -- an important percentage of growth, sorry, 3.7% plus compared clearly to wholesale web distribution, which has been instead negative in the 9 months and by marketplace performance, which is strongly negative, but also is determined by our own decision of winding down some of the platforms that we were not performing in terms of profitability, despite this a conscious decision to exit business, which is lowering our overall profitability. If we try to have a look at the sales by region, -- we can see that Italy is almost flat, EUR 144 million compared to EUR 143 million. Europe, the overall performance moves from EUR 239 million to EUR 235 million with an overall performance, which is slightly negative as the positive results, which is coming from the retail channel has been more than offset by a weaker performance into the wholesale distribution. This is mainly happening in France and Iberia region, as we mentioned. France, overall instead continues to deliver resilient and positive performance in retail, reflecting the solid market leadership while it is underperforming in the other channel . if we look at the rest of the world, clearly worth to mention, worth to notice that the performance needs to be is mainly impacted by the perimeter effect of the closing or the winding down of 2 main -- 2 markets of China and U.S. And at the same time, we have an important decline of the business in Russia in the range of the EUR 16 million within the 9 months. Quick highlight on the sales by product, mainly dividing the world into footwear and apparel. The percentage remain -- in terms of percentage remain unchanged compared to last year, being the footwear business still representing 91% of our own -- of the total business and the apparel is in the region of 9% to 10%. I would like to give you a highlight of the overall structure of the distribution of our brick-and-mortar retail network. As we can see from the chart, we see that we have an important perimeter reduction. We moved from the 616 number of doors in 2024 -- at the end of 2024 to 569 at the end of the 9 months 2025. The reduction, if we look at the structure, is mainly driven by the reduction into what we call franchisee in deal. So the -- our own partners that are working within our own perimeter. We decreased that number from 141 to 111, so a decline of 30 stores in the 9 months, while the structure of the -- our own shops remain substantially unchanged with a slight negative of 4, which is clearly the average between the new openings and the shutting down of the shops, which were not performing. Just again, a quick highlight on the net debt as of September 2025. We mentioned EUR 119 million as overall value of the net debt and the net financial position, which is clearly including a negative fair value of the hedging instrument, which is in the range of EUR 14 million -- sorry, of EUR 12.5 million. Therefore, we confirm that the bank net debt as of September 2024 is EUR 106 billion, which is in line with our forecast, with our expectation for the year and is setting up positively for us the trends to be in line with our expectation at year-end as well as committed to the original budget. I think that in terms of outlook, -- based on the performance that we have recorded in the first -- in the 9 months of 2025, our company forecast is that the 2025 sales for the full year are expected to decline a little bit more than what we have seen in the previous market presentation, moving into the high single-digit area compared to what we have represented in the fiscal year 2024. On the other side, we continue to work to perform and protect on the adjusted EBIT margin, which is -- which we estimate to remain unchanged compared to the target that we set for 2025, thanks to the strong ongoing initiatives into the rationalization and cost saving initiatives. And the net debt -- the bank net debt is expected to be in the year-end in the range of EUR 100 million to EUR 110 million, which is again in line with what we have forecasted at the beginning of the 2025 in January. So thanks for the attention. I think that we are now opening the session of the Q&A, if any. Operator: [Operator Instructions] The first question is from Oriana Cardani of Intesa Sanpaolo. Oriana Cardani: Thank you for taking my 3 questions. The first one is on the Q3 sales performance by category. Is there any difference between men's, women's, children's between the premium and value segments? Or is the weakness of the quarter general across all categories? The second question is on the measures implemented to accelerate savings. Regarding the agreement reached with the trade unions, can you tell us the expected structural savings from these measures starting in 2026? And besides personnel costs, have you found other areas for intervention such as in supply chain or logistic cost? And finally, do you plan to present an update of the business plan next year? Andrea Maldi: Okay. thanks for your question. I tried to give a fair answer to all your point. The first one is on your business mix in terms of decline. Overall, we have seen that we are struggling mostly on women categories, mainly on the [ sandals ], which is resulting in 8.5% decline compared to last year. And overall, if we look at the third quarter 2025, we have a women performance, which is still quite weak in the range of minus 15.4%. Francesco Di Giovanni: This is primarily -- excuse me, Francesco Di Giovanni. This is primarily driven by a very dramatic September result, which in October saw a rebound, not significant rebound in inventory part. Andrea Maldi: Coming to the second point, which is related to the overall restructuring costs on the personnel side, there is clearly some sensitivities. So what I can say so far is that we are working in order to incorporate in our year-end results, the cost of the restructuring or at least, let's say, 70% of the cost of the overall restructuring. We are working on the detail to perform on the number. And the expected saving in 2026 is at least in line with the value of investment that we are going to make in 2024 -- in 2025 to prepare the first side of the restructuring. What I can also say in terms of the overall impact of the -- this project is that the run rate of the savings expected is paying back 1 year completely the investment that we are going to do in -- overall for our restructuring project. I think that we will have much more details clearly at year-end once we will have satisfied all the compliance activity that are currently under way of being performed in terms of determination exactly of the amount that we want to invest, how much of this amount will be cash driven, cash paid in 2025, how much will be just accounted into the P&L. We are working on this detail. But overall, the overall project is really profitable because the payoff in a run rate basis is in less than 1 year. Francesco Di Giovanni: Well, in addition to that, we can say, this is Francesco to join again, we can say that the restructuring plan is moving along quite quickly. We have had thus far approximately 60 people accepting the offer that was made to leave the company out of 120. In addition, we are moving faster than expected on the international network. And thus far, we have approximately half of the international network [indiscernible] Andrea Maldi: Thank you, Giovanni, Francesco. The third question is, I think -- the third question is, I think that if I recall properly, is on the overall approach on the other -- on the base cost on what we normally define as indirect cost. As you know, we have identified an important indirect cost base spending that we are taking. There has been already a significant portion of activity of acceleration and work on this target on the financial target in 2025, which is going to pay off because -- to pay back quite quickly because we are expecting to be on track with the year-end net results. The saving is quite important in the range of the 70% of the overall in direct base cost. And this process will continue in 2026 as well, not only clearly on the personnel and staff cost, as you just mentioned, as a part of the overall restructuring project, but also on the indirect cost as well. Just to highlight again that if you take our announcement to date of the overall results, we have been able to achieve an overall EUR 20 million reduction of cost in the first 9 months of 2025 compared to last year. This is including already overall EUR 5 million of personnel cost saving in the first 9 months. Francesco Di Giovanni: Well, as far as the last question was about the business plan. Andrea Maldi: The last question is about the business plan. I think that we have expectation is that we are working on it and that we -- probably in the beginning of spring, let's say, placing the date in spring next year, we will produce an amended or an adjusted business plan, a revised and updated business plan. Clearly, we will need to catch on the sales and the new cost structure to represent the evolution from 2027 and going forward for the next 3 years of the plan. At the same time, we are working deeply in those weeks in the budget for 2026, and we are trying to commit to remain in terms of cash flow unchanged compared to the expectation of our business plan that we have declared to the market back in March 2024 either. Operator: [Operator Instructions] Management, there are no more questions registered at this time. Francesco Di Giovanni: Okay. Well, thank you very much, everybody. Andrea Maldi: Thank you. Operator: Ladies and gentlemen, thank you for joining. The conference is now over. You may disconnect your telephone.
Sean Peasgood: Good afternoon, and thank you for joining us for Intermap Technologies conference call to discuss its financial results for the third quarter of 2025 for the 3 months ending September 30, 2025. We I'm Sean Peasgood, from Sophic Capital. We handle Intermap's Investor Relations. On today's call, we have Intermap's CEO, Patrick Blott, CFO, Jennifer Bakken; and COO, Jack Schneider. [Operator Instructions] Before management discusses the results, I'd like to remind everyone that certain statements in this call may be forward-looking in nature. These include statements involving known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied in our forward-looking statements. For caveats about forward-looking statements and risk factors, please see our MD&A for the third quarter ended September 30, 2025, which will be filed on our company profile at SEDAR+ on November 13. I'll now pass the call over to Intermap's CEO, Patrick Blott. Patrick, go ahead. Patrick Blott: Good afternoon, ladies and gentlemen, and welcome to Intermap's financial results conference call for the third quarter of 2025. I'm Patrick Blott, Chairman and CEO of Intermap. Today, as we review the third quarter results, I'll provide highlights along with the business update and outlook. Then I'll turn the call over to Jennifer Bakken, our CFO, to walk through our recent financial performance, and we'll leave some time at the end for Q&A. A little over a year ago, we were ramping up to execute our new program in Indonesia. Since that time, we permitted both in Indonesia and in the United States... Sean Peasgood: Looks like we just lost Patrick. So give us 1 second, and we'll get them back on the line here. Sorry about the inconvenience. [Technical Difficulty] Patrick Blott: Sorry about that. Okay. So a little over a year ago, we were ramping up to execute our new program in Indonesia. Since that time, we permitted in both Indonesia and the United States. We've hired locally in large numbers, upgraded processing systems and capacity with advanced technology and GPUs, deployed a massive team into the field. We've delivered exquisite data to the customer better than specifications, collected attributes and 3D vectors and built 1:5000 scale base map and unbelievably record time, turnaround that was unimaginable 5 years ago before our process automation. So we accomplished this using AI-driven and advanced GPU-driven models and automation technologies built by our own team, working in partnership with customers all over the world. Our lenders have stepped up offering incredible financial support for our contracting activity, allowing Intermap to comply with financial requirements which reflects a positive credit assessment of the quality of our customer base that delivers our revenue. In addition, our equity and shelf registration, Intermap was able to demonstrate over $100 million of credit support to back its work on large government contracting programs all over the world. That's a huge step forward. We've raised over $35 million of equity capital through a life offering and a base shelf prospectus. We've removed the going concern qualification from our financial statements. In Indonesia, the $200 million integrated land administration and spatial planning project is moving forward as expected. During the quarter, we submitted bids covering all 4 lots of the program. The tender review committee is currently evaluating those submissions. The program remains backed by the World Bank denominated in U.S. dollars, which enhances certainty and margin predictability. We're the incumbent in our technology, local operations and performance history continue to set the standard for national mapping. We've evolved our technology, systems and platform, working with the Air Force, the U.S. Air Force, NGA, DARPA and others. Nothing that we're doing right now for customers is conceptual. It's proven. We're driving growth by hitting the repeat button, not just the create button, and when we do create things, it's for specific customer value gaps where they lead the way with identified demand signals, it's not speculative investment. It's ROI-driven high technology investment. That's why organizations like DARPA and NGA Research want to work with Intermap to better leverage the returns on their own research dollars. We've announced today 2 contracts on IDIQ vehicles totaling more than $500 million combined ceiling to work with NOAA to integrate where water shoreline intersects with terrain. The $250 million Coastal Geospatial Services Contract 5 and the $250 million NGS shoreline mapping support IDIQ, our long-cycle programs that provide recurring opportunities to deliver data analytics across a range of coastal and climate applications. The $21 million equity financing completed in September, increased shareholder equity to more than $27 million and provided the liquidity we need to scale and compete. It also expands our strategic flexibility in a critical moment with major tenders now underway throughout Southeast Asia, the United States and Europe. Revenue for the quarter was $1.7 million compared to $5 million last year, reflecting the timing of government programs, most notably in Indonesia and the slowdown in U.S. government activity caused by the shutdown. More than 90% of revenue came from the United States and Europe. Commercial performance has been particularly strong. Commercial revenue grew 37% year-over-year Commercial is currently tracking around $7 million a year. Working capital was $23.3 million at the end of the quarter, allowing the company to remove our going concern qualification, the company is in the process of uplifting its audit to comply with U.S. securities registrations under PCAOB. Adjusted EBITDA was negative $1 million for the quarter compared to positive $1.6 million for 2024. Net loss was $1.5 million compared to net income of $1.1 million. Operating cash flow year-to-date was $2 million compared to negative $1 million for the same period last year. Cash flows was reinvested to improve our working capital and net of that investment operating cash flow during the quarter improved to negative $1.7 million compared to negative $2.3 million last year. We're expecting continued growth for our insurance segment around the world, driven by continued adoption of our Elevation as a Service and analytics subscriptions along with growing demand for our insurance risk assistant subsystem or IRAS. The product's agentic AI foundation is proving valuable for insurance carriers to price and manage risk and estimate loss to share some high-level metrics on insurance specifically, we currently have several hundred daily users, making more than 5 million 3D data calls in a typical month which we track to analyze properties all over North America, Europe and soon Asia. These numbers surge during and immediately after climate events. The data usage contributes to our understanding and modeling of climate perils we don't compete with these clients for their premium dollars. We empower them to do more profitable underwriting to use our proprietary global flood models, for example, within their own underwriting process. With some capacity providers, we are negotiating incentive compensation arrangements to allow Intermap to capture more of the underwriting value it delivers and participate in premium growth. These existing customers are earning billions of dollars in profitable underwriting and reinsurance premium globally. On the origination side, in the U.S. alone, the private flood market now exceeds $1 billion in premium, with $4.5 billion national flood insurance program retrenching further every year, which extends the protection gap, that also though increases the market opportunity for private flood. Today, our business is supporting more than 60 underwriting programs worldwide with new capacity providers joining us every quarter. Because our data models and analytics are proven, Intermap's programs are drawing capacity from the largest insurance and reinsurance companies in the world. They trust Intermap software to support their in-house underwriting, portfolio management, reinsurance with better analytics, automation, speed, accuracy, tools and data products. They're growing with us, into new global markets because they trust Intermap as an enabler of accurate underwriting, which in turn, enables scalable distribution. A significant amount of growth was contributed by Europe, our first-to-market AI agent there draws on Intermap's proprietary data, allows established multi-peril underwriters and reinsurers to significantly expand automated and rapidly scale their processes, driving very high conversion rates. A typical small capacity provider will consider 250,000 to 500,000 risks a year, representing $200 million of premium, the risk assistant allows this customer to rapidly scale their capacity, providing automated, scalable AI-driven capabilities to confidently execute real-time property-level risk assessment, premium pricing, claims assessment and reinsurance. Subscribers benefit from an independent real-time automated and objective risk assessment that penetrates 3D locations and 3D vectors deeper than algorithms that rely solely on geo-located addresses. This leverages our enormous archive of historic 3D location and data to mitigate basis risk and improve underwriting outcomes. Intermap is the only commercial company with underwriting quality, high-precision 3D foundation of vector data available across the entire globe to support global insurance programs at this level of acuity. The risk assistant also incorporates proven proprietary easy to calibrate and patented global flood models that overlay additional diverse views of risk. The company continues to ramp its operations to qualify for and execute larger contracts, we continue to invest in technology and in our people. Our processing and AI capabilities are expanding, and our aircraft and sensor kits are performing exceptionally. We're building for scale to execute on multiple larger contracts to sustain recurring revenue. So today compared to a year ago, we're better, we're faster, we're more precise. We're definitely more global. We're more integrated within all of our domains, earth, air, sea and space. Compared to a year ago, we have new technology, better platforms, additional talent, more scale, better specs that we're hitting, better data, more liquidity, credit support, growth capital and very, very importantly, incredible past performance after working for a year in Indonesia. Overall, this quarter demonstrated the discipline of our operating model and the strength of our strategy and the ability of the company to generate cash throughout the contracting cycle. We're competing for additional work in Indonesia. So I'm not going to talk further about that specifically other than to say with specific cost performance and well-capitalized balance sheet and having delivered exceptional data products to them already, we're in a much stronger position than we were when we won this program last year. In government contracting, uncertain timing effects can impact revenues, where Intermap is competing for large dollars relative to its current size, where we have greater control over timing, we've converted years of investment into financial stability. We deepened our commercial traction, and we established a significantly stronger platform for growth based upon the work we've done to date, and the focused work happening right now for the remaining weeks of the year, we're maintaining our guidance of $30 million to $35 million in revenue and 28% adjusted EBITDA margin, there's ample identified contracting opportunities to support these dollars in short time frames once our customers decide to work with Intermap. Risks include assumptions regarding future contracts awards revenue recognition timing and uncertainty of subscription renewals. With that, I will turn the call over to our CFO, Jennifer Bakken, to review the financial results in more detail. Jennifer Bakken: Thank you, Patrick. As a reminder, we report our financial results in U.S. dollars. For more detailed financial information, please refer to the financial statements and management discussion and analysis that we will file on SEDAR+ and EDGAR today. For the third quarter ended September 30, 2025, revenue was $1.7 million compared to $5 million in the third quarter of 2024. The difference primarily reflects the timing of program activity in Indonesia and U.S. government programs. Year-to-date revenue was $9 million compared to $10.2 million for the same period in '24. By segment, Acquisition Services contributed, $0.1 million; Value-added Data, $0.4 million; and Software and Solutions, $1.2 million for the quarter. Software and Solutions increased 20% year-over-year, underscoring continued growth in our SaaS and analytics offerings. Operating cash flow for the year-to-date period was $2 million, when you exclude the investment to repay accounts payable compared to $1.4 million use of cash when you exclude the growth of accounts payable last year. Net of accounts payable changes, operating cash flow for the quarter improved to negative $1.7 million from negative $2.3 million in 2024. Working capital at September 30 was $23 million, and shareholders' equity rose to $27.2 million, reflecting the $21 million bought deal financing completed in the quarter. This strong working capital position allowed us to remove the going concern qualification from our financial statements, a major milestone that demonstrates our financial stability and the confidence of our capital partners. Adjusted EBITDA was negative $1 million for the quarter compared with positive $1.6 million last year. The change reflects the expected timing of project execution, partially offset by stronger commercial performance. Net loss for the quarter was $1.5 million compared with net income of $1.1 million last year. Our balance sheet has been transformed. We now have the liquidity and equity base to pursue and execute larger government programs while maintaining investment in our high-margin recurring software business. We ended the quarter with no significant debt maturities and modest ongoing obligations related to our aircraft and equipment financing. From a risk perspective, our primary exposure continues to be the timing of government contract awards for foreign currency volatility, with World Bank funding for the Indonesian mapping program now denominated in U.S. dollars, we expect that exposure to be significantly reduced going forward. In summary, Intermap finished the quarter with a strong capital foundation, improving cash generation and clear visibility into our next phase of growth. Patrick, back to you. Patrick Blott: Thank you, Jennifer. So our focus for the remainder of 2025 and into 2026 is execution. We're converting tenders into contracts expanding our commercial SaaS footprint and leveraging proprietary AI and GEOINT capabilities to deliver value at global scale. We appreciate the continued support of our shareholders, partners and employees as we build a stronger and more resilient Intermap, thanks again for tuning in today. I'm now going to pass the call to you, Sean, to moderate the Q&A. Sean Peasgood: Great. Thanks, Patrick and Jennifer. [Operator Instructions] So first questions are around Indonesia. On the August call, you noted that the technical specifications for the new work were unchanged from your current Phase 1 work, the RFB was revised somewhat. Can you comment on how the final technical requirements compare with Phase 1? Patrick Blott: Yes, the final -- the final specifications are the same. So they're building a country map very important that, that is well understood. They're building a country map. And so that map has very prescriptive specs around what the scale is and what the components of building it are, and those have not changed and those went through multiyear technical process to define those specs. Sean Peasgood: Around technical capabilities. Are you familiar with the technical capabilities of the other companies being on the Indonesia contracts and contrast that with what you offer? Patrick Blott: I'm not going to do that. I mean, I don't -- I'm not sure what the upside to us or anyone for doing that right now in the middle of this process is. Sean Peasgood: Okay. So aside for Indonesia, you previously expressed optimism on other government contract wins in Southeast Asia and potentially South America and other markets. Can you comment on an update from that after the last quarter? Patrick Blott: Yes. I mean we have active pursuit happening on every continent right now. We have dedicated teams on every continent, including Southeast Asia, Latin America, South America, even Africa, Europe. And increasingly in the United States and Canada as well. So there's a lot of activity happening. The shutdown, it did affect certain funding and certain actual task orders but it did not affect -- because essentially, the civilians were getting paid, right? But the uniform personnel were and they kept working and we kept meeting and we kept refining requirements, there's a lot of activity there. So it did not miss a step because the world didn't stop. And so there's lots of stuff going on in addition to Indonesia. Sean Peasgood: I know you did -- so you made a comment about the NOAA contract, but can you provide more insight into those 2 contract opportunities? I don't know if there's any more you can add. Patrick Blott: I mean I think 1 of the key things that is important is the integration of the different domains because solutions today do require multi-domain expertise. Our -- both our sensor kit and processing kit, our GEOINT products are multi-domain designed, and they do bring value into multi-domain, particularly and especially during the integration. So when you're talking about integrating -- we talked about IRAS before and how our architectures build. The 2 defining features: one, global scale and two, it's source agnostic. And so that ability to integrate, particularly around the seams of terrain and maritime, air and space, that's really an important capability, and that is the requirement on that contract. Sean Peasgood: Another question here about the shutdown, just asking if you can quantify or talk to the impact of how the shutdown has impacted 2025? And maybe if you're seeing anything come back or your -- how you foresee that changing in the future? Patrick Blott: I mean it's still -- in terms of -- it's really resolving itself real time right now. Like I said, it did not interrupt our work I do believe that it slowed down because a lot of the administrative stuff is civilian, and it did slow down contracting, but I don't think it's fundamentally changed much for the year. Sean Peasgood: Okay. Sticking with defense. Can you talk about what you're seeing in terms of order potential on Luno A and B and JANUS? Patrick Blott: No, I don't have anything to add since last quarter. I mean, the requirements -- those are GEOINT requirements, they're very specific and they're very different. So they're not generic. Our other contract vehicle, which is JANUS is more generic in terms of the requirement flow, more geography-based, but these requirements are GEOINT, and they're very, very different. And all the teams were put on that contract vehicle for very specific reasons. Sean Peasgood: You talked a lot about insurance on the call. Can you talk about -- a little bit about other opportunities in the commercial landscape for the company, other industries or other opportunities? Patrick Blott: Yes. I mean we purposely designed our commercial because we're still a very small company. The beauty of the kind of data that we create, it really cuts horizontally but that's all well and good because to commercialize it, it's very important, in my opinion and what's worked for us to go very vertically and very focused in terms of business use cases. So we really very deliberately and thoughtfully targeted the main, the large and the fastest-growing segments. And so that started with insurance. That's why we started there first, and that's why it's the more mature of our segments and you hear about it more but we certainly didn't stop there. And the transportation NAV problem set is an enormous opportunity. We're just about to do some upsizing of those contract vehicles because we're making tremendous technology progress in that sector and the demand pull is increasing a lot as well with the commercial customer base. So navigation problems that affect technology, logistics, distribution, is really important. And then finally, the telecom set which is also a really important set because we're now having systems -- commercial systems that are both terrestrial and space based. They're integrating. They're not where they need to be. It's mostly a land-based bottleneck rather than a space-based bottleneck. And I think that's a tremendous opportunity for us. So we're investing a lot of time in it. Sean Peasgood: Switching gears a bit here. What was the catalyst behind switching the company's auditor from KPMG to MNP? Patrick Blott: Yes. So 1 of the things I've said is our goal is to upgrade particularly our U.S. listing and improve the liquidity profile of that listing which is essentially it's been an underutilized opportunity for the company but that requires a whole lot of steps to get there. And probably the most time-consuming one is complying with the audit standards for the U.S. listing. And so we have started, we are a foreign private issuer, that's the capital, F, FPI. So we have taken the step to file our statements on EDGAR, and you can find them on EDGAR and SEDAR now. And we're in the process of upgrading our audit to be PCAOB, which is the public company accounting standards board compliant. That falls out of Sarbanes-Oxley and the financial crisis and new rules and regs around U.S. financial reporting. We're an IFRS reporter at the moment. We report in U.S. dollars, but we're an IFRS reporter, and in order to lift that IFRS audit up to a PCAOB standard, that is a new audit. And so we needed auditors qualified to do that, who were licensed to do that. Our former auditors, the ones -- the audit group that did us for literally decades, they weren't able to do that. Their firm out of the U.S. could have done it. So we considered that and we considered that, and we considered 3 other firms. And we went and hired 1 that we are really comfortable with that we think is doing a great job. So MNP is uplifting our IFRS accounting to that PCAOB standard, which is going to allow us, in turn, to upgrade our listing in the U.S. to a higher exchange and then improve the liquidity which is the whole objective there. Sean Peasgood: Perfect. Okay. There are several people asking about that uplift. So I think that's quite clear that, that's the plan. I think last quarter, you said by the end of the year, we're getting close to the end of the year. There's a lot to do. Do you have an updated time line on that? Patrick Blott: It remains the target, and obviously pushing hard to meet that objective. I mean there are very prescriptive things that need to happen, including upgraded controls, we're a global company. We have employees and revenue and operations all over the world. And so we have a lot of work to do in terms of making sure that everything gets uplifted to that standard and then document it as part of the audit. And so there's just a lot of activity happening there. So we're pushing it as quickly as we can, but there's physics behind it and stuff that needs to get done. So my objective is still the end of the year but we've got to take it 1 step at a time. Sean Peasgood: Okay. We have a number of questions that are fairly specific around companies and probably things that we're not going to answer on a public call. So if I didn't answer your question, please e-mail me or -- and we can get back to you but I don't think we're going to call out specific customers here on this call. Back to insurance, can you further describe the potential size of the insurance opportunity? And how does that contrast to your perception of the opportunity a year ago? Patrick Blott: Yes, that's a great question. So there's a couple of things going on there. One, I believe, the largest potential commercial market in the sector. And -- which is obviously why we've targeted it as a really, really good use case for what we do as well. And we've been doing it now for a number of years. We're quite smart on it, and we have a lot of customers and we learn from them and they learn from us. So there's a dynamic there which has allowed us to expand the scope. So when we grow that -- when we think about that business, there's a couple of things. One, the primary overriding objective has been to grow by customers. We want to prove value to as many customers to start as we can. And so that's been an overriding objective. And our go-to-market in that regard has been software-based and that's worked pretty well for us and has worked pretty well -- very well for the customer because it relieves them of a lot of burdens and a lot of things that would basically be impossible to do on their own, without the benefit of the scale and the benefit of the automation. So we're bringing a lot of value and that's important. And then I think the other thing is we're purposely going to market in a way that allows us to take a global perspective on it, right, since day 1. And -- because, again, our data, Intermap's unique, quite unique because our data set, 3D data set is a global data set. And it's a very, very rich global data set. It's over a very long period of time. We have all kinds of archive and history, and our models are very, very special and they're built on global data sets. And so we're looking at every industry we go in, including insurance from a global perspective. That harmonizes really well especially with the big carriers because they're based -- whether they're based in London or New York or wherever they're taking a global view and they're running a global business. And each market is different and each market is regulated in a different way. But fundamentally, from a risk perspective, the key drivers aren't that different, and they're very, very influenced by what we provide. And so they're global, our customers, we're global, and that's been sort of the approach there. And so that the opportunity set then also becomes Well, hey, there's massive regions of the world where the protection gap the uninsured for perils is really big. It's big in the United States, which I would say is probably 1 of the more mature markets but it's massive in other places. And our customers are looking at the world and we're looking at the world, and we're going into these new markets together because it's taken several years to establish that kind of a relationship. So that's how we're approaching it. So we're going to grow both in scope. We're going to do more for these customers. We're going to grow in terms of the scale and the geographic reach and we're doing that in partnership with the customers. We're going to grow because the industry is growing each market a little bit differently but perils are growing globally, and that's a driver. That's a real tailwind for the entire industry and we're going to grow because governments are stretched. So the one that probably gets the most airtime is the U.S., where the NFIP is extremely stretched, and so that's creating -- as they retrench, they create more market opportunity for private insurers, which is good because that creates incentives and that creates proper price discovery and things happen where they should happen and they don't happen -- people don't build a house where they are not supposed to build it when you have to pay a market rate. So I think it's all good, even though we're dealing with a category that is -- nobody wants to hear about a hurricane, right? But I think what we're bringing to this is very, very constructive and positive. And there's a huge tailwind there because the government programs are stretched. Sean Peasgood: Okay. Great. Another housekeeping one. How is the company dealing with and addressing foreign exchange risk, if there is any? Patrick Blott: Yes in a couple of ways. I mean we do have FX lines. So we will, for certain situations where we feel like there's excessive exposure, we will hedge it. And particularly, we'll hedge it from a cost perspective that's very important. And then we'll also hedge it from a revenue perspective. So it's case by case. It's country by country. Even on the most basic level, I mean, we're TSX-listed Alberta Corp that also reports in U.S. dollars, and we have USD-CAD not as volatile a currency. But -- so FX, we have operations in Eastern Europe. We have operations in Southeast Asia. We have employees in both. So we do have FX considerations, both internally and with our revenue and customers and with our partners and suppliers. So it is -- we have an FX line if need be for special contracts, we can extend and do much more. We can also ensure with there's government programs both in the U.S. and Canada, where we -- our FX lines are insured. So we can extend that way too. So there's a lot that goes on behind the scenes on that. But essentially, the idea is, don't take any exchange risk on cost, and then where there's volatility on the top line, mitigate that as well within reason because if you get too unreasonable, especially in certain markets, the costs could be pretty extreme. Sean Peasgood: Okay, great. Just looking here to see if there's any more. I think we've answered most of these questions. I'm going to give it another minute for anything to show up if there's nothing else, and I think we'll wrap it up here. Okay. I think we're going to wrap it up. I don't see anything else. And if I missed anything, please e-mail me, there were a lot of questions. I tried to put as many together as possible. So we created an informative discussion here. But if I missed anything, please e-mail me, I'm happy to get back to you quickly here. Thank you all for joining the call today. And I'll pass it back to Patrick for quick closing remarks, and we'll close it off. Patrick Blott: Yes. Thank you for joining today, and we look forward to updating you on our progress as we go through future quarters. Have a good night, everyone. Sean Peasgood: This concludes Intermap's second quarter -- or sorry, third quarter of 2025 conference call. Thank you for joining.
