加载中...
共找到 39,813 条相关资讯
Operator: Greetings, and welcome to the HeartBeam Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. Before we begin the formal presentation, I would like to remind everyone that statements made on the call and webcast may include predictions, estimates and other information that might be considered forward-looking. While these forward-looking statements represent our current judgment on what the future holds, they are subject to risk and uncertainties that could cause actual results to differ materially. You are cautioned not to place undue reliance on these forward-looking statements, which reflect our opinions only as of the date of this presentation. Please keep in mind that we're not obligating ourselves to revise or publicly release the results of any revision to these forward-looking statements in light of new information or future events. Throughout today's discussion, we will attempt to present some important factors relating to our business that may affect our predictions. You should also review our most recent Form 10-K and Form 10-Q for a more complete discussion of these factors and other risk, particularly under the heading Risk Factors. A press release detailing these results crossed the wire this afternoon and is available in the Investor Relations section of our company's website, heartbeam.com. Your host today, Rob Eno, Chief Executive Officer; and Tim Cruickshank, Chief Financial Officer will present results of operations for the third quarter ended September 30, 2025. And at this time, I would like to turn the call over to HeartBeam's Chief Executive Officer, Mr. Rob Eno. Please go ahead. Robert Eno: Thank you, operator. The topics we'll cover in today's call are listed on the slide. We'll start with an overview of the HeartBeam system and the product vision. We'll touch on our recently achieved and upcoming milestones and highlight the upcoming commercial launch strategy, followed by financial results, and we'll end with a Q&A. Before we dive into updates since our last call in August, I wanted to remind everyone about our vision and our initial product, the HeartBeam System. HeartBeam is dedicated to developing groundbreaking ECG technology for patients to use at home to allow them to feel confident about their heart health. HeartBeam is developing the first ever portable cable-free ECG that can synthesize a 12-Lead ECG. A unique IP-protected approach captures the heart's electrical signals in 3 dimensions or non-coplanar directions and synthesizes the signals into a 12-Lead ECG. The system is designed to be easy to carry and easy for patients to use at the time of symptom onset anywhere, anytime. The technology is supported by an on-demand cardiologist who can interpret the clinical-grade ECG and triage patients appropriately to ensure timely care. As a reminder, in December 2024, we received our foundational FDA 510(k) clearance. This was for the system as a whole for arrhythmia assessment, the credit card signal collection device, the patient application, a physician portal and signal quality algorithms. This major milestone validated our unique approach. In January, we submitted our second FDA 510(k) application. This is for the software that synthesizes a 12-Lead ECG from our 3D signals for arrhythmia assessment. We're engaging in the final steps with the FDA related to our 510(k) submission and continue to anticipate clearance by the end of the year. This clearance will be a major inflection point for HeartBeam as these 2 clearances together will form the product with which we'll start our initial commercialization. We believe that the HeartBeam system can be part of one of the most important trends in medicine today, the movement of clinical-grade devices from the hospital and clinic to becoming a part of daily life at home. Connected clinical-grade technologies are changing the healthcare landscape by expanding access, reducing healthcare costs and enabling personalized medicine. From continuous glucose monitors to home blood pressure cuffs, these technologies empower patients and provide physicians with insights that lead to identifying conditions earlier and monitoring trends over time. Heart disease is the leading cause of death worldwide and most cardiac events, whether arrhythmias or ischemia happen outside of the medical setting. Diagnosing these events is crucial and ECGs are the most common cardiac test, yet most at-home options have been limited to downgraded versions unable to provide a clinical-grade 12-Lead output. HeartBeam's credit card size system will change that by delivering a synthesized 12-Lead ECG into the patient's hands, starting with the arrhythmia assessment application. The ability to get clinical-grade insights when they need it, wherever they are, will enable patients to get more timely care. When a patient has symptoms and uses the HeartBeam system, they first open the smartphone application, which guides the patient through the process of taking a recording. Once the recording is complete, it's sent to the HeartBeam Cloud where it's processed and immediately sent to a cardiologist for review. Last month, we announced an agreement with HeartNexus, a group of U.S.-based board-certified cardiologists with coverage across the United States. When a patient has arrhythmia symptoms and takes a recording with the HeartBeam system, a HeartNexus cardiologist will send an ECG interpretation back to the patient. This agreement is a key part of the product and one of the final pieces needed for our commercial launch, which is anticipated to be early next year after our FDA clearance for the 12-week synthesis software for arrhythmia assessment, which we anticipate receiving before the end of the year. Next, I'd like to remind you about the larger ecosystem we're building around the HeartBeam system. This ecosystem dramatically increases the overall value of the system and will drive deeper adoption. As I mentioned, at the core of the ecosystem is the HeartBeam system itself, the first and only credit card-sized cable-free device that synthesizes a 12-Lead ECG. This is complemented by an on-demand U.S.-based board-certified cardiologist available to review ECG readings 24/7. Our market research confirms that this concept resonates strongly with both physicians and patients who have indicated a willingness to pay a premium for this functionality. Building around this foundation, we're creating an ecosystem to maximize the benefits of our technology and encourage stronger engagement among patients. Key components of our ecosystem include automated arrhythmia assessments for use during routine recordings, integration with wearables that trigger patients to take readings when their wearable produces inconclusive results or if worrisome underlying parameters are detected. Community features with tailored educational content and AI wellness features such as ECG-based cardiac age insights. We'll also be able to provide long-term trending of the HeartBeam synthesized 12-Lead ECGs, allowing the patient's physician to get longitudinal insights, including the trending of specific ECG parameters over time. Creating this ecosystem will add unique insights and actionable data for both patients and physicians that are unavailable elsewhere and add to the premium offering of HeartBeam. The team has done an exceptional job of achieving the milestones we said we're going to achieve over the past year. The highlights are listed here. Last December, we received our foundational FDA clearance for the HeartBeam system for arrhythmia assessment. In January, we submitted our second FDA 510(k) application for the 12-Lead ECG synthesis software for arrhythmia assessment. We successfully met the clinical endpoints in the VALID-ECG pivotal study, which is the basis for this 12-Lead synthesis submission. The study demonstrated a 93.4% overall diagnostic agreement between the HeartBeam synthesized 12-Lead ECG and a standard 12-Lead ECG in the assessment of arrhythmia. These results were presented at the Heart Rhythm Society meeting in April. We also started our early access program, or beta testing, which has provided us with valuable feedback, allowing us to enhance the onboarding, training and overall user experience. And finally, as I mentioned, we signed the agreement with HeartNexus to service the cardiology reader service. We have a number of important milestones in the coming weeks and months. We continue to anticipate the FDA 510(k) clearance for the 12-Lead ECG synthesis software for arrhythmia assessment this quarter. In 2026, we expect to start enrollment on additional clinical trials on the clinical and cost-effectiveness benefits of HeartBeam. The focus of our clinical studies to date has been a comparison with standard 12-Lead ECGs. These planned post-market studies will be important for adoption and ultimately for payment and reimbursement. We're also preparing for commercialization. We anticipate hiring the Chief Commercial Officer and other key members on the commercial team upon FDA clearance. We also anticipate initial commercial agreements with concierge and preventive cardiology practices. While our focus remains squarely on working with the FDA toward the 12-Lead ECG synthesis clearance and preparing for commercial launch, we achieved several milestones that help us toward our longer-term goals. Important data were presented at 2 recent scientific meetings. First, at the HRX Live meeting in September, an abstract was presented on the capabilities of the HeartBeam AI algorithm in classifying arrhythmias. And earlier this week at the American Heart Association Scientific Sessions, data were presented on the promise of the HeartBeam 3D3-lead technology for the detection of coronary occlusions. These studies add to the growing body of clinical evidence. They demonstrate the progress and promise of our AI efforts, as well as the potential to apply the HeartBeam technology to heart attack detection. IP continues to be at the core of the company's efforts. With 3 newly issued patents, we now have 24 issued patents worldwide. In addition, HeartBeam was recognized as a global IP and technology leader in portable cardiac diagnostics and a report from the IP firm PatentVest, with Heartbeam ranking #2 worldwide in the 12-Lead ECG innovation out of 243 companies analyzed. As we prepare for our initial launch, we've established clear strategic pillars. First, we're creating a new product category, and the overarching focus of our efforts will be establishing the HeartBeam system as the first personal cable-free synthesized 12-Lead ECG. We believe that the HeartBeam system is clearly differentiated from other offerings by combining an easy-to-use device that can produce a 12-Lead ECG with an on-demand cardiologist who can provide ECG assessment. Second, we're preparing a controlled market entry. We anticipate starting with a small number of prominent concierge and preventive cardiology practices, both independent practices and those associated with major healthcare systems. These practices will provide an opportunity to get early real-world feedback and will serve as reference accounts. Beyond that, our strategy is to focus initially on 2 U.S. geographic regions to prove the business model, followed by expansion of this model into additional regions. We plan to establish a small direct sales and marketing organization in the U.S. with sales reps and implementation specialists focused on a geographic region. We're exploring multiple options that will allow efficient expansion, including distribution partners and chains of concierge practices. A final key element of the strategy is demonstrating the value of the HeartBeam system to patients and practices, driving retention of our users over time. We'll focus on the patient experience and provider engagement to drive recurring use of the system as part of our strategy of developing a subscription model. And now I'll turn it over to Tim to discuss our financial. Timothy Cruickshank: Great. Thank you, Rob. I'll quickly go through some of the key financial data for the quarter ended September 30, 2025. We continue to be focused on our cash management as we maintain strong financial discipline aligned to achieving milestones. When we look at the quarter, net loss for the period was $5.3 million or $0.15 per basic and diluted share, consistent with the prior quarter and also in line with our expectations and analyst consensus. Of that net loss, I'll note a significant portion was related to noncash expenses such as stock-based compensation. So the result in net cash used in operating activities was under $3.2 million. That's an 8% decrease quarter-over-quarter, and it builds on the 23% decrease we had from the prior quarter. So we're pleased with our ability to balance competing priorities we have over the recent quarters by both maintaining a capital-efficient organization and also judiciously timing the key investments we need into the commercial readiness activities. So you're seeing evidence of this as we continue to reduce our cash outflow. And we'll continue to take this approach as we derisk the business and while we're building the proof points we need prior to accelerating investments into commercial traction and scale. Cash and cash equivalents at September 30 were $1.9 million. Obviously, with a tight balance sheet, we're monitoring things closely, but we're confident in our approach of strategically funding the company consistent with how we've outlined it in the past. We've got optionality in place both in the vehicles and the sources of funding, and we have confidence in our ability to achieve near-term milestones, including the FDA clearance, which we believe will be a major inflection point for the company. We remain committed to minimizing dilution for our shareholders so that they're rewarded for their time and commitment to our company and our vision. Our Board, management team and key insiders are more excited than ever about what lies ahead with commercialization on the near-term horizon. We believe very strongly in the value we're creating here at HeartBeam and getting this critical technology into the hands of clinicians and patients is going to be a really rewarding step for us here in the very near future. With that, Rob, I'll turn the call back over to you for closing summary. Robert Eno: Thanks so much, Tim. So to summarize, this is an incredibly exciting time for HeartBeam. We continue to engage in positive and productive discussions with the FDA and our anticipated time line for the clearance by year-end remains intact. Combined with the foundational FDA clearance received in December 2024, this clearance will mark a pivotal milestone for the company to initiate our commercial launch. We've made significant progress with our commercial readiness plans in anticipation of the FDA clearance. Of note, we announced a partnership with HeartNexus to provide on-demand board-certified cardiologist reviews of synthesized 12-week ECGs for arrhythmia assessment. These 2 elements, an ECG that's capable of synthesizing a 12-week ECG and a cardiologist on call 24/7 able to provide ECG assessments to the patient, they're the core of our system. While our focus is squarely on the interactions with the FDA and preparing for the commercial launch, we continue to prepare for the company's future. We added to the body of clinical evidence with 2 recent presentations at scientific meetings, one on AI and the other on heart attack detection. In addition, we added 3 newly issued patents, bringing the total to 24, and we're pleased to be recognized for our IP, ranking #2 worldwide in 12-Lead ECG innovation out of 243 companies analyzed. HeartBeam is at a very exciting inflection point, and we'll continue to work with our partners to strategically finance the company in a manner that adds to and creates shareholder value. We believe that HeartBeam's technology is poised to be a fundamental advance in cardiac care. Our team has worked incredibly hard on the development and validation of the technology, and we're excited to be nearing the next stage in the company's growth, introducing the groundbreaking technology of HeartBeam for patients to use at home to allow them to feel confident about their heart health. We thank you all for attending, and now I would like to open it up to Q&A. Operator? Operator: [Operator Instructions] And our first question for today will come from Kyle Bauser with ROTH Capital Partners. Kyle Bauser: Maybe we could start off on the discussions you've had with the FDA. Can you talk a little bit more about sort of what you're working on and responses and factors that you'll want to address ahead of a clearance? Robert Eno: Yes. I can't really comment much more than that. I guess what I'd reiterate is that, we continue to categorize our interactions with FDA as productive. The normal process of FDA questions and us answering them, and we're continuing to anticipate the FDA clearance before the end of the year. But from the last clearance in this one, we haven't gone into more details of the characterization of the questions. I'll just leave it there. Kyle Bauser: Fair enough. Good to know the time line is still on track before year-end. As you gear up for the commercial launch, you sort of talked about it a little bit, Rob. Are you still kind of focused on a couple of territories initially to gather feedback and intel ahead of a broader launch to, say, 5 to 10 territories? Robert Eno: That's exactly right. Yes. I think the nuance on that is the very first accounts, we believe, will be prominent accounts, some really exciting ones that we're talking to. Some of them are independent. Some of them are associated with major healthcare institutions. And in a sense, those can be reference accounts, those can be our pilot accounts. And then beyond that, we start to go deep into the 2 regions to start. And then exactly, as you say, we want to prove the model there to show everything around our sales model, that the expected coverage, we think. And as we get that, we can expand to a larger number of regions exactly. Kyle Bauser: Got it. Got it. And how should we be thinking about pricing regarding sort of symptomatic versus asymptomatic readings? I know you're able to charge a premium potentially for symptomatic readings and great to know about the recent partnership with HeartNexus, but just trying to understand how you're thinking through that. Now it's a little bit early. Robert Eno: Yes, sure. No, yes, it is a little bit early, but what we've identified so far are a few things. We're planning on a subscription offering. The initial thought is that the -- it will be upfront a 1-year subscription and that 1-year subscription gives you the device itself and access to a certain number of cardiology reads. And so we'll work on the details of that pricing level and how many reads. What we're building into the system, not exactly at the initial launch, but we're building in is the automated assessment, algorithmic assessment. So the vision that we're building toward there as that comes in, that requires an FDA clearance. As that comes in will be one pathway for routine recordings, which the patient will have an unlimited number of routine recordings because we want them to practice and to build up their data. And then when they're having symptoms, they go down this symptomatic pathway, and that is what uses one of their credits and activates the reader service. Kyle Bauser: That's helpful. Got it. And maybe one more. As you prepare for the commercial launch, how are you managing inventory levels? And how does your sort of manufacturing capabilities look at this point? Robert Eno: Great. Tim, do you want to take that one? Timothy Cruickshank: Sure. Yes. Thank you so much. Yes, we've got a great partner for manufacturing, U.S.-based contract manufacturer. What's great about the latest round of our device that we have for commercialization, it's all off-the-shelf componentry, nothing customized. So from a product line or from a build line standpoint, we've got the capabilities built out. So it's all about -- for us, in the near term, when you talk about launch over the first year plus, the building of devices isn't a concern to us, line of sight to part, no real long lead time parts, obviously, dynamic situation, so monitoring that. But given they're all off-the-shelf components, we've got a number of different areas we can source -- known areas we can source parts from. So really confident in the manufacturing side, and it's all about determining the demand and building into it. And then the real area of focus is on workflow and really making sure we nail the onboarding piece. So, I would say that is more of a focal area of getting it right than the manufacturing side. Operator: Your next question will come from Bill Sutherland with the Benchmark Company. William Sutherland: Wanted to just maybe find out a little more color on the 2 initial market launches that you had planned. Maybe a sense of the available TAM that you're going to be looking at there? And just a couple of assumptions to help us think about the numbers that we might just begin to think about for next year and maybe the following year. Robert Eno: Tim, would you take that? Timothy Cruickshank: Yes, sure. No problem at all. Yes. So, the first 2 geographies, we've said before, most likely we have Southern California and South Florida, 2 really strong territories with a lot of great accounts and inbound demand there. The way we sort of look at it is the territory size, if you think about an average, the initial territories we're going after, 75,000 patients roughly in those -- that we would be targeting in those regions. You can do a really concentrated rollout in terms of the number of accounts that you really need to talk to, to start to get some good penetration there. And we plan on going to, as Rob indicated, individual practices and some of the institutions that have concierge practices associated with them to nail workflow, really make sure that the patient experience is right. But then within those territories, as we build that out, there are a number of concierge chains that we'll be able to look at to help accelerate adoption and growth. So, it's all about getting it right in the first couple of quarters, so keeping expectations modest in terms of what that means from a revenue and user perspective. But as we get to the second half of '26 is when we start to see some of the real penetration into those geographies and as we head to '27, when those concierge chains likely come on. Obviously, we'll be working to accelerate that faster, but I think that those 3 waves are how we're looking at it. William Sutherland: Okay. And how does the -- how do you sort of target the marketing because it's partly, I guess, involving the cardiologist themselves, but then some direct to the patient. I know that this is an out-of-pocket type of expense. Robert Eno: Sure. Yes, I'll take that one. Right, so it's -- to start with, it's obviously for, it's a prescription device, and we're targeting these practices, concierge and preventive cardiology practices. These are practices that have these patients and are comfortable having discussions about items that are patient pay. And so, the first stage in our process is talking to those accounts, explaining the product, explaining that -- how it can help their practice. And then we plan to work with the practice to support them in outreach to their patients. So, to really be the practice talking to their patients about the technology and potentially adopting it, and we can certainly give the materials and support them through that. So, in a sense, working with and through the practices. We think over time, part of the way of thinking about this region by region is there are other ways to move beyond the patients that are already at these concierge practices. We think that can happen through a referral business where patients can refer patients who can either go join the concierge practice or get access to the technology through other clinicians and potentially some direct-to-consumer marketing. We obviously think we to be as efficient as possible, those first couple of approaches of working with the concierge practice in the preventive cardiology practice and adding referral is probably the most efficient, but that's part of what we learn as we do the early stages of these commercialization in these couple of regions. William Sutherland: Great. And then I'm wondering, you are establishing this as a new category. But when you go into the practices, are they using something at this point that gets at some of the functionality of HeartBeam and that you'll have to take the position? Robert Eno: Yes. There's -- it's going to vary. Some of them don't have anything like this. Some of them may be using the existing one lead ECGs that are out there from various companies. We don't think there's anything that is commonly used that can synthesize the 12-Lead, but also has the reader service tied to it. So, it's a mix. Some might be new and some might be offering things already or encouraging their patients to use things already. The feedback has been very positive in our market research with patients and in market research to practices and in direct conversations with practices that even despite that current landscape, they see incremental value in this offering and are excited about taking advantage of it. Operator: We will now turn for any webcast questions. Unknown Executive: Our first webcast question asks, you ended Q3 with $2 million in cash. What are your plans for additional funding? Timothy Cruickshank: Sure. Happy to take that one. Yes. Yes, I can't share specifics on plans, but I'm happy to add as much color as I can from my prepared remarks. I think I mentioned the optionality we have in place, both vehicles and sources of funding and just reiterating our confidence in our ability to achieve these near-term milestones right ahead of us. So, we believe with those -- the inflection point we're going to see will provide us an opportunity to strategically look at the balance sheet. We're balancing 2 important priorities. One, heavily -- we care deeply about minimizing dilution for our existing shareholders. We've got -- but having a proper balance sheet to capitalize the opportunity ahead of us is obviously important. And I believe it will unlock the stock by having a proper capital markets profile in place, one that this company deserves based on the opportunity ahead of us. So, we are strategically balancing those priorities, and we believe we're getting close to having the opportunity to make both of them a reality for the company. But we're going to stay steadfast on the path to get there. Unknown Executive: And one of the webcast questioner asks, if there are any contracts that are currently sitting on your front burner? Robert Eno: Yes. I'd characterize that as we've had -- we're having great discussions with sites that we think could be the early users of the system. And there are some large practices. There are some very prominent practices, and we'll be -- so we had really good discussions there. And post FDA clearance and early commercialization, we're looking forward to being able to announce more of those. Unknown Executive: And do you have any expectations for the level of sales next year following the commencement of commercialization? Timothy Cruickshank: Yes, happy to take that, Rob, if you want. Robert Eno: Please. Timothy Cruickshank: So, I haven't provided guidance, but again, let me provide as much color as I can in context to help answer it. I think, first, HeartBeam is becoming a commercial entity for the first time in 2026. So, we're going to be hyper focused on user experience, getting things right for physicians and patients. That means we may need to go slow in the very early days of the first quarter of launch, the first half of the year. But we anticipate, as I was describing to Bill, the second half of the year is where sales and user base begins to increase in a more meaningful way. Obviously, I mean, based on some of the inbound demand we've gotten, we believe we can begin -- we can get things going faster than that. But just knowing that we are becoming commercial for the first time, we're trying -- when we model this out, we try to be pragmatic in doing so. We've got newly issued coverage on the company. And so, the active research reports that are out there do a really good job of capturing how we model things out early days. As we get the data points we need to expand into additional territories, we're going to be looking for ways to accelerate growth and have some inbounds demand on how that's going to happen. But based on the conversations we've had with concierge and preventative cardiology accounts to date, we're very excited by what could be meaningful demand. Unknown Executive: And once you obtain FDA clearance for arrhythmia detection, what is your planned pathway for pursuing an additional indication for myocardial infarction detection? Robert Eno: Yes, it's a great question. We've addressed that previously, but I'll go through it again here. We have announced that we already have started initial discussions with FDA. So yes, we are planning to pursue that. We believe it's the same product and an expanded indication. We have 2 proof-of-concept studies that have been done and presented of the similarity between our output and that of a standard 12-Lead in patients with ischemia heart attacks. We have -- what we'll do is we want to talk to FDA to understand more about the regulatory path and more about the clinical trial needs. So, the expectation is that we will need to do a clinical study in one way or another that will show the performance of our system in comparison to a 12-Lead in that population. We have ideas of that and looking forward to talking more with FDA about what they're looking for and how to implement on those plans. Unknown Executive: And will you work exclusively with HeartNexus? Or are you planning to -- or open to expanding your network to other telcardiology firms? Robert Eno: Yes. We -- first of all, we think HeartNexus is great and excited to partner with them. And the real -- the strategy is, we want this to be something that patients can use if they have symptoms 24/7. And we want to make sure that we don't put the prescribing physician necessarily on the front line if they don't want to be 24/7. We are getting feedback from some accounts that they might want to take on that themselves. So, we're working on a version of the product offering to specific accounts in which the account themselves will take on the capability to do the reading. Beyond that, we don't have any plans right now to go beyond HeartNexus. We think their ability to scale with us is there, but have this option if accounts are interested in doing that function of the offering themselves. Timothy Cruickshank: Yes. I would just add, I think what's great about HeartNexus at our stage of launch is they have coverage across the U.S. So, for a company of ours where we're going to be learning what our usage rates are, they have the ability to go quickly with us early days. And I think it's just an amazing group over at HeartNexus, and they want -- they believe in this technology and want what's best. So, they are open to exploring all sorts of avenues with us as we really start to scale. So, I think both of us are open to expanding as we really learn what demand looks like. Robert Eno: That's great context. They really are a great partner. Unknown Executive: And regarding your commercial launch, are you looking or considering partnering with other companies as strategic partners to increase production or operational capabilities in any way? Robert Eno: Yes, sorry, let me just, yes, absolutely. So, I'm just trying to make sure I can answer the question in the best way. We're definitely looking at all different types of strategic partners. We've talked a lot about that one of the areas we want to focus on is how do we scale most efficiently. And there's a couple of ways we believe we can scale efficiently, and that's with distribution partners or focusing on concierge and preventive cardiology chains. So, that from a sales and distribution perspective is one of the key things we're going to look into as we prove the concept and start to progress. We are open to and have had ongoing discussions with strategic partners in all kinds of different areas and are certainly open to exploring collaborations. We've talked about collaborations in the past on the AI algorithm side and the data side and even potential partners that could be co-development partners for some of the technologies that are in our pipeline. Unknown Executive: Thank you. And that concludes our webcast questions. Operator: I would like to turn the call back over to Mr. Eno for his closing remarks. Please go ahead. Robert Eno: Great. Thank you, operator. I want to thank each one of you for joining the earnings conference call today. We look forward to continuing to update you on our ongoing progress and growth. If we were unable to answer any of your questions today, please reach out to our IR firm, MZ Group, who would be more than happy to assist. Thank you. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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.
Operator: Good day, and welcome to the Legacy Education, Inc. First Quarter Fiscal Year 2026 Earnings Conference Call. Today's call is being recorded and broadcast live. It will also be archived on the Legacy Education website for future reference. To kick off the call, I will turn it over to Nicole Joseph, Senior Vice President of Legacy Education, Inc. Nicole, please go ahead. Nicole Joseph: Thank you, and hello, everyone. Legacy Education has issued a news release reporting its financial results and corporate developments for the first quarter fiscal year ended September 30, 2025. The release is available in the Investor Relations section of our corporate website at legacyed.com. With us today on the call are LeeAnn Rohmann, Chief Executive Officer; and Brandon Pope, Chief Financial Officer. On today's earnings call, statements made by Legacy's management regarding the company's business, which are not historical facts, may be forward-looking statements as identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate and continue as well as similar expressions are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance. The company cautions you that these statements reflect current expectations about the company's future performance or events and are subject to a number of uncertainties, risks and other influences, many of which are beyond the company's control. That may influence the accuracy of the statements and projection upon which the statements are based. Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on the information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All forward-looking statements are qualified in their entirety by this cautionary statement, and Legacy undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events or otherwise after the date thereof. I will now hand the call over to LeeAnn Rohmann, CEO of Legacy Education. LeeAnn to you. LeeAnn Rohmann: Thank you, Nicole, and good afternoon, everyone. Welcome to Legacy Education's First Quarter Fiscal Year 2026 Earnings Call. I'm joined today by our Chief Financial Officer, Brandon Pope. We are pleased to report a strong start to fiscal 2026, building on the transformative momentum of 2025, a year of record enrollment, robust financial performance and strategic progress that solidified our leadership in the high-demand allied health education sector. Our growth is accelerating, driven by the nation's urgent need for skilled health care professionals and our proven ability to deliver job-ready graduates through innovative hands-on programs with chronic shortages in fields like nursing, medical assisting, ultrasound technology, cardiac sonography and MRI, where hospitals and clinics are actively seeking talent. Legacy Education is at the forefront, capitalizing on this structural demand to expand our reach and impact. These are not just careers. They are essential roles that require human empathy, precision and expertise, qualities we instill in every student, preparing them to meet the needs of a resilient and growing sector. Our Q1 results reflect disciplined execution and the effectiveness of our growth strategy. We delivered meaningful year-over-year improvements across key metrics, revenue, enrollment, EBITDA and EPS while making targeted investments to expand capacity and program offerings. This performance confirms that we are starting the fiscal year on track, beating our internal projections and leading with strong momentum and a clear path to sustained value creation. Let me walk you through the highlights. Revenue grew 38.5% to $19.4 million, driven by a 31.6% increase in new student starts to 1,117 and a 37.7% rise in ending student population to 3,495. This is an all-time high and a clear sign of strong demand and the success of our enrollment initiatives. Importantly, this growth represents our 13th consecutive quarter of double-digit revenue growth, and it does not yet even include the contributions from the 4 new programs that we have recently received approvals. Adjusted EBITDA rose 9.6% to $3.1 million, with a margin of 15.9%. The year-over-year decline in margin reflects deliberate front-loaded investments in growth and nonrecurring charges, which Brandon will detail shortly. Net income increased 4.6% to $2.2 million. Diluted EPS was $0.16 compared to $0.21 last year. This was impacted by the increase in diluted shares from 9.8 million to 13.9 million, following our September '24 IPO. On a normalized share count, EPS would have been $0.22, demonstrating the underlying strength of our earnings. Now let's talk about accounts receivable. In Q4 of fiscal '25, we recorded a $700,000 reserve for graduated borrowers who had fallen behind on payments, a conservative, transparent action to strengthen our balance sheet without writing off the receivable. We committed to you a quarterly write-off and reserve analysis to improve visibility and control. We delivered on that commitment. This quarter, we recorded $178,000 reserve. That's 0.9% of revenue, exactly in line with our expectations. We've enhanced our collections process through executing a partnership with well-known collection company, Williams & Fudge. We are doing weekly AR reviews and a proactive borrower outreach and support to our graduates exactly what we've been doing with our active students in-house. The delinquency trends are stabilizing. We are seeing the improvement in the collections and AR is under control with no anticipated surprises. This disciplined approach reflects our commitment to financial rigor and long-term shareholder value. Moving to our taxes. Last year's tax estimates created some variability. But this quarter, we reported an effective tax rate of 26.5%, better than the annual estimated 29.4%. This benefit was a result that was tied to employee stock option exercises following our IPO, an advantage that we anticipated and now realize. Taxes are stable, they're predictable and aligned with our projections, reflecting enhanced financial governance and operational maturity. As I move to margins, this quarter reflects strategic investment for long-term growth. Adjusted EBITDA margin was 15.9%, down from 20.1% a year ago. This reflects strategic front-loaded investments and 4 new programs approved and not yet launched this quarter. Three of those are degree programs and one is a certificate in high-demand fields, including MRI, cardiac sonography, surgical technology and sterile processing. These investments included curriculum development and regulatory approvals, faculty recruitment for hiring subject matter experts from the field, simulation lab and facility upgrades, surgical tech and sterile processing lab, ADN continued program enhancements and new finance leadership. That's our new controller. Annual investments and professional development and training for our exceptional instructional leadership and staff to conduct quality education training that gets our graduates jobs. Educational service expenses rose 53.2% of revenue from 51.4%. This is a reflection of our unwavering commitment to clinical quality and hands-on training. G&A expenses increased to 31.5% from 28.3%, but this is driven by professional services increase, audit, legal, compliance and M&A-related valuations, all nonreoccurring. Brandon will share more detail when I turn it over to him. Additionally, under G&A expenses, marketing investment up 15% to $1.6 million. This is driving enrollment and the launch of the new programs. And then additionally, in G&A, D&O insurance and bad debt reserves tied to the revenue growth, and it's all in line with projections. These are not cost overruns. They are strategic investments in capacity, compliance and market reach. All these programs scale and fixed leverage costs. We expect margins to expand sequentially throughout the year. This is our playbook for sustainable high-return growth and a resilient sector. Our balance sheet, it remains a competitive advantage. We're cash-rich, low debt and high liquid. We are well positioned to fund organic growth, pursue accretive M&A and navigate any environment with confidence. Operating cash flow was positive but lower year-over-year. This was simply due to the timing of our Federal Title IV disbursements. It's a function of the enrollment cycles and regulatory processing, completely unrelated to the government shutdown. Student collections remain strong and growing. CapEx was $200,000 with a targeted and high ROI. Our liquidity position is robust. Cash flow dynamics will normalize as disbursement timing aligns in our future quarters. As I turn to our strategic developments and milestones, the allied health sector is defined by the enduring human need, not disruption. Technology can assist in diagnostics, it cannot replace the nurse at the bedside. AI can streamline workflows. We're taking advantage of that internally, but it cannot perform a sterile procedure with precision and care. Data can inform decisions, but it cannot build trust with a patient in crisis. We are training the professionals who deliver that care. The demand remains structural and unrelenting with more than 200,000 nursing openings annually through 2031, growing shortages and medical assisting, sonography and sterile processing, just to name a few. Health care systems actively seeking job-ready graduates. We are meeting that demand with precision. Our key achievements, I am so thrilled to share with you that Contra Costa Medical Career College that we acquired in December of last year is now over 500 students. We have been able to secure our vocational nursing program approval so that their nursing program is aligned with our legacy standards and programs. We have additional new program approvals, MRI, Associates of Applied Science, Cardiac Sonography, Associate of Applied Science at Central Coast College. Similarly, Surgical Technology Associate of Applied Science approval at High Desert Medical College, it's Lancaster, it's Bakersfield and [Temecula] Campuses. Sterile processing technician certificate program at our Integrity College of Health and High Desert Medical College, Lancaster, Bakersfield and [Temecula]. These are all new program approvals that we've talked about that we have secured and that we've been making the investments in order for you to see those in the future quarters. Additionally, RN program approvals are in active pursuit across several more of our campuses. Our Advisory Board is providing strategic guidance and telehealth integration, AI-assisted diagnostics and hybrid training models, ensuring that we are leveraging innovation to enhance, not replace the human-centered care. We're preparing our graduates to respond to the changes that are occurring. The graduate placement rates remain above the industry standard and our graduates are placed within 6 months. We are incredibly proud of that, and it's a testament of the program quality and the employer alignment. These milestones reflect our operational excellence that we are constantly and continuously striving for as well as a deep commitment to our outcomes for our students, for our employees, our shareholders and the communities that we serve. With that, I'm going to turn it over to Brandon for a detailed financial review. Brandon? Brandon Pope: Thank you, LeeAnn. I'll review the first quarter results with year-over-year comparisons, then discuss our balance sheet and cash flow. First quarter 2026 highlights include revenue increased to $19.4 million, up $5.4 million or 38.5% from $14.0 million last year, driven by a 31.6% increase in new student starts to 1,117 students from 849 students last year, resulting in a 37.7% rise in ending student population to 3,495 as LeeAnn mentioned, an all-time high. EBITDA increased to $2.8 million, up 2.5% compared to prior year. Adjusted EBITDA increased to $3 million from $2.8 million from prior year, representing an increase of 9.6%. The effective tax rate was 26.5% compared to 28% in prior year. This improvement is based upon our estimated annual effective tax rate of 29.4% less the impact of stock option exercises within the period in which they receive the tax benefit. As LeeAnn mentioned, we improved our practice to review our effective tax rate each quarter as opposed to simply annually. Net income increased to $2.2 million or 4.6% increase from $2.1 million last year. Diluted earnings per share was $0.16. However, on a comparative share basis, diluted earnings per share would have been $0.22 compared to $0.21 per diluted share last year. Now turning to expenses. Educational services expense was $10.3 million or 53.2% of revenue compared to $7.2 million or 51.4% of revenue in prior year. This increase as a percentage of revenue of 1.8% is primarily attributable to enhancements in the ADN program, new program approvals, new hires, externship fees and noncash compensation. General and administrative expenses were $6.1 million or 31.5% of revenue compared to $4 million or 28.3% of revenue. The increase as a percentage of revenue of 3.2% is primarily attributable to increases in the first quarter period costs relating to audit, legal, regulatory acquisition valuation costs, representing approximately $742,000 compared to $423,000 in prior years. These costs relate only to the first quarter when these activities occur. Additional increases as a percentage of revenue are in the areas of marketing to support new programs, D&O insurance due to being a public company and the increase in bad debt expense. Bad debt expense as a percentage of revenue increased 0.9% of revenue or $178,000 due to our quarter write-off and reserve analysis and consistent with our projections. Now turning to the balance sheet and cash flow. Cash, $20.6 million. Accounts receivable was $17.6 million compared to $15.1 million in prior year or year-end specifically. The increase is primarily attributable to increase in student population as well as timing of Title IV disbursements. AR reserve was $1.9 million or 9.5% of AR compared to $1.6 million or 9.8% of AR at year-end, consistent with our quarterly reserve requirement process. Current assets were $40.9 million, total assets were $72.1 million, current liabilities, $15 million and debt was $700,000. And finally, stockholders' equity was $43.7 million. And returning to cash flow. Cash provided by operating activities was $1.1 million compared to $3.2 million last year, primarily due to Title IV disbursement timing. Cash used for investing activities was $300,000 for both periods relating to investments in program expansion and technology. The cash used from financing activities was $500,000 related to paying off of an equipment lease in the quarter compared to cash provided by operating financial activities of $8.3 million related to the IPO of last year. Overall, we have a very strong balance sheet and positioned well to execute on our strategic strategy. With that, I'll turn it back over to LeeAnn. LeeAnn Rohmann: Thank you, Brandon. Looking ahead, we are focused on 4 strategic priorities: continuing the enrollment momentum. We are going to be driving organic growth by scaling our digital marketing, deepening our employer partnerships and expanding our high school outreach. We have curriculum expansion and in particular, full rollout of the new programs in cardiac sonography, surgical technician and sterile processing, all aligned with the employer demand. As we look at our operational innovation, we're continuing our advancement of our hybrid model delivery with simulation technology, clinical partnerships for superior outcomes, and we remained committed to a disciplined growth to leverage our $20.6 million in cash and our legacy Board to evaluate accretive M&A opportunities. Compliance and regulatory. We are operating in a highly regulated environment, and compliance is not just a requirement, it's a core competency and a competitive advantage for us. Title IV disbursements in Q1 were impacted only by normal timing variations unrelated to any government shutdown or the Department of Education staffing changes. Recent reductions in federal workforce have no material impact on our operations. Our programs are accredited. They're approved and fully compliant across all jurisdictions. We're offering programs AI can't replace. We remain robust with internal controls. We are performing regular audits and proactive engagement with regulators, ensuring 0 disruption to funding our program delivery. In fact, as policy shifts and workforce challenges at the federal level only underscore the critical importance of our mission and what we do. The private sector led by institutions like Legacy is stepping in to rapidly train the job-ready allied health professionals where public systems cannot keep pace. Hospitals don't want to wait for policy. The clinics don't pause their hiring. They need graduates now, and we deliver them with industry-leading placement rates, employer-aligned curricula and a compliance culture second to none. The resilience combined with growing bipartisan support for workforce development funding positions legacy to thrive regardless of the regulatory backdrop. We expect sequential margin improvement as investments mature and revenue scales. And a sector supported by strong policy tailwinds and structural demand, our compliance strength, program quality and financial discipline position us to deliver sustained growth and shareholder value. Let me share a story with you that represents exactly what we're doing. A recent graduate from a medical assisting program in Lancaster, a first-generation student and a working mother, completed her flexible -- our flexible hybrid curriculum while balancing her family responsibilities. She passed her certification exam on the first attempt and secured a full-time clinic position within 2 weeks of graduation. That program took her less than 9 months for her to complete. And today, she leads patient intake, trains new staff and provides stable support for her family. This is the legacy impact, one graduate, one career, one community at a time. I want to thank you for participating today, and I want to turn over to the operator now for questions. Operator: [Operator Instructions] And the first question comes from the line of Mike Grondahl with Northland Securities. Mike Grondahl: Nice quarter. I wanted to ask about the 4 new programs. I think they roughly started in October. Could you talk about how they started and sort of what capacity they have over the next, I don't know, a couple of quarters? LeeAnn Rohmann: So Mike, in terms of as we -- I know that these questions are coming in terms of they are starting in our second quarter. The capacity for these are -- these degree granting programs enroll 20 to 24 in each of the approvals and the locations. We can start them both in the morning and in the evening, and we are excited to see the response that we have benefited from the marketing efforts that we incurred through the first quarter marketing efforts that we've seen. Sure. Very excited. Mike Grondahl: Any sense of I guess, break it down a little, if you can. There was 4 programs and everyone started a morning and an evening class. Like incrementally, did this add 50 students, 150 students? LeeAnn Rohmann: It didn't add any into the Q1 results. None of those have been realized yet. They will be in Q2 and Q3 and beyond. Mike Grondahl: Got it. Got it. And then how is the acquisition pipeline looking? Are you spending more time there, less time there? Any color would be helpful. LeeAnn Rohmann: Yes. The acquisition pipeline remains strong. We have several that have been elevated to the Board level in order for us to really ensure that we are targeting the right plan for us is how we are