加载中...
共找到 39,812 条相关资讯
CNBC's Steve Liesman joins 'Closing Bell Overtime' to talk recent comments from members of the FOMC on rate changes.
Boston Fed President Susan Collins has voted in line with the central bank's majority decisions so far this year.
Nicolas Janvier, head of North American equities for Columbia Threadneedle, says tech earnings have shown AI investments are paying off. He joins Caroline Hyde and Ed Ludlow on “Bloomberg Tech.
Capital is already rotating from speculative, high-momentum AI and tech stocks toward value and defensive plays as market froth shows signs of unwinding. Berkshire Hathaway (BRK.A, BRK.B) is positioned for relative outperformance, with disciplined capital allocation and renewed investor attention amid market rotation.
Boston Fed President Susan Collins said she will be reluctant to support further rate cuts anytime soon with inflation still high and policymakers hampered by a lack of data. "I see several reasons to have a relatively high bar for additional easing in the near term," said Collins, a voter this year on the Federal Open Market Committee.
Operator: Ladies and gentlemen, welcome to the ElringKlinger AG Q3 2025 Earnings Conference Call. I am Maira, the Chorus Call operator. [Operator Instructions] The conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Thomas Jessulat, CEO. Please go ahead. Thomas Jessulat: Ladies and gentlemen, welcome to our earnings call for the third quarter of 2025. Also on behalf of my colleague on the Board here, our CFO, Ms. Isabelle Damen. Today, I will start with some highlights also from a strategic perspective, and my colleague, Isabelle, will walk you through the key results for Q3. With this publication, we reaffirm our guidance for 2025 as well as our medium-term outlook originally communicated in the annual report in March. As always, we will conclude the presentation under the Q&A session, and we look forward to addressing your questions. We advanced the implementation of our SHAPE30 transformation strategy as a top priority. Since its launch last year, we have made significant process in reshaping the ElringKlinger Group and further measures are in process. Another measure is the STREAMLINE program, which aims to reduce personnel costs. Initial savings are expected to take effect in 2026 with full savings realized by 2027. In addition, our organic sales performance during the first 9 months of 2025 grew by 2.2% compared to the previous year, outperforming the European market, which recorded a decline of 1.7% over the same period. We're making significant process in the field of e-mobility. Operations have started at our e-mobility hub Americas in Easley, South Carolina, which is in preparation for production ramp-up. At the same time, we are gearing up for production chart also in China. After a phase of substantial investments, our CapEx level is expected to normalize to a more moderate level going forward. SHAPE30 represents our road map for transforming the group given the profound changes in our industry. Our transformation strategy is designed to improve profitability and cash flow. We have already taken significant steps along this path, including the sale of 2 companies in the U.S. and Switzerland, the discontinuation of the electric drive systems and with a reinforced focus on profitable components. In this context, measures to strengthen the balance sheet have also been implemented. These actions are now complemented by a strict cost reduction plan. One of its elements is the STREAMLINE program, which targets at least EUR 30 million in global staff cost savings. Shaping the profile of the group summarizes one dimension of the SHAPE30 activities. The other dimension encompasses the preparation for future growth based on the received nominations of the past quarters. And in this context, we have successfully initiated the ramp-up of major e-mobility projects. Currently, we're completing the final steps for the start of production, focusing on cell contacting systems and battery components. As part of the product transformation at ElringKlinger, we have made initial investments in production and space and equipment. At present, we're getting closer to the end of the investment cycle. Along this, we'll return to a more disciplined CapEx level according to our mid-term target of 2% to 4% of group sales. With having said this, now I hand over to my CFO colleague on the Board, Ms. Isabelle Damen. Isabelle Damen: Thank you, Thomas. I will now provide you with some more details on our financial performance in the third quarter of '25. At the first glance, the order intake appears to have declined by around 3%. However, we reported slight growth in organic terms compared to the prior year period. This is primarily due to the fact that last year's figures still included contributions amounting to EUR 21.1 million from the divested entities, which have not been part of the group since December 31, 2024. Despite the challenging market environment, we see a positive development in the underlying business. Organically, which means adjusted for the M&A effects and exchange rate development, order intake increased by EUR 16.6 million or 3.6% to EUR 477 million. The order backlog representing customers' cumulative short-term call-offs not yet realized, stood at EUR 1.1 billion at the end of the third quarter of '25. For comparison, the previous year's reporting period showed EUR 1.3 billion, a figure that still included the backdrop on the 2 group entities divested, which amounts to EUR 136 million. Starting with the sales and an organic change on Slide #5. In a challenging market environment, ElringKlinger generated revenue of EUR 396 million in the third quarter of 2025, representing a year-on-year decline of 10% according to reported figures. But figures have been affected by M&A as well as FX for this quarter. The 2 entities in Switzerland and the United States had contributed revenue of EUR 34.1 million in the third quarter of '24. This means the relevant basis for a year-on-year comparison will be EUR 407 million. Additionally, revenue was diluted by currency effects equivalent to EUR 8.1 million. All in all, when excluding currency and M&A effects, revenue declined organically by 0.6% in the third quarter of 2025, remaining at a relative stable level compared to the previous year. While global automotive production in the third quarter was 4.4% higher than the prior year level, Europe, ElringKlinger's core market, posted only a modest increase of 1.2% in the third quarter and Germany declined by 3.6%. When considering year-to-date sales figures, prior year's numbers included EUR 123 million from the divested entities. With this in mind, sales in the first 3 quarters of '24 amounted to EUR 1.228 billion, in line with the first 9 months of this year. When taking into account FX effects, organic sales even increased by 2.2% year-to-date. The global production market grew by 3.8% over the first 9 months, mainly driven by China. ElringKlinger's core market, Europe even contracted by 1.7% in the first 9 months. This disparity underscores the challenging conditions in ElringKlinger's primary market where limited momentum contrasts with stronger global trends. The sales mix presented on Slide 7 provides a more detailed breakdown of the factors behind organic sales. Within the segment breakdown, the Original Equipment segment remains the largest contributor, accounting for 66% of total group revenue, which corresponds to EUR 262 million in sales. Compared to the same quarter last year, revenue in this segment declined, mainly due to the divestment of the 2 entities in the U.S.A. and Switzerland as well as ongoing challenging market conditions. Within the OE segment, E-Mobility generated sales of EUR 26.3 million in the third quarter of '25. This business unit is currently in a ramp-up phase for upcoming large-scale serial orders, underlying its strategic importance for the group's transformation. The divestment of the 2 entities has also been reflected in the decline in the Metal Forming & Assembly Technology business unit. The Aftermarket segment continues its strong performance, increasing sales from EUR 32.8 million in Q3 '24 to EUR 37.4 million in the third quarter of '25. Growth was achieved in the Asia-Pacific region, South America and the rest of the world, while revenues in Europe and North America declined year-on-year. In addition to currency headwinds and a general weak market environment, the primary factor behind this trend was the divestment of the 2 entities in the U.S. and Switzerland. Adjusted EBITDA of the group declined to EUR 41.1 million compared to EUR 51.4 million in the last year's third quarter. In Q3, adjusted EBIT reached EUR 21.2 million, corresponding to a margin of 5.4%, which is even above the full year target of around 5%. Adjustments totaling EUR 16.7 million almost exclusively relate to exceptional items from the STREAMLINE program to structurally reduce personnel costs in the context of SHAPE30 transformation strategy. Reported EBIT amounted to EUR 4.5 million, corresponding to a margin of 1.1%. This is a noticeable improvement to the same quarter last year when EBIT reported stood at minus EUR 35.2 million. Thanks to the strategic measures implemented as part of the company's transformation strategy, the group is well positioned to maintain a solid adjusted EBIT margin at a comparable high level. These actions refer to an EBIT improvement of EUR 4 million and created a more resilient foundation for sustainable performance, although have been more than compensated in the third quarter by effects like tariffs totaling EUR 2 million or others amounting to EUR 2.7 million, such as ramp-up costs for the large-scale orders in South Carolina and China. In addition, the release of provisions of EUR 1.1 million in Q3 '24 has to be considered. In the third quarter, the R&D ratio rose to 5.9%, while absolute R&D spending edged down year-on-year slightly from EUR 24 million to EUR 23.5 million. This keeps the company comfortable within its target range of 5% to 6% of group revenue. In the third quarter of '25, ElringKlinger reported net working capital of EUR 389 million. The corresponding ratio stood 23.2%, bringing the group to its short- and medium-term goal of maintaining the figure below 25%. This development highlights ongoing initiatives to improve capital efficiency and enhance operational flexibility in parallel to sales activities relating to the ramp-up. Following elevated expenditures around the turn of the year in Q4 '24 and Q1 '25, CapEx has been lowered in the second quarter. As anticipated, this figure was quite stable in absolute numbers in Q3 with CapEx at EUR 27.8 million and a CapEx ratio of 7%. It is expected to lower this level starting next year and realize a CapEx ratio level of around 2% to 4% in the mid-term as well. Regarding the cash flow in the third quarter in '25, the group maintained a positive level of performance as in Q2 and achieved an operating free cash flow of EUR 18 million. This underscores the continued benefit of disciplined financial management and the sustained impact of working capital measures even in a challenging market environment. And it is the basis for reaching our target range of 1% to 2% of sales with a strong fourth quarter as we had last year. This is what we are currently working hard on. Net financial debt slightly increased to EUR 389 million, corresponding to a net debt EBITDA ratio of 2.2. And last but not least, group equity totaled EUR 653 million by the end of the third quarter of '25, slightly below the EUR 659 million recorded at the close of Q2 '25. Coming to the segment performance on Slide 11. In the third quarter of 2025, the OE segment generated sales of EUR 262 million. When comparing this to the prior year figure, it's important to account for a sales contribution of EUR 34.1 million from divested entities. The adjusted segment EBIT margin stood at minus 0.8%. The aftermarket segment is successfully advancing its growth strategy, delivering yet again a quarterly increase in revenue. In the third quarter of 2025, sales reached EUR 96.1 million, which implies a growth of 13.2% compared to a previous year's quarter. With an adjusted EBIT margin of 18%, the segment once again delivered a strong level of profitability. The Engineered Plastics segment delivered a strong performance in the third quarter of '25, supported by its broad and diversified industry mix. The segment recorded sales of EUR 37.4 million, marking an increase of EUR 4.6 million compared to the same quarter last year. With an improved adjusted EBIT margin of 13.4%, the segment demonstrated its resilience in a challenging market environment. Now I'll hand back to Thomas Jessulat for concluding words on the market and the outlook. Thomas Jessulat: Thank you, Isabelle. Let us now turn our attention to the market expectations and the group's outlook. Let me quickly show you our agenda for Q4 in the upcoming quarters. We anticipate a weaker fourth quarter with regard to the market, while the outlook for fiscal year 2026 suggests largely sideways movement on a global scale. Against this backdrop, we'll continue to prepare for entering the sales cycle, strengthen profitable business areas and continue to refine the group's profile to ensure sustainable performance. Our focus remains on our SHAPE30 targets, which is increasing the group's profitability, particularly, of course, in the OE segment and sustainably generating cash flow. This is crucial to enhance the group's resilience and competitiveness. We are continuing the ramp-up of additional large-scale e-mobility projects, building on the progress achieved in previous quarters. Following a CapEx-intensive phase, capital expenditure will normalize from next year onwards and reach a disciplined level of 2% to 4% in the medium-term. And at the same time, we maintain an elevated level of e-mobility sales supported by strong demand. Cash flow is projected to improve significantly in the fourth quarter, recovering from the weaker start in Q1. Market dynamics remain uneven and are expected to persist into 2025. While global light vehicle production shows a positive trajectory overall, the regional picture is mixed. China continues to gain momentum with strong growth for the full year, whereas Europe and especially North America, ElringKlinger's main markets are still struggling to recover. This contrast reflects the year-on-year development from 2024 to the forecast for 2025. Robust expansion in China is helping to cushion the impact of weaker demand in Europe and North America and therefore, ensuring that global production maintains a stable growth path. We now turn our attention to the forecast for the fourth quarter of 2025. Current projections indicate a decline in light vehicle production across all regions during Q4, including Asia-Pacific, which has been the strongest region so far with China as the main growth driver. This anticipated slowdown highlights the high volatility that characterizes the automotive industry. Overall, the automotive market is showing a growth of 2% in 2025, while Europe is expected to face a decline of 1.8% over the same period. I will close my comments with a remark on the outlook. Despite this short-term moderation of markets, we remain committed to our strategic targets and are preparing for the next growth cycle driven by serious production orders, particularly in the E-Mobility segment. Against the volatile backdrop, we confirm the outlook published in the fiscal year 2024 annual report, including organic sales at prior year levels and adjusted EBIT margin of around 5% and operating free cash flow between approximately 1% and 3% of revenue. Based on our strategic measures, we aim for a mid-term adjusted EBIT margin range of approximately 7% to 8%. With having said this, Isabelle Damen and I are now ready to answer your questions. Operator: [Operator Instructions] The first question comes from the line of Marc-Rene Tonn from Warburg Research. Marc-Rene Tonn: Basically 3, if I may. The first one would be on the e-mobility sales outlook for the fourth quarter as you are now ramping up for the new orders, which are, let's say, coming into production at your customer. Can you give us some indication when we should expect the top line contribution to be more pronounced on your side? Will it already be Q4? Is it more beginning of next year? That would be the first question. The second one would be on special items, whether we should expect any additional restructuring expenses for the fourth quarter between adjusted EBIT and the EBIT line? And lastly, on EKPO. When I look at your -- let's say, on the minorities line, I think it's minus EUR 2.5 million, if I'm not mistaken, for the third quarter, minus EUR 5.5 million for the first 9 months, basically representing about, let's say, 40% of the net profit or net loss in this case of that business. So obviously, a large drain on your operating performance when we're looking at EBIT. Do you expect any improvement on that side going forward? Or what could be potential measures to, let's say, stabilize or improve the situation on that side? Isabelle Damen: Thank you for your questions, Marc. Sorry, I lost my voice a bit. I'll answer the second question for you. If we expect some special items in Q4, as we are still in transition, we might still expect some -- and we're not [ completely true ] with our plan. So we might still expect some impact in the fourth quarter of our restructuring measures. Thomas Jessulat: Okay. On the e-mobility sales for the fourth quarter will step-by-step will be ramping up. On the same time, it's not so sure if it is showing significantly. It will show, I'm sure, but it will not -- in Q4, it will not be showing significantly as a contribution. And certainly, starting from next year on, expectation is that we'll see top line growing in regard to e-mobility sales. Okay. Third question from your side on EKPO, there is a lot of activity that we have right now in regard to cost reduction as part of our global, of course, cost reduction measures. And we would expect that we have some good progress here between Q4 and Q1 next year. So in fact, it is still in a start-up loss-making situation here, EKPO, but also here, we are working on reductions in order to minimize the impact here to the EK Group. Is that answering your question? Marc-Rene Tonn: It does. Just one quick follow-up, if I may. Could you remind -- and not related to that, could you remind us on the incremental increase of net indebtedness from the IFRS 16 accounting for the -- what we have to expect for the fourth quarter from the U.S. facility? Thomas Jessulat: Yes. When we look at IFRS 16 specifically, then we are at roughly EUR 90 million right now, which compares to EUR 47 million to previous year's quarter and expectation for Q4 this year will be roughly EUR 30 million addition. Yes, this is an estimation. So it's a mid-double-digit million euro figure, maybe a little bit less than EUR 40 million. This is the expectation that we have right now. Operator: The next question is from Michael Punzet from DZ Bank. Michael Punzet: I have only one left with regard to your OE business. You're still in the red figures for Q3 on an adjusted basis. Can you have any kind of time when we could expect a positive run rate on a quarterly base? Is that a thing we could expect for 2026? Or is it -- or [ happily ] wait until 2027 when all the positive impacts from your cost reduction program came in? Thomas Jessulat: Yes. When we look at the year, right now, we are in an expected frame in regard to the current results. We are on the way with the STREAMLINE program. We are making progress here. So that is having already some positive impact here, but not yet a full impact in terms of our activities here in 2025. Expectation is that we'll see if there's no negative impact from the market of some significant sort that we'll see some impact here first half of next year also on the OE segment. Operator: [Operator Instructions] The next question comes from Tobias Willems from LBBW. Tobias Willems: Tobias Willems, LBBW. I have one question left regarding on your company strategy and your reshaping programs. Will we see further divestments in the years ahead, let's say, in 2026 and 2027, especially in the automotive segment? Thomas Jessulat: Yes. Thank you for your question. What to expect going forward? One, it is a continuation of the transformation path into 2026. We'll have also like Isabelle has said, we'll have the expectation of some more adjustments, but adjustments are going to be getting smaller going forward compared to what we have seen in the past. We'll see -- in 2026, we'll see the following. We'll see a reduction of the balance sheet size because we have quite a figure. It's a high double-digit figure right now on our balance sheet of items, tooling equipment that will be sold off to customers. So we'll see a reduction of balance sheet size in 2026, going into 2026. And we'll also see an improvement of financial KPIs based on the impact of all the activities done in 2025. So that I would say is a very general comment that we have laid a lot of groundwork here for improvements that we expect to kick in, in 2026. And we also have to say that some items are still in process where it is, to some extent, uncertain if they have an impact in 2025 or beginning of 2026. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Thomas Jessulat for any closing remarks. Thomas Jessulat: Thank you very much for joining our Q3 conference call today. We truly appreciate your continued interest and support, and we look forward to meeting you either next week at our Capital Markets Day or during our next update when we present the full year figures. Until then, we wish you all the best for the weeks ahead.