Operator: Good day, and a warm welcome to today's conference call of the PATRIZIA SE, following the publication of the 9-month financial results of 2025. [Operator Instructions] Having said this, I hand over to PATRIZIA's Director, Investor Relations, Janina Rochell. Janina Rochell: Thank you, Sarah. Welcome, everyone, to our analyst and investor call for 9 months 2025. This is Janina speaking, and I'm happy to be back from parental leave and truly excited to reconnect with all of you. I am pleased to have our CEO, Asoka Wohrmann; and our CFO, Martin Praum, with us today. Asoka will start by presenting the highlights of the first 9 months 2025. Afterwards, Martin will guide you through our 9 months financials and provide an outlook for the rest of the year. As mentioned by Sarah, the call will be followed by a Q&A session. During today's call, we will refer to our results presentation, which you can find on our website. If you have any questions, the IR team is more than happy to assist. As usual, this call will be recorded and made available on our website. We will also provide a call transcript for further reference. With that, I'd like to hand over to Asoka to start with the presentation. Asoka, the floor is yours. Asoka Woehrmann: Thank you, Janina. Great to have you back. Ladies and gentlemen, a warm welcome from my side as well. Let me comment on our 9 months 2025 results. Hopefully, you will have already seen our ad-hoc release and financial earnings statement that we published this Tuesday. We have raised our guidance for EBITDA and EBITDA margin, and we also specified our guidance for assets under management for the full year 2025 financial year. Our financial performance in the first 9 months of 2025 showed a strong EBITDA growth to EUR 44.6 million. We significantly improved our EBITDA margin to 22.1%, well above last year's EBITDA margin of 3.5%. This earnings performance is a clear result of our new organizational setup that enables us to scale our operations efficiently while maintaining strict cost discipline. Last year, we established an integrated investment platform, including fund management and asset management. We strengthened our international client division, which is responsible for product management, development, fundraising and client relationships. And we created a new operations platform that is leveraging our technology expertise to streamline processes and strengthen collaboration across all business divisions. This new operational strength enables us to drive efficiency across all platforms and profitable growth in the new cycle. Our assets under management were slightly up quarter-on-quarter to EUR 56.3 billion. This improvement was driven by a small amount of net organic growth as well as reemerging positive valuation effects. And we use open client commitments for additional investments for our clients. Especially in real estate, transaction activity shows that more clients are taking advantage of market opportunities in the new cycle. Let us move to Slide 4. In preparing for the new cycle, our clear aim was to drive cost down and effectively scale our integrated investment platform for smart real assets. Today, our integrated investment platform enables us to leverage our operational strengths in both real estate and infrastructure investment management. As a result, our management fees alone more than [Audio Gap] covered total operating expenses. This is a key step. As already said in our last half year analyst call, we see the new cycle is starting to gain momentum. However, let me emphasize again that this cycle will be slower, tougher and bumpier than previous cycles. As you can see from our results, transaction activities went in quarter 3 with more clients returning to the buy side. Our closed acquisitions surged by around 41% in the first 9 months of 2025, reaching EUR 1.8 billion, a continuation of the positive trend we have seen since beginning of 2024. In the third quarter, we closed 3 major real estate acquisitions with triple-digit euro ticket sizes for international clients, both in Living and Commercial, as you can see on this slide. And let me reemphasize, our sector-specific investment strategies are led by the 4 dual megatrends, the digital, urban, energy and living transition. All dual megatrends are powered by technology as a key value driver. The Living sector remains one of our key investment strategies, offering attractive long-term returns for our clients. Living has been a strategic growth pillar for PATRIZIA for more than 40 years and we have an exceptional track record in Living. Today, modern living goes beyond traditional residential real estate and includes fast-growing attractive subsegments like affordable housing, student housing, co-living, micro living and senior living. And all Living segments are poised for growth in the new cycle. With valuation stabilizing, transaction volumes picking up, we believe this is the right moment to start investing in real estate again. In addition, we also see momentum building in our Infrastructure business. We have signed several transactions which will accelerate Europe's energy transition. We have created a Nordic district heating platform worth over EUR 300 million. This will support our AUM in the fourth quarter after the expected closing, and it demonstrates PATRIZIA's strong mid-market position as a leading investor in Europe's energy transition. Let me continue to the next slide to show you what your clients -- what our clients expect for the future. Our Annual International 2025 Client Survey provides further proof that the new cycle is gaining momentum. This survey captured the views of 110 leading institutional investors of PATRIZIA, representing close to EUR 1 trillion in capital. The main takeaway is that client sentiment has clearly improved in real estate across all major categories, and the survey anticipated that real estate valuations are improving again for the first time since 2022. Another result -- key result is the growing strategic importance of infrastructure investments for institutional clients. Driven by the dual megatrends, the energy transition and digital infrastructure are top priorities for investors, and both areas clearly play to our strengths. Just to give you one example, our strategic investment in aligned data centers in the North America at the beginning of the year that has already performed very well. And with the expansion of our Nordics district heating investment platform, we continue to leverage attractive investment opportunities, the energy transition trend. So you can see our sector-specific investment strategies driven by dual megatrends are gaining traction. Let us move to the next slide. Let me conclude by reemphasizing our 3 management priorities. First, clear client and product focus; second, further improving earnings quality; third, and scaling our smart real asset investment platform. Those 3 pillars are the crucial success factors to win in the new cycle. First, we will deliver outstanding products and services to our clients and step up fundraising. One key investment area for PATRIZIA has always been and will be the living sector with all its attractive subsegments. Second, we want to grow management fees and improve our co-investment results while maintaining strict cost discipline to strengthen our long-term profitability. Third, we will strengthen synergies between real estate and infrastructure, what we call Re-Infra, and scale our integrated investment platform. And we will continue to focus on attractive sector-specific investment strategies driven by the dual megatrends. Thank you for your attention. And now I would like to hand over to our CFO, Martin Praum. He will guide you through our quarter 3 financials and the updated 2025 outlook in detail. Thank you for your attention. Martin, please. Martin Praum: Thank you, Asoka, and hi, everyone. Welcome also from my side. Let's continue on Page 9 of the presentation. As some of you might remember from our last analyst and investor call at end of second quarter, we back then showed a decline in equity raising year-on-year. But at the same time, we were confident that momentum would come back throughout the year. And this is exactly what happened during the third quarter. With equity raised, as you can see here, now at EUR 0.8 billion after 9 months, up 7.6% compared to last year. If you look at this on a quarterly level, we had EUR 0.5 billion in the third quarter, and this is the highest in the last 4 quarters. The subsequent investments for our clients from equity raised and existing equity commitments were the major drivers for continued net organic growth in AUM. Valuation effects turned positive during the third quarter. Remember, at Q1, this chart showed a EUR 0.6 billion negative effect. This turned into a 0 impact at the second quarter. And now you can see a positive EUR 0.2 billion valuation support. However, currency effects still weigh on AUM. This is leading to a virtually stable overall AUM development if compared to the beginning of the year. But if we would exclude these valuation -- sorry, these currency effects, then AUM would be up 1% year-to-date. In my view, it's also noteworthy that open equity commitments have also increased from EUR 0.9 billion last quarter to EUR 1.1 billion at the end of the third quarter. So the overall picture shows a stabilization. And as Asoka mentioned before, the cycle is slower and probably bumpier. That also means that the speed of market recovery is currently slower than what many market participants expected at the beginning of the year. This also drove our decision to move the AUM guidance range slightly down to now EUR 56 billion to EUR 60 billion for the year-end '25, also taking into account the currency effects. Now let's move to the next page, Page 10, on profitability. Basically, what you see here is that we decoupled from the overall market environment. We showed a material increase in profitability with EBITDA up over 500% to EUR 44.6 million, and this is already within the previous full year guidance range of between EUR 40 million to EUR 60 million after only 9 months. Management fees well exceeded operating expenses, and we saw a smaller contribution to revenues from transaction and performance fees compared to last year, driven primarily by a higher share of investment for clients with all-in management fee structures and also continuously slower realizations for clients, which has an impact on performance fees. The key message to me here is overall management fees contributed with 91% to total service fee income. The material reduction in operating expenses and the improvement in net sales revenues and co-investment income, basically, this means rental income of consolidated assets and dividends from co-investments and funds, both significantly supported the strong year-on-year increase in EBITDA. Now let's have a deeper look on the next 2 pages, 11 and 12. You can see that management fees showed resilience in line with AUM, with market-driven fees, like transaction and performance fees, still under pressure. If we look at it on a quarterly basis, on the next page, it shows that management fees had a breakout from the trend in the quarter, which was driven by catch-up fees we were able to invoice during the third quarter So the overall picture is unchanged with resilient management fees and volatility on market-driven revenues, which is why it is so important that the reduced operating expenses are now well covering -- are well covered by management fees. Let's go to the next page, Page 13, to look at the cost development. You will see that we further intensified cost efficiency measures. We've made the platform more efficient, adjusted to the market cycle and made significant progress, both on staff costs and on other operating expenses. We will continue working on platform efficiency. And the reduced cost base provides PATRIZIA and its shareholders with significant positive leverage once fundraising and investment volumes increase more markedly in absolute terms. And as you might know, PATRIZIA runs, as we call it, a dual engine, a business model that is driven by our asset-light investment management combined with the use of our balance sheet capital to co-invest and seed strategic investments. And this is what you'll see on the next page, 14, of the presentation when we talk about the segment reporting. The significant improvement of our EBITDA was driven by both investment management and our balance sheet investments. One driven by cost discipline, resilience in AUM and management fees, the other driven by a normalization of income from consolidated assets and higher rental revenues. Let's look at how we've invested the balance sheet capital on Page 15. You'll see the value creation from using the group's balance sheet equity to invest both in real estate and infrastructure. And we will continue to take selective market opportunities to support new fund initiatives, and we will also crystallize value when the time is right also for our shareholders. We will always make sure that we have a decent financial flexibility, both in terms of balance sheet ratios and available liquidity. Talking about liquidity, Page 16 shows the strong improvement in operating cash flow during the first 9 months. This is, on the one hand, driven by the general improvement of profitability, but also by the successful active management of working capital freeing up additional liquidity. Let's move to Page 17. And this is a financial reporting you are probably well familiar with. You will see the balance sheet and liquidity overview on this page. Net equity ratio is still strong, now closer to 70% and up 1.3 percentage points compared to the last quarter. If we look at available liquidity, this also increased by EUR 20 million compared to the last quarter, now slightly above EUR 100 million, with further financial flexibility shown on this slide. Let me finish with the outlook for 2025. Our key messages here are: first, we expect the stabilization and slow recovery to continue, so the direction of travel is right, and to support the revenue side, while the positive effects from our cost efficiency measures should continue to support our P&L going forward. And this drives the guidance change and the increase of the EBITDA guidance from EUR 40 million to EUR 60 million to now EUR 50 million to EUR 65 million. Subsequently, the EBITDA margin is increased from around about 15% to 21% to now 19% to 24% for the year '25. We will continue to raise equity and use existing equity commitments from our clients to invest along the dual megatrends. However, the overall level of equity raised, the expected timing of closing of investment transactions and currency effects led us to slightly move the midpoint of our AUM guidance from EUR 60 billion before to EUR 58 billion. Also, year-end valuations for real estate and infrastructure will play a role on where we will end the year with this KPI. As a summary, the market is stabilizing and slowly going into growth mode again. And as we said in the past, it's not a V-shaped recovery, but rather a steady improvement. Second key message, we have decoupled PATRIZIA's P&L and profitability from the market and market-driven revenues, and we'll continue to work on efficiency, quality of earnings and overall profitability to the benefit for both our clients and our shareholders. With that, I'm handing back to Sarah, and we're happy to take your questions. Operator: [Operator Instructions] And having said that, let's take a look in the queue. And by now, we have one virtual hand from a person who has dialed in by phone with the phone ending 370. Philipp Kaiser: It's Philipp from Warburg Research speaking. Congrats to the sound operating performance. I have a couple of questions. I would go through them one by one, starting with the EBITDA and the main driver of the EBITDA improvement, the cost-cutting measures. You did a superb job on streamlining your platform. But I can imagine the greatest potential now is lifted. So looking ahead, do you expect that the operating expenses can further decline? Or are you expecting just a kind of a flat development for the next couple of months and the next year? Martin Praum: Philipp, it's Martin speaking. And thank you for your feedback on what we've achieved so far. We will -- as I said, we will certainly continue to work on the expenses side and do everything we can also as a reaction to the market environment to make this platform more efficient. We still believe that there's some room for more efficiencies. And you will also see –- as you see in the number, this is basically an effect of measures we've not taken this week, but a few quarters before. So the full impact of the measures we've taken, take a while to show up in the P&L. So we expect also some further potential here in terms of P&L and cost efficiency going forward. Philipp Kaiser: Okay. Perfect. Then the next one is on the management fees. You also stated in your presentation that they are partly positively, impacted by one-off catch-up fees. Could you provide us with the exact amount of those catch-up fees? Martin Praum: Yes, sure. If you look at the management fees on a quarterly basis, you would see that the third quarter was very strong with EUR 60.6 million of management fees versus an average of, say, EUR 55 million to EUR 57 million in the quarters before. The third quarter was positively impacted by around about EUR 2.5 million of catch-up fees. So if you basically would exclude that, we would talk about around about EUR 58 million run rate management fees in the third quarter. Philipp Kaiser: Okay. Perfect. And my next one would be on the AUMs. You already stated during your presentation that you already have signed acquisition, but not closed yet, which will support AUM development. Could you give us a broad range which volume we can expect for the last quarter of the year? Martin Praum: Sure. I can give you a broad guidance, because what I said is we certainly have a pipeline of a few hundred millions that has been signed already and will close in the fourth quarter as acquisitions. So you have from a net organic growth prospects some upside in the fourth quarter. The somewhat unknown is timing effects of closing of certain transactions and valuations. You might remember that slightly over 25% of our assets are valued in the fourth quarter. So this will have an impact. And then currency effects. But as you can see in the guidance range, which is now EUR 56 million to EUR 60 million. And where we stand today in terms of AUM, we currently expect that the AUM at the end of the year will come in higher than what we've reported for the first -- for the third quarter. Philipp Kaiser: Okay. Perfect. My last question with regards to the EBITDA would be the rental income. So it has come from the balance sheet assets. Do you have any visibility when those assets might, yes, [ went ] out from your balance sheet and you kind of, yes, get rid of the positive impact of the rental income? I think it's roughly EUR 12 million. This year, we will earn those assets. So any visibility on that? Martin Praum: It is actually -- it really depends on the asset because we've got different assets and portfolios on our balance sheet, Philipp. So in terms of exit date, we will have a look at the market and then we'll have a look at the assets, because some of these assets are what you would call core assets with a very stable cash flow. These are the ones that could come to the market earlier. Then we also have some value-add exposure, where we will spend some CapEx and invest to increase the value, and then find the right time to exit. So for your modeling, I would, for the time being, assume that the rental income will stay with us for, say, the next 1, 2 quarters, and then we'll see where the market is and how we've developed the assets further. Philipp Kaiser: Okay. Perfect. My last one would be on your mid-term guidance. I mean it's probably a bit too early to get very nervous, but does anything change with regards to your, yes, EUR 100 billion guidance in 2030? Asoka Woehrmann: Very valid questions. Again, the mid-term guidance is something we agreed that we are looking every year. We are running and looking what the market environment, client behavior, sector developments are. We are very strongly geared, as we mentioned, around our dual megatrends. We are very confident that trends are right, but it is -- we are seeing our clients are getting more confident to invest, but it's much slower, as Martin and I mentioned earlier. So I do think it is always for us to go to EUR 100 billion, is a North Star. And we will go in this direction. We will do everything. We have now the operational leverage, what we are creating. And I do think it a little bit depends on the dynamic. Every year, we have to review how far and how reachable is this magic number. But even though, we are confident that the market will gain some momentum at some point. But I do think -- also '26, I do think it will be slower. It will be, again, not a stabilizing year like '24 and '25. It will see some growth, but not the same expectations as we have created in the plan. So we will consult and go back to our NTP and we will check that, the EUR 100 billion number. But even though, our profitability numbers and expectations, we will keep on a clear eye, and we want to deliver strong profitability to our shareholders. Philipp Kaiser: Okay. And maybe out of curiosity, just purely on operational-wise –- I'm just making up a number, say that by the end of next year, you reached EUR 60 billion in AUM. Then 4 years left for the EUR 1 billion (sic) [ EUR 100 billion ] in AUM, left. Roughly EUR 10 billion net organic growth per year. Just operational-wise, is it possible that your current streamlined platform can handle this transaction volume per year? I guess kind of the overall transaction volume would be a bit higher with like disposals, et cetera. So is it just purely from operational-wise possible to have over EUR 10 billion per year? Asoka Woehrmann: Yes. No, great arithmetic you open up. I think Martin will talk in some second. But let me give you a little bit the philosophy behind the EUR 100 billion number and the clear North Star of our organization. And it's important -- you are right, '26, in our expectation, that will be a growth year for the sector, will come back, as we said, but in a modest way. And that's really good. But it is the jump of base, EUR 60 billion. In my opinion, without guiding now, it's a probable one. And you're arithmetic every year EUR 10 billion. First of all, in the past, PATRIZIA was able to manage, yes, sometimes EUR 9 billion to EUR 10 billion transaction volumes. So that's nothing new. We are experienced. Also, our transaction sizes are much bigger. And don't forget the projects we are involved also in the co-investment area, also in more and more in SMA, they are the big clients, they are coming like in the Nordic district heating platform. I'm not going to name the clients, but they are very big clients. They have sizes. They can come in. And we will -- we are expecting the transaction sizes will be bigger. And again, important for you, we are expecting the infrastructure as well as the heating topics in living, affordable housing, they will get much more, let me say, public support for these themes, and we want to be involved. And I think even we have not definite programs for that, we are seeing, and I do think that all is possible. I don't know if we are ending in EUR 90 million or EUR 1 billion or EUR 110 billion, but the direction is right and the desire. And this North Star is the right direction, as you can see. And that is, in my opinion, important. It's a quite unknown market at the moment because I think as you not see the transaction, the willingness of clients to invest because the fixed income area is so booming and performing. That going a little bit the demand down, I do think the people will turn quite fast for long-term returns in real assets, and we are ready for that. Martin, please. Martin Praum: Yes. I can only second what Asoka just said, and want to go into the same direction. If you compare PATRIZIA and what we've delivered in the past in terms of investment volumes, you shouldn't forget that PATRIZIA's platform has actually grown over the last few years. We've built the platform. And besides the efficiency programs we run, we continue to invest in the platform. We have grown the number of institutional clients over time. We have now access to different pools of capital. And it is a question of ticket size. We are more international than we were in the past cycle. And we now have access to also larger funds like state funds that will give us opportunities to create new investment solutions for these clients. Overall, certainly depends on the market environment. And sometimes in a cycle, there is a point where suddenly, you can say, the powers come to play. And we do expect that as well at some point to happen. But there's a good opportunity we'll reach these targets and we will go into that direction. Operator: And now we will move on with the questions from Lars Vom-Cleff. Lars Vom Cleff: One question remaining, and that would also be regarding your EUR 100 billion North Star. I mean, on the current basis, that implies a CAGR of around about 12%. And if I understood you correctly, you feel that all of that is doable with organic growth. But seeing real estate markets somewhat stabilizing, revaluation -- or negative revaluation slowing down, if not having come to a halt, and taking into account your equity ratio and the available liquidity, would now not be a good time to think about potential bolt-on acquisitions again in order to reach your target faster? Asoka Woehrmann: I think also -- thank you for your view. And also, as Philipp asked the EUR 100 billion and mentioned the EUR 100 billion, don't forget in our thinking there was also revaluation of the market that was included. It's not only pure organic growth, capital raising. And we expect that infrastructure has much more momentum. And I do think you can read and [ smoke ] every day from the newswires how much people are geared to invest in infrastructure. So far not happening than anecdotical evidences like data centers and so on. I do think that will get momentum. But your question -- and Lars, let me say that in -- since I joined now nearly 2.5 years now as PATRIZIA CEO, this question came up, do you don't want -- what's your opinion about inorganic growth? I always -- even though I was always active in my former thinking, I always said we have to press the pause button, because we have to consolidate our platforms, we have to create our efficiency, we have to do -- we are a very fast-growing organization over the last 15 years. We sprinted to EUR 60 billion. I think it's a remarkable growth. That means also remarkable growth of platforms. Different platforms, fragmented platforms have to be consolidated. I do think the effects are playing out for the now investors, as Martin very nicely played out. But again, I am seeing opportunities. I do think as long as lasts the slow, sluggish growth of the sector, and clients demand are going to persist. I do think that small players will have a very -- much difficulties, and mid-sized players, to be in the market. I think there will be opportunities. But we will not do for AUM growth inorganic growth activities. I've been all my career against that, and I will also not do to destroy shareholder value. If that enrich our expertise, open up new markets and client segments, then the right arguments are there -- and the pricing must work for us and for our shareholders, we will do that. This is the way of our organization. I'm thinking we are full of entrepreneurial spirit in this organization, and we are not going to blast our AUM. Even we phrase the $100 billion as a North Star, I do think we have to do the right things. But I do think it will be -- and I think your question is the right timing. Now in my view, Lars, we have to open up our eyes for opportunities, also for strategic partnerships. I do think the market is just going to shape. I can see lot of partnerships are -- programs are coming. And there's a very interesting period, in my opinion, kicking in, in, let me say, illiquid sector space. And I do think, therefore, I am super keen to answer in the next quarterly earning meetings this question. And we will be active. A very clear answer, yes, we will look into that, but various opportunities, not only pure M&A transactions. Operator: And by now, we have one virtual hand left from Thomas Neuhold. [Operator Instructions]. So Mr. Neuhold, please go ahead. Thomas Neuhold: I have 2 questions on your balance sheet investments. Firstly, I was wondering if you can please provide an update on your Dawonia investments. Have there been any new developments there? And the second question is on the strategic seed investments. What is the status of the 3 strategic seed investments? And by when do you expect to be able to release at least some capital there? And I was wondering if you have any additional seed investments in the pipeline? And if yes, if you can talk a little bit about potential size, sector and timing of those? Martin Praum: Sure. Can you hear me, Thomas? Thomas Neuhold: Yes, I can. Martin Praum: Okay. So first of all, on Dawonia, probably a repetition of last quarter's call, but we are still in very constructive negotiations with the investors in that fund. All on track. And we will update the market once we have news on that. The portfolio continues to perform very well. I think this is also in line with what you heard from other listed residential players in the market, and we can also confirm that these developments are also reflected in the Dawonia portfolio. In terms of seed investments, I made a statement on that before. Some of them are on the list for an exit and others will keep for a little while to work on the asset. So there's no detailed time frame for disposal at this stage. We are still happy with the rental income we are generating and the development of these assets. In terms of additional seed investments, you might have noticed we've increased our exposure to Dawonia in this year because we saw good opportunities. And also, we continued to invest in co-investments like in the infrastructure space, where we spent another single-digit million amount in the third quarter to facilitate further investment and product growth. Operator: Thank you so much. And in the meantime, we have received no further virtual hands. So everything appears to be answered by now. Therefore, we come to the end of today's conference call. Thank you, everyone, for joining and your shown interest. And also a big thank you to you, Asoka and Martin, for the presentation. And it was a pleasure to be your host today. And now I hand back to Martin for some final remarks, which concludes our call. Martin Praum: Thank you so much, Sarah, and thank you everyone who attended this call and thank you for your great questions. We are happy to meet as many of you during our next conference attendance. We'll be in London next week and we'll also be at Deutsche Borse's Equity Forum from 24th to 22nd (sic) [ 26th] November in Frankfurt. We'll be there for the full 3 days, and we'll be happy to meet and discuss. And with that, thank you, everyone, and speak soon. Bye-bye. Asoka Woehrmann: Thank you.