driving to remain in California as well as to extend outside of California. So our real goal has been, as I've said in the past, that we've done all single campus acquisitions. We're looking at multi-campus acquisitions, both that would reside inside California and outside of California. And we're on track and on pace for the timing for which we are hopeful to be able to announce the next one. Mike Grondahl: Is that roughly the next 6 months? Or how do you see that playing out? LeeAnn Rohmann: That's how we actually talked about it in the last call and what we've shared in the past is, yes, within this fiscal year. Operator: The next question comes from the line of Jeffrey Cohen with Ladenburg Thalmann. Jeffrey Cohen: I think I just have 3. So I guess, firstly, are you nearing being capacity constrained with the existing buildings and facilities? What kind of total patient population can you handle at this point? LeeAnn Rohmann: So we have some of our -- like a lot of our campuses are ranging upwards of 700 and 800 students per campus. in the existing ones that we've had. In those campuses, those are where we also have leases that will be expiring in the next 12 to 24 months. And so we are taking all of that into consideration as we are doing our lease renewals and expansion to do this in line with where we see that the increase in capacity will be needed. We're benefiting a lot from the hybrid delivery of the programs. Many of our degree granting programs start their first 6 to 9 months in their general education courses, those are all online, and they don't need to come to the campus for anything. It's post to that 6 to 9 months, that's when they'll start coming in for their laboratory interactions and the things that they do for showing up on the campus a couple of days a week. Jeffrey Cohen: Got it. Sorry, I meant students, not patients. Okay. Secondly, can you talk about the placement side the Legacy? Is Legacy itself in touch with ASCs and physician offices and hospitals directly? LeeAnn Rohmann: So our placements in terms of we continue to add for our clinical as well as our external placements. We are reaching out to both local facilities and partners in the community. Many of our partnerships are hospitals and facilities like RadNet, like Sharp, health care systems, like Scripps, these particular locations and facilities, they take our MAs, they take our nurses, they take our MRIs. They're taking cardiac. So as these new programs that we're adding, this is as a direct impact of them telling us what they're needing. And then these graduates are sequentially, these are the places where they are getting hired. Jeffrey Cohen: Got it. And then one more, if I may. As far as placements goes, currently, are you placing any students outside of the state? And are you placing any students outside the U.S.? LeeAnn Rohmann: So outside of the U.S., we have not had much, if any, experience, maybe a few that have crossed over into Canada. But when it relates to us placing students outside of California, that's going to be -- it would be when the student is actually transferring out from there. They're not actually enrolling in our campuses to obtain education and then to participate outside the state. There's anything that I would kind of circle back with is as both Jeff and Mike continue to ask about just our M&A activity as we have also mentioned in the past that we're ready to do the next greenfielding, and we will continue to make sure that at the same time that you are looking at announcements that we would be making in the next 6 months for M&A, we have experience in greenfielding and identifying the right locations outside of California where we could do that. Operator: As there are no further questions at this time, I would now like to turn the call back over to LeeAnn Rohmann for closing remarks. LeeAnn Rohmann: Thank you, operator, and thank you all for joining us. Q1 fiscal 2026 marked a strong foundation with robust continued growth, strategic progress and confidence in our financial and operational discipline. We remain deeply committed to our mission, training exceptional health care professionals to strengthen our nation's workforce and improve lives every day. To our employees, our students and our shareholders, I want to continue to thank you for your trust and partnership. We are on track, well positioned and poised to deliver an outstanding year. Back to you, operator. Operator: Thank you. Ladies and gentlemen, this concludes today's call. Thank you for joining us, and have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Starz Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Nilay Shah with Starz Investor Relations. Please go ahead. Nilay Shah: Good afternoon. Thank you for joining us for Starz Entertainment's Fiscal 2025 Third Quarter Earnings Call. We'll begin with opening remarks from our President and CEO, Jeffrey Hirsch followed by remarks from our CFO, Scott MacDonald. Also joining us on the call today is Alison Hoffman, President of Starz Networks. After our opening remarks, we'll open the call for questions. The matters discussed on the call include forward-looking statements, including those regarding expected future performance. Such statements are subject to a number of risks and uncertainties. Actual results could differ materially and adversely from those described in the forward-looking statements as a result of various factors. This includes the risk factors set forth in our most recently filed 10-Q for Starz Entertainment Corp. Starz undertakes no obligation to publicly release the result of any revisions to these forward-looking statements that may be made to reflect any future events or circumstances. The matters discussed today will also include non-GAAP measures. The reconciliation for these and additional required information is available in the 8-K we filed this afternoon, which is available on the Starz Investor Relations website at investors.starzcom. I'll now turn the call over to Jeff. Jeffrey Hirsch: Thank you, Nilay. Thank you, everyone, for joining us today. I am pleased to report that Starz delivered a strong quarter, both financially and operationally. Before I get into the highlights of the quarter, I want to give an update on how Starz is executing against our post-separation plan. As we laid out at separation, our growth strategy has 2 clear paths. First, our focus has been on growing our core business by increasing our margins to 20% as we exit calendar 2028, converting 70% of adjusted OIBDA to unlevered free cash flow and delevering to 2.5x as quickly as possible. Rebuilding our content library through ownership is a key component to delivering this result. Ownership of our series improves both the cost structure of our content and allows us to generate incremental revenue through international content licensing. Today, we are announcing a structural change to our Canadian operation. We are moving from a joint venture model to a stable, consistent content licensing agreement with our partner, Bell Canada. Under this new simplified structure, the Starz-branded service will continue to be available in Canada and Starz will generate international licensing revenue, while Bell will assume full operational responsibility in the territory. This approach is consistent with our strategy of owning our content and creating incremental licensing revenue without the need to operate international services directly. As we've shared over the past couple of quarters, we have been aggressively working toward delivering our previously stated goal of owning half of our slate. We opened several writers rooms just weeks after separation. A couple of weeks after that, we greenlit our first Starz-owned original, Fightland from Curtis 50 Cent Jackson. The series currently in production in London, and we are thrilled with how the show is coming along. We have a stellar cast an award-winning stable of directors and producers, and we plan to have it ready to premiere next year. I'm excited to share today that we're in the late stages of bringing on a co-commission partner on Fightland, which will improve the economics of the series. This will layer incremental international revenue on top of the previously discussed revenue from Bell Canada. The partnership will lower the per episode cost on an already attractively priced show and has the potential to expand to additional Starz owned originals. Both the Bell and Fightland deals will be modestly accretive to adjusted OIBDA and free cash flow in calendar 2026, and they will assist us on our path to reaching 20% margins exiting calendar 2028. While we continue to strengthen our core business, we are also looking to build upon our valuable core demos of women and underrepresented audiences. With the potential for increased consolidation across the media landscape, we believe that we are uniquely positioned to capitalize on potential M&A opportunities. Given our track record of profitably converting our business from linear to digital and our industry-leading tech stack, we are poised to increase our scale as assets that are strategically valuable to Starz become available. Turning to the quarter. We delivered on all key operational goals we outlined on our last call, including a return to positive revenue and U.S. OTT subscriber growth. U.S. OTT subscribers have now grown by 670,000 year-over-year with growth in 3 out of the last 4 quarters. We expect to continue revenue and U.S. OTT subscriber growth in the fourth quarter and to finish another year with approximately $200 million of adjusted OIBDA. Digging deeper into the third quarter results, OTT engagement reached a 12-month high, driven by the performance of Blood of My Blood, the Prequel to our hit franchise Outlander. The series successfully reengaged the fan base while also attracting new subscribers, demonstrating the continued strength of the Outlander universe. The quarter was also aided by the premier Ballerina from the John Wick franchise, which we strategically moved to air a quarter earlier than planned. Key tentpoles in the fourth quarter include Season 3 of Power Spin-off Force and the new chapter in the Spartacus World, House of Ashur. Our slate continues to be strong as we head into calendar 2026. We have a full lineup of originals, including the return of some of our most highly anticipated tentpoles. These include the Epic Final seasons of Outlander and Power Book III: Raising Kanan, the premiere of Fightland, the return of Blood of My Blood and the new season of one of our biggest hits, P-Valley, from [indiscernible] winning creator to Katori Hall. Even with the strength of the slate, we expect investment in content to decrease year-over-year, helping drive improved free cash flow in calendar 2026. In closing, Starz continues to execute well in a rapidly changing operating environment. While the media industry continues to face significant headwinds, we are confident in our ability to deliver on our plan, and we are well positioned to take advantage of the structural changes we expect to take place in the sector over the next 12 to 24 months. And now I'd like to hand it over to Scott to go over the financials. Scott MacDonald: Thanks, Jeff, and good afternoon, everyone. It was a strong financial quarter, as Jeff noted, and I'm pleased that we reached the key financial metrics that we outlined on last quarter's call. Specifically, we grew revenue sequentially and added U.S. OTT subscribers. Looking forward, as Jeff noted, we are affirming our guidance for the remainder of the year, which includes achieving positive U.S. OTT subscriber growth and positive sequential revenue growth as well as generating approximately $200 million of adjusted OIBDA for the year. Now let me walk through the financial details for the quarter, starting with subscribers. We added 110,000 U.S. OTT subscribers in the period, ending the quarter with 12.3 million. The increase in the quarter was driven by the successful debut of Outlander Blood of My Blood and the [indiscernible] Premier of Ballerina. We ended the quarter with 19.2 million total subscribers in North America, representing a sequential increase of 120,000 subscribers. Our North American linear subscriber base ended the quarter at 6.2 million, which was flat on a sequential basis. During the quarter, the carriage dispute in Canada that we mentioned on our May call was resolved. As a result, we reinstated approximately 250,000 Canadian linear subscribers into our base, which offset linear declines in the U.S. As Jeff noted in his remarks, we modified the structure of our Canadian business, which will result in us no longer reporting Canadian subscribers starting with the December quarter. The Canadian content licensing revenue that we will start to generate next quarter will be a component of linear and other revenue in our statements of operations. Moving on to revenue. Total revenue for the quarter was $321 million, up $1.2 million sequentially. OTT revenue was up $1.7 million to $223 million, while linear and other revenue was down slightly to $98 million. The sequential increase in total revenue was due to the content slate, which drove improved subscriber performance. Next, our adjusted OIBDA of $22 million was expectedly down $11 million on a sequential basis due to higher advertising and marketing costs related to driving awareness and subscriber acquisition in connection with the premiere of the first season of Outlander Blood of My Blood. Additionally, advertising and marketing spend was impacted by the marketing associated with the Premier of Ballerina, which we aired a quarter earlier than originally planned. Next on to debt. We ended the quarter with $588 million in total net debt. As a reminder, debt includes $300 million of our Term Loan A and $325 million of our 5.5% senior unsecured notes, plus $37 million in cash. We had no borrowings outstanding on our $150 million revolving credit facility at the end of the quarter. Our leverage on a trailing 12-month basis was 3.4x for the quarter, better than the 3.5x we noted on the last call, and we continue to expect to exit the year with leverage at approximately 3.1x. As we have mentioned on our last couple of calls, we view 2025 as a transition year for our cash flow. For the final quarter of 2025, we will have some fluctuations in the timing of our content payments, but we will reach a normal payment flow as we move through 2026. This will set us on a good path to deleverage, which, as we have noted, will be our focus in 2026 and into 2027. Now I'd like to turn the call back over to Nilay for Q&A. Nilay? Nilay Shah: Thanks, Scott. Operator, could we open the call up for analyst questions. Operator: [Operator Instructions] Our first question comes from Brent Penter with Raymond James. Brent Penter: First one for me. Jeff, I appreciate the color on Fightland and good to hear that, that's starting to make it through the process and expected next year. Can you just go over a little bit the mechanics in terms of the cost savings that you get as well as the international revenue you get when you produce your own shows with your own IP. I think you said like $1 million to $2 million in savings per hour from that in the past. So just can you help us understand where those savings come from? Jeffrey Hirsch: Yes. Brent, thanks for the question. I think there's 2 components to getting IP ownership back on the network, which really helps drive us to that 20% margin goal exiting 2028. First and foremost is we're de-aging shows. So we're going from late-stage shows, which are more expensive on a per hourly basis to newer shows, which, generally speaking, are much cheaper than a season 4 or Season 5. We also can control the economics in terms of how we start the show. And so we set the budget and what we're willing to pay as we come into the content. And so as we open the writers' room and they think about the show, they know what kind of financial envelope they have to work within, and we're rigorously defending that number against that. The second side, obviously, is as a U.S.-based company, we're creating our own content. We can monetize that around the world. And much like if you think about the output deals that HBO and Showtime used to do outside the U.S. as we get to scale and we add 2, 3, 4 shows each year that we own, we can actually package those and really drive kind of an originals output deal that puts an MG or a good amount of incremental revenue on top of the business. And so creating and owning your own IP domestically allows you to control costs on the front end, but it also creates a lot of incremental revenue from outside the U.S. Brent Penter: Okay. Okay. I appreciate that. And then when you all originally announced Fightland in the writers room, there were a few other shows that you talked about as well. So any update on any of those other shows? And should we expect those also to be coming in the near term? And could that help improve your EBITDA margin then once you start to get more of those owned shows? Jeffrey Hirsch: Yes. We announced rooms on 4 shows right after separation. [indiscernible] was one of them, and that room is just about to close. So we have most of the script materials. It's probably going to be shot in Venice. And so we're looking at production partners. We're also looking at brand partners to come in to also reduce the cost of that show. The other one was Kingmaker. That room is just about finished as well, and we're really starting to look for production entities to help us produce that show as well. And those really should earnest come on the network into '27, where half the slate will be owned by Starz. The fourth show we talked about was [ all ours ]. We just announced a production partner there, and we will start to move into kind of a writer's room once we pick runner and a writer we're in that piece right now. So all those shows are moving really, really well. We've added a bunch more into development since we separated. And so we were really laser-focused on getting half that slate owned by Starz in '27 and really then having the ability to go out and package those together and package kind of each year, 4 or 5 shows to a partner outside the U.S. that it will become our kind of distribution partner outside the U.S. and really drive significant incremental revenue. Brent Penter: Okay. Great. And then final question for me. On the EBITDA guide, can you just walk us through the moving pieces? Obviously, it bounces around quarter-to-quarter based on the costs. So what are the kind of bridge to get us to the $51 million, I think, that you need in 4Q to hit the $200 million? And then through the separation process, you all had talked about the $200 million EBITDA and then that could be something that you would grow off of. Can you talk about your level of confidence that, that's still the case that you hit the guide this year, but then you continue to grow off of that in the future? Scott MacDonald: Yes, this is Scott. So on the cadence to get to the $200 million, and we feel confident getting there as we sit here in November. The first quarter was -- I'm looking on a calendar year basis. Now the first quarter was our strongest quarter from an EBITDA basis. Q2 and Q3 were always expected to be lower from an adjusted OIBDA basis. And then Q4 was expected to be a better quarter. It's really primarily due to the timing of content and the programming amortization that we'll see in the quarter. So we're quite -- which are -- we know what those items are at this point. So we're confident that we will ultimately get to the $200 million. It's about $52 million that we need in Q4. Brent Penter: And just in terms of confidence level that the $200 million is a level that you can grow from? Scott MacDonald: Yes. We've continued to deliver against that $200 million. And if you think about the building blocks that we've talked about, getting ownership on the network controlling cost. You'll see our content cost spend will come down next year in '26. That will further come down as we get 4 or 5 shows that Starz owns on the air in '27. And that as we start to really get that content cost spend down, which is stuff that we can control, you'll start to see the business move that margin up to 20% coming out of calendar '28. And so we feel very confident that we can move that EBITDA up based on the fact that this is self-help and self-control. Operator: Our next question comes from David Joyce with Seaport Research Partners. David Joyce: Could you please provide some color about particular programming viewership trends, you did have to cancel BMF recently, and you've kind of alluded to that last quarter. But -- how should we think about the performance of these shows granted that we look at the multi-day period? Alison Hoffman: Yes. This is Alison. I think one of the things that we mentioned with Jeff's remarks is that we did see improved engagement in the last quarter. So active -- we look at it in terms of monthly active viewers. They hit a 12-month high and so we were really excited to see that. It was up about 7% versus the prior quarter. And I think that's a testament to strong performing content like Blood of My Blood and movies that we have like Ballerina. And so I think that, that sets us up in a nice way in terms of that Outlander universe and what we can expect from that. We had Force premier last weekend. It went very well. We have early read on that, but we've seen stronger gross additions for Force than we saw with our prior 2 tent poles. So nice trajectory there. We're going into a really strong viewing and subscription time of year. If you think about Black Friday and holidays and people being home -- so our expectation is that's a really nice platform for growth for the service. Obviously, we have Spartacus coming on in December as well, that will be a new title, but really nice to think about sort of the Power universe being able to discover Spartacus and new viewers coming in for Spartacus and being able to cross you with the power of universe. So I think we're very excited about that. And then just as we've mentioned, we've got -- looking ahead to next year, we've got Outlander coming for a final season. We've got Kanan. We've got P Valley coming back. We've got Fightland, as Jeff mentioned. So we're feeling really good about our slate, what we're seeing in terms of engagement and what we have coming up. David Joyce: And can you provide color on how much of your overall viewership of your services is on theatrical content as opposed to these originals? Alison Hoffman: Yes, definitely. In general, as it pertains to viewership or even how we think about subscription or subscriber acquisition, we measured in terms of first title streams. It is about 50-50 -- it will vary by platform. So for instance, our own retail app will lean a little bit more towards the original series. We'll see more viewership and subscribers coming in there for our originals. But then other platforms, other distributor platforms that carry us might rely more heavily on the movies. So it really is a nice portfolio. And I think if you think about our amortization versus sort of the viewership and the subscriber acquisition, it's all really nicely aligned to performance. Jeffrey Hirsch: The other thing I'd add, David, is if we look at the lifetime value of our customers, the consumer -- or customers that watch an original on a movie, their lifetime value is significantly longer than if just one watch one or the other. So having a good mix of the portfolio of both originals and movies together really helps drive reduced churn and increase lifetime value. Operator: Our next question comes from David Karnovsky with JPMorgan. David Karnovsky: Jeff, it would be great to get your thoughts on the streaming landscape currently. I think investors sometimes have concern generally as they look across domestic operators on how much incremental volume or pricing growth there is from here. So I'd be curious to get your thoughts broadly and then if you can tie that context back to your confidence on continued OTT subscriber revenue growth at Starz, that would be great. Jeffrey Hirsch: Yes. I think as I said in my prepared remarks, there's a lot of headwinds out there. I think there's a lot of moving parts. There's a lot of integrations of platforms. There's a lot of consolidation going on. And I think all of that creates a lot of noise in the marketplace for consumers, and it makes it hard, especially for us because we are a complementary service, and we do depend on these large broad-based streamers to package us, bundle us and sell us. We're sold on top of Hulu, we're sold on top of Amazon. I think we're the most bundled service on Amazon today. I think we're over 2/3 of all their bundles have a Starz component, and that's really been our strategy. And so as people continue to change and focus on themselves to figure out what their platform looks like, it gets it a little more complicated for us to get sold on top of. But as you saw, we've had 3 out of the last 4 very strong subscriber quarters. We think that will continue based on the strength of our content slate in the fourth quarter and through all of next year. And as people continue to raise rate as a way to drive revenue, it creates room for us to also raise our rate because as a complementary partner, we've always wanted a large gap between the stated retail rate of our broad-based streaming partners versus our complementary service. And so it continues to give us the ability to raise rate if we need to. But for now, we really think based on the strength of our content, we can continue to grow subscribers on an organic basis without -- and revenue without having to put rate on the business today. David Karnovsky: Great. And then I want to follow up on your M&A comments. I don't know if it's possible for you to give any more detail in terms of assets you might be interested in and how you think that can transform Starz'. And then how should we view Starz' potential financing of any deals just given your goal to delever and maybe use of equity being a challenger. Jeffrey Hirsch: Yes. I'm not going to comment any specific names, but I think I've said on a few quarters ago that we would like to diversify our revenue base from just an SVOD base into an AVOD and an SVOD base, because of the nature of the adult nature of our content and the amount of content we have, it's not really possible for us to expand into an AVOD basis in terms of competing with the large giants in terms of advertising. But the one way we can do that is to look at [ maroon ] linear networks that are -- that their consumers have moved to the digital side, but the brands are stuck on the linear side. We can use our tech platform to kind of -- to reposition those brands into the digital world that are very complementary to the Starz content on the SVOD world. And as we've seen and a lot of the work we've done, as you put complementary AVOD businesses next to the SVOD business, the churn reduction on the Starz side is really meaningful, and it really can accelerate both subscriber and revenue growth on scale. And so we're super interested in looking at that. I do think as these large companies continue to consolidate, pieces of those businesses that become less important to them because their focuses are on, whether it's the studio or the streaming services, not the linear, some of the networks that may strategically fit with Starz may become available. And I think we are uniquely positioned because of our -- what we've done at Starz in terms of transitioning from 100% linear to 70% digital, doing that profitably, owning our own tech stack, having our own customer acquisition team, having our own data stack, we're able to actually give that expertise to those networks and really put the businesses together and really generate a ton of growth. In terms of the balance sheet is a pretty good size to be tax efficient in terms of some of these deals. But the one thing I would reiterate, and I said this in the last couple of calls is we're not going to be in the market of doing deals that puts an incredible amount of leverage on the business. We just won't do those deals. And so if it's a deal that allows us to stay within the kind of the leverage range that we have, it fits with us strategically in terms of our 2 core demos and we believe that we can actually convert the business from linear to digital, and we think that's our home run deal for us. Operator: Our next question comes from Thomas Yeh with Morgan Stanley. Thomas Yeh: I just wanted to follow up on your comments about the subscriber momentum into the back half of the year. Can you maybe just tease out the dynamics around churn relative to gross acquisitions supporting that momentum? Are we at a point where the slate is bridging consumers over from one series to the next and retention is benefiting? Or is this more like a gross acquisition story, given some of the bundling dynamics that have been picking up a little bit more? Jeffrey Hirsch: Yes, I think what you saw in the quarter was -- I would say it was a 2/3 was kind of on the growth side, a 1/3 was on the churn side, depending on the platform. The Starz app churn continues to come down to all-time lows. It's a combination of stringing, like you said, stringing shows together, but also looking at longer-term offers. If you look at the business, if we can get a consumer to month 7 and month 13, churn gets down in the low single digits. And so we've been trying to use pricing strategy to drive consumers to that critical point where we can bring churn down significantly increased lifetime value. I think as we move into the slate in '26 when you have shows -- you really have shows sung back to back to back. I think you'll start to see that we'll be more reliant on the churn reduction side of the business and less on the gross add side of the business. We did announce Power: Origins, which is an extended a longer season. That's one of the reasons why we're excited about that is to try to do a lot more episodes over a longer period of time. So you have a show that goes instead of 8 to 10 weeks, it goes somewhere between 18 and 20, 22 weeks. We think that may be another way to really drive churn down and really, especially at certain month points after the show premier getting that to a real all-time low. So we're looking at not only back-to-back shows, but length of series to try to see if we can manage that in a longer way in a more cost-effective way. Thomas Yeh: Okay. Understood. And can we revisit the Canadian business model shift? I might have missed this, but are you expecting licensing revenues to cover the existing subscription revenues? And is that licensing fee variable to what the partner benefits from, from a subscriber adoption perspective? Jeffrey Hirsch: No, it's a great question. Yes, it does more than cover what we had in terms of the subscriber business. It's also much more stable in a sense. It was a unique deal where we had 3 partners in that deal. So it was incredibly hard for us to do what we do here in the U.S. in terms of managing the customer acquisition, retention, save cues, all of the different life cycle management. And if you think about, again, the building blocks of how we're getting this business to extend adjusted OIBDA and get to that 20% margin, Canada and licensing is, again, another international territory. So you have to think about it as a kind of overall output deal with Canada for our content. We hope to have more of those around the world in terms of driving stable incremental revenue to the kind of linear and other line item in the revenue side. Thomas Yeh: Okay. Great. And just last one for me. Can we revisit the cash spend outlook is $700 million kind of still the right number for 2026, and then it kind of continues to go down beyond that just based on some of the timing of how you transition to fuller slate. Scott MacDonald: Yes. This is Scott. That is our expectation that we would be under -- just under $700 million in 2026. And we're still working through and we'll provide a little more guidance on 2026 on our next call. But that's the plan, and we're also looking to move further down as we move forward, which is key as we de-age the content, as Jeff mentioned, get the ownership on the network that helps to bring the average cost per episode down of the portfolio of shows we have on the air. And that will contribute to getting down to that $600, $650 range here in a couple of years. Operator: Our next question comes from Matthew Harrigan with The Benchmark Company. Matthew Harrigan: Firstly, apart from the de-aging on the slate, I think you cited some advantages on the cost side in terms of development and maybe a little more latitude in terms of really using your data lake to optimize for Starz. I mean, even with the best of intentions, you may have had a bit of a suboptimization problem when you were so tightly bound with Lionsgate television. And then secondly, I thought your cash burn was a little bit less than -- or actually quite a bit less than I had anticipated. I generally don't ask too many prosaic cash flow timing questions. But does that more or less imply that maybe some of that got punted into Q4 and maybe people are probably going to be in roughly the same place on the cash burn for the year once you -- before you get to normality more or less over the next couple of years? Scott MacDonald: No. As we noted, again, this is Scott on our prior calls, the cash was going to be a bit choppy right after the separation. So the prior quarter, Q2, we were actually quite favorable. And some of that was just part of the process of us starting to manage our cash. This quarter, we were a bit negative. We expect to be a bit negative next quarter as well on that. And then we start to improve as we move through 2026. I mean it doesn't change overnight. But some of the challenges has been we were not necessarily -- when we're producing shows in the past, typically, you pay for your show and fund it over its production cycle very consistently, and the shows are at different times in their production. So you get a much more consistent cash flow. Just based on being part of the bigger studio, those cash payments dependent on the needs of the corporate parent. So we would -- they were way more -- they fluxed a lot more than you would like from a normal business perspective if you're just a stand-alone company. That's what we're working on now to get that back into a better alignment with kind of what you see in the industry. And that's -- we're getting -- we're starting to get there as we get to the end of the year. We'll be working -- still working on it early in '26, but '26 will start to get back in that more normal cadence. And you'll see content spend, as we mentioned earlier, come down probably just below $700 million next year, which is a meaningful decline from where we are today. So it's really -- it just takes some time to get that all worked out through the system. So it will be a bit spotty as we get into the Q4 and maybe a little bit into Q1, but we'll see it start working to be much more consistent after that. Matthew Harrigan: And I guess, then, on the development question, the development costs and your latitude for more creativity and maybe being faster on that side and getting costs down. Jeffrey Hirsch: Look, I think all of having control over when you open a room, when you greenlight a show, when you go into production, to Scott's point, timing and aligning all of the production to the on-air date to the cash spend. I mean when you get to a consistent kind of assembly line from the day you put it into development to the day you greenlight, to the day you deliver and you pay on delivery and then you air it, ultimately, we should get cash content spend should be 1:1 with cash air over time if you are consistent. Having control over our own production gives us the ability to align these shows and deliver them when we need to and so that we can get the choppiness of cash content spend out of the business. And so ultimately, the goal is when we get there is that cash content spend at amort should be almost 1:1 as the business goes forward. Matthew Harrigan: And then on the marketing side, I thought you might have some ideas, particularly given the huge demographics actually that you're targeting. But at the same time, I thought you might have some more opportunities there. Are you hamstrung by having such a high bundling component in terms of really being able to do marketing yourself to address those groups through a targeted process? Jeffrey Hirsch: I don't think we are. I mean I think bundling does a few things. I think back to the prior question, it allows us to align our content slate with others' content slates to fill gaps and you do that at a discount for the consumer. So ultimately, you're bringing 2 slates together to provide more benefit and more value to a consumer, which ultimately gives you more lifetime value. But again, we are distributed across all different vehicles. We have our own retail app. And again, when we market to our demos in ways that are unique to us, I think it rises not just our own retail, but the component of stars that are in those bundles as well. So we see in our data when we put stuff on the top of the funnel, it drives -- it softens the bottom, not just for us and our own app, but for all of our partners as well, whether it's a stand-alone a la carte sub or it's in a bundled sub. Operator: That concludes today's question-and-answer session. I'd like to turn the call back to Nilay Shah for closing remarks. Nilay Shah: Thank you, operator, and thank you, everyone. Please refer to the News and Events tab under the Investor Relations section of our website for a discussion of certain non-GAAP forward-looking measures discussed on this call. Thanks all. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and welcome to the FitLife Brands Third Quarter 2025 Financial Results Conference Call. [Operator Instructions] It is now my pleasure to turn the floor over to your host, Dan Judd, CEO of FitLife Brands. Dan, the floor is yours. Dayton Judd: Thank you, Tom. I would like to welcome everyone to FitLife's Third Quarter 2025 Earnings Call. We appreciate you taking the time to join us this afternoon. Joining me on the call is FitLife's CFO, Jakob York; and FitLife's EVP, Ryan Hansen. As we typically do, I'll provide some opening commentary to get us started, and then we'll open the call up for Q&A. Before jumping into the numbers, let me begin by saying how excited we are about our previously announced acquisition of Irwin Naturals, which closed on August 8, 2025. FitLife's financial results for the third quarter of 2025 include Irwin's performance for the 53-day period from August 9 through September 30. In addition, beginning with this quarter, the results of MRC are now reported as part of Legacy FitLife. However, we will continue to provide more detailed disclosure about MRC when it makes sense to do so. For the company overall, for the third quarter of 2025, total revenue increased 47% year-over-year to $23.5 million. Revenue from Irwin accounted for $6.8 million of the $7.5 million revenue increase during the quarter. This means that our other brands collectively delivered $0.7 million of organic growth during the quarter. MRC declined, but Legacy FitLife, excluding MRC, delivered 8% organic growth during the quarter, and MusclePharm delivered 55% organic growth. On a year-to-date basis, MusclePharm and Legacy FitLife, excluding MRC, have delivered organic growth of 15% and 7%, respectively. However, total organic growth for the company on a year-to-date basis is slightly negative due to the previously discussed MRC headwinds. Wholesale revenue for the quarter was $13.2 million, an increase of 156% compared to the third quarter of 2024. Excluding the $6.5 million of wholesale revenue generated by Irwin, wholesale revenue for the company's other brands increased 30% year-over-year, with wholesale revenue for Legacy FitLife and MusclePharm increasing 4% and 112%, respectively. Online revenue was $10.3 million or 44% of total revenue, a decrease of 5% compared to the third quarter of 2024. MRC online revenue declined 16%, while Legacy FitLife online revenue, excluding MRC, increased 14% and MusclePharm online revenue declined 3%. Gross margin declined to 37.2% during the third quarter of 2025 compared to 43.8% during the same period in the prior year. Excluding the impact of the amortization of the inventory step-up in the Irwin business, which I'll explain in more detail a bit later, gross margin for the company overall was 38.9%. The decline is due to lower gross margin in the MusclePharm business as well as the addition of Irwin during the quarter, which has historically generated a lower gross margin than FitLife. I'll provide more detail on margins for both of these businesses a bit later in my commentary. Contribution, which we define as gross profit less advertising and marketing expense, increased 25%, driven primarily by the addition of Irwin, partially offset by lower contribution from MRC and MusclePharm. Net income for the third quarter of 2025 was $0.9 million compared to $2.1 million during the third quarter of 2024. The decline is primarily due to elevated merger and acquisition-related expense associated with the acquisition of Irwin Naturals, but also due to lower gross margin and higher income tax expense. Income tax expense was unusually high during the third quarter due to a true-up of the company's 2024 tax provision and the amount actually owed when the company filed its 2024 tax return. With regard to brand level performance, I'll start with Legacy FitLife. Total Legacy FitLife revenue for the third quarter of 2025 was $12.9 million, of which 68% was from online sales and 32% was from wholesale customers. This represents a 4% year-over-year increase in wholesale revenue and an 8% year-over-year decrease in online revenue or a 5% decrease in total revenue. Excluding MRC, online revenue for the other Legacy FitLife brands was up 14%. Gross margin for Legacy FitLife declined very slightly from 45.3% to 45.0% Contribution declined 9% to $4.7 million and contribution as a percentage of revenue decreased to 36.2% compared to 37.9% in the same quarter last year. Excluding MRC, both contribution and contribution as a percentage of revenue for Legacy FitLife increased during the quarter. Moving on now to MusclePharm. Total MusclePharm revenue increased 55% during the third quarter, with wholesale revenue increasing 112% and online revenue declining slightly at 3%. MusclePharm's gross margin declined to 19.8%, which is a function of 2 primary factors. First, gross margin from wholesale revenue is lower than from online revenue. And due to our strong wholesale growth, total gross margin for the MusclePharm brand was lower. And second, the cost of whey protein continues to climb, and MusclePharm's product portfolio is heavily weighted to protein. Thus far, the company has elected to absorb these cost increases rather than increase prices to its customers. We anticipate that the cost of whey protein will continue to increase during the fourth quarter and early in 2026. We have begun communicating the potential for price increase to many of our MusclePharm customers effective January 1. Now, I will provide our report on the performance of Irwin Naturals. The numbers we are reporting for the third quarter reflect about 7.5 weeks of operations for Irwin. Irwin's revenue during the period from August 9 through September 30 was $6.8 million. Of this amount, roughly 95% or $6.5 million was from wholesale customers and $0.3 million was from online sales. The company did not start selling Irwin products on Amazon until October. So there is no Amazon revenue included in Irwin's third quarter numbers. There are a couple of items worth calling out that impacted Irwin's revenue during the quarter. First, the previous owner pulled forward approximately $0.6 million of sales prior to the transaction closing. He did this by offering an aggressive discount to the customer along with extended payment terms. As a result, we didn't get the credit for the revenue, although we did get to collect the receivable. And second, as part of our strategy to grow online revenue, we ceased wholesale sales of our products to the third party who has been the primary seller of Irwin products on Amazon. Pre-transaction, wholesale revenue from this customer was roughly $0.5 million per quarter or approximately a $0.3 million impact for the 7.5 weeks we owned Irwin during the third quarter. So this is a situation where we are choosing to give up wholesale revenue in the short term in order to generate higher and more profitable online revenue in future quarters. Regarding margin, Irwin's gross margin was 32.2% during the third quarter, including the effects of $0.4 million of inventory step-up amortization. Under GAAP, when you acquire a company, the inventory has to be stepped up to its net realizable value. The effect of that is a lower reported gross margin, which, although in accordance with GAAP, does not reflect the economic reality or the cash flow profile of the sale of the underlying inventory. Excluding the effect of the amortization of the inventory step-up, gross margin for Irwin during the quarter would have been 37.9%. We are actually pleased with that number for a couple of reasons. First, the gross margin in the mid- to high 30s is very typical for a wholesale-oriented supplement company. If you go back in time and look at FitLife's margins before we began focusing on online sales, you'll see a similar margin profile. And second, Irwin's historical margins have been much lower. We filed abbreviated financial statements for Irwin with the SEC on October 20. And from those, you can see that Irwin's gross margin in 2023 was 24.7%. In 2024, it was 32.3%. And for the first half of 2025, it was 35.7%. We expect Irwin's gross margin to continue to slowly increase over time as we optimize supply chain and fulfillment and as our percentage of revenue from online sales increases. Regarding online sales trends, as previously mentioned, following the consummation of the acquisition, we ceased wholesale sales to the customer who has been the primary seller of Irwin products on Amazon. As that customer sells through their remaining inventory, we expect to replace them as the primary seller of Irwin products on Amazon. Our first sales on Amazon were on October 11, and sales have grown steadily since then. We are currently generating approximately $10,000 of revenue daily from Amazon or approximately $3.6 million on an annualized basis. And we are now actively selling on only 116 of our 242 product listings. So we expect online sales to continue to grow. Now let me provide a few additional high-level comments and some forward-looking remarks, and then we can move into Q&A. We continue to work on generating revenue from the Dr. Tobias brand off Amazon as well as driving increased traffic to the brand's listings on Amazon. We have made some progress, but there's still a lot of work to do. We began to experience the Amazon revenue declines for Dr. Tobias during February of 2025. So we are nearing the point in time when the year-over-year comparisons will be easier, and we are hopeful that we can achieve greater revenue stability for that brand in the near future. In terms of balance sheet, we did not pay down any debt during the third quarter, instead using our cash flow to pay expenses associated with the Irwin acquisition. For example, we had accrued a very substantial legal bill over the several months leading up to the transaction. Much of this was paid during the third quarter and the remainder was paid early during the fourth quarter. Going forward, we expect to incur additional nonrecurring expense related to the transaction, but certainly not at the scale you saw during the third quarter. Our term loan balance begins amortizing at the end of December, so you will start to see debt reduction in the fourth quarter and beyond. Last, we referenced in the earnings press release a couple of exogenous factors we are seeing in the business. The first was the cost of whey protein, which I mentioned earlier in my remarks. If you have additional questions about this, I would be happy to answer them during the Q&A. And second, late in the third quarter, we began to see evidence of across-the-board general consumer weakness. For example, beginning in September, our subscriber counts on Amazon started to decline. Excluding the MRC brands, this is something that hasn't happened as long as we have been selling on Amazon. For pretty much 7 years, every week, the chart of our Amazon subscriber count only went up and to the right. In fact, our first reaction when it happened was to let Amazon know that there was something wrong with their data. But in our discussions with our account executives at Amazon, who also support other supplement sellers, they indicated that other accounts are seeing the same trend. We are also seeing a reduced pace of replenishment orders from our wholesale customers, which is corroborated by the reduced traffic counts many of them are experiencing in their brick-and-mortar locations. It is not unusual to see performance fluctuations within a specific brand as each brand can have its ups and downs driven by a number of considerations. But what we are seeing now is across all brands and all channels, and we have heard similar commentary from other consumer-driven companies when they have reported their performance. We also note that consumer confidence, as measured by the widely accepted University of Michigan Consumer Sentiment Index is close to the lowest level it has ever been since they started tracking the data in 1951. The government shutdown in the U.S. certainly contributed to the consumer sentiment and weakness. So hopefully, the fact that the bill was passed and signed yesterday will help. To be clear, the sky is not falling, but in the spirit of transparency and good disclosure, we just wanted to communicate what we are seeing in the business. The subscriber count declines are very small, but when you're used to seeing them only going up, it catches your attention. Total revenue for October came in a bit softer than we would have otherwise expected. Bottom line, we started to see cracks in September and October was a bit soft. But if things pick up from here, it will be largely immaterial in the grand scheme of things. But of course, there's always the risk that the consumer weakness persists or accelerates. So that concludes my opening commentary. And operator, you can go ahead and poll for questions. Operator: [Operator Instructions] And your first question today is coming from Ryan Meyers from Lake Street Capital Markets. Ryan Meyers: First one for me, Dayton, I just want to kind of piggyback off of what you just had commented on as far as the consumer softness and the impact on the subscription side of the business. Can you remind us what percentage of the business came from some of these recurring subscriptions? And then just so I understand it correctly, was it less new subscriber adds that you saw? Or was it also customers just turning off their subscription? Just want to make sure I understand all that correctly. Dayton Judd: Yes. So yes, good question. So before we acquired Irwin, we were getting -- I think Ryan can jump in and correct me, but it's somewhere between 20% and 25% of our online revenue was coming from subscribers. So our online revenue, again, pre-Irwin was 2/3 of our revenue and then 20% to 25% of that was from subscription. So that -- post-Irwin it's very different because Irwin has very little online revenue and pretty much no subscribers. So as a percentage of our total revenue, it's a much lower number now. As far as your second question, it's -- we actually don't give visibility at least on Amazon. We do to our subscribers on our websites. But on Amazon, we don't give visibility into additions and deletions or cancellations. All we get is a net number. So we couldn't tell you. I couldn't tell you whether people are signing up slower or churning faster. We just see the net effect. And again, I don't want to make a mountain out of a bike at this point, it really isn't a big deal. We're talking about like 1% declines. It's not anything dramatic. I just -- we knew we were having the call and just wanted to bring everyone up to date on what we're seeing in the business. So it's not -- this is not like we're seeing a massive drop-off in subscribers. It's just -- like I said in my remarks, when for 7 years, every week, it goes up, and then that trend stops, you notice. So I just wanted to point it out. Ryan Meyers: Okay. Got it. No, that's good to know. And then just kind of looking at the MusclePharm business, first off, congrats kind of getting that business to where you guys were able to during the quarter. Just as we understand sort of the wholesale part