Operator: Good day, and thank you for standing by. Welcome to Aristocrat Full Year 2025 Results Briefing Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I'd now like to hand the conference over to your first speaker today, Mr. Trevor Croker, Chief Executive Officer and Managing Director of Aristocrat. Thank you. Please go ahead. Trevor Croker: Good morning, and welcome to Aristocrat's financial results presentation for the full year to 30 September 2025. My name is Trevor Croker, Chief Executive Officer and Managing Director of Aristocrat. Joining me today is Sally Denby, our Chief Financial Officer. Sally will step through the highlights of the results and provide an update on our strategy. Sally will then discuss our group financial results and balance sheet, after which I'll run through the operational performance and outlook. All figures are in reported currency, unless otherwise stated. FY '24 was restated to exclude Plarium at the last result. Please note the usual disclaimer statement on the back of the deck. Turning now to Slide 2. Aristocrat delivered on our second half performance commitments and achieved another strong full year result with double-digit growth across all key metrics. This illustrates the quality of Aristocrat's portfolio and our ability to continually grow through different environments whilst investing for the future. This was a period of positive change at Aristocrat as the business aligned its enterprise portfolio to refreshed priorities while maintaining an approach that has delivered consistent operational performance and superior profit growth over a sustained period. Along with our strategy, we completed the divestiture of Plarium during the year, generating a significant gain on sale and subsequent to year-end, we divested Big Fish Games. From FY '26 onwards, our mobile operations will be focused purely on social casino. Our 3 complementary business segments are now united by a common core of great gaming content and technology with each offering exciting growth prospects. During the year, the group also invested significantly in technology and product strategies while taking foundational steps that will set up Aristocrat Interactive to accelerate performance, and allow us to fully leverage our content, scale and capabilities over the coming years. Group revenues grew 11% over the period, while segment profit grew 12%, benefiting from strong organic growth the inclusion of NeoGames for the full 12 months and FX translation. Aristocrat Gaming delivered strong performance driven by an outstanding second half outright sales across all market segments, with significant share gains in North America and ANZ where our ship share recovered to over 50%. Gaming Operations delivered installed base growth and continued market share gains, with a sequential improvement in fee per day in the second half. Product Madness delivered impressive performance with continued share gains, profit and margin growth, reflecting focused investment in user acquisition, high-performing content and effective execution of our direct-to-consumer strategy. Interactive benefited from double-digit organic growth in content and iLottery, including from the NeoPollard Joint Venture. Group NPATA grew 12% or 9% on a constant currency basis with EPSA growth even stronger at 15% over the year. Looking forward, we continue to see momentum in our business. We expect to deliver NPATA growth over the full year to 30 September 2026 on a constant currency basis. Performance is expected to be phased towards the second half of the year. I'll now turn to our strategy. Slide 4 recaps our approach to delivering superior long-term sustainable profit growth, which we've shared many times. We start by investing and innovating to create the world's greatest gaming portfolios across key markets at scale. We have committed to high levels of D&D investment to support content development and growth with an increasing focus on returns from high-performing products. This includes investment in outstanding creative talent and technology to improve both the speed and efficiency with which we can deploy content across multiple priority markets, cabinets and channels. The establishment of Interactive provides scope for our studios to innovate across channels and expand their distribution opportunities. Aristocrat takes a rigorous proactive approach to growing and defending our intellectual property and ensuring fair competition on a level playing field. The litigation against Light & Wonder continues to progress in both the U.S. and Australia. We are pleased with the U.S. Court's recent decision to extend discovery and require Light & Wonder to provide access to game maps for certain of its hold and spin games. Next, we focus on growing and distributing our leading content aiming to take share wherever we compete including an existing and new adjacent markets. Interactive is now a full solution provider for online RMG with an expanded portfolio across iLottery, content and platforms. We are investing to become a scaled global player in this important adjacency and to position the interactive business to accelerate its growth consistent with our stated target of achieving USD 1 billion of revenue by FY '29. Aristocrat also invests in differentiating enablers. These include long-term customer partnerships and commercialization capabilities and a compliance culture that is underpinned by our commitment to a sustainable and vibrant industry. While our priorities and focus areas evolve over time, our fundamental approach to generating growth remains consistent and continues to deliver strong results with considerable opportunities ahead. Over the 5-year period since 2020, group revenues and segment profits have grown at a CAGR of 9% and 19%, respectively, reflecting share gains and operating leverage across all key segments. NPATA has grown at 27% CAGR. This was underpinned by market share gains in gaming operations installed base from 34% to 43% and steady share gains in North American outright sales from 23% to 31%. This strong financial performance has been delivered through diverse conditions, demonstrating the resilience of the group and reflecting the high proportion of recurring revenues that we generate. Consistent delivery has also allowed us to maintain investment and fully fund our organic growth and invest behind inorganic growth priorities while delivering ongoing returns to shareholders. Over the same 5-year period, we've returned over $4.3 billion of capital to shareholders through dividends and on-market share buybacks. Turning to Slide 6. We continue to advance our sustainability agenda over the year by driving improvements and further lifting maturity across our most important priorities. This slide shares a few highlights. Empowering Safer Play, or ESP, remains our most important sustainability matter, directly supporting our ability to deliver financial results over the long term to benefit our people, our customers and shareholders. Over the course of the financial year, we made significant progress against our 6 medium-term strategic ESP goals, which were initiated and shared publicly in 2024. Other highlights during the reporting period include comprehensive preparations for the mandatory climate reporting and the integration of NeoGames operations into our sustainability program with a focus on safer play standards and processes. Upholding high governance standards and strong compliance with gaming and other regulations also remains a fundamental commitment at Aristocrat. Robust and effective gaming regulation is critical to maintaining strong property and consumer protection standards. This enables the industry to remain vibrant, welcome in the community and able to deliver benefits to all stakeholders over the long term. Full details will be shared in Aristocrat's FY '25 sustainability disclosures, which will be published on the 2nd of December 2025. I'll now hand over to Sally, who will take us through a summary of the group's results. Sally Denby: Good morning, everyone. I'm starting on Slide 8, our group results summary. As Trevor mentioned, Aristocrat delivered NPATA of $1.6 billion over the year, an increase of 12%. On a fully diluted basis, EPSA increased 15% to $2.47 reflecting solid operational performance and accretion from our share buyback program. Revenue increased 11% to $6.3 billion and 8% in constant currency. Aristocrat Gaming delivered a strong second half with robust outright sales, unit pricing and market share increases in both the U.S. and ANZ. Gaming operations recorded solid growth in the installed base, with a sequential improvement in fee per day in the second half of the year in line with our guidance. Revenue growth was further assisted by continued market share gains in social casino, organic growth in Interactive and the inclusion of NeoGames for the full 12-month period. EBITDA was 16% higher than the PCP, reflecting margin expansion from favorable mix and improved operating leverage. Benefits from effective cost initiatives taken in FY '24 also supported the results. Ongoing cost management continues to provide capacity for strategic reinvestment with well-established discipline across the group. I would like to call out some other items further down the P&L. Firstly, we recorded a $28 million gain on the sale of [ Berkshire ] Integration Center in the U.S. through corporate costs. Legal costs increased by $33 million compared to FY '24, which includes legal costs associated with taking proactive steps to defend Aristocrat's intellectual property, including $21 million in relation to the ongoing litigation against Light & Wonder. Interest income decreased by $34 million compared to the PCP, primarily due to lower average cash balances following the NeoGames acquisition and continued share buybacks over the course of the year. Interest expense for the period includes a one-off item of $9 million relating to a tax matter. Excluding this matter, underlying interest expense was in line with the top end of previous guidance of 6% to 7% of U.S. dollar borrowings. The effective tax rate for the year was 28% compared to 27% in the PCP. As we outlined in May, the increase reflects changes in the regional earnings mix and acquisition-related transitional changes, which are expected to moderate over time. Our approach to significant items is consistent with previous years with M&A-related gains and losses recorded below the NPATA line. Finally, the directors have authorized an unfranked final dividend of $0.49 per share for the half year ended 30th of September 2025, representing a payout ratio of 37.4%. The full year dividend of $0.93 per share represents an increase of 19% over FY '24. Slide 9 provides a snapshot of the drivers of NPATA growth over the reporting period. NPATA was driven by strong organic growth and share gains in both Gaming and Product Madness and the addition of NeoGames and Interactive, further supported by favorable FX. This was partially offset by increased investment in D&D and lower interest income. Turning now to cash flows on Slide 10. Strong cash flow generation was achieved over the period, reflecting continued operating momentum. CapEx was driven by investment to support continued growth in the North America gaming operations installed base, partly offset by the proceeds on the sale of properties previously flagged. Acquisition and divestments reflected the sale of Plarium, offset by some small strategic technology investments. Aristocrat completed its $1.85 billion on-market share buyback program during the first half of the year and announced a new $750 million program running through to March 2026, of which we have executed $584 million to date. In total, $1.4 billion have been returned to shareholders through share buybacks and dividends over the full year, whilst the business has continued to invest for growth. Aristocrat allocates capital to support our long-term growth strategy and deliver shareholder returns. In particular, the business achieves organic growth through consistent, strong and disciplined D&D, UA and CapEx investment, whilst actively pursuing strategic M&A opportunities in a disciplined and consistent manner. Post year-end, we completed the acquisition of Awager, an exciting adjacent opportunity in line with our growth strategy. Aristocrat invested $800 million in D&D during the year to further strengthen our product and technology portfolios and lay the foundations for scaling in online RMG. This represented 12.7% of revenues compared to 13.4% for FY '24. Aristocrat manages its balance sheet through cycles of investment. And during the first half of the year, we deployed a portion of the proceeds from the sale of Plarium to retire debt. We continue to target a leverage ratio of 1 to 2x net debt to EBITDA over the medium term. However, taking into account the consistent levels of cash generation, our leverage will not fall within this range without material M&A. I would now like to focus on our investments to drive organic growth laid out on Slide 12. Total organic investment is generally tracked around 25% to 27% of group revenues with the potential to flex this where required in response to business needs and opportunities. High levels of CapEx in 2024 reflected the exceptional growth of our gaming operations installed base as well as the investment in the commissioning of our Las Vegas integration center in the prior year. This has normalized in the reporting period. UA spend increased to support strong business momentum while also reflecting our continued focus on efficiency and return on marketing spend. Increased D&D largely reflects the inclusion of NeoGames for the full period. Slide 13 provides a more detailed view of D&D. As part of our wider review of D&D expense, interactive operating costs of around AUD 35 million, previously incorrectly included in D&D were reclassified to segment profit during the period. Adjusting for this, second half '25 D&D would have been 13.2% within our 12.5% to 13.5% guidance range. The net impact to the group P&L from this change was neutral. In Interactive, we continue to invest a significant proportion of revenues in iGaming content, Class II mobile and the New Hampshire Lottery. We maintained D&D investment levels in Product Madness with a small step-up in gaming to support content development. As discussed for the past 2 results, the growing proportion of D&D investment relates to enterprise technology managed across the entire portfolio. Additionally, as we have consolidated responsibility for D&D under our group product and technology functions, we are now managing spend at an enterprise level rather than across channels. From the first half of fiscal '26, we will no longer disclose D&D by division. Instead, we will be aligning D&D reporting to the way Aristocrat now manages this important investment in 2 discrete buckets for products and technology. Over the medium term, we continue to expect D&D investment to land within a range of 11% to 12% of revenue as scale benefits are realized. However, our approach to D&D guidance is changing. We will no longer be guiding to D&D as a percentage of revenue, shifting instead to provide a growth expectation, reflecting our evolving business and maturing approach to D&D as we move through investment cycles. We are targeting D&D at mid-single-digit growth next year on a constant currency basis. I'll now hand back to Trevor to step through operational performance. Trevor Croker: Thanks, Sally. Turning first to the Aristocrat Gaming business on Slide 15. Revenue and profit increased 9% and 7%, respectively, in reported currency, driven by outstanding performance and strong share gains in North American and Australian outright sales in the second half of the year, along with continued share gains in our North American gaming operations business. Innovations in both games and hardware contributed to this success with titles such as Phoenix Link, Spooky Link, House of the Dragon and Buffalo Ultimate Stampede being well received in the U.S., while Thunder Empire and Cashman drove penetration in Australia. In North America, our game performance continues to run at 1.4x floor average, maintaining a healthy gap to our major competitors. The Baron cabinet was welcomed enthusiastically by customers around the globe. Dragon Link continued to perform well in its eighth year with particularly strong demand in Asia under a hybrid commercial model. North American revenues and profits were up 5% and 3%, respectively. Gaming operations revenue growth was driven by a 6% increase in the installed base over the prior year. We achieved sequential improvement of 2% in our market-leading fee per day in the second half, driven by effective portfolio execution and support of GGR growth. We added almost 4,100 units over the year, further extending our market-leading share to around 43%. North American outright sales exhibited clear revenue leadership given the combination of strong average selling price, or ASP, and ship share of around 31%. Outright sales units increased 18% in the second half, driven primarily by the Baron Portrait cabinet, which was released in April. Demand was further supported by the success of games like Spooky Link, which achieved the fastest ramp-up of any outright game sales product in Aristocrat's history and has taken the top 3 spots on Eilers core games leaderboard for the past 3 months. ASP increased by 1% and remains at leading levels overall. Adjacencies increased 29% over the PCP and represented 26% of total unit sales, driven by continued expansion in Georgia COAM, Historical Horse Racing and Quebec VLT markets. North America's margins of 57.8% decreased by 110 basis points, reflecting the mix effect of the exceptionally strong outright sales performance. As we move into FY '26, we don't anticipate a material impact from tariffs. Rest of World revenues and profits increased 11% and 9%, respectively, driven by a strong rebound in both ANZ and Asia. We previously flagged the timing of the highly anticipated release of the Baron Cabinet in ANZ halfway through the year. The Baron scaled quickly with strong customer demand and effective commercialization along with a host of game innovations, including Thunder Empire and Cashman, our ship share in Australia rebounded to 52% in the second half with unit sales more than doubling and ASP increasing by 8%. Rest of World performance, excluding ANZ was also weighted to the second half due to higher opening and expansion activity in Asia with a strong uplift in recurring revenue units. Turning to Product Madness on Slide 16. The business delivered strong performance in a transformational year with refreshed leadership and more effective integration into the enterprise. The benefits of our mobile operations being focused on social casino have been evident this year. Product Madness continued to take share in a contracting market through investment in new content, effective player engagement, live ops and features. Social casino bookings increased 5%, driven by growth in our evergreen franchises, including Lightning Link, Cashman Casino and Heart of Vegas compared to a social slot market decline of 9%. We