Operator: Good day, ladies and gentlemen. Welcome to the SmartCentres REIT Q3 2025 Conference Call. I would like to introduce Mr. Peter Slan. Please go ahead. Peter Slan: Thank you, operator, and good afternoon, everyone. Welcome to our third quarter 2025 results call. I'm Peter Slan, Chief Financial Officer; and I'm joined on today's call by Mitch Goldhar, SmartCentres Executive Chair and CEO; and by Rudy Gobin, our Executive Vice President, Portfolio Management and Investments. We will begin today's call with comments from Mitch. Rudy will then provide some operational highlights, and I will review our financial results. We will then be pleased to take your questions. Just before I turn the call over to Mitch, I would like to refer you specifically to the cautionary language about forward-looking information, which can be found at the front of our MD&A. This also applies to any comments by any of the speakers made today. Mitch, over to you. Mitchell Goldhar: Thank you, Peter, and good afternoon, and welcome, everyone. Our comments on this Q3 call will be abbreviated so as to leave more time for your questions. For the third quarter, SmartCentres once again delivered across the board in rental lifts, NOI growth, FFO and a strengthening balance sheet. On the property level, we are driving performance across all sectors, retail, industrial, residential, storage and office, translating into higher occupancy, healthy same-property NOI increases, attractive lease expansion rates and continued tenant demand for new build locations. With this demand, we are able to focus on high-quality covenants from national retailers who focus on value for all Canadians in our preferred categories of general merchandise, grocery, pharmacy, apparel, home improvement, sports and rec, financial services and more, deepening our role as Canada's shopping center. As we have said previously, the foundations of this positioning were laid many years ago, that is to provide value and convenience to all Canadians. The third quarter performance reflects that belief that providing value and convenience is good business. While the business continues to grow organically and through new income-producing developments, we carefully manage our debt and debt-related metrics. In that regard, we have improved our financial flexibility with approximately $1.1 billion in liquidity, 88% of debt being at fixed rate and an unencumbered asset pool at $9.8 billion, which Peter will speak to in a moment. But before that, let me turn it over to Rudy for some more operational highlights. Rudy? Rudy Gobin: Thanks, Mitch, and good afternoon, everyone. The third quarter was once again a standout in many areas and related operating metrics. Tenant demand for space remained strong, delivering high-quality income across all provinces maintaining a leading 98.6% occupancy at the quarter end. In addition, this added demand allows us to make some upgrades to both retailer quality and covenant strength. Same-property NOI continued its strong momentum with 4.6% growth in the quarter ex anchors and 5.9% year-to-date, equating to an overall all-in 3.7% for the year thus far. With 5.3 million square feet of space maturing in 2025, by quarter end, the REIT had already extended nearly 85% with rental spreads of 8.4% excluding anchors and 6.2% all in. Rent collections remained stable at 99% in the quarter. Costco at Winston Churchill and 401, as we mentioned before, along with Walmart in Oakville Center, both opened strong shortly after the quarter end. While overall retail and demand for space remains robust, we did, however, book a provision in the quarter for one tenant. Overall, the REIT continues to grow, strengthening its cash flow and stability while reducing risk. We expect this momentum to continue through to year-end. Thank you, and I will now turn it over to Peter. Peter Slan: Thanks, Rudy. As you've seen in our press release, same-property NOI growth remains solid increasing 2.9 -- 2.6% for the quarter or 4.6% excluding anchor tenants, as Rudy mentioned, mainly due to lease-up and lease extension activities, partially offset by the impact of a credit provision primarily associated with one retail tenant. Excluding the credit provision, same-property NOI growth would have been about 50 basis points higher or 3.1%. The change in FFO this quarter was primarily due to NOI growth, town home closings and the fair value adjustment on our total return swap. FFO with adjustments increased 5.6% in the quarter compared to the prior year. During Q3, we closed on 13 townhomes in our Vaughan Northwest project. This has resulted in a cumulative margin of about 22% for the project to date. Subsequent to the quarter, we have also sold an additional 8 town homes, which are expected to close in Q4, bringing Phase 1 of the project to virtual completion with 119 of the 120 homes sold. We again maintained our distributions during the quarter at an annualized rate of $1.85 per unit. The payout ratio to AFFO continues to show improvement at 89.6% for the rolling 12-month period ending September 30, 2025. Adjusted debt to adjusted EBITDA was 9.6x in Q3, unchanged from last quarter, but an improvement from 9.8x for the same period last year, primarily due to continued growth in EBITDA. Subsequent to the quarter, we increased our liquidity through the issuance of $500 million of unsecured debentures in 2 tranches. The blended interest rate of the 2 tranches was 3.96%. The proceeds from this offering will be used to repay our Series X debenture upon its maturity in December 2025 as well as floating rate debt on our operating lines. We also closed on a CMHC financing for our Millway purpose-built rental project and a portfolio financing on 10 self-storage properties subsequent to the quarter end. The weighted average term to maturity of our debt, including debt on equity accounted investments is 2.9 years, or 3.4 years on a pro forma basis, accounting for those subsequent events that I just mentioned. As in previous quarters, we've updated our MD&A disclosure, focusing on those development projects that are currently under construction. As you can see on Page 18, there were 8 projects under construction at the end of Q3, up 1 from last quarter as a new self-storage facility is under construction in Victoria, British Columbia. And with that, we would be pleased to take your questions. So operator, can we have the first question on the line, please? Operator: [Operator Instructions] The first question is from Sam Damiani from TD Securities. Sam Damiani: Thank you. Good afternoon. Maybe just to start off, maybe perhaps Rudy for you is just the exposure to Toys"R"Us, I'm just wondering if you could comment on the remaining stores within the portfolio and how you view potentially having to backfill those locations and at different rents? Mitchell Goldhar: Yes. I mean, Toys"R"Us, yes, we're all over it. Actually, it's turned into actually more of an opportunity, frankly. We have a lot of interest in the toys that we're getting back, stronger companies, more compatible actual users, bigger draws and higher rents. So it's actually turning into a, quite frankly, like that, that setback is turning into an advance. We're well along. So 2 are leased, and there's interest in the majority of the balance. So then, Rudy, do you want to add anything? Rudy Gobin: Yes. The only thing I would add is when we replaced 2 of our locations, we mentioned, Sam, a couple of quarters ago, we were doing that. We started getting calls. And we have a really good interest from, as Mitch mentioned, stronger retailers, stronger covenants, the grocers, the TJXs the like. So we're not expecting that there would be any issues if and when we would have to execute on any of these. But it is looking better on an overall rental basis as well. Sam Damiani: Okay. Great. And maybe, Mitch, for you, just in the MD&A, the retail development pipeline for the next 5 years, really, I guess, it did increase quite materially to 3 million square feet. And I know it's just kind of a plan. It's nothing that's kind of concrete and pre-leased and all that. But like what is the visibility, I guess, on the REIT constructing 3 million square feet over the next 5 years of purely retail space? Mitchell Goldhar: Well, I guess, I think we've alluded to it in previous calls that we're sort of witnessing some increase in interest in our portfolio from the retail side of things. So it's starting to move further along and materialize. That's the reason for the increase there. You also put that -- combine that with the fact that the residential side of things has slowed down. So in some of the cases, the residential program was on what was going to be retail. And when the residential was more attractive than the retail, we were inclined to -- we are open to doing residential. But many of those properties are actually shopping centers and permit retail. And so some of it is plans that we had considered for residential. Now we have interest from retailers. So that's also part of the increase that you're seeing there. Sam Damiani: And does the increase include one or more greenfield new shopping centers? Mitchell Goldhar: That number does not actually -- so I'll say that we are anticipating some growth in our retail -- core retail business. That number is really on existing properties. But I'll say it now, and it's just, I guess, a little bit of guidance or whatever you want to call it that, that could go up and the greenfields development potential, I would say, it's something to look out for. We'll see still sort of earlier stages. But in terms of just indications, there might be -- yes, there might be something up the road that we'll be focusing -- we'll be announcing or putting -- shedding more light on in the coming quarters. Sam Damiani: Interesting. And last one for me. Just the Costco and Walmart that just opened, did they contribute any FFO or cash rent in the third quarter? Mitchell Goldhar: Yes, yes. And I'll also point out, I don't know if anyone out there lives near the Winston Churchill 401, you should go check it out. And that's an example of what we're talking about earlier about the toys being replaced by certain other retailers. I mean, that was an old Rona and it was a fantastic tenant. But Costco, of course, is bigger traffic generator. And if you go to the Winston Churchill 401 project and just imagine what that Costco is doing for that shopping center, you'd also be able to extend the trajectory of that on some of the other comments we were making about filling the toys and certain other things that are going on that we're alluding to. But yes, not quite in a position or ready to announce. Operator: [Operator Instructions] This question is from Dean Wilkinson from CIBC World Markets. Dean Wilkinson: Mitch, thank you for the truncated open comments. I think I can say for everybody. We appreciate that. Just following along Sam's question on the development and the development pipeline. I mean, you've got $2 billion of PUD, maybe another $0.5 billion of identified capital that you've got to put in there. How comfortable are you taking -- like how high are you comfortable taking that number up over 20% of the balance sheet? Or are you looking at some of those 3- to 5-year time horizons to have some developments burn off? Just trying to get a sense of how much you want to push the balance sheet on the development side of things given you've got more properties under development than some REITs have entire assets? Mitchell Goldhar: Yes. I mean, obviously, Dean, we're just monitoring all of that. We're never going to jeopardize anything. There's great opportunities. It's big difference between residential and retail, especially high density. So with the retail, single-story stuff, mostly at-grade parking and the income kicks in usually between 9 and 12 months. So -- and there's some pretty good accretion there. So we just watch it and manage it in terms of timing and so on and so forth because the EBITDA kicks in pretty quick. And a lot of it, as we were saying, is on site. So there's no land costs, et cetera, et cetera. So it's quite sensitive to we can do that. It's quite sensitive in terms of the metrics that you're referring to. So we're just going to find a way to do it. within all the metrics and being conservative with inside those metrics, we just find a way to do it. But the guiding principle, the guiding -- yes, first principle is to stay well within all the important metrics. But not to give up the business. This is just a question of how we're going to get there properly. But we're pretty confident we can find a way to get there. Dean Wilkinson: Shorter development cycle over a longer one sounds like it would be more preferential. Mitchell Goldhar: Yes. Yes, exactly. Operator: Right. There are no further questions in the queue. Mitchell Goldhar: I guess we are all picking up on the theme. So thank you all for participating in our Q3 call. Please feel free to reach out to us at any time for any further questions. And until then, have a great day. Operator: Ladies and gentlemen, this concludes the SmartCentres Retail Q3 2025 Conference Call. Thank you for your participation, and have a nice day.
Operator: Good day, and a warm welcome to today's conference call of the PATRIZIA SE, following the publication of the 9-month financial results of 2025. [Operator Instructions] Having said this, I hand over to PATRIZIA's Director, Investor Relations, Janina Rochell. Janina Rochell: Thank you, Sarah. Welcome, everyone, to our analyst and investor call for 9 months 2025. This is Janina speaking, and I'm happy to be back from parental leave and truly excited to reconnect with all of you. I am pleased to have our CEO, Asoka Wohrmann; and our CFO, Martin Praum, with us today. Asoka will start by presenting the highlights of the first 9 months 2025. Afterwards, Martin will guide you through our 9 months financials and provide an outlook for the rest of the year. As mentioned by Sarah, the call will be followed by a Q&A session. During today's call, we will refer to our results presentation, which you can find on our website. If you have any questions, the IR team is more than happy to assist. As usual, this call will be recorded and made available on our website. We will also provide a call transcript for further reference. With that, I'd like to hand over to Asoka to start with the presentation. Asoka, the floor is yours. Asoka Woehrmann: Thank you, Janina. Great to have you back. Ladies and gentlemen, a warm welcome from my side as well. Let me comment on our 9 months 2025 results. Hopefully, you will have already seen our ad-hoc release and financial earnings statement that we published this Tuesday. We have raised our guidance for EBITDA and EBITDA margin, and we also specified our guidance for assets under management for the full year 2025 financial year. Our financial performance in the first 9 months of 2025 showed a strong EBITDA growth to EUR 44.6 million. We significantly improved our EBITDA margin to 22.1%, well above last year's EBITDA margin of 3.5%. This earnings performance is a clear result of our new organizational setup that enables us to scale our operations efficiently while maintaining strict cost discipline. Last year, we established an integrated investment platform, including fund management and asset management. We strengthened our international client division, which is responsible for product management, development, fundraising and client relationships. And we created a new operations platform that is leveraging our technology expertise to streamline processes and strengthen collaboration across all business divisions. This new operational strength enables us to drive efficiency across all platforms and profitable growth in the new cycle. Our assets under management were slightly up quarter-on-quarter to EUR 56.3 billion. This improvement was driven by a small amount of net organic growth as well as reemerging positive valuation effects. And we use open client commitments for additional investments for our clients. Especially in real estate, transaction activity shows that more clients are taking advantage of market opportunities in the new cycle. Let us move to Slide 4. In preparing for the new cycle, our clear aim was to drive cost down and effectively scale our integrated investment platform for smart real assets. Today, our integrated investment platform enables us to leverage our operational strengths in both real estate and infrastructure investment management. As a result, our management fees alone more than [Audio Gap] covered total operating expenses. This is a key step. As already said in our last half year analyst call, we see the new cycle is starting to gain momentum. However, let me emphasize again that this cycle will be slower, tougher and bumpier than previous cycles. As you can see from our results, transaction activities went in quarter 3 with more clients returning to the buy side. Our closed acquisitions surged by around 41% in the first 9 months of 2025, reaching EUR 1.8 billion, a continuation of the positive trend we have seen since beginning of 2024. In the third quarter, we closed 3 major real estate acquisitions with triple-digit euro ticket sizes for international clients, both in Living and Commercial, as you can see on this slide. And let me reemphasize, our sector-specific investment strategies are led by the 4 dual megatrends, the digital, urban, energy and living transition. All dual megatrends are powered by technology as a key value driver. The Living sector remains one of our key investment strategies, offering attractive long-term returns for our clients. Living has been a strategic growth pillar for PATRIZIA for more than 40 years and we have an exceptional track record in Living. Today, modern living goes beyond traditional residential real estate and includes fast-growing attractive subsegments like affordable housing, student housing, co-living, micro living and senior living. And all Living segments are poised for growth in the new cycle. With valuation stabilizing, transaction volumes picking up, we believe this is the right moment to start investing in real estate again. In addition, we also see momentum building in our Infrastructure business. We have signed several transactions which will accelerate Europe's energy transition. We have created a Nordic district heating platform worth over EUR 300 million. This will support our AUM in the fourth quarter after the expected closing, and it demonstrates PATRIZIA's strong mid-market position as a leading investor in Europe's energy transition. Let me continue to the next slide to show you what your clients -- what our clients expect for the future. Our Annual International 2025 Client Survey provides further proof that the new cycle is gaining momentum. This survey captured the views of 110 leading institutional investors of PATRIZIA, representing close to EUR 1 trillion in capital. The main takeaway is that client sentiment has clearly improved in real estate across all major categories, and the survey anticipated that real estate valuations are improving again for the first time since 2022. Another result -- key result is the growing strategic importance of infrastructure investments for institutional clients. Driven by the dual megatrends, the energy transition and digital infrastructure are top priorities for investors, and both areas clearly play to our strengths. Just to give you one example, our strategic investment in aligned data centers in the North America at the beginning of the year that has already performed very well. And with the expansion of our Nordics district heating investment platform, we continue to leverage attractive investment opportunities, the energy transition trend. So you can see our sector-specific investment strategies driven by dual megatrends are gaining traction. Let us move to the next slide. Let me conclude by reemphasizing our 3 management priorities. First, clear client and product focus; second, further improving earnings quality; third, and scaling our smart real asset investment platform. Those 3 pillars are the crucial success factors to win in the new cycle. First, we will deliver outstanding products and services to our clients and step up fundraising. One key investment area for PATRIZIA has always been and will be the living sector with all its attractive subsegments. Second, we want to grow management fees and improve our co-investment results while maintaining strict cost discipline to strengthen our long-term profitability. Third, we will strengthen synergies between real estate and infrastructure, what we call Re-Infra, and scale our integrated investment platform. And we will continue to focus on attractive sector-specific investment strategies driven by the dual megatrends. Thank you for your attention. And now I would like to hand over to our CFO, Martin Praum. He will guide you through our quarter 3 financials and the updated 2025 outlook in detail. Thank you for your attention. Martin, please. Martin Praum: Thank you, Asoka, and hi, everyone. Welcome also from my side. Let's continue on Page 9 of the presentation. As some of you might remember from our last analyst and investor call at end of second quarter, we back then showed a decline in equity raising year-on-year. But at the same time, we were confident that momentum would come back throughout the year. And this is exactly what happened during the third quarter. With equity raised, as you can see here, now at EUR 0.8 billion after 9 months, up 7.6% compared to last year. If you look at this on a quarterly level, we had EUR 0.5 billion in the third quarter, and this is the highest in the last 4 quarters. The subsequent investments for our clients from equity raised and existing equity commitments were the major drivers for continued net organic growth in AUM. Valuation effects turned positive during the third quarter. Remember, at Q1, this chart showed a EUR 0.6 billion negative effect. This turned into a 0 impact at the second quarter. And now you can see a positive EUR 0.2 billion valuation support. However, currency effects still weigh on AUM. This is leading to a virtually stable overall AUM development if compared to the beginning of the year. But if we would exclude these valuation -- sorry, these currency effects, then AUM would be up 1% year-to-date. In my view, it's also noteworthy that open equity commitments have also increased from EUR 0.9 billion last quarter to EUR 1.1 billion at the end of the third quarter. So the overall picture shows a stabilization. And as Asoka mentioned before, the cycle is slower and probably bumpier. That also means that the speed of market recovery is currently slower than what many market participants expected at the beginning of the year. This also drove our decision to move the AUM guidance range slightly down to now EUR 56 billion to EUR 60 billion for the year-end '25, also taking into account the currency effects. Now let's move to the next page, Page 10, on profitability. Basically, what you see here is that we decoupled from the overall market environment. We showed a material increase in profitability with EBITDA up over 500% to EUR 44.6 million, and this is already within the previous full year guidance range of between EUR 40 million to EUR 60 million after only 9 months. Management fees well exceeded operating expenses, and we saw a smaller contribution to revenues from transaction and performance fees compared to last year, driven primarily by a higher share of investment for clients with all-in management fee structures and also continuously slower realizations for clients, which has an impact on performance fees. The key message to me here is overall management fees contributed with 91% to total service fee income. The material reduction in operating expenses and the improvement in net sales revenues and co-investment income, basically, this means rental income of consolidated assets and dividends from co-investments and funds, both significantly supported the strong year-on-year increase in EBITDA. Now let's have a deeper look on the next 2 pages, 11 and 12. You can see that management fees showed resilience in line with AUM, with market-driven fees, like transaction and performance fees, still under pressure. If we look at it on a quarterly basis, on the next page, it shows that management fees had a breakout from the trend in the quarter, which was driven by catch-up fees we were able to invoice during the third quarter So the overall picture is unchanged with resilient management fees and volatility on market-driven revenues, which is why it is so important that the reduced operating expenses are now well covering -- are well covered by management fees. Let's go to the next page, Page 13, to look at the cost development. You will see that we further intensified cost efficiency measures. We've made the platform more efficient, adjusted to the market cycle and made significant progress, both on staff costs and on other operating expenses. We will continue working on platform efficiency. And the reduced cost base provides PATRIZIA and its shareholders with significant positive leverage once fundraising and investment volumes increase more markedly in absolute terms. And as you might know, PATRIZIA runs, as we call it, a dual engine, a business model that is driven by our asset-light investment management combined with the use of our balance sheet capital to co-invest and seed strategic investments. And this is what you'll see on the next page, 14, of the presentation when we talk about the segment reporting. The significant improvement of our EBITDA was driven by both investment management and our balance sheet investments. One driven by cost discipline, resilience in AUM and management fees, the other driven by a normalization of income from consolidated assets and higher rental revenues. Let's look at how we've invested the balance sheet capital on Page 15. You'll see the value creation from using the group's balance sheet equity to invest both in real estate and infrastructure. And we will continue to take selective market opportunities to support new fund initiatives, and we will also crystallize value when the time is right also for our shareholders. We will always make sure that we have a decent financial flexibility, both in terms of balance sheet ratios and available liquidity. Talking about liquidity, Page 16 shows the strong improvement in operating cash flow during the first 9 months. This is, on the one hand, driven by the general improvement of profitability, but also by the successful active management of working capital freeing up additional liquidity. Let's move to Page 17. And this is a financial reporting you are probably well familiar with. You will see the balance sheet and liquidity overview on this page. Net equity ratio is still strong, now closer to 70% and up 1.3 percentage points compared to the last quarter. If we look at available liquidity, this also increased by EUR 20 million compared to the last quarter, now slightly above EUR 100 million, with further financial flexibility shown on this slide. Let me finish with the outlook for 2025. Our key messages here are: first, we expect the stabilization and slow recovery to continue, so the direction of travel is right, and to support the revenue side, while the positive effects from our cost efficiency measures should continue to support our P&L going forward. And this drives the guidance change and the increase of the EBITDA guidance from EUR 40 million to EUR 60 million to now EUR 50 million to EUR 65 million. Subsequently, the EBITDA margin is increased from around about 15% to 21% to now 19% to 24% for the year '25. We will continue to raise equity and use existing equity commitments from our clients to invest along the dual megatrends. However, the overall level of equity raised, the expected timing of closing of investment transactions and currency effects led us to slightly move the midpoint of our AUM guidance from EUR 60 billion before to EUR 58 billion. Also, year-end valuations for real estate and infrastructure will play a role on where we will end the year with this KPI. As a summary, the market is stabilizing and slowly going into growth mode again. And as we said in the past, it's not a V-shaped recovery, but rather a steady improvement. Second key message, we have decoupled PATRIZIA's P&L and profitability from the market and market-driven revenues, and we'll continue to work on efficiency, quality of earnings and overall profitability to the benefit for both our clients and our shareholders. With that, I'm handing back to Sarah, and we're happy to take your questions. Operator: [Operator Instructions] And having said that, let's take a look in the queue. And by now, we have one virtual hand from a person who has dialed in by phone with the phone ending 370. Philipp Kaiser: It's Philipp from Warburg Research speaking. Congrats to the sound operating performance. I have a couple of questions. I would go through them one by one, starting with the EBITDA and the main driver of the EBITDA improvement, the cost-cutting measures. You did a superb job on streamlining your platform. But I can imagine the greatest potential now is lifted. So looking ahead, do you expect that the operating expenses can further decline? Or are you expecting just a kind of a flat development for the next couple of months and the next year? Martin Praum: Philipp, it's Martin speaking. And thank you for your feedback on what we've achieved so far. We will -- as I said, we will certainly continue to work on the expenses side and do everything we can also as a reaction to the market environment to make this platform more efficient. We still believe that there's some room for more efficiencies. And you will also see –- as you see in the number, this is basically an effect of measures we've not taken this week, but a few quarters before. So the full impact of the measures we've taken, take a while to show up in the P&L. So we expect also some further potential here in terms of P&L and cost efficiency going forward. Philipp Kaiser: Okay. Perfect. Then the next one is on the management fees. You also stated in your presentation that they are partly positively, impacted by one-off catch-up fees. Could you provide us with the exact amount of those catch-up fees? Martin Praum: Yes, sure. If you look at the management fees on a quarterly basis, you would see that the third quarter was very strong with EUR 60.6 million of management fees versus an average of, say, EUR 55 million to EUR 57 million in the quarters before. The third quarter was positively impacted by around about EUR 2.5 million of catch-up fees. So if you basically would exclude that, we would talk about around about EUR 58 million run rate management fees in the third quarter. Philipp Kaiser: Okay. Perfect. And my next one would be on the AUMs. You already stated during your presentation that you already have signed acquisition, but not closed yet, which will support AUM development. Could you give us a broad range which volume we can expect for the last quarter of the year? Martin Praum: Sure. I can give you a broad guidance, because what I said is we certainly have a pipeline of a few hundred millions that has been signed already and will close in the fourth quarter as acquisitions. So you have from a net organic growth prospects some upside in the fourth quarter. The somewhat unknown is timing effects of closing of certain transactions and valuations. You might remember that slightly over 25% of our assets are valued in the fourth quarter. So this will have an impact. And then currency effects. But as you can see in the guidance range, which is now EUR 56 million to EUR 60 million. And where we stand today in terms of AUM, we currently expect that the AUM at the end of the year will come in higher than what we've reported for the first -- for the third quarter. Philipp Kaiser: Okay. Perfect. My last question with regards to the EBITDA would be the rental income. So it has come from the balance sheet assets. Do you have any visibility when those assets might, yes, [ went ] out from your balance sheet and you kind of, yes, get rid of the positive impact of the rental income? I think it's roughly EUR 12 million. This year, we will earn those assets. So any visibility on that? Martin Praum: It is actually -- it really depends on the asset because we've got different assets and portfolios on our balance sheet, Philipp. So in terms of exit date, we will have a look at the market and then we'll have a look at the assets, because some of these assets are what you would call core assets with a very stable cash flow. These are the ones that could come to the market earlier. Then we also have some value-add exposure, where we will spend some CapEx and invest to increase the value, and then find the right time to exit. So for your modeling, I would, for the time being, assume that the rental income will stay with us for, say, the next 1, 2 quarters, and then we'll see where the market is and how we've developed the assets further. Philipp Kaiser: Okay. Perfect. My last one would be on your mid-term guidance. I mean it's probably a bit too early to get very nervous, but does anything change with regards to your, yes, EUR 100 billion guidance in 2030? Asoka Woehrmann: Very valid questions. Again, the mid-term guidance is something we agreed that we are looking every year. We are running and looking what the market environment, client behavior, sector developments are. We are very strongly geared, as we mentioned, around our dual megatrends. We are very confident that trends are right, but it is -- we are seeing our clients are getting more confident to invest, but it's much slower, as Martin and I mentioned earlier. So I do think it is always for us to go to EUR 100 billion, is a North Star. And we will go in this direction. We will do everything. We have now the operational leverage, what we are creating. And I do think it a little bit depends on the dynamic. Every year, we have to review how far and how reachable is this magic number. But even though, we are confident that the market will gain some momentum at some point. But I do think -- also '26, I do think it will be slower. It will be, again, not a stabilizing year like '24 and '25. It will see some growth, but not the same expectations as we have created in the plan. So we will consult and go back to our NTP and we will check that, the EUR 100 billion number. But even though, our profitability numbers and expectations, we will keep on a clear eye, and we want to deliver strong profitability to our shareholders. Philipp Kaiser: Okay. And maybe out of curiosity, just purely on operational-wise –- I'm just making up a number, say that by the end of next year, you reached EUR 60 billion in AUM. Then 4 years left for the EUR 1 billion (sic) [ EUR 100 billion ] in AUM, left. Roughly EUR 10 billion net organic growth per year. Just operational-wise, is it possible that your current streamlined platform can handle this transaction volume per year? I guess kind of the overall transaction volume would be a bit higher with like disposals, et cetera. So is it just purely from operational-wise possible to have over EUR 10 billion per year? Asoka Woehrmann: Yes. No, great arithmetic you open up. I think Martin will talk in some second. But let me give you a little bit the philosophy behind the EUR 100 billion number and the clear North Star of our organization. And it's important -- you are right, '26, in our expectation, that will be a growth year for the sector, will come back, as we said, but in a modest way. And that's really good. But it is the jump of base, EUR 60 billion. In my opinion, without guiding now, it's a probable one. And you're arithmetic every year EUR 10 billion. First of all, in the past, PATRIZIA was able to manage, yes, sometimes EUR 9 billion to EUR 10 billion transaction volumes. So that's nothing new. We are experienced. Also, our transaction sizes are much bigger. And don't forget the projects we are involved also in the co-investment area, also in more and more in SMA, they are the big clients, they are coming like in the Nordic district heating platform. I'm not going to name the clients, but they are very big clients. They have sizes. They can come in. And we will -- we are expecting the transaction sizes will be bigger. And again, important for you, we are expecting the infrastructure as well as the heating topics in living, affordable housing, they will get much more, let me say, public support for these themes, and we want to be involved. And I think even we have not definite programs for that, we are seeing, and I do think that all is possible. I don't know if we are ending in EUR 90 million or EUR 1 billion or EUR 110 billion, but the direction is right and the desire. And this North Star is the right direction, as you can see. And that is, in my opinion, important. It's a quite unknown market at the moment because I think as you not see the transaction, the willingness of clients to invest because the fixed income area is so booming and performing. That going a little bit the demand down, I do think the people will turn quite fast for long-term returns in real assets, and we are ready for that. Martin, please. Martin Praum: Yes. I can only second what Asoka just said, and want to go into the same direction. If you compare PATRIZIA and what we've delivered in the past in terms of investment volumes, you shouldn't forget that PATRIZIA's platform has actually grown over the last few years. We've built the platform. And besides the efficiency programs we run, we continue to invest in the platform. We have grown the number of institutional clients over time. We have now access to different pools of capital. And it is a question of ticket size. We are more international than we were in the past cycle. And we now have access to also larger funds like state funds that will give us opportunities to create new investment solutions for these clients. Overall, certainly depends on the market environment. And sometimes in a cycle, there is a point where suddenly, you can say, the powers come to play. And we do expect that as well at some point to happen. But there's a good opportunity we'll reach these targets and we will go into that direction. Operator: And now we will move on with the questions from Lars Vom-Cleff. Lars Vom Cleff: One question remaining, and that would also be regarding your EUR 100 billion North Star. I mean, on the current basis, that implies a CAGR of around about 12%. And if I understood you correctly, you feel that all of that is doable with organic growth. But seeing real estate markets somewhat stabilizing, revaluation -- or negative revaluation slowing down, if not having come to a halt, and taking into account your equity ratio and the available liquidity, would now not be a good time to think about potential bolt-on acquisitions again in order to reach your target faster? Asoka Woehrmann: I think also -- thank you for your view. And also, as Philipp asked the EUR 100 billion and mentioned the EUR 100 billion, don't forget in our thinking there was also revaluation of the market that was included. It's not only pure organic growth, capital raising. And we expect that infrastructure has much more momentum. And I do think you can read and [ smoke ] every day from the newswires how much people are geared to invest in infrastructure. So far not happening than anecdotical evidences like data centers and so on. I do think that will get momentum. But your question -- and Lars, let me say that in -- since I joined now nearly 2.5 years now as PATRIZIA CEO, this question came up, do you don't want -- what's your opinion about inorganic growth? I always -- even though I was always active in my former thinking, I always said we have to press the pause button, because we have to consolidate our platforms, we have to create our efficiency, we have to do -- we are a very fast-growing organization over the last 15 years. We sprinted to EUR 60 billion. I think it's a remarkable growth. That means also remarkable growth of platforms. Different platforms, fragmented platforms have to be consolidated. I do think the effects are playing out for the now investors, as Martin very nicely played out. But again, I am seeing opportunities. I do think as long as lasts the slow, sluggish growth of the sector, and clients demand are going to persist. I do think that small players will have a very -- much difficulties, and mid-sized players, to be in the market. I think there will be opportunities. But we will not do for AUM growth inorganic growth activities. I've been all my career against that, and I will also not do to destroy shareholder value. If that enrich our expertise, open up new markets and client segments, then the right arguments are there -- and the pricing must work for us and for our shareholders, we will do that. This is the way of our organization. I'm thinking we are full of entrepreneurial spirit in this organization, and we are not going to blast our AUM. Even we phrase the $100 billion as a North Star, I do think we have to do the right things. But I do think it will be -- and I think your question is the right timing. Now in my view, Lars, we have to open up our eyes for opportunities, also for strategic partnerships. I do think the market is just going to shape. I can see lot of partnerships are -- programs are coming. And there's a very interesting period, in my opinion, kicking in, in, let me say, illiquid sector space. And I do think, therefore, I am super keen to answer in the next quarterly earning meetings this question. And we will be active. A very clear answer, yes, we will look into that, but various opportunities, not only pure M&A transactions. Operator: And by now, we have one virtual hand left from Thomas Neuhold. [Operator Instructions]. So Mr. Neuhold, please go ahead. Thomas Neuhold: I have 2 questions on your balance sheet investments. Firstly, I was wondering if you can please provide an update on your Dawonia investments. Have there been any new developments there? And the second question is on the strategic seed investments. What is the status of the 3 strategic seed investments? And by when do you expect to be able to release at least some capital there? And I was wondering if you have any additional seed investments in the pipeline? And if yes, if you can talk a little bit about potential size, sector and timing of those? Martin Praum: Sure. Can you hear me, Thomas? Thomas Neuhold: Yes, I can. Martin Praum: Okay. So first of all, on Dawonia, probably a repetition of last quarter's call, but we are still in very constructive negotiations with the investors in that fund. All on track. And we will update the market once we have news on that. The portfolio continues to perform very well. I think this is also in line with what you heard from other listed residential players in the market, and we can also confirm that these developments are also reflected in the Dawonia portfolio. In terms of seed investments, I made a statement on that before. Some of them are on the list for an exit and others will keep for a little while to work on the asset. So there's no detailed time frame for disposal at this stage. We are still happy with the rental income we are generating and the development of these assets. In terms of additional seed investments, you might have noticed we've increased our exposure to Dawonia in this year because we saw good opportunities. And also, we continued to invest in co-investments like in the infrastructure space, where we spent another single-digit million amount in the third quarter to facilitate further investment and product growth. Operator: Thank you so much. And in the meantime, we have received no further virtual hands. So everything appears to be answered by now. Therefore, we come to the end of today's conference call. Thank you, everyone, for joining and your shown interest. And also a big thank you to you, Asoka and Martin, for the presentation. And it was a pleasure to be your host today. And now I hand back to Martin for some final remarks, which concludes our call. Martin Praum: Thank you so much, Sarah, and thank you everyone who attended this call and thank you for your great questions. We are happy to meet as many of you during our next conference attendance. We'll be in London next week and we'll also be at Deutsche Borse's Equity Forum from 24th to 22nd (sic) [ 26th] November in Frankfurt. We'll be there for the full 3 days, and we'll be happy to meet and discuss. And with that, thank you, everyone, and speak soon. Bye-bye. Asoka Woehrmann: Thank you.