of that business, how much of that growth was new versus existing customers? It sounds like you saw positive signs from both those avenues. But is there any way to kind of unpack how much was new versus existing? Dayton Judd: Not numerically. I just certainly don't have those numbers in front of me. If I had to guess, it's much more heavily weighted to existing customers. So we had some customers that have been pushing the brand and selling a lot more. And again, if I had to guess, it's 80-20. I mean the other consideration when you sell into a new customer, it's typically not -- right, you're starting from the beginning. There's not a huge installed base and they're making replenishment orders. Sell-in orders tend to be pretty small. So if I had to guess, I'd say 80-20. But again, I don't have the numbers in front of me, but it is primarily increased sales to existing customers. But we continue to have new sell-in. No major accounts yet, no kind of nationwide accounts, but a lot more regional chains, regional grocers, decent traction with our RTD proteins. In fact, we've made 3 flavors: chocolate, vanilla, salted caramel. We've sold out completely of the vanilla and salted caramel and are waiting to get more made, and we still have a little bit of chocolate, but we're trying to keep up with demand on that front. Ryan Meyers: Okay. Got it. And then last question for me, and I don't think I saw this in the press release, but the Irwin business during the quarter, can you give us a sense of what the year-over-year business looked like for Irwin? Was it flat? Did it grow? Was it a decline? Just so we can get a sense of maybe how that business trended at least during the third quarter? Dayton Judd: Yes. I don't have that. I can tell you it will be a decline. But if I did it on an apples-to-apples basis, I don't know. And maybe we can do that and look at it on a future call. The reason it would be a decline, I think we've referenced in previous press releases and conversations. Irwin used to sell a lot of product through Costco. And when they were in bankruptcy, actually, before they went into bankruptcy, Costco discontinued one of their items. And while they were in bankruptcy, Costco discontinued the second one. So any year-over-year, look, I would do right now would show a decline because of the loss of the Costco business. What I haven't done is look at the period that we owned it or the period -- the same period last year when we didn't own it to the period this year when we did own it, take out Costco and then compare. So I would expect -- I mean, the declines were down to low single digits when we did that math as of the time of the acquisition. And my best guess would be we're still in the same range, right, like somewhere between stable and down low single digits. Operator: Your next question is coming from Sean McGowan from ROTH Capital Partners. Sean McGowan: A couple of questions, if I can. First, have you worked through all or substantially all of the stepped up inventory? And if not, what kind of an impact would you expect to see in the fourth quarter on that? Dayton Judd: So no, we have not. It ends up being, I think, about 4 months' worth of inventory. And I'm going to try -- I think we've worked through about 40% of it. The total inventory step-up amount was $1,045,000 -- and I think it was about 390-something thousand, if I recall, that came through during the third quarter and the balance is about $650,000 and that will all flow through in the fourth quarter. So basically, we'll have one more quarter with that step-up and the amortization of the step-up. And after that, the numbers will be clean. Sean McGowan: Okay. And you'll call that out, right? So… Dayton Judd: Yes, we'll call that out. We include that in the add-back in the EBITDA table. It's noncash, right? It's just -- again, it's an accounting convention under GAAP. Sean McGowan: Yes. So that -- how much pressure would you expect to see beyond what we've seen already in MusclePharm gross margin in the fourth quarter due to the we issue or any other issues? Like is this the level we'll see? Or could it get worse? Dayton Judd: So I think it might get a bit worse. And the reason is, again, the protein costs have continued to go up, and we have not -- like what you're seeing in the reported numbers is for July, August and September. And protein costs were increasing in the background. So the inventory that we're selling now is at a slightly higher cost and the inventory that we'll be selling in early 2026 is at even a higher cost. I don't have the numbers in front of me, but whey protein, we're happy if it's between $3 and $4 a pound. It's been below $3 a pound. Just to give you all a sense for the market, you cannot buy whey protein in the spot market today. You can't even buy whey protein for delivery during the first quarter, right? It's all been snatched up. Our most recent purchases, so we have forward bought. Just to be clear, we were fine through the first quarter. We've locked in the supply that we need. But at prices going up to $6.30 a pound, we're working on locking in supply for the second quarter of 2026 and pricing is basically starting with the $7 now. So it's a really strange dynamic, something that we've never seen. Happy to talk more about it if people want. But I think at a high level, what's going on is there is a huge protein trend in the U.S., right? You go into Starbucks, right? People are putting protein in everything, whether it's coffee or chips or even desserts. So I think the food companies are buying a lot of that, and you've got a lot higher demand and supply hasn't adjusted. So to answer your question, Sean, I would be surprised to see margins up for sure. I would not be surprised to see them a bit lower. But like I mentioned in my prepared remarks, we've already started communicating kind of a January 1 price increase, at least for big accounts. And so we're hoping to mitigate the effect of that going forward. We could have done it previously. We -- like this isn't something that caught us by surprise. This is an intentional decision we made, right, knowing that we're trying to grow the brand, like you all have seen starting with the fourth quarter of last year, first quarter of this year, right, the intentional investment in promotions and advertising, right? We're trying to grow this brand. So the good news is that happened, and we're finding success, and now we're trying to find the balance between growth and fiscal responsibility. So... Sean McGowan: Yes. We talked about this earlier in the year and maybe just the prices wind up or costs wind up being higher. So it's a little bit more of an impact. That doesn't mean you would have gone and raised prices if you had known exactly where the cost would be because you'd make the same strategic decision, right? Dayton Judd: Yes. Yes. I mean we know what our costs are going to be months in advance, right? Because like I mentioned, we've locked in our protein for Q1. So protein -- MusclePharm products that we are making and have ordered and are going to be delivered in Q1, we know exactly what the price is going to be. And so we have pretty good visibility into that, right? The decision we always have to make is at what point do we try and ratchet the price up. It's something we talk about every week, so. Sean McGowan: Okay. A couple more questions. Can you remind us what the issue ongoing is with Dr. Tobias? Dayton Judd: Yes. The main issue, and I wish I could explain the root cause, but I can't. The main issue is that for reasons unknown to us, traffic to these -- to our Dr. Tobias listings on Amazon fell. And when I say fell, fell dramatically. Again, we can't tell you why. Our gut instinct is it's something internal to -- Amazon is a black box. We -- if they change their algorithm or they do something like that, it can be to your detriment. And I will also add, it can be to our benefit, right? You see strong online growth under Legacy FitLife, excluding MRC. We have some products that are up 50% year-over-year and have been for the whole year. So there are areas where you win, where we want to pat ourselves on the back when that happens and say, didn't we do a great job. But the reality is with Amazon, there is a very significant amount of, call it, luck, call it, black box, whatever, right, that is going to determine the outcome. So something happened that resulted in much lower traffic to the Dr. Tobias listings. We can pull the data and we can see the traffic, we can pull the data and we can see the conversion. When people get to the listings, they convert at the same or actually higher rate than they were doing before. So the issue isn't once they are on the page, they find something they don't like and they leave. It's actually a very high conversion, what we experienced on Amazon relative to, say, the average listing. The issue is the top of funnel, right, getting people to the listing. And again, we didn't do anything different. It just started happening. And so look, we blame Amazon or we say it's a black box, but that's really the issue. So we have tried, you can see in the numbers. I think we spent more on advertising during the third quarter, I think, across all of our brands. For Dr. Tobias, that was largely on Amazon. We spend more money advertising on Amazon and then we do the numbers, and it doesn't -- like this is not something we can spend our way out of in terms of spending on Amazon. We're continuing to try that, but we're also spending time and effort trying to grow off Amazon. Just to give you an example, if you bring a customer to the Amazon ecosystem, right, like through a website or through an ad, like we could run ads on Meta or Google. And if we're driving people to new traffic to Amazon, their algorithms prioritize it. They like that. So if they see you doing that, then they try and -- then the belief is or our understanding is that they will bolster your listings. So those are the types of things that we're doing. But I wish I could point to something we did or even something specific they did. But the reality is it started happening. not quite a year ago, and we've been suffering the consequences since. Sean McGowan: Okay. Last question, a little knit and did here on taxes. So is the reason that the effective tax rate is so much higher that some of these expenses are not tax deductible? Dayton Judd: No. No, so that's not it. The reason is -- and this is all kind of new to me, I'm not a tax expert. But as you go through the course of a year, you estimate, you calculate a provision for income taxes. And just so you know, we don't do this ourselves, right? We use a very, very reputable firm, we use Grant Thornton. And at the end of the day -- or when I say at the end of the day, really at the end of the year and then several months after that, when you actually do your tax return and you figure out how much you owe to the extent there were discrepancies between what you what you ran through the P&L for your taxes and what you actually owed, there has to be a true-up. So we filed our tax return for 2024 during the third quarter of 2023. We were -- our provision did not -- had not expensed enough income tax. And so it's kind of a catch-up that's flowing through Q3, but it's not an ongoing thing. Sean McGowan: Okay. So the rate we see then through the 9 months is not indicative of what you expect the full year rate to be. It's just a true-up in the quarter that makes the quarter look weird and the 9 months look weird. Dayton Judd: Yes, it might be higher for the full year than, say, a typical 24%, 25% rate again because some of it is really attributed or because of 2024. But yes, on a long-term steady-state basis, we would expect something closer to 24%, 25%... Operator: Your next question is coming from Samir Patel from Askeladden Capital. Samir Patel: The first one, I'll start with Irwin, and congrats on the momentum there with the online sales. So you mentioned the $3.6 million and I think about half of SKUs, and you also mentioned that you're still competing with inventory overhang from other sellers. As you roll out those remain listings and you become the primary seller, do you have some sort of vision for where you think the revenue might get to? Like, for example, I'm not sure if you did the high-volume SKUs first, so if we can kind of extrapolate based on that figure of it being half. And then you also can kind of quantify how much inventory might still be out there in the channel that you'd sold wholesale previously. So any thoughts there would be helpful. Dayton Judd: Yes. So I'll give you some additional detail. So to your question of did we start with the highest volume SKUs first? No, not necessarily. What we do, this company ironically was the same company that was the primary seller of MusclePharm products, the exclusive seller of MusclePharm products on Amazon when we bought MusclePharm. So we know them. We have a working relationship with them. I'm not saying they like us because every time we show up, we take their business, but they cooperate with us. So they share with us their inventory. We know which SKUs they're going to run out of first. And so we have prioritized our inventory and what we're shipping in on based on when they're going to run out of a particular SKU. So it's not like we picked the 112 or 116 highest volume, and that's where we went first. So it's actually a mix of higher volume and lower volume. It's more a function of not wanting to run out. We want the customers to be able to buy the products on Amazon. In terms of how big it could be, I think -- I don't have the exact number in front of me, but we have some software tools that allow us to size on the total volume of sales that are happening for listing on Amazon. If you add those up across the Irwin portfolio, it was somewhere in the range of, I think, $7 million to $8 million. Again, I could be off plus or minus $1 million on that number. So the value of the inventory being sold by that $30 million plus that third party, plus there's a lot of other smaller sellers that are buying the product through regular distribution that are showing up out there. Like if we just took it over from them, it would be, again, let's just say, high single-digit millions. right? Incremental to that would be, right, are we able to grow more quickly? Are we able to launch new products? Are we able to gain more revenue through subscribers? So all those levers we will pull. But I think what you'll probably see is a ramp-up to the high single-digit millions, and then we'll kind of see how things grow from there. Samir Patel: Okay. That's super helpful. And that's actually better than I was expecting. There's a couple of areas I want to walk through. So one is just very, very simply, other than the $0.5 million quarterly, $2 million annualized that you talked about from getting rid of the wholesale partner. I mean, is there any other trade-off to those online sales? I mean, obviously, indirectly, like if someone walks into a health store and they've already bought it online. I'm not talking about that. I'm talking about just like, if you're just trying to model where the business was and where it's going to be, is it reasonable to kind of take that, add 7 and then subtract 2? Or am I missing a piece of the math there? Dayton Judd: No, I think that's very reasonable. Like we're assuming that we don't -- that these changes don't affect our direct-to-consumer business, right? So that was about, I think, $0.3 million, right, $300,000 during the 7.5 weeks that we owned it. So -- but that business has been coexisting with the other sellers on Amazon for years. So we don't think that would change either. So no, I think it's the delta between the $7 million, $8 million, $9 million and the $2 million we're giving up in wholesale sales. Samir Patel: Okay. That's really impressive, actually. And then -- can you go a little bit more in depth? It sounds like there's people. Did I hear it right, that there's people who are basically buying this product in a store and then reselling it on Amazon? Dayton Judd: No, no, not buying it in the store. So we sell these products through like tens of thousands of doors in the U.S. So like Walmart, every single Walgreens, every single CVS. But in addition to that, it's in hundreds and hundreds of independent health food stores. So there may be a business owner. They may have 1 health food store, they may have 10, right? But they are able to buy the product through our fulfillment partners through our distributors that sell to these smaller health food stores. They're buying the product. They're putting it on the shelf in their store, right? Some of them are kind of opportunistic and say, well, I'm just going to box some up and send it into Amazon and also sell on Amazon. So really, what we see is one really big third-party seller, which is the one I talked about, the $2 million. And then a lot of these are a handful of these smaller, let's just say, independent health food retailers, some of them may be dedicated online retailers, some of them may have physical stores who are buying primarily through distribution and then in addition to selling in their stores, they're selling online. So that's a dimension of sellers that we didn't have. For example, when we bought MusclePharm, it really was just this one big third party. But with Irwin, we do have a handful of smaller sellers that are also out there. Samir Patel: Okay. Okay. And then the final question on Irwin is, you talked about expecting those margins to go up over time. I mean you've outlined numerous times kind of the contribution margin delta for the GNC business between someone buying that product online and buying it through the wholesale channel. I mean, do you have math that you want to share around if you sell one unit of an Irwin product through the wholesale channel versus through Amazon, what the kind of margin delta is? And then as a related issue, kind of both margin and operational, any progress on the glass issue that I know you're dealing with Amazon? Dayton Judd: Yes. Sorry, did you say glass bottle, is that what you said? Samir Patel: Yes. Them wanting the bottles bubble wrapped in your 3PL and all that. Dayton Judd: So thanks for bringing that up. On your first question, I don't have the numbers in front of me. I know you and I and many others, we've talked through the economics selling the brands that are exclusive to GNC on Amazon, that's very compelling financially. But pretty much every other part of our business, it's not as that compelling, right, where it's such a big trade-off between a unit in store and a unit online. The reason for that is that we don't advertise those brands, like we spend literally $0 and ever advertising any of those brands, right? Those are retail brands, and we're just -- we're putting them online. We're putting them online at a premium price to where they're sold in the store and whatever we pick up, we pick up. So obviously, those economics are very compelling because, A, there's no advertising; and B, it's a premium price. That's not the case, right, with Irwin or with iSatori or with Mimi’s Rock, Dr. Tobias, where we're having to spend money to advertise and get the product in front of customers. That said, right, every -- we've seen this movie multiple times. That's why we deploy this strategy. We know when we sell online, we make, A, the revenue is higher, right? Instead of selling a unit for $10 wholesale, let's say, you're selling it for $20 or $25 at retail, right? So the revenue number to the company is higher and the margins that we generate are higher. So I don't have a unit-to-unit trade-off I could give you on that, but it's not as compelling as some of the GNC items. But again, we're not even pushing those. To your second question, just to maybe bring everyone up to speed, there's just a lot of nuances and complexity about Irwin and how they have -- the packaging that they use and the challenges that, that presents as far as selling on Amazon. Very specifically, Amazon doesn't like glass, glass bottles. So you cannot sell anything on Amazon that's packaged in glass unless it's first bubble wrapped. So we get product from our manufacturer. It's almost all in glass bottles. If we want to ship it into Amazon and sell it on Amazon, we have to have a third party open every single box, take out every single unit, wrap it in bubble wrap, label it with what it is, repack it and then ship it into Amazon. And there's a not immaterial cost of doing that. And so right now, we're just dealing with it. And by the way, that's the same thing the other sellers on Amazon are having to do as well. But it may make sense over time to -- at least for maybe some of our higher-volume SKUs that maybe we do production runs in a plastic bottle. And that would save us, again, a very real kind of cost per unit that we wouldn't have to incur to package and prep for Amazon. So we're doing nothing on that yet, right? Everything right now is just managing through the transition, and we've had transitions in team and people, but we're kind of working on higher priority items right now. But over time, we think there's a ton of opportunity to further optimize this business from supply chain to packaging like you talked about to how products are fulfilled to selling more on Amazon, et cetera. So lots of opportunity to come. Samir Patel: Perfect. And then I'll just ask a couple on MusclePharm that and let other people ask. But the -- on the whey protein, basically, 2 questions. I mean the first is, I was trying to look around at some data sources this morning. I found like a USDA index for, I think, 34% whey protein. But from the numbers you quoted per pound, it sounds like you're using a different one. So just question one is like is there kind of a good public data source or benchmark that you would have us look at to keep track of that? And then the second is just on the pricing and obviously, understanding what you're doing to try and grow that brand, but just maybe how you're seeing other competitors out there dealing with this issue if they're pushing through price increases as well. So that's all for me. Dayton Judd: So yes. So first of all, on protein, I don't know if I could point you to a data source specifically. I will ask kind of our operations team because I know they have data and they pulled together charts that we've reviewed and I've shared with the Board and whatnot. So -- so we get it from somewhere. The other thing I will point out, though, is protein, there's all -- it's not like protein. There's tons and tons of different kind of protein from whey protein, milk protein, casein, gelatin. There's all kinds of different protein. And even within whey, which is what I'm talking about, there's what's called WPC 80, which is whey protein concentrate with a minimum of 80% protein content. So that's like -- that's what we tend to watch because that's what we use. MusclePharm's biggest selling product is our 5-pound chocolate, 100% whey. So we're buying that WPC 80, and that's the reference protein that I'm talking about. So it may be I'm looking at a different protein than you are, but there are sources out there, but I just couldn't tell you off the top of my head kind of what we use or if we get it from our manufacturers or straight from the protein suppliers. I think your second question was about what we're seeing other people doing. Look, we gained share during the third quarter because we didn't raise price. right? It's very apparent to us, right? Going back to the question of how much of it was incremental volume from existing customers versus selling into new, like the bulk of what we gained was gaining share, and we attribute that to not raising price. So we think, right, that others are choosing to pass it along, and we have chosen at least for a period of time not to. So that said, the protein is the least profitable and most competitive part of the supplement market. It's one of those things where everybody's got one, right? It's expensive. Again, the protein is expensive. They're big, they're bulky, they're expensive to ship. So if you get 30% protein -- 30% gross margins in a protein business, you're killing it. You're doing well. And so those are just the considerations here. But if you want to be in sports nutrition, you have to have a protein, right? There's not too many companies that are targeting the athletes and the body builders and they don't have a protein. So it's kind of if you want to be in the space, you got to have a protein, and it's just not a super attractive product to sell. So those are some of the dynamics that we're dealing with. But yes, it was -- I think it was share gain driven by the fact that we did not -- at least partially because we did not increase our price. Operator: Thank you. That concludes our Q&A session. I will now hand the conference back to management for closing remarks. Please go ahead. Dayton Judd: Thank you all very much for participating in the call. If you have other questions, feel free to reach out to us. Otherwise, we will speak to you all again towards the end of March. Thank you. 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.
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: Ladies and gentlemen, thank you for standing by. [Operator Instructions] I would now like to turn the conference over to [ Mary Horn ]. Please proceed. Unknown Executive: Welcome to ESS' Third Quarter Fiscal Year 2025 Financial Results Conference Call. Joining me on the call today from ESS are Kelly Goodman, Interim CEO; and Kate Suhadolnik, Interim CFO. Following management's prepared remarks, we will hold a Q&A session. Earlier today, ESS released financial results for the third quarter of 2025. The earnings release is available in the Investor Relations section of the company's website. As a reminder, the information presented today will include forward-looking statements, including, without limitation, statements about our growth prospects, partnerships, Energy Base product, financial performance, capital raising, including under our ATM program, and strategy for 2025 and beyond and the impact of regulatory and legislative developments. The forward-looking statements are also subject to known and unknown risks and uncertainties that could cause actual results to differ materially from those projected or implied during this call. In particular, those described in our risk factors set forth in more detail in our most recent periodic filings filed with the Securities and Exchange Commission as well as the current uncertainty and unpredictability in our business, challenges with raising capital, issues with our partnerships, the markets, the economy, the current geopolitical situation and the development and launch of the energy base. You should not rely on our forward-looking statements as predictions of future events. All forward-looking statements that we make on this call today are based on assumptions and beliefs as of the date hereof, and we disclaim any obligation to update any forward-looking statements, except as required by law. During the call, we will also present certain financial information on a non-GAAP basis. Management believes that non-GAAP financial measures taken in conjunction with U.S. GAAP financial measures provide useful information for both management and investors by excluding certain items that are not indicative of our core operating results. Management uses non-GAAP measures internally to understand, manage and evaluate our business and make operating decisions. Reconciliations between U.S. GAAP and non-GAAP results are presented within our earnings release. With that, I will turn the call over to Kelly. Kelly Goodman: Thank you, Mary, and good afternoon, everyone. Before we dive into the quarterly results, I want to take a moment to reaffirm who we are as a company and the value we deliver. ESS is a technology leader in long-duration energy storage. Our iron flow battery platform delivers safe, sustainable, non-flammable storage capable of 10 or more hours of discharge. Built with abundant U.S. sourced materials, iron, salt and water, our systems are designed to cycle over 20,000 times without capacity fade. That combination of durability, safety and sustainability positions ESS to meet a critical market need as data centers expand, electrification accelerates and utilities seek reliable clean power at scale. Short-duration and lithium-ion technologies simply cannot fill that gap cost effectively or sustainably. We have built strong relationships with Tier 1 customers, including SB Energy, Honeywell, Portland General Electric, Sacramento Municipal Utility District and most recently, Salt River Project. These partnerships validate our technology and highlight its readiness for real-world deployments, giving ESS a strong foundation as we move from development into execution. The third quarter was an important continuation of the strategic plan we have been executing throughout 2025. We advanced key customer programs, strengthened our capital position and laid the foundation for the delivery of our first Energy Base system. Most notably, we announced a 50-megawatt-hour Energy Base pilot project with Salt River Project, or SRP, one of the nation's leading utilities and a recognized innovator in long-duration storage. This project represents the first commercial scale deployment of our next-generation Energy Base platform and is a powerful validation of our technology and our team. Shortly after the SRP announcement, we completed a $40 million financing with Yorkville Advisors. That transaction reinforced our balance sheet and gave us the flexibility to move forward with confidence as we prepare for manufacturing and delivery in the next 18 months. Since closing that transaction, we have already repaid $15 million of the original $30 million drawn to date. For additional capital to support execution, we are launching a $75 million at-the-market equity program with a syndicate, including Yorkville, BMO Canaccord, Needham and Stifel. This is intended to provide efficient access to capital to support growth and execution as needed. As I step back and look at where we are, the progress this year has been clear and deliberate. We started 2025 with a focus on strengthening our leadership team and tightening our cost base. From there, we aligned our organization around the Energy Base, a product designed and manufactured in America to meet the growing need for 10-plus hour storage. Today, we are executing with customers who understand that long-duration storage is essential to a decarbonized and resilient grid. We are particularly encouraged by the strength of our commercial pipeline. Since launching the Energy Base earlier this year, 100% of our active opportunities are centered on this platform, with RFP activity and proposal volume continuing to increase. These engagements are larger in scale, longer in duration and more strategically aligned with the needs of major utilities, data center developers and industrial customers. Looking forward, our focus over the next 18 months is on execution, building, delivering and validating performance in the field. We are continuing to drive operational discipline, scale manufacturing capabilities and demonstrate to customers that our technology delivers safe, sustainable, long-duration energy storage at competitive costs. Finally, I am pleased to share that we plan to host an Investor Day in early 2026, where we will provide an in-depth look at our progress, the Energy Base program and our road map into 2026 and beyond. With that, I will turn it over to Kate for the financial update. Kate Suhadolnik: Thank you, Kelly, and good afternoon, everyone. Unless otherwise noted, all figures I'll reference are on a non-GAAP basis and reconciliations can be found in our earnings release. For the third quarter of 2025, we reported revenue of $200,000 compared to $2.4 million in the second quarter. The year-to-date trend reflects our ongoing transition from Energy Warehouse and Energy Center deliveries to the Energy Base platform, which will become the foundation of our commercial activity going forward. GAAP cost of revenues totaled $4.9 million while operating expenses were $5.1 million, consistent with our commitment to disciplined cost control. Net loss for the quarter was $10.4 million or $0.73 per share. We ended the quarter with cash, cash equivalents and short-term investments of $3.5 million which, as a reminder, does not include the $30 million of proceeds from the Yorkville financing, which closed after quarter end. These funds provide a solid runway to continue advancing manufacturing readiness and support early project execution. As Kelly noted, we are launching a $75 million at-the-market program, which we view as an additional tool, not a requirement for accessing capital. With the funding we secured earlier this quarter, we have the flexibility to time any use of the ATM strategically based on market conditions and our progress towards key milestones. Together with continued cost control, this positions us to execute from a position of strength. Operationally, we continue to focus our resources on productization of the Energy Base, vendor optimization and supply chain readiness for 2026 delivery. At the same time, we remain highly selective in spending, aligning every dollar to programs that directly support execution, delivery or validation in the field. In summary, Q3 was another step forward in strengthening our financial and operational foundation. We have greater visibility, improved efficiency and growing customer momentum, all key ingredients as we prepare for our next phase of growth. With that, I'll hand it back to Kelly for closing remarks. Kelly Goodman: Thank you, Kate. To close, ESS' priorities remain clear. One, deliver on customer commitments, starting with SRP and our early Energy Base programs; two, execute with discipline, controlling costs scaling responsibly and ensuring operational excellence; three, convert momentum into long-term growth, validating performance and building durable relationships with leading utilities and developers. We are proud of what the ESS team has achieved this year. The pieces we have put into place, technology, capital, customers and people are setting the stage for the next chapter of growth and value creation. Thank you for your continued support. And with that, we will open the line for questions. Operator: [Operator Instructions] We have a question from Justin Clare of ROTH Capital Partners. Justin Clare: So first, I wanted to start out with the Energy Base product here. I was wondering if you could just talk about the scale of the projects that you're currently pursuing with the Energy Base? And what kind of durations your customers might be looking for? And then also, just in recent RFPs, could you talk about the technologies that you're most frequently competing against? Is this lithium-ion potentially? Or is it primarily alternative long-duration technologies that you're seeing? Kelly Goodman: Sure. Thanks, Justin. This is Kelly. So to answer your questions in order, as far as scale, our strategy over the next couple of years is to deliver projects similar in size to SRP, which is a 5-megawatt -- 50-watt -- 50-megawatt-hour project but projects that have a significant follow-on opportunity in the next couple of years. So by that, I mean 100-megawatt or 200-megawatt project opportunities. As far as duration, our current Energy Base offering is a 10-hour duration. By 2029, we're targeting having a 16-hour battery. So that's sort of the duration we plan to offer in the later years. As far as RFPs and technologies, I would divide those into two buckets. We're seeing more and more RFPs that are specifically targeting long duration like SRP. And by that, I mean technologies that offer more than 10 hours. So in those RFP, we're competing against technologies that can actually offer more than what you see in the normal 4-hour space. In other RFPs that are sort of storage agnostic, we are competing against lithium, other competitors that offer for our storage, where we're really pleased by what we're seeing as an emerging trend and recognition that longer duration 10-plus hours will be needed. Justin Clare: Got it. Okay. I appreciate that. And then I guess, just following up for the RFPs that you are pursuing here, can you talk about the types of customers that are issuing me. So are these utilities, IPPs or are you participating in RFPs directly with data centers, whether it's behind the meter or front-of-the-meter approach? Kelly Goodman: Sure. So in the RFP space, I would say the customers are either utilities or they are IPPs acting on behalf of the utility. We are not engaged in RFPs behind the meter but rather for data centers and other customer hyperscale like that, those are bilateral conversations. Justin Clare: Got it. Got it. Okay. And then just on the balance sheet here. So you've obviously raised a decent amount of capital. And so wondering if you could just talk a little bit more about the use of proceeds for that capital in the near term. And then just thinking about your liquidity needs, how much runway does that capital provide you? And how are you thinking about liquidity ahead? Kate Suhadolnik: Yes. Justin, this is Kate. I'll take that one. I'm happy to give some more details as a lot has definitely changed in the last few weeks since the end of the quarter. As of today, we have roughly $30 million in cash on hand, and we still do have the ability to draw the remaining $10 million from Yorkville's promissory note at our discretion. So together with that and the new ATM program that we announced today, I think we feel we have significant flexibility to manage liquidity sort of on our terms as we need it over the coming months and quarters. Over the past 11 months, we've taken a lot of deliberate steps to streamline the company. We're really focused now rather than on survival, which has been kind of our focus on execution and really driving towards delivering on the SRP project, pursuing new opportunities. And as I mentioned, just really executing on those milestones as we move forward. Operator: That seems like all the questions we have. So I'll pass it back over to the ESS team for any closing or further remarks. Kelly Goodman: Yes. Thanks for that. This is Kelly. Just wanted to say thank you. Thank you for joining. Thank you for the support and look forward to what's ahead of us. Operator: Thank you. That will conclude today's call. Thank you for your participation. You may now disconnect your lines.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Co-Diagnostics, Inc. Third Quarter 2025 Earnings Webcast. [Operator Instructions] I would now like to turn the call over to Andrew Benson, Head of Investor Relations. Andrew, please go ahead. Andrew Benson: Good afternoon, everyone. Thank you all for participating in today's conference call. On the line today from Co-Diagnostics, we have Dwight Egan, Chief Executive Officer; and Brian Brown, Chief Financial Officer. Earlier today, Co-Diagnostics released financial results from the third quarter ended September 30, 2025. A copy of the press release is available on the company's website. We will begin with management's prepared remarks and then open the call to analyst Q&A. Before we begin, we would like to inform listeners that certain statements made by Co-Diagnostics during this call, which are not historical facts are forward-looking statements. In addition to diagnostic test developments and timing for commencement of clinical evaluations, this includes statements concerning the company's Co-Dx PCR testing platform, which requires regulatory approval and marketing authorization for diagnostic use and is not currently for sale. Actual outcomes and results may differ materially from what is expressed or implied in any statement. Important factors, which could cause actual results to differ materially from those in these forward-looking statements are detailed in Co-Diagnostics filings with the SEC. Co-Diagnostics assumes no obligation and expressly disclaims any duty to update any forward-looking statements to reflect events or circumstances occurring after this call or to reflect the occurrence of unanticipated events. In addition, the company may discuss certain non-GAAP financial measures during today's call. These non-GAAP financial measures should not be considered a replacement for and should be read together with GAAP results. We refer you to the company's earnings release issued shortly before this call, which contains reconciliations to the non-GAAP financial measures presented to their most comparable GAAP results. At this time, I would like to turn the call over to Co-Diagnostics Chief Executive Officer, Dwight Egan. Dwight? Dwight Egan: Thank you, everyone, for joining us today and for your continued support of Co-Diagnostics. As we head into the final stretch of the year, it is shaping up to be one of the most active and important times for our business. Over the past 45 days alone, we've shared several important updates, which are all part of our plan to position Co-Diagnostics for its next phase of growth. Each of these steps brings us closer to our goal, building a stronger, more resilient Co-Diagnostics operationally, financially and strategically. Importantly, these developments are the effect of cumulative growth and every initiative that we are currently working on connects to a broader strategy designed to create lasting value for shareholders. Over the coming months, our team is focused on executing across four main growth pillars. First, we recently announced the engagement of Maxim Group to assist in identifying potential strategic alternatives for the company's Indian joint venture, CoSara Diagnostics, which may include a merger with a Special Purpose Acquisition Company, or SPAC, or similar entity listed on a U.S. National Securities Exchange. We believe such a transaction may unlock value from our joint venture project in India and support our long-term funding strategy. Second, the CoMira joint venture with Arabian Eagle, which marks the next step in our international expansion and commercial footprint as we expand our presence in Saudi Arabia and 18 additional MENA nations. Third, our AI business unit, which is driving innovation, operational efficiency and new data-driven opportunities. And finally, the initiation of our upcoming upper respiratory multiplex test clinical evaluations, which highlights our scientific leadership and reinforces our domestic credibility. Together, these initiatives form a complete and aligned strategy focused on financial strength, global reach, technological innovation and disciplined execution. This is how we are approaching the remainder of 2025 and preparing the foundation for 2026 and beyond. This period represents a key inflection point for Co-Diagnostics and reflects years of execution to reach this stage of momentum and readiness. With that context in mind, let's begin with the first and most time-sensitive development, the SPAC. One of the most exciting updates is our planned CoSara SPAC transaction with Maxim Group. This is a major step that we believe can unlock real value for both our operations in India and for Co-Diagnostics as a whole. The funds raised in this transaction are expected to represent a significant infusion of growth capital for CoSara operations in India and to increase Co-Diagnostics' value as well. Preparation for the transaction is progressing according to plan, and we expect to share updates on this project over the next several weeks and months. Combined with recent fundraising activities, this transaction has the potential to provide both flexibility and financial stability as we move into 2026 and begin commercialization of the new platform. This is a proactive step that has the potential to strengthen our balance sheet and create a clear path toward long-term sustainable value creation for our shareholders. I look forward to providing more updates on this transaction as they occur. Shifting focus, the next major component of our growth strategy is the CoMira joint venture. Our recently announced joint venture with Arabian Eagle Manufacturing has led to the formation of a new company named, CoMira Diagnostics, which, along with CoSara will stand as one of the cornerstones of our international expansion strategy. The principles of Arabian Eagle ran the primary distributor in the Middle East and were instrumental in Kingdom of Saudi Arabia, or KSA, being one of the largest international markets for the company's Logix Smart Test. Under the terms of the definitive agreement signed in the KSA, we have established CoMira to localize our Co-Dx PCR platform and other PCR-related intellectual property across the Middle East and North Africa. The partnership covers 19 countries, creating a significant commercial footprint in a high-growth region. CoMira will be headquartered in Riyadh with a dedicated manufacturing and assembly facility designed to produce PCR tests for infectious diseases and other applications relevant to the region's healthcare needs. The venture will initially focus on local manufacturing and distribution of the Co-Dx PCR platform with plans to expand into custom assay development and AI-enhanced diagnostics. The initiative aligns with the KSA's Saudi Vision 2030, supporting technology localization, industrial diversification and regional healthcare innovation. The regulatory pathway is anchored in obtaining Saudi Food and Drug Authority, SFDA clearance to facilitate regional distribution and regulatory acceptance across other MENA markets. CoMira will combine Co-Diagnostics molecular testing technology with Arabian Eagle's expertise in regional operations, infrastructure and local market access. The agreement marks a major step in localizing advanced molecular diagnostics within the Middle East and positions Co-Diagnostics as a strategic partner in regional public health resilience. This milestone demonstrates that our international growth strategy has advanced from concept to execution and reflects the strong high-value partnerships we continue to build globally. While this global initiative expands our reach outside the United States, we remain equally focused on commercialization and on advancing innovation through our AI business unit and other technology-driven initiatives. Another key part of our strategy is our new AI business unit, led by our Chief Technology and AI Officer, Christopher Thurston. This team is bringing all our current and future AI projects under one umbrella, the Co-Dx Primer AI platform. Additionally, our AI business unit is designed to accelerate the development of proprietary AI-powered diagnostics, enhance data analytics and improve operational efficiency across the organization. Integrating AI into our workflows will enable faster, smarter and more scalable testing processes while minimizing human error and improving efficiency at the point of care. These tools will support real-time PCR diagnostics, advance Co-Primers design and optimization and automate interpretation to improve outcomes in both lab and field environments. Our AI models are also being designed to deliver predictive epidemiological insights, giving healthcare providers and public health authorities earlier warning signals and improve situational awareness during potential outbreaks. Over time, the system is expected to leverage analytics from widespread deployment of the Co-Dx PCR Pro to anticipate disease patterns and possibly predict outbreaks before they occur. As necessary, some of these models will be built on a secure HIPAA-compliant cloud platform with a new business unit formed to integrate internal data, workflow orchestration and AI-driven analysis into a single cohesive framework. This initiative underscores our commitment to staying at the forefront of innovation by combining advanced AI technology with our proven PCR expertise. Importantly, this program will position Co-Diagnostics to participate in one of the most dynamic growth areas in healthcare technology while building valuable new intellectual property and data assets. This is not simply an upgrade to existing systems. It is a transformational step that redefines what diagnostics can achieve in speed, accuracy and real-time intelligence. As we continue to innovate technologically, we are also executing scientifically through our flu A, B, COVID-19 and RSV multiplex test clinical evaluation program, which further validates our progress and credibility in core diagnostics. We are preparing to initiate clinical evaluations for the upper respiratory multiplex test in the immediate future, a key milestone for Co-Diagnostics. This test is designed to simultaneously detect flu A, flu B, COVID-19 and RSV, making it the most comprehensive respiratory panel in our portfolio. Test has been supported by a RADx Tech grant from the National Institutes of Health, or NIH, underscoring both the credibility and importance of this work. RADx Tech program was created to accelerate innovation in diagnostic testing and our participation validates the strength of our technology and its public health relevance. This trial represents the culmination of extensive planning and development and marks the first Co-Dx multi-pathogen test to enter human clinical evaluation. The upper respiratory panel addresses a critical need in the domestic market by combining accuracy, speed and multiplex capability within a single point-of-care platform. And we are pleased to be delivering on our commitment to initiate clinical evaluations in this flu season. The data from this trial will be used to support future regulatory submissions and commercial readiness for the U.S. market and potentially for regulatory submissions in other markets as well, such as the SFDA in parallel with the U.S. FDA submission. Initiating this study is a major step forward for our domestic business and a meaningful validation of our scientific and technical leadership. This test has generated consistent interest from both investors and potential partners, particularly those focused on high-volume U.S. respiratory testing demand. The global market size for infectious disease diagnostics is expected to grow to $73.56 billion by 2030, and the demand for rapid accurate point-of-care diagnostics is driving an expanded opportunity for multiplex tests in the infectious disease testing market. The largest single geographical market for these tests is in North America, although the market for respiratory infectious disease testing in the Middle East is also expanding. This is largely influenced by substantial investments in the Kingdom of Saudi Arabia and the KSA's commitment to improving public health in alignment with the Saudi Vision 2030 program. This program represents a rigorous NIH-supported multiplex evaluation with strong commercial potential and is a key component in reinforcing our reputation for execution and reliability within the diagnostics industry. In short, this milestone demonstrates Co-Diagnostics is executing, not just planning and delivering tangible scientific progress that supports both near-term and long-term growth. Looking at our other programs like Co-Dx PCR MTB or tuberculosis test and Co-Dx PCR HPV8-type multiplex test, both remain on track to initiate clinical evaluations before year-end, as stated in previous communications. Both tests have been supported by grants from the Bill & Melinda Gates Foundation and are anticipated to significantly contribute to our international expansion ambitions and represent key components in our goals to provide gold standard solutions for unmet needs in various markets that are only anticipated to expand over the coming years. We believe that the introduction of competitively priced diagnostics into markets anxious to gain the upper hand against the spread of deadly and often devastating infections will position Co-Dx as a leader in innovation and point-of-care PCR diagnostics. Taken together, the initiatives we have discussed today, including the CoSara SPAC transaction, the CoMira joint venture, the launch of our AI business unit, the imminent domestic clinical evaluations and the upcoming clinical evaluations of the other tests in our pipeline all reflect the significant progress Co-Diagnostics has made over the past several months. Each of these milestones strengthens a different part of our business from capital structure and international growth to innovation and scientific validation. Collectively, they demonstrate that our strategy is working, our execution is on track and our team remains focused on creating lasting value for shareholders. Over the last 2 months, we also closed two strategic direct offerings totaling gross proceeds of $10.8 million. We are entering the next phase of growth from a position of strength, supported by a robust balance sheet, a growing pipeline and a clear path toward both near-term and long-term milestones. With that, I'll