are confident in our market position and our ability to grow into the future. Segment profit was up an impressive 12%. Margins improved 380 basis points, driven by a continued focus on efficiency, increased off-platform revenues and disciplined UA investment. We continue to drive D2C revenue growth by offering better value to players and actively promoting these through various channels. D2C represented 16% of social casino revenues for the full year, up from 7% in the PCP and was over 18% in the second half. We believe there is more scope to steadily grow D2C over the next few years. Product Madness was an early adopter of AI and automation and in progress in this area accelerated in FY '25 as the business shifted to more dynamic and personalized player experiences. We are using AI effectively to automate solutions to expand live ops development and using generative AI for scaling asset production and quality improvements. Turning to Interactive. The FY '25 results reflected the inclusion of NeoGames for the full period versus 5 months in FY '24. Revenue increased 7% on a pro forma basis, including the iLottery JV. Profits increased with margins improving 260 basis points for the full year. Excluding the previously referenced reclassification, which represents a full year adjustment of USD 23 million, Interactive's FY '25 profit margin would have been around 35%, with higher profit margins in the second half compared to the first half. iLottery delivered strong performance with new contract wins and improving metrics across existing contracts. On a pro forma basis, including our share of the JV, revenue growth was 14%, with strong contributions from North Carolina and Virginia. Content revenues grew 15% on a pro forma basis, reflecting strong growth from our larger aggregation customers and numerous content launches with major operators in the U.S. and Canada. The consolidation of our remote game server technology over the year allowed us to roll out content across more markets simultaneously, including increasingly complex mechanics and features such as progressives and daily free games. iCasino U.S. market share increased from around 2% in March 2025 to 3.5% in September 2025 and benefit from top-performing games such as Mo Mummy Mighty Pyramid and Bao Zhu Zhao Fu. Platforms continued to expand across the U.S. and ANZ markets, supported by installation expansion and software sales. While significant work lies ahead to realize Interactive's full potential, we are making important and encouraging progress and have full confidence in our plans. I'd like to share a few notable call-outs. In iLottery, we were recently awarded the contract for the Massachusetts iLottery, beginning July 2026. And the Michigan iLottery on an exclusive basis also from July 2026. We will be investing behind these great long-term opportunities. In content, we'll be bringing more of our leading land-based content to digital in the coming year including the iconic Lightning Link and expanding our market access through entering the remaining 2 U.S. states with Delaware and Connecticut having recently launched. And in platforms, we'll be rolling out our mobile Class II product with the Chickasaw Nation at the WinStar World Casino later this month. Turning now to outlook on Slide 19. Aristocrat expects to deliver NPATA growth over the full year to 30 September 2026 on a constant currency basis, reflecting continued revenue and market share growth from Aristocrat Gaming supported by resilient underlying GGR growth in key markets. continued market share growth from product managers with an increasing contribution from D2C, accelerating performance at Aristocrat Interactive towards our FY '29, USD 1 billion revenue target through further scaling of content and investing in iLottery to support broader market access in North America and Europe. In summary, the group has delivered a strong result for the financial year 2025 with robust fundamentals, investment and execution driving continued market share gains and operating momentum. Going forward, we remain committed to our capital management strategy and executing our on-market share buyback program. We continue to position Aristocrat from an organizational capability and financial perspective to actively pursue strategic M&A opportunities in a disciplined and consistent manner to accelerate our growth strategy. Today, Aristocrat is proud to have a global team of approximately 7,400 talented individuals. I want to extend my sincere gratitude to each and every one of our employees for their dedication, passion and hard work throughout this period. With that, I'll conclude the formal part of the presentation and hand it back to the moderator to open the floor for questions. Operator: [Operator Instructions] We will now take our first question from the line of Adrian Lemme from Citi. Adrian? Adrian Lemme: Orally. I was interested in your view, Trevor, on the gaming -- North American gaming ops market. So I think last year, it grew by 800 units or about 5%, and you took most of it. This year, you've grown by 4,100 units, and you've grown your market share again. So is it that the market has slowed down? And what are your expectations for the next 12 months on the market outlook, please? Trevor Croker: Yes. Thanks, Adrian. I appreciate the question. As you rightfully said, in '24 the market grew and we drove the majority of that growth. And I'd position the result this year again the same context as the market grew and we drove the majority of market growth. Market share for the top 5 were up about 1 percentage point year-over-year to 42.3% of share. I think what we've seen and what we're seeing now is that -- but certainly, there's been better GGR momentum across the market, so a much more supportive model from a GGR perspective. On a new openings basis, it's about the same -- a new opening expansion is about the same expected in '26 as it was in '25, and we expect to be successful in taking a greater share of those. And then we continue to improve our performance on the floor, both with new games like Phoenix Link, but more recently, Buffalo Mega Stampede which is a succession game to Buffalo Ultimate Stampede, Cash Express Legend, Millioni$er and then ultimately MONOPOLY in the second half of next year. So my view on where the market sits, it's around about the same size. I think Eilers are quoting it's around 15% of the install -- of the total installed base in North America. We feel confident that our expectations into '26 are consistent with what we've said in the past, which is between 4,000 and 5,000 units of incremental opportunity for Aristocrat, and we feel well positioned with the portfolio. We also have a good line of sight on how to manage fee per day, and we feel comfortable that that's a growth opportunity for us in '26. Operator: We will now take our next question from the line of Justin Barratt from CLSA. Justin Barratt: Look, I just wanted to get you to comment a little bit more on Product Madness. Clearly, a very strong result. I was particularly interested in your ability to take or drive revenue growth in a declining market. Can you talk about how you're seeing that overall market, your ability to take share? And then obviously, it sounds like, Trevor, you're confident in gaining more penetration in the DTC platform as well. Trevor Croker: Yes. Thanks, Justin. Look, PM has been a great story for us this year. And I think it goes to the single threadedness of our social casino focus now where we are focused on that portfolio, and that's about monetizing the content that we make in land-based and building good Live Ops and effective UA around that. The PM business has done an excellent job in the year. And I think where they have positioned themselves to be able to take share in a declining market, but also to set the standard around things like Live Ops, new game innovation. NFL was not a big contributor to the year. So it's not in there, and NFL is showing some good early signs. We'll continue to monitor that as we launch. So on a go-forward basis, I think if you look at the evergreen portfolio of apps, they are very robust apps. They've got good content flows and innovation coming out of the gaming content that we make across the group. And then on the DTC, yes, you're right. I think the team has done a great job going from 7% this time last year to 16% this year and 18% in the last quarter is great. And we do believe that both from a regulatory -- a market point of view with the change in some of the operating models with the platforms that we have the ability to continue to expand on that. So I know that the team is very focused on that, and I think that we are in well positioned to improve that percentage and to continue to grow and to take share in Social Casino. Justin Barratt: Yes, fantastic. Okay. And then I just wanted to follow up on Adrian's question. I guess, the weakness in your net adds or installed, I guess, the net adds number came in the second half. I was just wondering if you could provide any more specific commentary around the second half exactly. And then, I guess, over the last few years, you have absolutely spoken to that sort of 4,000 to 5,000 net adds number, and you've reiterated that again for FY '26. But I guess just given the ongoing penetration of premium leased into the North American market, how long do you think you can maintain that sort of 4,000 to 5,000 net adds for. Trevor Croker: Yes. So back around -- back to the first part of that question, which was really around a bit of extra depth around the second half. I mean we carried strong installed base from Play Hub for Phoenix Link in the first half, and that continued in the second half. We then built on that with Buffalo Ultimate Stampede, Millioni$er and House of the Dragon. Those were MSP installs in the business. Also, we've got a portfolio of games coming out for the rest of FY '26, including Lightning Link 10-year store, Buffalo Mega Stampede, which has only really just been released in the last month, it's doing 3.9x floor. Spooky Link Grand, which is a gaming operations extension of the Spooky Link franchise, which is doing exceptionally well. Plus, as I said, Phoenix Link momentum and pipeline there and Cash Express Legend plus a couple of other games. So I guess where I see our portfolio is that the market was quite volatile in the first half from a GGR perspective. If that normalized in the second half, we were able to continue to work on our momentum of installs. And also, we talk about net installs. So we were able to refresh some of the underperforming portfolio as well and improve that. As far as going forward, as I said, I think 4 to 5 in '26 -- between 4,000 and 5,000 in '26 is a good number for Aristocrat. There are about the same number of new openings and expansions. Obviously, MONOPOLY is a great opportunity for us in the '26 calendar year, which we're excited by as another incremental add to the portfolio. So I feel comfortable that we will get our rightful share and take share again in gaming operations in FY '26. Operator: We will now take the next question from the line of Annabel Li from Goldman Sachs. Annabel Li: Just one on D&D, which you flagged will increase in the mid-single digits next year. Maybe could you talk about where you're prioritizing that incremental investment? Sally Denby: Annabel, thanks for the question. It's Sally here. I think as we've said before, we are currently in an investment cycle as we continue to scale up the Interactive business and really a heavy focus on the investment in technology, which will enable us to efficiently port content across the 3 distribution channels now. So that remains our focus going forward. And we're increasingly managing the D&D portfolio on an enterprise basis, which goes to the point that we've made today about changing how we think about it with our focus on fundamentally managing the cost base and as we said, managing that year-on-year increase within the mid-single-digit range. Operator: We will now take our next question from Matt Ryan from Baron Joey. Matthew Ryan: Just hoping with the participation yield, if you could give us some color on the second half. I think 6 months ago, you talked in quite a lot of detail actually around the mix between sort of coin in promotions, MSP and the different drivers. So just any color you could provide on those types of things and what sort of drove your second half performance? And I guess, leading into that, when you might see that yield start to converge on what overall GGR growth looks like moving forward? Trevor Croker: Yes. Thanks, Matt. It broke up a few times. I think you're talking about gaming not just fee per day. So a couple of levers in there. So we talked about GGR being an impact in the first half, affecting, as you know, because we've got effectively 2/3 of the portfolio participation. So GGR was relatively not volatile, but unpredictable in the first half. We've seen GGR be more supportive in the second half. So that's been a positive contributor to our fee per day performance. At the same time, we've been -- we've seen more favorable on our performance on our participation games. So things like Buffalo Ultimate Stampede as I mentioned earlier, House of Dragons and Millioni$er and also increased average fee per day on Phoenix Link. So we have taken the promotional aspects and roll those back over the period as well. And we did say at the half that those were some of the contributing factors, but we have taken those into control. And also, we continue to focus on churning the underperforming games out of the portfolio. So we continue -- as we said, we would get sequential improvement. We believe that the portfolio continues to give us the right to expect improvement again into next -- into 2026 and the GGR momentum that we've seen in the early part of the year suggests that at this point in time. Matthew Ryan: And just for the outright sales, obviously, a very strong period. Just interested in your thoughts on I guess, how much of that was driven by the pent-up demand for the Baron cabinet. I guess, I'm just trying to think about, obviously, moving forward, you've got a lot of pretty solid releases coming out, just your ability to sustain that level of sales growth? Trevor Croker: Yes. Maybe it's best if we break it down by region. So there was pent-up demand in Australia because we didn't launch it until the second half. And at the half, we were talking about the fact that it was only just launching in Australia as we were talking to you in May. So we've just gone live in New South Wales. We're going live in Queensland, about to go live in Victoria. That said, that Baron cabinet has been well accepted by our Australian cabinet, the customers, but also supported by a strong portfolio of games, which have actually helped support the installed base and see both the cabinet and the games be released and also see the overall game performance of Aristocrat's portfolio improve. As we said, 52% ship share at the end of the half is a very strong result. n North America, we already had Baron Upright in the marketplace, and it was performing well. We then moved to Baron Portrait in April, and we saw an acceleration both from the games like Spooky Link that were on that platform, improve the performance of the platform, but also allow for us to gain greater distribution. I wouldn't have called that pent-up demand because we'd already launched Baron there, and that was really driven by game cycles and new hardware configuration. So strong results there. As far as Baron goes from the rest of the market point of view, it's due for EMEA this year and also into Asia this year being FY '26. And so we see that games coming through on that portfolio into those markets as opportunity. I felt that the gaming -- the full sales numbers for North America and Australia were a real credit to our team. It was the great commercialization, working with our customers, content, hardware and a portfolio of games that we really have a floor average now of about 1.4x. Our nearest competitor is 1 to a 40% premium on our floor performance. And I think that ultimately helps our customers decide where to place their capital and where to -- whose games to place. So think the team did a great job on that basis. Operator: Our next question comes from Sriharsh from Bank of America. Sriharsh Singh: Two quick questions from my side. One on ANZ, very strong performance, 52% ship share in second half. Can you talk about the ANZ pipeline and talk about how sustainable this 52% share is? Was there a little bit of a one-off element from the Baron launch at the start of the second half? Or do you think the pipeline should support 50% kind of a ship share in ANZ. The second question I have is on the North America outright sale market. So very strong performance in the second half again. Could you talk a little bit about the opportunity to lift ship share in North America to maybe close to 30% because your ship share or flow share in premium gaming ops is over 40%. So maybe you can narrow the gap there with strong content that is coming online. And lastly, on online content share, 74 new games launched in 2025. When I look at some of the digital-only suppliers, they're launching 250 to 300 games a year, a few of them. Is that the aspiration over the next 1 to 2 years? Or would you follow a slightly different strategy in online slots. Trevor Croker: Thanks, Sriharsh. Great way to get 3 questions into 2. Well done. I appreciate it. So firstly, from the ANZ perspective, 52% share, as I said just earlier, I think there was an element of pent-up demand from the hardware coming out with the Australian team. But there was also other initiatives like MarsX that the team are working on as well. So those MarsX continued to be released during the year, which was Cash Express luxury line and also the Dragon Link 90,000 jackpots. So continue to see those products being released. So my view is that we haven't finished penetration of Mars in the Australian marketplace, and we've got a portfolio of games, which were released at AGE that were seen to be a highly -- high-performing series of games. Heaven & Earth, which was launched in mid-October is performing very well. It's got strong demand to support that. So we expect to continue to be able to run in that sort of range of share in the Australian marketplace from both a content point of view and also from a hardware point of view. So I feel confident around that. Around the comment around North America, I think you're talking outright sales, was that correct? Sriharsh Singh: Yes, because the ship share [indiscernible]. Trevor Croker: Yes. We finished the half at about 31.2% -- sorry, finished the year at 31.2%, which is the first time that Aristocrat has shipped more than any manufacturer in North America. So of the top 5 manufacturers, we had the highest shipments of game sales products in North America, and that's the first time we've achieved that. So on a year-over-year basis, we were 5.5% up on the previous year, and the market was actually flat. I do believe that the team again is executing very well there. There's an element of adjacencies in there. But