Operator: Good evening, ladies and gentlemen. Welcome to Companhia Paranaense de Energia COPEL's video conference call to discuss third quarter 2025 earnings results. This video conference is being recorded, and the replay can be accessed on the company's website, ri.copel.com. The presentation is also available for download. [Operator Instructions]. Then we will start the Q&A session when further instructions to participate will be provided. Before proceeding, I would like to stress that forward-looking statements are based on the beliefs and assumptions of COPEL's management and on information currently available to the company. These statements may involve risks and uncertainties as they relate to future events and therefore, should be treated as forecasts dependent on the macroeconomic environment, the country's economic situation, the performance and regulation of the energy sector in addition to other variables -- such forward-looking statements are therefore subject to change. This video conference will be presented by Mr. Daniel Slaviero, CEO of COPEL; and Mr. Felipe Gutterres, CFO, as well as officers of the subsidiaries. They will be available during the question-and-answer session. I would now like to give the floor to the CEO of COPEL, who will begin the presentation. Please proceed, Mr. Slaviero. Daniel Slaviero: Good morning, everyone. I would like to thank you all for joining us in this video conference call. I'd like to start highlighting the healthy operating and financial performance of the company in this third quarter. We posted recurring EBITDA of BRL 1.3 billion, up almost 8% over the same period last year and a recurring net income of BRL 375 million. These numbers show the -- how solid and consistent COPEL's results are. Another point that deserves to highlight is the strong investment made in the period, BRL 981 million in CapEx in the third quarter alone, totaling BRL 2.6 billion in the 9 months of 2025. This level of investment reflects our commitment with quality of service expansion and modernizing our asset base and ensures that we are preparing for a historical tariff review in the distribution company in 2026, in line with our commitment to continuously optimize our portfolio. This month, we completed the divestment of 4 photovoltaic solar plants totaling 22 megawatts peak in distributed generation in a deal evaluated at BRL 78 million. This follows our commitment to simplify our portfolio. Additionally, with the completion of the Mashigua Sue HPP divestment in the start of October, our leverage ratio is at 2.8x net debt over EBITDA ratio, well on target of our optimal capital structure. This fact reinforces 2 things. Firstly, our excellence in executing the commitments that we set forth with the market. And secondly, this [indiscernible] deal with its characteristics, it represents the essence of this new phase of COPEL, a company that is agile, attentive to opportunities and focused on creating value. On the operational side, we recorded sales of almost 5 gigawatts and the build market of DISCO grew 1.7%, still comparing with a very high base recorded in Q3 2024. These indicators reinforce the resilience of our business, the abundance of our concession area and the trust of our customers. On the side of generation, it is important to put things into context. The results obtained by [indiscernible] were recorded in a very challenging scenario. In this quarter, we had a GSF of approximately 65% and a curtailment of almost 35%. Fortunately, these assets subject to curtailment are very small in the structure base of COPEL. On the positive side, we had an increase of PLD spot market of close to 50% compared to Q3 '24, totaling about BRL 250 per megawatt hour. The intelligence of our strategy and trading structures led by Rodolfo and risk mitigation, coupled with the positive effect of optimizing our portfolio and special the modulation of the hybrid source made all the difference. To end the slide in this period, for the first time, we had a consolidation of the results of Mata de Santa Genebra, the transmission company and [indiscernible] ensuring a more robust and efficient portfolio, which contributed to better results. This reinforces our differential, the fact that we are an integrated company with a solid presence in all 4 segments where we operate. I take this moment to give you an update on the process to migrate to Novo Mercado. The structure of the deal is already known to all of you, but I would like to record the steps that have been completed. On August 22, we had the approval of the common shareholders in the special general meeting, and we got waivers of debenture holders in all of the necessary issuances, and we have handled the unification of preferred shares, Class B to Class A. Lastly, we had the approval conditioned by B3 to migrate to Novo Mercado. And now next Monday, November 17, at 11:00 a.m., we will have the Special General Meeting and the agenda is to ratify the conversion of preferred shares into common shares in a rate of 1:1 plus a new Class B preferred share redeemable. I would like to invite all preferred shareholders to take part in this special meeting and to give us their vote. This is a decisive step for us to consolidate a simpler, more transparent shareholder structure and one which is more aligned with the best practices of the market. In parallel, unification of shares into one single class will bring more liquidity to our security to our share, which is a relevant factor to attract new investors. Should this measure be approved, we will be prepared to end or to complete the whole process by year-end, which will open up a path to distribute part of the dividends referring to the first event of the exercise as set forth in our dividend payout policy. This will be a historical moment in our journey to create value at COPEL. Last Friday, we launched to our employees the new element of the COPEL culture. Reason of existing ambition and our values. The T-shirt that myself and my partners are wearing today is part of the -- of this event and part of the internal communication process. This year, we revisited the company's strategic planning and thus built a vision for COPEL 2035. We cannot think about strategy if it's not coupled with culture and vice versa. A strong culture is a central pillar to sustain a long-term vision and a very bold one, I should say, more than a concept. We believe that our culture is a competitive differential for COPEL. All these elements of culture as well as strategic planning will be presented to the market in our COPEL Day. By the way, before I give the floor to Felipe, who will detail the financials of the quarter, I would like to reinforce the invitation for you to sign up to our COPEL Day, which will be held next Wednesday, November 19, directly from Rio de Janeiro, the wonderful city with an online broadcast starting at 9:30 a.m. It's going to be a big event. Thank you very much. Felipe Gutterres: Thank you, Daniel. Good morning, everyone. I'll start highlighting the consistency of our results, COPEL's discipline in capital allocation and the operating efficiency of our business, which is proven by the robust numbers we posted in the quarter even in a more challenging business environment. In the quarter, our recurring EBITDA consolidated grew 7.8% over Q3 '24, reflecting the health of our operation and the efficacy of the measures adopted for efficiency. COPEL [indiscernible] was responsible for 53% of this result [indiscernible] 49%. I will give you more color on COPEL Generation and Transmission in a minute. Recurring EBITDA of COPEL Genco grew 11% over Q3 '24, driven by a combination of factors, better performance of assets, integration of new enterprises or endeavors and consolidation of strategic asset results. In the transmission company, the highlight was the increase of BRL 119.4 million in EBITDA with the consolidation of Mata de Santa Genebra and the average increase of 2.2% in RAP of the transmission companies. In the Generation segment, we were able to mitigate the impact through a smart trading strategy, optimization of the portfolio captured the positive effects of hydro modulation despite an adverse event with GSF of 64.9% and curtailment of 34.4%. The result was positive, especially given the BRL 23 million increase in short-term market sales, 21% up in volumes sold, incremental BRL 10 million in bilateral contracts, BRL 7 million coming from revenues of regulated contracts. I highlight the startup supply of Jandaira in the consolidation of the Mashigua Sue HPP. These results were partially offset by greater curtailment, which generated a negative effect of BRL 39 million more in the generation deviation in the quarter. Now moving to COPEL [indiscernible] Distribution presented a recurring EBITDA 7.2% up in this quarter. This result is the result of a 1.7% growth in the build grid market with an average adjustment of 6.8% at TUSD occurring in June in RTA and the efficient management of costs, highlights going to 16% reduction in personnel year-on-year. Now moving to trading. COPEL com EBITDA recurring posted a drop of BRL 7.3 million in the margin, mainly due to the effect of legacy contracts of electricity starting from intermittent sources as well as a 39.1% increase in the PMSO expenses, a reflects of the advancement of the process of restructuring the trading company. On the other hand, sales volume for 2026 to 2030 grew 96.2% in relation to Q2 '25, adding an amount sold of 431 megawatts, which shows the potential of expansion of the business. So ending the analysis of, I highlight the advances obtained in operating efficiency in Q3. PMSO expenses, recurring ones totaled BRL 718.7 million, a 4.1% reduction over the same period last year. This is a reflection of the discipline in cost management, which is a priority across the company. Main highlight was an 18.4% reduction in personnel and administrative expenses driven by structuring measures such as the voluntary severance program, which contributed to adjusting the headcount. We also saw a reduction of 8.5% in costs with pension plans and health plans, reinforcing the positive impact of rationalization actions. In addition, we reduced 3.6% of expenses with materials, while third-party services posted a 4.7% increase, reflecting the hiring of specialized services for maintenance and operation. The others line, the 10% basically related to the write-off of the activation of assets, especially in DISCO, given the high level of investment in the period. We reduced cost of preserving safety of the operation and quality of services provided, which reinforce -- reinforces our commitment to operating efficiency and excellence. In Q3 '25, COPEL presented a recurring net income of BRL 374.8 million, down 36.5% over the same period last year, which is a result of a 7.8% EBITDA increase, offset by an increasing negative financial results, driven by robust investment cycle funded by the company within the parameters of an optimal capital structure. In addition, in the comparative period, we had in cash BRL 4 billion, which we used to pay the granting bonus for the renewal of generation assets for another 30 years. Another highlight is the CDI increase year-on-year, which negatively impacted the cost of debt. Income tax and social contribution was higher than past year as a result of interest on equity that we executed in '24 and have now been executed in '25. In other variation, I highlight the impact of reduction of equity income of Mata de Santa Genebra that started be 100% consolidated. Now talking about investments in this quarter. On the slide, we can see consolidated CapEx totaling BRL 981.4 million, maintaining the planned rhythm and aligned to the company's plan. Year-to-date, investments totaled BRL 2.6 billion with a focus on assets that broaden the remuneration base, modernize the infrastructure and ensure quality of service. Most of the resources was directed to the segments of distribution and generation, highlights going to projects that strengthen the reliability of the energy system, increase installed capacity and promote operating efficiency gains. We continue with a disciplined capital allocation, prioritizing projects with attractive return and aligned with the long-term strategy of the company. Coming to the end, I speak about the capital structure. Net debt over EBITDA ratio was 3x in the quarter within the range established in our study of optimal capital structure. But if we consider the sale of Mashigua Sue HPP completed in October, this ratio would have been 2.8x, reinforcing our financial discipline. Net debt totaled BRL 16.6 billion with a diversified makeup among financial institutions and market insurance debentures and securities. This diversification is strategic, reduces risk and improves the forecast of predictability of the financial flow. Important to mention that the company has a AAA rating, reflecting the solidity of our balance sheet and the dimension of our manifest of capital allocation. As for the CDI equivalent cost of debt, we had a debt costing 98.46% of the CDI to 88.7%, showing our efficiency in funding and managing our debt. We continue to pay attention to market dynamics, and we remain committed to maintaining a healthy capital structure that would allow COPEL to continue to invest with safety, competitiveness and a focus on value creation for our shareholders. With this, I come to the end of the presentation, and we can now start the Q&A session. Operator: [Operator Instructions]. Our first question comes from Guilherme Bosso with Goldman Sachs. Guilherme Bosso: I have 2 actually. First, I believe it has been partly addressed in the presentation about the migration to Novo Mercado. I just want to clarify, I'd like to confirm if the expectation of completion remains at the end of December? Or can you tell us when this is expected to happen? And in that regard, what is the company thinking about dividend payout -- are you expecting an announcement for this year after you complete the migration process? Or can we expect something before? That's the first question. Secondly, I'd like you to elaborate on the cost efficiency agenda. In this quarter, we saw again manageable costs dropping year-on-year. So I would like to understand if for next year, the company still sees room to reduce costs. And if so, the extent of these cuts. Daniel Slaviero: Well, I'll answer part of your question, and then Felipe will speak about efficiency gains. It is exactly as you -- and then as we said, our idea is on Monday, the 17th, if we get approval by the preferred shareholders, our expectation is that we will complete the operation -- the migration by year-end. It will be towards the end of the year because if we have approval on the 17th, we have 30 days of recess as determined by law. And then the operational time line, the notary public [indiscernible] and our expectation is to end to complete the migration still this year, but more towards the last week of December, but still in 2025. And then we have a commitment regardless of the -- regardless but linked to the migration, which is our base scenario, we expect to announce dividends, dividends payment for the first event of the year as set forth in our policy with a minimum of 2 events. So it will be the first year consolidating the result of the first half and according to our financial analysis of the company. So we're quite excited, and we are working hard. The process to obtain the waiver with several debentures being very polarized. It was very hard work led by Felipe and the whole team. By the way, I'd like to publicly thank them for the efficiency. We have the support of many financial institutions, which helped us access the huge amount of shareholders. So this is moving on, moving forward smoothly, and it's all conditioned to next Monday. Thank you, Daniel. As regards to the process of cost reduction, we continue in an attempt to capture more efficiencies. Please remember that our goal is compared to 2023 annualized until 2026. So there is an effort to reduce costs in 2026 with an important move concentrated in some business units as status quo, but also there are other moves which are more geared by supply, the shared services center. So there are a number of initiatives and the value creation levers that are actionable expected in 2026. We'll give you more on that at COPEL Day. And just to add to that, Guilherme and everyone, we are completing this phase of structuring efficiencies and operating excellence in cost reduction. As Felipe mentioned, during COPEL Day, we'll give you more detail of the 10 promises that we took on at the follow-on time by Novo Mercado, we need 3. So we have also the tariff review in mid next year and the completion of this phase of structuring efficiency gains. And then we'll speak a lot about this at COPEL Day. Then we'll turn the page. You've heard me tell you over and over that no company creates value sustainably in the long term, just cutting costs and selling assets. We have to finalize the cycle throughout 2026 and then turn the page, change the chapter and focus on efficiencies, profitability indicators. And Felipe will have a session dedicated to this in his presentation on November 19, COPEL Day. Operator: Next question from Raul Cavendish with XP. Mr. Cavendish, go ahead. Raul Cavendish: My question has to do with the Genco, GMT generation and transmission. What we saw this quarter was a portfolio strategy that was very well performed by the company. We can see this at a much lower cost of energy [indiscernible]. So my question is, in terms of the strategy of the trading company, taking one step back to understand the process to build this portfolio hedge strategy for the year. And what is the [indiscernible] for next year in terms of price, market and strategy to continue to maximize the value of the GEN portfolio? Daniel Slaviero: Well, excellent question. We have worked to develop an internal expertise with Rodolfo and the whole team to add this competitive edge, this market intelligence and this trading strategy. So Rodolfo, perhaps you can share with Raul and the investors our macro strategy, -- remembering that our competitors also join our calls. And then that's why, you can add whatever you want. So Rodolfo? Rodolfo Lima: Excellent. So let's divide this into 2. Let's speak about the hedge strategy for this year, and then I'll speak about the market currently. In the mid-2024, we had some windows of good opportunities of low prices. Before materializing the need of power with the increasing price in September, we had good windows to purchase energy. And that's when we purchased most of the energy. And coupled with that, we had a lot of swaps. We know the need for electricity in Q3 and have some excess at the end. So much of advantage of this moment to have this kind of swap using these more competitive prices in Q3. And that's why we were successful in our strategy vis-a-vis the spot market. Now speaking about the market currently, the market is at very high levels. We understand that there's still a lot of room to increase. And what matters is with a lot of liquidity. We have high demand in the market. We are weighing our speed of sale. You could see that we have good sales, but quite contained compared to the amount we have available. So overall, I believe these are the 2 main insights regarding our strategy for short term, Q3 and mid- and long-term thinking about the future electricity prices. Brittol, any comment? Unknown Executive: Yes. Good morning, everyone. Well, I think Rodolfo spoke well about the strategies. The strategies are executed by the TradeCo, but it's all discussed with COPEL generation and transmissions led by Daniel, and we execute the strategy. We posted good results this year given the opportunities mentioned by Rodolfo for the price window for energy purchases. And during this period, we had a strong result regarding modulation of the hydropower plants, which accounted for quite a lot of our results. So this is a solid articulated strategy executed by the TradeCo based on the analysis of COPEL Genco. I can just to final comments, Raul and everyone. Brittol mentioned an important point about the benefit of hydro modulation and the role it has played and how it has been better priced here in this environment. Given the role it has to sustain the hydroelectric system, in addition, [ AMP304, SMP304 ] that is to be approved to bring some positive elements in our view in terms of ancillary operational services. And coupled with all that is the fact that the bulk of our portfolio, especially our hydro plants are in the South region, and we see an appreciation of price. I guess this reinforces the unique characteristic of COPEL's portfolio. In broader terms, what have we seen? And this is our strategic approach. Firstly, we see pricing structures that are much better than 2, 3 years ago, but still below the price potential that we envision, particularly if we consider marginal cost of expansion for 2028, '29 and 2030 and beyond. So we'll see and you will see that we have some room here regarding prices. So what is our strategy? We don't want to put all eggs in one single basket. So strategically, we sell some small blocks along A plus 2, A plus 3 so that we can ensure an average price. But clearly, with the price volatility we have seen hourly prices and also with the need that the system has for power, and we are going to talk a lot about that at COPEL Day. So we will need to work with more uncontracted energy, plus 1, plus 2, so that we can capture these better energy prices greater than BRL 250, BRL 280, which is what we have seen. This is the fact that COPEL has 64% stress, 64% of its EBITDA linked to the grid distribution and transmission grids. This gives us comfort in our balance sheet to be able to execute these strategies quite easily in trying to capture better price opportunities. Raul Cavendish: Perfect. It is clear. If I may ask another 2 quick questions. Because there is, in terms of looking forward and turning the page in terms of cost cuts and efficiency gains, the strategic vision in addition to the auction of capacity reserves and now including batteries, I would like to understand how does the company see the opportunity in batteries? Does it make strategic sense for the company or given the structure, this is a kind of a [indiscernible] business that will not add so much value to the portfolio. And in terms of prices, if I may ask another question, we have seen some small complex elements that have pushed prices down. Nothing transformational, but kind of a weaker load given the climate in the end of Q3, beginning of Q4, slightly better rainfall. In your view, do these elements would [indiscernible] downside for 2026? Or have you priced this? Daniel Slaviero: All excellent points. So let's start with the end. Rodolfo, perhaps you could give us more color on the second part of the question, and I will answer the first question, and Felipe can help me. Rodolfo Lima: Well, excellent. I think that you raised the main variables that can impact price. But we see this happening in a one-off basis. There is 1 month with more rain perhaps. The trend is that the prices will be higher. Why do we say this? If again, how the system is being operated this year compared to last year with the same scenario of storage and rainfall, the prices are different. We're talking about a floor versus BRL 300 in March. So I can't have a specific month when it rains a lot, and I don't have the need for thermal dispatch and the prices can be lower. And that's when we take the opportunity to hedge the operation, as I mentioned. But in the midterm, the need for thermal dispatch is abundant. So I think it is almost impossible to have a scenario where it will rain a lot throughout the year to the point that we can only serve the system with hydro. And that's why we believe that prices will be higher in the mid- to long term. Very well put. And Raul, looking forward, I think it is important to highlight that the efficiency agenda remains. It is permanent. Cost, it's like nails, you trim them, they grow back, you trim them, they grow back. But the centerpiece is that previously, we had structuring inefficiencies, either due to the hiring process, materials, bidding forces, everything we know about. I just want to make this clear. The centerpiece of our agenda will lose some momentum and this other agenda focus on efficiency. Good, correct disciplined capital allocation will gain more relevance. To that end, [indiscernible] CAP in our view is a strategic point with 2 products in 2030, 2031. Of the 5.5 gigawatts recorded for both auctions, 2 gig COPEL project, Foz do Areia and Segredo. We've been repeating this, but this auction was expected to happen has been postponed. And now it has been set for March also because there are very important needs from the system. So I guess it will arrive with very competitive projects. We'll analyze size, product size, capital price. There are some elements that are not yet very clear, but we are going to be very disciplined. Although we do like the project, although the projects are competitive with all necessary licenses ready, it is at the moment of the auction that theory will meet practice. Having said that, as for batteries, well, we're looking into that. We have a due diligence for that. But I think that this entails an assessment of the level of competitiveness that we can have, that we can add to these auctions, considering that most of it is linked to the battery acquisition cost. If you have easier access to the inputs, they might be more competitive. But we believe a lot in the elements of power and need. This can be supplied in different ways. Hydro -- reversible hydroelectric power plants that exist around the world, China with almost 90 gig, Japan and others, this can be a path forward, and we will address this in the future based on this work front, where we have know-how, knowledge, engineering expertise of decades, which is the management operation and construction of hydroelectric power plants. And also Raul and everyone to end, I think we will speak a lot about this. We have to work towards a scenario where prices will reflect the operation. There's an effort by ONS to move to this kind of model, and we will need to discuss greater progress so that the price signals will be correctly aligned with the effective cost of generation. Where else we're going to see what has been happening in Brazil over and over the explosion of cost subsidies and so on and so forth. But anyway, this is a different discussion, and we can talk about this later at COPEL Day, we'll speak more about this. And mainly then regarding attributes of the hydro source. This needs to be done. Operator: Next question from João Pimentel with Citi. João Pimentel: I would like to build on Raul's question and also saying that [indiscernible] Always talks about. Daniel Slaviero: Can you hear me? My thoughts and my connection has crushed. And you normally said that the company cannot create value over time just paying dividends that eventually you need to look at opportunities for growth and so on and so forth. And now talking about [indiscernible] And the batteries auction, this is kind of mapped already. So beyond that, I'd like to understand what are you looking at beyond that? Are you considering any other segments in addition to the ones you operate in or in the segments where you operate, do you see any opportunities in terms of inorganic growth? We see a number of players of renewable sources facing difficulties given curtailment. They don't have such an integrated portfolio with COPEL. So I'd like to understand how do you see this dichotomy between I'm going to grow, I'm just going to pay dividends or I'm going to grow and I want to transform COPEL in a much bigger company than it is today. So I'd like to hear your take on growth. Rodolfo Lima: Well, you have an excellent point actually. And just to clarify, what I normally say is it has always been and will continue to be, given my own belief and the partners' belief that the company does not create value in the long run, just cutting costs and selling assets. Paying dividends is a good and interesting option for us and one that we intend to materialize either paying dividends or through a share buyback program. We have a minimum payout in our policy of 75% as a consequence of an optimal capital structure as is with the current base of 2.8. In addition to being the boldest in the sector, it is a big competitive edge for us. Daniel Slaviero: And we see an appreciation of compressing our return rate. You know this better than a lot of people. You know this dynamic of how things work. But I think that our case and Felipe has been saying this that we can balance both. We can be a good company, paying good dividends because we have mature assets, a solid cash generation, a lot of depreciation. So we are not just fixed on net income, although it is a fundamental reference for any dividend payout policy. But we look at the whole context of the company being a cash cow in the context of good opportunities. Good opportunities in our view, do not appear every year. So we have to be prepared with a well-behaved disciplined capital structure so that as opportunities arise, we can make structural moves. And to address another point of your question, which was excellent, by the way, we are actively -- whether we are actively looking at an asset. I can share this with you. We are not also because we are still in the phase of digital transformation of looking internally. And next week, we're very much focused on COPEL Day because it is our big event. We're preparing for it. And we are going to announce the CapEx plan of the distribution company for the next cycle and also for the generation company. So we still have a lot of room to invest organically, which is low risk with super attractive returns. In addition to the regulatory walks that [indiscernible] and Genco have, these bring efficiency gains with this [indiscernible] to create with the operation with cost reductions. We had an event last week. You will follow that. We had an event a tornado of climate events. We are having extreme climate events, and this has required a new model of operation. [indiscernible] is also going to give you more detail on this at COPEL Day. And this has to do with our CapEx planning, with our -- it has to do with our operations, number of crews and so on and so forth. And this is a strategic view. And I think that COPEL in that episode and in others has shown to be a benchmark in the sector. Operator: The next question from Giuliano Ajeje with Citi. Just a correction. I'm with UBS. Giuliano Ajeje: Okay. I have 2 questions. Daniel, we're getting to the end of the year, and that's the moment when we start looking at 2026. And next year, we have a super important event for the company, which will be the process of tariff review. And this is going to be the first tariff review process with the company having been privatized. So what do you expect from next year's tariff review process? What is the company doing differently? My second question has to do with [indiscernible] I think it brings 2 points that kind of change the long-term horizon of the company. The first is [indiscernible] contracting of energy. Could this reduce the size of [indiscernible] next year? And what could the company do with its current project? And secondly, [indiscernible] under the possibility of renewal of hydroelectric power plant? And if your base case continues to be a [indiscernible] process or given that there's a possibility of renewal could this quite inorganic growth in jeopardy with more possibility of the hydroelectric power plant assets. Daniel Slaviero: Excellent points. Very important structuring questions, which I think. Let me try to address them. First tariff review. I think that this is a milestone. It's going to be a historical tariff review. [indiscernible] is dealing with this firsthand, but we have our regulatory VP, the whole team, accounting. We are all working together. We hold weekly meetings. I, myself, lead a working group following this on a monthly basis, given the importance it has in this expertise and the freedom that a private company has, of course, it makes us look at all opportunities. But this is a regulated sector. And COPEL has a track record of good tariff reviews. In the last 2 cycles, the denial that COPEL had resumed [indiscernible] a good track record. But of course, there is always room for improvement. [indiscernible] and how we can optimize things. And Ajeje, you have your reports and you have talked with us, have approached us on this before. And I think you know that we have the right conditions to exceed the consensus of the market, which is around EUR 18 billion or slightly above EUR 18 billion. And this is our commitment. Felana, would you like to comment on this? And then I can speak about the [indiscernible] 304. Unknown Executive: Yes, we have a working group with several departments involved with full attention on the tariff review event, which goes beyond the investment plan. We are looking at the regulatory standards of [indiscernible] indicators. We are looking at losses, recovery of unrecoverable revenues [indiscernible] and also to complete the main works of the investment plan by December because we know that whatever goes or stretches to the next year will only remunerate in the next cycle. So we meet on a weekly basis. We follow all the works and all of the process of the tariff review. And [indiscernible] all of the people on the call, the market consensus is close to EUR 18 billion, as I mentioned, given the relevance and our track record of fulfilling our promises. It is very important for us to be able to achieve this number or perhaps exceed it or deliver. Having said that, tariff review is at the top of our agenda. This will change the game for COPEL, this point COPEL. [indiscernible] Well, Ajeje, we could have an earnings call just to talk about that. But I'll go straight to the points that you raised, this compulsory contracting. Of course, it tends to affect the dynamics of the LR cap. But in our view, it will not be that structuring also because of thermal power plants in the Eletrobras law, fortunately, they were left out to run the risk of analysis of [indiscernible] That's a big risk. I don't know how many gigs it will be 5 or 8 gig is flexible in the sector from the technical standpoint, it does not make any sense. And this would be the most deleterious effect in our view. Fortunately, the Congress had common sense and didn't take forward this point. And the second point is that we're very confident in the hydric products because they're unprecedented. We recognize [indiscernible] M&E was and everyone involved with the auction. They made an effort to include 2 hydro products because they are national technology, renewable and with a totally national industry. This will be the cheapest product compared with any other thermal product with all respect. But the hydroelectric plants have the conditions to offer an end price to consumers that will be lower -- always lower. So there will be some impact. But it is not going to be that relevant, and we believe that the characteristics of the hydro products tend to perform better. As regards to renewal of the HPPs, I think that a lot of expectations were created. But what the text of [ BNB ] says is basically part of the legal framework with the exception of the quotas. And when [ BNB ] [indiscernible] talked about the possibility of renewable and concession that will be in the hands of the breaking power. In our view, this was the base scenario, one of bidding process. We at COPEL do not envision a scenario without a competitive process. Given what is happening in other sectors, what's happening in highways, renowned [ DS ] highway and all the other highways, they all go through a bidding process, given the auction of GSF by [ CCE ] 60% margin. So this competitive process shows the appetite that the operators have. They have an inherent advantage. Of course, they know it's better than anyone else, but that other competitors can bring. In our base scenario, the law didn't change anything. Actually, brought a benefit, which is not allowing the renewals to be by quotas. But in our view, I don't think it's very likely. I think it's highly unlikely that there will not be competitive processes given what's happening in other infrastructure segments in the country, either by the granting power or by resolution of the Federal Court of accounts. Operator: Next question from [indiscernible] with Santander. Unknown Analyst: Congratulations on the results. I have 2 quick questions. First, still on MP1304. [indiscernible] Understand the company's view, what were the most relevant points that were left out in the text and that should be discussed in the short to medium term if you need a quick resolution of the issue. And another quick question about the possibility of extraordinary dividends with the possibility of taxation of dividends. What do you think about that? Daniel Slaviero: [indiscernible] all right. Let me try to slice your question. Let's start with the dividends. Felipe, you've been studying this -- could you give us more color on what we're thinking and our studies to address this? And then I will answer about the 1304. Felipe Gutterres: We cannot disregard the phase in which we are migration to Novo Mercado and the current dividend payout policy. And the taxation environment, the taxation on dividends in 2026 still to be approved by the President. We haven't come to a definition yet. This is most likely happening in the coming weeks. We are studying the several scenarios and possible impacts using our shareholder base, here also supported by our external advisers and by our tax department. But of course, we will position the company with a defined framework and strategy in light of the current shareholder base. Daniel Slaviero: Excellent. And Felipe, you're leading this process in the coming weeks as you put it yourself, we will be announcing what we intend to do. But obviously, there is a new fact when you have a 10% taxation individuals for foreign investors, even if there are some [indiscernible] to sovereign funds and others, there is a new fact there that requires, as Felipe mentioned, some diligence with the company. We have to look into this. And we have to do the best considering the company's balance sheet. There we have a profit reserves, which is reasonably high. And also considering that in our trajectory, we are focused on attracting new investors. So we have to find the optimal point at sweet spot. And I'm sure that Felipe and the whole team will bring you something quite balanced until the end of the year. So that's the first. And secondly, this needs to be finalized whether this conflict with the corporate law, if this is going to be paid in 2027, '28, '29, which is not so likely or whether this is going to be paid only within the 12 months. So there are some elements that need to be more clear, right, Felipe, so that we and all publicly traded companies can position themselves. But after Novo Mercado, that will be the top priority in our agenda. And as for the MP1504, absolutely, the topic that was left out that should not have been left out and that shows how the pressure is important is the [indiscernible] distributed generation in the apportionment and the curtailment in terms of having a contribution of EUR 20, EUR 15 or whatever. So I think that the reality will impose itself if this is not addressed and it will be because the reality is physical. -- knows this is already causing terrible problems for the system. This needs to be addressed because this has become big. It doesn't make sense for this segment to carry the level of subsidies that exist today. So I think that [indiscernible] Pedro, this is the more pressing matter to be addressed in this initiative by ANEEL in terms of tariffs, white flags, that could be a mitigating path. And I think that this will help remove the perverse incentive of the subsidies in the electric system [indiscernible] . What could improve the separation. We have several initiatives, LR contracting capacity in the form of voltage. We should have the separation of ballast and energy as expected in [indiscernible] that was being discussed at Congress. It was not addressed. And now we have to wait for the approval of MP1304 and wait for the regulation and see what will happen in terms of modernizing the electricity, the [indiscernible] Operator: Last question from Victor [indiscernible] with Itaú BBA. Unknown Analyst: I'm sorry to go back to this [indiscernible] Could you could tell us what they included in terms of curtailment and also the definition that should come in the next 3 weeks, 21 days regarding what is renewable versus oversupply, renewable oversupply, if this can have a significant impact and what will be considered curtailment that could be reimbursable looking forward, depending on the definition by the Ministry of Mines and Energy, MME and whether the totality of curtailment could be reimbursable. Could you give us more color on that specific point that would be much appreciated. Daniel Slaviero: Victor, I think that is an excellent point. We are monitoring this, not just in the press, but the discussions of several sectors about that. I think that we have to look at the glass as being half full. A half full glass means that it is possible. It is consolidated that the electric part and reliability is of value of the pure renewables, the wind plants and the solar power plant. They will have the right because this happened independent of [indiscernible] . The big problem, as you mentioned, is the energy piece. In my view, when we have the original tax and the amendment of the tax, in my view, that's a sign that one of the 2 will be too. And I think that this is a legitimate discussions on both ends of the generation companies trying to address this by saying that this will not have an impact for the consumer in terms of charges or not reducing tariffs. This is undeniable. There will be an impact. This is a structural decision. This is about what the government wants, what the Ministry of Mines and Energy and the central government understand. This is a risk of the entrepreneur, which is one thesis or if this could be reimbursed if they choose. If they choose this path, think that this will not have an impact on consumers, well, this is not sustainable. But we're monitoring this closely because, of course, curtailment is something that needs to be addressed in the future because it is indeed a topic that has made this segment of wind and solar power feasible specifically. I think that we are going to be seeing what's going to happen next, and we'll see what the government -- how the government will interpret the policy and understanding how to reconcile these 2 arguments, which are legitimate for both sides. Operator: The Q&A session is closed. I would like now to give the floor to Mr. Daniel Slaviero for his final statements. Daniel Slaviero: Well, I can only thank all [ COPELLIONS ] for another quarter of solid, stable results. They show how COPEL is a predictable company that has been performing well and delivering consistent results quarter after quarter. I think this is the first element. Secondly, I'd like to thank all of you for joining us your questions that were very relevant. The sector is going through a transformational moment and the regulatory and legal framework will undoubtedly have many impacts in the coming months and over 2026, some regulations will be necessary. But I think that we are moving forward with some structural changes. We have some positives, some not so good things, but we are moving forward. And I always stress the price signaling. If we have adequate price signaling, that's the best way. Whenever the government chooses certain segments or categories, I think that this causes future long-term deleterious effects. And we've seen this not just in the energy sector, but in several sectors. Once you give players benefits to remove them, it is very hard to remove them. And I'd like to close with the elements here on the T-shirt, it's about the culture, the cultural transformation that we are living at COPEL. As I mentioned on the 19th, we will share with you these elements about our culture, our ambition, our bold ambition, one that is relevant value generation, value creation for the company. Myself, all of my partners and all [ COPELLIONS ] are enthusiastic and very engaged with this new moment of COPEL, a moment that we are building together. We are building together a company that is and will continue to be a big benchmark in the Brazilian energy sector. Thank you very much. Have a good day. Operator: COPEL's video conference call is closed. Thank you very much, and have a good day.