now turn the call over to Brian Brown, our Chief Financial Officer, to provide an update on our financial performance and outlook. Brian Brown: Thanks, Dwight, and thank you to everyone who joined today's call. For the quarter, total revenue was $0.1 million compared to $0.6 million in the same period last year. In the prior year period, revenue from grants represented approximately $0.4 million, while in Q3 2025, all revenue recognized came from product sales. Total operating expenses for Q3 2025 decreased to $7.1 million compared to $10.6 million in Q3 2024. This reduction reflects our continued focus on becoming more operationally efficient. Research and development expenses were $4.5 million compared to $4.9 million in the prior year comparable period. Net loss for Q3 2025 was $5.9 million or a loss of $0.16 per fully diluted share compared to a $9.7 million loss or $0.32 per fully diluted share in the same period last year. Adjusted EBITDA was a loss of $6.3 million in Q3 2025 compared to a loss of $8.8 million in Q3 2024. We ended the quarter with $11.4 million in cash, cash equivalents and marketable investment securities. As always, we are carefully managing our spending to maintain a healthy balance sheet while positioning the company for commercialization. Throughout the year, we will continue to optimize our operating footprint to drive efficiency gains and cost savings. In addition to the strategies outlined by Dwight earlier, we plan to meet other capital requirements through a combination of equity and debt financing, additional grant funding and continued operational efficiencies. We are also evaluating other financing structures to strengthen our financial position and maintain flexibility. In parallel, we continue to pursue grant funding opportunities to support the advancement of our Co-Dx PCR platform. In the near term, our focus remains on progressing our development pipeline, completing clinical evaluations and preparing for regulatory submissions. We are allocating our resources and time strategically to support these priorities. Looking ahead, we are optimistic about multiple commercial launches expected in 2026 and the ongoing development within our test pipeline. I look forward to sharing additional updates and milestones on our next call. With that, I will now turn the time back over to Dwight. Dwight Egan: Thank you, Brian. To close, we want to extend our gratitude to Co-Diagnostics' shareholders and to our employees whose consistent dedication and hard work is one of our most valuable assets to achieving the Co-Dx vision. Let's now open the line up for questions. Operator? Operator: [Operator Instructions] Your first question comes from the line of [ Katherine Degen ] with H.C. Wainwright. Unknown Analyst: This is [ Katherine ] on for Yi. My question centers around performance of CoSara and CoMira. For CoSara, are they meeting your performance expectations? And if not, what's causing that discrepancy? And how do you kind of expect CoMira to perform financially in comparison? Dwight Egan: [ Katherine, ] thank you for the question. With respect to the performance of both CoSara and CoMira, we're very pleased with the performance of both of those entities. Keep in mind that the CoMira entity is newly formed, and it was formed with leadership from previous interactions that we have had from a business standpoint with the distributors of our product in Saudi Arabia. Saudi Arabia has been consistently the largest international customer for Co-Diagnostics. And so it made a lot of sense for us to establish a joint venture where we could participate more actively in the forward-going opportunity in Saudi Arabia, especially as it revolves around the introduction of our new and revolutionary point-of-care device, the Co-Dx PCR Pro. So they played a huge role in what we're doing and what we have been doing for the last several years at Co-Diagnostics, and we expect that they will be a wonderful partner to this joint venture in moving our agenda forward in what, again, has been our largest international customer. With respect to CoSara, we have been involved in this joint venture with CoSara for about 8 years, we have established a real solid footprint in that country. We have sales personnel that cover largely the entire country. We have significant manufacturing operations there, mostly on the Sarabhai family properties where we established our first laboratory for manufacturing in 2019 when we cut the ribbon on that facility. And then last December, if you'll recall, we established on that same acreage, another more sophisticated property for the development of our oligonucleotides, which we can now produce there in country, and we'll continue to progress the manufacturing opportunity there so that they are manufacturing in connection with the Make it in India initiative of Prime Minister, Modi. They will be making the cups or the cartridges along with the instrumentation. And so we're very pleased with the kind of market development that has occurred over there. Co-Diagnostics is a real fan of the leadership of the Sarabhai family and the other scientists and workers have brought to our company in India. We are well respected in India at the government level, in the academic area and in being able to supply our products to lots of different labs throughout the country. So we have developed a mature business there that is now capable to kind of go off and bring additional value, both to the people at CoSara and also the people at Co-Diagnostics. We think this will be a mutual benefit to both entities, and we're very enthusiastic about our prospects there. Operator: Your next question comes from the line of Mike Okunewitch with Maxim Group. Michael Okunewitch: Congrats on all the great progress. I guess to kick things off, I'd just like to see if you could talk a little bit about how a potential spinout of CoSara might interact with the MTB and HPV point-of-care programs. Is this something where they might be licensed over or you get some sort of distribution agreement signed? I'm just curious since it seems like there's quite a significant market in India for these programs. Dwight Egan: Well, thanks for the question, Mike. Tuberculosis is a disease that is the #1 killer in terms of infectious diseases in the world. And about 25% roughly of those deaths are coming from India. And a similar number is coming from Africa. And so between those two areas of the world, you have about half of all the deaths from -- coming from tuberculosis and tuberculosis is something that is curable. So it's really a shame not to be able to diagnose it effectively and get people treatment because it can be cured if it's caught in time and properly dealt with the therapeutics. So we have a very concrete plan in India with respect to CoSara capitalizing on being able to fill the gap between where they currently have access to PCR tests and where they need to have access. I don't think there's any credible key opinion leader in the world that believes that the main -- that doesn't believe that the main solution to that problem of tuberculosis comes from replacing smear microscopy, which is about 125-year-old diagnostic tool, replacing that with molecular diagnostics is really what has to happen. And in order to make that happen, you have to have a product that has accessibility, that has the kind of accuracy that molecular has, and it also is something that you have to be able to get it down to the end of the row. You can't make it too unaffordable. So we are the -- we -- in our mind, the perfect solution to being able to fill that gap between where they currently have -- and it's not a lot of places, but where they currently have molecular diagnostics and where it will be able to be taken by virtue of the new accessible, affordable and accurate solution that we have. So that applies both to tuberculosis and the human papillomavirus, which has a large presence in India. And I don't want you to think of India or Africa as being just TB and MTB markets. They have a lot of other issues that need to be addressed, and we intend to make those part of what we're addressing in these joint ventures and in the forthcoming transaction that we anticipate and hope for, for CoSara. Brian Brown: Mike, if I can add something, this is Brian. We are talking about different structures internally and what this might look like, but we don't have anything concrete to share to the market, and we will as we move forward in the process. Michael Okunewitch: I appreciate the additional color here. I did want to follow up just on the angle of affordability and in particular, for the PCR Pro, I want to see if you could give a little bit more color on how you're actually able to reach a price point that is so much more affordable than your competitors. Does this have something to do with Co-Primers allowing you to use a more -- less complex device? Any additional clarity you could provide on that would be helpful. Dwight Egan: Again, an excellent question, Mike. And I think one of the reasons that we're able to produce a product at the price point that we've done is that's what we set out to do initially. Shortly after the COVID pandemic kicked in, we looked forward saying, where is this going to go? And we brought in a very, very good team of engineers that -- and scientists with the express idea that they would create a product that could have a price point potentially as low as about $300 to $500 at scale. And that's been our goal from the beginning. And one of the remarkable things about the research and development of this product is that in the large measure, we've been able to keep a lid on what we think we will be able to produce this for at scale. And so as to whether other companies, why they haven't been able to do this, I think some of that has to do with the fact that they were making boxes before we even existed. And so they didn't really come at it with a fresh open, clean slate like we did. And so we had certain important discrete goals that we wanted to accomplish as we set out to engineer both scientifically and mechanically this wonderful device. Of course, Co-Primers play a role in the effectiveness of the assays, but that -- the Co-Primer advantages revolve mainly around its ability to multiplex. So for instance, when you look at the human papillomavirus, this is an 8-plex test for certain specific cancer markers associated with human papillomavirus, plus a ninth marker that is a human DNA control. So that's where Co-Primers kick in. They allow us to do this sort of multiplexing in a class by ourselves because of the way Co-Primers get rid of the formulation of primer-dimers. So I think that's the kind of guidance I could give you and the information about why we've been able to hold the price line. And if you can't make the product at a price point that's relevant to the people that you're trying to serve, it doesn't matter. So we've really held the lid on that. We're excited to take it into the market. There's a huge gap. Michael Okunewitch: Absolutely. And then one more for me, if you don't mind, and I'll hop back into the queue. When looking at the CoMira JV in Saudi Arabia and the Middle East, are there any particular products, particularly from the PCR Pro that you believe are most relevant for that market? Dwight Egan: I believe that all of our current pipeline are very relevant to the CoMira market. It's not just tuberculosis and HPV. It also includes the #1 problem in infectious disease. It's not the most deadly, but it's the most cases, and that's the upper respiratory. So our flu A, B plus COVID plus RSV is a very, very important test for that market as well. And then that's just the beginning. We'll continue to develop more and more. Operator: That concludes our question-and-answer session. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Luminar Third Quarter 2025 earnings call [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Yarden Amsalem, Head of Investor Relations. Yarden Amsalem: Thank you, Josh, and welcome, everyone. With me today are Paul Ricci, Luminar's Chief Executive Officer; and Tom Fennimore, our Chief Financial Officer. As a quick reminder, you can find the press release and presentation that accompany this call at investor.luminartech.com. In a moment, you will hear remarks from Paul and Tom, followed by a Q&A session. Before we begin the prepared remarks and Q&A, let me remind everyone that during the call, you may refer to GAAP and non-GAAP financial measures. Today's discussion also contains forward-looking statements based on the environment as we see it today. And as such, it does not include risks and uncertainties. Please refer to our press release and presentation for more information on the specific risk factors that could cause actual results to differ materially. With that, I'd like to introduce Luminar's CEO, Paul Ricci. Paul Ricci: Good afternoon, everyone, and thank you for joining us. This has been a pivotal and challenging quarter for Luminar including the developments we disclosed in our 8-K a few weeks ago. We're now taking deliberate action to reposition the company, and I want to begin by addressing a few items directly. First, on our capital structure, we've entered into forbearance agreements with the majority of our secured noteholders, which run through November 24. We anticipate further extensions as we continue to negotiate with our secured noteholders towards a longer-term solution to our capital structure and liquidity needs. During this period, our 2025 financial guidance remains suspended. We've also paused usage of our equity finance, credit and preferred stock programs while we work toward a comprehensive solution. We may decide to resume use of these programs in the future depending on developments. As previously disclosed, we've also received and are evaluating multiple preliminary proposals and indications of interest to purchase the entire company as well as certain of its assets and business lines. We have added Patricia Ferrari and Elizabeth Abrams as independent directors to support our efforts. Together, Ms. Ferrari and Ms. Abrams bring extensive experience in banking, finance and restructuring advisory work. In addition, this will be Tom Fennimore's final quarter with Luminar as CFO. Tom has worked tirelessly with me over the past 6 months and I'm appreciative of all the contributions he's made during his time here and wish him the best in his next chapter. I also want to take a moment to welcome our new CFO, Tom Beaudoin. Tom brings more than 4 decades of financial and operational leadership across both public and private technology companies. Tom and I work side-by-side for many years in building Nuance, and I'm delighted to be working again with him here at Luminar. On the business front, we are managing continued challenges in our automotive LiDAR business. As disclosed, the future course of our relationship with Volvo will depend on the outcome of ongoing processes. We've made a claim for damages and paused further production commitments of Iris units pending resolution. We remain in dialogue with Volvo and are hopeful we can reach an agreement on a path forward. At the same time, we have advanced the strategic shift we outlined last quarter. We're pursuing nonautomotive markets more deliberately in elevating the role of our LSI Photonics business where we see continued progress. Over the past several months, momentum has continued to build across both Luminar and LSI, especially in aerospace and defense, where our technology addresses mission-critical sensing and National Photonics needs. These developments reinforce our belief that this strategic direction better positions Luminar for the years ahead. I'll speak more to that progress in a moment. But first, let me turn to customer updates. Starting with Volvo, the uncertain status of that relationship will reduce or perhaps eliminate the expected volume and revenues from the EX90 and ES90 programs. But given the unfavorable economics of Iris sales to Volvo at these depressed volume levels, this change also will help our cash flow and gross losses. We're continuing the dialogue with Volvo and we'll provide updates when there is more to share. Regarding Mercedes, we do not anticipate further development activity under the current Halo development contract although our technology remains under evaluation for future programs. Finally, our relationship with Nissan continues to advance as we remain focused on meeting their hardware and software program milestones and delivering the quality and performance they require. Taken together, the developments of Volvo and Mercedes reflects broader industry conditions including extended time lines for L3 ADAS program readiness and award decisions. These dynamics reinforce the direction we outlined last quarter to move more deliberately to pursue commercial markets outside of automotive, where engagement and near-term opportunities continue to grow and particularly so in aerospace and defense applications. Luminar now works with nearly all major developments in terrestrial off-road autonomy, including Caterpillar, where we recently shipped the first design validation units as we progress towards start of production. We are also expanding into defense and industrial use cases. For example, Forterra, a leading autonomous mission systems company is currently using Iris on its off-road autonomy platforms. Our 1550-nanometer approach supports operations and conditions where stealth, detail and reliability are important. It captures a highly accurate 3D view of unstructured terrain and allow safe navigation without GPS, which is increasingly important as GPS jamming becomes more common. Beyond ground systems, we are seeing similar interest in aerial and marine applications. Our work with LAKE FUSION Technologies is an early example where Iris sensors are being used to help helicopter pilots identify power lines and other hazards. We're also supporting partners in marine autonomy for obstacle avoidance and precision positioning. Ultimately, these commercial, defense and industrial markets represent growing high-margin opportunities that validate the scalability of our technology. This connects directly to the progress we're seeing at LSI. As a reminder, LSI supplies photonics components subsystems and systems across aerospace, defense, industrial and medical markets, combining defense-grade reliability with chip scale innovation from concept to deployment. As a trusted U.S. supplier in export control domains, such as missile defense, quantum sensing, directed energy and optical communications, LSI is well positioned to benefit from strong tailwinds, driven by rising defense budgets, reshoring mandates and national security priorities. Given the LSI currently represents about 1/3 of Luminar's annual revenue, we believe is an underrecognized element of our business. Year-to-date, LSI has generated roughly $18 million in revenue, and we see a path for strong growth from here. And unlike the automotive business, which has proven to be a more unpredictable business, LSI benefits from stronger revenue visibility with a significant portion of its backlog tied to multiyear customer orders. With strong secular tailwinds, we believe LSI stands to build on this momentum over the next several years. Before turning it over to Tom to discuss Q3 results, I'd like to discuss our organization briefly. Where we are taking steps to align our cost base with our long-term goals. As previously discussed, as part of our ongoing realignment, we will reduce roughly 25% of our workforce by year-end. This was a difficult but necessary step to get the company the stability of requires. We expect a meaningful reduction in operating expense as a result of these actions beginning in 2026. Regarding the supply chain, we are currently reviewing our arrangements with our contract manufacturing partners. This is consistent with our broader effort to rightsize our cost structure and align our supply chain strategy with a lower volume environment in the near term. And with that, I'll hand it off to Tom to discuss Q3 results. Thomas J. Fennimore: Thank you, Paul. Revenue for the quarter came in at $18.7 million, up about 20% sequentially and 21% year-over-year. The increase in revenue during the quarter was primarily driven by 3 factors: First, we shipped roughly 5,400 Iris sensors in Q3 compared to 4,800 in Q2, with the vast majority of these shipments going to Volvo. Second, higher NRE revenue related to development work we are currently performing for our customers; and finally, a sequential increase in LSI revenue, as we've seen continued growth in defense and aerospace related spending. Further quarter, we reported a gross loss of negative $8.1 million on a GAAP basis and negative $7.3 million on a non-GAAP basis. Q3 gross loss improved sequentially, driven by a higher mix of NRE revenue lower inventory purchases following the previously discussed Volvo program pause as well as a lower warranty expense. This was partially offset by higher shipment of series production sensors and unfavorable economics. OpEx came in at $66.6 million on a GAAP basis and $43 million on a non-GAAP basis. Non-GAAP OpEx declined roughly 9% and $4 million relative to the prior quarter and 29% or $18 million relative to Q3 of last year. This decrease was driven primarily by lower R&D spend and continued progress on our cost actions. We ended the quarter with $74 million in cash and marketable securities, in line with the preliminary results shared a few weeks ago. As Paul noted, we have paused usage of our equity financing in preferred stock programs while we work towards a longer-term solution for our capital structure and liquidity needs. We may decide to resume use of these programs in the future depending upon developments. We are also actively evaluating multiple nonbinding preliminary proposals and indications of interest to purchase parts up or the entirety of the company. We will share updates on this when appropriate. Our change in Q3 was negative $34 million above the $31 million level from Q1. This was driven by lower proceeds from our equity financing program. Free cash flow for the quarter was roughly negative $48.5 million lower than the $53.8 million in Q2 and significantly below the $58.4 million from a year ago. I'll now turn it back to Paul for closing remarks. Paul Ricci: While this is undoubtedly a challenging period, we're approaching it with disciplined transparency and focus. We're deeply grateful to our employees, customers and partners for their continued commitment and trust as we navigate this transition. And we'll now take your questions. Operator: [Operator Instructions] Our first question comes from Winnie Dong with Deutsche Bank. Yan Dong: I was wondering if you can provide maybe a preliminary update on the direction of the strategic actions going forward. In the prepared remarks, it was said that you're evaluating potential to sale or partial sale of the company. Just wondering if there is any preliminary indication of interest and what you guys might be leaning forward? Paul Ricci: Yes. As we -- as I did comment in my moments ago, we have had interest in assets, business lines and in fact, the entire company and we're in the process of evaluating those as well as other financing interest in the company. Yan Dong: Okay. That's helpful. And then maybe in the meantime, in terms of your next-gen product development, is that put on hold? Or is that still behind you scenes like still progressing? Paul Ricci: No, it has not been put on hold. We've maintain critical engineering and related resources necessary to pursue the Halo architecture, which we've talked about in some detail in previous quarters. And that work continues unabated. Operator: [Operator Instructions] Our next question comes from Jash Patwa with JPMorgan Chase. Jash Patwa: I wanted to start with LSI. Could you maybe give us a sense of the size of the business, the intellectual property portfolio and the current momentum you're seeing with customers? I understand that LSI is the result of a series of acquisitions over the years. So I appreciate your perspective on how you think about the intrinsic value of that segment? And I have a follow-up. Paul Ricci: Well, I -- earlier in my comments, gave a little bit of indication of revenues year-to-date in LSI. Other than that, I can't comment terribly on the size, too much on the size. It is a growing business. It has deep technologies in various areas of Photonics that I mentioned in my comments. Those range from medical applications to industrial applications to military and defense applications. As I've indicated previously and again today, we think it's an under-recognized asset and kind of business line in our company. And we're doing the things necessary to accelerate growth in that business. And there has been, as I've mentioned, strategic interest in that business as well. Jash Patwa: Appreciate it. As a follow-up, while we appreciate all the detail on your automaker partnerships, I was hoping you could also share any updates on your relationships with platform partners like NVIDIA, is there a continued engagement on that front, especially in light of several major automakers recently announcing their L4 platforms in collaboration with these platform players? Paul Ricci: The company does continue to work with platform players. I don't have any updates on partnerships in that area today now. Operator: This concludes the conference. Thank you for your participation. You may now disconnect.
Operator: Greetings. Welcome to Alpha Cognition's Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Henry Du, Interim CFO. Thank you. You may begin. Henry Du: Thank you, Vaughn. Good afternoon, everyone, and thank you for joining us today for Alpha Cognition's Third Quarter Financial Results Conference Call. Today, after the close of the market, the company issued a press release announcing these results. On the call with me today are Alpha Cognition Chief Executive Officer, Michael McFadden; and Chief Operating Officer, Lauren D’Angelo. Today's call is being made available via the Investors section of the company's website at www.alphacognition.com. During the course of this call, the management may make certain forward-looking statements regarding future events and the company's future performance. These forward-looking statements reflect Alpha Cognition's current perspective on existing trends and information. Any such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in the Risk Factors section of the company's latest SEC filings. Actual results may differ materially from those projected in these forward-looking statements. For the benefit of those of you who may be listening to the replay, this call is being held and recorded on November 13, 2025. Since then, the company may have made additional announcements related to the topics discussed. Please reference the company's most recent press releases and current filings with the SEC. Alpha Cognition declines any obligation to update these forward-looking statements, except as required by applicable securities laws. I'll now turn the call over to Michael. Michael McFadden: Thank you, Henry. Good afternoon, everyone, and thanks for taking the time to join us on today's call. This call marks our second quarter of earnings following the commercial launch of ZUNVEYL for the treatment of mild to moderate Alzheimer's disease. The third quarter of 2025 was characterized by sales growth of ZUNVEYL, continued engagement in the long-term care segment of the market, additional pricing action on ZUNVEYL, progress with our business development partner, CMS Pharma, and additional publications that highlight ZUNVEYL data and the Alzheimer's market opportunity. Post close of the quarter, the company raised additional capital that strengthened its balance sheet and will allow the company to invest in a significant growth opportunity that has emerged with symptom management of Alzheimer's disease. The capital will be used to accelerate growth and invest in sales, marketing and research for ZUNVEYL in treating behavioral symptoms that often emerge with Alzheimer's. During the quarter, the company made substantial progress on our commercial launch. The sales and marketing team has made contacts with over 1,850 prescribers in the long-term care market, and we saw prescriptions written in over 500 nursing homes. Launch to date, we've seen duplicative prescriptions written in 70% of these nursing homes, which is a strong indicator of product trial. We expect new and duplicative home numbers to rise significantly in the coming quarters. Regarding clinical performance, ZUNVEYL appears to be performing well with anecdotal reports of cognition improvement, behavioral reduction or amelioration and continued limited reports of adverse events. Reported GI adverse events continue to be in the low single digits, indicative of a well-tolerated medication. One of the company's focuses in 2025 has been to share medical information that provides rationale for ZUNVEYL treatment of Alzheimer's. This quarter, the medical team had 7 abstracts accepted for publication with 3 poster presentations made to LTC Pharmacy at ASCP. This is the Association of Consultant Pharmacists in October. Two poster presentations were made to psychiatrists and neuroscientists at the Neuroscience Education Institute last week, and 2 poster presentations will be made to Alzheimer's researchers as the clinical trials for Alzheimer's Disease, or CTAD in December. Our medical team continues to publish compelling data in the Alzheimer's segment regarding cognition and behavioral symptoms. Regarding research and development, the company will initiate 2 studies in long-term care setting, one in Q4 of 2025 and one in Q1 of 2026. The 2 studies, which we call CONVERGE and BEACON will assess ZUNVEYL cognitive benefits, tolerability, effects on sleep and behaviors and utilization parameters like polypharmacy. These studies will provide critical data for ZUNVEYL, and the patient population for our commercialization focus. We anticipate CONVERGE will complete in Q3 of 2026 and BEACON will complete in Q4 2026. Both of these studies are lower-cost studies, which are accounted for in our current spend guidance for this year and in 2026. The company will also initiate a prospective registry trial in Q1 of 2026 called RESOLVE. That will provide valuable data on ZUNVEYL efficacy in treating behaviors that occur with Alzheimer's disease. The trial will also assess ZUNVEYL tolerability and caregiver burden. These are important measures all providers consider when choosing a treatment. And we think the data will be instrumental for ZUNVEYL positioning with physicians and payers. More information will be communicated about the registry trial in Q1. From a business development perspective, our partner, CMS, filed in China for approval and the file was accepted for review. We anticipate the 18-month review process will apply to our application and the approval could occur at the end of 2026. We also continue to advance our sublingual formulation and anticipate formulation and tasting work to be completed in Q1 of 2026. The company plans to run a comparative PK study versus existing formulations, and we'll use this data as a basis for submission of an IND in Q3 of 2026. The company continues to manage our expenses judiciously while preparing to capitalize on emerging opportunities in the long-term care market. Chief among these is optimally positioning ZUNVEYL, which has clinically meaningful benefits across both cognitive and behavioral symptoms associated with Alzheimer's. Lauren will discuss our commercialization process momentarily, but first, Henry will speak to the financials for the company. Henry? Henry Du: Thank you, Michael. Good afternoon, everyone, and thanks for joining us today. As I review our third quarter 2025 results, please refer to today's press release and Form 10-Q. So let's start with the numbers. For the quarter, we generated total revenue of $2.8 million, driven by $2.3 million in net product sales from our lead commercial product, ZUNVEYL, and $507,000 in licensing revenue from our collaboration with CMS. These results show encouragingly early traction and lay a solid foundation for scalable growth in the quarters ahead. Total operating expenses were $8.2 million, including $633,000 of cost of goods sold and cost of revenues and $7.5 million in operating expenses compared to $2.5 million of OpEx in Q3 of last year. The increase mainly reflects higher SG&A costs as we ramped up our commercial launch activities for ZUNVEYL and expanded our operations to support growth. That resulted in an operating loss of $5.3 million versus $2.5 million in the same period of 2024. Turning to net income performance. We reported a net loss of $1.3 million or $0.08 basic loss per share and $0.30 diluted loss per share compared with a net loss of $1.9 million or $0.31 per share basic and diluted last year. The improvement reflects a $3.7 million noncash gain from changes in the fair value of derivative liabilities, along with $378,000 in interest income for the quarter. Now moving on to the balance sheet, where we remain well capitalized. As of September 30, we held $35.4 million in unrestricted cash and cash equivalents, which does not include approximately $38 million in net proceeds raised in October through our equity offering and overallotment exercise. Combined, these resources provide a strong balance sheet and an operational runway that extends well into 2027, giving us the flexibility to execute on our commercial and corporate priorities with confidence. Lastly, a brief update on guidance. Looking ahead, while we're not providing formal revenue guidance today, we expect continued sequential growth in ZUNVEYL sales as awareness and payer access expand through 2026. From an expense perspective, we now expect full year 2025 operating expenses to be in the range of $28 million to $30 million. That's a reduction from prior guidance, reflecting our ongoing focus on cost discipline, operational efficiency and prudent resource allocation. Areas of concentration were contract negotiations, reassessment of marketing spend and delaying the hiring of certain positions that we believe will be more cost effective to outsource in the near term. So overall, the third quarter was a period of continued momentum, highlighted by steady revenue growth from ZUNVEYL and a solid financial position. We're encouraged by our early market progress. And as we look forward to the remainder of the year, our team remains focused on disciplined execution, sustainable growth and creating long-term value for our shareholders. Thank you. I will now turn the call over to Lauren to discuss commercial progress. Lauren? Lauren D’Angelo: Thanks, Henry. The third quarter reflected continued strong momentum in the U.S. rollout of ZUNVEYL within the long-term care market. Following a successful launch earlier this year, Q3 results show sustained acceleration in demand and prescriber adoption, reinforcing ZUNVEYL's growing role in Alzheimer's disease management. We delivered another quarter of robust growth. Ex-factory purchases rose 44% versus Q2, increasing from 2,640 to 3,808 bottles. The company believes this does reflect increased levels of inventory from multiple wholesalers and may have some impact on Q4 purchases. Demand sales bottles dispensed grew even faster, up 102% from quarter 2. Importantly, we are seeing double-digit growth month-over-month since June. Growth was broad-based across all regions, reflecting deeper facility engagement and rising prescriber confidence. Fulfillment rates remain high and patient titration and persistence continue to meet expectations. Our commercial footprint continues to expand rapidly. We engaged 2,038 homes in Q3, bringing our total reach launch to date to 2,942 unique homes. Of these, 605 homes have ordered ZUNVEYL with 70% of those homes repeat ordering and 15% new orders in September. Additionally, we saw a 50-50 split between 5 milligrams and 10-milligram orders in Q3, which demonstrates the strong tolerability profile of our drug as patients are consistently able to reach the therapeutic dose, an outcome that has not been possible with current treatment options. Our field team directly engaged with 1,850 prescribers in Q3, bringing total launch-to-date engagements to 2,630. 576 prescribers wrote orders in Q3, a 55% increase from Q2 with 62% of them writing multiple orders, a strong signal of growing confidence in clinical fit. These metrics highlight deepening engagement and sustained momentum across our prescriber base. Market access continues to advance as planned. Following our national health plan agreement earlier this year, we focused on operationalizing coverage and expanding regional payer discussions. 2027 Medicare Part D submissions remain on track. For the planned contract previously announced, the company has seen 15% of business cover ZUNVEYL with no restriction. We have no additional visibility for this PBM regarding when other plans may make a formulary decision for ZUNVEYL. The company anticipates a second PBM payer contract to execute by the end of 2025, and anticipates that it will take 2 quarters to realize unrestricted coverage from that business. We also executed a strategic WACC adjustment to $820.15 per month, aligning pricing with ZUNVEYL differentiated value and CNS benchmarks. Payer feedback confirms the price remains competitive within long-term care formularies. Our field and operations teams remain fully deployed and highly effective with an average of 16 years of industry experience, including 10 years in long-term care, our reps are driving meaningful clinical education and adoption across this complex channel. We've maintained strong product availability and fulfillment rates. Operational learnings from payer interactions are streamlining prior authorization process, improving speed to therapy and patient access. We have expanded our reimbursement team to better support homes in processing prior authorizations, enabling closer alignment with customers and allowing us to anticipate and address challenges more quickly. The organization continues to execute with financial discipline, ensuring every pricing, promotional and resource decision supports long-term value creation. Our marketing remained focused on HCP education and brand reinforcement. Digital and in-person initiatives continue to emphasize ZUNVEYL's differentiated clinical profile, particularly its label consistent benefits across multiple behavioral domains measured by the neuropsychiatric inventory. Feedback on our refined clinical messaging and titration support toolkit has been highly positive, reinforcing prescriber confidence and proper initiation. As we enter Q4 and prepare for 2026, our priorities remain clear and consistent: expand ZUNVEYL's presence across additional long-term care homes, deepen relationships with high potential prescribers, optimize payer access and approval time lines and sustain disciplined execution across all functions. ZUNVEYL's accelerating adoption, durable demand growth and expanding payer access underscore our strong commercial foundation and exceptional team execution. We remain confident in our ability to drive continued growth and broaden access for patients and caregivers in the quarters ahead. With that, I'll turn it over to Michael. Michael McFadden: Thank you. In summary, the team is focused on execution, executing more calls with high-value HCP targets, managing the current restrictions with health plans and pulling through contracts with others. We're focused on increasing prescriptions by home and by prescriber to take advantage of the opportunity we see for ZUNVEYL in the long-term care segment. Our business development team has worked with our partner in Asia to file ZUNVEYL ahead of schedule and to deliver what we believe will be several 2026 approvals that will add additional revenues for the company. The company believes we have a disruptive opportunity with ZUNVEYL. Will focus in the next quarters on selling efforts and continued financial discipline. We'll now take questions. Operator? Operator: [Operator Instructions] Our first question comes from Ram Selvaraju from H.C. Wainwright. Unknown Analyst: This is Eduardo on for Ram. Thanks for all the color on the commercial development. I was -- it was tough to catch all the information. I was hoping to go back to what's the current status of contracting discussions? And how many GPOs have reached the agreement to cover ZUNVEYL? And you mentioned the second one. So I assume there's one, maybe the second one on the way by the end of the year. Just to add a little more color there. Lauren D’Angelo: Sure. No, absolutely. So we're highly, highly focused on all of the plans that matter in the long-term care setting. I think I've shared in past calls, there's 4 key Medicare plans, PBMs that we are hyper targeting. We have one of those under contract, as I mentioned in my last call, and we're now working the downstream accounts to ensure that they pick up coverage for ZUNVEYL. We expect -- we're in very close finalization with another contract, another one of those big PBMs. We expect to have that complete by the end of the quarter. And then as we look into Q1 and Q2, we're already focusing on those downstream accounts, having those regional payer calls to make sure they pull through the contract and cover ZUNVEYL. So when we look across these 4 plans, they're an equal split. I mean you can assume each plan covers about 25% of lives for long-term care. So we feel really good about where we're at right now, so close to just launching. We've got one. Now we have to pull that through. We hope to have another by the end of this quarter, and then we'll pull that through, obviously, in Q1 and Q2 of next year. And then, of course, we're still staying in tight negotiations with the other 2. Yes, that would be helpful. Unknown Analyst: Yes, that was really helpful. And you mentioned 15% coverage, 15 without restriction right now? Lauren D’Angelo: Yes. So what we have visibility to, so when you think about the plan that we signed last quarter, what happens is it takes 6 to 9 months for the downstream plans to adopt the contract. What we know is about 15% of those have adopted their processing claims for ZUNVEYL without any restriction. We don't have visibility into the other plans yet, and we'll start to see more of that over the next couple of quarters. Unknown Analyst: Got it. And then to get a little bit details on the -- you mentioned the number of unique prescribers for ZUNVEYL and the change there and how many of them, the breakdown between repeat and new prescribers? Lauren D’Angelo: Sure. So total launch to date -- well, actually, in Q3, we had 576 prescribers. And of those, 62% wrote multiple orders. If you look launch to date, when we look at the homes because the orders are coming out of the homes, we see 605 homes have ordered ZUNVEYL, 70% of those homes have repeat orders. But then 15% more are new homes that are prescribing in September at the final month of the quarter. So we're seeing a lot of repeat ordering. We're hearing about a lot of repeat ordering. But basically, the general consensus feedback from physicians is once they try -- they start off slow, they try the product. You got to give it a little bit of time. This is a frail elderly population. Once they start seeing results in 1 or 2 patients, they start writing quite a bit more. So it's kind of getting through that initial prescribing, trying the product, then they'll try a few more, and then it kind of starts to compound. So we're seeing quite a bit of repeat orders. I think importantly, Ram, what I mentioned when I was going over my section, not only are they writing quite a bit, but they're writing month-over-month, we're seeing double-digit growth. And they're getting to the 10-milligram dose. That's so key because if you look at the last 3 decades of these products, most of these patients are on a subtherapeutic dose. So they're able to titrate the patient. We've got half of our prescriptions on the 10-milligram dose. That's something we haven't seen in this market. And it's because the drug is working as it's intended. Unknown Analyst: Great. And if I could have one more on -- for the -- when do you expect to start -- this related to benzgalantamine royalty revenue from China? Michael McFadden: Yes, -- probably not until '27 from Mainland China, but we should have some smaller Asian countries obtain approval in 2026. And from those countries, we would be launching immediately upon approval. So the company would realize revenue in the quarter launch from each of those countries. Operator: Our next question comes from Boris Peaker with Titan Partners. Boris Peaker: Great. First, I just want to say congratulations on the excellent sales growth here. Maybe kind of speaking of that, could you comment on what are the key marketing messages that are maybe resonating with prescribers? And what is the most common pushback that you get? Lauren D’Angelo: It's a great question. So I will say that depending upon the stakeholder type, we have several different customers within the home that we're calling on. Certain key messages really resonate with that specific customer. But I would say, overall, we are hearing a lot of positive impact on ZUNVEYL's impact on behaviors. So as we've shared in quarters past, we have adjusted our messaging. We heard early on that prescribers were seeing a significant impact on patients who are having behaviors that are also obviously mild to moderate Alzheimer's patients. So we started really messaging that. We have label consistent data on ZUNVEYL that shows a significant benefit in behaviors. That's probably one of the most impactful messages that we're delivering. But also, I think many providers are very interested in the no impact on sleep. That's a significant key message for us. We knew that going into the launch because if you look at Donepezil, which, of course, is the market leader, it's highly associated with insomnia, sleep disorders, nightmares. And so that one is very much resonating because we're seeing a lot of our business coming from switches -- and a lot of that has to do with the no insomnia. So I would say those are our top 2 messages. But overall, I think the package of benefits that ZUNVEYL brings to the table is really valuable to all of these customers with this specific patient population. Boris Peaker: Great. And in terms of pushback? Lauren D’Angelo: Yes. No. So the pushback as it relates -- I wouldn't say we're getting any pushback from ZUNVEYL messaging per se. I think, obviously, one of our -- our main pushback is working through the payer obstacles, helping the prescriber and the homes process the prior authorizations when they are required. So from a messaging, drug working experience for ZUNVEYL, that is doing far better than we expected. I think our biggest pushback is how can we help support them in the prior authorization process so that the drug can get approved. And that's why we've really put an emphasis on growing our reimbursement support team. We've learned a ton in a very short amount of time how to ensure we can provide that support, and that's really where we're focused. So we've increased that team. We are aligning with providers. We are providing support so that they know how to complete the prior authorizations appropriately so that the drug gets approved. What I can say on that is if the [PA] is filled out appropriately, very, very high percentage of approvals. So that's really where our team is focused right now. Boris Peaker: Got it. And my last question, maybe on the WACC adjustment you were talking about. Can you please explain exactly maybe I missed the details of that and kind of what the impact is on the gross to net from that and kind of your revenue per patient? Lauren D’Angelo: Sure. So we took a price increase because what we were seeing is that when you look across the long-term care market, you look at CNS products, we really -- and payers reinforce that the product has got the value that we could take that price increase. So we've had no pushback with the price increase. As it relates to gross to net, we are still keeping our percentages very high. As we shared, we've got one contract. We've only seen about 15% offer with no restrictions. So we're still -- we still have very, very high GTN at this point. Michael, I don't know if you want to comment on that. Michael McFadden: Yes, I'll add. I assume a plus 9% short term on 9% on the impact of that price and at steady state, we still anticipate we'll have a $500 to $550 net price on ZUNVEYL. Henry Du: Yes. And I think in terms of percentages, GTN should be in the mid- to upper 20% discount just from a percentage standpoint. Operator: Our next question comes from David Storms with Stonegate. David Storms: I was hoping we could go back. You mentioned earlier that you're getting about 50% to the 10-milligram dosage. Could you spend a bit more time talking to maybe the difference in demand among the dosages and how that changes as prescribers get more comfortable with the product? Lauren D’Angelo: Sure. So when we launched the product, obviously, a significant amount were right off the [indiscernible] of 25 because you have to get them through the 4- to 8-week titration period, especially in this frail population. Most providers, they start low and go slow is kind of the motto within the nursing home. So we actually expected the ratio to shift more to the 50 milligram over time. We thought we would see more of that shift happening in Q4 and Q1 of next year. We figured it would take a lot longer to get providers comfortable to titrate them to the 10 milligrams because of the population. And for decades, they haven't been able to push the dose and the treatment options that were available. So we were pleased to see what's happening is because we've seen such a low AEs as providers have tried the product, they are definitely getting more comfortable titrating quickly, which is why we're seeing a 50-50 ratio in Q3, which is happening much faster than we expected. I don't know if that answers your question in terms of what we expected and prescriber confidence. But I think what we're seeing is physicians are trying it, obviously, at the starting dose. And once they get a few patients titrated to 10, they're definitely getting more comfortable -- you know what I mean, titrating other patients that they start a little bit quicker. So maybe not waiting 8 weeks, they're waiting 4 weeks. And so that's -- we're definitely seeing a faster acceleration to the 10s. It just speaks to the product's tolerability. Boris Peaker: Understood. And that's exactly what I was looking for that. And then just one more for me. Maybe how does the sales cycle look? You've been in the market for a couple of quarters now. Is the sales cycle shortening? Is maybe the prescriber interaction to order ratio, number of interactions declining to orders? Maybe any anecdotes of prescribers that have already been made aware of ZUNVEYL before the initial call, anything like that? Lauren D’Angelo: Sure. So right now, what we're seeing is we're definitely -- the way that it works with the launch, especially in long-term care is all providers are going to start flow. Even a provider that might have been a part of the studies, they will start with a couple of patients, see how it works and then they're going to obviously titrate, see how it works and then they're going to start expanding the patients that could potentially be a candidate for ZUNVEYL. We've seen that. Now what we are seeing is physicians who are starting to write a lot more, they accelerate quicker. So it's pretty much a slow start for everybody just given the vulnerable patient population and the fact they've been let down for decades in this class of drugs. And so once they get started, you start to see them increase their patient base more rapidly. So our focus right now from a sales perspective, because our homes are -- as I shared kind of during the call, many of them are repeat ordering. So 70% of our homes have repeat orders. That's a really high target or a really high metric for a launch brand in just 2 quarters. So we absolutely are seeing that for those providers who have tried it, they've given at time, there is a quicker sale call, obviously, for them to try it again and use it in more patients. But typically, that HCP naive patient who hasn't tried it, you're looking at -- it's a couple of months before you can get them to try it. And then obviously, they're going to wait. They're going to titrate. And so it's kind of that -- it takes a little bit before they're comfortable. Operator: Ladies and gentlemen, this now concludes our question-and-answer session and does conclude today's teleconference as well. We thank you for your participation. Please disconnect your lines, and have a wonderful day.