if you look at the core business, strong growth from a gaming operations point of view, and our ASP is largely held as well. So from a wallet share point of view, well over 31% from that perspective. Will we continue to lift it, again, coming back to performance. When you look at Spooky Link to the top 3 games in the outright sales list from an Eilers perspective, great place start and another portfolio of games. We're very happy with our response from operators at the G2E this year and felt that it was a great indicator to remain confident about our pipeline in '26 for game sales and for -- sorry, for gaming operations. Your final question on online, you're correct. We launched 74 games. We made 92 games. We have had challenges in getting games into the market as it's more complex release process. I think it's fair to say that we're not targeting a 250, 300 game release. We are more interested in the quality of games. And if you look at our share, which has doubled from March this year to September or effectively doubled and that has really been driven by fewer games but higher quality. And we believe that high-quality land-based content will resonate and be more attractive to our operators and will actually be more attractive to the players. So our objective is to release high-quality land content into that market. And I think the proof is in the pudding in what we've been able to do with Product Madness over the last decade as we've taken land-based content and now the #1 social slot share in the social casino market. So I believe that it's -- it's under our expectations to publish 74. We did say 90. We have made more than that number, and we'll look to be able to publish that noting we did go into Delaware and Connecticut after the end of the financial period. So we still have 2 more states to enter in North America as well. Operator: Our next question comes from David Fabris from Macquarie. David Fabris: If we stick with Interactive, can we just confirm that the technology integration is fully completed there, and there's nothing holding you back in that business. And then as part of that question, I appreciate you spoke about the quantum of game launches just now. But maybe can we talk about when some of the higher-performing games are coming out, Maybe some Scott Olive's games? Because I would assume that would support a significant step-up in market share? Trevor Croker: Yes, sure. Thanks, David. Yes, when you're involved in technology, you're always investing to upgrade your technology, and we referenced the point that we continue to invest in product and technology, and that investment is across the organization and getting the streamlining of our ability to make games and distribute it across multiple channels. The fact that we're continuing to increase invest in technology will continue. When you think about each iLottery contract that we achieve is a new opportunity to invest and to drive strong long-term returns for the group. So we will continue to invest in technology, and that will benefit across the group, but it also does create the opportunity, particularly in the iLottery -- sorry, in the Interactive business to support our longer-term growth aspirations. So we're not fully completed. And I think every time we see a new opportunity, we will take the opportunity to invest for growth as we have with adjacencies in our gaming business. and the way that we've added adjacencies to continue to drive growth from our organic investment in the organization. On the games release basis, we will be bringing Lightning Link to the market in FY '26. It is currently planned to be coming out in the calendar year of 2026. So it will be up middle of next year. That will be our first, if you like, iconic land-based game -- not first, but it's our biggest iconic land-based game to come to that market. There are a pipeline of games that come in behind that as well, and we'll continue to build those out. And that's where -- back to my earlier point, it's about the quality of games that will be released in Interactive as opposed to the quantity of games that will be released. And we also feel that that's a good way to work with our partners, particularly the land-based operators with the digital footprint to be able to offer games from their land floor, the retail floor into the online environment as well. David Fabris: Yes. I guess my question is, why is there a 6-month delay in launching Lightning Link? Why can't you go today? Why do you have to wait to mid-2026? Trevor Croker: The games -- just the same as when you make a game for Queensland and you take it to New South Wales. It's under different regulations, different structure. The game has to be made. Therefore, that's part of the investment in technology is to streamline that over time. And the games have a different game, different play. It's not the same memory structure. It's not the same size game. You have to take out graphics, you have to take out various aspects to it to make it applicable and playable on a mobile device. So it is a reconfiguration of a game, and it's the same that would happen with anyone that's moving games from social iGaming or from iGaming -- from gaming to get to an iGaming environment. So that's over the last couple of years is to streamline that with GDKs and tools for our teams at a more efficient way. David Fabris: Got it. Understood. And can I just ask a question about how the business is utilizing AI, I guess, in particular, within D&D I'm wondering that if you're getting some efficiencies and gains in there, whether the growth of D&D may slow in outer years or whether we should be extrapolating that mid-single-digit growth rate beyond FY '26. Trevor Croker: Look, we've tried to help guide to the mid-single-digit growth rate because if you look at that, that's actually a more applicable way to think about the way that we've invested behind D&D across the group now. We've structured the organization where product and technology is a group solution and that we make these solutions across the organization and then we plan to commercialize it in various structures. We've also now put in place the portfolio planning to do that as well. As far as AI goes, we're working on it in a number of areas. We mentioned where we are in Product Madness with art and art generation also with live ops. In the digital -- in the technology piece, it's around quality. It's also around how do we test our quality on a real-time basis to reduce quality and time to make games and also around porting of games so how we move games from market to market. So we are using these tools. They're proprietary within our organization, and we continue to focus on that. And we see it as a way to continue to evolve our game porting and game efficiency. It will not take away from the creativity of games. It will not take away from how we make a game, but it will help us to be more efficient in the way that we move games across our portfolio. Operator: [Operator Instructions] Our next question comes from Andre Fromyhr from UBS. Andre Fromyhr: Just, I guess, coming back to the couple of questions we've had on gaming ops and the outlook. More specifically, I was interested in the role that MONOPOLY will play in that over the next 12 months. So you launched at G2E, but if I understand correctly, you can't be putting that on floors until the new calendar year. So what's been the reception so far? Are you getting indications from operators that already have MONOPOLY licensed content on their floors about swapping over to the Aristocrat product? t? Trevor Croker: Yes. Thanks, Andre. So we released it for showing it at G2E. So that was the MONOPOLY Big Board Bucks, which is our first game in the Class III MONOPOLY portfolio. We actually can't start placing that until the new calendar year under the contract with Hasbro. So we are continuing to build momentum around the brand. We had excellent feedback from G2E from customers who came back many times to look at the product and share it with their teams. There's also a Class II version, which will come out shortly after that. And then there'll be other games that will roll out in FY '26 as well. So we are in the transition period at this point in time. The contract with the current licensee expires at the end of this calendar year. And then from next calendar year, we can continue -- we can start placing it. So our feedback at this point in time from operators is that they are excited by the product. They thought it was a very innovative way to bring contemporary maps to a really relevant gaming floor theme, and they thought that the way it was integrated was a great experience. So we're very happy with the way MONOPOLY has been shown at the show and excited by what it will do in 2026. Andre Fromyhr: Could you give us any sense of scale of the role that MONOPOLY would play in your net installs for next year? Trevor Croker: Not at this stage. We know what the installed base roughly is out there at the moment, which I won't say because it's not our installed base, but we see it as an opportunity to replace that installed base over the '26 period and also to be incremental to our existing installed base given that we don't have a card-based -- sorry, a games-based theme in our portfolio of gaming operations. So we have many other themes. We don't have a games-based theme, and this is one that existed in the gaming market for a number of years. Operator: Our next question comes from Liam Robertson from Jarden. Liam Robertson: Just first thing on me on gaming ops. I'm just keen to understand how you look to balance fee per day growth with net install growth. I'm just conscious, obviously, it was a tale of 2 halves for fee per day, and then it was essentially the opposite for net installs with a softer second half. Trevor Croker: Yes. Thanks, Liam. Look, I think the way you got to look at this is that there's an element of GGR, which influences fee per day because around 2/3 of the portfolio is on a participation model. So GGR will have some impact on that for the whole industry from that perspective. The way that we improve fee per day is through mix. So better MSPs, higher-performing games, different mix within the portfolio. And so that's an important way of doing it. And the other part is taking control of our commercial terms, which we did in the second half. So I feel that our fee per day improvement is good. As I said, it was supported by a couple of those metrics, and we are taking proactive steps in rebuilding the portfolio, particularly around the MSP and also enhancing the execution of our gaming ops as well. Liam Robertson: Maybe just in terms of, I guess, taking control of your commercial terms, any impact there in terms of the softer second half net installs? Trevor Croker: No, nothing at all. Nothing at all. We were still able to place -- still able to work with our customers and increase our installed base, particularly in new openings. It didn't impact that at all. Liam Robertson: Okay. Great. And then just maybe secondly on capital management. Obviously, net debt to EBITDA only 0.2x 80% through the buyback. To me, it looks like you've got close to $4 billion of headroom to the midpoint of your gearing range on an FY '26 basis. I mean I'm conscious of your comment of not getting back there without material M&A. But is there any reason we shouldn't be thinking about further buybacks alongside M&A moving forward? Trevor Croker: Yes. I think -- thanks for the question. Our capital allocation strategy has actually got buybacks and well embedded in there now. We've been doing buybacks for a couple of years. And we've been clear that that's part of our ongoing strategy. So you can absolutely expect us to continue to do buybacks. And we obviously announced a new program back in February. We're 77% of the way through executing on that. So yes, it's absolutely part of our ongoing strategy to help manage our balance sheet and obviously return to shareholders. I mean, this year, we returned a total $1.4 billion across buybacks and dividends, and it's certainly our intent to keep that momentum going forward. Operator: Our next question comes from Kai Erman from Jefferies. Kai Erman: Obviously, you had a pretty decent earnings due to the second half this year. And Trevor, I think you made a comment earlier you expect that into '26 as well. I'd just be keen to kind of see where you're seeing that divisionally and what the specific drivers of that are? Trevor Croker: Yes. Thanks, Kai. I mean if you look at our historical profile, we've generally been weighted to the second half as a rule. So it's not an unusual profile for us to be normally weighted to the second half. Largely, that comes off the back of games in gaming operations going into the installed base post G2E and obviously, game releases in the first quarter, second quarter of the year. So it's not unusual for us to be skewed to the second half. Some of those second half opportunities will also be because of the Interactive business as we see 2 lotteries coming online in July being Michigan and Massachusetts. So there will be some momentum from that perspective. But it's not an unusual profile to us to be phased in the second half of the year on the way that games are released. Post G2E -- games are placed post G2E and then momentum with the seasonality of the industry as well. Kai Erman: All right. And then just a follow-up. I guess in North American outright sales looked quite strong when you consider the adjacency mix. Taking out the adjacencies, what are you sort of seeing the pricing trends there? Do you sort of expect a sustainable pricing increase throughout FY '26 as well? Trevor Croker: I wouldn't say sustainable pricing increase. But first of all, I appreciate the fact that you recognize that the negative draw on adjacencies from an ASP point of view. I would put that down to hardware being the new Baron Portrait cabinet and also high-performing games like Spooky Link where high-performing games support a premium price and the new hardware has been very well received. It's not a case of pricing up because we can. It's about a value solution for our customers and high-performing games on new hardware, which is working is a great return for our customers. Operator: Our next question comes from the line of Rohan Sundram from MST Financial. Rohan Sundram: I'll ask just one Trevor or Craig, actually, on the land-based side of things, how would you rate your forward visibility at this point in time? And just how would you describe the overall state of slots CapEx at the moment from customers? Trevor Croker: Yes. Thanks, Rohan. Look, I think we're very happy with the visibility of the market at this point in time. Performance of our portfolio is strong. Hardware configurations are very good and the ability to see both new openings and expansions, which we anticipate is going to be around about the same size as '25 and '26. We've got line of sight to those, and we feel very competitive around our ability to take a good share of those new openings and expansions. So a visibility point of view, I think where we were at the half, there was still a lot of volatility in the market, uncertainty around tax changes, regime -- the regime tax changes and other changes in the market, and that has settled down now. And I think operators have been willing to invest in game placement, and we were able to take advantage of that through the second half. So I feel confident about our visibility. I feel confident about our momentum into this year. And October, as I said, I feel good from what I'm seeing in October that '26 is in good shape. Operator: Our next question comes from Sam Bradshaw from Evans & Partners. Sam Bradshaw: Just wondering how you're seeing current M&A opportunities and which segments you'd be most interested in? Trevor Croker: Yes. Thanks, Sam. Appreciate the conversation. A couple of points here. We're still working on integrating NeoGames. We've done a lot of work there, and we reorganized the product and tech side of things as we spoke about a number of times now. And Neo is very much part of the Aristocrat Group, and we're continuing to leverage that opportunity. I would point to a couple of small tuck-ins that we've done, which to me are about building the investments for the future. One of those was [ MGS Big Boss ] which is really around creating connectivity, real-time connectivity between gaming machines and the operators to allow direct marketing, et cetera. And the second one was Awager, which is a streaming business -- very small streaming business that is starting to emerge in the North American and Canadian markets. We closed that on the 5th of November. So there are just a couple of small bolt-ons that continue to enhance our strategy. As you know, we use M&A to accelerate our growth, not to replace organic growth and share taking. As far as the future goes, we feel pretty well placed with our gaming portfolio of assets at this point in time and see that we can continue to take share rather than buy share through acquisition in the gaming space. Social casino and online, as you know, we've streamlined our portfolio. Our portfolio of social casino assets continue to be strong with NFL being the latest new app, but continuing to leverage the Evergreen is critical there. And then we would look at areas in Interactive space as well that would be attractive, but would have to accelerate our Interactive position. So we continue to participate in the markets and monitor those things that are strategically aligned to our objectives and remain disciplined around what is appropriate for our company. And as we said, we're building -- we have built the capability to do this, and we've built the financial structures to support it as well. Sam Bradshaw: Great. If I've got time to squeeze in a follow-up. Can I just ask whether you plan on entering charitable gaming, either organically or via M&A? Trevor Croker: We look at all of those things, Sam, to be honest with you. We continue to look at all markets and where we're focusing at the moment is on what we've got in front of us and leveraging the scale of the organization, but we look at all markets. Operator: I'm showing no further questions. Thank you all very much for your questions. I'll now turn the conference back to Trevor for his closing comments. Trevor Croker: Thanks, operator. Aristocrat continues to deliver strong performance in line with our strategy of maintaining a diversified gaming portfolio that capitalizes on our market-leading content and capabilities. Our ongoing commitment to invest in talent, technology innovation underpins our confidence in capturing the many opportunities that lie ahead. And again, this year, we've taken market share in every market in which we participated, feeling confident going into '26 as well. Should you have any further questions or queries, please feel free to contact our Investor Relations team. I'll now bring the formal proceedings to a close. And on behalf of the entire Aristocrat team, thank you for your continued interest and support, and we wish you all a pleasant day. Thank you. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect your lines.