Operator: Dear ladies and gentlemen, welcome to the Merck Investor and Analyst Conference Call on Third Quarter 2025. [Operator Instructions] Please note that at our customers' request, this conference will be recorded. I'm now handing over to Florian Schraeder, Head of Investor Relations, who will lead you through this conference. Please go ahead, sir. Florian Schraeder: Thank you so much, Smart Sarah, and a sincere welcome to everyone joining the Merck Q3 '25 Results Call. I'm Florian Schraeder, the Head of Investor Relations at Merck. I'm delighted to be here today with Belén Garijo, our Group CEO; and Helene von Roeder, our Group CFO. During the Q&A part of this call, we will also be joined by Kai Beckmann, CEO of Electronics and Deputy Chair of the Executive Board; Jean Charles Wirth, CEO of Life Science; and Danny Bar-Zohar, CEO of Healthcare. In the first few minutes, we will walk you through the key slides of our presentation. After that, we will be happy to take your questions. Now I will turn it over to Belen to get started. Belén Garijo López: Thank you, Florian. Good afternoon, and welcome, everybody, to our Q3 earnings call. I am now on Slide #5, starting with the highlights of this quarter. So as you have seen during the morning in Q3, we delivered solid organic growth across all 3 sectors. Organically, the group revenues increased by 5.2% and EBITDA pre went up by 8.8%. Life Science delivered the strongest organic sales growth at 6%, followed by our Healthcare and Electronics businesses, which both delivered solid organic growth of 5%. One key highlight of the quarter is the continuation of the strong performance of our Process Solutions business, which showed organic growth above 10% for the third consecutive quarter despite rising comparables. We saw a very strong order growth year-over-year and a book-to-bill ratio that is still comfortably above 1. In Science & Lab Solutions, we returned to organic growth, and that despite continued near-term headwinds. In Healthcare, organic growth was largely driven by the CM&E franchise, up 7% and solid N&I performance of 6%, driven by Mavenclad which reached double-digit growth in this quarter. Oncology showed moderate organic growth despite heavy competitive headwinds for Bavencio and rising competition for Erbitux in China from noncomparable biologics. Following the closing of the SpringWorks acquisition on July 1, this is the first quarter in which we are consolidating our rare disease franchise, which has contributed 4% portfolio growth for Healthcare and has performed well in line with our expectations. Moving into Electronics, we saw organic growth of 5%, driven by our semi-material business, and in this context, please note that Q3 includes 1 final month of Surface Solutions since we have now successfully divested as of July 31. Regarding full year 2025, we are now confirming and narrowing our absolute guidance ranges for net sales, EBITDA pre and EPS pre. We are maintaining the midpoints for net sales and EBITDA pre, while slightly increasing the midpoint for EPS pre. So turning to Slide 6 for an overview of our performance by business sector. Once again, organic sales growth in the third quarter was plus 5.2% and Life Science was the largest contributor with organic sales growth of almost 6%, driven once again by the stellar performance of Process Solutions. Healthcare grew 4.6% organically, driven by strong growth of our CM&E franchise alongside contribution from Mavenclad and Fertility, which has returned to growth, supported by Pergoveris. Electronics also showed the solid organic sales growth with Semi Materials up high single digits, while DS&S was down in the low teens range as was expected. Regarding our earnings, EBITDA pre amounted to EUR 1.69 billion, up plus 8.8% organically versus the same quarter of last year. The currencies had a negative effect across all sectors, while the portfolio effect was slightly positive driven by the contribution of SpringWorks. As flagged in our Q2 earnings call, EBITDA pre in Q3 was supported by the sale of a priority review voucher resulting in a gain of plus EUR 60 million in health care and legislative changes in South America, adding another EUR 59 million of income in [ CO ]. Our underlying EBITDA pre margin, excluding these 2 effects, was stable at around 29%, fully aligned with our expectation for the full year. And with this, let me hand it over to Helene for a more detailed review of our financials. Helene von Roeder: Thank you very much, Belen, and also a warm welcome from my side. And with that, I'm now on Slide 8, and we'll start with an overview of our key figures in the third quarter. Net sales increased by 1% to EUR 5.318 billion. Organic growth of EUR 273 million and a portfolio effect of EUR 34 million were largely offset by FX headwinds of minus EUR 256 million. EBITDA pre was up by 3.1% to EUR 1.669 billion with a margin of 31.4%, and that is up 70 basis points year-on-year. The group margin benefited from the sale of a priority review voucher and legislative changes in Latin America, which together contributed EUR 119 million supporting the margin by 220 basis points. EPS pre increased slightly by 0.9% to EUR 2.32 per share. The gains resulting from the aforementioned priority review voucher and legislative changes have supported EPS pre growth and overcompensate the higher interest related to the SpringWorks acquisition. Our operating cash flow increased moderately by 4.1% to EUR 1.518 billion. Net financial debt rose 29.8% to EUR 9.228 billion (sic) [ minus EUR 9.228 billion ], primarily reflecting financing for the SpringWorks acquisition via a U.S. dollar bond issuance. Our return to the U.S. dollar bond market after 10 years was highly successful and further diversified our fixed income investor base. We were over 4x oversubscribed and that enabled us around 25 basis points of pricing tension underlining the strong confidence from fixed income investors. Let me also briefly comment on our reported results. And with that, I'm now on Slide 9. EBIT was up by 11.3% year-on-year. The financial results declined significantly from minus EUR 54 million to minus EUR 99 million, and that is primarily due to higher interest costs from the U.S. dollar bond related to the SpringWorks acquisition. The year-to-date effective tax rate was 21.2%, and that is within our guidance range and reflects normal quarterly fluctuations throughout the year. Turning to EPS. Reported EPS was EUR 2.07, which is up 11.3% year-on-year and is on par with our EBIT growth. With that, let's move to the business sector review, and I'm beginning with Life Science on Slide 10. Life Science grew organically by plus 5.9% in Q3. Growth accelerated versus prior quarters with Process Solutions maintaining its momentum and Science & Lab Solutions returning to growth. As projected, Process Solutions continued its strong momentum with organic sales up by 10.3%. That is the third consecutive quarter of low teens growth despite increasing comps. Order intake remained strong in Q3 and the book-to-bill ratio stayed comfortably above 1. To further strengthen our Process Solutions downstream offering, we announced on October 15, the acquisition of JSR's Chromatography business. This adds advanced protein A chromatography capabilities, enhancing our ability to offer more efficient, scalable protein purification solutions that support accelerated biopharmaceutical production. Turning to Science & Lab Solutions. Sales grew by 2.5% organically despite continued headwinds from U.S. policy changes weighing on academic and government lab spending and still challenging market conditions in China. While the U.S. government shutdown had no impact in Q3, we do expect some effects to materialize in Q4. Life Science Services reported organic sales growth of 5.2% against the low comp, driven by our CDMO business, and that is notably bioconjugation for ADCs. As noted at our recent Capital Markets Day, Life Science intends to gradually increase R&D investment towards roughly 5% of sales over the midterm. And the R&D increase in Q3 is absolutely in line with this goal. EBITDA pre increased by 6.1% organically, with the margin up by 20 basis points year-over-year, reflecting operational leverage. I'm now on Slide 11 with an overview of the Healthcare business sector's performance. Healthcare delivered solid organic sales growth of 4.6% in Q3, about 1% of the growth resulted from a pull-in from Q4. For the first time this year, we consolidated our rare disease franchise contributing a plus 4 percentage point portfolio effect well in line with expectations. CM&E was once again the largest contributor of Healthcare's organic growth, delivering 7% organic growth with all therapeutic areas contributing. Fertility sales were up 2% organically, mainly driven by very strong growth of Pergoveris, up 37%. Meanwhile, we announced on October 15, a voluntary agreement with the U.S. government to accelerate the U.S. review time lines for Pergoveris and access to our IVF therapies via trumprx.gov. Our oncology franchise delivered 3% organic sales growth as Erbitux sales rose by 10.3%. Erbitux' performance was driven by strong growth in Latin America and Europe, more than offsetting tougher competition for noncomparable biologics in China where sales declined in the low teens. Our N&I business grew by 5.6% organically in Q3. Mavenclad delivered stellar organic growth of 20.4% supported by continued strong commercial execution. I want to briefly comment on the recent decision by the Court of Appeals for the Federal Circuit, which has affirmed the conclusion by the U.S. Patent Office that our 2 Mavenclad dosing regimen patents are invalid. We are disappointed by the ruling and intend to file a petition for rehearing or rehearing en banc. Belen will comment on implications later. Regarding our pipeline, longer-term results from Part 2 of the Phase III pimicotinib study were presented at ESMO, showing increasing ORR over time and ongoing improvements in key secondary endpoints. We intend to launch pimicotinib in 2026 in TGCT. On R&D spend, as mentioned in our Q2 earnings call and the Capital Markets Day, we are increasing our R&D ratio in H2. The key drivers are project ramp-up costs and a small effect from the SpringWorks acquisition. Our Q3 ratio of 20.9% is in line with our midterm ambition of around 20%. Overall, EBITDA pre amounted to EUR 818 million in Q3, which represents a margin of 37%. Please keep in mind that this includes the EUR 60 million gain from a sale of a priority review voucher and only a modest dilution from SpringWorks. Furthermore, please note that the margin in Healthcare tends to be lower in Q4 due to seasonality. Let us move to electronics on Slide 12. Organically, sales increased by 4.8% in Q3. Semiconductor Solutions sales were up in the high single-digit percentages organically overcompensating lower DS&S sales. In Semi Materials, AI and advanced nodes continue to drive growth. In addition, we see demand from mature nodes in Asia, where we have been able to gain market share with new qualifications. On business, the quarter was in line with our expectations. As we communicated in Q2, we expect a very muted year 2025. Considering the usual back-end loaded seasonality of DS&S, we're calling out Q4 '25 as the bottom. We're more constructive on the outlook for 3D NAND driven by [ eSSDs ]. This is consistent with the view Kai and his team shared at the Capital Market Day '25. Our Optronics business achieved moderate organic growth of 2.9%. Resilience in our offerings for liquid crystal and OLED drove organic growth complemented by a strong portfolio contribution from UnitySC. The EBITDA pre margin went up by 150 basis points year-on-year to 27%, mainly driven by the accretion from the divestment of Surface Solutions. We see gradual improvement of Electronics margins from here onwards. Before handing back to Belen, let me also briefly comment on our balance sheet and cash flow statement. Now as you can see on Slide 13, our balance sheet decreased by EUR 700 million compared with the end of December '24. Taking a closer look on the asset side. Cash and cash equivalents increased quarter-over-quarter, reflecting the U.S. dollar bond issuance and receipt of proceeds from the divestment of Surface Solutions. Inventories were stable, while receivables rose by EUR 300 million, following a quarter of strong focus on cash collection efforts. Intangible assets increased slightly by EUR 100 million due to goodwill created by the SpringWorks acquisition, partially offset by negative FX. Property, plant and equipment decreased slightly by EUR 200 million, which is mainly due to FX translational differences. And lastly, other assets were down by EUR 700 million, mainly due to the divestment of Surface Solutions and revaluation effects. On the liability side, financial debt increased by EUR 1.8 billion with the issuance of the U.S. dollar bonds. Pension provisions were slightly down, driven by actuarial gains. Payables decreased by EUR 100 million as we saw declines in current payables across all 3 sectors. And net equity decreased by EUR 1 billion as the increase in retained earnings was more than offset by FX differences, primarily reflecting a weakening U.S. dollar. In summary, our equity ratio declined from 58% at the end of December '24 to 57% at the end of Q3. Turning to cash flow on Slide 14. Operating cash flow increased to EUR 1.518 billion in Q3 '25, up from EUR 1.456 billion (sic) [ EUR 1.458 billion ] in Q3 of last year. Profit after tax rose driven primarily by the gain of the sale of a priority review voucher and changes in local legislation in Latin America. The EUR 166 million year-over-year delta in other assets and liabilities reflect variable compensation and tax adjustment. Other operating activities decreased by EUR 181 million year-over-year in Q3 '25, largely due to the neutralization of gains from the PRV voucher and the Surface Solutions divestment. Net cash used in investing activity reflects the SpringWorks acquisitions and the Surface Solutions divestment. CapEx on PPE was EUR 63 million lower, in line with the updated full year guidance of EUR 1.5 billion to EUR 1.7 billion, down from previously EUR 1.6 billion to EUR 1.8 billion. The change in financing cash flow is explained by the proceeds from the U.S. dollar bond issuance. Lastly, consistent with my comments at the Capital Markets Day, within CDMO, we are actively reviewing our mRNA and viral vector activities with potential financial implications in the next quarters. And with that, let me hand back to Belen for the outlook. Belén Garijo López: Thank you very much, Helene. Let's now move into taking a closer look at our full year guidance on Slide 16 before we open for Q&A. As you may have seen in the press release, we have sharpened our group sales guidance to a range of EUR 20.8 million to EUR 21.4 billion with an unchanged midpoint at EUR 21.1 billion. FX remains a strong headwind and has been refined to minus 5% to minus 3% from the earlier minus 5% to minus 2%. Our organic net sales growth guidance is now set at around 3%, staying within the previously communicated range. Turning to EBITDA pre, we have also kept the midpoint at EUR 6.1 billion and narrowed the absolute range to between EUR 6 billion and EUR 6.2 billion. Organic sales growth has been narrowed from previously plus 4% to plus 8% to now plus 5% to plus 7%. For EBITDA pre, we anticipate an FX between minus 6% and minus 4%, adjusted from the previous minus 6% to minus 3% and we have raised the midpoint of our EPS pre guidance by EUR 0.05, now guiding a range of EUR 8.20 to EUR 8.60. For some additional color, let's take a look at Slide 17. Consistent with our group-wide approach, we are narrowing our organic sales growth guidance to plus 4% to plus 5%, while reaffirming the midpoint at 4.5% for the full year. We're also maintaining the midpoint at 5% for EBITDA pre and narrowed the guidance to a corridor of plus 4% to plus 6%. In Healthcare, we anticipate organic sales growth of around 3% at the lower end of our previously communicated guidance range of plus 3% to plus 5%. This reflects the underlying year-to-date trends and some uncertainty for Q4 related to the recent Mavenclad news Helene referred to earlier. For organic EBITDA pre, the guidance has been updated to plus 9% to plus 11%, consistent with the adjustment to sales and within the corridor communicated in August. As portfolio effect, we now expect the SpringWorks to contribute EUR 180 million in sales, up from EUR 170 million previously guided and EBITDA pre of between 0 and minus EUR 20 million, which is significantly better than the prior minus EUR 70 million to minus EUR 90 million communicated before. For Electronics, we forecast organic sales development between minus 3% to minus 1%, tightened from the prior range of minus 5% to minus 1%. Organic EBITDA pre for electronics is now expected to be between minus 11% to minus 7%, compared to the earlier guidance of minus 15% to minus 7%. Now turning to 2026 in which, I am sure, you are expecting a bit more transparency. We recently provided you at our Capital Markets Day with an early indication of group sales and margin for 2026. You may now be wondering about the potential impact of the recent Mavenclad news regarding the upcoming loss of exclusivity in the U.S. To no surprise, this will impact the 2026 sales and earnings projections for Healthcare. To what extent it's going to be influenced by the phasing of U.S. generic launches and our ability to drive volume also outside of the U.S. and Danny can provide further information later during Q&A. Hence, we will closely monitor the developments in these respects means U.S. generic launches, an update due in Q4 with the full year guidance. In any case, you should assume for your modeling that Healthcare margins should remain north of 30%. Coming to the group, first of all, we see our early 2026 indication for the group during the Capital Markets Day for sales within the range we provided, trending to the lower end. When it comes to group margins, you can ensure that we stay laser focused to mitigate the potential impact of the Mavenclad erosion in the U.S. While acknowledging state cost mitigation measures, you could assume for 2026 a margin of around 28%. As mentioned, more to come at Q4 earnings when we will provide a full year guidance to all of you. And with that, Florian, over to you to lead us through the Q&A session for today. Florian Schraeder: Thank you, Belen and Helene, for leading us through the slides. Actually, there's one small amendment to what we have set and is on group level, the organic EBITDA growth, which has been narrowed from previously quarter 8 to now 5% to 7%, not the organic sales growth. With that, Sarah, I'm very happy to hand over to you to manage the Q&A part of the call. Operator: [Operator Instructions] Your first question today is from Matthew Weston from UBS. Matthew Weston: Two questions, if I can, please, both on pharma and on the guidance for 2025. Belen, you called out the SpringWorks change in guidance where we've seen a very sharp turnaround in profitability of what you expect from inorganic this year. I'd love to understand what's changed in your assessment of SpringWorks? Have you reduced costs? Have you had more revenue leverage? Because it looks like a very dramatic change in assumption. And then the second question is around the offset to that within guidance, which is a downgrade to the organic Healthcare growth. I'd love to understand if that's also associated with an assumption of Mavenclad U.S. generics entering on the 22nd of November, as you previously flagged in the release around the patent board decision? Or is it another part of the business which is performing less well? Belén Garijo López: Thank you, Matthew. Let me invite Danny to address the 2 questions for Healthcare. Danny Bar-Zohar: Thanks, Belen. Hello Matthew, thank you for the questions. So I'll address first the SpringWorks question around the margins for Q3. So it is rather technical. We have taken a conservative approach when we provided the first guidance. As you remember, the first guidance was provided several weeks only after closing. So we took a rather conservative approach for that in terms of cost. Now moving forward, as you could see, we have upgraded the guidance on the portfolio from EUR 170 million to EUR 180 million. So there is a gain there. And so we do expect sequential sales growth in Q4 for the SpringWorks Therapeutics compounds. We do expect an EBITDA pre loss in Q4, which will be a bit above Q3 due to the phasing of investments. But overall, you're absolutely right, most of the assumptions were conservative when it comes to the cost of SpringWorks marketing and sales and a little bit on R&D. When it comes to the EBITDA pre at the group level -- sorry, at the Healthcare level. So what did we communicate? We communicated an update to the top line of around 3% growth, instead of of the 3% to 5%. What are the drivers for that? First and foremost, as Belen said, when we look at the 9 months year-to-date, we see the trends on Erbitux. We see the trends on Gonal-f on Bavencio. Only this would bring us to the, I would say, the lower half of the previous guidance. Add to that, that in Q3 for Healthcare, the 4.6% growth is approximately 1% overstated. There is a pull-in from Q4. That's the second component. And then goes to the last one, which is the uncertainty regarding the effect of Mavenclad in Q4, and I'm sure that we will get questions around that later. So the guidance for the EBITDA for Healthcare, we upgraded it slightly and what it reflects are actually the downside on the updated sales, the 3% -- around 3% instead of 3.5%, the updated headwinds on FX. And on the upside, the pull-up of the portfolio effect when it comes to the SpringWorks. I hope that it gives you the bigger picture. Matthew Weston: Danny, perfect. If I could add one very quick follow-up. Can you tell us where the 1 percentage point to pull-in from 4Q was in terms of the product breakdown? Which drug should we look at? Danny Bar-Zohar: Yes. Thank you. That's a good one. In terms of regions, it was mainly in Middle East, Africa due to the tensions in the Middle East or the fluctuating tensions in the Middle East they -- there was a tendency to play safe and to stock a little bit ahead of time. So we are talking about mainly the CM&E and a little bit of Erbitux. Operator: The next question is from Richard Vosser, JPMorgan. Richard Vosser: One follow-up just on Mavenclad. Danny, I think Belen was saying, you would give some more color maybe about Mavenclad and the assumptions for '26 in terms of the growth, the generics coming in, et cetera, into the U.S. and growth ex U.S. Maybe you could give us some of that color, that would be great. And then secondly, on Electronics. it seems that Surface Solutions, as I think we all know, was a lower-margin business. So that should enhance the margins going forward. But also there's been the widening of growth, a little bit elements beyond maybe in Semi Materials outside of just traditional AI. So perhaps you could talk about the implications for growth -- for the gross margin of that and the margins going forward in the Electronics business. Danny Bar-Zohar: Okay. Richard, thank you for the Mavenclad question, and I think that, yes, it is appropriate to provide more color. So let's step one step -- let's take one step backwards. This quarter, sales of EUR 304 million, exceptional growth of 20%, and this 20% growth is driven pretty much equally between North America and Europe. Very strong commercial execution. Now when it comes to what's next, how should we think about it? First of all, Europe, which is approximately 1/3 of the revenue should continue growing in 2026. So this one is clear. When it comes to the U.S., we are definitely not in a position to speculate here. Technically, there is one single company with a tentative FDA approval for a generic version of Mavenclad and the earliest possible conversion of it to a full approval is the 22nd of November. Now the FDA guidance states that it generally assesses a request for a conversion from tentative approval to a final approval within 3 months. So we don't have the full clarity on where it is going to land. So the -- when it comes to 2026, so this is a little bit of premature. Why? Because the time of entry of a generic is still unknown. We can think about something about early 2026, and we don't know about other generics. There is no other generic that has an FDA tentative approval, but we know about other generics. It's in the public domain. We have a petition prepared for filing and also generics are generics and the game and the price play is not always expected. So obviously, what we told you at the Capital Markets Day when it comes to the top line, as Belen said, will need to be adapted and when it comes to the [ staged ] cost mitigation that Belen mentioned, so this is a U.S. play only, and it will depend a lot on the timing and on the phasing of who comes after the first generic. When the first generic is there, we can continue playing, and we should continue investing moderately. What's good in the U.S. is that once we see the dynamics, we can act very rapidly, so we will modulate the cost appropriately. Just one sentence to add. With this, repeating what Belen said, all of this negative impact on the top line that we expect for Healthcare in 2025. The costs will be managed and the margins will be managed to be north of 30%. Kai Beckmann: Second attempt. Richard, I'm taking the Semi question on the margin. Let me provide a bit more color on this one. So we made steady progress on the EBITDA margin in Q3 with 27% now and we've put the exceptional items that you have seen in Q2 '25 behind us. Still we aren't where we want to be in Electronics. The margins should be higher, but the biggest missing piece is the acceleration in volumes and our midterm target to the mid- to high-single-digit organic sales growth. So in Q3, we see support from the first 2 months where Surface is deconsolidated. On an annualized basis, we expect 100 basis points of margin accretion from the Surface Solutions divestment. We also see the continued benefit of operational leverage in Semi Materials and positive mix for materials for applications that serve AI and advanced nodes. And we did get some support from the release of some provisions in Q3 '25 as well. And it's worth remembering that biggest driver of lower margins are the investments we make in capacity for our local-for-local strategy, investments like the new Taiwan site are helping us to mitigate tariff operationally as well as gaining share via new qualifications. What we anticipate is exiting the year with margins in the high 20s with the guidance implying 26% to 27% EBITDA pre margin. So clearly, we have still work to do, but it's a clear sign of focus, Richard. Operator: We'll now take the next question. And this is from Shyam Kotadia from Goldman Sachs. Shyam Kotadia: I have one on the SpringWorks assets. So on a quarter-over-quarter basis, it appears Ogsiveo sales were broadly flat. So given your portfolio effect guide for Healthcare assumes EUR 180 million and you achieved EUR 85 million in 3Q, it implies EUR 95 million of sales for 4Q. I imagine the majority of this EUR 10 million uplift in 4Q may come from Gomekli, given its earlier in the launch and the recent growth momentum. So this would again imply Ogsiveo being relatively flat in 4Q. So I just wanted to, therefore, check what's driving this flat quarter-on-quarter revenue assumption for Ogsiveo? And are you anticipating a growth uplift there? That's the first question. And then Second question on SLS. So there was some positive phasing dynamics I saw in the release in the chemistry subdivision. So how much of that supported the low single-digit organic growth this quarter? And given it was a phasing impact, how should we think about 4Q for SLS? And also if you could quantify the potential impact from the government shutdown, that would be great. Danny Bar-Zohar: So regarding Ogsiveo, I'll give a little bit more color. So in the third quarter, sales came in at EUR 62 million, which is 38% up year-over-year, which is practically the strongest quarter since launch and the drug was launched exactly 2 years ago. So it's not a very fresh launch. We continue to see robust underlying demand with new patient adds and refills and also low discontinuations. Ogsiveo is the standard of care holding more than 70% share of first-line systemic new patient starts. So this is very significant for us. Why are we confident with Ogsiveo? We saw a drop in surgery rate from 70% prior to launch to 50% already 18 months after the launch in the U.S. We see a very high level of satisfaction amongst both patients and prescribers, 90% prescribers have the intent to prescribe again. The drug is in the NCCN guidelines, high level of refills above 90%, real-world data that suggests a very positive feedback from both physicians and patients. Long-term efficacy and safety data we published a couple of weeks ago, that indicates clear increase in response rates over time, sustained improvement in quality of life and a very consistent safety profile. So we are definitely, definitely excited about that. What we need to do is to continue to drive leadership as first-line systemic treatment of choice, continue to grow the systemic treatment market for desmoid tumors through physician and patient education. And then when it comes to the flattening that you suggested, we are changing practice here. And this is the first in disease in this indication, in this severe indication. And in some cases, you need to, I would say, do a lot of education in terms of mobilizing patients. As I indicated on the Capital Markets Day with Ogsiveo, we are moving now. And I guess that SpringWorks has moved into this phase just between signature and closing to the second phase of the launch. This is the phase where the bolus of patients waiting at the center of excellence for the first drug ever are already treated. And now the task on us is to mobilize those patients under, what we call, active surveillance into therapy and increase the number of new patients, increase the funnel. So I'm referring back to two other things that I said when we announced the deal. One, expect volatility. Second, we'll need to deepen penetration in the U.S. The potential of more than 20,000 diagnosed patients in the U.S. only is huge, and the vast majority are sort of stuck with symptoms, but no decision how to treat these, and these are the patients that we need to get. So we have this -- and this is exactly what I meant when I said at the closing depending on our efforts in the U.S. Now specifically, when it comes to Q3, chronic disease, we do see summer seasonality. And if one splits that 2 months, you clearly see the seasonality there. When it comes to Q4, you saw that overall, we topped the SpringWorks guidance a bit. It's for both compounds. We will not provide additional split. But I would not expect the dynamics also that you might have observed between Q3 and Q4 last year, which was, as communicated by SpringWorks, a result of increased stocking in anticipation for a price increase. So we will consciously control this. We will continue to see broadly consecutive growth, and we are super excited with the recent launch in Germany. We launched 3.5, 4 weeks ago, and I spoke with a commercial lead there. And I'm very, very content about the progress of both Ogsiveo and Gomekli. You're absolutely right about Gomekli, fantastic launch as it looks right now in the U.S., EUR 23 million, 73% growth quarter-over-quarter. Both adult and pediatric population, we feel very confident with this product. Jean Wirth: And Shyam, let me comment on SLS overall. So first of all, talking about Q3. Yes, we returned to positive organic growth in Q3 despite changing environment. When you peel the onion, biomonitoring from a portfolio point of view was a strong driver. Same is true for Chemistry and Lab Water as well. From a region point of view, Europe was the key driver. Now I would like to share also the fact that a few months ago, we launched an initiative around customer focus. What I mean and what we mean by customer focus. We have concentrated on enhancing our supply chain in SLS, particularly regarding inventory management and fill rates in order to improve the customer experience. And yes, we saw a nice and important benefit on chemistry, but this is a onetime effect. Moving forward, we are seeing some kind of sequential