Operator: Good day, and welcome to the 5E Advanced Materials Earnings Conference Call. [Operator Instructions] After the prepared remarks we will open the floor for a question-and-answer session. Please note, today's call is being recorded. Before we begin, I would like to remind everyone that today's discussion will include forward-looking statements. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially. For more information on these risks, please refer to the company's filings with the Securities and Exchange Commission. 5E Advanced Materials undertakes no obligation to update or revise any forward-looking statements. At this time, I would like to turn the call over to Paul Weibel, Chief Executive Officer of 5E Advanced Material. Paul, please go ahead. Paul Weibel: Thank you, and good afternoon, everyone, and thank you for joining us today. Fiscal 2026 is shaping up to be a pivotal year for 5E, a year defined by momentum, achievement meaningful progress toward establishing ourselves as a leading U.S. borate producer. We've reached what is, for us, the most significant moment in both domestic borate market and the evolution of supportive U.S. policy. Boron, the fifth element on the periodic table is now officially recognized as a U.S. critical mineral. On November 7, the U.S. Geological Survey and the Department of the Interior formerly added boron to the final 2025 Critical Minerals list. That recognition is a major validation of our strategy, confirming what we've long advocated that boron is a cornerstone of America's energy policy, national defense and high-technology sectors, while also being essential to glass, ceramics and agriculture. There is a clear necessity to secure and maintain a reliable domestic borate supply chain and for the U.S. to remain an important global exporter of high-quality borates. 5E is a proud leader in the effort to maintain the United States position of strength in the borates market and with this designation, we believe it brings meaningful economic advantages that include expanded access to federal funding and financing as well as strategic partnerships that will accelerate the development path for Ford Cady. Before I dive deeper into what this means for 5E, let me summarize the quarter's key highlights. First and foremost, is that boron was added to the U.S. Critical Minerals list which confirms the importance of Ford Cady's positioning as the leading advanced stage boron project in the U.S. 2, the addition of boron to the list expands our eligibility for federal funding programs including USXM, the Department of Energy's Loan Programs Office, Department of Wars Office of Strategic Capital and the International Development Finance Corporation. 3, continued customer validation with full-scale product testing underway with multiple Tier 1 specialty glass manufacturers. 4, progress on feed engineering, supported by our application to the XM engineering multiplier program for a $10 million loan facility. And finally, we remain on track towards final investment decision in 2026. These achievements built directly on what we discussed during our year-end 2025 call. Our foundation is strong, our milestones are stacking and we're steadily moving towards construction readiness. Before turning to our progress, I want to briefly address the broader borates market because understanding that context helps highlight the opportunity 5E is stepping into. Legacy producers continue to face rising operating costs, decreasing grades and depleting reserves that have created a market opportunity for 5E a new generation boron company to be built on innovation, operating efficiency and long-term resilience. Market research, insight and customer discussions highlight a clear tightening of supply and demand in the borates market with an expectation of demand outpacing supply. Demand for borate materials continues to accelerate across EVs, wind, nuclear energy, semiconductors, defense applications, ceramics and specialty glass, exactly where Boron's thermal, optical, density and hardness properties are essential. 5E is uniquely positioned to step in and fill the market deficit with a project that has logistical advantages and a flow sheet and process that is modern, low cost and high value underpinned by resilient domestic boron supply that supports both commercial and national priorities. Market participants are increasingly viewing 5E as a strategic partner for the future. When combined with the U.S. Critical Minerals designation, these market dynamics further strengthens 5E's position and reinforce Ford Cady's importance to the U.S. supply chain security. As the only pure-play U.S. advanced stage domestic boron asset, Ford Cady now qualifies for several federal funding and grant programs designed to rebuild American mineral supply chains. These include the U.S. export import bank, where 5E already holds a $285 million letter of interest under the Make more in America initiative a program specifically created to support U.S. manufacturing exports, infrastructure and supply chains. XM's engineering multiplier program, where we have applied for a $10 million loan that has the possibility to finance a significant portion of our feed activities on a non-diluted basis. The Office of Strategic Capital and the U.S. Development Finance Corporation, where Executive Order 14241 to find a mineral largely with reference to the USGS list. The executive order delegates the Defense Production Act, lending and investment authorities to the Secretary of War and the CEO of the DFC and requires the establishment of certain mineral funding mechanisms including the Department of War Office of Strategic Capital. The 1 big beautiful Bill Act of 2025, authorized $5 billion for investments in critical mineral supply chains -- sorry, $5 billion for investments in critical mineral supply chains made pursuant to the industrial base fund and up to $100 billion in principal amount of direct loans and guaranteed loans for critical minerals and relative industries and projects. The Department of Energy's loan program office, where in addition to Title 17, the innovative energy and innovative supply chain prongs are enhanced by this designation given the explicit reference to the statutory reference of critical minerals being the USGS list. 5E is ideally positioned to benefit as a shovel-ready advanced stage project aligned with national priorities. Access to these programs has the potential to strengthen our balance sheet reduce equity dilution and accelerate execution. That's a direct result of the federal government recognizing what we've built and our strategic domestic resources and reserves ready to move into production. Operationally, our team continues to execute with precision, maintaining strong alignment with our milestones and reinforcing the quality of our technical and commercial foundation. As we discussed last quarter, our pre-feasibility study confirms strong project economics, a 39.5 year mine life and 19.2% pretax IRR and a pretax NPV of $725 million for only Phase 1 of the -- Ford Cady project. Those fundamentals continue to anchor our forward plan. We've now successfully qualified our high-purity boric acid with multiple customers across sectors, including specialty glass, fiber glass, ceramics, agriculture, defense and advanced materials. Most notably, we have advanced to full-scale testing and furnace trials with a Tier 1 specialty glass manufacturer, following the successful shipment of 20 tons of boric acid from the Port of Los Angeles to Taiwan, I can confirm that as of last week, the shipment had arrived in Taiwan and will be deployed in a live testing environment in the near term. Additionally, we supplied an additional 1,000 pounds of boric acid to a domestic boron carbide manufacturer. China currently controls much of the boron carbide supply chain, and we're excited to do our part in reassuring domestic boron carbide production as it is critical to our national defense. On the back of the 20-ton shipment, we're also preparing additional product shipments for other LCD glass producers, reinforcing both the scalability and reliability of our operation. Each one of these milestones build customer trust and advances us towards long-term offtake agreements, a key bridge between development and commercial operations. Looking at the market opportunity, the critical minerals designation aligns perfectly with broader U.S. industrial policy. Boron is essential to technologies that support advanced manufacturing and enable the energy policy objectives. Everything from permanent magnets, semiconductors, EVs, wind turbines and defense armor systems to advanced glass and composites, which 5E position as a strategic enabler within multiple national frameworks. From a development standpoint, our trajectory remains clear. We are nearing completion of field ready engineering deliverables, advancing strategic financing discussions and negotiating offtake terms. Each step brings us closer to our goal of a 2026 final investment decision. As we move through these milestones, our goal remains consistent with what I outlined in our previous call. To progress methodically derisk every stage and build a capital structure that supports long-term value creation. The remainder of fiscal year 2026 will be focused on 3 primary priorities: 1, securing non-dilutive U.S. capital support through XM, OSC, DFC and DOE programs. While skeptics may have heard this previously from 5E, the [ RESI ] designation is a major catalyst and milestone to having a much more broader and in-depth discussion on financing our project and providing access to larger pools of capital; 2, advancing customer agreements in commercial offtake contracts where we expect a more detailed negotiation to commence before year-end. And 3, executing a rigorous and diligently planned feed and brief FID work streams to ensure we are construction ready in 2026. Additionally, we have commenced the work stream to upgrade our mineral resource statement on the back of securing and recording the remaining federal load claims for the rest of the colemanite mineralization of the deposit. Further, we have begun steps to build a portfolio of intellectual property on our proprietary mining techniques and processing solutions. These steps position 5E to cement our mineral tenure for the long term, become the premier ISL borate producer in the United States and transition confidently into construction and, ultimately, commercial production, delivering long-term value for our shareholders and strengthening America's domestic mineral independents. In closing, this quarter truly represents an inflection point, one that underscores our growing momentum, validates our strategy and sets the stage for sustained growth and value creation. The federal recognition of boron as a critical mineral validates years of technical work, market engagement and policy advocacy. It affirms that what we're building at Ford Cady matters, not just commercially, but strategically. As I said on our last call, this is a story of proof, not potential. And now with federal alignment and growing customer attraction, we're proving that 5E is positioned to become America's trusted borate supplier of Advanced Materials. Thank you to our employees, partners and shareholders for your continued commitment. We're building something rare and a foundation for America's energy and Advanced Materials future. With that, we'll open up the call to any questions. Operator: [Operator Instructions] Our first question is coming from Tate Sullivan of the Maxim Group. Tate Sullivan: And Paul, congratulations on having boron beyond the critical mineral list, and [ also ] you highlighted the potential in your last call and how you were part of that process. So congratulations. Is part of being on that list, is there any word from -- or previous comments from the Defense Logistics Agency that boron that there may be government stockpile boron going forward? Or any boron derivatives? Paul Weibel: I think the trend has been to in the past, stockpile carbide on the USGS commodity summary, there was a pretty large award, maybe about 1 year, 1.5 years ago to a company through DPA for domestic production of boron carbide obviously, that's a supply chain that's dominated by China. That customer has reached out to a couple of the other borate producers kind of our understanding has been a bit ignored. And so we partnered with them went through the initial qualification process with smaller samples and now they are piloting production, looking to move to full scale and that was 1,000 pounds as part of that pilot process. And I think, listen, there's -- so to get back to your question, I think the stockpiling of carbide has occurred in the past not sure, if there's stockpiling right now, especially given what is happening on the midstream with that producer, but I think the plan is to ultimately get off of China and domesticate that supply chain. Tate Sullivan: And then separately in the 10-Q, I saw some language about the horizontal wells -- 2 horizontal wells that you're drilling. Is that for resource expansion and definition work? Is that for flow testing and have you started flow testing if that is part of the process? Paul Weibel: No, this is actually validating the commercial design. So we drilled in July into early August to horizontal lateral. So we had 4 injection recovery wells and about maybe each of those wells were going down to about 1,500 feet total depth vertically. And we have at about 1,080 feet below ground. We've sidetracked off those 2 wells with 1,500 foot laterals. We got a minor modification from EPA to get commission to do that. Our commercial mine plan contemplates 4,000-foot laterals. So we're kind of -- as you think about scaling and proof of concept. And so we've run about 6 or 7 cycles on those wells. And the results have been really good. One of the things that as we're coming up on 2 years of operating the small-scale facility here in January. And 1 of the things we saw with the vertical wells is you'd have head grades that would be consistently at 5% and then they jump to 7%, 8% and then back down to 3%. You had a bit of variance. And from a geology perspective, our deposit was a late millions of years ago and it evaporated and it's pretty homogeneous. It's about the mineralized zone is 1,300 to 1,500 feet underground. And that gives us the ability to take a horizontal well and run kind of for a couple of thousand feet through high-grade colemanite zones. So what has happened now as we've tested these wells, all samples, right from a head grade and boron percentage and solution, the variance has like gone away. And there's a much higher rate of efficiency from a mining process and that we're consistent. And as you think about your design going into feed engineering, the basis you're going to give your EPC contractor we now have a really high degree of confidence on what that bell curve looks like from a boron in solution percentage as well as our metal and purities and our calcium to boron ratio. So it really gives -- it just gives us a much better position to have a successful feed program and ultimately design a plant at commercial scale that's going to work. Operator: Our next question is coming from Heiko Ihle of HC Wainwright. Unknown Analyst: Paul, it's [ Chase ]. Heiko is on the plane right now listening to the webcast. Paul Weibel: No problem. Chase, how are you? Unknown Analyst: Great. Earlier on the call, you discussed several government programs that supported Boron. Can you give us some color on maybe the percentage or in dollar terms that you think we could see from such programs? It seems pretty pertinent given the long-term demand drivers are pretty obvious. Paul Weibel: Yes. Great question. Listen, I think now that you have this critical minerals designation, it really opens up all aspects of the capital structure from the loans to what you saw what happened with [indiscernible] where they came in and now they're a 10% shareholder and they did the preferred. So I think I would get asked previously at different conferences and as we're talking to investors, is that a possibility? And my kind of first response was, listen, we need to get the government to acknowledge boron as critical mineral. So now that we've done that, I think we can really have a much more in-depth discussion on, hey, what's the right loan we want to go after. We have the LOI with XM, but now you can kind of run parallel processes. As you go get the debt, and obviously, the debt helps geared IRRs. So you can optimize your cash flows through the loans, but then you can have the conversation about, hey, what does the balance of the equity look like? And could you have a conversation with OSC on potentially providing some of that capital. And so now on the back of that, like, I would say, like -- we have a $435 million capital estimate like that's the sky is the limit. In the interim, there's had a call today on we are a member of Cornerstone Consortium. What we're doing on the well field side is both innovative and just on an extent -- we're proving that the horizontal -- we know the vertical wells work. We're proving that the horizontal wells are actually a better design, and the results are already speaking for themselves. But hey, can we go get smaller wells now through cornerstone on the mining side. And I think on the back of some of these executive orders that kind of came out earlier in the year, now you're getting through CRs have been passed. You can -- people returning to their guests, you can actually go have those conversations. Unknown Analyst: Absolutely. One more question. You mentioned some of the fluctuating head grades on the call. From a geological point of view, what exactly is this based on? And how does it impact your internal model as you mentioned, having more clarity on the bell curve to see what's going on? Paul Weibel: Great technical question there. So when we say high grade we're talking about what's the boron percentage by weight in solution that's coming and being extracted from underground to surface. And so -- when we start an injection recovery cycle to go mine the bond, we're starting for our permit with 95% water, 5% hydrochloric acid. And just HCL, it's no different than the muriatic acid I put in my swimming pools as a conditioner. But that with the water and increases in temperature, creates the ability to leach the colemanite. And so when we inject, we let that then sit underground, what happens in that a 24- to 48-hour time period is that HCL reacts to colemanite and dissolves the minerals. And so when we come up above ground, what ends up happening is we catch multiple samples of solution. We send them to our lab on site, and we run an ICP analysis on that. And what happens is you can see what's your HCL concentration in that solution. And so when you -- before you injected, you started at 5%. And when we test in the lab, it's about 0.25% to 0.5% HCL. So that HCL has now been reactive and replaced with dissolved boron and solution. And because boron is super soluble, i.e. with temperature, the more you can dissolve the better head grade you can get, we -- you can supersaturate and outperform on the mining side. And so our base case assumes 9% to 10% head grade. We've proven the solubility curve out on the low end. And ultimately, what we're focusing here on the next like 1.5 month, 2 months is really bedding that out on the commercial design. So economics for the PFS remain intact. And I think we -- we've had some really initial good results, where we've gotten kind of right around that 7% head grade. And -- but we're limited today on the temperature we can actually inject at the small scale facility. And so one of the items, and this is kind of a teasing out like the next call is like we have downhole heaters on order. They're used in oil and gas and every day, they can get up to actually 300 degrees C. That's not the temperature we need to mine at. We're going to kind of hang it right around 160 to 180 degrees at. Operator: [Operator Instructions] Our next question is coming from Dmitry Silversteyn of Water Tower Research. Dmitry Silversteyn: Quick question. When you talk about -- you talked about one of your goals for 2026 is to secure offtake contracts and you're working right now to have your products trialed. Is there, in your mind, a sort of percentage of your annual production that you would like to have under offtake agreements and long-term contracts at what level would you feel comfortable deploying capital and how do you see maybe a steady-state business operating between offtake agreements and selling on the spot market? Paul Weibel: Great question, Dmitry. Glad to have you on the line. Yes, I think the first kind of group we proposed to, they were -- we pitched about 20% of our production, so about 24,000 metric tons. There's 2 or 3 other customers in queue. I think what we'd like to get to is a bankable portfolio that consists about 70% of our production under offtake agreement, maybe 75%. And then you want to take advantage of the spot market and specifically distribution because they are not bankable customers, but they ultimately do provide a higher price in the spot market, that's how you can -- there's boron is using 300-plus applications and the way you can kind of scale is ultimately through those distribution channels, where you have smaller participants buying it, but they're buying at much higher prices. And so from as we're thinking about that offtake portfolio, you target 70% of the 130,000 tons under contract and then you keep another 25% to 30% for the spot market. Understood. Dmitry Silversteyn: That's very helpful. And then just a point of clarification. When you talk about making the final decision by the end of 2026 or talking about offtake contracts by the end '26? Do you mean your fiscal year or the calendar year? Paul Weibel: Great question. So that was a reference to calendar year 2026. Operator: Thank you very much. Well, there are no further questions at this time. I will now turn the call back over to Paul for any closing remarks. Paul Weibel: Thank you, everyone, for your time, interest in dialing today for our Q1 2026 call. We have a tremendous opportunity in front of us to become the newest borate producer in the world. We have a proven asset and a strategy to modularly expand the asset over the next several years. We're looking forward to sharing this journey with all of you in the coming quarters, and thank you for dialing in. Have a great day. Operator: Thank you, Paul, and thank you to everyone for joining today's call. This concludes today's conference. You may now disconnect.
Operator: Welcome to the Atrium Mortgage Investment Corporation's Third Quarter Results Conference Call. [Operator Instructions] A reminder that this conference is being recorded Thursday, November 13, 2025. Certain statements will be made during this phone call that may be forward-looking statements. Although Atrium believes that such statements are based upon reasonable assumptions, actual results may differ materially. Forward-looking statements are based on the beliefs, estimates and opinions of Atrium's management on the date the statements are made. Atrium undertakes no obligation to update these forward-looking statements in the event that management's beliefs, estimates, opinions or other factors change. I would now like to turn the conference over to your host, Robert Goodall, CEO of Atrium. Mr. Goodall, please go ahead. Robert G. Goodall: Thank you for calling in today. Our interim CFO, Jeffrey Sherman, is on holiday, so our Senior Vice President of Finance, Chris Anastasopoulos will be speaking today. Chris will start by talking about our financial results, and then I'll speak about our performance from an operational and portfolio perspective. Chris? Unknown Executive: Thank you, Rob. Atrium continued to generate another strong quarter for shareholders amid a challenging economic environment. Atrium generated net income of $11.9 million in the third quarter, an increase of 2.5% over the prior year. Our basic and fully diluted earnings per share was $0.25 per share for the quarter, which continues to exceed our fixed dividend of $0.2325 per share. On a year-to-date basis, we generated $0.78 per share, again, ahead of our fixed dividend rate of $0.6975 per share. As expected, the average interest rate on the mortgage portfolio has decreased to 9.2% as at September 30, 2025, from 9.98% as at December 31, 2024. The decrease was largely driven by repayments of loans with higher yields compared to new loan originations and the impact of 325 basis point rate cuts by the Bank of Canada during the period with 2 in the first quarter and 1 in the third quarter, impacting floating interest rates. As at September 30, 2025, 83.2% of the mortgage portfolio was priced based on floating interest rates, with the majority having rate floors in place. The mortgage portfolio ended the third quarter at $917.3 million, which is an increase from $886.7 million at December 31, 2024. As at September 30, 2025, 96% of our mortgages were first mortgages, and we maintained a conservative average loan-to-value ratio of 60.8% for the portfolio, which decreased from 61.9% at December 31, 2024. Our allowance for mortgage losses was $29.5 million at the end of the third quarter, which is as a percentage of the mortgage portfolio represents a healthy 321 basis points. Stage 2 loans increased to $96.8 million at the end of the third quarter, up from $89.9 million at June 30, 2025, primarily due to the addition of 3 commercial loans totaling $40.7 million and $6.1 million of single-family loans. This was offset by 2 commercial loans totaling $13.5 million that migrated to Stage 3, and 3 commercial loans totaling $26.8 million that migrated to Stage 1. Stage 3 loans increased to $56.3 million at the end of the third quarter, up from $45.7 million at the end of the second quarter, primarily due to the addition of 2 commercial loans totaling $13.9 million and offset by $3.7 million of single-family loans that were either repaid or brought current. We continue to maintain a strong, liquid and well-capitalized balance sheet. As at September 30, 2025, balance sheet debt remained low at 41%, with $253 million drawn on our $340 million credit facility, leaving a healthy available capacity. The weighted average cost of borrowing on the credit facility was 5.14% for the third quarter, down from 6.96% in the prior year. Subsequent to quarter end, on October 22, we exercised our right to increase our credit facility by $40 million to $380 million, which underscores the confidence of our lenders. We are pleased to announce that PricewaterhouseCoopers has been appointed as our new auditors effective for the year ending December 31, 2025. In addition, we would like to provide an update on our press release issued on June 30, 2025, where our predecessor auditor was asked to complete remediation procedures identified by the Canadian Public Accountability Board. Atrium has been informed by the predecessor auditor that the remediation procedures have been completed and the audit opinions for Atrium's annual financial statements as at and for the years ended December 31, 2023 and 2024 are fully supported and no restatements are required. The third quarter continues our trend of strong financial performance for our shareholders this year. We continue to apply our disciplined risk management approach to new opportunities, manage our operating expenses and maintain a strong balance sheet to navigate the current economic cycle with confidence. I'll now pass you back to Rob for the business and portfolio updates. Robert G. Goodall: Thank you. As Chris said, Atrium MIC had a good quarter with basic earnings per share in Q3 of $0.25 compared to $0.28 last quarter. The reduced earnings were mostly due to a $1.63 million loan loss provision this quarter versus nil last quarter. Our 9-month results are $0.78 a share, virtually identical to last year and well ahead of our dividend. Overall, the portfolio was steady at $917 million versus $921 million last quarter. Loan advances were $63 million in the quarter and $287 million for the first 3 quarters of 2025, which is more than 23% ahead of last year's loan production. We're proud of this accomplishment given the lack of overall activity in the real estate markets across Canada. Loan repayments in Q3 were $65 million, which is very similar to the repayment level in Q2. For the first 9 months of 2025, we had annualized portfolio turnover of 36%, which is only slightly below our long-term turnover rate and is a sign of a healthy portfolio. We expect both new loan advances and repayments to be considerably higher in Q4. We continue to make good progress implementing CMCC strategy to increase our exposure to commercial loans and single-family mortgages. The commercial category has seen a net increase of $101 million over the last 12 months and has risen to 27.2% share of the portfolio, representing an 11% increase year-over-year. And the single-family and apartment category has risen to 19.1% of the total portfolio. These lower risk sectors now represent 46.3% of our total portfolio. In Q3, Atrium's average mortgage rate dropped to 9.2% from 9.3% last quarter, which reflects the 25 basis point drop in the prime rate of interest in September. The total of high ratio loans, that is loans over 75% loan-to-value was $52 million, equal to 5.7 of the total -- 5.7% of the total portfolio, and a little change from last quarter. This total is still well below a year ago when the balance was $79 million and roughly 9% of the portfolio. In addition, one $6.2 million high ratio loan was paid off shortly after quarter end, and another $5.7 million loan is scheduled to be repaid by the end of this month. In Q3, the average loan-to-value of the portfolio declined slightly from 61.2% last quarter to 60.8% in Q3, and continues to be well within our desired range of 65%. Atrium's percentage of first mortgages remained high at 96%, construction loans represented only 3.5% of the portfolio. Construction costs have become more stable in our target markets and are actually declining in the GTA, so we are now more willing to consider underwriting construction loans with experienced developers. We anticipate funding of $12.5 million loan with a well-known Toronto developer on a purpose-built rental project in Q4. Turning to portfolio quality. In Q3, the level of Stage 2 and Stage 3 loans increased slightly. Stage 2 loans increased from 9.8% last quarter to 10.6%, and Stage 3 loans increased from 5% to 6.1%. In the Stage 3 category, there are 6 commercial and multi-residential loans totaling $39.4 million. A $6.2 million loan was repaid shortly after the end of the quarter and another $5.7 million loan is expected to be repaid tomorrow. 100% of the principal and interest will be collected on both of those loans. And we expect that another 2 of the remaining loans in Stage 3 will be repaid before the end of Q4. There was many as 4 of the 6 commercial and multi-residential loans in Stage 3 are anticipated to be repaid in Q4 or very shortly thereafter. Turning to the loan loss reserve. We expensed a loan loss provision of $1.63 million in Q3 after having no loan loss expense in Q2. On a net basis, Atrium's total loan loss reserve increased marginally from $28.9 million last quarter to $29.5 million this quarter, equal to 321 basis points on the overall mortgage portfolio. With regard to our line of credit, we met with ATB Bank early in Q3 after they expressed an interest in joining our lender syndicate. At the meeting, they expressed a strong interest in participating for $40 million. They very quickly obtained approval. And on October 22, we closed the transaction. As a result, the committed amount of our line of credit has now increased from $340 million to $380 million, with only $20 million of the accordion remaining uncommitted. My economic commentary is as follows: economic data in Canada has improved recently with the unemployment rate dropping to 6.9% after 2 consecutive months of outsized employment gains in September and October. The Canadian economy had contracted 1.6% in the second quarter, led by a sharp pullback in exports and the preliminary estimate for Q3 is a 0.5% gain. The growth forecast for calendar 2025 is still tepid at 1.2%. Business investment is expected to remain weak as companies remain apprehensive until they have a better sense of the Canada-U.S. trade relationship. CPI in Canada rose to 2.4% in September from 1.9% last quarter. Headline inflation in the United States also accelerated to 3% in September. But both the Bank of Canada and the Fed dropped interest rates on October 29 by 25 basis points, suggesting they're more worried about economic growth in jobs than they are about inflation. But based on the recent employment guidance at Canada, it's unclear whether there will be more interest rate cuts in Canada this year. Turning to commercial real estate. After a period of weakness, the commercial real estate sectors across Canada has stabilized. According to CBRE, the national average all properties cap rate held flat in Q3 after dropping by just 1 basis point in Q2. Most commercial real estate sectors are actually performing quite well, including multiresidential, industrial, retail and seniors housing. The office sector continues to be weak, but there are signs of improvement, especially in downtown Toronto, as many large companies are requiring their employees to return to the office 4 to 5 days a week. Looking at the residential and multiresidential real estate markets, the sentiment of real estate developers and realtors in the GTA and the Greater Vancouver area is quite negative. First, looking at resales. In the GTA, resales in October were down 9.5% compared to October 24, but they were up from last month. The MLS composite benchmark was down 5% year-over-year in October and was flat on a month-over-month basis. In Metro Vancouver, it was much the same situation. Resales in October were down 14% on a year-over-year basis, and the home price index in Metro Vancouver was down 3.4% from a year earlier. Turning to new home sales. The new home market remains extremely slow. In the GTA, there were only 438 new home sales in September, which was down 29% on a year-over-year basis. Condominium sales were down 44% on a year-over-year basis, while single-family new homes were down 16% from the previous year. In the condo sector, the only good news is that the number of condominium units under construction and GTA has dropped sharply from a high of 108,000 units in 2023, to 61,000 units at the end of this last quarter, and to approximately 50,000 units by the end of 2025. Completions will decline from over 30,000 units this year to a more normal level of 18,000 units in 2026, and then dropped very sharply in 2027 when we expect the market to recover. In Vancouver, new sales were a little better. They totaled 1,200 units in Q3, but it was still down 46% from the previous quarter and 38% when compared to the same quarter last year. Sales decreased 55% in the pricier North of Fraser area, and by 35% in the more affordable South Fraser area compared to the previous quarter. Like the GTA, Vancouver has a lot of completions in 2025 and 2026 before falling to less than 10,000 units in 2027. The housing market clearly needs a resolution of the trade war and lower interest rates to improve consumer confidence. We believe that a sustained recovery in the housing market should occur in early 2027, when the number of project completion starts to drop sharply. To conclude, Atrium continued to perform well in a difficult real estate market. Our year-to-date earnings per share of $0.78 is almost identical to last year's results and well above our dividend. We made considerable progress on a number of fronts in Q3, including engaging PwC as our new auditors, increasing the committed amount of our line of credit by $40 million to $380 million to ensure ample liquidity, and fully recovering $12 million of principal and interest on 2 Stage 3 loans. One of the lessons I've learned over my 35-year banking career is that it's important to continue lending in a downturn, albeit as conservatively as possible. Our underwriting teams have done a great job of originating loans this year, and we're well above the volume funded over the same period in 2024. We intend to actively source new loan business in our target markets, while some of our private nonbank competitors are facing loan portfolio issues and/or redemption requests leaving them with limited financial capacity to generate new loan business. While conditions are difficult, Atrium's results to date have been strong as they consistently have been in past downturns. Our track record confirms that we know how to construct and manage a resilient loan portfolio in all stages of the market cycle. That's all for the presentation, but we'd be pleased to take any questions from the listeners. Operator: [Operator Instructions] First question is from Michael McHugh of TD Securities. Michael McHugh: Just first on sort of the portfolio growth front, obviously a bit of cautious sentiment. But you did mention that you expect both the originations and repayments to be a fair bit higher in Q4. Any commentary on sort of the outlook for portfolio size? And then within those originations, if that's going to be more focused on some of the lower risk sectors that you had mentioned? Robert G. Goodall: I think they will be in the lower risk sectors, although with repayments -- some of those repayments will also be in those same sectors. So it's difficult to know, but we're continuing to push hard to increase our -- as closer to that commercial and single-family area. We're expecting the portfolio size to increase. But we literally have about a month before the market sort of shut down for new fundings. So some of them are on the edge as to whether they'll be funded in December or at the beginning of January. So it's difficult to forecast, but we're thinking the portfolio will be up slightly. Michael McHugh: Okay. Great. That's very helpful. And then sort of to that end, obviously, you saw you upsize the credit facility. Any appetite at the moment to reenter the convertible market now that the audit is behind you? Robert G. Goodall: Yes. We're going to look at it very closely at the beginning of 2026, probably shortly after our Q4 financials or full year financials are completed and released in late February 2026. Michael McHugh: Great. And then I might just sneak 1 more in before requeuing. The average mortgage rate held up pretty well quarter-over-quarter in a more broadly declining rate environment. Any sort of commentary on dynamics there and what we can expect going forward, maybe rates on originations versus repayments as we move into a lower policy rate environment? Robert G. Goodall: I was saying to the Board yesterday, the irony is when you get rid of and dispose of the difficult loans, they've usually been on the books for 2 or 3 years, and they often have very high coupon rates. So a lot of the -- or some of the reduction that we've had over the last 9 months is because we've dealt with our problem loans. We haven't just kept them on our books and hope that time would solve the problem. We've actually dealt with them. And that caused a reduction in rate. No question every quarter. Also with rates probably staying and prime probably staying where it is for the rest of the year, and a couple of loans, quite frankly, in our Q right now of new loans to be funded that have pretty healthy coupons on them. We're thinking that the average rate will be steady. Operator: The next question is from Sid Rajeev of Fundamental Research Corp. Siddharth Rajeev: With 4 out of 6 loans in Stage 3 to be repaid in Q4 and Q1 mostly. Could you please provide some guidance on forecasting provisions and allowances in Q4? Robert G. Goodall: In Q4? Siddharth Rajeev: Yes. Robert G. Goodall: We tend not to do that. We're pleased with the way the portfolio looks. But -- it's a fairly weak market. So we're dealing with the Stage 2 and Stage 3 actively. But you never know if another loan is going to deteriorate and come into that. Right now, we feel good, as I say, about the portfolio, but we still got another 1.5 months in the quarter. And the real estate markets, as I say, particularly the housing market is pretty weak in Ontario and BC. Siddharth Rajeev: Okay. And then just 1 more question. You talked about interest rate being steady in the next quarter, likely. How are you pricing your current originations just to get your internal thoughts? Are you anticipating 1 more rate cut? Robert G. Goodall: Sorry, how are we pricing new business? Siddharth Rajeev: Yes. Robert G. Goodall: So we generally are still pricing new business at prime plus. And we obviously are not a prime plus 1 or prime plus 1.5 like a bank or a higher spread. And we try to institute floors. So, for instance, if we were a prime plus 3.5, that would be roughly, what, 8% today. Am I getting it right? 8% today. [ 45 plus 3.5 -- 3 -- 7.95 ]. So we would try and put in a floor of [ 7.95% ], depends how competitively bid the businesses, whether you can actually negotiate that and keep it. Siddharth Rajeev: Got it. I appreciate it. Robert G. Goodall: Because one of the reasons borrowers want floating is because they don't see rates moving up, and they see them possibly continuing to move down. Operator: [Operator Instructions]. It appears that there are no other questions at this time. I will now give the call back to Robert Goodall for closing statements. Robert G. Goodall: Okay. Thank you for attending our conference call. We're pleased with the results. I hope you are as well. And for existing shareholders, thank you for your continued support. Have a great day. Operator: Thank you for participating. This conference call has now concluded. Please hang up.