Operator: Welcome to the Acurx Pharmaceuticals' third quarter 2025 conference call and business update. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Robert Shawah, Chief Financial Officer. Thank you, sir. You may begin. Robert Shawah: Thank you, Maria. Good morning and welcome to our call. This morning, we issued a press release providing financial results and company highlights for the third quarter of 2025, which is available on our website at acurxpharma.com. Joining me today is Dave Luci, President and CEO of Acurx, who will give a corporate update and outlook. Following that, I'll provide some highlights of the financials from the third quarter ended September 30, 2025, and then turn the call back over to Dave for his closing remarks. As a reminder, during today's call, we'll be making certain forward-looking statements, which are based on current information, assumptions, estimates, and projections about future events that are subject to change and involve a number of risks and uncertainties that may cause actual results to differ materially from those contained in the forward-looking statements. Investors should consider these risks and other information described in our filings with the Securities and Exchange Commission, including our quarterly report on Form 10-Q, which we filed today, Wednesday, November 12, 2025. You are cautioned not to place undue reliance on these forward-looking statements, and Acurx disclaims any obligation to update such statements at any time in the future. This conference call contains time-sensitive information that's accurate only as of the date of this live broadcast today, November 12, 2025. I'll now turn the call over to Dave Luci. Dave? David Luci: Thanks, Rob. Good morning, everyone, and thank you so much for joining us to review our financial results for the third quarter 2025, and also to hear some recent updates. We would be pleased to take any questions. First, I'd like to briefly summarize a few of our key activities for the third quarter, or in some cases, shortly thereafter. On August 4, we effected a 1-for-20 reverse stock split of our issued and outstanding shares of common stock, and as a result of the reverse split, on August 26, we regained compliance with the minimum bid price requirements of $1 per share under the NASDAQ listing rules. In addition, we met the minimum stockholder equity threshold of $2.5 million under the NASDAQ listing rules. We're now in full compliance with all NASDAQ continued listing requirements, and our common stock will remain listed and traded on the NASDAQ stock market. In September, the Australian Patent Office granted a new patent for the company's class of DNA polymerase 3C inhibitors, including composition of matter. To date, Acurx has obtained three U.S. patents: one Israeli patent, one Japanese patent, one Indian patent, and now the Australian patent, in each case which cover the ACX-375C program related to DNA polymerase 3C inhibitors for infections caused by gram-positive bacteria, including MRSA, VRE, and PRSP, with other country-level filings in process. Also, in September, at our special meeting of stockholders, our stockholders approved an amendment to our certificate of incorporation to increase the total number of authorized shares of common stock from 200 million to 250 million. In late September, we filed the amendment with the Secretary of State of the State of Delaware with immediate effect. In October, the company received gross proceeds from the exercise of 170,000 Series F warrants for approximately $1.4 million. Also, in October, we are one of five companies selected to make a formal presentation at ID Week in Atlanta at the session entitled "New Antimicrobials in the Pipeline." Presenting on behalf of Acurx were Dr. Michael Silverman, our Medical Director, and Dr. Kevin Garry, Professor and Chair of University of Houston College of Pharmacy and the Principal Investigator for Microbiology and Microbiome Aspects of the ibezapolstat clinical trial program. The company's presentation included an update on ibezapolstat and its microbiome-sparing properties. Also presented were new colonic microbiome data from a state-of-the-art mouse infection model showing a potential microbiome-sparing class effect of representative compounds from our DNA polymerase 3C inhibitor preclinical pipeline. In describing the work performed at his laboratory at the University of Houston, Dr. Garry stated, "Initial work on novel lead DNA polymerase 3C inhibitor compounds indicates that the positive microbiome-sparing results from our ibezapolstat studies may be a class effect. This is an important finding because microbiome-sparing likely contributed to ibezapolstat's sustained efficacy in the phase two trial for C. diff infection, where no patient cured of C. diff experienced a recurrence. In our recent experiments, mice given the comparator antibiotic linezolid demonstrated an overabundance of uncommon and harmful gram-negative bacteria known to contribute to recurrence of infection. Dr. Garry further stated, 'These data indicate a low probability for DNA polymerase 3C inhibitors to increase the risk of causing a C. diff infection, vancomycin-resistant enterococcus, or other gut microbiome-related infections. Next, this month, on November 10, the company announced that the Nature Communications scientific journal published results from our scientific collaboration with Leiden University Medical Center in the Netherlands, demonstrating structural biology research that reveals, for the first time, a DNA polymerase 3C inhibitor, ibezapolstat, bound to its target. The publication is entitled, "A unique inhibitor conformation selectively targets the DNA polymerase 3C of gram-positive priority pathogens." This is an important milestone in our highly productive scientific collaboration with Leiden University Medical Center in advancing development of these new-to-nature compounds, fortifying the foundation for the rational development of our innovative class of antimicrobials against other gram-positive priority pathogens. We continue to identify and pursue funding opportunities for a phase three clinical trial program for ibezapolstat, as well as consideration of alternative pathways to achieve success. We have several initiatives underway to this end, and we'll report in future updates as appropriate. As we've continually reported, ibezapolstat clinical and non-clinical results continue to outperform in a serious and potentially life-threatening infectious disease caused by C. diff bacteria that the CDC categorizes as an urgent threat and calls for new classes of antibiotics for initial treatment that also have a low incidence of recurrence. I'd also like to highlight that our company does recognize the month of November as C. diff Awareness Month, as designated by the CDC, and supports the work of the Peggy Lillis Foundation in raising awareness, educating, and advocating for the prevention, treatments, clinical trials, and environmental safety of C. diff infections worldwide. For more information about the work of the Peggy Lillis Foundation, please visit their website at cdiff.org. Additionally, ibezapolstat has FDA QIDP and FAST TRACK designation for treatment of C. diff, as well as SME, small and medium enterprise status in the EU. We also believe that ibezapolstat, if approved, could make a favorable economic impact by reducing the overall annual U.S. cost burden for C. diff infection of approximately $5 billion, of which $2.8 billion is due to recurrent infection. We remain confident that while development of ibezapolstat's competitive profile continues to strengthen, we will continue to navigate successfully through these challenging times in the macroeconomic environment and in our industry sector. Now back to our CFO, Rob Shawah, to guide you through the highlights of our financial results for the third quarter of 2025. Rob? Robert Shawah: Thanks, Dave. Our financial results for the third quarter ended September 30, 2025, were included in our press release issued earlier this morning. The company ended the quarter with cash totaling $5.9 million, compared to $3.7 million as of December 31, 2024. During the quarter, the company raised a total of approximately $1.7 million of gross proceeds through purchases under the equity line of credit. In addition, after quarter end, the company raised an additional $1.4 million from a warrant exercise by one institutional investor. Research and development expenses for the three months ended September 30, 2025, were $0.4 million, compared to $1.2 million for the three months ended September 30, 2024, a decrease of $0.8 million. The decrease was due primarily to a decrease in manufacturing costs of $0.1 million and a decrease in consulting costs of $0.7 million as a result of the prior year trial-related expenses. For the nine months ended September 30, 2025, research and development expenses were $1.6 million versus $4.6 million for the nine months ended September 30, 2024. The decrease of $3 million was primarily due to a reduction of $0.7 million in manufacturing costs and a $2.3 million decrease in consulting costs due to higher trial-related costs in the prior year. General and administrative expenses for the three months ended September 30, 2025, were $1.6 million, compared to $1.6 million for the three months ended September 30, 2024. The expenses remained relatively consistent from the prior year, as a $0.2 million decrease in compensation-related costs were offset by a $0.1 million increase in legal fees. For the nine months ended September 30, 2025, general and administrative expenses were $4.9 million versus $6.8 million for the nine months ended September 30, 2024, a decrease of $1.9 million. The decrease was primarily due to a $0.6 million decrease in professional fees and a $1.3 million decrease in share-based compensation. The company reported a net loss of $2 million, or $1.23 per diluted share for the three months ended September 30, 2025. That was compared to a net loss of $2.8 million, or $3.45 per diluted share for the three months ended September 30, 2024. A net loss of $6.4 million, or $5.01 per diluted share for the nine months ended September 30, 2025, that was compared to a net loss of $11.3 million, or $14.23 per share for the nine months ended September 30, 2024, all for the reasons previously mentioned. The company had 1,800,299 shares outstanding as of September 30, 2025. With that, I'll turn the call back over to Dave. David Luci: Thank you, Rob. And to all of you for joining us today. Now back to the operator to open the call for questions. Maria? Operator: Thank you. We will now be conducting a question-and-answer session. If you would like to ask a question, please press Star 1 on your telephone keypad. A confirmation tone will indicate that your line is in the question queue. You may press Star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the Star keys. One moment, please, while we poll for questions. Our first question comes from Jason McCarthy with Maxim Group. Please proceed with your question. Joanne Lee: Hi. This is Joanne Lee. Operator: Good morning. Joanne Lee: Oh, sorry. This is Joanne Lee on the call for Jason McCarthy. Thank you for taking our questions. Starting with, given recent changes under the current FDA administration, do you see increased potential for the agency to prioritize domestically manufactured novel antibiotics? If you could share your perspective on the PASTOR Act, if there is any still meaningful potential for it to advance or impact the antibiotic funding landscape. Thank you. David Luci: Thank you, Joanne. So with regard to the FDA, we certainly see buds on the trees. Maybe this relates more to a sister agency that we're talking about with a public-private partnership. We're already FDA, FAST TRACK, and QIDP. There is some legislation that may be coming out related to novel drugs that treat life-threatening conditions that we may be able to avail ourselves to. We're not sure yet. We would be the first antibiotic under that program, but we're certainly on it and looking into it. The second component of your question, the PASTOR Act, I don't think anyone in Washington is focused on the PASTOR Act or Project Bioshield. Given what's going on in Washington, I think 90% of the folks down there are wondering what their new appropriation is going to be for fiscal 2026 because of the shutdown and that kind of thing. It's going to be until the end of the year until folks are sure what they're going to have to spend. I would expect both of those will continue to be under consideration when normalcy returns to the capital. That may take some time. Joanne Lee: Got it. That was helpful. And just given recent shifts under the current FDA leadership, do you see increased potential for the agency? I'm sorry. Does the proposed clinical priority review voucher framework impact the company's regulatory approach or commercial strategy going forward? David Luci: No. It would be the same strategy. We would certainly try to avail ourselves of that program at the appropriate time. We're aware of it. We have a couple of phase three trials in front of us, along with the 20-patient take-all-comers trial in the secondary C. diff market that we'd like to get underway kind of ASAP. Joanne Lee: Got it. And just the last one for me. Has the team explored the possibility of filing for approval based solely on the phase two ibezapolstat data? And I guess, what would the regulatory pathway look like if you were to take that route? David Luci: Yeah. We couldn't. If we could do that, we would. You need a safety database. We're going to need whatever we're able to kind of follow as the most recent regulatory pathway. If a new one, the conditional approval pathway, for example, we're still going to need phase three trial data to support the safety database. Joanne Lee: Got it. David Luci: We don't have enough patients yet for the FDA to be comfortable. Joanne Lee: Got it. Thank you so much. Appreciate you taking the time to answer our questions. David Luci: Thank you, Joanne. Operator: Our next question comes from Matt Keller with HC Wainwright. Please proceed with your question. Matt Keller: Hello. Good morning. Thanks for taking our questions. Just one from us. You kind of touched on this, but you've had a number of recent publications and presentations. I'm kind of curious how these data might be informing or potentially changing your clinical strategy going forward, particularly ahead of the start of the potential phase three. David Luci: I mean, the data is compelling. I mean, to have a microbiome-sparing class effect, that means that as we get our second antibiotic in the pipeline into clinical trials, if our second program is effectively treating MRSA and anthrax and VRE, we'll be very confident that there are going to be very, very few or no reinfections because of the class effect of the microbiome-sparing mechanism of action. It doesn't really change the clinical program. What it does do is it makes us confident that we'll be able to demonstrate to the scientific community that we deserve a seat at the table. The way we'll do that is to do in the secondary or salvage market for C. diff. In the worst of the worst cases, we'll dose up to 20 patients who have had three prior episodes or more of C. diff treated by the standards of care. We expect to be able to show that we're able to cure those patients of their C. diff with lasting cures because of the elucidation we have now in our mechanism of action. We'll basically be saying to the scientific community worldwide, "The existing antibiotics that are standards of care are fine, but we deserve a seat at the table." We think that data will be compelling. We would anticipate that data will help us to engender a public-private partnership. It doesn't really change your primary strategy. Matt Keller: Yeah. It totally makes sense. Thanks for the update. Thanks again for taking the question. David Luci: Thanks, Matt. Operator: Our next question comes from James Malloy with Alliance Global Partners. Please proceed with your question. James Malloy: Hey, guys. Good morning. Thank you very much for taking my questions. I wonder if there's any way to put a framework or a timing around potential partnership discussions. I know it's always partnerships never there until it's there. You highlighted alternative or additional pathways in your prepared remarks for getting to phase three. Is there any way to put some error bars around when that could potentially happen? I have a couple of follow-ups. Thank you. David Luci: No problem. Thank you, Jim. Good morning. A partnership is a two-way street. We can't tell exactly when the people we're talking to are going to come to terms or if they're going to come to terms. I would be surprised if on the next earnings call, there hasn't been some major news for the company. James Malloy: Excellent. Thank you for that. On the QIDP and FAST TRACK designation, there's no sort of expectation or time limit or sort of movement that has to go forward for those to keep going? Once you get them, you sort of have them in perpetuity? David Luci: Absolutely. James Malloy: Got it. Thank you. And then just the last question too on the OpEx. Pretty steady state right now. You guys are, in some respects, holding fast. Are these numbers the numbers we should anticipate going forward, again, barring something substantial being announced before the next call? David Luci: Yes. We continue to tighten our belt. We would think that, if anything, our costs will continue to gradually go down. We've done a lot of cost cutting. I'm sure we can find more corners to cut. We're in kind of a good position with, I think we said $5.9 million, plus we had the $1.4 million after the end of the quarter. With $7 million-ish in the tank and another $9 million remaining on our ELOC, we can kind of bide our time while we wait for a public-private partnership or some sort of M&A activity. James Malloy: Absolutely. Comments to Rob for keeping the steady hand of the tiller. Thank you, guys, for taking the questions. David Luci: Thank you so much, James. Operator: We have reached the end of our question-and-answer session, which now concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Karl Steinle: Good morning, everyone, and welcome to our earnings call on our results for the first 9 months of 2025. And as usual, our CEO, Clemens Jungsthofel; and CFO, Christian Hermelingmeier, will provide a brief overview of the business development so far in '25. And afterwards, Clemens will present the updated outlook for the current year. And as usual, we'll provide an initial guidance for the financial year '26. For the Q&A, we will be joined by Claude Chèvre and Sven Althoff. And with that, I hand over to you, Clemens. Clemens Jungsthofel: Thank you, Karl, and good morning from Hannover. So on the first slide, the business performance in the first 9 months was very satisfactory. The group net income of EUR 1.96 billion reflects a strong underlying profitability and additional positive tailwind from currency translation and from tax, adding up to more than EUR 400 million. The low tax rate, particularly in the third quarter, is mainly connected to the newly enforced change in the German corporate tax, resulting in a corresponding release in deferred tax liabilities. This not only left us in a comfortable position to increase the group net income guidance to around EUR 2.6 billion for the full year. In addition, we used the extra level of profits to further strengthen our company's balance sheet. We have added significant prudency to our P&C reserves. We've taken a more cautious view on certain pockets in our Life & Health portfolio, and we have realized more than EUR 300 million losses in our fixed income portfolio. All of this improves our already strong balance sheet and our confidence in future earnings growth. In P&C reinsurance, we have continued to grow our portfolio in an attractive rate environment. As in the first half, the refinement in the calculation for the non-distinct investment component does have a negative base effect on reported growth numbers. As it does not impact earnings, this is no cause for concerns at all, also not when comparing to our 7% growth target. So on an adjusted basis, the growth is close to 10% and therefore, clearly ahead of the 7% mark. The favorable underlying growth is also reflected, as you can see, in the increase in our new business CSM to now EUR 2.6 billion. The large loss experience in Q3 was rather benign, particularly on the nat cat side. Hence, the overall impact from large losses was well below our budget for the