stabilization in academia, government and hospital, but the market remains volatile. And I will give you 2 concrete examples. One is China, where we continue to see China as a muted market linked to geopolitical situation, local competition and so forth. And the second key driver I would like to highlight looking forward or going forward is the U.S. government shutdown that caused some kind of uncertainty within the market, especially for academic government hospital customer segments. And we saw, let's say, a slowdown of our order intake per week in U.S. over the last few weeks. Good news is the shutdown should be now behind us, but it's true that it has impacted the first weeks of Q4. Operator: The next question is from Charles Pitman-King, Barclays. Charles Pitman: Just a first question please on the kind of thinking about the Fertility business. Just thinking about the kind of [indiscernible] performance in the quarter versus consensus a little bit weaker, but also just thinking a little bit more broadly next year, now that you've signed your MFN agreement with the U.S. administration to improve access to your Fertility business, what sort of dilution should we really be expecting to be reflected in FY '26? Or do you expect that to be offset by volume rises due to the improved access? And just wondering if you can confirm this is expected to eliminate the rest of your portfolio tariff risk as a result of the agreement, just given that happened about a couple of hours after the end of your CMD? And then just a second question. I'm not sure I have missed it earlier, apologize I had to join late. But can you just talk a little bit more -- can you just confirm what the driver of the lower dilution seen from the SpringWorks acquisition was for the third quarter and why you're now only expecting EUR 10 million for the year? Is it just the better-than-expected sales seen for Ogsiveo and Gomekli you were just referencing? Danny Bar-Zohar: Yes. Thanks. I'll take that. I'll start from the second one because it has the potential to be shorter. So the driver -- the key driver of the lower dilution of SpringWorks in Q3, we moved it from a midpoint of minus 70 to a midpoint of minus 10 is mainly a very conservative approach that we took just a few weeks after we closed the deal in terms of commercial and R&D spend. So we are releasing a little bit of this conservative approach when it comes to spend, some of it will phase to Q4, but overall that's the key reason for this lower dilution. I hope that it helps. So when it comes to Fertility, the third quarter was at EUR 360 million as a franchise, 2% up organically. And we pretty much anticipated that. It's the first quarter this year that returns to growth. The previous 2 ones were flattish to minus low single digit. By region, yes, a double-digit decline in North America due to mainly almost exclusively Gonal-f price erosion as we flagged in the last couple of quarters. And this decline in North America was more than offset by growth across all other regions. First, Europe, then Asia Pacific, Middle East, Latin America. When it comes to the brands, high single-digit decline in Gonal-f and this is driven, as we said, in North America by negative price effects and in the U.S. and in China as it has been the situation in the last 2 quarters. I would call them still temporary market softness in China in a rather competitive environment with local biologics and local hMGs. But these were largely offset by double-digit growth, 36%, 37 almost percent growth of Pergoveris across all regions, and it's a very differentiated profile that this drug offers and all other fertility products grew moderately. So this is what we have in terms of the status quo. Now for 2026, we are anticipating low single-digit growth as near-term headwinds, Gonal-f price erosion and also a little bit of the muted market growth in China will be more than offset by the continued strong growth of Pergoveris. We expect the launch of Pergoveris in China in the first half of 2026, which is very important for us. And as you mentioned, we are working towards a launch of Pergoveris in the U.S. in the second half of 2026 under the Commissioner's National Priority Review Voucher Program. Now this is, I would say, a breaking news immediately after the Capital Markets Day with the private public deal that we have with the White House and we intend to file Pergoveris to the U.S. FDA in the next couple of weeks after the shutdown is over. And we hope to have, I would say, if approved, with a broad label, a significant upside in the U.S. and globally. Now in the midterm, I expect Fertility to grow, as we said at the Capital Markets Day mid-single digits. And the key growth drivers for Fertility are, first of all, a growing market fueled by the increased need for IVF combined with improving access in many areas, Asia Pacific and Europe and also reimbursement and market share gains of Pergoveris and we also intend to launch Pergoveris Pen to replace the vial in several markets. So this is likely to give us an additional boost. There are risks, further penetration by biosimilars, and most of the risks are on Gonal-f in China and in Europe, but we are very confident with this forecast. When it comes to the tariffs. So the second part of this agreement with the White House, the first part was on [ DTC ] for Gonal-f and for Pergoveris. The second part was a letter of intent with the Ministry of Commerce, where the aim actually once we finalize this conversation is to exclude a pharmaceutical product and ingredients from the Section 232 tariffs. So we are in negotiations with a very good intent in order to relief us from the pharmaceutical tariffs moving forward. Operator: Now I'll take the next question. This is from Peter Verdult, BNP Paribas Exane. Peter Verdult: Danny, just can we come back to Fertility, just in the context of how much of a medium to long-term underappreciated value driver is the deal that you've done with the U.S. So I heard all the comments you made with respect to the previous question, but could you perhaps be helpful in baseline for us as we exit 2025, the run rate of Pergoveris. And I think most people on the call would think that Fertility might be a sort of mid-single-digit growth franchise. So I don't want you to repeat all the dynamics that you've just said. But I do want to ask, when you think about that government deal and the volume opportunity, and the fact that you're not yet in China and Japan with Pergoveris. Do you, as a management team, think about Fertility as a mid-single-digit growth? Or do you start to think about upside to that. So baseline on Pergoveris and the medium- to long-term outlook for Fertility. Danny Bar-Zohar: Thank you, Peter, for this question, and I will clarify, you're absolutely right. So what we expect for the full year this year for Fertility is flattish organic sales growth. You saw the effects -- the very muted effects in the first 2 quarters, returning to growth, getting our heads above the water in the next couple of quarters. So this is what you should expect for this year. Now for Gonal-f, I would say expect the pressure. We broadly think that it's going to be stable midterm outlook for Gonal-f. On one hand, we see the drivers that I mentioned before. On the other hand, we'll see the biosimilars, the price pressure and also to some extent, some extent, partial cannibalization by Pergoveris. Now when it comes to the U.S. deal, you need to think about it like this. There are 2 channels where we commercialize Gonal-f. There is the private channel, which is a cash-paying channel, and there is managed care through PBM, okay? The deal with the White House relates to the private one. So this discount or rebate that we are providing around 83% brings, generally speaking, the price to the private channel at the same range that is currently on the public one. So I would continue given that we are still -- we still have contracts with managed care channels, I do expect continued erosion in the next year and then eventually in outer years, not in 2026, we will start seeing, I would say, a stabilization. But this should be largely offset by Pergoveris, which is, in my opinion, and not just in my opinion, key opinion leaders, patients, a huge innovation in each and every market that we have Pergoveris. Both Pergoveris and Gonal-f are doing better. So this makes us very excited about the potential of this drug. And of course, we confirm the mid-single digit for Fertility in general. I don't think that we are at the stage to change it either up or down. We need to see how it [indiscernible]. Operator: And the next question is from Oliver Metzger, ODDO BHF. Oliver Metzger: So the first one is on Healthcare. It's more about the strategic nature. So the recent news regarding Mavenclad and the loss of exclusivity, how has this, say, earlier happening or changed your view on the MS business as a whole? Second question, in your qualitative comments on SLS, you described some higher demand coming from early biotech. Do you consider this as a sustainable turn to be better? Or would you rate this still as a quarterly volatility. Danny Bar-Zohar: So regarding Mavenclad loss of exclusivity and the impact on the multiple sclerosis franchise. So as I said before, the loss of exclusivity, yes, it came 10 months, 11 months earlier than expected in the U.S. In Europe, the end of regulatory exclusivity is in August 2027. And after that, we have SPCs per country. So the situation in Europe is well known, and we expect Europe or ex U.S. to continue to grow when it comes to Mavenclad. Now in the U.S., as I said at the beginning and as was mentioned a couple of times, we will need to manage this decline properly, and we have all the plans and all the capabilities to do that and to respond as fast as possible. Now longer term in multiple sclerosis, you know exactly what is the situation of our pipeline when it comes to multiple sclerosis. We don't have additional products in this field. So what we are going to do, and I mentioned that at the Capital Markets Day when it comes to Mavenclad, it just came a little bit earlier. We will manage the Mavenclad decline for cash, which means having a profitable decline. I hope that it gives you more color on that. Jean Wirth: Jean-Charles speaking. So to answer to your question related to SLS, we confirm that we are seeing some positive green shoots from pharma company impacted Science & Lab Solution moving forward. However, I want to repeat what I said about China. We have seen some quite muted demand in China on short term. Nevertheless, China remains a very important strategic pillar for Life Science in general. And a few weeks ago, in this context, we announced a new go-to-market transformation. We are making good progress. We just nominated 24 hours ago, the new head of of China. And again, it highlights the fact that China for us remains very, very important. And last but not least, I also would like to repeat again that we are seeing some impact coming from the U.S. shutdown on our academic customer in North America. Operator: We'll now take the next question. And this is from Florent Cespedes, Bernstein. Florent Cespedes: Two quick ones, please. First on pharma for Danny on the pipeline, could you maybe share with us which are the key milestones that we should anticipate for 2026 in terms of clinical trial readouts? And my second question for Kai. Electronics, DS&S, why do you anticipate stabilization in 2026 for this business? Danny Bar-Zohar: Florent, thanks. I'll take the first one. Key milestones. First, you should expect initiations, Phase III trial initiations for precemtabart tocentecan, the ADC, in colorectal cancer third line. As I mentioned and also David mentioned at the Capital Markets Day, we are in active discussions when it comes to partnering because of the size of -- potential size of this program also in the second line and the first line. You should expect data release in 2026, initial data release from the pan tumor trial. For that compound, we are testing it in pancreatic, in gastric and in lung cancer in a basket study. So that's for [ Pareto ] you should expect enpatoran entering Phase III trial in lupus rash. We completed the interactions with the regulators, very fruitful interactions. And these are the big ticket items, the myasthenia gravis with cladribine is enrolling patients, the Phase III, and of course, super important. It's not a trial. It's a drug in registration. We are expecting the launch of pimicotinib in China and also in the United States. In China, it's currently under review. In the U.S., it's going to be submitted in the next few days. We had the shutdown thing, but it's going to be released. We are going to also to get into a decision -- data-based decision on the PARP1 selective. Kai Beckmann: Florent, let me take the DS&S question. So let me take it from where we started in Q2 with our messaging. In Q2 '25, we envisioned a drop of sales of EUR 200 million to EUR 300 million. That was the organic sales downside that we have mentioned in Q2. Now that we are 3 months further, we can confirm that slightly more than EUR 200 million, which was our optimistic case. So that's where we are ranging. So the downside is largely projects and related equipment, and we have seasonality in the large capital equipment and protect business and a lot of revenue here is booked at the year-end. You can see that since we bought Versum, Q4 was often seasonally the highest sales quarter of the year. And as we have seen now EUR 100 million downside in the first 9 months of the year, that means counterseasonal downside now of another EUR 100 million in Q4 '25 to get to the slightly more than EUR 200 million, I just mentioned. So we are calling Q4 '24 now as the bottom for DS&S and that's why when you do the math on the Electronics guidance, expect Q4 '24, it's our lowest sales quarter of the year. And if you take the guidance, midpoint down around 7% organically and around EUR 200 million down considering the divestment of Surface as well. So that's the bridge for Electronics and specifically for DS&S. And looking at our order pipeline and a very low base of projects, we expect stabilization for 2026. Operator: The last question today is from Simon Baker from Rothschild. Simon Baker: Two, if I may, please. Firstly, going back to Pergoveris in the U.S. Danny, you said you will be filing in the next couple of weeks now that shutdown has been resolved. Given the 1- to 2-month review period of these national priority vouchers, can you explain what else needs to be done in order to get to a second half rather than the first half launch in the U.S.? And then a question on SpringWorks and just in terms of phasing of the integration costs, it looks like more was taken in Q3 than we were perhaps expecting. So I just wonder if you could give us some idea of the phasing and cadence of SpringWorks related costs on acquisition and integration. Danny Bar-Zohar: Thanks. So when it comes to Pergoveris, so this, I call it, an exercise with the Commissioner's National Priority Review Voucher is new to us and is also new to the FDA. So on that, we are in -- despite even the shutdown, we are in active discussions with that particular division, and we are preparing the file. So we have what we need to do when it comes to preparation of the file. The file needs to be prepared based on data that was submitted to the EU regulators. As you know, there were no trials in the United States on Pergoveris, and there is work that needs to be done on that regard. And then we need to get this reviewed. It's up to 60 days, it's, I would say, one of the -- it's a leading assumption by the FDA, but we need to see how it goes because still the drug was not tested in the United States. But I also want to make sure that we have the right label for this drug and prepare for this launch. So yes, theoretically, you can see that at the very end of H1 2026, we'll update you as we go because we are relatively early in this process. When it comes to SpringWorks integration, we actually have a positive update on integration and transaction costs, which we now expect at approximately EUR 250 million in total versus the EUR 260 million that we communicated previously, EUR 300 million originally. And in detail, we confirm our assumption for the integration cost of EUR 200 million and have slightly lowered our assumption for the transaction costs to around EUR 50 million, the previous assumption was at EUR 60 million, due to some lower legal costs. I hope that gives more clarity. Operator: I will now hand the conference back to Florian Schraeder for closing comments. Florian Schraeder: Thank you, Sarah, and thank you, everyone, for your continued interest in Merck. With this, we closed the Merck Q3 '25 results call, and we look forward to meeting many of you in our upcoming roadshows. Thank you, and goodbye. Operator: Ladies and gentlemen, thank you for your attendance. This call has been concluded. You may disconnect.
Operator: Ladies and gentlemen, welcome to the Aquafil Group Q3 and 9 Months 2025 Results Conference Call. [Operator instructions] I will now hand the conference over to Giulia Rossi, Investor Relator. Please, Giulia, go ahead. Giulia Rossi: Thank you, operator. Good evening, everyone, and welcome to Aquafil investor conference call. Today, we will update you on company's 9 months 2025 results. Before going ahead, let me remind you that this presentation may contain certain statements that are neither reported financial results nor other historical information. Any forward-looking statements are based on Aquafil's current expectation about future events and are subject to risks and uncertainties that could cause results to differ from those expressed by the statement. For a discussion of these risks and uncertainties, you should review the disclaimer in the presentation we issued today. I will now leave the floor to Mr. Giulio Bonazzi, for his remarks. Giulio Bonazzi: Thank you, Giulia. Good evening to all, and thank you again for attending our video conference. The first 9 months of 2025 marked a solid performance compared to the previous year, especially in terms of profitability. The slight downturn in revenues is largely due to the adjustment of selling prices to the raw material trend, in addition to foreign currency translation effect. Volumes showed a positive trend compared to last year, with different dynamics at a geographical level. The United States reconfirmed the strong growth seen in the first half of the year related to the fibers for carpets. Europe and Asia Pacific observed a slower market, which was not fully supported by the expected volume increase in the fibers markets. The Engineering Plastics business continues its growth trajectory, delivering positive performance in terms of both volumes and margins. The cost rationalization project is progressing in line with expectations, generating the first savings already in 2025, with most of the effects becoming visible starting from 2026. The net result for the year was positive despite the impact of the extraordinary items concerning the various reorganization projects, which amounted to over EUR 8 million. The positive trend will consequently be even more pronounced next year. The change in net financial position is mainly attributable to planned strategic decisions. The inclusion of new European suppliers has temporarily led to a change in payment terms. Furthermore, the need for non-EU imports to adapt to the changing raw materials market has lengthened our cash cycle, which will be normalized in the coming periods. We look forward to next quarter with determination, focused on consolidating our position and maximizing operational efficiency. We are now welcoming your questions about our first 9 months results. Operator: [Operator instructions]. The first question is coming from Tommaso Nieddu from Kepler Cheuvreux. Tommaso Nieddu: The first one is on the update of the industrial plan. So volume expectations for both BCF and NTF have been revised from growth to being substantially stable, while polymers were cut from 45% to 15%. So could you elaborate on whether this softness in volumes is due to weaker appetite for your products? Or is it more market driven? The second question is on the timing of CapEx, which has been revised down by roughly EUR 12 million, EUR 13 million versus the previous guidance. So could you clarify what you now expect for the next year, and specifically, if this reduction is mainly deferral of the planned investment in 2025, or just a structural downsizing of the investment plan? Giulio Bonazzi: About volumes, as I have already said during my first presentation, we are seeing a very strong momentum in United States, while Europe and Asia are unfortunately not showing the growth we were expecting. This is not because of a lower appetite on our product -- it is exactly the contrary -- but it's a market situation, which unfortunately is not delivering what was, let's say, hoped at the end of last year, partially because of the uncertainty driven by the U.S. tariffs, partially because in Europe also a strong import coming from China that has deviated from exporting to United States and has started to be more active in our market for certain products. About the polymer, I always remember you that we have two business lines inside this, let's say, larger area of business. One, which is considered more a commodity, where volumes are not of great importance, which is so-called basic polymer business. And it consists in buying raw material, the monomer, caprolactam, transforming it into polymer and selling it to the market. This activity is mostly an activity which is driven by the idea of filling up capacity, utilizing our utilities at a level which is considered cost competitive and of course, trying to strike a contribution margin for covering our fixed cost. But the unit margins of this activity is not so important. On the contrary, the activity that we denominate engineering plastic, it's a different matter. This activity is the strategic activity that Aquafil is targeting and is having an intrinsic marginality, which is definitely much more interesting than the one of the basic polymer. In this second activity, we are also comprehending the activity of the sale of ECONYL polymer in the plastic or engineering plastic market. This second business line is behaving or has behaved in the first 9 months of the year very strongly in comparison with last year and also in comparison with our budget expectation. And this is the activity that we are considering, let's say, very important for our future growth in the European market in the coming years. In this activity, we will also try to push stronger and stronger the sales of our ECONYL polymer for the plastic applications. BCF and NTF, they have shown a very similar trajectory, but with very different moments during the course of the third quarter. We have seen a very slow July and August. On the contrary, the month of September has shown a very interesting demand and sales, and quantities have partially recovered from the downturn of July and August. In fact, the month of September also for NTF was higher than our expectation and close to our, let's say, financial plan that we have delivered to the market last year. Unfortunately, there is a big uncertainty, which is not helping us to give reliable forecast. But for sure, during the coming weeks, we will come out also with, let's say, our idea, not only obviously, for 2026, where we are now currently in our budget activity, but also for the year to come -- '27. About CapEx, as you remember, we have partially anticipated [Technical Difficulty] for the Chinese project, which was the most important project of our business plan, already at the end of '24. So this is partially revising our CapEx for 2025. And in 2025, if you remember, we have also communicated to the market that we were for the time being suspending and postponing the project of automation in our Italian operation because we were starting more interesting projects in the field of energy savings, which are about to come during 2026. In any case, our, let's say, future projections are bringing capital expenditures in a very cautious way. So we will certainly keep investing less than what we have, let's say, foreseen in the previous plan. Also because if volumes are not recovering, clearly, we need less capital expenditures for fulfilling our future demand. Operator: The next question is coming from Dave Storms from Stonegate. David Joseph Storms: The first one I wanted to ask about was in terms of margin defense. How much more room is there for the reorganization projects looking into 2026? My second question is -- thinking upstream, is there more work to be done in terms of further diversifying to European suppliers? And then will that also correlate to further change in payment terms and resetting the clock on cash generation? Giulio Bonazzi: Thank you, Dave, for the question. When we entered into the summer, we have seen that, unfortunately, the market was likely not to respond as strongly as we were forecasting. And so we went strongly to reconsider our organization in order to reconcile direct and indirect labor and all, let's say, the costs that are related to our activity. We have targeted a very strong cost reduction activity for the year '25 and '26, which is amounting to more or less EUR 20 million. Currently, we have already, let's say, agreed between layoff of personnel plus revision of purchasing contracts, a number which is exceeding the EUR 10 million, of course, without considering inflation of '25 and '26. So we are still seeing an inflation trend, in particular for the labor cost in certain areas of the world that will diminish the cost reduction activity that I have just spoken. Nevertheless, let's say, we are very confident that during 2026, between the completion of the reorganization project regarding our carpet collection and carpet recycling activity, and the completion of the energy saving project that is showing very interesting numbers during '26, we will strike the EUR 20 million of cost reduction. So there is still room as well as there is still further room in operational efficiency through, of course, even higher production yield and lower certain grade production in our operations, and we will continuously act in order to reach this better efficiency levels. About the upstream and the supplier side, we are experiencing, in our opinion, a structural modification of the market. We are in presence everywhere in the world, but in the United States with a strong importation of Chinese commodities and raw materials in our industry in the form of monomer, caprolactam, and nylon-6 polymer. The Chinese industry has set up an incredible capacity, and it is now after fulfilling completely the local demand, acting very strongly in exporting this product first to the neighborhood countries and they have already, let's say, closed the shutdown of the caprolactam plant in the nylon industry or the bulk of the nylon industry in Korea. Thailand will close its caprolactam plant in March of '27. And Japan has already announced that they will close another caprolactam plant in March -- Thailand in March of '26, and Japan in March of '27. We, of course, have suffered what the disappearance of our European suppliers. In fact, during '24, we have seen one producer in Poland shutting down during '23, one plant in Germany shutting down. During the first quarter of '25, another plant in Czech Republic shutting down. And at the end of October, an important strategic producer in Holland has announced that they are going to temporarily shut down production capacity. But they have not said in the local newspapers, the news was not temporary, but let's say, full shutdown of the operation in this important plant. And this is, of course, how can I say, an alarm that is sounding on our brain, our head. At the same time, in the month of October, BASF, which is the largest caprolactam producer in Europe, was in its planned turnaround. And when they return from the turnaround and they tried to start up the plant, gosh, they have got a technical problem and they entered in force majeure. So to cut the story short, 50% of capacity of our suppliers has disappeared or is currently not operating in Europe during the last 24 months and today. Is this going to be a contingent situation or a structural situation? Well, thanks God, Aquafil has the fortune of having a very flexible, let's say, operation. So we are capable of importing and using raw materials coming from overseas as well as, of course, we have our ECONYL production capacity that is producing at the very same month. So we have partially reoriented purchasing from different caprolactam suppliers in Europe. Partially, we have increased our import of caprolactam, particularly during this current financial year. And very likely, we will further increase during '26 as well as, of course, we are always careful to see how much ECONYL we can produce eventually. If it is becoming cheaper than the purchasing price, we could also produce ECONYL caprolactam instead of buying, if the marginal incremental cost is lower than the purchasing market price. So in terms of raw material availability, we are confident that we have solved our problem, which is not the case for all our competitors. Clearly, temporary, we have very aggressive, let's say, knock the door to other suppliers, and this has temporarily impacted our net financial position and our cash flow. But of course, with the time, we will be able to adjust also in terms of payment with our suppliers returning somewhat similar to what was before this problem that has strongly impacted our net financial position. Operator: The next question is coming from Gianluca Pediconi from MOMentum Alternative Investment. Gianluca Pediconi: I understand that the visibility is very poor. But I have a question which you can answer also in a qualitative way. There is a EUR 10 million shortfall in EBITDA compared to the previous guidance, and there is also a lower volume growth compared to what you were expecting at the beginning of the year. How the combination of these 2 facts is going to impact 2026? I mean do you expect that thanks to the cost saving program, you will be able to partially offset the lower enter into 2026, or this shortfall will not be recovered because the market conditions are actually worse than expected? Giulio Bonazzi: The cost reduction program will certainly positively impact our EBITDA during 2026, has already positively impacted our EBITDA during 2025. And so clearly, it will be showing even stronger effect during '26. Clearly, the final result will be, let's say, also impacted by the forecast on volumes. And this is now a little more challenging to forecast clearly. Now everybody is very prudent and tend to repeat, or being very close to the volumes that we have seen during 2025. We will see. As I said, and as you have wisely said, it is not easy now to make a forecast. This not only in our industry, but in every industry, if not in AI and in the military sector, at least for the time being. Hopefully, this will come soon. Let's say that we are seeing already the first orders of the new production programs like the maritime, the aviation, the transportation, and also the technical yarns for circular fishing nets and ropes and for the area rugs systems. We are seeing also positive impact on our actions of targeting new customers in the NTF. Of course, we must understand what is the net effect, considering also our traditional customers that are suffering the current crisis of the fashion industry and the sportswear industry. So we are all very positive about 2026. But mostly because our cost reduction program, which we have already, let's say, realized and the one which is under realization for next year are quite tangible and visible. And so this of course will permit us, while reducing cost also, to become more aggressive in the market for gaining market shares and orders instead of import of our, let's say, local competitors. Operator: [Operator Instructions]. There are no more questions at this time. So I hand the conference back to the speakers for any closing remarks. Giulio Bonazzi: Well, I want to thank you all for attending our 9 month financial results for 2025. And we will come back soon, hopefully, with good news for the next quarter and for the next financial year and the next business plan. Thank you all, and see you next time. Operator: Thank you for joining today's call. You may now disconnect.