Operator: Greetings, and welcome to the Super League Third Quarter 2025 Conference Call. Please note, this conference is being recorded. Before we begin, I'd like to caution listeners that comments made by management during this call may include forward-looking statements within the meaning of applicable securities laws. These statements involve material risks and uncertainties, and actual results could differ from those projected in any forward-looking statements due to numerous factors. For a description of these risks and uncertainties, please see Super League's financial statements and MD&A for the third quarter ended September 30, 2025, available on EDGAR. Important qualifications regarding forward-looking statements are also contained in Super League's earnings release distributed earlier this afternoon and also available on EDGAR. Furthermore, the content of this conference call contains time-sensitive information accurate only as of today, November 13, 2025. Super League undertakes no obligation to revise or otherwise update any statements to reflect events or circumstances after the date of this call. I'd now like to turn the conference call over to Matt Edelman, President and Chief Executive Officer. Please go ahead, Matt. Matthew Edelman: I appreciate it. Thank you very much, and thank you to those who are joining us today. Today marks my third time speaking with shareholders, analysts, partners and others in this forum, and the second time I've reported on Super League's earnings. With confidence, I can say that Super League is in a stronger position to succeed now than at any point since pivoting our business into the gaming media space 4 years ago. Super League is stable and poised for growth from a fortified foundation. In April, when I started as CEO, Super League was facing a myriad of challenges. Today, we are a different company. In April, we needed to raise capital. As of October 28, we reported a final close on $20 million of financing in a private placement, which was the maximum amount approved by our shareholders. We are fully funded with no plans to go back to market other than for opportunistic growth. In April, we had a heavy debt load. As of last week, we have eliminated our debt. Our balance sheet is stronger than it has been in years. In April, we had a complex capitalization table with several layers of preferred shareholdings. We have streamlined our capital structure, creating renewed flexibility to be opportunistic towards the future. In April, we had 3 NASDAQ deficiencies. As of October 29, we are fully compliant with all NASDAQ listing requirements. And we now have a formidable lead investor in Evo Fund, whose strategic backing, including access to its global network and portfolio amplifies our ability to grow our core business and advance a forward looking digital asset strategy designed to unlock new economic value. Achieving profitability and increasing shareholder value remains our highest priority. We recognize that profitability is the foundation for growth and innovation. With the disciplined execution we've demonstrated recently and the new beginning now in place, we are confident in our ability to deliver that result. How will we get there? It starts by leaning into our expertise, which is enabling iconic brands and IP owners to engage the legions of consumers whose daily content consumption includes playing games. I'm not talking about just hardcore gamers who build their own PCs and spend all night collaborating with friends and strangers through a headset on how to win around or defeat an enemy. We help brands reach the 190 million U.S. consumers who play mobile games, Roblox, Fortnite, Minecraft and more. Our addressable audience enjoys Wordle, Subway Surfers and Candy Crush as much as Madden and Call of Duty. That's why we focus on the importance for brands to understand the cultural dominance of the psychology of play. The average member of Gen Z spends more daily time playing video games than they spend daily on all major social media platforms combined. 68% of Gen Z also watches gaming content on these platforms, representing about 30% of their video diet. When you see Super League partnership announcements about expansion into TikTok and Connected TV, now you know why. Even when consumers are not playing, those who love to play, engage more deeply with brands who appeal to that joy through playable ads and gamified content wherever it appears, compared to linear video ads and static billboards. This was reinforced when the International Advertising Bureau created a new measurement framework for gaming as well as through the overwhelming success of the first-ever Gaming Summit organized by Super League in partnership with Advertising Week at AWNewYork in October. Super League worked alongside leaders from L'Oreal, Publicis Media, YouGov and others to guide programming for a first of a kind -- first of its kind event spotlighting gaming's role in the marketing mix. Executives from Walmart, PepsiCo, WPP, Dentsu, Dave's Hot Chicken and more participated in a standing room only 4 hour showcase presenting the value effectiveness and scale within the gaming content and media space. With the Gaming Summit as a backdrop, our recent partnerships have set up Super League for business acceleration that can match our Profound corporate turnaround. With playable media consistently generating superior performance compared to linear ad formats, we partnered with Automatic Worlds, an advisory and investment firm founded by industry veterans, John Rosenberg and Dave Getson, they are the entrepreneurial duo behind g-NET agency, one of the gaming industry's most respected creative agencies. Their expertise in scaling marketing organizations and unlocking growth will elevate the rigor and reach of our go-to-market engine, strengthening client outcomes and creating durable value for our shareholders. We recently signed an exclusive partnership with ES3, a leading technology and media solutions company specializing in interactive content experiences for Connected TV or CTV, and traditional Pay TV environments. Super League will serve as the exclusive third-party sales partner for nGage, a gamified content module, but is activated through ads on CTV devices and platforms, and is designed to transform how brands and advertisers connect with streaming audiences. Our partnership with ES3 opens access to CTV budgets, with the total ad spend in the category projected to grow from $33 billion in 2025 to $47 billion by 2028, when it is expected to surpass traditional TV advertising for the first time, a nice new source of revenue diversification for Super League, aligned with our core business. Client highlights from the third quarter included one of our most compelling recent programs in partnership with Google. Together, we launched an update to their Be Internet Awesome world which we then advance further in October to become one of the first ever AI-themed gameplay experiences on Roblox. The new missions bring Google's AI literacy curriculum launched in September, to life through interactive standards aligned gameplay for grades 2 through 8. As an official agency partner to Google since 2024, we're proud to help one of the world's most influential brands lead the conversation around AI education and responsibility through the power of play. We also delivered a bold first of its kind campaign across both Fortnite Creative and Roblox with Panda Express and their creative agency, The Many. The activation demonstrates the power of playability to drive memorable brand engagement and transform a product launch into a hands-on shareable adventure. It also extends Super League successful track record and expertise within the quick-serve and fast casual restaurant sector, having previously partnered with Dave's Hot Chicken, Dave & Buster's, Freddy’s and of course, Chipotle across the world's largest immersive platforms. We were trusted and excited to bring Juicy Drop, the candy brand known for bold mashups into its first-ever Roblox activation, the Juicy Drop Pop-Up 2025 Tower Obby, produced in partnership with media agency, Beacon Media Group, Bazooka Brands, the company that makes Juicy Drop became one of the first major candy brands to build a full-scale, multilayered campaign inside of Roblox. With more than 4 million visits to the Juicy Drop Super League Pop-Up, the campaign was a blueprint for what's possible when consumer brands embrace playable media. Noteworthy within our Roblox and Fortnite business, and in response to a reduction in demand from brands to build custom destinations on the platforms, we made a decision to pursue a scalable strategy leveraging our Super Biz software developer kit on Roblox. At the IAB PlayFronts in April, we've rolled out pop-ups, many interactive experiences that can appear in multiple UGC games simultaneously. We will have launched 12 pop-up programs by the end of 2025, including renewals from 2 partners within the same calendar year. We expect pop-ups to become more meaningful in 2026 with several campaigns already booked. Pop-ups are a higher-margin product for Super League and custom builds, faster to market and more efficient in delivering against the client's objectives. Additional client partnerships in Q3 included programs with companies across multiple verticals, entertainment with Universal Pictures, Paramount and Lionsgate, Beauty With NYX, Gaming With Sega and Government with the Department of Veteran Affairs and the Food and Drug Administration. Like other brands with a story to tell, even government agencies recognize the power of play, having run in-game and playable ad campaigns with Super League. Turning to our Q3 financials. Q3 revenues decreased to $2.4 million, impacted by the demanding focus of our corporate turnaround. With the financing and related accomplishments now behind us, all of our attention is on making sure Q3 2025 revenue can be a historical low point. Our gross margin was up at 45%, up from 44% in Q2 and 39% in Q3 of 2024. Our pro forma operating costs, which exclude noncash charges were down 23% at the end of Q2 now they are down 29% compared to the respective prior year periods. We saw a 23% improvement in our operating loss on a cash basis for Q3 2025, even with a decline in revenue compared to Q3 2024, highlighting our improved margins and the positive impact that our extensive cost reduction initiatives will have on our bottom line going forward. We will deploy capital with discipline, ensuring our cost structure remains lean, growing only as we scale and only as our revenue merits doing so. Revenue diversification continues. Roblox opportunities now represent only 42% of our pipeline, down from 57% of our revenue in 2024. 20% of our pipeline is now attached to playable and in-game mobile advertising, which also held steady at 15% of Q3 revenue. Our pipeline overall has been -- become increasingly healthy as we neared the conclusion of our corporate restructuring process. We have 8, 7-figure opportunities active, an all-time high occurring simultaneously. Our weighted pipeline has increased by 69% in the past 6 weeks. Perhaps most important, our booked revenue for Q4 is already higher than our Q3 revenue, and our revenue picture for Q1 2026 is already approaching our reported revenue from Q1 2025. With a much stronger balance sheet and a streamlined cost and capital structure, we also have been able to reignite accretive M&A conversations that have the potential to accelerate our path to profitability. Based on recent business momentum, it is even more clear we're bolstering our suite of offerings through inorganic growth will have the greatest positive impact. We also see new opportunity for Super League in the user-generated gaming space. where player levels on Roblox have eclipsed player levels on any other gaming platform in history and where new monetization features have been released on Fortnite Creative. Growth in revenue for individual games makes it attractive to consider taking ownership positions in select games where gross margins are high and our expertise and brand partnerships could lead to revenue expansion. This type of prospective growth is only possible now because of our solid cash position. One final area we have referenced actively in recent communications, where we see meaningful and outsized potential for value enhancement is in the digital asset space. That does not mean we are determined to launch a digital asset treasury and sideline our operating business. The market has made it clear that, that model has its challenges, particularly with non-core crypto currencies. It does mean we are determined to explore and hope to pursue a strategy that has enduring growth potential. We believe in the sector and see emerging evidence that a model in which there is a symbiotic relationship between a company's operating business and its digital asset treasury can become fuel for material growth. We will share more information on this initiative as we progress towards a target launch of the strategy in Q1 of next year. Thank you for listening to our extensive update. It is extensive because of this unique moment in Super League's history. In the past 6 months, we have proven what can be accomplished through a determined executive mission and cohesive team unity. We have taken bold steps to overcome significant challenges, made tough decisions and delivered a structural turnaround that sets the stage for lasting growth and renewed value creation for shareholders. With capital raising now behind us, we can channel the same intensity into scaling operations by recapturing our revenue and partnership momentum, pursuing new avenues for business acceleration and continuing to execute at the highest level. I look forward to celebrating our successes with you on future updates. And with that, I'll turn it back to the operator to start the Q&A. Operator: [Operator Instructions] Our first question is from Jack Vander from Maxim Group. Jack Codera: This is Jack Codera calling in for Jack Vander. A couple of questions. First, kind of a housekeeping question. Do you expect the current OpEx levels to be kind of the go-forward base? Or do you expect to see more efficiencies realized over the next few quarters given that it's at just above $4 million now. Matthew Edelman: Our -- we have really worked diligently to reduce our cost structure. We had 75 people on April 1. We're now down closer to 35 people. And we think there's -- we've hit a good spot and have the right level in order to really accelerate growth with renewed momentum. We don't anticipate increasing our cost structure, but I would say we aren't looking at immediate additional reductions. Jack Codera: Okay. That's helpful. And then I have a more general question. Can you give me a commentary from your view, the sentiment around the broader advertising market over the next 12 months. Are conversations with CMOs, do they seem positive? Or does it seem like it's becoming more challenging? Any content and information there would be helpful. Matthew Edelman: Marketing and advertising budgets are a constant puzzle, and they're a puzzle for everyone at Meta, Google and Amazon, all the way to companies of our size where we are looking for budgets to come into newer channels. What I will say is that over the past couple of quarters and probably through the end of this year, there has been a bit of a flight to safe havens and very performance-oriented advertising solutions, which I think explains one of the impetuses for growth in the advertising results at Meta, Google and Amazon in their Q3 reports. And that did have an impact on the breadth of money available to companies like Super League in more experimental channels. It does seem that the budgets have opened back up. As I mentioned, the renewed acceleration of our pipeline and the growth that we've begun to see really just in the past 1 to 2 months gives us a fair degree of confidence that budgets are becoming a little bit less tight. It remains to be seen what will happen with the economy and how any rate adjustment or lack of rate adjustment may impact advertiser and CMO budgets. But right now, we're seeing encouraging signs. Jack Codera: Okay. That's super helpful. And then if I could ask one more. You mentioned a little bit about kind of the key growth initiatives, mobile, immersive experiences, pop-ups. And then kind of the inverse of that is the Roblox kind of diversification given the changes to that structure. Where do you see that Roblox mix getting to? And kind of what are the most important, most significant buckets that are going to fill that difference? Matthew Edelman: Well, the good news is we're starting to fill the difference now. And Roblox will, I expect, continue to represent a meaningful percentage of our revenue going forward. I would be surprised if it dips below 1/3 in 2026. We do see Fortnite growing, Minecraft has continued to be healthy. But honestly, mobile continues to be the area with the largest growth potential because it is an open platform compared to closed environments where platform policies can shift what's achievable for a brand. And we're quite excited about the Connected TV partnership we recently announced. Connected TV is growing and the opportunity to activate a video ad as a viewer and go into an interactive content experience that's accessible through your television remote is quite exciting. The engagement times are very encouraging, and we see that as an entirely new bucket of revenue that we haven't even been able to pursue in the past. Operator: Our next question today is coming from Howard Halpern from Taglich Brothers. Howard Halpern: Congratulations on the quarter and getting the capital structure where it needs to be, that was very impressive. Matthew Edelman: Thank you, Howard. Howard Halpern: You talked about the digital strategy. Have you tapped anybody? Or are you still going through the process of finding the right person to lead all the different intricacies of that of -- maybe a multifaceted strategy. Matthew Edelman: That's a great question. So we are in an enviable position from our perspective given Evo Funds experience and the principal from Evo Fund is our direct investor and available really on a moment's notice when we have questions and want to discuss ideas and opportunities. So that is a meaningful part of why we have some confidence in evaluating this area. We also have launched a search to bring a Board member into Super League who has deep experience in the digital asset space, have exciting conversations developing there. We, in addition, anticipate bringing in a handful of advisers with strong track records in the areas that we find most compelling in the digital asset sector, and should be able to talk about some of those advisory relationships perhaps even before the end of the year. Howard Halpern: Okay. And when you talked about pop-ups, is that I know it's a high-margin business and expanding, but is that also leading to new customers, like a lead generation that you can prove yourself and then cross-sell into a larger revenue opportunity. Matthew Edelman: It's as if you're in our sales strategy meeting with that question, Howard, yes, the answer is absolutely. We see pop-ups as, in many ways, the starter package, that will help a brand get into an immersive platform like Roblox or Fortnite before they're ready to commit larger amounts of money. And it's a very efficient quick-to-market solution that takes advantage of the creativity and interactivity you can deploy on those platforms. And when they go well, as I mentioned earlier, you have a much easier time getting renewal business. We've already had 2 of our 1 dozen customers this year renew in the same year. And so we do see it as a low-friction entry point to get into these channels. Howard Halpern: And in terms of gross margin, do you anticipate what you experienced in the third quarter to be somewhat of a 4 and you're going to just strive for revenue that provides expanded gross margins, even if it's -- even if first half seasonality is a little low, you're still going to drive gross margin going forward? Matthew Edelman: Our focus continues to be on making our way to profitability. And as a result, gross margin is always on our minds. We do also recognize that there are some opportunities that come to us where a client asks us to take on more of a general contractor role. And when that happens, there can be meaningful portions of a campaign that we end up passing through to a third-party who is supporting our work, where we do the principal amount of work, they help on the back-end execution. And so in those circumstances, while the programs and partnerships are more significant and can really help grow the top line, the margins can be a little bit more challenging. However, we wouldn't want to turn down those significant relationships because they tend to last a long time and bring a lot of rewards as we deliver. Operator: We have reached end of our question-and-answer session. I'd like to turn the floor back over to Matt for any further or closing comments. Matthew Edelman: I would just like to thank everyone again for joining the discussion today and look forward to being back here to talk about the year-end 2025. Thank you again. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time, and have a wonderful day. We thank you for your participation today.
Operator: Good afternoon, and welcome to TriSalus Life Sciences' Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I will now turn the call over to Jeremy Feffer, Managing Director with LifeSci Advisors. Please go ahead, sir. Jeremy Feffer: Thank you, operator, and thank you all for participating in today's call. Joining me today from TriSalus Life Sciences are Mary Szela, President and Chief Executive Officer; David Patience, Chief Financial Officer; and Dr. Richard Marshall, Medical Director. Ms. Szela will provide an overview of the company's third quarter results and strategy for the balance of the year. Then Mr. Patience will review the financial results for the quarter in detail. Following their prepared remarks, Dr. Marshall will join the call to help address questions from covering analysts. Earlier this afternoon, TriSalus released its financial results for the quarter ended September 30, 2025. A copy of this press release is available on TriSalus' website. Before we begin, I would like to remind you that management will make statements during this call that include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Reform Act of 1995. Any statements contained in this call other than the statements of historical fact are forward-looking statements. All forward-looking statements, including, without limitation, statements relating to our sales and operating trends, business and hiring prospects, financial and revenue expectations and future product development and approvals are based upon our current estimates and various assumptions. These statements involve material risks and uncertainties, including the impact of macroeconomic conditions and global events that could cause actual results or events to materially differ from those anticipated or implied by these forward-looking statements. Accordingly, you should not place undue reliance on these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of our Form 10-Q on file with the SEC and available on EDGAR and our other reports filed periodically with the SEC. TriSalus disclaims any intention or obligation, except as required by law, to update or revise any financial projections or forward-looking statements, whether because of new information, future events or otherwise. The conference call contains time-sensitive information and is accurate only as of this live broadcast today, November 13, 2025. And with that, I'll turn the call over to Mary. Mary Szela: Thank you, Jeremy, and good afternoon, everyone. Thank you for joining us for a review of our third quarter 2025 results. I will begin with a high-level review of the quarter and recent weeks and provide a quick update of our longer-term strategy. David will then follow my remarks to provide a more in-depth review of our financial and operational results for the quarter. We will then be happy to open the call to questions. Let's begin. I'm pleased to report that our third quarter results were strong. Revenues were $11.6 million, representing 57% increase over the prior year quarter and a 3% sequential gain over the second quarter of 2025. During the quarter, we also continued to expand our TriNav platform, launching our TriNav FLX infusion system and advancing new clinical applications to expand our market opportunities. We also simplified our capital structure through the successful completion of our exchange offer and consent solicitation for preferred stock. Operationally, we continue to manage cash efficiently, ensuring resources were allocated strategically to advance our key priorities. We increased commercial investment to maintain our strong growth, a deliberate decision that extends our time line to reach EBITDA positive and cash flow breakeven. Our commercial momentum in the third quarter remained strong. The commercial organization continued to drive deeper penetration within the complex liver embolization market. Bolstered by the Centers for Medicare and Medicaid Services, CMS, HCPCS code C8004 introduced in April. This new code expands coverage to include simulation angiogram or mapping procedures using TriNav, enabling interventional radiologists to utilize TriNav for other treatment planning and delivery using radioembolization. As a result, the reimbursable use of our technology within the radioembolization market has effectively doubled, supporting the broader adoption we're observing. Now interventional radiologists are able to use TriNav across the full continuum of radioembolization care. Early feedback from key accounts and users highlight the clinical and economic advantages of the expanded reimbursement, which we expect to continue driving adoption into 2026. We are reaffirming our 50% revenue growth guidance, reflecting strong confidence in our growth momentum and market opportunities. Consistent with our prior commitment, we continue to invest in long-term growth via increasing commercial resources and funding of new applications. We believe TriSalus' Pressure-Enabled Drug Delivery, or PEDD technology represents a transformative opportunity with substantial long-term value across a wide range of solid tumors and interventional treatment approaches. We continue to execute a focused strategy to expand our platform with technologies that address the complex challenges of tumor vasculature and improved delivery. Momentum across our programs remain strong, reflecting the growing clinical and commercial impact of our PEDD technology. In the last year, we launched TriNav LV, TriGuide and the TriNav FLX, each advancing our commitment to innovation and improving therapeutic delivery precision. Expanding our product suite broadens our addressable market, strengthens physician adoption due to a technological solution for all the various vascular challenges and extends our reach beyond the liver into new therapeutic areas. Expanding our product portfolio remains a core pillar of our growth strategy. By broadening our addressable market and delivering solutions with greater versatility and precision, we're enabling more physicians to treat complex patients and extending our reach beyond the liver into new therapeutic areas. Following the quarter, we began market evaluation of our next-generation TriNav XP, which features compatibility with larger particles and a more flexible distal tip, an important advancement for low bar liver and uterine artery embolization procedures. Although early, feedback from over 20 initial cases with key opinion leaders have been outstanding, which highlighted exceptional trackability, enhanced visualization for precise targeting and improved professional efficiency. These advances reinforce our confidence in TriNav powered by PEDD, as a platform that helps interventional radiologists address their most difficult tumor drug delivery challenges, we continue to invest in the TriNav portfolio to deepen its clinical impact to improve drug penetration, reduce complications and expand patient eligibility. Our results this quarter demonstrate that TriNav is well positioned to become the standard of care in liver embolization for complex patients. We remain focused on strengthening the clinical evidence base, engaging closely with key medical societies and driving commercial expansion to fully realize TriNav's market potential. As previously discussed, beyond leveraging our PEDD technology in liver cancer, we're also expanding the clinical application through the TriNav Infusion System. Yesterday, we hosted the first in a series of key opinion leader events focused on the potential use of TriNav Infusion for the treatment of uterine fibroids. The event featured Dr. Nicole Lamparello of Weill Cornell Medicine and NewYork-Presbyterian Hospital and Dr. Francis King of Rutgers Robert Wood Johnson University Hospital and University Radiology Group. Both speakers highlighted the significant unmet need in uterine fibroid treatment and reviewed the current therapeutic landscape. In addition, enrollment continues in our PROTECT registry, a multicenter initiative evaluating PEDD for patients with thyroid nodules or goiters who are not candidate for surgery radioiodine or ablation. This study is designed to assess disease-related quality of life, thyroid function and outcomes following PEDD-based thyroid artery embolization. As previously noted, preliminary results published in the Journal of Endocrine Society were highly encouraging, showing 100% technical and clinical success, no neurovascular complications, mild and transient discomfort in 81 of all patients, all resolved within 2 weeks and a 73% reduction in thyroid size and importantly, normalization of thyroid function in 71% of participants. These findings reinforce the promise of this minimally invasive alternative to thyroidectomy. We also initiated a pilot registry in the emerging field of genicular artery embolization or called GAE, which offers a novel minimally invasive approach to pain management and mobility preservation for patients with knee osteoarthritis. GAE has the potential to delay or avoid total knee arthroplasty in select patients. In parallel, we're preparing to launch a clinical trial evaluating TriNav and GAE as a treatment option for knee osteoarthritis, a condition affecting more than 30 million adults in the United States. The study aims to determine whether TriNav and GAE can effectively reduce pain and delay the need for knee replacement surgery. In parallel with expanding the clinical utility of TriNav, we're also advancing our efforts to begin partnership discussions to maximize the long-term value of nelitolimod across several high-value oncology indications. This transition will eliminate the vast majority of development-related expenses for nelitolimod by the end of 2025, while preserving the program's potential upside. It also allows us to focus internal resources on the near-term high-impact opportunities within our PEDD platform. Phase I studies of nelitolimod in multiple liver tumor types, which include metastatic uveal melanoma, hepatocellular carcinoma or HCC, cholangiocarcinoma are now complete. Enrollment has also concluded in PERIO-3, our Phase I trial in locally advanced pancreatic cancer with final data expected by year-end. Clinical study reports for all 3 PERIO Phase I dose escalation trials are in preparation with data releases anticipated in Q4. We're currently finalizing reports and data presentations to support future partnership discussions. Completion of enrollment and closure of these studies will drive a reduction in R&D expenditures in the second half of 2025, and we continue to support several ongoing investigator-initiated studies. Before turning the call over to David for a review of our third quarter financials, I want to reiterate that TriSalus remains focused on executing our near-term milestones, including advancing the TriNav platform across multiple indications focused on the interventional radiology call point, advancing PEDD solutions designed to optimize therapeutic delivery and address the full spectrum of vascular access and perfusion challenges faced by the interventional radiologist, generating and publishing new clinical and HEOR data to validate the effectiveness, safety and economic value of our technology, enhancing operational performance in our manufacturing and improving gross margins and also building a scalable, high-growth organization. As we look ahead to the balance of 2025 and into 2026, we're energized by our long-term vision of bringing our PEDD technology platform to a broader range of patients, improving outcomes and redefining standards of care. TriSalus remains a science-driven organization with patients at the center of everything we do. Our progress continues to make meaningful difference for people living with liver, pancreatic and other solid tumors. And with that, I'll turn the call over to David. David Patience: Thank you, Mary. As Mary mentioned earlier, TriSalus delivered another strong quarter. For the 3 months ended September 30, 2025, revenue was $11.6 million, representing 57% year-over-year growth and 3% sequential growth versus the second quarter. This continued momentum reflects the exceptional performance of our commercial team and the expanding adoption of the TriNav for liver embolization procedures across a growing customer base. In the third quarter, we increased the number of unique ordering accounts by 30% compared to the third quarter of 2024, adding 20 new accounts while also achieving higher utilization per account. Sequential growth reflected expected seasonal trends, a temporary dip in July was driven by lower procedure volumes followed by record levels in both August and September. The gross margin for the quarter was 84% compared to 86% in the prior year period. The modest decline was primarily due to lower manufacturing efficiency associated with newly launched products, a dynamic we expect to improve in the fourth quarter as production stabilizes. Research and development expenses were $5.2 million, up from $4.2 million in the third quarter of 2024. The increase was largely attributable to a onetime charge of approximately $2.1 million related to the closure of our clinical studies for nelitolimod, partially offset by the revision of approximately $700,000 in patent-related costs to general and administrative expenses. Excluding the onetime charge and the revision, R&D spend was down about $400,000 year-over-year. Sales and marketing expenses totaled $6.8 million compared to $6.1 million in the prior year. The increase was primarily due to higher performance-based compensation reflected by our strong commercial momentum. General and administrative expenses were $6.7 million, up from $4.7 million in the third quarter of 2024, driven mainly by the acceleration of approximately $1.6 million in noncash stock-based compensation and the revision of approximately $700,000 of patent-related expenses. Excluding the onetime accelerated stock-based compensation and revision of patents, G&A was down $300,000 year-over-year. Operating loss for the quarter was $9 million compared to $8.7 million in the prior year. The increase was primarily driven by the onetime charge related to the closure of our clinical studies for nelitolimod and the noncash stock-based compensation acceleration in the period. Cash used in operations was $3.7 million, a substantial improvement versus $11.2 million compared to the third quarter of 2024. Adjusted EBITDA loss was $5.4 million, an improvement from $7.1 million in the prior year. This includes approximately $2.1 million in onetime charges related to the PERIO study closeout. The improvement in adjusted EBITDA reflects stronger sales performance, lower underlying R&D spend and disciplined operating expense management. Our cash burn for the quarter was approximately $3.8 million, bringing our quarter end cash and cash equivalents balance to $22.7 million. We believe this provides us ample liquidity to fund our operations and strategic objectives. Subsequent to the quarter, we amended our debt agreement to reduce the minimum cash covenant from $10 million to $5 million, providing additional balance sheet flexibility. As Mary highlighted earlier, the preferred conversion completed in July simplified our capital structure, eliminated the 2027 preferred stock reset provision and better aligned our long-term investor base for future growth. With that, we're ready to open the line for questions. Operator: [Operator Instructions] And the first question comes from Frank Takkinen with Lake Street Capital Markets. Nelson Cox: This is Nelson Cox on for Frank. Congrats on all the progress here. I want to start with 2026. I understand you guys are not guiding for that today, but just any color you feel comfortable providing there in terms of how we should be thinking about growth in 2026. When I look at kind of where the Street is at, there's kind of a wide range. So just wanted to give a chance if you guys are comfortable to provide more color there. David Patience: Yes, Nelson, this is David. Thank you for the question. Right now, we're confident and very excited about our current momentum, especially in the fourth quarter. So that's really our focus right now. We are maintaining our guidance thus far of the 50% growth and adjusted EBITDA positivity in the first half of next year. But other than that, we're pretty focused on the current operations of the business, and we're excited about it. Nelson Cox: All right. Fair enough. And then -- kind of curious if there's any additional color you can provide outside of liver in terms of growth you're seeing in your other indications. Mary Szela: Yes, I can take that, Nelson. One of the things that we're doing right now is we're investing in some of the new applications that our technology can be used for. And yesterday, we had a webinar on uterine artery embolization, and we are right in the middle of our market evaluation for one of our new products, and we're really excited about it. I think this is a product that can be really meaningful for uterine artery embolization, help reduce procedural time, help reduce the amount of embolics that are used, which correlates to reduce pain. And the other important thing is just reduce the administration of embolics into the myometrium tissue, which can cause a lot of post-procedural pain. So we think this could be a major opportunity for us in 2026. We'll enter our full launch in about a week. But already, just based on the feedback and just the utilization and the market evaluation, it's been really robust. I think we mentioned too on our earnings remarks that we are in the midst of a genicular artery embolization trial. That's something that we'll continue to invest in and move even further. We have a new product launch coming in the fourth quarter, which is TriNav Advance. And this one, we think, could be really interesting for us because this is a technology where the interventional radiologist has the potential to use any microcatheter. And we think that could open up the opportunity for other different procedures. I'd like to have Dr. Richard Marshall comment on this. He's actually used this product and also used our XP and maybe you can comment on those as well, Dr. Marshall. Richard Marshall: Thanks, Mary, and good afternoon, everybody. So I am very excited about both the XP, which is our product for uterine artery embolization that's currently in limited market release, and the feedback has been great. This will allow physicians to use a TriNav in a part of the body where they couldn't use it or it was very difficult to use previously. The same thing goes for our genicular artery embolization. So currently, we have a pilot trial going on to evaluate this. But in Q4, we'll be launching the advanced product, which will allow physicians to get deeper into these arteries with their favorite microcatheter. So we're going to be giving them the effects of a TriNav, but they're going to still feel like they're using and be able to treat patients like they normally do with their favorite microcatheter. So I think that's going to provide a lot of opportunity, especially in really small arteries and smaller parts of the body like genicular arteries, which is a growing area of treatment. I've been able to use these products. The advance, I have not used in a human yet because it's not available. But I can tell you my experience with it in pigs has been phenomenal. And I think it's going to generate a lot of excitement and expand what we can do, the number of patients that we can treat. Operator: And the next question will come from William Plovanic with Canaccord. William Plovanic: I think as we come into the year, I mean, I just want to -- the revenue was a little light for the quarter. I appreciate the cadence comments regarding August, September. I think that gives you the confidence to finish out the year, which I think consensus is sitting right about that $45 million. But I do think going back to the first question was asked, I mean, there are estimates out there that have over 50% growth next year and up to almost 90% year-over-year growth next year for some of the sell-side analysts. So I understand you don't really want to comment, but is there any reason you think that your revenue growth could accelerate above 50% in '26? David Patience: Yes. No, I think it's a great question. So we have not managed the Street to the 2026 numbers. I think those that are closest to the story are pretty familiar with kind of where we see the growth of the business. And we're just not ready to comment on 2026 just yet. We're very focused. We appreciate your understanding and the first quarter being $9 million and then 2 quarters of over $11 million in a row is exactly how we forecasted and we're on target and tracking towards that 50% growth, which will be a nice step-up in the fourth quarter. September was a record month for us, just to close that out and very strong momentum for us. And it was the best month ever for our company. That said, we just don't -- we don't want to comment on 2026 just yet. We're very focused, but confident that we'll hit our 50% growth target. William Plovanic: And then just a follow-up. As we think about the use case -- use cases for mapping, it doubles the opportunity. What percentage of your case mix today is mapping? And then if I could squeeze in just what are you seeing in terms of the new account penetration going deeper versus new account additions as drivers for you? David Patience: Perfect. Yes, I'll take the last part. Our new account additions, we are adding about 20 accounts through VAC approval for the quarter. Again, our focus going into this year was opening a lot of accounts, excuse me, were already opened, and we are driving deeper penetration, as you commented. And so our utilization is continuing to grow on a quarterly cadence per account, and that is really driven by new physicians spreading word of mouth using TriNav where we used to have 1 champion. Now we have 1 or 2. And then the newer applications will play a big role as those interventional radiologists are going to be using us not just for the liver. And so to answer your question, very focused deep penetration within each account to improve utilization, and we're seeing that in the numbers, and that's what we're excited about. And I'll turn it over to Mary to talk about mapping. Mary Szela: Bill, thanks so much for a good question. Yes, mapping has actually been a very important driver for us in the back half of the year. I would -- we estimate, and this is based on our -- we don't really have detailed market data or external market data. This is based on our Veeva internal data from our representatives. So we're estimating about 30% of our growth is coming from the mapping. Remember, about half the market is radioembolization. Half the market is chemoembolization. They don't do mapping in the chemoembolization. So we're really seeing kind of a 2 for 1 in the radioembolization. And the other factor has just been because it's a new code and it came out in April, we're working -- we have a reimbursement resource with Dr. Z. We're still having some bumps with that where people are just not familiar with this code. So we've really gotten through some of the bumps along the way, and we're starting to see that accelerate. So that's been very helpful for us this year. Operator: And the next question will come from Ross Osborn with Cantor Fitzgerald. Junwoo Park: This is Matthew Park on for Ross today. I guess just starting off, as you initiate the genicular artery embolization study for knee OA, I guess, how do you view the broader competitive landscape developing around here? And where would you see TriNav fitting in within the potential standard of care? Mary Szela: Sure. So GAE is a really exciting opportunity, I think, not only for patients because it can potentially reduce the need for a knee surgery or more fundamentally, it just addresses the immediate pain that these patients are in. We're a drug delivery device. So where we see a lot of the competition coming in this is really around what type of feed that they're administering. Are they resorbable? Are they -- is it different types of drugs that they're administering. And I think the key that we believe that we offer is that we can penetrate these vessels much more deeply, and we can actually protect against off-target delivery. And I'll have Dr. Marshall comment about this because he's been involved in our early cases and our pilot study. And this is -- this drug delivery, we think, can be a very important one in this procedure regardless of what's being administered into the vessels. Dr. Marshall? Richard Marshall: Thanks, Mary. I think you highlighted some really good points. The most difficult thing about these cases is being able to deliver particles or liquid into these genicular arteries. It got to go deeply without having it go into places where we don't want it to go. So obviously, the foot is distal or downstream from the knee. And so that's what we all want to protect. And TriNav, with both its flow modulation and reflux protection accomplishes both of those. So it is -- this procedure is already being performed with traditional microcatheters. The interest that we've received so far and the success that we've seen is that physicians do an angiogram with the TriNav and they say, they can see vessels a lot better. And then when they deliver their microspheres or their liquid embolic, they can push it in much further without having to worry about nontarget embolization. So they feel safer and more confident. We've got some other positive feedback that we're going to publish in the near future about how we can treat multiple sites from one injection. And I think that's going to -- that is going to distinguish this catheter from the traditional way of treatment. It's going to allow physicians to do this procedure faster and better. Junwoo Park: Got it. That's super helpful color. And then maybe one for David. So on gross margins, you called out some headwinds in the quarter driven by these newly launched products. I guess how should we think about the cadence of gross margin over the next couple of quarters and when you would kind of expect these manufacturing efficiencies to come back in? David Patience: Perfect. I think the short answer is the fourth quarter we'll see an uptick. We've done -- we've thrown a lot at our manufacturing team with 4 new products and 8 new SKUs in 1 single year, but we're proud of kind of where we've evolved our processes, our procedures and our lot sizes to really scale efficiently. So we should see normalized gross margins here in the fourth quarter and then expanding early next year as well. Operator: And our next question will come from Carl Byrnes with Northland Capital Markets. Carl Byrnes: Congratulations on your progress. Going back to TARE mapping, what have you experienced with respect to conversion of existing TARE users with TriNav to mapping? Is it -- I know you mentioned that there's some education process around the new HCPCS code, the C8004 code. Are you -- can you quant that at all? I know you quanted the revenue growth of 30% for mapping, but do you have any feel there? Mary Szela: Yes. That's -- I mean, I think what -- the data that I have is what I shared with you that comes out of Veeva. I think all I could really offer you is anecdotal data. Maybe I'll have Dr. Marshall respond. Dr. Marshall, how do you think about this? Just the impression that we get from physicians now is everyone likes to map with the same technology that they treat with. You want to make sure that what you see in the initial session is what you're going to define your dose on and how you're going to treat the patient. And I think that's been a big message for us as we interface with physicians. And that's been the big conversion because they've been doing -- oftentimes, they'll do it with an endhole, then they'll want to treat with an endhole. So now we're converting 2 catheters versus the 1, and that's really what's been driving the majority of the upside. But to your question, I don't have that definitive data. Dr. Marshall, do you want to weigh in? Richard Marshall: I do. I'll reinforce it. I think physicians want -- they basically want to treat apples and apples. They don't want to map with 1 catheter and then treat with another because when they give Y90 or this radiation, they can't take it back. And so it has to do what they think it's going to do. And I think physicians have been really impressed with the angiography quality that they get from TriNav because of the way that contrast goes through it and is pressurized into arteries, they can see things better. And so that's a lot of the feedback that I get is not only can I map with the same catheter that I'm treating with, I'm actually seeing things and sometimes seeing more tumors. So the feedback has been very positive. We do still have some education to do for physicians who understand that they can use the catheter and it's covered by insurance or Medicare, Medicaid with a CPT code. Carl Byrnes: Great. Very helpful. And then just one quick follow-up. What are you seeing with respect to adoption of LV and FLX and in what procedure specifically? Richard Marshall: I can comment on this. So we have centers that have converted completely to FLX that they love the catheter and they only want to use that. Those are centers that typically do more selective treatments. So smaller portions of the liver and smaller arteries that may be that are a farther distance for the catheter to travel. And so they appreciate the trackability of that catheter being able to go out farther. Whereas others are -- seem to be more comfortable, but I think we've had a lot of users convert to FLX. It's been very well received. LV has helped us in areas where TriNav really shines. And those are really large territory treatment. So for example, half of the liver, we call it a low bar treatment or an entire lobe of the liver. We can -- that valve is larger. And so some patients, for example, with primary liver cancers, hepatocellular carcinoma or metastases that receive a lot of blood flow like neuroendocrine tumors. Those arteries are larger. And so this is a nice fit in both of those scenarios so that the valve can fit appropriately and they can actually inject more contrast and particles faster because it's a larger catheter. So I think people really appreciate that. Outside of the liver, we've seen some use of TriNav FLX in thyroid arteries because they are tortuous. So it's a nice fit in that area. And the same is true -- was true in uterine artery embolization, but the XP catheter, which we've just released is going to be, I think, it's going to have a lot of growth in uterine artery embolization because it's designed specifically for that. That's been well received so far. I hope that answers your question. Mary Szela: Yes. That's really helpful color, Dr. Marshall. And I think I would add, we saw FLX. We didn't anticipate this to be this robust, but it's already about 35% of our mix. TriNav is at 50% and the large is at about 15%. But we're seeing FLX grow every month. It's been a bit of a race to keep up with how that -- from a manufacturing perspective and how that's growing month-over-month. So it will be interesting now then to see XP. That's been our manufacturing challenges, how -- and remember, we have a single price for all these products. So it's really up to the use of the physician, the type of vessel tortuosity. And so we're just -- that's part of the inefficiency in manufacturing is just trying to estimate how this is changing month-over-month. We think that's going to settle out probably over the next couple of months in 2026. Operator: And our next question will come from Justin Walsh with JonesTrading. Justin Walsh: It's great to see you exploring different use cases for TriNav. I'd love to hear your thoughts on the long-term mix of uses if some of these indications are more likely to be more significant than others. Mary Szela: Yes. So that's a really good question. I think when we first looked at our procedural code, there's roughly about 40 different embolization procedures that we could potentially be used for. So we picked ones that we think really have the most significant near-term patient benefit and market benefit. And when we think about uterine artery embolization, kind of the estimates for those markets are probably between -- we've seen the low at the 110, higher at kind of the 250, that could be a significant market opportunity for us. But probably the biggest one that we think that could really even rival the liver market is really GAE. And just based on the patient volume and just the enthusiasm. In fact, we met with a big group of interventional -- not interventional -- radiologists and also some orthopods and they were even excited about potentially using this procedure for even people who have had surgery. 2 days postoperatively, patients are still in enormous pain, and they were thinking about how do we incorporate this procedure to help allow them to do physical therapy more appropriately and recuperate much better. So that's a market that could equal the size of the liver or actually be even higher than that. Maybe I can even have Dr. Marshall talk about that. The thyroid market being very comparable again to the uterine artery embolization, but there's more even beyond these. This is all the ones that we're focused on right now. We've got quite a bit on our plate, but we really believe this type of embolization approach can really benefit patients in terms of minimally invasive surgery, often can take a surgical procedure and make it more cost effective for the payer, a better outcome for the patient and potentially be used in combination with other treatments as well. So Dr. Marshall, do you want to comment on that? Richard Marshall: Yes. And so we're talking about delivery of embolics right now, and we still have more room to grow in the liver, obviously. But the -- I think the elephant in the room is genicular artery embolization, just the number of patients that have osteoarthritis. And with a population that's aging, the number of knees that are going to need to be treated in the future is going to grow quite a bit. So we have a great solution for that, and that's why I think it's going to be a huge area of growth for us. Operator: And our next question comes from Suraj Kalia with Oppenheimer. Shaymus Contorno: This is Shaymus on for Suraj. Just one from our end, but just trying to cut this, I guess, two different ways. So how has kind of growth/utilization look for accounts that launched, say, 18 months ago versus 1 year ago versus 6 months? How kind of -- has the ramp kind of been increasing over time? And I guess, could you kind of quantify that? And then on a separate note, again, on utilization, how does utilization for a physician that's added on with an existing account look over time? Mary Szela: No, that's a really good question. We segment accounts into 2 major buckets. And oftentimes, if an account really hasn't had any education about the tumor microenvironment or some of the challenges associated with interstitial tumoral pressure and the challenges associated with it. We call that a bit of a cold account. That's going to take a little bit longer. So it really depends on the type of account, an account that's more familiar with that, that's a much faster ramp. But overall, we see accounts that we started 18 months ago just continue to improve month-over-month. And a lot of that improvement is we get one user in account, they're using it very consistently. And I think one of the things that we've also seen in parallel is as we offered these new options of devices, it allows that single physician to use more and more cases because we didn't have really the best technology for that particular patient. So we're seeing that current user grow in a deeper amount of use within his patient population, and we're also seeing the new users kind of start down that path. So if it's an account that is receptive and educated along those lines, we see a more rapid uptake. If it's an account that doesn't have that information that we're starting a little bit from ground zero, and we need to do some of that education and really get them familiar with the technology and the rationale and then they get to see the technology and use. And those take a little bit longer. So those are the two buckets that we have. And I don't know, Dr. Marshall, you can talk about it as well, but we're seeing -- I think what we're excited about is we continue to see the continual utilization grow pretty steadily, and it seems to marry how we've launched these new products, too, because now we've expanded the options for them to really address any vessel size or vessel tortuosity that they see in a particular patient, and we think that's going to accelerate over time. Dr. Marshall? Richard Marshall: Yes. I think we typically see a single user at a site become a champion for us and start to use our catheter. And these older accounts where a physician has been treating patients and seeing the results and they show them to their partners, then partners can start to understand, okay, maybe there really is something to this if they're not educated about the tumor microenvironment. And so we see that growth for sure, that grows from one partner who's getting better results and then all of a sudden, the other partners start to show some interest and start to try to use it in their cases. And certainly, as physicians see their own results, then they start to apply it to additional treatment tumor types, treatment scenarios. And that's what we've seen. That's what we saw with adoption in uterine artery embolization. So I think that explains the general idea of how it grows within a facility. Operator: I show no further questions in the queue at this time. I would now like to turn the call back over to Mary for closing remarks. Mary Szela: Thank you, everyone, for joining the call and all your active support and interest in the company. We really appreciate it. Thank you again. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the CytoSorbents Corp. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] This call is being recorded on Thursday, November 13 of 2025. I would now like to turn the conference over to Adanna Alexander, Investor Relations Consultant. Please go ahead. Adanna Alexander: Thank you, Chloe, and good afternoon, everyone. Welcome to CytoSorbents' Third Quarter 2025 Financial Results and recent Business Highlights Conference Call. Joining me today from the company for the prepared remarks are: Dr. Phillip Chan, Chief Executive Officer; and Pete Mariani, Chief Financial Officer. Before I turn the call over to Dr. Chan, I'd like to remind listeners that during the call, management's prepared remarks may contain forward-looking statements, which are subject to risks and uncertainties. Management may make additional forward-looking statements in response to your questions today. Therefore, the company claims protection under the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from results discussed today. The forward-looking statements we make may reflect our views and estimates as of today, November 13, 2025, and we assume no obligation to update these projections in the future as market conditions change. During today's call, we will have an overview presentation covering the operating and financial highlights for the third quarter 2025. Following the presentation, we will open the line to analysts for questions. And now it is my pleasure to turn the call over to Dr. Phillip Chan. Phil? Phillip Chan: Thank you very much, Adanna, and good afternoon, everyone. CytoSorbents continues to make solid progress as we execute on our long-term growth strategy. Our company is built around a platform blood purification technology designed to remove harmful substances and toxins from the bloodstream. We have 2 main products that leverage our proprietary polymer bead technology. CytoSorb is used to treat life-threatening conditions in the ICU and during cardiac surgery and DrugSorb-ATR, our investigational device designed to reduce the severity of perioperative bleeding in patients on antiplatelet therapy and other blood thinning therapy. CytoSorb is now approved in the European Union and available in more than 70 countries with nearly 300,000 treatments performed to date. Trailing 12-month core product sales reached a record $37 million as of September 30, 2025, supported by strong execution across our global network. Our strategy remains centered on 5 key initiatives. The first is to return to higher growth in our core CytoSorb business. The second is to obtain marketing approval and open the U.S. market for DrugSorb-ATR. The third is to achieve near-term cash flow breakeven and future profitability. The fourth is to continue to strengthen the balance sheet. And fifth is to increase and maximize shareholder value. Let's start with an update on our core CytoSorb business. By the way, someone on the line is not on mute. Please go on mute. In the third quarter of 2025, revenue was $9.5 million, up 10% from $8.6 million a year ago or 4% on a constant currency basis. This performance was led by record sales in our distributor territories and strong results in our other direct markets. Gross margin remained strong at approximately 70% compared to 61% in the third quarter of 2024. While we've made meaningful structural progress in Germany, we recognize that consistency remains an area of focus. We believe our ongoing work will lead to stronger performance in 2026. On a trailing 12-month basis, core product revenue grew to $37 million, up from $33.8 million a year ago. Breaking that down further, distributor and partner sales grew 14% to $15.6 million. Direct sales outside Germany rose approximately 24% to $8.8 million, and Germany declined modestly by 3% to $12.6 million. Overall sales growth, including Germany, in the past trailing 12 months was 9%. And excluding Germany, growth was a stronger 17%. This is the reason why we are in the process of restructuring our sales team and sales approach in Germany. In Germany, we have built a strong foundation with established clinical centers, device reimbursement and experienced sales talent. Our focus now is to strengthen leadership, improve sales processes and accountability, enhance training and sharpen account targeting, particularly among key accounts. We're simplifying our message to emphasize right patient, right timing and right dosage, which we believe will improve adoption and consistency going forward. We continue to see real-world evidence and clinical validation from leading institutions around the world that support the value of CytoSorb therapy in critical care and cardiac surgery. We would encourage investors to explore our corporate website where there is a wealth of clinical data and information supporting the broad use of CytoSorb in a wide range of applications in critical care and cardiac surgery. You can see here just some of the recent webinars that we've had, particularly turning the tide in sepsis and septic shock, which you can find on the Investor web page as well as a white paper talking about the broad application of CytoSorb in the treatment of septic shock. Our next major initiative is to obtain marketing approval and open the U.S. market for DrugSorb-ATR. Our FDA breakthrough designated device DrugSorb-ATR is designed to remove blood thinners such as Brilinta from the bloodstream. These blood thinning drugs improve outcomes in cardiac -- in heart attack patients that can cause severe bleeding during urgent coronary artery bypass graft surgery. Unfortunately, patients often cannot wait the required 3 to 5 days for drug washout, leaving surgeons with a difficult risk-benefit trade-off. DrugSorb-ATR is designed to solve this unmet medical need, representing an initial $300 million market opportunity that could exceed $1 billion as Brilinta becomes generic and as we expand to additional indications. Now to give you an update on our FDA regulatory timeline. Following our FDA appeal decision on August 20, the agency upheld the denial of our original de novo submission. But importantly, they confirmed that there were no safety issues with the device. And two, they indicated that the review of a new submission would focus only on the remaining open items from the first application. Because of this, on November 7, 2025, we filed a formal pre-submission meeting request with supporting documentation and anticipate a pre-submission meeting will be held in either late 2025 or early Q1 of '26 to confirm FDA requirements for the new de novo application. We expect to file a new de novo filing in the first quarter of 2026, which will include robust analysis of real-world data demonstrating DrugSorb-ATR's effectiveness in clinical practice that was not available with the first submission and was not eligible for inclusion in the prior review and appeal. We anticipate mid-2026 regulatory decision following a typical 150-day review process, and this review may be expedited as DrugSorb-ATR is still an FDA breakthrough device eligible for priority and interactive review. So with that, let me turn it over to Pete Mariani to go over financial highlights and some additional key initiatives. Pete? Peter Mariani: Thank you, Phil, and good afternoon, everyone. Today, I'll be reviewing our third quarter financial performance and important updates that strengthen our balance sheet and our outlook through 2026. First of all, revenue was $9.5 million, an increase of 10% and 4% on a constant currency basis compared to $8.6 million in the third quarter of 2024. As Phil noted, our growth was led by record sales in our distributor territories and strong sales in our other direct markets. Now this sales growth was partially offset by a decline in our direct German market, where we continue to make progress with the reorganization of our team and are confident that this work will lead to stronger execution and improved performance in 2026. Gross margin for the quarter was 70%, which is consistent with our recent history and an improvement over the 61% in the prior year and the prior year's gross margin were negatively impacted by a planned reduction in unit production to rebalance inventory, coupled with a short-term manufacturing issue, which was resolved in the third quarter of 2024. Q3 operating expenses were $9.5 million for the quarter, an improvement of 6% compared to prior year. The decrease was led by a $900,000 reduction in R&D expenses following the completion of certain projects and other cost reductions implemented last year and partially offset by a $400,000 increase in SG&A expenses. The increase in SG&A was led by regulatory spending related to DrugSorb-ATR filings and initial commercialization expenses in anticipation of DrugSorb approval and launch, offset by lower compensation and royalty expenses in the quarter. Given that we now expect DrugSorb approval in mid-2026, the company has taken steps to reduce these commercialization expenses as part of our strategic workforce and cost reduction program. Our Q2 operating loss improved to approximately $9.2 million from $4.8 million in the prior year. And net loss was $3.2 million for the quarter or $0.05 per share compared to net loss of $2.8 million or $0.05 per share in the prior year. However, after eliminating the impact of foreign currency changes and noncash stock compensation in both periods, adjusted net loss for the quarter improved to $2.6 million or $0.04 per share compared to an adjusted net loss of $4.5 million or $0.08 per share in the prior year. Adjusted EBITDA loss for the quarter, which also excludes the impact of noncash stock compensation and changes in foreign currency, improved to $2 million compared to an adjusted EBITDA loss of $3.6 million in the prior year. Our total cash, cash equivalents and restricted cash was $9.1 million on September 30 compared to $11.7 million at the end of the second quarter of this year, reflecting net operating cash burn of $2.6 million in the quarter. One of our key strategic priorities has been to ensure that our core business is running at cash flow breakeven as we enter 2026. We are pleased with the improvements in operating margins and cash burn over the past year. However, we have determined that the pace of our operating improvements needs to accelerate in order to achieve this important goal. As a result, we have implemented a strategic workforce and cost reduction program. This initiative follows a comprehensive review of company's cost structure and operating model. The actions taken include a workforce reduction of approximately 10% as well as reductions across production and operating expenses, which we believe will allow us to achieve cash flow breakeven beginning in Q1, and do so while continuing to fund key growth initiatives, including regulatory approval and launch of DrugSorb-ATR in the U.S. We expect to record a charge of up to $900,000 that will include severance and other charges related to the restructuring. Additionally, we are pleased to announce that we have amended our loan and security agreement with Avenue Partners effective today, November 13. The amended terms provide for immediate funding of $2.5 million of new capital as well as an extension of the interest-only period to December 31, 2026. The amendment also provides for an additional $2.5 million of capital, along with an additional 6-month extension of the interest-only period to June 30, 2027, both upon FDA approval of DrugSorb-ATR in 2026. The company issued warrants to Avenue Capital to purchase 1.4 million shares of the company's common stock for cash at an exercise price of $0.70, which expire on November 13, 2030, and the number of warrants and exercise price is fixed. The amendment requires the company to maintain certain operating cash burn targets until U.S. FDA marketing approval of DrugSorb-ATR is achieved. So we're pleased to be able to complete this timely amendment to our credit agreement. We appreciate the partnership with Avenue Capital Partners, and we look forward to continuing to execute our strategy. And finally, we are pleased with the structural improvements we are making across the company to drive improved execution at the top line and provide a more rigorous ROI focus on our spend, leading to improved margins and cash burn. We believe that these improvements will continue to drive efficiencies and allow us to achieve cash flow breakeven beginning Q1 of 2026. We believe these improvements, along with our amended credit agreement, further strengthen our balance sheet with the liquidity and flexibility to continue driving growth across our core business and pursue what we believe is a derisked plan to U.S. marketing approval of DrugSorb-ATR in mid-2026. And now, I'll turn the call back over to Phil. Phillip Chan: Thanks, Pete. And now I'll cover briefly the last key initiative, which is to increase and maximize shareholder value. To summarize, CytoSorbents has a clear and compelling value proposition. We have a proven international business generating $37 million in annualized high-margin product sales. We have a scalable recurring revenue model, a razor blade and other people's razor business model that's very attractive, a promising U.S. regulatory path for DrugSorb-ATR and a strengthened balance sheet following our credit amendment and cost reductions. We're pleased with our recent execution against our key initiatives and are confident that these actions will enable us to drive towards profitability and long-term shareholder value creation. We very much appreciate your patience and continued support. And finally, before we move to Q&A, I'd like to take a moment to recognize and honor Dr. Robert Bartlett, our former Chief Medical Officer for 10 years and the Father of Extracorporeal Membrane Oxygenation that has saved more than 100,000 lives around the world since its inception. Dr. Bartlett's vision and contributions to this field and to CytoSorbents have left a lasting legacy. Please see our recent press release highlighting his many contributions to the world. That concludes our prepared remarks. Operator, please open the line for questions. Thank you. Operator: [Operator Instructions] There are no questions at this time, please continue. We have a question from Tom Kerr from Zacks Small-Capital Research. Brian Lantier: This is actually Brian Lantier. Tom is triple booked this afternoon, but he wanted me to jump on the call quickly and ask if you could clarify a little bit about where you see the gross margin in Q4 and 2026. Do you feel like it's sort of normalized now around the 70% level? Phillip Chan: Thank you, Brian. Well, Pete, do you want to go at that? Peter Mariani: Well, we -- go ahead. Yes, sure. Yes, Brian, look, we are pleased with the 70% level that we've been able to execute. I do think that we've got opportunities to continue to see improvement. Some efficiencies have begun to come into the [ plant. ] We're seeing consistency there. And certainly, as we move towards higher volumes and eventually with DrugSorb approval, we do see possibilities for extension of -- or expansion of gross margin in the future. Brian Lantier: Okay. Great. And have you shared any either internal or external milestones or guideposts that we can sort of look to, to see progress on the German sales force restructuring to see that it's having the effect that you're looking for? Phillip Chan: Yes. I think that it's a little too soon to say, as I mentioned in my remarks, that it's still a work in progress. But I do think that we are seeing by following certain metrics that we follow improvements in rep performance and efficiency, et cetera. I think that ultimately, we believe that will translate into improvements in sales and returning Germany back to growth. But hopefully, you'll be able to see that in future quarters. Brian Lantier: Okay. Great. And maybe just to satisfy my own curiosity, can you differentiate a little bit between a pre-submission package that you're going to submit to the FDA and the actual full application that you'll be submitting in 2026? Phillip Chan: Sure. The pre-submission package or the pre-submission meeting is designed to get on the same wavelength as FDA. And so that we understand what FDA's concerns are. We understand what guidance -- to be able to incorporate FDA guidance into our de novo submission when we finally submit so that there are no surprises. And in the pre-submission document, we lay out basically our strategy of what we are planning on doing. We'll be asking for FDA feedback during the meeting on those; and then, again, taking all of that and putting that into the final de novo submission. And again, I think that we're excited by the opportunity to be able to present data that has been out there and also new analyses that no one has even seen, of course, based upon FDA feedback as well to be able to demonstrate to FDA this probable -- that the probable benefit outweighs the probable risk or that the benefit-to-risk ratio is a positive one, which is the basis of the de novo marketing authorization. So we're very excited that we've now put in for this pre-submission and hope to stay on schedule to be able to submit that de novo in the first quarter of next year. Brian Lantier: Great. And I guess one last one, and then I'll open it back up for anyone else. Any feedback from the World Sepsis Day webcast that you had? Phillip Chan: Yes. We've actually had excellent response from that webcast internationally. The statistics are very promising. And I think the important part is that we're getting the message out there that CytoSorb is not just a blood filter to treat cytokine storm. What we've been able to demonstrate and what our collaborators and researchers around the world have been able to demonstrate is that by controlling that cytokine storm, it has broad-ranging effects on the pathophysiology of sepsis and septic shock, helping to ameliorate organ dysfunction and organ failure and importantly, allowing clinicians the next step of getting the fluid, which is essentially drowning the patient from the inside out, out of the patient, which they typically cannot do because of that severe inflammation that is happening. So the feedback that we've gotten so far has been outstanding. And this is actually going to be -- it is one of the focuses of our sales teams around the world to continue highlighting really the significant amount of data that has been generated in the area of sepsis and septic shock and help clinicians solve this critical problem for their patients. Operator: There are no questions at this time. Please continue. Phillip Chan: Well, thank you, everyone, for joining the call today. If you do not have any other questions, please feel -- if you do have any other questions, please feel free to reach out to us at ir@cytosorbents.com. We look forward to updating you in the next call. Have a great evening, everyone, and thank you very much. Have a good night. Operator: This concludes today's conference call. You may disconnect your lines. Thank you for participating, and have a wonderful day.
Operator: Good afternoon, and welcome to the Sera Prognostics Conference Call to review third quarter fiscal year 2025 results. [Operator Instructions] As a reminder, this call is being recorded for replay purposes. I would now like to turn the call over to Jennifer Zibuda, Sera's Head of Investor Relations for a few introductory comments. Sera, (sic) [ Jennifer ], please go ahead. Jennifer Zibuda: Thank you, operator. Good afternoon, everyone. Welcome to Sera Prognostics Third Quarter Fiscal Year 2025 Earnings Conference Call. At the close of market today, Sera Prognostics released its financial results for the quarter ended September 30, 2025. Presenting for the company today will be Evguenia Lindgardt, President and CEO; and Austin Aerts, our CFO. During the call, we will review the financial results we released today, after which we will host a question-and-answer session. If you've not had a chance to review our quarterly earnings release, it can be found on our website at sera.com. This call can be heard live via webcast at sera.com and a recording will be archived in the Investors section of our website. Please note some of the information presented today may contain projections or other forward-looking statements about events and circumstances that have not yet occurred, including plans and projections for our business, future financial results and market trends and opportunities. These statements are based on management's current expectations, and the actual events or results may differ materially and adversely from these expectations for a variety of reasons. We refer you to the documents the company files from time to time with the Securities and Exchange Commission, specifically the company's annual report on Form 10-K, its quarterly reports on Form 10-Q and its current reports on Form 8-K. These documents identify important risk factors that could cause the actual results to differ materially from those contained in our projections and other forward-looking statements. I will now turn the call over to Zhenya. Evguenia Lindgardt: Thank you, Jennifer, and good afternoon, everyone. Building on the momentum from our PRIME study and ongoing commercialization efforts in the third quarter of 2025 marked continued progress in our transition towards PreTRM Test adoption. We advanced our geographically focused strategy. In these regions, we are executing an integrated approach to achieving payer coverage, physician education and patient awareness. We've continued to build visibility through key industry events and data presentations. Earlier this week, we presented health economics data at the International Society for Pharmacoeconomics and Outcomes Research, or ISPOR, Europe Conference. In October, Dr. Brian Iriye delivered a compelling presentation of PRIME study outcomes at the Inaugural Renaissance Conference, the 3 ages of the women-- titled Dismantling the Preterm Barrier: Biomarker-guided Bundled Care to Improve Neonatal Outcomes. Links to both the poster and the presentation are now available in our press release issued today. We remain on track to publish the full results of our PRIME study in a peer-reviewed journal by the end of the year. We're very far along through the process of preparing a publication and we look forward to sharing it with all stakeholders. What you can expect from us is a press release upon acceptance for publication followed by an investor and analyst event with our principal investigators to discuss the strong primary outcomes we shared earlier this year as well as some new and compelling data points from the study, demonstrating the efficacy of the PreTRM Test. Following PRIME, we plan to maintain a steady cadence of data publications and presentations focused on key topics, including health economic benefits, subpopulation analysis, for example, first-time moms versus other moms and Medicaid expected cost savings associated with Sera PreTRM Test. These data subsets will build on the robust evidence base, already established by our PRIME and AVERT clinical studies. Together, they will not only reinforce the clinical and economic value of preterm, but also help support its adoption into standard prenatal care. Let's now shift to our commercial strategy and progress. And for those newer to our story, I'll start with a quick overview. Our sales and marketing efforts are concentrated in select regions where we see strong alignment across several factors, headway with payer and Medicaid program discussions, support from influential local opinion leaders, engagement from early adopter institutions and presence of PRIME study sites. By focusing on areas where these elements converge, we are creating conditions for meaningful clinical uptake of the PreTRM Test. We've made real strides with Medicaid plan pilot programs, and our inaugural pilot in Nevada is actively enrolling patients. We're engaging payers in our first wave of 6 started states, collectively representing a strong commercial opportunity, covering approximately 33% of U.S. births and 35% of Medicaid births annually. Beyond this first wave, we've initiated outreach to the next year of target states, expanding our footprint of states in discussion to 13 in total. We're also in discussions with organizations with regional and national reach across multiple lines of business. These early signals of market engagement give us confidence that we are well positioned to drive meaningful coverage and adoption in our target states and beyond. Our commercialization strategy is anchored in getting coverage first. It is built on a 2-pronged approach. First, targeting state engagement across first and second wave states, for example, Nevada, Texas and Massachusetts that have shown interest, face high preterm births and have leveraged tools to adopt innovative programs and prenatal care. Second, payer-driven adoption through pilots and alignment to value-based care programs. By engaging state and payer leadership and connecting to the efforts of local institutions driving improvement in prenatal and maternal care quality outcomes, we're building a local flywheel of adoption that aims to accelerate provider buy-in and lays the groundwork for broader coverage. With Medicaid financing over 40% to 3.6 million U.S. births annually, the opportunity to drive meaningful cost savings and improve outcomes is substantial. We believe the PreTRM Test offers a differentiated, data-driven solution for states seeking to reduce neonatal complications and manage Medicaid expenditures more efficiently. Our health economics data shows potential in-year savings from PreTRM Test screening of low-risk pregnancies. The path from initial state Medicaid director engagement to a state coverage decision takes time. Initially, we anticipate a cycle of about 24 months or more driven by the nature of prenatal testing and claims data availability. For example, the blood draw occurs between weeks 18 and 20 of pregnancy and followed by 4 to 5 months until delivery of babies and another 3 months or so for claims data to become available for analysis. Once the data is reviewed, we present the pilot results to the Medicaid plan and other state stakeholders to inform coverage decisions. As additional pilots launch, we will use the resulting data to demonstrate feasibility and build a strong business case for statewide coverage. Our commercialization strategy in the immediate term will focus on the target geography adoption wave by wave until guideline inclusion. Success of these efforts depends on achieving coverage in Medicaid and commercial plans, value-based care arrangements and activating physician adoption and advocacy. Engagement with clinical leaders and alignment on target populations will be critical to securing guideline inclusion and accelerating adoption. Post guidelines, we scale nationally with a field sales force aiming for broader payer coverage and expand national awareness building through traditional marketing channels. Although guideline inclusion is a longer-term milestone, our focused efforts, both in evidence generation, KOL engagement, targeted state coverage and physician adoption are all needed to support it. Ultimately, the strategy positions us to drive meaningful revenue growth while improving outcomes from mothers and babies nationwide in helping address health care utilization trends, including rising costs associated with rising NICU admission rates and longer hospital stays surrounding maternal and neonatal care. To provide clear visibility into our accelerating commercial execution, even at this early stage, we will begin sharing some key traction indicators such as Medicaid pilot momentum, including a number of live pilots, enrollment completion milestones and expanding pipeline of states in discussions that will serve as tangible markers of progress as we build towards sustainable revenue growth. We're gaining meaningful traction across the payer landscape. We're actively engaging with 10 payers across 13 states, a diverse mix, both national and regional, Medicaid and commercial, who are focused on offering a competitive health care benefits while managing rising costs. Our strategy targets forward-thinking organizations with strong member bases in key states where our sales reps are positioned well to maximize pull-through. We're also prioritizing institutions with value-based payment models, aligning incentives for providers and payers in preventing preterm birth complications. PRIME and AVERT data strongly support value-based approach and can accelerate preterm uptake where positive outcomes translate into payer, provider and patient success. To recap our commercial progress, momentum is building. Our first Medicaid pilot is now live. We are in active dialogue with all 6 of our initial target states, and we've already begun engagement with the next wave of states, setting the stage for broader adoption and impact. To support our fundamental, clinical and commercial efforts, we've made high-impact leadership appointments to the Sera team. As announced in October, Dr. Tiffany Inglis was appointed Chief Medical Officer, an accomplished OB/GYN with over 20 years of experience, including a decade in clinical practice and recent leadership at Elevance Health and Carelon Health. Dr. Inglis excels at driving women's health initiatives, payer coverage and cost-effective outcomes. She will spearhead our medical affairs and strategy to accelerate PreTRM Test adoption and establish it as a standard of care for preterm birth risk. In preparation for broader adoption of the PreTRM Test in our target states and beyond, we appointed Marisol Urbano as the Head of Commercial Operations. With 20 years of health care experience and a proven track record in diagnostics, her leadership will be instrumental in accelerating customer onboarding and supporting clinical integration, key enablers of commercial traction during this foundational growth period. Complementing this leadership, we have successfully completed the hiring of sales representatives across all 6 of our target states and are well positioned to expand market access and preterm utilization. Lastly, beyond our progress in the United States, we continue to explore Europe in a region that fully appreciates the pressing gap in preterm birth risk screening. We remain engaged in productive discussions with European regulatory bodies and are on track to submit our dossiers in early 2026. In closing, we've made significant strides in laying a strong foundation for adoption and reimbursement, setting the stage for future growth. Looking ahead, we're optimistic about the flywheel effect on these initiatives, which we believe will drive meaningful adoption and contribute to better maternal and neonatal outcomes. With that, I'll turn it over to Austin, our CFO, for a review of our financial results. Austin? Austin Aerts: Thanks, Zhenya, and good afternoon, everyone. I'll provide an overview of our financial performance for the third quarter of 2025 and our balance sheet position. Net revenue for the third quarter was $16,000 compared to $29,000 in the same period last year. During the quarter, we received a $100,000 prepayment from the first Medicaid pilot in Nevada, which increased our deferred revenue balance as of September 30, 2025. Total operating expenses for the quarter were $9.0 million compared to $8.9 million in the third quarter of 2024. Research and development expenses were $3.3 million, down from $3.5 million for the third quarter of 2024, primarily due to lower clinical study costs following the completion of the pivotal PRIME study and as the company shifts towards commercialization. Selling, general and administrative expenses were $5.7 million, up from $5.4 million for the prior year period, a modest increase as we carefully invest in targeted commercial activities and strategic headcount additions, while building market awareness in preparation for the publication of PRIME study data. Our net loss for the quarter was $7.8 million, down from $7.9 million in the third quarter of 2024 as we continued our focus on managing our capital resources ahead of revenue expansion in the future. As of September 30, 2025, we had cash, cash equivalents and available-for-sale securities of approximately $102.4 million. We are encouraged by the commercial momentum that Zhenya discussed, including our first Medicaid pilot program in Nevada. We are diligently working to translate our foundational progress into tangible outcomes and significant growth opportunities. In the meantime, we continue to manage our capital prudently, prioritizing high ROI opportunities to support commercialization, while maintaining a strong balance sheet to fuel our growth strategy. Operator, we can now open the line for questions. Operator: [Operator Instructions] And your first question comes from the line of Dan Brennan from TD Cowen. Daniel Brennan: Great. Maybe just on the Medicaid pilots, Nevada, you've got 6 other states behind it or 5 other states behind it. I know at the Q2 call, you discussed 2 to 4 pilots signed up kind of -- I don't know what the time frame was, but it was kind of in the near term. So do you feel like progress is going on track? Do you feel ahead of plan, behind plan in terms of getting Nevada signed up? And when do you think you'd have -- get the 4 or get to the 6 pilots signed up? Evguenia Lindgardt: Dan, thank you so much for the question. We are very much on track. One is launched in recruiting, another one is in contracting. And so that gets us to 2. And we believe a couple more shortly. In active discussions with the payers in other states. So with that, the fact that we've expanded to the next wave of states tells you that we're very much on track on getting a foot in the door in each of the states and going beyond because we feel we have good traction even in the first wave of the states. So we'll definitely continue communicating progress once the pilots are up and running. Obviously, while we're in contracting, we're going to probably not communicate what the states and the payers are. But once we are underway with their permission, we'll share it with all of you. Daniel Brennan: And how big are the pilots? So Nevada, you said $100,000 prepayments. Just how do we think about? I know the criticality is to get it established, you can eventually get state Medicaid coverage. But just speak to during the pilot phase, like what's the economics? Like what are you getting paid to run these tests? How big is the Nevada program? Just any color around that? Evguenia Lindgardt: Sure. The trade-off here, Dan, are how fast we want results. So the fewer patients in the pilot, the faster the decision on coverage, which, of course, would be best to driving outcomes for moms and babies sooner. The drive to have a bigger pilot, of course, is powering the pilot to show great results. because, again, we are looking at reasonably rare events of significant preterm birth that we want to ameliorate. So from that perspective, the typical size of a pilot would probably be a few hundred patients. However, I will tell you, as we're engaging with plans and state Medicaid directors, we're not only suggesting that we pilot, but we are in active discussions with some value-based health care arrangements and contracts where we can show what the test can do when screening the moms in the state with achieving quality metrics and putting some dollars at risk as opposed to setting up a similar conversation in context of a pilot. So it's hard to tell you specifically because each state has a slightly -- or each payer has a slightly different arrangement and size and scale of the program. Some payers and states are looking for a state-wide contract that is value-based. So obviously, that would be many thousands of patients as opposed to a few hundred. Does that help? Daniel Brennan: Okay. And -- okay. And are you collecting like full price when you -- even though it's small, like hundreds of thousands are you collecting the full preterm birth price or it's a discount? Or just how does that work? Evguenia Lindgardt: So again, the specifics, I won't get into. But we are very happy with the price realization in these early engagements with payers and state Medicaids. We don't know how that will evolve when we get to full scale coverage for the state, but we're optimistic about what we've seen to date. Daniel Brennan: Got it. And then just in terms of PRIME, so timing-wise, you guys still feel confident it will come before year-end. So we've got, whatever, 8 weeks -- excuse me, like 6 weeks left. So you think it will come before then? So maybe just any more color on the confidence there if it slips a little bit, I guess, no big deal. But then, b, just remind us of the additional data we're going to get and what's going to be impactful that will come out in the publication that we didn't see so far? Evguenia Lindgardt: Yes. No, Dan, we are -- I know we've been talking about any day now for the last few quarters, but it truly is super close now, and we are confident it is coming in the coming weeks, ideally before the end of the year. And in terms of specific data, of course, it would be impossible to highlight the data before the publication itself. But what I can promise is as soon as the publication is out, we'll have an in-depth event to go over all of the new insights. I will highlight that the insights are coming from engagement with the reviewers. And as you know, we've talked about a series of publications coming out of mining an incredibly rich data set that comes out from PRIME. So we pulled forward some of the insights that were coming in future publications because of the requests of the reviewers to add that to the publication. So look forward to sharing that. But unfortunately, I can't highlight those until publication date. Daniel Brennan: Got it. And maybe one more. Just in terms of the path forward, $100 million in cash, you have these pilot studies in the background and then the PRIME study and then obviously, guidelines. But as we think about the next 1, 2, 3 years, getting PRIME out, getting the pathway to guideline inclusion, whatever you need to do there and then simultaneously, like you said, with these pilot studies. But on the guideline, you said in the past, I think, typical cadence is what, 24 to 48 months post publication. Is that still your best guess right now such that if the publication, let's say, comes out in the next month, the end of '25, are we thinking more like end of '27? End of '29 is when guidelines could occur? And then I guess the focus between then and now would just be these pilot studies? Evguenia Lindgardt: Okay. So a couple of questions on that one. Yes, we are -- that is still 24 to 36 months, still a pretty good guesstimate, I would say. We are -- we've developed an engine to mine the data and add real-world evidence to our portfolio that certainly is going to be the best thing we can do to influence and create literature for review for the guidelines to be updated with the new tools that are available to clinicians. So that is a critical work stream for us, and we're hoping that will be a truly a steady stream of data. In addition to mining PRIME data, of course, we talked about a real-world evidence, which should see its first publication next year as well as the data that's coming out of engagement with the plans and the states. Until the guidelines, I do think the key focus is this geographic focus in driving density of adoption in specific states. Given our first target states represents over 1/3 of births in the United States, that's not small volume at all. That is plenty of work to get done and volume to drive. I don't want to just zero-in and call it pilot engagement. Not at all. It's going to be much broader than that, including policy -- positive policy coverage achievement across plans and value-based care contract arrangements and just driving physician adoption institution by institution in some of the multi-hospital systems and women's health clinics. So a lot more to come on that, but please don't just focus on the pilots. Pilots is one tool in our toolkit. But indeed, it's going to be a geography-focused effort. And post guidelines, we're going to move to a nationwide commercialization. Operator: [Operator Instructions] And your next question comes from the line of Andrew Brackmann from William Blair. Margarate Boeye: This is Maggie Boeye on for Andrew today. Maybe first, just to start, can you walk through just once you have the PRIME publication in your hands, what your plans are there? And how you think about organizational readiness at this point once the PRIME publication comes hopefully before year-end? Evguenia Lindgardt: Thank you so much, Maggie. Organizational readiness, we've been preparing for quite a few quarters for PRIME to come out. So what we've done is prepared the dialogue that can commence once the data is out, specifically policy review by payers. As you can imagine, without a peer-reviewed publication, engagement is on the pilot basis and early engagement. However, once we have the publication, the formal processes of review can commence within the payer institutions. So number one priority, as we mentioned, is getting coverage and reimbursement. So that's the first thing that organization will drive upon publication. Second, of course, is dissemination of information with clinicians, education awareness building. What you can anticipate is presence at conferences, ECOG district conferences, seminars, CME events. We really want to get the data out to as many physicians and opinion leaders as possible. In parallel, of course, we are engaging with opinion leaders on the new data that is coming out of the PRIME that will shape new publications coming out of the data. Our field force is going to use as a third key thrust, the PRIME publication to make sure that in all of our target states, we are driving physician adoption with the major institutions and hospitals who've been engaging with us under CDA around the data to go ahead and drive education with all of their clinicians with the publication in hand. So we feel the organization is very much ready with all of the appointments we've made this year with our Chief Commercial Officer, Lee Anderson; with our Chief Medical Officer, Dr. Tiffany Inglis. A lot of roles within the commercial organization and hiring our sales force, we are in great shape to press go on our plan post publication. Margarate Boeye: And then maybe just one, just on the commercial team. How should we be thinking about that build out as we get into 2026 once the PRIME publication is out there? And then just with that, how should we think about your SG&A expense in 2026? Evguenia Lindgardt: Great question. I'll start with the commercial team size and then Austin, if you want to talk through the SG&A question, that would be great. So Maggie, what we're aiming to do as we expand the engagement with states and the payers and have the initial coverage established, we plan to expand the sales force to drive the pull-through in those geographies. So each of the waves is about 4 to 6 states, so we've staffed the first wave of 6 states. You can anticipate that we will bring new sales reps and medical science liaisons to the next wave of states as traction in those geographies is achieved. So we'll continue following our philosophy of investing behind the wins to put field personnel in place to drive engagement on the ground with physicians, with practices, with office managers and opinion leaders. So Austin, do you want to talk through on the parameters of our SG&A change anticipated in 2026? Austin Aerts: Sure. Maggie, thanks for the question. We're aiming next year to keep expenses relatively similar to the way they are this year, while also shifting a lot of our capital allocation certainly towards sales and marketing activities. So we do expect to see a relatively significant increase on the sales and marketing line, while overall expenses stay relatively flat. Evguenia Lindgardt: Thank you so much, Maggie. We are excited to reallocate capital to commercialization from our main evidence-generating activities over the last couple of years. Operator: There are no further questions at this time. Ms. Lindgardt, please proceed with closing remarks. Evguenia Lindgardt: Thank you so much. Before we close the call, I just want to emphasize the strong foundation we've built this quarter with advancing the evidence generation, accelerating commercial execution and strengthening our leadership team. With the first Medicaid pilot live and active engagement across 13 states and key hires in place, we're really well positioned to drive adoption of the test and delivering meaningful impact in maternal and neonatal outcomes. Looking ahead, we remain focused on disseminating PRIME results, expanding payer coverage and working towards guideline inclusion. Thank you all so much for the continued support as we work towards transforming prenatal care and creating long-term value for patients, providers and shareholders. Over to you, operator, to close the call. Operator: Thank you. And this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Good day, everyone. Thank you for standing by. Welcome to the Vistagen Therapeutics' Fiscal Year 2026 Second Quarter Corporate Update Conference Call and Webcast. Please note that today's call is being recorded. At this time, I'd like to turn the call over to your host, Mark McPartland, Senior Vice President, Investor Relations at Vistagen. Mark? Mark McPartland: Thank you, operator. Good afternoon, everyone, and welcome to our conference call and webcast. Earlier this afternoon, we filed our quarterly report on Form 10-Q and issued a press release for our fiscal year 2026 second quarter, which ended on September 30, 2025, providing an overview on the progress in our PALISADE-3 program for fasedienol and social anxiety disorder across our other lead clinical neuroscience programs. We encourage you to review the PR and 10-Q, which are available in the Investors section of our website. Now before we begin, please note that we will be making forward-looking statements regarding our business during today's call based on our current expectations and information. These forward-looking statements speak only as of today. Except as law requires, we do not assume any duty to update any forward-looking statements made today or in the future. Of course, forward-looking statements involve risks and uncertainties and other actual results could differ materially from those anticipated by any forward-looking statements we make today. Additional information concerning risks and factors that could affect our business and financial results are included in the fiscal year 2026 second quarter Form 10-Q for the period ending September 30, 2025, and in future filings that we'll make with the SEC from time to time, all of which are available in the Investors section of our website or, of course, on the SEC's website. Now with the formalities out of the way, we warmly welcome our stockholders, sell-side analysts and others interested in our programs and our progress. I'm joined on our call today by Shawn Singh, our President and Chief Executive Officer; and Josh Prince, our Chief Operating Officer. Shawn will provide a brief business update, clinical update, and Josh will be available to provide additional feedback during the Q&A portion of our call. After our remarks, we will take questions from the sell-side analysts participating on the call today. I remind you, a replay of the webcast will be made available in the Events section of our Investor page on our website. With that taken care of, I'll now turn the call over to our President and CEO, Shawn Singh. Shawn Singh: Thank you, Mark, and good afternoon, everyone. We've built a very strong momentum as we enter into what could be a potentially transformative period for Vistagen. Last week, we announced another major milestone in our PALISADE program. The last patient completed the randomized double-blind portion of our PALISADE-3 Phase III trial, evaluating our most advanced intranasal “pherines” product candidate, fasedienol for the acute treatment of social anxiety disorder. We are now preparing for the release of top line results from the PALISADE-3 study by the end of this calendar year. We extend our sincere gratitude to the patients who participated in the study as well as the dedicated and experienced clinical investigators, the clinical site staff and our contract research organization. Their enthusiasm, their focus on detail and the collaboration throughout the study were notable and greatly appreciated and will remain so during the ongoing open-label extension of the study. Over the past several months, I've had the privilege of meeting in person with many of the dedicated teams conducting our PALISADE-3 and PALISADE-4 studies. The energy, the curiosity, the optimism that I've witnessed reaffirmed just how great the need remains for new treatment options for individuals whose daily lives are affected by social anxiety disorder and how differentiated and innovative fasedienol could be in meeting their needs. Together, our teams remain deeply focused on fasedienol's potential to become the first FDA-approved acute treatment of anxiety for the millions of adults with social anxiety disorder. Looking ahead, we remain on track to report top line results from our PALISADE 4 Phase III trial in the first half of 2026. Both PALISADE-3 and PALISADE-4 share a similar public speaking challenge design and the same primary efficacy endpoint as our previously successful PALISADE-2 Phase III trial. In parallel, we are continuing preparations designed to advance our broader pherine pipeline, including itruvone for major depressive disorder and PH80 for menopausal hot flashes. Both depression and women's health represent areas where far too many patients still struggle without adequate options. We're deeply motivated to bring forward the innovative nonsystemic neurocircuitry-focused potential of itruvone and PH80 to help address these important and widespread needs. Turning now briefly to our financials. As of September 30, 2025, we had $77.2 million in cash, cash equivalents and marketable securities. We believe current cash covers all known aspects of our ongoing U.S. registration-directed PALISADE program for fasedienol for the acute treatment of SAD, including potential NDA submission if our PALISADE program is successful. Before I conclude the business update, I'd like to welcome Mr. Paul Edick to our Board of Directors. Paul joins us at a pivotal time for Vistagen, bringing decades of experience leading successful FDA approvals, commercial launches and strategic transactions. His leadership will be invaluable as we prepare for our next phase of growth. I'd also like to extend our deep gratitude to Dr. Jerry Jin, who served on our Board from 2016 until his retirement earlier in September of this year. In closing, our mission remains clear and unwavering: to redefine what is possible in neuroscience, to restore emotional well-being and improve quality of life for millions worldwide. With a diverse and innovative pipeline, experienced team, several key milestones approaching, we believe we are entering one of the most exciting and potentially transformative periods in our company's history with deep confidence in our ability to deliver meaningful value for patients and for our stockholders. I want to thank you all for your continued interest, your support and your engagement with Vistagen. It makes a lot of difference, and we look forward to sharing our progress with you in the weeks and the months ahead. Mark McPartland: Thank you, Shawn. These are definitely exciting times at Vistagen as we continue to build momentum across our programs. Operator, we would now like to open up the call for questions from the sell-side analysts joining us today. Operator: [Operator Instructions] Your first question comes from the line of Andrew Tsai with Jefferies. Lin Tsai: Look forward to the top line data readout soon. And so I think you guys have mentioned before that we should expect 6 to 8 weeks after the last visit for the top line release. Is that still the case? Or could it come earlier than that actually? Shawn Singh: Our guidance, I think we're just going to stick with it, Andrew. Thanks for asking the question, and thanks for coming on. But our guidance is that we'll see top line results released before the end of this calendar quarter, so by the end of this calendar year. Lin Tsai: Okay. And for the top line analysis, how should we think about discontinuation rates, any protocol violations? Will that -- can we expect the top line to be pretty close in terms of the number of patients you've enrolled in the study? And then how should we also be thinking about the safety profile? Shawn Singh: Well, you're going to hear as we did with PALISADE-2, right? So we're going to give you, obviously, top line results on the primary, the CGI-I, the secondary and also the PGI-C as a secondary. And obviously, pretty customary information regarding the safety profile that we've seen throughout the course of the study -- through the randomized portion of the study. So that's what we're printing out, and that's what we're reading out is -- are the top line results from the randomized double-blind portion, which is the public speaking challenge. So any safety data that we have from that study, similar to PALISADE-2, we'll be reading that out as well. Lin Tsai: Okay. And then last question is from what you can tell, what have been the top reasons why patients screen failed in PALISADE-3? And are the top reasons different from what you saw in PALISADE-2? Shawn Singh: So we can unpack that later. But what I can tell you, Andrew, is the reason that we made enhancements to the PALISADE-3 and 4 studies, again, was to make sure that there's very high-quality assessment for subject eligibility. And as a result of that, we had our own teams involved here with our teams for subject eligibility review. We had other enhancements into the execution of the study, of course, throughout the duration of the study. So I think we've seen generally what we've expected to see and as we've modeled forward for not only screen fail, but also attrition rates throughout the course from enrollment through randomization through the end of the study. So I think we're comfortable with what we've typically seen and maybe more to come on that later. The important piece of the puzzle is -- yes, one more thing is obviously the important piece of the puzzle is that we got to the last patient class visit with the full complement that we had modeled for purposes of the studies. We've noted before, our end target was 236. So last patient class visit reflects our original thought. Operator: The next question comes from the line of Paul Matteis with Stifel. Unknown Analyst: This is [ Matthew ], on for Paul. I guess for us, assuming one of PALISADE-3 or PALISADE-4 works, is there anything else gating registration -- gating filing? Is there anything else that you need to complete before then? How soon can you file? Shawn Singh: Sure. Matthew, thanks for the question. So as you know, as we move closer toward completion of the Phase III development program, we always plan to interact with the agency. But we've said this before, obviously, it's the pivotal program data, it's a repeat dose study. It's the open-label data from our long-term safety study, a human factor study, the typical preclinical safety-related studies, reprotox and carc, all those are aspects that we expect to have wrapped up upfront, of course, of an NDA package. So -- and we'll, of course, be meeting with the FDA as we get closer to make sure that we're in line with what's necessary regarding a submission package. So we estimate currently, and if everything goes according to plan that we've been executing on, we could see an NDA submission if PALISADE-3 is positive sometime around the middle of '26. Operator: [Operator Instructions] Your next question comes from the line of Myles Minter with William Blair. Myles Minter: Just the first one, is it your view that fasedienol would be eligible for commissioner's priority review voucher? It seems to me like SAD is potentially a public health crisis, and it's certainly a massive unmet need with over 30 million patients out there. That's the first one. And then second is just, I think in late October, you updated clinicaltrials.gov. You terminated a site in Arkansas and Kansas. I'm just curious whether that was because you've completed enrollment and you didn't need those sites anymore or just because of your site vigilance and you're going to see these sites in person? Was it something performance related that you terminated those sites? Shawn Singh: Thanks, Myles. Thanks for the question. Josh, why don't you go ahead and take that last question first? Joshua Prince: Sure. Yes. Thanks, Myles. As we've gone through the course of these studies for both PAL-3, PAL-4, it's a constant evaluation of fit with sites. And so we've had a few sites that, for whatever reason with regard to their ability to enroll the appropriate patients, whether it was their recruitment programs or other reasons, just they were not able to enroll. And so at some point, it makes sense to terminate those sites. There's been 1 or 2 like that. And then also beyond that, as we -- to your point, as we get towards the end of the study, we definitely take a wind-down approach for a soft landing for the study to make sure it's well controlled. We're controlling variability and then making sure that we will be able to get from that end of study last patient out to top line results efficiently in the time line that Shawn mentioned. So for us, it's kind of course of business as we've gone through the process of the studies. Shawn Singh: Thanks, Josh. So Myles, on your first question related to the voucher program, the CMPV program. So we're certainly aware of it and the criteria the FDA uses to evaluate eligibility. I think right now, while we don't expect that fasedienol falls within the typical scope of the CMPV programs, we, of course, believe the magnitude of unmet need and especially for a rapid situational treatment without the worrisome side effects and safety concerns, it's significant. But I think if the regulatory pathways evolve or additional guidance creates a relevant framework, then of course, we'll evaluate it at the appropriate time. Operator: Your next question comes from the line of Elemer Piros with Lucid Capital Markets. Elemer Piros: Shawn, this is Elemer dialing in for Elemer. What I'd like to ask you is if you have any indication on the usage patterns, this is coming from -- perhaps more likely from PALISADE-2 than maybe to a lesser extent from PALISADE-3 at this point for those who went out to complete the OLE up to 1 year? Shawn Singh: Yes. Most of the usage pattern data is going to come from the open labels. And so what we can talk about, of course, is related to the reported open label, the long-term safety study that we had before. And the patterns established in the context of that study give some pretty good guidance to us about what we see going forward in the real world. Remember, this is a disorder that is -- it's chronic, but it manifests acutely and episodically. And so a lot of it in terms of utilization depends on where people are in their particular phase of their journey, what is their job? What academic setting are they in? How frequently do they need to interact with people on a social basis? And you definitely see in that long-term safety study we've reported on more activity during the week, especially after people are back to work, back to school in the kind of rhythm of life that we're in now. You see more utilization during a week, especially during work kind of hours. Weekends, it tends to taper off, obviously, because people are not in similar stressful settings or may be social situations, a barbecue at your friends or you go to a sporting event where there's worry about how you're looking, how you're -- whether you're being judged or not being judged, which is really the -- what anchors this disorder, unfortunately. So more often during the week, less often during the weekend, and that's the pattern we saw early on in the open-label study we reported on, and it's reasonable to expect that sort of activity on a go-forward basis, at least that's what's anchoring a lot of our informed assumptions about how we could see the drug used in the real world. Elemer Piros: Thank you, Shawn. And do you see any difference between the number of people entering the open-label phase between PALISADE-2 and PALISADE-3, and roughly what percentage is that? Shawn Singh: Yes. I'm not going to remark on the percentages, but I can tell you, it's a high throughput rate we've seen historically in any open-label activity that we've got. And as to be expected, it's part of the reasons why people get interested in participating in the study in the first place is that they think if they complete it, there's an opportunity for the investigational agent to be part of their go-forward experiences. So I think the reasons people don't tend to go into an open label historically are associated with a change in job, a change of living location, something significant that's a life-changing event that allows them to -- or causes them to not be proximate to the site that they were involved in the randomized study. Elemer Piros: I see. I see. I just have 2 more if you have -- if you're okay with that. What would be the minimal effect size in terms of the SUDS or the CGI that would be deemed clinically meaningful? Shawn Singh: So, we're going to try to, of course, replicate what we were able to accomplish in PALISADE-2, right? So you always have to contextualize whatever your primary is with the outcomes that are from the other endpoints, especially in this case, the cross association with CGI-I and PGI-C. So you get to clinical significance or clinical meaningfulness when you look at all 3 of those, and we take a look at not only what happens with the SUDS, but also with the secondaries. So -- and it's -- I think we're targeting to try to replicate what we already believe is not only statistically significant, but a clinically meaningful outcome associated with the PALISADE-2 study. Elemer Piros: Understand. And lastly, how do you think about commercialization at this stage? On your own, be a partner? Have you thought about this recently? Shawn Singh: Companies -- yes, certainly we think about it all the time. Companies in positions like we are, if you have a contemplation for -- in the first commercial launch, you have to have a lot of good reasons for that. And here, as a company, we always position for optionality. There's many things that can happen. Key for us is to make sure we have the optimal opportunity to generate the value that could be associated with fasedienol if it gets approved. So there is certainly a very solid potential commercial plan. There's also opportunities should other strategic arrangements bring greater value potential. But yes, as a company, we have the expertise. We have the planning. We have execution in certain cases already underway to be able to bring this extremely innovative asset into the treatment paradigm where there is just nothing sitting there that's interesting and exciting for patients to be able to recapture the agency that allows them to tailor the use of a medication to fit how these stresses are impacting their lives day-to-day. And the world right now, it's a very interesting market out there in terms of the dynamics of telehealth and mental health, digital psychiatry, consumer-generated influencer-based activity across the socials, what we see with anxiety, very similar to what people see and hear about weight and a GLP-1 drug. So there's a transformed market environment over -- just even the last couple of years. And now you're also looking at a population of patients and maybe practitioners too, who really would prefer online engagement as opposed to in-person. So there's some really unique opportunities, especially with what we would hope to be borne out as the target product profile and the way to access not only practitioners, but also raise awareness among consumers. So it's a really exciting opportunity for the company around this very unique asset that fits in so many ways for what we think are the clarion calls of not only practitioners, but certainly patients. Elemer Piros: Yes. Exciting times. Looking forward to the read-out. Operator: There are no further questions at this time. I would now like to turn the call back over to Mark McPartland for closing remarks. Please go ahead. Mark McPartland: Thanks, operator, and thank you again, everyone, for joining us on the call today and for your continued interest and support. With a diverse and innovative pipeline and several key major milestones on the horizon, we believe Vistagen is entering one of the most exciting and potentially transformative chapters in our company's history. If you have any additional questions, please don't hesitate to reach out to us at ir@vistagen.com or through the Contact Us section of our website. We also encourage you, of course, to register for e-mail updates to stay informed about our latest news and developments from Vistagen. We truly appreciate your time, engagement and ongoing support, and we look forward to keeping you updated on our continued progress. This concludes the call. Have a great day. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.