first 9 months. But as you know, as usual in this situation, we have booked the full year-to-date budget. Therefore, the reported combined ratio does not reflect the benign large losses. On the contrary, we have actually used the overall positive results situation to add further prudency to our P&C reserves with a corresponding effect on the reported combined ratio. Nevertheless, the reported 86% is well in line with our target, pointing to an even better underlying number. In Life & Health reinsurance, the revenue is growing moderately. The new business generation increased by 16% to EUR 575 million, including a favorable contribution in the third quarter. The Reinsurance service result of EUR 671 million reflects the overall positive business development and confirms that we are well on track to deliver on our target for 2025. The ordinary investment performance was very satisfactory against the backdrop of another strong quarter, including the positive tax effects, we have decided to accelerate the loss realization in our fixed income portfolio. After around EUR 60 million in the second quarter, we have realized another EUR 260 million in the third quarter to improve future investment returns and to increase the flexibility in our investment portfolio. Hence, the return on investment of 2.8% is deliberately below our target for the full year. Finally, the capitalization remained strong with a solvency ratio of 259%. In the third quarter, the operating capital generation was slightly above EUR 1 billion. We have also been successful in deploying capital. So the recognition of planned growth for 2026 had an impact of around 6 percentage points on the solvency ratio. Furthermore, the quarterly accrual of foreseeable dividends, including the update of our dividend strategy impacted the solvency ratio by minus 4.5 percentage points. Model changes had a minor positive impact. On the next slide, the shareholders' equity increased by 2%, driven by the strong 9 months results. A mitigating factor is a negative impact from currency translation within the OCI. The CSM increased by 2.1%, mainly reflecting the new business generated by both business groups, again, also here partly mitigated by negative currency effects. The risk adjustment decreased by 7.8%, mainly driven by some model refinements in P&C as well as a negative currency effect and a new retrocession in Life & Health. Altogether, the performance of both business groups and our strong balance sheet, including the CSM and including the risk adjustment, gives me considerable confidence in current and future earnings growth. The return on equity of 22% is a further confirmation of our success. And on that note, I hand over to you, Christian. Christian Hermelingmeier: Yes. Thank you, Clemens, and good morning, everyone, also from my side. So on the next slide, our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance. The top line growth in the first 9 months is marked by the refinement in our accounting, resulting in a one-off effect when comparing the 2025 revenue to the previous year. Excluding this base effect, the FX adjusted reinsurance revenue would have increased by 9.5%, clearly supporting the target achievement. Importantly, there is no impact on earnings due to corresponding effects in the service expenses. Furthermore, the accounting impact on reported growth should decline in the fourth quarter. In the third quarter, the NDIC refinement continued to have an impact. Additionally, the timing of bookings for some larger treaties had an impact on the reported Q3 revenue. In this respect, we expect some catch-up effects in the fourth quarter. The combined ratio of 86% is well within the target range below 88%. The impact from large losses was EUR 459 million below budget, which has nevertheless been booked in full as usual. The unused budget should be sufficient to cover the expected losses from Hurricane Melissa, meaning that full Q4 budget is available for other losses in the fourth quarter. As Clemens explained, the underlying profitability was even stronger in light of the additional balance sheet strengthening with an increase in reserve prudency. However, we have added less to the reserve resiliency in Q3 compared to the previous quarters and have instead decided to use the better-than-planned result for active loss realization in our investment portfolio. The reason is that we feel very comfortable with the current level of reserves and saw a good opportunity to lock in higher interest rates to improve the contribution from investments in the years to come. Finally, the combined ratio includes a discount effect of around 9.5%. As usual, the increase in prudency for our reserves is biased towards long tail lines with a higher level of discounting. Overall, the discount effect is still higher than the interest accretion in the reinsurance finance result, but we continue to be very prudent on the reserving side as an offset. The investment result reflects an increased ordinary income and the loss realization for fixed income of around EUR 320 million. The currency result was significantly positive at EUR 219 million, driven by the weakening of the U.S. dollar over the course of the first half year. The main contributor to the P&C service result is the CSM release, reflecting the recent renewals in a very attractive market environment. As in 2024, the CSM release includes smaller catch-up effects due to a prudent release in previous periods. The experience variance includes our prudent reserving on the business earned from current underwriting years. The run-off result has been positive in most regions and lines of business. But as explained, we have used the strong underlying profitability and the overall strong result situation to add additional prudency to our reserves. This is the main reason why we are reporting a negative run-off result of minus EUR 465 million. Apart from this, the runoff result also includes our updated view on the Russia-Ukraine aviation loss and the moderate increase in the best estimate for some pockets of U.S. liability business. The loss component from new business is quite low, confirming the attractive rate environment in P&C reinsurance. The CSM growth of 7% reflects the favorable market environment and our success in the renewal period in 2025, resulting in a strong new business CSM of EUR 2.6 billion. On the next slide, in Life & Health, reinsurance revenue increased by 2.2% adjusted for FX. The revenue increased in Financial Solutions and longevity. In traditional business, revenue moderately decreased mainly in Greater China. The result for the 9 months of 2025 is based on favorable underlying profitability. Furthermore, the experience variance was positive in all reporting categories. Assumption updates for onerous business and a more cautious position with regards to our morbidity business had a negative impact in the reporting period. Altogether, the reinsurance service result of EUR 671 million is fully in line with our full year target. The investment result reflects a good ordinary income from fixed income and the negative impact of an equity participation of around EUR 30 million in the third quarter. Altogether, the EBIT contribution from our Life & Health business group was EUR 645 million. On the next slide, looking at the IFRS components of the service result, the CSM release is the main profit driver and within the expected range. The same is true for release and risk adjustment. The experience variance is clearly positive based on a diversified contribution by line of business. The main drivers for the loss component are assumption changes for onerous business and morbidity. This is particularly driven by the critical illness business in Greater China, where we have updated our assumptions and took a more cautious positioning, reflected in an increase in the risk adjustment. As Claude highlighted at our recent Investors Day, one should focus here on a more holistic and economic view on assumption changes and experience variance. Adding up the positive assumption changes in the CSM and the change in loss component as well as the experience variance, the total deviation from initial assumptions of our diversified portfolio is positive year-to-date. The CSM development on the right side is clearly impacted by currency effects. The CSM generation, which includes the new business CSM and extensions on existing contracts, amounted to a favorable EUR 585 million based on a diversified contribution from financial solutions and our traditional business. Changes in estimates are driven by updated assumptions for our longevity business. Altogether, the total CSM would have increased by 5.2%, excluding the currency effects, nicely ahead of our 2% target. On the next slide, the development of our investments was very satisfactory. The ordinary investment income reflects the continued rollover in a higher yield environment and a strong operating cash flow. Inflation-linked bonds contributed EUR 110 million. Additionally, the contribution from alternatives was very solid. And as explained, we have used the overall result situation to accelerate the realization of losses in our fixed income book in the third quarter. In total, we are looking at the realized fixed income loss of EUR 324 million for the first 9 months. The corresponding higher locked-in interest rates will support a further increase in investment income in the coming years, and the lower level of unrealized losses will increase the flexibility for our asset managers, both helpful in the overall trading environment. The impact from the change in ECL and the fair value of financial instruments remained moderate. All in all, the return on investments of 2.8% is deliberately steered below the initial 3.2% target due to the realization of losses in our fixed income portfolio. So no concern at all as the main group target for 2025, the net income is not only maintained, but has even been increased, including an adjusted lower target for the ROI. At this point, I would like to point out that depending on the business development in the fourth quarter, I would not rule out further opportunistic steps with an eye on the remaining level of unrealized fixed income losses of more than EUR 2 billion on our balance sheet shown at the bottom of the slide. Apart from the strong movement in fixed income, you can see that the unrealized gains within the OCI have changed materially in the category others. This reflects the sale of our stake in Viridium, concluding a highly successful financial investment for Hannover Re. To conclude my remarks, the business performance in the first half of the year was very satisfactory. The positive impact from currency and tax has been used to further strengthen our balance sheet and improve future investment returns. We are well positioned to deliver on our increased target for 2025. And on that note, I'll hand back to you, Clemens, for the comments on the outlook. Clemens Jungsthofel: Thank you, Christian. So despite the significant increase in reserve prudency and the realization of fixed income losses, the reported group net income of close to EUR 2 billion after 9 months is running nicely ahead of our plan. Consequently, we have increased the target to EUR 2.6 billion. The new target assumes a full realization or full utilization of our large loss budget at year-end. As of today, we do have significant budget available to cover potential losses in the remainder of the year. In case not all of this is used by year-end, this might provide the option to continue realizing some fixed income losses and additional flexibility for the assumption setting in our annual reserve review. These comments also need to be considered looking at the updated target for the combined ratio, which is expected to come in below 87% and the ROI target, of course, of around 2.9%. The expectation for the Life & Health service result remains unchanged. And as explained, the FX adjusted growth in P&C revenue is influenced by the refinement in the NDIC calculation. Excluding this effect, the 7% target remains unchanged. And again, this effect does not have any impact on earnings, hence, no reason for any concern here. Altogether, we are confident that we will achieve a net income of EUR 2.6 billion, higher than initially anticipated for the year. Furthermore, I'd say there are probably more upside risks than downside risks for the delivery on our guidance, potentially also providing options to further improve the basis for future earnings growth. So future earnings growth brings us directly to the guidance for the financial year 2026. The new group net income target for 2026 is at least EUR 2.7 billion. This is an increase of 12.5% compared to the initial guidance for 2025. So you can see this as a strong commitment to continued earnings growth also in a slightly more challenging market environment. Looking at the underlying drivers, we expect further growth. Our P&C business, excluding structured reinsurance, is expected to grow in the mid-single-digit percentage range. The reason why we have excluded structured reinsurance here in our guidance is the transactional character of the business. So individual treaties can be a bit bulky. And for 2026, we have an indication for some reductions in session rates on the one hand. And we do continue to see a strong pipeline for new business on the other hand. The combined effect is not easy to predict, and hence, we have decided to exclude this part of our activities from our top line guidance. All in all, it is possible that the revenue development in structured reinsurance might be less dynamic in 2026 than the average of previous years. The combined ratio target for the total P&C business is below 87%. This is an improvement compared to the below 88% target for this year despite the expectation of some softening of rates in the underwriting year 2026. One reason for this is the discount effect, which is expected to be around 9% to 10% in 2026. This is rather stable compared to this year, but higher than initially expected for 2025, so providing some uplift compared to the previous target. Furthermore, the pricing environment is expected to remain on an attractive level overall. So this means that the quality and the profitability of our portfolio will remain strong. As explained earlier, our underlying combined ratio is running well ahead of our target in 2025. This means that also the new target of below 87% does leave room for some pricing pressure, not only in 2026, but also going forward. With regards to our reserving, we feel very comfortable with the overall confidence level of our reserves. The option of adding less to reserve prudency compared to previous years adds further confidence in the ability to deliver on our target. Based on the successful new business generation in 2025 and a healthy pipeline looking forward, we anticipate an increase in reinsurance service result to around EUR 925 million in Life & Health reinsurance. The assumed CSM and risk adjustment release remains unchanged compared to this year at around 11% to 13% for the CSM and 6% to 8% for the risk adjustment. Furthermore, our strategic midterm target for the CSM growth of around 2% remains valid. The return on investment is expected to reach around 3.5%. So altogether, the new guidance highlights Hannover Re's successful and lean business model, our ability to grow and our very strong balance sheet. So this concludes my remarks, and we would be happy to answer your questions. Operator: [Operator Instructions] The first question comes from the line of Shanti Kang from Bank of America, Merrill Lynch. Shanti Kang: So the first one was just on the Q3 model refinements that you made in P&C. Could you just give us some color on what was driving those for this quarter? And then my second question is just going into the renewal period in January, what you're sort of expecting from conditions there? And then my last question is just on the guide for 2026 of that less than 87% combined ratio, and that's got the higher discount rate between 9% and 10%, as you mentioned. What's really driving that assumption? Has the duration of the book changed? Or are you assuming continued long-tail reserve releases? I'd expect that to come down with rates. So any color there would be helpful. Christian Hermelingmeier: Yes, thanks for the question. So I'll take the first one, the Q3 model refinement in the P&C book that relates to the risk adjustment. So there have been some seldom combinations of contracts where the risk adjustment just by the methodology that is applied in the data was larger than the expected losses and the cash flow for the losses. And so we refined that in capping the risk adjustment to the maximum amount of the lost cash flow, so to erase the outliers that we figured out we have here and there in the book. That's basically everything. So no reference to the underlying business itself. Sven Althoff: And when it comes to the renewals, Shanti, I mean, as we said on previous occasions, we are expecting a broadly similar market momentum compared to what we have seen in 2025. We have not seen too many firm order terms from the renewals yet. So there are too few data points to give you an update on that expectations. So from that point of view, we are still expecting similar momentum, as I said, which would be mostly on price and stable on retention levels and terms and conditions. Clemens Jungsthofel: Shanti, it's Clemens here. So on the last one, on the underlying drivers for the 87% combined ratio guidance for 2026, a couple of points here. One is the discount rate, as you mentioned, but there are a couple of other drivers that have led us to go for a slightly lower combined ratio. One is that we -- and it's not that we expect portfolio composition. So we do expect growth rather on a diversified basis also as we go into 2026. It's a reflection on that, we still believe that the quality and the profitability of our portfolio will remain strong even if there is more pricing pressure as we go into 2026. So it's also not led to the fact that we have changed or will change our reserving approach. The prudent reserving approach is unchanged. However, just adding a bit less to the overall confidence level will already have an impact on our -- on the combined ratio. So overall, this is basically a reflection also of the fact that we have seen that the underlying combined ratio was strong in '25, and that has led us to that decision. Operator: The next question comes from the line of Andrew Baker from Goldman Sachs. Andrew Baker: First one, sorry, just to go back to the combined ratio target for '26. I guess, if I look at the '25 original guidance, sort of the less than 88%, you add back in the discounting of 6% to 7%, you get to sort of less than 94% to 95% undiscounted. And my understanding was, and correct me if I'm wrong here, this was sort of a through-the-cycle assumption. And then if I look at the updated guidance, so the less than 87%, you add back in the 9 to 10 points for the discounting, you're sort of less than 96%, 97%. So I guess a couple of points deterioration on the undiscounted. I hear what you're saying in terms of some of that pricing. But I guess I thought that was in the original target. So maybe just help me think through or should I be thinking about that undiscounted combined ratio or not? And then I guess, as you're looking at the 9% to 10% discounting for next year, is this still in excess of the [ iffy ]? And if so, should we expect sort of further prudent building within the less than 87% for next year? Clemens Jungsthofel: Andrew, just briefly, I'll start and then probably Christian can also complement. And that is, in fact, the discount and the, let's say, the management of the volatility of the discount, which we have done in the past, also have a compensating effect. So that had an impact on our underlying combined ratio last year. As you know, we -- it was a tailwind when you compare the discount impact versus the unwind of that discount. And we have also -- we've always taken the approach to not take advantage of that tailwind, but increase our loss assumptions in roughly in the sort of size of that delta. That has also fed into our 2026 combined ratio assumptions. So there is -- and I'm just looking at Christian, there is still expected to be a slight tailwind. So therefore, that will also have an impact on the combined ratio in our assumptions. So there is a smoothing impact overall if we look at the combined ratio. Christian Hermelingmeier: Yes, Andrew, and I can absolutely confirm this view going forward. So as Clemens also briefly mentioned, we think