Operator: Greetings, and welcome to ReposiTrak Fiscal First Quarter 2026 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Jeff Stanlis with FNK IR. Mr. Stanlis, you may begin, sir. Jeff Stanlis: Thank you, operator, and good afternoon, everyone. Thank you for joining us today for ReposiTrak's Fiscal First Quarter 2026 Earnings Call. Hosting the call today are Randy Fields, ReposiTrak's Chairman and CEO; and John Merrill, ReposiTrak's CFO. Before we begin, I would like to remind everyone that this call could contain forward-looking statements about ReposiTrak within the meaning of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements that are not subject to historical facts. Such forward-looking statements are based on current beliefs and expectations. ReposiTrak's remarks are subject to risks and uncertainties of which actual results may differ materially. Such risks are fully discussed in the company's filings with the Securities and Exchange Commission. The information set forth herein should be considered in light of such risks. ReposiTrak does not assume any obligation to update information contained in this conference call. Shortly after the market closed today, the company issued a press release overviewing the financial results that we will discuss on today's call. Investors can visit the Investor Relations section of the company's website at repositrak.com to access this press release. With all that said, I would now like to turn the call over to John Merrill. John, the call is yours. John Merrill: Thanks, Jeff, and good afternoon, everyone. Fiscal 2026 started as a continuation of the success of fiscal 2025. We continue to execute on our business plan. Once again, the proof is in the numbers. Our strategy remains the same: Grow annual recurring revenue between 10% to 20% and grow profitability even faster, generating more cash to bolster our balance sheet and support our continuation of returning capital to shareholders. Simultaneously, without exception, we take superb care of the customer because when they are successful, they buy more from us. Let's get to the numbers. First fiscal quarter revenue increased 10% from $5.4 million to $6 million. Total operating expenses for the quarter increased 3%. This is largely due to investment in RTN, including Wizard onboarding tools, increased cybersecurity costs, database license fees and other direct costs associated with development. SG&A costs were up 6% due to higher payroll costs associated with higher revenues, increased insurance premiums and increases in employee benefit costs. We grew total revenue at approximately twice the rate of SG&A expenses and at 3x the rate of total operating expense growth. Simultaneously, we delivered $356,000 of revenue per employee on an annualized basis, twice the rate of the 2024 statistic software industry average of $175,000 per employee. This is due to our lean nature, efficient operations and our ongoing use and expansion of automation. It also reflects our methodical spending decisions based on return on investment and not hope. At the same time, we will never trade growth at the expense of delivering less than exquisite customer care. Income from operations was up 28% to $1.9 million versus $1.5 million. GAAP net income was $1.8 million, up 13% versus $1.7 million last year. The conversion of income from operations to GAAP net income was muted during the quarter due to higher income taxes. As previously communicated, the company is at the end of its benefit period from utilized and expiring net operating losses for both federal and state income tax. Historically, the company had net operating losses to offset income for income tax purposes, resulting in an effective tax rate of approximately 4% to 6%. Many of those NOLs have been used up or expired given our 30-plus quarters in a row of continued GAAP profitability. While continuous and growing profitability is not a bad problem to have, our NOLs to offset income for tax purposes have largely run out. We're exploring tax credits and other initiatives to mitigate our effective tax rate. However, I believe it is fair to say our tax rate will be higher than 6% going forward. GAAP net income to common shareholders increased 13% to $1.8 million from $1.6 million. Earnings per share for the quarter was $0.10 per share basic and $0.09 per diluted. This is based on 18.2 million basic shares outstanding and 19.1 million shares diluted. This results in a year-over-year EPS growth of 13% when factoring in the accrual for higher income taxes. Cash from operations was $1.5 million, down from $1.9 million in the year ago quarter due to the conversion of deferred revenue to booked revenue. Total cash increased to $28.8 million from $28.6 million at June 30, and the company continues to have 0 bank debt. I remain confident that our continued financial performance will double the size of the company over the next several years. Historically, our business model results reflect double-digit revenue growth, 80-plus percent gross margins and roughly 30% net margins and strong cash generation. In accordance with our capital allocation strategy, the Board continues to target returning 50% of annual free cash flow to shareholders. Since inception, the result has been 3 increases in the cash dividend. At the same time, we continue to redeem the preferred stock and repurchase common shares without any bank debt. We are experiencing growth in all lines of business. While traditional sales of one service to solve one problem continues to grow, our cross-selling initiatives are delivering accelerated momentum. Again, our strategy has not changed. First and foremost, take exceptional care of the customer and execute perfectly. Next, grow recurring revenue, increase profitability, use cash to buy back common stock, redeem the preferred and do it with no bank debt. At the same time, return capital to shareholders through an increasing cash dividend. Finally, we have and will continue to build cash on the balance sheet, close to $29 million as of September 30, 2025. Turning to our capital allocation plan. Since inception of the capital allocation plan, the company has paid off over $6 million of bank debt. As of September 30, 2025, the company has 0 bank debt and 0 need for additional capital. We maintain that confidence given our financial health, which is precisely why we terminated our $12 million line of credit some quarters ago. Since inception, the company has redeemed approximately 572,000 shares of preferred stock at the stated redemption price of $10.70 per share for a total of $6.1 million. There remains 266,000 preferred shares to redeem for a total of $2.8 million. At the current rate of redemption of $750,000 a quarter, I maintain our goal to redeem all of the remaining preferred shares issued and outstanding on or before December of 2026. During the first quarter of fiscal 2026, the company also repurchased 8,715 common shares for a total of $150,000 or an average of $17.21 per share. The company has approximately $7.8 million remaining of the $21 million total common share buyback authorization as approved by the Board of Directors as of September 30, 2025. The company holds no treasury stock. Common shares repurchased and simultaneously canceled. Since inception, we have paid out over $5.7 million in cash dividends to shareholders and raised the common stock dividend now 3x by 10% each time since December of 2023. From time to time, the Board will evaluate our capital allocation strategy, making appropriate adjustments based on the approach most beneficial to all shareholders at that time. Our goal is to continue to return 50% of annual cash from operations to shareholders and putting the other half in the bank. In a moment, Randy will talk about our strategy to modernize the software code we utilize. This initiative aligns with our existing capital allocation strategy of taking half the cash from operations and put it in the bank with the other half allocated to redeem the preferred, buy back common shares, pay off debt, increase the dividend and consider M&A opportunities. In other words, if M&A opportunities we come across don't make financial sense or don't fit with our long-term development strategy, then let's build it, not buy it. We are exceptional at building things. The logical question is, what will it cost and is it a distraction? First, we do not anticipate meaningful increase in our cash expenses related to this initiative. Instead, we will reallocate annual capital expenditures, which may result in increases in depreciation and amortization down the road and modest short-term adjustments to our research and development costs, but we believe the overall impact is negligible. Meaning, as we have done in the past, we expect to reallocate existing developer resource to transition the core of our development environment to take advantage of newer capabilities, including expanding our use of artificial intelligence or AI and with little distraction. I will let Randy provide more color on the technical components. However, in my financial view, our strong cash generation, solid balance sheet and the continued growth from all lines of business means that we are well positioned to undertake this task. The time is right, and we believe this is an appropriate use of our capital and consistent with our capital allocation strategy. Once complete, we believe the advanced modernization of our platform will position ReposiTrak for the next phase of profitable growth. So all I have today. Thanks, everyone, for your time. At this point, I'll pass the call over to Randy. Randy? Randall Fields: Thanks, John. As John said, the results speak for themselves. We continue to grow revenue, expand our operating margins, net margins, earnings per share and generate substantial cash. This has been and is the plan. Over the past 2 years, our prime focus has been on traceability. The result is that we've established ReposiTrak and the ReposiTrak Traceability Network, or RTN, as we call it, as the dominant player in the industry. We have some key competitive advantages in the area. And I think over time, those advantages will create an even bigger moat between us and any alternatives that might arise. But what I find particularly exciting is how effectively we have leveraged our presence in traceability, both at the top and the bottom of the value chain to grow and leverage all of our lines of business with, frankly, minimal additional cost. We're not just a traceability company. We are a food safety company with a business model that should lead to even greater dominance in the future. The traceability solution for our customers and emerging industry food safety requirements have pushed us to develop and use much more automation. This automation focus in turn, is helping our entire business. As you know, we've been using automation and AI for years. So what we've done is to simply add more and more of those to our base capabilities. Traceability requires each step in the supply chain to provide clean and accurate data and then hand that data off to the next participant in the supply chain. But here's a stunning fact. Did you know that on average, the initial data we received from either retailers, suppliers down to greenhouses all the way down, up and down has a 70% error rate before we're involved. Think about that for a minute, garbage in, garbage out. This fact explains why we are ultimately so important to the industry. We take data, identify errors, clean up that 70% error rate, standardize it, automate its collection and transmission and make sure that each step in the value chain can read it, integrate it and send it upstream. The errors usually happen at the data handoff step. A label won't fix this. A label won't even identify an error. Our systems, however, identify and increasingly actually correct the errors automatically. This fact also explains why our focus is increasingly on smaller suppliers as these market participants have the most need for our error correction capabilities. This is good news and bad news. It means that the problem we solve in providing clean data to the traceability world is critical, but there's an awful lot of work to get it right. Smaller farmers, suppliers, et cetera, typically don't maintain robust data records or have sufficient IT support, frankly, frequently no support at all. So error detection and correction is an essential step in the process. Thankfully, error correction is ideally suited for the ReposiTrak capabilities. We're using proprietary automation and AI to both identify and correct the errors. We are seeing encouraging results from this automation initiative. And just as with our onboarding Wizard, we'll continuously improve it. In fact, the more we scale, the better our automation is getting. It's really in our DNA. The sheer number of individual touch points and data handoffs require significant automation, it's a form of these Wizards to efficiently process the inflow. We've talked about the Wizards for several quarters now. We continue to iterate and improve their functionality, but there's many other areas of our work that could use that kind of automation. As John mentioned, we're embarking on a multiyear initiative to update our development environment. Over the years, we've built a robust library of modules that perform certain tasks. These functional, if you will, building blocks can be reused in applications. Each of these functional building blocks, as we call them, has been tested and validated over time. Since we have only one development environment and platform, that results in a tremendous leverage in terms of our speed and economics. I'm not exaggerating when I say a typical year with thousands and thousands of users and an immense code base, we typically find no more than a handful of bugs. And we have nearly no downtime in our data centers. In fact, in the last 7 years, we've had less than 1 second, seriously, 1 second of unscheduled downtime in our data centers. As John mentioned, we're in the early stages of redoing our base systems, and it will be a very exciting project for us. There are newer foundational technologies creating an opportunity for us to modernize the back-end environment on which these building blocks have been built. Modernization will make it faster, easier and less expensive for us to develop and deploy new applications and functionality in the future. You might ask why are we undertaking this when our current systems work so well? Well, first, the available tools today are much better than they've ever been before, not just in terms of capabilities, but today's tools can be partially developed with AI, streamlining development time lines and costs and processes, and we can also then embed AI analytics at the core, creating some very exciting downstream capabilities. Secondly, this initiative will make us ultimately much more productive. Why? With what we know today, there are many points in the processing of information that we do where human intervention might be required or desirable, and we can mitigate that further with these new tools, further expanding our revenue per employee. Using advanced technologies, we believe we'll be able to scale revenues and support a larger number of customers without materially adding to our development team or support staff. And then third, we're going to be able to embed AI capabilities into our base level applications, expanding our automation capabilities even further than they are today. This is going to be a multiyear project, but we believe it has the potential to drive significant efficiencies and create incremental value for our customers and our shareholders and perhaps even open some new markets. As it relates to traceability, we now have the largest network of its kind. and we're continuing to add participants daily. The revenue from traceability is continuing to grow and a reputation in the industry is growing with it. We are increasingly being seen as the de facto choice to address the ever-changing food industries need for compliance, traceability and supply chain work. This is excellent for us. It significantly increases the addressable market, not just for traceability, but for frankly, everything that we're doing. While traceability is top of mind, our focus is on growing all our business lines. Meanwhile, we're generating an increased number of referrals. This is interesting and important. Think about it this way. A supplier benefits significantly from having its ingredient supplier in the ReposiTrak Traceability Network, the RTN, as this ensures that raw ingredients moving into its work stream are properly tracked. In a similar way, that supplier benefits from having its distributors and wholesalers upstream participate in the network. One common system between handoffs makes moving data upstream or downstream easier as the completed products move toward retail shelves. Long term, this is how we will evolve, and it certainly offers some incredible opportunities for us. As I mentioned earlier, we've built all of our major solutions, traceability, supply chain, compliance on a single platform. This is and has always been a key and intentional differentiator. The common platform creates incredible financial and operational efficiencies. If a customer is using the RTN, he's already done the hard work of connecting. Data has been collected, synchronized, scrubbed and mapped. As a result, expanding into other of our services, such as compliance or supply chain becomes relatively easy. Cross-selling, therefore, is an area of focus for us across all the revenue lines. In summary, we continue to do what we said we would do. We are delivering the growth and increased profitability we expected. In fact, once again, our profitability increased at about twice the pace of our revenue, demonstrating the inherent leverage we have methodically built into the business model. Even with the impact of taxes, common share purchases, preferred share redemptions, cash dividends, et cetera, we continue to grow our cash reserves, maintaining a fortress balance sheet with no debt. As encouraged as we are with the progress to date, we really just started to take advantage of the numerous opportunities we see in front of us. We are a key player. We're facilitating food safety within the world's largest industry, the U.S. food business. We're aligned with regulatory trends, retailer priorities and frankly, pain points in the whole supply chain by offering an affordable, effective and efficient set of solutions. We maintain an elegant, sustainably profitable business model, and I'm certainly excited for the future, we really have, as we say frequently, just begun. So with that, I'd now like to open the call for questions. Operator? Operator: [Operator Instructions] The first question comes from Thomas Forte with Maxim Group. Thomas Forte: Randy, John, congrats on the quarter. I'm going to ask 2 questions at once, but I'd appreciate your answers. So how, if at all, were you impacted by the government shutdown? That's my first question. And then my second question is, one quarter later, do you still believe your buy ingredient efforts are increasing your total addressable market? And if so, how could that impact your future operating results? Randall Fields: Let me take a stab at it. The shutdown does impact the industry that we're in, meaning the food industry because the FDA isn't working, lots of pieces, the SNAP part of it, a large amount of that SNAP money, as you probably have figured out, goes through the grocery stores because we're members of all the trade associations. There's an enormous amount of attention on what's happening to SNAP. So it does impact the industry. It's just one more of those things between tariffs, inflation, importation restrictions, blah, blah, blah that caused the industry to be a little bit more cautious than it might otherwise be. The impact isn't substantial, but it has some level of impact. In terms of the second question, we think it's foundational, meaning if you are in the place of having to create traceability records for your customers, you have to gather the information from your suppliers. And those suppliers have to gather information from their suppliers and so on and so forth. That's why the entire chain is, in fact, connected. It's also the opportunity because for us, and we talked a lot about the problem of errors, here's how it works. If you imagine a farm passing information to its packing house, growing some vegetable, passes on to the packing house incorrect data for traceability, that packing house is now going to pass it on to its distributor and then what's going to happen is it gets worse from there. The distributor passes it on to the next step and so on and so forth. So errors in the supply chain for traceability create an enormous problem in correcting errors. They don't show up in one place. They typically show up in 4, 5 or 6 places, and each of those is a different entity, a different business. So we believe, we could be wrong, but I don't think so, that years from now, the real problem in traceability is going to be data integrity. And it's really our sweet spot. We are extremely good at the detection and correction of data errors. John, do you want to add anything to that because it is a major part of our strategy going forward. John Merrill: No. I think I had that in my remarks, which was, I think, where we are financially, cash generation revenue, the time is now to do these things. It will not have -- well, it will have a negligible impact on our expenses. We merely will reallocate our capital CapEx spending. As we've announced before, we've already expanded in 2 data centers that's behind us. So as far as the financial wherewithal, now is the time to do that. I think it's the right decision. We evaluate M&A opportunities pretty much weekly. And I think we're in a good spot now to build it versus buy it because we're good at building things. That would be my response to where we're going in the next 2 years. Randall Fields: It substantially expands our market is the truth of it. But it does it because at each level, you want the participants ahead of you in the supply chain, meaning your suppliers to participate as well. So we're pretty excited about it, and it seems to be working so far. Operator: Thank you. At this time, I would like to turn the call back to Mr. Randy Fields for closing comments. Randall Fields: Thank you, operator. Thanks, everybody, for taking some time this afternoon to chat with us. You know how to reach us if you have additional questions, we're happy to make ourselves available. Thanks a lot. John Merrill: Thank you. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a great day.
Operator: Greetings, and welcome to The Oncology Institute Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Mark Hueppelsheuser. Thank you. You may begin. Mark Hueppelsheuser: The press release announcing The Oncology Institute's results for the third quarter of 2025 are available at the Investors section of the company's website, theoncologyinstitute.com. A replay of this call will also be available at the company's website after the conclusion of this call. Before we get started, I would like to remind you of the company's safe harbor language included within the company's press release for the third quarter of 2025. Management may make forward-looking statements, including guidance and underlying assumptions. Forward-looking statements are based on expectations that involve risks and uncertainties that could cause actual results to differ materially. For a further discussion of risks related to our business, see our filings with the SEC. This call will also discuss non-GAAP financial measures, such as adjusted EBITDA and free cash flow. Reconciliation of these non-GAAP measures to the most comparable GAAP measures are included in the earnings release furnished to the SEC and available on our website. Joining me on the call today are our CEO, Dan Virnich; and our CFO, Rob Carter. Following our prepared remarks, we'll open the call for your questions. With that, I'll turn the call over to Dan. Daniel Virnich: Thank you, Mark. Good afternoon, everyone, and thank you for joining our third quarter 2025 earnings call. During the third quarter, we were able to build on momentum from the first half of this year, delivering strong results across all areas of the business, including proving out MLR performance on our expanding delegated capitation model in Florida in addition to other significant pipeline wins, continuing to set records in our Pharmacy business and hitting a big milestone as we achieved adjusted EBITDA profitability for our first month as a public company in September. The combination of these factors provides us with the confidence required to increase our outlook for 2025. Our third quarter revenue of $137 million increased 23% compared to a year ago and was driven by 42% growth in our Pharmacy business as well as 13% year-over-year growth in our fee-for-service business which outperformed expectations. Adjusted EBITDA loss of $3.5 million in Q3 represents a $4.7 million improvement compared to the same quarter last year. We are reinforcing our expectation to achieve profitability in the fourth quarter and become free cash flow positive in 2026. Turning to our operations. During the quarter, we saw material progress on integration of care and MLR performance in the initial 40,000 delegated capitated lives with our partnership in Florida with Elevance Health. We are expanding this relationship with Elevance in Q4 through additional Medicare Advantage lives in Central Florida, which more than doubles our relationship with this payer in less than a year as measured by MA lives under capitation to TOI. Other key milestones achieved in Q3 were expansion of our MSO network in Florida to over 200 providers and growing as well as the official opening of our TOI Florida pharmacy location, which will serve network providers requiring delivery of Part B drugs as well as a fast and convenient option for Part B specialty medications for patients and providers alike. We view the Florida Pharmacy as incremental growth to our core Part D dispensing strategy as well as meaningful to our capitated MLR where we can provide Part B drugs to practice that deliver at our cost. On a full year basis, the new capitation contracts that we had signed across markets over the course of 2025 will contribute an estimated $19 million of full year revenue, a 29% increase to capitated revenue versus full year 2024. We expect margins on these contracts to continue to mature to target over the next few quarters as we see these new patients transition their care and pharmacy needs to our in-network providers and as we focus on adherence to our care pathways and increased script attachment. Last quarter, I mentioned that we were launching three AI enablement efforts in the coming months to make meaningful changes in performance and costs, specifically in revenue cycle management, prior authorization services, and our patient call center. As an example of how this is now benefiting patients and delivering OpEx efficiencies, we expect our offices and authorizations to be fully transitioned to our agentic AI model in Q4, which will take submission time from 18 minutes to approximately 5 seconds and deliver savings per auth of over 80%. This will expand to other authorization functions in 2026, and our early estimate of savings from authorization efficiencies alone could yield up to $2 million of operating expense efficiencies. This frees up hundreds of hours a week for our staff, which can be directed to patient care and yield a more efficient operating model for our organization. I also want to address an 8-K that we filed last week related to a cybersecurity incident at one of our key vendors that we utilize for billing and practice management. Due to the incident, we experienced a period where we were unable to bill for fee-for-service claims while we transition to a new platform. Thanks to the quick response of our team, we were able to pivot and manage schedules through our EHR and develop an interim billing process, minimizing the impact on our day-to-day operations. Importantly, despite this incident, our patient treatment plans remain intact, and we've seen no significant disruption to volume. From a timing perspective, this event will influence collections in late Q4 and early Q1 as we catch up on submitted claims, but we project ample cash on our balance sheet to manage through this and meet our operating goals for Q4 and 2026. Heading into the last few months of 2025, I'm excited about the momentum we have built over the last year. We continue to prove that our model is profitable across markets and have proven our ability to manage full delegation with health plan partners, which opens a massive new TAM of value-based contract growth in upcoming years. Now I'll turn the call over to Rob to review the financials. Rob? Rob Carter: Thanks, Dan, and good afternoon, everyone. I want to echo Dan's comments on what was another strong quarter for TOI. In the third quarter, we continued to build momentum across our fee-for-service and capitation businesses as well as dispensing while moving toward achieving adjusted EBITDA profitability. On the call today, I'll provide an overview of our different value-based care contract methodologies, review our third quarter results, touch on our balance sheet and liquidity, and conclude by reviewing our increased outlook for 2025. Regarding our primary value-based care contracting methods, I want to take a step back to provide an overview of each and describe some of the nuances to give you a better understanding of how they all flow through our P&L. Let me start with our narrow network capitation contracts, which represent approximately $50 million of revenue for us this year, where we act as the exclusive oncology provider for a risk-bearing organization, typically a risk-bearing primary care group or IPA that takes global risk for health plan partners. This is a product that we have used in California since 2007. In these arrangements, we are required to build clinics to achieve network adequacy but due to their exclusivity, we can optimize utilization, experience very low leakage and drive high Part D script attachments. From a financial standpoint, these narrow network capitation contracts typically produce medical loss ratios in the mid-60%. More recently, we've been focused on growing our delegated model, first in Florida, although we believe this will eventually become our most prominent model across all markets. In these arrangements, our partner is the health plan, and we manage the entire oncology benefit from designing the provider network to managing claims and preauthorizations, allowing real-time views into utilization trends and the ability to include non-employee providers in care. The provider network is a combination of our employed oncologists and clinics and are affiliated with contracted or MSO oncologists and the health plan partners network. Leveraging the health plan partners network allows us to more quickly scale and address the TAM in a more capital-effective manner. We can also steer complex patients to our clinics to more closely monitor their treatment. There are also ancillary opportunities to drive revenue and margin through engagement with our MSO partners in our pharmacy business, decentralized clinical trials and other long-term value creation initiatives. Our mature MLR in the delegated model is typically in the mid-80s, although it yields a higher gross profit dollar compared to our legacy network model because we're addressing a larger TAM and typically driving savings against higher benchmark utilization. Our results highlight the strength of our diversified capitation portfolio. Turning to financial performance. Total revenue for the third quarter was $136.6 million compared to $99.9 million in the prior year period, representing 36.7% year-over-year growth. Patient services revenue, which includes both capitation and fee-for-service arrangements totaled $60.2 million or 44.1% of total revenue and increased 21% year-over-year. Within this segment, fee-for-service contributed roughly 66% of total revenue and capitation accounted for 34%, reflecting our strong mix of recurring revenue and steady patient volumes. Patient service growth was driven by our capitated revenue, which increased 38.9% year-over-year. Pharmacy revenue was $75.9 million, representing 55.6% of total revenue and increased 57.4% year-over-year driven by higher prescription volumes and greater pharmacy attachment within our network, which is a key operational focus for us. Turning to gross profit. We reported $18.9 million for the quarter compared to $14.4 million in the third quarter of 2024. Gross margin was 13.9% versus 14.4% in the prior period. With our fee-for-service revenue exceeding expectations and following the input from our new Chief Administrative Officer, we elected out of an abundance of caution to begin reserving for potential future bad debt as fee-for-service revenue is recognized. As a onetime catch-up adjustment, we recorded a $1.8 million reserve against fee-for-service revenue in the third quarter. Normalized for this reserve, gross profit for the quarter would have been $20.7 million, with a gross margin of 15.2%. Looking ahead, we do not expect any material impact to fee-for-service revenue recognition on a go-forward basis. Patient services gross profit was $5.6 million, up from $4.6 million a year ago, representing a 21% year-over-year increase with a gross margin of 9.3%, consistent with the prior year period. Within patient services, capitation margin declined modestly year-over-year due to the ramp of new delegated contracts with typical MLRs beginning at low margins. In contrast, fee-for-service margin improved driven by higher provider utilization and continued improvement in Part D purchasing as we scale. Pharmacy gross profit totaled $12.8 million compared to $8.1 million in the third quarter of 2024, a 58% year-over-year increase driven by higher dispensing volumes. The gross margin of 16.9% remained essentially flat compared to prior year. Turning to SG&A. Excluding depreciation and amortization, it was $25.3 million or 18.5% of revenue compared to 26.7% of revenue, a reduction of approximately 820 basis points versus a year ago. The decrease reflects continued cost discipline operating leverage inherent in our model and technology efficiencies realized across our administrative and support functions. Adjusted EBITDA was negative $3.5 million, improving from negative $8.2 million in the third quarter of 2024. This is in the range of our prior guidance for Q3, and we remain on track to achieve adjusted EBITDA positivity in the fourth quarter, a key milestone as we exit 2025. As mentioned earlier, we saw our first adjusted EBITDA positive month in September. Turning to the balance sheet and cash flow. We ended the quarter with $27.7 million in cash and cash equivalents and $86 million of convertible debt outstanding maturing in 2027. Cash flow from operations was negative $27.8 million, improving 9.5% from prior year reflecting investments in drug inventory and working capital to support our scaling dispensing activity. I want to remind you that operating cash flow will fluctuate as we scale and become more active in drug buy-ins with our partners at the end of periods. During the quarter and immediately subsequent, we efficiently utilized our aftermarket equity program to generate growth capital consisting of $14.4 million of gross proceeds and $4.1 million of common shares. The transaction provided additional operational flexibility and allowed us to participate in end-of-quarter drug buy-ins, which contributed roughly $3 million to incremental profitability year-to-date. Finally, turning to guidance. We are raising our guidance ranges for the full year of 2025 because of the strength of our year-to-date financials and providing our initial outlook for the fourth quarter. For the full year revenue, we are raising outlook from $460 million to $480 million to a range of $495 million to $505 million. For adjusted EBITDA, we are raising the lower end of our range from our previous guidance of a loss of negative $17 million to negative $8 million to a range of a loss of negative $13 million to negative $11 million. This implies adjusted EBITDA between breakeven and positive $2 million for the fourth quarter. We remain focused on executing against our strategic plan and delivering continued progress towards sustained profitability. The third quarter reflected clear momentum in the business. Notably, September marked the first month of profitability in our business and demonstrated the inherent leverage in our model. With that, I'll turn the call over to Dan for closing remarks. Daniel Virnich: Thanks, Rob. In closing, in the third quarter, we saw very strong top line growth in all lines of our business and have now shown two full quarters of strong MLR performance on our delegated model which we believe will give confidence to investors in our ability to manage risk and lead the world in oncology value-based care. We also continue to set records in our Pharmacy business, and look forward to the next wave of growth as we expand our use cases over our rapidly growing network of non-employee providers. Finally, we saw some amazing results from integration at agentic AI into our central business office functions and are in a position to fully scale these efforts through the course of 2026 as we grow. I'm excited that we can increase our guidance on 2025 full year revenue and reaffirm Q4 adjusted EBITDA positivity. We look forward to continuing to update you in future earnings calls. Operator, at this point, let's open the call to questions. Operator: [Operator Instructions] First question comes from David Larsen with BTIG. David Larsen: Congratulations on a very good quarter. Rob, you mentioned an impact to the cost of goods, I think, for a reserve. Can you just describe what that was again, please? What was the amount? And was that unfavorable impact included in your reported adjusted EBITDA for the quarter? Rob Carter: Dave, yes. So it was