Operator: Good afternoon, and welcome to Red Cat's Third Quarter 2025 Earnings Conference Call. My name is Steve, and I'll be your operator for today's call. Joining us are the Red Cat's CEO, Jeff Thompson; and CFO, Chris Ericson. Please note that certain information discussed on today's call will include forward-looking statements of our future events and Red Cat's business strategy and future financial and operating performance. These forward-looking statements are only predictions and are subject to risks, uncertainties and assumptions that are difficult to predict and may cause actual results to differ materially from those stated or implied by those statements. Certain of these risks, uncertainties and assumptions are discussed in Red Cat's SEC filings, including its most recent annual report on Form 10-K and other SEC filings. These forward-looking statements reflect management's belief, estimate and prediction as on date of this live broadcast, November 13, 2025. and Red Cat undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call. In addition, our comments on the call today contains reference to non-GAAP financial measures such as adjusted EBITDA and key business metrics such as annual recurring revenue. Non-GAAP measures should be viewed in addition to and not as alternative for the company's reported GAAP results. A reconciliation of these non-GAAP measures to their most directly comparable GAAP measures as well as definition of the key business metrics referenced and management reasons for including the non-GAAP measures and key business metrics referenced may be found in the press release. Finally, I would like to remind everyone that this call will be recorded and made available for replay via a link available in Investor Relations section of the company's website at ir.redcatholdings.com. With that, I'll turn the call over to Jeff. Jeffrey Thompson: [Audio Gap] 2025 earnings call. I will start by providing some high-level commentary on our financial results and then share exciting updates about our unique market position and revenue growth initiatives. Red Cat delivered a record-breaking third quarter with revenues of $9.6 million, up 200% from second quarter of 2025. Q4 will be more revenue in 1 quarter than we have ever done in a 12-month period. A majority of that almost $40 million of revenue in 2025 will have been shipped in the second half of Q3 and Q4, that's just 1.5 quarters. This performance reflects the accelerating adoption of our drone and robotic solutions across defense and national security sectors. Our product portfolio has reached new levels of validation and market acceptance. We are uniquely positioned and have built capacity to meet the U.S. Army's need for 1 million drones. We are ready with speed and volume. Here are additional milestones we achieved this quarter. The limited rate initial production Tranche 2 contract we signed in July 2025 has expanded. It is now $35.1 million. We launched Blue Ops, our new maritime division focused on uncrewed surface vessels with facilities now established in Georgia, Maine and Southeast Florida. Our FANG FPV drone was officially added to the Blue UAS cleared list, a critical validation for U.S. government use and now being used by other PM UAS categories. We successfully completed flight testing with Palantir's Visual Navigation software on our Black Widow platform, enabling operations in GPS-denied environments and now a Black Widow product option that will improve Black Widow margins through software sales. We announced a strategic partnership with AeroVironment, enabling deployment of FANG from the P550 UAS, part of the LR program of record and Edge Autonomy is deploying the Black Widow on their long-range platform. Our Black Widow system was approved for NATO NSPA catalog, opening doors to NATO members and partner nations and possible foreign military sales. To unpack that a bit more with added color, our limited rate production contract for the Black Widow system valued at $35 million demonstrates the military's confidence in our technology and manufacturing capabilities. The total contract in 2025 is now approaching $40 million for the U.S. Army alone. While we experienced a 6- to 7-week delay due to change orders that pushed the first shipments to mid-August, this reflects dynamic nature of defense requirements and our ability to adapt to solutions to meet evolving specifications. We received the new changes at the end of July. We iterated and delivered the first LRIP drones 3 weeks later. We proved that we can do quick changes and continue to ship at volume. Perhaps the most exciting strategic expansion is the launch of Blue Ops. Our new Maritime division, this represents a natural extension of our autonomous systems expertise into a high-growth adjacent market. Our partnership in Europe with a battle-proven boat technology gives Blue Ops a 3-year advantage in the USV space, and we expect our first boat hulls to be completed in December with potential pricing from about $750,000 to $1.5 million per unit. This division opens up substantial new revenue opportunities. We now opened 155,000-square-foot manufacturing facility in Georgia, capable of building more than 500 to 1,000 vessels per year and established a sales showroom and lab in Southeast Florida and a prototype partner in Maine that has built some of the most complex boat technology in the industry. We believe this is the most undervalued Red Cat asset. If we only ship 200 boats at the low end of pricing, that is $150 million in revenue. Red Cat believes factories are the moat. Additional expansion strategies are propelled by the need for manufacturing, speed and volume, and we believe factories are becoming a new moat for defense. We have doubled our manufacturing space in Salt Lake City and doubled our manufacturing space in Los Angeles, and we have U.S. capabilities for 1,000 USVs a year and can build a new hull design in months to production. Now to provide the Army SRR program update. We continue to execute on the U.S. Army's short-range reconnaissance program. The LRIP contract signed in July has been expanded and is now valued at $35 million. So let me share some context on changes in our revenue outlook and where our projections are shifting slightly to the future. The highly anticipated SRR contract took an extended amount of time to finalize. The government budget was not signed until July 4, and we're still receiving changes to the black window as late as the last week in July. The unanticipated delays shifted our expected revenue recognition by about 6 to 7 weeks to the right, but our long-term trajectory remains unchanged. In fact, the recent expansion of the LRIP contract to $35 million gives us further excitement of the future trajectory of U.S. public announcements and specifically the 1 million drones last week. We expect to announce additional contracts and partnerships in the coming months, including developments in our USV segment, Edge 130 move to Trichon, new power capabilities combined with swarming. Given some of the delays mentioned, we are needing to lower our full year revenue guidance range from -- for 2025 to between $34.5 million to $37.5 million. Q4 guidance is just below a $100 million annual run rate. We remain very optimistic about our ability to recover revenue from the delayed continuing resolution known as the One Big Beautiful Bill and the government shutdown of 2025. Demand has grown significantly in the last 3 months with the Army alone looking for millions of drones. We are currently implementing Warp Speed in Salt Lake City and expect to send Palantir and 4 deployed engineers to FlightWave Long Beach facility then soon to Georgia for the Blue Ops facility. We believe running our factories utilizing Palantir's Warp Speed will give us lower cost, higher margin, better operating metrics, better visibility and help us dominate against old trusty prime vendors. As you know, we also previously announced our new product with partnership with Palantir for digital navigation. We also expect to launch other important products from Palantir on the Black Widow and the USV products earlier next year as partnerships continue to grow with Palantir utilizing their AI products. I will now turn the call over to Chris to discuss our financial results. Christian Ericson: All right. Thank you, Jeff, and good afternoon, everyone. I appreciate everyone jumping on today. As Jeff mentioned, we're pleased with our record third quarter 2025 results, absolutely ecstatic. Our financial performance reflects the success of our ongoing strategic initiatives and our commitment to delivering value to our shareholders. On the income statement side, revenues were $9.6 million for the third quarter of 2025. Now this is trending up from $3.2 million in the second quarter and up further from the $1.6 million in Q1 of 2025. This improving trend is due to increasing product revenue as we have started delivering drones to the U.S. Army under the SRR program. Gross profit was $638,000 in the third quarter of 2025, up from $375,000 in the second quarter of 2025. Margins have been primarily driven by higher revenues in the 2 consecutive quarters. Q3 gross profit was a large increase compared to the gross loss of $392,000 in the third quarter of 2024, an improvement of over $1 million. On a percentage basis, gross profit for this quarter was 7% compared to a gross loss of 30% during the third quarter of 2024. The year-over-year same quarter change is due to higher utilization of plant capacity and decreased inventory obsolescence in 2025 compared to 2024. On our operating expense side, we've strategically increased the areas of R&D and G&A to support our rapid growth trajectory and market expansion initiatives. During Q3 of 2025, we invested approximately $6 million into R&D, a quarterly increase of 66% over Q2 of 2025. We have accelerated R&D to focus on growing our technological leadership in all areas, including, but not limited to, unmanned maritime surface vessels, advanced communication systems, electrical, optical and thermal sensor technology, universal flight controls, AI-based navigation systems and swarming capabilities to say the least, plenty of other areas that we're spending R&D as well to improve our technologies. General and administrative expenses have grown to $9.2 million for Q3 of 2025, a quarterly increase of 48% over Q2 of 2025. This is to support our larger organization, including the establishment of our Blue Ops division and the operational infrastructure required to manage our expanding operations. Now on to the balance sheet and cash flow side. The most significant trend across our balance sheet and cash flow metrics is the strengthening foundation we're building for sustained growth and profitability. We've ended the quarter with $212.5 million in cash and receivables. This liquidity positions us well to execute on our SRR obligations, scale our USV division and pursue other strategic growth opportunities. The investments we're making in working capital, manufacturing capabilities and organizational infrastructure are already generating returns through accelerated revenue growth and enhanced market position, positioning us for continued success as we scale our operations and capture the tremendous opportunities in the defense drone market. Despite the timing shift of revenue that Jeff talked about, we remain confident in our ability to meet long-term goals. Our production capacity continues to improve with minimal constraints. We are on track to scale up drone output to 1,000 units a month by early 2026, and our USV manufacturing is building up with first deliveries expected in Q2 of 2026. On the capital allocation side, we are focused on deploying capital across 3 key areas: our USV division build-out of Blue Ops, estimated to be a $20 million to $25 million investment to fully operationalize the division. Strategic investments targeting technologies in farming battery tech, AI and communications, among others. And the third, our facility expansion with completion of our facility expansions in Salt Lake City and Los Angeles here in the next 3 to 4 months and then also in Georgia with our Blue Ops facility. General outlook. Turning our guidance to the full year 2025, as Jeff mentioned, we expect revenues to be between $34.5 million to $37.5 million. This represents Q4 revenues between $20 million and $22 million or a sequentially quarterly increase of 170%, more than doubling the Q3 revenues. This continued strong sequential growth driven by our accelerated Black Widow production ramp and thank system deliveries following Blue UAS certification. This guidance reflects our confidence in our production capabilities with our anticipated manufacturing scaling from 500 to 1,000 drones per month in Q1 of 2026 and our strong order visibility from both existing defense customers and new opportunities generated through our NATO catalog approval. Several key factors are driving our optimistic outlook for the remainder of 2025 and into 2026. Our limited rate production contract for Black Widow Systems provides a solid foundation of committed revenue, while our expanded production capacity position allows us to capture additional opportunities as they emerge. With the launch of Blue Ops opens an entirely new revenue stream and significant potential, giving our pricing expectations between $750,000 to $1.5 million per vessel and the growing demand for autonomous maritime solutions. Our strategic partnerships with Palantir and AeroVironment are beginning to generate collaborative opportunities that should contribute meaningfully to our revenue growth trajectory. Market conditions continue to be exceptionally favorable in our solutions. Defense spending on autonomous systems is accelerating globally, driving by evolving geopolitical driven by evolving geopolitical dynamics and the proven effectiveness of drone technology in modern conflicts. The emphasis on domestic manufacturing and supply chain security creates substantial competitive advantages for Red Cat, while our international expansion through NATO approval opens up significant new market opportunities. We're also seeing increased interest in our maritime capabilities as defense organizations recognize the strategic importance of Unmanned Surface Vessels. Our internal initiatives are positioned to drive sustained growth beyond the current quarter. In closing, we remain focused on disciplined execution, strategy expansion and delivering shareholder value. We are pleased with the progress we have made on each of our strategic initiatives and operational performance of the business. And with that, happy to answer your questions. So operator, Stephen, if you would please open up the line for Q&A. Operator: [Operator Instructions] First question comes from Austin Bohlig with Needham. Austin Bohlig: First one, we're just curious on an update regarding the full rate production order. It sounded like previously, you guys were hoping to secure that by the end of the year. Is that still kind of the expectation? And any idea on like sizing of that opportunity? Jeffrey Thompson: Austin, thanks for the question. Well, we hope that, that was going to be by the end of the year, but that was before the shutdown. We're still communicating with -- they're using OTAs from now on, as you probably heard Secretary Hegseth last Friday. We do not know the size yet, but considering that LRIP is closing in on a $40 million size. If you look at the President's budget, it's for 2250 systems for SRR, which they have at about $148 million now. Until budgets are approved, no one knows what that's going to be. But I think the size is going to be dramatically larger from the $40 million basically we got in 2025. Austin Bohlig: Okay. Great. And then just on the boat opportunity, shipping, it sounds like in Q2 of next year. What is the type of cadence for revenue opportunity do you think that could be next year for you guys? Jeffrey Thompson: Well, as I said in my comments, if we only sold 200 boats, that's $150 million, and that would be the least expensive 5-meter boat. We're starting with the 7-meter variant, which has lots of opportunities for missiles, torpedoes, black widows. It comes in many, many different configurations because it's the bigger size. And those will be probably in the midrange of that $750 million to $1.5 million. But we think there's a robust need for shipbuilding as there was also an executive order just like the Drone Dominance Executive Order. The U.S. is way further behind in shipbuilding and way further behind than Ukrainians are with their naval capabilities. So we believe it could be a pretty robust revenue stream for us in 2026. A little too early to start giving guidance on that. We did have a very successful outing in Portugal in September. And once the first hulls are ready to demo, we're probably booked the first 3 months of the year giving demos to almost everybody who wants to take our meeting because of our partner that we have in Europe has 3 years of proven -- battle-proven, not battle-tested, battle proven, which is a key differentiator in the Black Sea. So we expect to get all the meetings. It's going to be up to us to show them how good our brand-new hull is and our capabilities are. And we're actually probably going to add a lot more robust capabilities with additional cameras than they are in other countries right now. Operator: The next question comes from Mike Latimore with Northland Capital Markets. Mike Latimore: All right. I guess on the -- you mentioned the 6- to 7-week delay. Just maybe can you provide a little framework on how much revenue recognition was influenced by that, which products, which programs were affected? Jeffrey Thompson: Well, there's a lot of moving pieces to that, Mike. A, because they keep changing the contract from the Army. The good news is we're already delivering on it. We did a delivery today. As we mentioned, we're going to be doing more than 100% growth in Q4. Basically, the way I would look at it, Mike, is if you took -- instead of our production shipping starting in the beginning of July, if you just shifted everything 6 to 7 weeks to the right, nothing has changed with our demand from our customers to -- from the previous guidance. I would say the only thing that was significantly different from -- that held us up in demand was that we had to do some reconfiguring, which I mentioned this publicly about 2 months ago. The FlightWave Edge 130 is a great flying machine, but it's not a very robust tool to hand a soldier that's going to be pretty rough with it. So the $25 million that we were expecting to have from FlightWave this year, we decided to rip the Band-Aid off early and start that reconfigure a couple of months ago, as I mentioned on a previous call, to make that Edge 130 a more robust aircraft so that a soldier could handle it and would not be breaking it and so the decision was to just move straight to the Trichon instead of messing with the interim version. And that's where we are. That's the only -- and we expect the $25 million in 2025 from FlightWave, which we're not going to get because of that. Mike Latimore: Okay. Got it. And then it looks like inventory almost doubled sequentially. Is that largely finished goods, Black Widow? Like what's in there? Jeffrey Thompson: Yes. So I'll let Chris take that. Christian Ericson: Not finished goods, but raw materials inventory ramp-up, a lot of deposits in there as well. As we've started production now, of course, at the very beginning of any type of process like this, you do have a lot of long lead time lead items that have to build up. And so as we built that out to prepare for, especially the big ramp starting up in Q1 for these deliveries, we've built up that inventory. But that's all in raw materials and parts for those inventories as well as deposits. Mike Latimore: Did you say that was for Blue Ops or Black Widow or both? Christian Ericson: Black Widow. So a majority of that is Black Widow, smaller portion FlightWave. Blue Ops, we're going to start having that to ramp up this next quarter, but you won't see that yet. Mike Latimore: Got it. Okay. And then just thinking about Blue Ops in '26, what -- I think you're launching, again, the demos. Like what's the next -- maybe walk through a couple of steps here. The -- which programs are most visible? What do you think sort of sales cycles are, funding cycles are? When do you think you might get some commercial wins there? Jeffrey Thompson: Yes. Well, there's a lot of stuff that's going to be coming up in the 2026 budget for shipbuilding, USVs. It's all out there for the taking. We believe because of our platform is mature compared to competitors, it's 3 years old. It's been the most successful against the Russian Navy and that we have actually improved the hulls dramatically, have some of the best boat building capabilities, and we have the capability to scale rapidly with lots of volume coming out of Georgia. That factory used to do 850 Lake boats per year before we took it over in September. The USVs that we're making don't require bathrooms. They don't require upholstery. They don't require sound systems. They're much simpler boats to build. There is some great technology in them. There's a lot of sensors. There's a lot of comms. We actually just tested our tech stack this week on a traditional commercial boat. That's not one of our USVs coming out of the factory, and we're able to drive that boat from pretty much anywhere in the world through Starlink, and we've been demoing that in Florida. So our tech stack is getting mature. We're pretty stoked about that. But -- we'll be able to give you much stronger updates early in Q1. The demo in Portugal was very successful for us. The people know that there's a U.S. option of the most successful USV in the industry. So we'll be able to update you on where we'll be next year -- early next year. Operator: [Operator Instructions] The next question comes from Glenn Mattson with Ladenburg Thalmann. Glenn Mattson: Nice to see the revenue ramp. I imagine there's a lot of moving parts still, but the gross margin was up, obviously year-over-year, still sub-10%. Like what's your expectation, Chris, in Q4, given this higher revenue level? And can you just remind us where you think you'll be when you're at a higher scale, say, later next year or whatever that may be? Christian Ericson: Yes, absolutely. Yes, we do expect this margin of 7% to increase up continuing on to next quarter as well as building up into next year. So we're going to expect to see it probably right around 10% for Q4 and then breaking into Q1 through the end of next year, that will continuously increase, projecting towards 20% by the end of next year. This is part of full utilization of the overhead implementing into it and then starting to bring down the cost on the supply chain. It's for the first time of ramping up, things are a little bit more expensive. But as we accelerate that, we will be able to bring down the cost of that as well. And so that will extend on the low end, 20% by the end of next year, shooting for around 30% to 35% in the long run. Jeffrey Thompson: And Glenn, just to add to that, we have to look at each system as a separate entity when we're looking at how to get these gross margins up. So if you look at the Teal products we had in the past, the Teal 2 went from negative 10% to right around 8% to 10% in its first quarter to 20% then to plus 30% each quarter. So previous ramping experience was that it will go up nice and steadily quarter after quarter, specifically as the revenue grows, like we're seeing triple-digit growth next quarter, and we expect similar growth going forward. But each one -- each device is going to have a different margin. FlightWave's margins are actually slightly higher than the Black Widow. So once we get that switched to the Trichon, that will probably help our margins on an overall basis. But we look at them per unit. We have the Black Widow, we have the Trichon, we have the FANG and we have the USVs. They all have different margin capabilities in their maturity. Glenn Mattson: Great. When it comes to the Trichon, what programs are you targeting in terms of like the uptake for that UAV? Jeffrey Thompson: Yes. What's interesting is the demand is very strong for the -- even the Edge 130, but it's currently not to where we want it to be. We've done some incredible improvements to it in the last couple of months to make it more reliable and adding features, all the things that we're getting feedback on. If there's lots of different programs. Your MRR is still wide open. We could look at MRR with the Trichon. There's a lot of different things. Border patrols really like the Trichon, long-range capabilities with it. We could also turn it into a loitering munition. It's a very unique aircraft. Our sales team love it. We just need to make it more robust. And once it's more robust, there's a lot of things we can do with that platform. It flies the longest on the Blue UAS list. It's one of the fastest drones on the Blue UAS list. So if we can make it a more robust aircraft, it's going to sell very well. Glenn Mattson: Great. And then I'm just trying to think about like the first part of '26. I know you're not giving guidance, but like if your prior guidance at the low end was, say, $80 million and you're coming in now just ballpark, say, $40 million, although it's lower than that be $40, say, that's a $40 million delta, and you're saying basically $25 million of that is FlightWave. So the remaining $15 million or so is kick out into Q1. Is that fair? And then what else backfills into Q1 to rise sequentially, say, from Q4 in your mind, Jeff? Jeffrey Thompson: Well, obviously, just to bash the haters, the haters out there said that our LRIP contract was $12 million. It's $35 million. The plan for what you see in the President's budget is for $2250 next year, which is probably a small number after the Army announcing they need to deliver 1 million drones over the next year or 2. So all the numbers seem to be going up. LRIP went up. We believe all of 2026 is going to go up. So we're not going to get into guidance yet in 2026. We got burned severely by the government, massive postponements through half the year and then a government shutdown. So we're going to wait until we have our OTA contract, which is going to give us a very great barometer for 2026. And if you look at how SRR LRIP worked out, Skydio got 7, we got 35. The Black Widow is doing some incredible things in Europe right now. We expect the Black Widow to end up dominating this category of drone, the way it's performing in very contested environments, and we're just going to continue to improve the Black Widow and give the Army a product that we're proud of so that they can be safe and more lethal. So long answer to we're not going to give 2026 guidance with the way this government has been operated. As soon as we sign the OTA contract, which who knows when it's going to be signed, I'm not going to give dates on that. I'm starting to learn at least. But yes, we're not concerned with 2026 being significantly larger than 2025. Now just to back up here a little bit, all this revenue that we're talking about, almost all of it is from the Black Widow. So we're not getting contributions from the Blue Ops yet and from FlightWave. We expect them to significantly contribute next year, but we're not ready to give guidance yet. So we're hoping to be able to do that at the beginning of next year. Operator: This concludes our question-and-answer session. I would like to turn back the conference over to Jeff Thompson for any closing remarks. Jeffrey Thompson: Well, thanks, everybody, for joining. We're pretty excited about what's going on. We're excited about where we're going with the Army. We're excited where we'll go with all the other groups. We're going to continue to just keep building and delivering drones. Thanks again for everybody joining. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.
Operator: Good morning, and welcome to the Nuvve Holdings Corporation's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please note, this event is being recorded. On today's call are Gregory Poilasne, Chief Executive Officer; and David Robson, Chief Financial Officer of Nuvve. Earlier today, Nuvve issued a press release announcing its Q3 '25. Following prepared remarks, we will open up the call for questions. Before we begin, I would like to remind you that this call may contain forward-looking statements. While these forward-looking statements reflect Nuvve's best current judgment, they are subject to risks and uncertainties that could cause actual results to differ materially from those implied by these forward-looking projections. These risk factors are discussed in Nuvve's filings with the SEC and in the earnings release issued today which are available on our website. Nuvve undertakes no obligation to revise or update any forward-looking statements to reflect future events or circumstances. With that, I would like to turn the call over to Gregory Poilasne, Chief Executive Officer of Nuvve. Gregory? Gregory Poilasne: Thank you, and good afternoon to everyone here today. Welcome to our Q3 '25 results call. In our last call, I shared with you that we were finalizing the restructuring of the organization. Now that our structure is in place, we have been able to shift our focus to stationary battery deployment. And over the last few days, we have made a few exciting announcements. First, in Europe and more specifically in Denmark, we are in the process of developing 3 2-megawatt battery projects. These battery projects represent about $10 million of CapEx with the forecasted internal rate of return greater than 25%. Once the development is well underway, we will be working with financing partners interested in investing in the project. Once the installation, interconnection and commissioning are done, which is planned for late 2026, we will start generating recurring revenue for the life of the batteries, most likely 10 to 12 years. Our experience over the last 9 years has shown potential revenues ranging between $400 and $600 per kilowatt year or potential annual revenue generation of $2.4 million to $3.6 million for the combination of the 3 batteries. These 3 battery projects are also strategically positioned as they are next to different type of fleets, which will convert into electric vehicles over the next few years and for which we will be able to provide optimal energy costs. Then yesterday, we announced that our Japanese subsidiary has concluded an agreement -- an aggregation agreement targeting existing stationary energy storage in order to manage 2-megawatt battery with an energy capacity of 8.2 megawatt hour installed in Tainai City in Niigata Prefecture with a targeted operation date in the first half of 2026. The expected value on a per kilowatt year basis in Japan is similar or greater than the value in Denmark. The expansion of the use of our platform for stationary batteries is working well and is going to help us accelerate our revenue growth over the next 18 months. Based on the growth for stationary batteries, we are seeing, we expect the number of battery project opportunities in Europe and Japan to accelerate, and we anticipate the same trend in the United States including territories covered by our Nuvve New Mexico subsidiary. The growth of the load on the electric system due to heat pumps and data centers is going to create a very large pool of energy. Energy storage is the only way we'll be able to keep the cost of energy equitable. We believe Nuvve's platform can provide an optimum return on investment for battery projects, especially when speed and aggregation can bring more value. In general, our subsidiary-base structure is working well, bringing more accountability across the organization. Fundraising is underway, and we shall be in a position to share more about our capitalization plan soon. NASDAQ gave us until December 31 to fix our bid price and shareholder equity efficiencies. And we are very confident we'll be able to address these efficiencies following that time line, and we have already received a shareholder approval for the reverse stock split. Some update on our crypto strategy now. Though we have not announced a full-scale move into the crypto space, we still see the convergence of energy, artificial intelligence and crypto at the core of our platform deployment. We had announced a potential purchase of Hype Token. We still have not purchased such acquisitions as we are still analyzing our best opportunity for integration of the blockchain into our platform. Indeed, multiple parameters have to be considered, including technical, economic, regulatory and operational, especially cybersecurity and smart contract capabilities. Looking closer into the quarter, the hardware revenue is more in line with our expectation, and we see a potential strong Q4. But for that, I will let David take you through the details of our financials. David? David Robson: Thanks, Gregory. I will start with a recap of third quarter 2025 results. In the third quarter, we generated total revenues of $1.6 million compared to $1.9 million in the third quarter of 2024. The decrease was primarily driven by lower service revenues due to the absence of management fees earned related to the Fresno EV infrastructure project versus the same period last year. Similarly, year-to-date through September 30, 2025, total revenues were $2.8 million, which compares to $3.5 million for the prior year period. The year-over-year decrease in revenues is also driven by lower service revenues due to the absence of management fees earned related to the Fresno EV infrastructure project this year versus last year. Margins on products, services and grant revenues were 52% for the third quarter of 2025 compared to 52.1% for the year-ago period. Year-to-date margins through September 30, 2025, were 46.8% compared with 42% for the year ago period. Our gross margins year-to-date have increased 480 basis points due to higher profitability on our service revenues. As a reminder, margins can be lumpy from quarter-to-quarter depending on the mix. DC charger gross margins at standard pricing generally range from 15% to 25%, while AC charger gross margins are approximately 50%, but in dollar terms are a small fraction of the revenue of the DC charger. Grid service revenue margins are generally 30% while software and engineering service margins are as high as 100%. Operating costs, excluding cost of sales, was $5.9 million for the third quarter of 2025 compared to $15 million for the second quarter of 2025 and $2.8 million for the third quarter of 2024. Operating costs were elevated last quarter due to nonrecurring grants of $8.2 million paid to consultants we engaged to support our digital asset strategy. Cash operating expenses, excluding cost of sales, stock compensation, depreciation and amortization expense was $5.4 million in the third quarter of 2025 versus $5.7 million in the second quarter of 2025 versus $2.2 million in the third quarter of 2024. This represents an increase of $3.2 million in expenses over the same quarter last year. Other income was $0.4 million in the third quarter of 2025 compared to $0.2 million in the third quarter of 2024. Both periods benefited from noncash gains from the change in the fair value of warrants or debt offset by interest expense. Net loss attributed to Nuvve common stockholders increased in the third quarter of 2025 to $4.5 million from a net loss of $1.6 million in Q3 of 2024. The increase was primarily a result of higher operating expenses previously mentioned. Now turning to our balance sheet. We had approximately $0.9 million in cash as of September 30, 2025, excluding $0.3 million in restricted cash, which represents a decrease of $0.8 million from last quarter. The decrease was a result of $3.4 million used in operating activities and the repayment of debt of $2.3 million, offset by proceeds from common stock offerings. Turning to the quarter. Inventories were flat at $4.3 million at September 30, 2025 compared to the second quarter of 2025. During the quarter, accounts receivable increased by $0.8 million to $1.1 million at September 30, 2025 compared to the second quarter of 2025 due to higher shipments of DC chargers this quarter compared with last quarter. Accounts payable at the end of the third quarter of 2025 was $2.9 million, an increase of $1.5 million compared to the second quarter of 2025 of $1.4 million. Accrued expenses at the end of the third quarter of 2025 was $5.7 million, an increase of $0.1 million compared to the second quarter of 2025 of $5.6 million. Now turning to our megawatts under management and estimated future grid service revenues. As a reminder, megawatts under management is a metric we use to quantify the aggregated amount of electrical capacity from the deployment of our V1G and V2G chargers, which are primarily deployed in the electric school bus market in the U.S. and in light-duty fleet deployments in Europe. In addition to stationary battery, currently, these chargers and batteries are located throughout the United States and Europe. Megawatts under management in the third quarter increased 3.1% over the second quarter of 2025 to 26.4 megawatts from 25.6 megawatts and a 9.6% decrease compared to the third quarter of 2024. In terms of its composition, 0.2 megawatts were from stationary batteries and 26.4 megawatts were from EV chargers. The year-over-year decline is primarily related to the decommissioning of batteries under management due to site requirements. Megawatts under management from EV chargers increased to 25.4 in the third quarter of 2025, an increase of 0.7% over the first quarter of 2025. We continue to expect further growth in our megawatts under management in 2025 as we continue to commission our backlog of customer orders we have earned. In addition, to new business we anticipate winning which we have visibility to in our pipeline for both EV chargers and stationary batteries. Now turning to our backlog. On September 30, our hardware and service backlog decreased to $19 million, a decrease of $0.1 million from $19.1 million reported at June 30, 2025. As we look out to the next several quarters, we expect to see more developments on our New Mexico contract and projects we are working on in Japan. We also anticipate improvements in our cash burn resulting from the benefits of lower operating costs compared with last year. That concludes my portion of the prepared remarks. Gregory, back to you to conclude. Gregory Poilasne: Thank you, David. In summary, we are very excited about our direction towards stationary storage. We expect a few more wins in the next few weeks and we'll share them as they become available and those agreements are signed and finalized. These battery deployments will come in addition to the charging station business that David just described. Thank you very much for listening to us today. Operator: [Operator Instructions] Showing no questions. This will conclude our question-and-answer session. I would like to hand the conference back over to Gregory Poilasne for any closing remarks. Gregory Poilasne: I would like to thank everybody who was listening to us today, and we are looking forward to sharing more with you about our progress over the next few weeks. Thank you very much. Bye-bye. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
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.