with our combined ratio guidance more over the cycle and midterm, so this has not changed here. So this is no short-term impact from changing interest rates. This is really just the overall balance of profitability and the positive impact that we currently still see. We are in 2025, around 2% of this tailwind. This is well covered by our very prudent and conservative reserving. Operator: We now have a question from the line of Kamran Hossain from JPMorgan. Kamran Hossain: Two questions. The first one is just on the decision-making process around some of the financial steering in the quarter. I hear what you're saying on taking -- adding a little bit less prudence into the reserves and doing more on kind of realizing losses and therefore, allowing the fixed income to, I guess, returns to pick up going forward. What's the decision-making behind that? Was there really -- is it an either/or? Could you do kind of more -- could you have done more reserving and less realized losses? Or is this a sign that you're reaching the top of what might be like an acceptable level of prudence in your reserves to auditors so you can't really add that much more, so you're choosing to do other things. The second question is just on the guidance on the [ HA ]. This is not a complaint at all. I can't remember in all my years when you've guided above consensus, so clearly very positive. But why now? You talked about -- over the course of the last couple of years, you talked about keeping the combined ratio stable. I think earlier in the year, we heard it might have been 88% for the medium term, and now it's moving to 87%. Just trying to understand kind of why now. And is the 87% now the medium-term guidance of it's not going to get worse than that for the medium term? Christian Hermelingmeier: Yes. Thank you, Kamran. Christian here. I'll take the first one. So you asked for the decision-making process, and there is no fixed rule. There is no automatism and there's also no either/or. So we have to assess the business, look at the development, and we can pronounce one measure over the other or we could balance both, and I would explicitly not rule that out for the future. So here, as we are already at a quite comfortable reserving level for our P&C business, we decided to focus more and act a bit opportunistically to lock in the higher interest rates. But this is -- and I want to emphasize this, there is no sign at all that we reach the maximum level of reserves or something like this. So there is still room to continue with our very prudent reserving approach also in the future, and we will see how this is used also for the rest of the year. Clemens Jungsthofel: Kamran, just on the overall guidance for 2026 and to add a bit of color here. So you should still see this guidance, the way we come up with the overall guidance has not changed at all compared to previous years. So you should still see this guidance in light of having built in some resilience, some level of prudency into that overall guidance also for 2026. I think this is a reflection of a strong underlying result, both coming [indiscernible] and Life & Health. It has allowed us, particularly in the third quarter, as you would have noticed come to realize some losses on the fixed income side, as you said, that will, of course, come through over the next 1 or 2, 3 years. So given the duration of the portfolio, we will see some of that increased run rate in our fixed income portfolio already into next year. So that has driven a bit our overall guidance for 2026. On the combined ratio, in particular, this is also a reflection of that we've seen a strong underlying combined ratio this year. Then we have the discount impact again, which is smoothened to some extent by way of not taking full advantage. And overall, we wanted to bring it, in fact, to a more realistic combined ratio. Still no change in prudency when it comes to our reserving approach, but we do this consider as a more stable combined ratio, a consistent combined ratio also over the midterm. So through the cycle, that's how you can read it. Operator: The next question comes from the line of Chris Hartwell from Autonomous Research. Chris Hartwell: Just a couple of quick questions. First one is on the Life side. New business appeared quite strong in the quarter. Just wondering if you could give a little bit more color on that. And secondly, probably a little bit of an extension to the previous question from Kamran. You commented that the target for 2025 is not a reflection of the loss benefit so far. And I guess I was a bit intrigued by your comment around more upside risk than downside for forward earnings guidance, particularly given, I guess, the historical nature of finding either realized losses or prudence or so on. So I was just again wondering on your sort of thought process if Q4 does or doesn't throw up anything particularly exciting on the loss front? And if I can have a sort of part B on that second one. You also sort of commented about Melissa being sort of contained within budget. But given how much budget you have still available from the first 9 months, that seems to put a number in the range of like 0 to almost EUR 500 million. So I was wondering if you can give a little bit more color on your Melissa exposure. Claude Chevre: Yes. Maybe let me -- it's Claude here. Let me start with the Life & Health question on the new business. This is really, as Christian already alluded to, it's the result of one -- mainly the result of one bigger transaction that we have written in Q3. And as you know, the new business CSM Life & Health is transactional, and this is really depending on some bigger transactions. This is the case here in Q3. Clemens Jungsthofel: Chris, on the guidance for 2025. So if we were observing another benign fourth quarter, mentioned there's still quite some budget left for the fourth quarter. So if that would be the case, as Christian said, I think there are mainly 2 things that we will consider at year-end. One is, of course, further realization acceleration of fixed income unrealized losses, which will support future earnings growth. Second, we do feel comfortable with our reserve level now. I think we significantly built reserve resiliency over the last couple of years, but there's still some room to increase those further. At the same time, I wouldn't fully rule out that some of that potential tailwind that we might see touch wood on Q4 would also have an impact on the P&L. But again, that's something to consider late in the year. Sven Althoff: Yes. And then on Melissa, Chris, it's Sven, I don't have a number for you yet. It's still early days. So we are still gathering all the information. But to narrow the range a little bit for you, if you look at the EUR 450 million unutilized budget for Q3, we are not expecting Melissa to use all of this EUR 450 million. On the other hand, we expect this to be a 3-digit loss for our share. And Jamaica, from a territory point of view, is where we have a slightly above average market share. So I hope that gives you a little bit of color, but we don't expect that the EUR 450 million unutilized budget is fully used for Melissa. Operator: We now have a question from the line of Darius Satkauskas from KBW. Darius Satkauskas: Can you tell us what was the market impact in the quarter in your Solvency II ratio? And then the second question is, I know you sort of carried the reserves in Life & Health as best estimate. But obviously, you're quite conservative in your assumptions. So I'm just wondering how much of the new business loss component impact in Life & Health would you attribute to building prudence in regards to China morbidity and what was needed due to the underlying trends? Christian Hermelingmeier: Darius, Christian, I'll take the first one. On Solvency, if I got you right, you asked for the impact of the -- market impact on the Solvency ratio. And there, I can say that the impact of risk-free rate and spreads together were rather neutral. Claude Chevre: And this brings us to your question on the Life & Health loss component. I mean the new business loss component, as we said, is very small. It's just about EUR 10 million. And the rest of the loss component that you were referring to the Chinese morbidity business, Greater China morbidity business is approximately 50% of this is coming from the Chinese morbidity business. Darius Satkauskas: So my question is more, should we see it as sort of reserve strengthening? Or is there an element of prudence in that number? And how much... Claude Chevre: Sorry, I got you. No, it's really an element of prudence. We did it via the risk adjustment. So it is pure prudency. Operator: The next question comes from the line of Iain Pearce from BNP Paribas. Iain Pearce: The first one was just on the insurance revenue in P&C. Obviously, that was quite a big miss. But if you could just give us a walk so we can understand sort of the different contributing factors because how much was NDIC, how much FX and how much was due to some large contract impacts that I think you flagged? And also, can you give us some guidance for how much NDIC impact you would expect in Q4? And if there's any expected to roll into Q1, Q2 next year as well? And then the second one was just on the discounting benefit, obviously slightly higher discounting benefits for next year. Could you just explain sort of why you're expecting that given where interest rates are? And then the third one, just on the tax rate in the quarter, that was obviously very low. Could you just give us a bit of an expectation as to what drove that and if anything to go forward to think about with tax rates? Christian Hermelingmeier: Okay. Iain, I'll take the 3 questions here. So first, on the insurance revenue in P&C, just to give you the walk again. So we had an FX impact of roughly 2%, and the NDIC impact was year-to-date around 7.5%. And I mean, you can do the math yourself, I know, but it's roughly EUR 1 billion of impact. And I would expect that we see not the same amount for the fourth quarter. It will go down substantially. And for Q1 and Q2 the next year, I would virtually expect that it's just -- yes, not substantial or relevant anymore. And the last impact that I mentioned was the timing of booking of some larger contracts. And this is an amount of a bit more than EUR 100 million, so 0.5 impact on the gross rate in P&C. The next question was regarding the discount rate. And here, yes, you referred to the capital markets and where rates currently are. But here, you have to see that we are talking about the earn-through of the interest rate. So we look not just at the very current renewals, but we look at more or less 2 to 3 underwriting years that we see here in the earnings pattern. And so we still see some catch-up for the interest rate environment. The last question referred to the high -- or the low tax rate, so a high one-off impact here. And this is the coming reform of the German corporate income tax. So to remind you all, starting in 2028, the corporate income tax in Germany will be lowered by 1 percentage point each year for consecutive 5 years. And this is the reason why we could release a substantial amount from our deferred tax liability that we carry under IFRS. And so this is a bit more than 8 percentage point positive one-off impact. And yes, as I said, it's a one-off. Operator: The next question comes from the line of Vinit Malhotra from Mediobanca. Vinit Malhotra: Some hopefully, 3 quick ones, sorry. In the combined ratio, I'm just curious, the slightly lower prudence in 3Q, where obviously, 3Q was also as, let's say, good a quarter as 2Q. And maybe it's a little bit of a follow-up here. But you said, obviously, you had no compulsion, no restrictions on reserving and prudence. And I'm just curious, was there any reason that you kept the prudence a bit lower in Q3? So that's the first question. Second question is on the top line for next year. I mean, from your comments about structured, which I understand is hard to predict. But if you could just comment what's changing in that area? Why is it that -- why do you think that this is becoming a little bit of a may be a headwind even to the growth, if my understanding of your comment is correct. And lastly, this kind of step-up in realizing bond losses, I think in the CMD or Investor Day of last month, we talked about maybe 10 basis points of pickup in yield. With these measures, could we expect that to kind of go up a little bit because that's hopefully the motivation behind that? Christian Hermelingmeier: Yes. Thank you, Vinit, for your questions. And I'll comment on the first one. So you asked for the lower prudency reserves in Q3 stand-alone. And I can see there are no restrictions that drove our decision here. But I would look more for the full 9 months of the year. And as you know, this already increased our resiliency in the reserves substantially. So from the overall view, it was a good opportunity to now shift a bit more to focusing on the investment side and use opportunistically the realization of hidden losses to increase the resiliency here and fuel a bit the future earnings by that measure. And maybe I directly jump to the third one and take that also. So as you said, and I elaborated on that on the Investors Day, we expect just from the rollover from our investment book, roughly 10 basis points increased running yield each year going forward. And you are completely right with your assumption by the over EUR 300 million of realizations we did in the 3 months. This will give another upside of around 7 to 8 basis points would be my rough guess. And this is already also reflected in the new guidance on the ROI. We started in 2025 with a guidance of 3.2%, and now we face 3.5% for 2026. And one of the drivers here is exactly the realization of losses. Sven Althoff: Yes, Vinit, and then on the structured side, and please keep in mind, the guidance we have given is for '26 only. It's not an over-the-cycle statement we are making on the structured side. But I mean, some of the buying when it comes to risk remote reinsurance can be transitional. So when we have looked at the guidance for next year, we had a few clients telling us that they will reduce their sessions. That does not necessarily mean that our market share will reduce more the opposite, very often in a situation where a client is reducing the session, our signed line is protected better compared to the average. But nonetheless, given reduced sessions, we have a little bit of a headwind. On the other hand, we can say that the demand for structured products is still strong. So we have a very good pipeline. We have already closed a few transactions, but as part of the pipeline, there are still quite a number of deals where the negotiations are not such that we can say with 100% confidence that we will close the transaction. And therefore, given the bulkiness of the business, to be on the cautious side, we have decided to let you know that the guidance is for the traditional business only, and that we have to wait and see the outcome on the structural side of things. Operator: The next question comes from the line of Will Hardcastle from UBS. William Hardcastle: The first one is coming back, I'm afraid, on the uplift in discount rate, 3 percentage points year-on-year. It's a really large uplift. I appreciate you said to Iain's question, it's a 3-year rolling on locked-in rates. Is there anything else underneath that's caused that? It seems like a huge jump. The second one is it's really tough to unpick the combined ratio guide year-on-year. I guess you're saying it's more of a cross-cycle guide almost. Is that right? And you're willing to say -- are you willing to say essentially that you'd be operating better than that cross cycle underneath the bonnet at the moment and for 2026? I'm just trying to work it out because you've improved at 1 point. There's 3 points more discounting benefit. You're suggesting that reserving prudency won't need to be as much additions either. So you might have something like 5 points of improvement year-on-year just from those things. So I'm trying to back out essentially what's the year-on-year deterioration that you're assuming in it from an underlying level. Are you able to help us out on that? Christian Hermelingmeier: Yes. Thanks, Will. And let me start looking at the discount again, and that's absolutely true. That's a substantial move if we just compare the numbers. But as I said, there are different elements here driving this. And one is the earn through we see here, I already mentioned from the different up to 3 underwriting years. And of course, we also see the reserve increases and the reserve actions here. So as we added and not just expect this for 2025 and the numbers on reserve and prudency buildup also for 2024, this is predominantly done in the long tail and very long tail lines as there is also the most substantial portion of the reserves. And of course, this also drives the duration of the overall portfolio a bit and gives another increase a bit like self-feeding on the discount increase. So it's not the one driver. It's really a composition of that. And last, I would also mention that as we now have quite some experience on IFRS 17 and IFRS 9, I think we are also bit more confident in doing forecasts and trying to utilize our models and our predictions with the methodology here. Clemens Jungsthofel: Will, and on the combined ratio, yes, as you mentioned, it is a mix of certain factors that are all meant together when we looked at it to bring us, in fact, to a running combined ratio, a guided combined ratio that is to be viewed over the cycle, really midterm to bring us to a more stable number. Again, one of the driving factors is the discount rate, yes, but also potential pricing and rate movements as we go into 2026. So it's also a reflection on the quality diversification of the book, of course. So hence, the underlying combined ratio has been very strong in 2025. So you should also see this combined ratio being, again, a bit more realistic. However, it gives also room for pricing dynamics as we go into 2026 or even beyond that. William Hardcastle: So I guess just to verify on that, do you think 2026 is likely a better than cross cycle, all else equal? Clemens Jungsthofel: On the combined ratio, you mean or? William Hardcastle: Yes, on that versus 87%. Clemens Jungsthofel: Yes. I mean the underlying combined ratio is expected to be below the 87%, of course. But again, it allows for some prudency depending on how the renewal goes, how the pricing environment will change. Operator: We now have a question from the line of Roland Pfaender from ODDO BHF. Roland Pfänder: Two questions on Life side, please. You had quite solid results on the Life new business in this quarter. Could you talk a little bit about the composition? Was it more mortality, longevity or financial solutions in the end? Then secondly, reinsurance service result, you added EUR 50 million towards '26 in your guidance. Is this entirely fueled by a better loss component? And maybe you could elaborate a little bit about your expectations regarding loss component going into next year? Claude Chevre: Yes. Thank you very much. It's Claude talking. So you talk about the new business CSM and in particular about Q3, I guess. Again, I said it before already, it's driven by one larger transaction, and this transaction is coming from the financial solutions business. So that's the question to your first -- the answer to the first question. Then afterwards, the increased reinsurance services of EUR 50 million is mainly driven by the increase of our business in general. As I told you probably in the Investors Day, I don't know whether you were there, with the size of our portfolio, you always have to expect some loss component, additional loss component, the same as you can expect some experience variances and changes in estimates. We have obviously included some prudency in this figure that we have shown there, but still it's coming really out of the growth of the Life & Health business. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks. Clemens Jungsthofel: Yes. Thank you very much for your interest this morning. Just to reiterate, I guess, overall, the new guidance highlights Hannover Re's successful and lean business model. That lean business model will support further efficient growth in the future, together with our strong -- very strong balance sheet, I'd say, that will allow us to grow our earnings throughout the cycle. And together with these capital returns, this will sustainably create value for our shareholders. And with that, thank you again, and speak soon.