a $1.8 million reserve to fee-for-service revenue, right? So that flows directly to adjusted EBITDA and was included in the adjusted EBITDA figures that we gave. And so we normalized for that in the script to show what sort of the normalized performance was, which was obviously significantly better than what we reported. David Larsen: So it would have been obviously not a $3.5 million loss. It would have been close to... Rob Carter: Yes, $1.7 million. David Larsen: $1.7 million. Okay. Great. And then -- and I think you said that you had your first month of profitability in September. I guess, how sustainable do you think that is? Was there anything unusual in September? And it sounds like you're on track for at least breakeven EBITDA in the fourth quarter? Rob Carter: Yes. No, that's exactly right. So we're fully expecting breakeven for the quarter. Obviously, we haven't put out full year guidance for next year yet. But as we've talked about before, are expecting full year positive adjusted EBITDA in 2026. David Larsen: And then will you have a positive free cash flow in 4Q of '25 as well? Rob Carter: In 4Q, we will, yes. Yes. In terms of free cash flow, it will be positive in Q4. Not from a run rate basis, we expect free cash flow positivity, mid-2026. David Larsen: Okay. Great. And then can you talk a little bit about the delegated contract? And I think you mentioned like a very good MLR actually. Just any more color there? What was that MLR? I think I heard mid-60%. Is that correct? Just any more thoughts there would be very helpful. Daniel Virnich: Yes. So thanks, Dave. So we will be filing an updated investor deck after hours today, which will kind of go into great detail on the MLRs between different contract types. But yes, the rough way to think about it is kind of an overall MLR for TOI across all markets and contract types in the high 60s with the delegated model being slightly higher. So typically, we would be kind of mid-70s and then the narrow network model being slightly better. And again, that's due the differences in engaging with non-employee providers in the delegated model but a much greater TAM in that model. So we expect long term, both the growth rate and total gross profit contribution to that model to be much greater. David Larsen: Okay. And then there's a lot of, we'll call them, generalist health care investors. Watching the managed care plans just come under enormous pressure because of pressure on their MLRs. Can you maybe just remind us why you're able to manage trends so much better than some of these other like MA plans and the value that you bring to them? Daniel Virnich: Yes, absolutely. I think really, the core of our value proposition is the fact that we have a very unique care delivery model because we've got a backbone of employee clinics and providers with a wrap network of nonemployee providers in select markets where we work with health plans which just gives us a much greater degree of control over consistency of care and NCCN guideline adherence and prescribing patterns across all encounter types. So that gives us a differential ability to drive better value for patients and payers. David Larsen: Okay. And then just one more, and I'll hop in the queue. The dispensing revenue was fantastic, up almost 60% year-over-year. Was there anything unusual driving that? Rob Carter: Not unusual. As we've talked about before, we've done quite a bit of work around minimizing leakage in our script attachment. And so I think that we've gotten that to a level that, quite frankly, we weren't expecting to get to. So it's been fantastic to see. I think there's a little bit of juice to be squeezed from here, but I wouldn't expect that level of growth, at least sequentially into Q4. Operator: Next question Yuan Zhi with B. Riley Securities. Yuan Zhi: Congratulations on a strong top line. Maybe just a follow-up there on the reserve for the receivables. What was the past performance of that reserve or receivables? Why suddenly we need to change the reserve for this revenue part, our receivable parts? Rob Carter: Yuan, thanks for the question. So this is fairly standard across provider practices. We're at a point now with fee-for-service revenue being as substantial as it is, that we thought was prudent. And so we don't think of this as something that's sort of out of the ordinary. We think of this as something that we should be doing proactively and we're in a position to do so. And so we made that choice to take that reserve in Q3. Yuan Zhi: Got it. And then what will be the impact for 4Q? And whether if we can recover most of the receivables from this reserve? Rob Carter: Yes. No impact to Q4 specifically. We want to keep it on the books obviously, out of conservatism. So no impact forecasted at this point. Yuan Zhi: Got it. So the other question I have is on the payer part. So payers are changing their behavior. Cigna is eliminating drug rebates. And then CMS in the process of removing many or most prior authorization, how will that impact your business? Great to see your AI initiative already in the prior authorization? I know this is a big question. So perhaps you can break it down into smaller pieces. Daniel Virnich: Yes, I would say that at the highest level, I mean, the overall sort of macro landscape when it comes to drugs, which were obviously firmly believers in is to lower the cost of drugs for patients and to simplify the drug reimbursement process. As it relates to specific changes that we see coming through the IRA and some of the other policies are being enacted, those -- as we talked about on prior earnings calls, we believe are still net positive for The Oncology Institute because they're, again, overall lowering the unit cost of drugs for the most part and enhancing accessibility. So the health plan specific changes like the Cigna prior auth change, again, that wouldn't really impact us that much directly. If anything, we think it would help accelerate kind of the care delivery process, but sort of at a very high level, we think the general trend towards lower-cost drugs and then also kind of easing the kind of reimbursement model is net favorable for TOI. Yuan Zhi: Got it. Now we have a very high medical utilization across the board in the industry, especially in oncology. Can you please comment on the current PMPM trend on your new contracts? And how does that compare to versus, let's say, 1 year ago? And then for your existing contract are you able to get the same level of upward adjustment based on this current utilization trends? Rob Carter: Yes. So as we've talked about before, PMPM is dependent on where the population is located. Ultimately, the benchmark spend of that market. And so if we're doing deals in markets like Florida, the MA PMPM there is going to be significantly higher than it is in California. The majority of our contracts at this point have PMPM escalators in them. And so it's contractual. We'll take an increase every year going forward contract by contract. Daniel Virnich: And I would just also add to that, as we called out in our earnings call, we've had phenomenal success growing our capitated business. We expect that growth rate to continue, if not accelerate, as you go forward. So the key question on many investors' minds is as you're growing so quickly, how is the MLR trending? And again, we've got a pretty crisp update in our new investor deck, but it's been basically stable despite the rapid growth, which is what we want to see. Yuan Zhi: Yes. Got it. Maybe my last question, Novartis reported strong adoption of Pluvicto in their community setting. I'm curious about your observation so far in California clinics? And any plans for you to offer that in your Florida clinics? Daniel Virnich: Yes, absolutely. We achieved certification on Pluvicto a little bit after this time last year. We have seen increased request patients for the therapy. And generally, I would say, strong adoption from a payer and risk-bearing medical group perspective. Given the fact that we can do it in the community as opposed to an acute care setting. At this point, the use cases are still fairly limited. So it's not massive numbers when you look at our overall encounters versus the number of patients that have enrolled in Pluvicto, but we expect as the use cases to expand over time, kind of the community-based ability to provide radiopharmaceuticals will be a distinct advantage for us. Operator: Next question Robert LeBoyer with NOBLE Capital Markets. Robert LeBoyer: Congratulations on a great quarter. You had mentioned that it's probably too early to give guidance for 2026. There were some things that you mentioned in terms of free cash flow. But in terms of what's in the pipeline for new contracts, new covered lives, margin goals or ballpark figures for revenue or anything else. Is there anything that you can tell us along those lines in addition to what's been mentioned already? Rob Carter: Yes. Robert. Yes, we are looking at top line growth that mirrors what we've seen in the last couple of years, so 20% plus, subtle improvement to gross margin and an SG&A percent of revenue that stays relatively flat. Robert LeBoyer: Okay. Great. And anything in terms of pipeline prospects or addition to the covered lives or territories? Daniel Virnich: Yes. Robert, I would say at a very high level, again, we continue to see ramp and interest in our model. I think we're working with, obviously, very high-quality payers like Elevance, and we think that our relationships are going to continue to grow with plans across markets as we kind of prove our ability to provide great care and high-quality care in the community. So no slowdown at this point in terms of what we're seeing in terms of opportunities to do value-based contracting across markets. Operator: Next question, David Larsen with BTIG. David Larsen: Just a quick follow-up. In terms of like the new contracts that you won that are being deployed in 2025, just any thoughts on how much of that has been recognized. I think the annualized value was like $50 million. And of that, like how much has been deployed? And just any thoughts on what we could expect for '26? Rob Carter: Yes. So I think Dan mentioned this in the script. So deals that have launched this year have generated about $19 million in revenue. That's got a good $10 million to $15 million left in it. So that's again deals signed within the year not contemplating deals that are in the pipeline that are going to be launching over the course of the next 3 months and into 2026. David Larsen: Congrats on a good quarter. Operator: Next question, Yuan Zhi with B. Riley Securities. Yuan Zhi: Maybe a quick follow-up here. So now we have this ACA debate, as the ACA change debate, we are not sure whether we will get credit for that. How will that impact your patient population or the broad business? Daniel Virnich: Sorry, Yuan. Can you clarify a bit more like what aspects of the ACA specifically? Yuan Zhi: So for the ACA, if the patient cannot get their credit or cannot pay the insurance themselves, how will that impact your patient population? Daniel Virnich: Yes. I don't think there will be much impact in our model broadly speaking. I think most of the patients that would qualify under that new rule are already in capitated arrangements to us. So they would have access regardless. I don't really foresee it as a major shift in volume or sort of patient mix for TOI at this point. Operator: Thank you. This does conclude today's teleconference. You may disconnect your lines at this time, and thank you for your participation.
Operator: Hello, and welcome to the BioStem Technologies Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the conference over to Trip Taylor, Investor Relations. You may begin. Philip Taylor: Good afternoon, everyone, and thank you for joining our conference call to discuss BioStem's Third Quarter 2025 financial results and corporate highlights. Leading the call today will be Jason Matuszewski, the company's Chairman and Chief Executive Officer; and Brandon Poe, the company's Chief Financial Officer. Before we begin, I'd like to remind everyone that our remarks may contain forward-looking statements based on management's current expectations. These involve inherent risks and uncertainties that could cause actual results to differ materially from those indicated. These risks are described in our filings with the OTC markets. You are cautioned not to place undue reliance on forward-looking statements, which speak only as of the date made. The company undertakes no obligation to update them unless required by law. Today's financial results are unaudited, and results may change pending the completion of our financial statement independent audit, including an audit of our restated financial statements, which were released earlier today. Finally, this call also includes references to non-GAAP financial measures. A reconciliation to comparable GAAP measures and related information can be found in our earnings press release posted on the Investor Relations section of BioStem's website. With that, I'd now like to turn the call over to Jason Matuszewski. Jason Matuszewski: Good afternoon, everyone, and thank you for joining us to discuss BioStem Technologies' third quarter results. This has been a busy and productive quarter for the company, and we're eager to share an update on the meaningful progress we've made across the business. I'd also like to welcome our CFO, Brandon Poe, who we introduced last quarter and will walk through our restated historical financials and Q3 financial results in a few minutes. This quarter once again demonstrated the resilience of our business model, our disciplined operations and the strength of our team as we continue to execute through the headwinds of an evolving reimbursement landscape. While reported revenue was down modestly from Q2 under the current ASP Plus 6 reimbursement dynamics, we sold 40% more product on a volume basis. This highlights the strength of the underlying demand for our clinically validated advanced wound care products and BioStem's ability to grow market share even in a difficult pricing environment. BioStem remains well positioned to lead through this transition and to emerge even stronger. We've now delivered 7 consecutive quarters of positive adjusted EBITDA, maintained industry-leading gross margins and continue to reinforce the financial, operational and clinical foundation that will support our long-term growth strategy. The recent restatement of our historical financials will now be subject to audit in accordance with U.S. GAAP as we prepare for our planned NASDAQ uplisting. Post restatement and pre-uplisting, BioStem is emerging as one of the few profitable small-cap medical technology companies with differentiated IP and a proven clinical foundation. The setup into 2026 is asymmetrically positive. At the same time, we've taken important steps to position the company for continued market share gains, including advancing our BioREtain clinical program, preparing to drive adoption as CMS payment reform takes effect in 2026, expanding patient access through new payers and sites of care such as Medicaid and the VA and continuing to evaluate strategic acquisitions that diversify our product portfolio and commercial reach. Before we do a deeper dive into our business updates, I want to address our restated financial statements, and then Brandon will provide more color. At first glance, our restated financials look substantially different than what we have provided in prior quarters. However, the only change that has been made is regarding the geography of our bona fide service fees paid to distribution partner, Venture Medical. The net result on the income statement is a reduction in top line revenue and an equivalent reduction in sales and marketing expense, which results in no change to EBITDA or net income. The resilience of our business model is clear as our gross margins and efficient cost structure enable continued profitability and demonstrate the potential to generate substantial cash flow as we scale the business. Restating the financials is an important milestone, representing progress on the path to our uplisting. Now I'll turn the call over to our CFO, Brandon Poe, to walk through the restated financials and our third quarter results in detail. Brandon Poe: Thanks, Jason, and good afternoon, everyone. It's great to be able to announce our financial results for my first time and share our progress over the last quarter. I will start with some more details with regard to our restatement, which I will remind you is subject to audit. In September, we had filed a non-reliance disclosure with regard to our quarterly financial statements from Q1 2024 through Q2 2025 as well as the annual financial statements for 2023 and 2024. This disclosure was the result of internal and external discussions regarding the appropriate accounting treatment for our agreement with Venture Medical. Earlier today, we issued restated unaudited financial statements covering all of the time periods I just described. The full details are in the press release, but I want to briefly explain what changed. Reiterating Jason's comments, the primary changes made in the restated financial statements relate to how we account for and report the bona fide service fees associated with our arrangement with Venture Medical, which impacts both the income statement and the balance sheet. Previously, these fees were recorded as a sales and marketing expense on the income statement. In the restated financials and going forward beginning in Q3 2025, those fees are now classified as a contra revenue, meaning they're reported as an offset to gross revenue to arrive at net revenue. This change reduces reported revenue and reduces sales and marketing expense by the same amount. It's important to note that there is no impact on EBITDA, net income or cash flow. However, because revenue is now reported net, percentage-based metrics such as gross margin and EBITDA margin will look slightly different. On the balance sheet, the amounts owed by BioStem to Venture related to bona fide service fees payable were previously shown as a separate current liability. In the restated financials, those amounts are now netted against accounts receivable due from venture, effectively offsetting the amounts owed between the 2 companies. Again, this is purely a presentation change for revenue, current assets and current liabilities. It does not affect EBITDA, net income or cash flow for any period. One further note, while we had previously considered potential restatement changes related to the timing of revenue recognition that is moving from a sell-in accounting model to a sell-through model, we have determined that the sell-in model is the appropriate accounting treatment. The restatement adjustments made were primarily related to the treatment of bona fide service fees, as I just described, plus some minor cleanup of balance sheet classifications. For clarity, you may hear us use the terms sell-in and sell to interchangeably. They both indicate revenue recognition upon sale to venture. The restatement was the culmination of a comprehensive review of the applicable U.S. GAAP revenue recognition guidance in consultation with our external technical accounting advisers. We determined that the restated accounting treatment of the company's arrangement with Venture Medical is appropriate and consistent with authoritative accounting standards. Again, this conclusion remains subject to completion of the audit to be conducted by our newly appointed independent auditors, KPMG. We anticipate that KPMG will complete the independent audits for fiscal years 2024 and 2025 by the end of Q1 2026, which will be an important step as we move toward our planned NASDAQ uplisting. I will now turn to our Q3 results. All the numbers referenced on this call prior to Q3 have been restated. Revenue in the quarter totaled $10.5 million compared to $11 million in Q2 of this year and $18.4 million in Q3 of 2024. The sequential decrease is primarily due to continued competition from higher-priced products under the current ASP Plus 6 reimbursement model and a lower selling price to Venture, partially offset by higher product volumes. Gross profit for the quarter was $9.3 million, representing gross margin of 88.5% compared to $10.3 million and 93.8% in the prior period and $14.2 million and 77% in Q3 of 2024. The sequential decline in gross margin was a result of a mix shift towards our products that carry a licensing fee and a lower selling price to venture. Operating expenses for Q3 totaled $7.8 million compared to $10.2 million in the prior period and $4.9 million in Q3 of 2024. The sequential decrease in operating expenses was mainly driven by lower stock-based compensation and disciplined G&A spending aligned to our revenue performance, including lower outside services spend. Moving to the balance sheet. Our cash balance was $27.2 million at the end of Q3 compared to $30.8 million at the end of Q2. The decline is largely due to the purchase of land to support our future headquarters in the Research Park at Florida Atlantic University as well as the timing of collections from Venture Medical. Despite the Q3 headwinds, this is our seventh consecutive quarter of positive adjusted EBITDA, highlighting the strength of our business model. Our gross margins remain among the best in the industry, and our healthy balance sheet gives us flexibility to continue to execute on our growth initiatives. With that, I'll turn it back to Jason. Jason Matuszewski: Thanks, Brandon. Let's talk about recent business progress and where we're headed. Our strategy continues to focus on 3 core priorities: advancing high-quality clinical evidence, scaling operational excellence and driving disciplined commercial growth. In late October, we presented top line results from our randomized controlled trial of BioREtain-processed amnion chorion or BR-AC published in the International Journal of Tissue Repair. This prospective multicenter RCT compared BioREtain plus standard of care versus standard of care alone in patients with hard-to-heal diabetic foot ulcers at 11 U.S. clinical sites. The study enrolled 71 patients after a 2-week run-in to confirm chronic non-healing wounds. By week 12, 36.7% of BioREtain-treated patients achieved complete wound closure compared to 17.1% in the control group, more than doubling the healing rate with a 97% probability of superiority and no product-related safety events. Of particular note in this study, the protocol established the highest standards of rigor in the wound care sector. Specifically, patients whose wounds reduced in size by more than 30% during the run-in period did not proceed to treatment, ensuring that only patients with hard-to-heal wounds were evaluated. Furthermore, patients' wounds had to remain closed for 4 weeks after initial closure to achieve what is known as lasting closure. We presented the top line results in early Q4 and expect to publish the full data set, including secondary endpoints and detailed statistical analysis as we move into Q1 next year. More importantly, we completed the top line analysis in time to submit to CMS for consideration and inclusion as a covered product when the new LCD is implemented. In fact, we were the only placental tissue manufacturer to submit a Level 1 randomized controlled trial by the November 1 deadline. Following that submission, we are actively reaching out to all 7 MACs to submit our data directly to each regional contractor. These results corroborate what we've seen in real-world practice. BioREtain process placental allografts preserve the tissue's native structure and bioactivity, translating to faster, more durable wound closure. Additionally, we are making great progress with our BR-AC venous leg ulcer study enrolling subjects ahead of schedule. We remain on track to share results in early '26, and we believe these findings will further validate BioREtain's platform and drive broader physician adoption and commercial growth. Operationally, our vertically integrated facility continues to deliver industry-leading margins and high-quality performance. In late Q3, the FDA performed a follow-up and routine inspection of our facility, confirming remedial actions arising from the prior 2023 inspection as well as a comprehensive review of our current 361 products and quality management system. The FDA found no nonconformance observations or comments in a clean inspection. We expect to receive an establishment inspection report showing no action indicated, which would officially close out the 2023 inspection. That result reflects the strength of our quality system, our operational discipline and our readiness to scale production to meet future demand. On the commercial front, we continue to navigate a competitive market shaped by the ASP plus 6% reimbursement system, where providers are reimbursed for the average selling price of the products plus 6%. This structure incentivizes the use of higher ASP products, and we've seen a continued increase in pricing, which has created a more competitive environment over the year. Our VENDAJE AC product with an ASP of $2,385 was well positioned on the pricing list in the first quarter of this year. However, during 2025, the gap between VENDAJE AC and the highest priced product has grown from $1,000 to over $3,400 per square centimeter, with the top-priced product climbing to $5,893 per square centimeter for the fourth quarter, a substantial increase in just a few quarters. Many manufacturers and marketers of placental products have taken advantage of the payment system, which continues to drive up the cost of care. This price escalation underscores why CMS is implementing a flat rate reimbursement model. Beginning January 1, 2026, all skin substitutes will be reimbursed at roughly $127 per square centimeter across the physician office, hospital outpatient and ambulatory surgery center sites of care. We have long been an advocate for reform of the Medicare reimbursement system for skin substitutes. And while the flat rate of $127 was lower than we initially advocated, we have been preparing for a wide range of outcomes to set the company up for success. In CMS' transition to the flat rate next year, the pricing gap limiting our growth under ASP Plus 6 will be eliminated. We are pleased that focus will shift away from products with inflated prices and instead clinical performance, operational efficiency and commercial reach will drive continued market adoption. BioStem is exceptionally positioned to capture share in what we expect to be a very dynamic market going into next year. To prepare for this new landscape, we've expanded our commercial strategy with Venture Medical and plan to address additional markets through new distribution channels as we continue to evolve our commercial structure. To start, Venture has prioritized large mobile wound care providers with broad geographic reach, groups that prefer long-term contracts and stable supply partnerships, which drove an increase in volume from the previous quarter. Even in today's ASP-driven market, our products continue to reach more patients. In Q3, we saw a 40% increase in volume over Q2. As Brandon noted earlier, even though volumes increased, revenue remained flat from Q2 to Q3 due to a pricing initiative introduced in late Q2, where we lowered prices to our distribution partner, Venture Medical. This allowed Venture to be competitive with higher ASP products and drive demand. We estimate that the total physician office market for skin substitutes is 6 million to 7 million square centimeters annually. Venture Medical's network represents less than 1% of market volume, a small share today, but a massive opportunity ahead. Beyond our core mobile wound care segment and as we look to the future, we're expanding into new markets. We will leverage our existing commercial partnership to deliver our products to more customers. One example is our partnership with a Service-Disabled Veteran-Owned Small Business to serve the Department of Veteran Affairs beginning in Q4. The VA is one of the largest and fastest-growing wound care markets in the country with over 170 medical centers, 1,100 outpatient sites and nearly 9 million veterans enrolled. Chronic wounds affect roughly 10% to 15% of veterans, largely due to diabetes and vascular disease. Placental tissue utilization in the VA has grown over 50% in 5 years and the Advanced Wound Care segment in the VA exceeds $200 million annually. Placental-derived allografts represent $63 million of that total and continues to grow at 9.5% annually. Importantly, this growth has occurred in a setting that is reimbursement agnostic. The federal supply schedule ensures that the VA procures products with most favored nation pricing, so this is a site of care where manufacturers are competing on the basis of clinical efficacy where BioStem excels. Through our Service-Disabled Veteran-Owned Small Business partnership, BioStem gains preferred procurement access to the VA network. Our new product for this channel, American Amnion, will launch at the Desert Foot Conference in early December. In Q3, we entered and have begun to see early traction in the Medicaid market, another meaningful growth opportunity. We've achieved initial success with Medi-Cal coverage and early wins in Texas Medicaid. These large programs validate our clinical value proposition and reimbursement strategy. More than 70 million Americans are enrolled in Medicaid and approximately 10% of those are over the age of 65. Expanding into this underserved segment will be an important long-term driver as state programs adopt evidence-based coverage. We're now working to broaden access across additional state programs in 2026, reaching more patients and driving sustainable growth beyond Medicare. In addition to organic expansion, we are evaluating strategic and accretive acquisition opportunities to broaden our product offering and more importantly, in this new reimbursement environment to focus on expanding to additional sites of service, including the ambulatory surgery centers and hospital settings. Our goal is to expand access to BioStem's technology while maintaining the same financial discipline and operational efficiency that define our company. These initiatives, preparing for reimbursement reform, expanding into VA and Medicaid channels and exploring strategic M&A are part of our large effort to scale BioStem for sustainable growth. To support our next phase, we took an important step this quarter by purchasing land at the Research Park at Florida Atlantic University in Boca Raton for our future headquarters and manufacturing expansion. This land purchase will provide future capacity to continue to scale, access to strong life sciences talent pipeline and proximity to a leading research institution to enable collaboration and accelerate innovation. This investment underscores our commitment to building BioStem for the long term with the operational scale, infrastructure and talent to meet growing demand and deliver on our mission. Finally, on the uplisting, as we shared in October, our Audit Committee appointed KPMG as BioStem's new independent registered public accounting firm, replacing Marcum. We're grateful for Marcum's support over the past 2 years and excited to engage with KPMG, a firm with a dedicated life sciences team and deep experience supporting companies as they prepare for national exchange listings. As part of that transition, we withdrew our previously filed Form 10, and we'll move forward with audits of our 2024 and 2025 financial statements. Once those audits are completed, we will reengage in the process with the SEC for our planned NASDAQ uplisting. We know this process has taken longer than we hoped, but it remains a top priority for this management team. A national exchange listing will enhance our visibility, improve shareholder liquidity and strengthen our ability to attract and retain top-tier talent. Before we open the line for questions, I want to take a moment to recognize the incredible work of our team. First, to our quality and manufacturing team, thank you for your exceptional focus and execution in our successful FDA inspection this quarter with no nonconformances, observations or comments. That result is a direct reflection of the discipline, expertise and commitment to excellence across our organization. Second, to our clinical operations and research teams, thank you for the outstanding effort in the publication of the BioREtain randomized controlled trial results ahead of the November 1 CMS submission deadline. Your work continues to strengthen the evidence base that validates our technology and drives improved patient access to this important technology. And finally, to our providers, partners and most importantly, our shareholders. Thank you for your continued trust, collaboration and belief in our mission. Your support enables us to keep investing in innovation, expanding access to care and building long-term value for all stakeholders. I'm incredibly proud of what this team continues to accomplish and deeply grateful for everyone's contribution to BioStem's success. Operator, you can now open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Bruce Jackson with Benchmark. Bruce Jackson: So if you're going to be pursuing the hospital market more aggressively, what are the steps you have to take to do that? And where are you right now, for example, in the hiring process and trying to build a sales force? Jason Matuszewski: Bruce, thanks for the question. We are actively working towards looking to achieve GPO coverage for our products. Now that we have this initial top line results and the data for the DFU study, and we're also actively working to get top line results for the VLU study near term, leveraging that clinical data to then communicate and work with several of the major GPO contractors to get on to those GPO agreements and then actively commercialize the product into the hospitals and ambulatory center -- ASC setting. So as you mentioned, that also requires us to scale our commercial efforts inorganically or organically, and those are some of the efforts that we'll be looking to focus on as we close out this year and into next year. Bruce Jackson: Okay. And then for my follow-up, I guess I'd be curious to know, do you have an anticipated time line for the uplist? Jason Matuszewski: I'll give that one to Brandon. Brandon Poe: Yes, we do. So as we mentioned on the call, the building block toward the uplist is completing the financial audits with KPMG. We anticipate those to be done by the end of Q1 of 2026. And shortly thereafter, we'll reengage with the SEC. So I don't have an exact time line of when we'll get that completed, but I would call it, we're targeting sometime in the middle of 2026. Operator: Your next question comes from the line of Eric Schlanger with D2C. Eric Schlanger: Jason, congratulations on the milestones you've achieved and the platform that you're building going forward. My question is in regard to BioREtain and assuming a good result there, which looks like you're on track for. Can you talk a little bit about the total addressable market that will open up to you and the possibilities around the share that you can garner from that market? Jason Matuszewski: No, it's a great question. As we -- as I kind of alluded to Bruce's question around access to GPO agreements in some of these other areas where we can start commercializing the product. Once we get the final results out for the DFU study and we get some top line results out for the VLU study, I think that gives us a lot of opportunity to look at focusing into the hospital outpatient setting as well as ambulatory surgery center setting. As I alluded to on the call earlier, with this change in reimbursement as far as payment methodology going to this flat rate of about $127, if you all remember, currently, the reimbursement methodology and payment methodology is roughly about $1,700 as a capitated payment rate in the hospital outpatient as well as a capitated rate of roughly around $800 in the ambulatory surgery center. So those rates are going to now be uncapped, meaning reimbursement for products in those 2 sites of service, which happen to be in the hospital, can be reimbursed at $127, roughly about $127 a square centimeter. So if you use a 10 or 15 or 20 square centimeter graft, something like large venous leg ulcers or large burns, there's an opportunity to not have to really compress pricing in those areas. And so I think this really opens up a large TAM for those areas. And leading with clinical evidence and some of the superiority of the current top line results, I think that allows us to look at some of the market share that's currently out there north of $300 million to $350 million from some of our competitors and look at capitalizing on that. Operator: [Operator Instructions] Your next question comes from the line of Kevin Bennett, private investor. Kevin Bennett: Yes. Congratulations on the quarter again there. It keeps getting better. I was curious about the investors here taking care of the investors that have stayed with you for a while. As far as like share buyback, I mean, with the stock price dropping from $28 to $3, $4, $5, you would think that the company, if it has any money, they could spend would be issue a share buyback to kind of protect investors plus future investment for the company. Is the share buyback an issue? Or can we do that? Brandon Poe: Yes. Jason, I can step in there. So Kevin, thanks for the question. Appreciate it. Thanks for being a shareholder. I would say we're exploring all options as we sort of think about that space, like how we should spend our cash. Obviously, we're at $27 million of cash at the end of the quarter. We're looking at all options. And I would say we've discussed a buyback as an option. It's something we're thinking about, at least overall in general and relative to maybe other options. So it is something that we could do and we're considering, but we don't have any plans at the moment to take that on. Operator: This concludes the question-and-answer session, and we will conclude today's conference call. We thank you for joining. You may now disconnect.