Unknown Executive: [Audio Gap] Huya's press release contains a reconciliation of the unaudited non-GAAP measures to the unaudited most directly comparable GAAP measures. With that, I'm pleased to turn the call over to our Co-CEO and SVP, Mr. Huang. Please go ahead. Junhong Huang: Okay. Hello, everyone. Thank you for joining our earnings conference today. I'm pleased to report a solid third quarter. Total net revenues reached approximately RMB 1.7 billion, the highest level yet in the past 9 quarters with year-over-year growth accelerating to around 10%. Non-GAAP operating profit was approximately RMB 6.3 million, representing a meaningful improvement over the same period last year. This encouraging performance was mainly driven by strong growth in game-related services, advertising and other revenues, while our live streaming revenues remained stable. Revenues from game-related service, advertising and others have now surpassed 30% of total net revenues of the first time this quarter. Our platform ecosystem and user base remained resilient in the third quarter, with total MAUs stable at around 162 million. The influence of our [ streamer ] ecosystem continues to expand as more top streamers are returning to Huya. And many of our streamers are also gaining recognition across other platforms, including WeChat channels, Douyin and [ Beiyang ]. Across all major competitive titles, including Honor of Kings, League of Legends, Delta Force and Peacekeeper Elite, our top-tier streamers consistently rank among the leading creators in their respective categories, in addition to our own products and app. We estimate through our top creators, we are able to reach over 100 million users across other platforms, expanding our audience influence and monetization opportunities across the wider gaming and streaming landscape. This impact is reflected in our third quarter performance, where our game-related service, advertising and other segment grew 30% year-over-year, reaching RMB 532 million in revenue. Within this segment, in-game item sales have become a significant growth driver as we deepen our collaboration with game developers, expand our SKU offerings and leverage the increasing synergy between our live streaming and gaming ecosystems. In-game item sales revenue grew by more than 200% year-over-year in the third quarter. Partnerships with flagship titles in both China and abroad, including Peacekeeper Elite, League of Legends, Arena Breakout and PUBG Mobile delivered short-lived results. Looking ahead, we are confident that in-game item sales will maintain robust growth momentum as we continue to broaden partnerships and enhance operations. In terms of game publishing, we are thrilled to announce the upcoming launch of our first title, Goose Goose Duck Mobile, a social deduction game centered on teamwork and strategic game play. The game has gone through its second round of testing throughout October with preregistration quickly surpassing 10 million during that period, leveraging our powerful streamer influence and stronger content-driven marketing capabilities. In October, we created a live streaming variety show, [ A SIKA ZIYE ], which brought together top streamers from -- for a group gaming session. The show attracted strong player engagement and brought market attention. We view Goose Goose Duck Mobile as a key step in our strategy to diversify into game publishing, an important milestone that will not only validate our publishing capabilities, but also position us for sustainable growth in this space. As we continue to step up for our efforts in key areas, including in-game item sales, game publishing, advertising, we believe this segment will remain a sustainable driver of our revenue growth. Let's move on to live streaming, where revenues increased by about 3% year-over-year, making our first quarter of positive year-over-year growth since the third quarter of 2021. Our content mix has become more balanced and vibrant with the outdoor live streaming category delivering solid gains in both viewing hours and monetization this quarter. At the same time, we continue to enhance both our mobile and PC platform to ensure users enjoy a truly best-in-class live streaming and e-sports experience. Our latest update introduced a new short-form video hub and interactive 3D game map tool of Delta Force and other cool features. The short-form video hub enables users to conveniently discover short clips from live streams directly within the Huya Live app, enhancing our content ecosystem and driving a notable increase in short video daily active users and time spent. Meanwhile, the Delta Force map tool provide rich immersive 3D environment for Delta Force players to quickly get familiar and better navigate the game, attracting more hard-core players to our platform. E-sport live streaming remains a crucial part of our content offering. We streamed nearly 100 licensed tournament and hosted around 40 self-produced events in the third quarter of 2025 during the recently concluded League of Legends World Championship, one of the most watched licensed e-sports events in China. We have remained the top live streaming platform in terms of average concurrent users. Building on our fan base, we hosted the 2025 League of Legends Asia Invitational, the first ever LOL international professional tournament produced by a live streaming platform. This event was an important milestone for us, attracting massive viewership outside of China and significantly enhancing our international brand recognition. We are also excited to announce that we will be hosting the Demacia Cup for League of Legends later this year. Again, we are privileged to be the first live streaming platform ever to be hosting this flagship official event for this game. Additionally, we have a strong lineup of other highly anticipated e-sports tournament that we will be hosting, including the Delta Force Diamond Champions autumn season following the success we had in the summer. On the international expansion front, our user base continued to grow steadily during the quarter through our overseas platforms. We are deepening our presence in key geographic market by focusing on user experience and the content ecosystem to enhance engagement and retention. We have also built closer partnership with popular game partners and diversified monetization strategy, driving sustainable growth and improving profitability. To sum up, we made solid progress expanding our content ecosystem, unlocked new monetization opportunities and advanced our emerging business models in a disciplined and sustainable manner. Looking ahead, we will remain focused on long-term development, deepening collaboration with partners, improving monetization efficiency and product experience, strengthening our content and technology capabilities and steadily expanding internationally to deliver sustainable, high-quality growth. With that, I will now turn the call over to our Acting Co-CEO and CFO, Raymond Lei. He will share more details on our results. Raymond, please go ahead. Lei Peng: Thank you, Vincent, and hello, everyone. I'll start with an overview of our financial performance. Our total net revenues for the third quarter reached approximately RMB 1.69 billion, increasing 10% year-over-year. Of this, live streaming revenues has resumed growth at 3% year-over-year to RMB 1.16 billion and game-related services, advertising and other revenues grew around 30% year-over-year to RMB 532 million, accounting for 31.5% of total net revenues. We also achieved a non-GAAP operating income of RMB 6.3 million, another quarter of solid improvement since we first broke even at operating level last quarter. Furthermore, we still achieved a positive net income for the quarter with non-GAAP net income of RMB 36 million despite a substantial decrease in interest income compared with previous periods, primarily due to special dividends paid out. Let's move on to more details of our Q3 financial results. Live streaming revenues were RMB 1.16 billion for Q3, up 3% from the same period last year, primarily due to the improvement of average spending per paying user for live streaming services. The number of the domestic paying users remained stable at 4.4 million in the third quarter. This figure excludes users who made in-game purchases through our game distribution business but didn't pay via our platform or related services as well as overseas paying users. Game-related services, advertising and other revenues were RMB 532 million for Q3, up 30% from the same period last year. The increase was primarily due to higher revenues from game-related services and advertising, which were mainly attributable to our deepened cooperation with game companies in China and abroad. Cost of revenues increased by 10% to RMB 1.46 billion for Q3, primarily due to increased revenue sharing fees and content costs as well as cost of in-game items. Within this, revenue sharing fees and content costs rose by 8% year-over-year to RMB 1.26 billion, reflecting growth in our top line. Gross profit was RMB 227 million for Q3, up 11% from the same period last year. Gross margin was 13.4% for Q3, also an improvement from 13.2% from the same period last year. Excluding share-based compensation expenses, non-GAAP gross profit was RMB 228 million and the non-GAAP gross margin was 30.5% for Q3. Research and development expenses decreased by 3% year-over-year to RMB 122 million for Q3, primarily due to decreased staff costs as a result of enhanced efficiency. Sales and marketing expenses decreased by 4% year-over-year to RMB 70 million for Q3, primarily due to decreased channel promotion fees. General and administrative expenses increased by 15% year-over-year to RMB 58 million for Q3, primarily due to increased professional service fees and staff costs. Other income was RMB 9 million for Q3 compared with RMB 13 million for the same period last year, primarily due to lower government subsidies. As a result, operating loss narrowed significantly to RMB 14 million for Q3 compared with a loss of RMB 32 million for the same period last year. Excluding share-based compensation expenses and amortization of intangible assets from business acquisitions, non-GAAP operating income reached RMB 6 million for Q3, a meaningful improvement from non-GAAP operating loss of RMB 13 million in the same period last year. Interest income was RMB 35 million for Q3, reduced from RMB 97 million for the same period last year, primarily due to a lower time deposit balance as a result of the special cash dividends paid. Net income attributable to HUYA Inc. was RMB 10 million for Q3 compared with RMB 24 million for the same period last year. Excluding share-based compensation expenses, gain arising from disposal of an equity investment, net of income taxes, impairment loss of investments and amortization of intangible assets from business acquisitions, net of income taxes, non-GAAP net income attributable to HUYA Inc. was RMB 36 million for Q3 compared with RMB 78 million for the same period last year. The decrease was mainly due to the lower interest income as explained earlier. Diluted net income per ADS was approximately RMB 0.04 for Q3. Non-GAAP diluted net income per ADS was RMB 0.60 for Q3. As of September 30, 2025, the company had cash and cash equivalents, short-term deposits and long-term deposits of RMB 3.83 billion compared with RMB 3.77 billion as of June 30, 2025. With that, I'd like to open the call to your questions. Unknown Executive: [Operator Instructions] Today's first question comes from Rebecca Xu from Morgan Stanley. Rebecca Xu: [Foreign Language] My question is regarding the in-game item sales business. Could you please share some color on the updates from the past quarter as well as the future outlook for this segment? Junhong Huang: [Interpreted] This quarter, in-game item sales continued to scale rapidly, supported by our strong live streaming ecosystem and deeper partnerships with flagship titles, including Honor of Kings, Peacekeeper Elite, League of Legends, Arena Breakout and PUBG Mobile. With broader SKU offerings and more engaging in-game events, in-game item sales revenue grew over 200% year-over-year in the third quarter, giving our users a much wider and more compelling selection on our platform. So looking ahead, our focus is threefold. Number one is to further enrich item categories in existing titles. And secondly, to expand into additional game partnerships to diversify our portfolio. And third one is to improve our storefront and merchandising systems, enhancing overall purchase experience, making it easier for our users to discover and buy our items. As collaboration expands and our operating model continues to mature, we expect in-game item sales to deliver sustainable, healthy and high-quality growth. Unknown Executive: And our next questions come from Maggie Ye from CLSA. Yifan Ye: This is regarding company's overall revenue growth. Firstly, live stream revenue has resumed positive year-over-year growth this quarter. So could you share your views on the segment growth going forward? And secondly, for the non-live stream business, which now accounting for over 30% of total revenue, what is your expectation on this segment future growth going forward? And what will be the primary growth driver? Lei Peng: [Interpreted] So we saw promising performance from both our live streaming business and our game-related services. Live streaming revenue has returned to growth for the first time since Q3 2021. Our game-related services, advertising and other revenues, on the other hand, grew 30% year-over-year to RMB 530 million, now accounting for over 31.5% of the total net revenues. The growth was driven in large part by very strong in-game item sales this quarter. So we expect live streaming revenues to remain stable into the fourth quarter, while non-live streaming businesses should continue growing at a very strong pace, potentially accelerating further due to in-game item sales expansion and other deeper game collaborations. Looking ahead to 2026, we expect overall revenue growth to accelerate versus 2025. Live streaming should remain stable, while game-related services, advertising and others continue to drive the majority of our growth. Unknown Executive: And our next questions comes from Ritchie Sun from HSBC. Ritchie Sun: [Foreign Language] So I would like to ask about the publishing of Goose Goose Duck and overall the game publishing business. So what is our strategy as well as outlook going forward? Junhong Huang: [Interpreted] So maybe I'll start by giving you an overview of our publishing strategy. Over the years, we have built a very robust content creator e-sports ecosystem with roughly 162 million MAUs on the platform in the third quarter. On top of that, in addition to our own apps and products, we estimate through our top creators outside of our platforms we are able to reach another 100 million-plus users across other platforms and this gives us a natural advantage in game publishing. The mobile version of Goose Goose Duck is our very first full-fledged publishing effort. The game has gone through a second round of testing throughout October with preregistrations quickly surpassing 10 million during that period. We expect the game to be ready for launch pretty soon. Now for this game specifically, we created a dedicated live streaming variety show, A SIKA ZIYE, which brought together top streamers for group gaming session, helping boost social buzz and community engagement. This project serves as an important milestone in validating our publishing playbook and execution, laying the foundation for titles to come. Going forward, we will continue to follow a content-driven publishing strategy. We rely on our stream of network, short-form media reach and e-sports presence to focus on titles that work well in live streaming and interactive settings. This allow us to bring more high-quality games to players and drive sustainable growth in this business. Unknown Executive: We will take next question from Nelson Cheung from Citi. Fuk Lung Cheung: [Foreign Language] With the solid momentum of Delta Force launch this year, we also observed a lot of like collaboration between Huya and this title. Maybe have management to elaborate more on their ongoing partnership. Junhong Huang: [Interpreted] Our focus on Delta Force is about building a vibrant community engagement and a sophisticated e-sports tournament ecosystem for that game. As part of community engagement effort, we launched Delta Force Map tool recently, which provides rich immersive 3D environments for players to quickly get -- to get familiar and better navigate the game, attracting more hard-core players to our platform. Over time, it will serve as a new entry point for value-added services, helping us to build a more complete ecosystem around that game. On e-sports side, we host the first [ EDC ] Diamond Championship in July for Delta Force, which was a great success. Building on that, we'll be hosting the second season in the coming months, gradually building a consistent structured e-sports presence around that game. Unknown Executive: So now we will take our last question from [ Wei ] from CICC. Unknown Analyst: [Foreign Language] My question is on the new business. Can you break down their financial impact in our profitability? And how should we think about the trend for our profit of this going forward? Lei Peng: [Interpreted] Our gross margin remained stable this quarter as we further scale and expand our game-related services and optimization of cost structures, we expect to see gradual margin improvement over time. This quarter, our gross profit actually grew over RMB 23 million, which is 11% year-over-year, which led to further improvement at operating level. Unknown Executive: Thank you. Thank you once again for joining us today. If you have further questions, please feel free to contact Huya's Investor Relations through the contact information provided on our website or Piacente Financial Communications. This concludes today's call, and we look forward to speaking to you again next quarter. Thank you. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Thank you for standing by. Welcome to the Roivant Second Quarter 2025 Earnings Call. [Operator Instructions] Please note that today's conference is being recorded. I will now hand the conference over to your first speaker, Stephanie Lee. You may begin. Stephanie Lee Griffin: Good morning, and thanks for joining today's call to review Roivant's financial results for the second quarter ended September 30, 2025. I'm Stephanie Lee with Roivant. Presenting today, we have Matt Gline, CEO of Roivant. For those dialing in via conference call, you can find the slides being presented today as well as the press release announcing these updates on our IR website at www.investor.roivant.com. We'll also be providing the current slide numbers as we present to help you follow along. I'd like to remind you that we will be making certain forward-looking statements during today's presentation. We strongly encourage you to review the information that we filed with the SEC for more information regarding these forward-looking statements and related risks and uncertainties. And with that, I'll turn it over to Matt. Matthew Gline: Thank you, Steph, and good morning, everybody, and thank you for listening. I appreciate all you dialing in. So not at all a quiet quarter for us and that we put out both the Graves' data and obviously, the Phase III data for brepocitinib in DM. So obviously a tremendous moment of transformation for the business, but a relatively quiet earnings call as we're looking forward to getting everybody together in December for a more fulsome telling of where we are as a business, more about the future on our Investor Day on December 11. That registration link is live on our website. So look forward to seeing you all there. Today will be more of a review of what's happened in the recent quarter, and then we'll talk much more about the future when we get together in December. So we're looking forward to that. I want to start out on Slide 5, just by taking a short victory lap because it's been a pretty wild year for us. Obviously, starting with and probably most notably, the VALOR data for brepocitinib in DM, which hit on all 10 ranked endpoints and just a phenomenal data set that we think is going to transform the lives of DM patients. So that NDA filing remains on track planned for the first half of next year, and it will be the first novel oral therapeutic in DM, if approved. We also put out data in this quarter from the durable remission sort of portion of the Graves' disease trial for batoclimab, which sets us up for the future there in our 1402 Graves' program. That demonstrated disease-modifying potential for 1402. And then we think -- earlier this year, we put out some data in MG and CIDP, and we can do a pretty nice job of validating the deeper is better idea for FcRns from an IgG suppression perspective. We also have initiated at Immunovant this year, potentially registrational trials in Graves', myasthenia gravis, CIDP, D2T RA and Sjögren’s as well as a POC trial in CLE. So some really exciting progress there with IMVT-1402, which we hope will take us to a first-in-class in many cases and best-in-class, we hope all -- in all indications potential. We got a favorable marketing ruling this quarter for Genevant in the Pfizer case and just overall continued progress in the LNP litigation with the jury trial and the Moderna case scheduled for March of 2026. And our capital position remains very strong with $4.4 billion of cash and cash equivalents, which will get our current pipeline to profitability and support pipeline expansion and potential additional capital return, including the $500 million that we have currently authorized. On Slide 6, and we've been showing this slide for a while, but it just -- it feels real and real with each passing quarter. Just a late-stage pipeline that we are really excited about with 11 potentially registrational trials and indications with blockbuster potential. Obviously, the first of those dermatomyositis now behind us, but many more to come. Setting us up for a slide that we've been showing since June on Slide 7, which is just a stacked 36 months ahead of us between multiple registrational data sets, first DM and NIU in brepo, and then the beginnings of a long list of them in 1402. Lining up for a series of launches, again, first DM in brepo and then NIU in brepo, and then very shortly thereafter, 1402 across multiple blockbuster indications, including Graves'. So look, as I said, a moment of real change and transformation for the business. I think we recognize that. We're excited to talk more about it when we get together in December. It's something that the team internally is excited about. It's excitement that I hear from investigators, certainly and patients and docs in the DM landscape and from investors as well. So looking forward to the next leg of our journey here. I'm going to do just a brief recap of the two major data sets from the quarter. So I won't spend a ton of time on either of these because we've talked about all of them in this setting before, but they bare re-mentioning just because of how exciting both of them are. Starting with the brepocitinib VALOR data on Page 9. Again, we've gone through this all before, but VALOR succeeded with really highly significant, robust and consistent data across the primary and all key secondary endpoints with a nice clear dose response that sets us up for 30 milligrams to be the optimal dose here. Responses were rapid, deep, broad and clinically meaningful across the board, a statistically meaningful and clinically important delta to placebo on mean TIS with deep responses occurring quickly and across a range of endpoints, including muscle and skin. And as a reminder, on Slide 10, this is a patient population with very significant unmet need, and this is a story that has been underscored over and over again as our team has been out talking to physicians in the field after this data. This is a patient population that is significantly underserved by therapeutic options. 75% of these patients are on only either steroids or ISTs and are struggling to get well controlled. And many of them are requiring high doses of oral prednisone in order to be sort of be treated appropriately and are all looking for options or many of them are looking for options. Only a relatively small percentage, only 1/4 of the market is currently on other therapies at all. And of the ones that are, some of them are on very demanding IVIg regimens, multiple days a month spent entirely in the infusion centers; and others are on a series of off-label therapies, many or most of which have failed DM programs before, but are used simply because there are no better options. So we're getting a predictably enthusiastic response from all of the physicians we've engaged with on this data already and are obviously looking forward to continuing that as we go through the registration process in the coming year. Looking at Slide 11, again, a recap from before, but this is the primary endpoint. This is mean TIS. And this is a textbook picture from my perspective of positive clinical data, statistically significant at the high dose starting at the earliest time point, nice clear separation, nice clear dose response. And one thing that I was mentioning and we said this, we put the data out originally. We had originally been focused on a steroid taper as a risk mitigant in order to make sure we saw a clear benefit from the drug against the background of not really placebo, but actually actively managed background therapy. And we did that. But the other thing we were able to show is a real dose response on steroid reduction. We were able to get a significantly greater portion of patients to lower steroid doses or off steroids on high-dose brepocitinib than on placebo. And I think that actually with the doc community has been enormously resident finding. It's something that the docs are really, really focused on getting these patients off high-dose steroids, and we are very excited that we were able to show this in the study, including as a part of at least one of the key secondary endpoints. On Slide 12, more than 1/3 -- and this is the key secondary where we were able to really hit both the TIS improvement or the TIS, I should say, and a minimal or no steroid burden. More than 1/3 of brepo 30 patients were able to get to both major TIS responses and minimal or no steroid burden at week 52. So that's just a really exciting finding across the board. And more than 1/2 of patients were able to achieve a TIS40, a moderate TIS response, with very low dose of oral steroids at the same time. So just a phenomenal outcome there on the combination of endpoints. On Slide 12, again, without going through them all, just a statistically robust data set, I'll say, with really low p-values across every secondary we tested benefit on muscle, benefit on skin, benefit on patient-reported outcomes like the HAQ-DI questionnaire on disability, just a terrific across-the-board outcome here. In terms of what's next year, I think everyone is clear, the NDA submission, we're moving as fast as we can. The only real gating item here was drafting and it's ongoing right now. We expect to get it filed in the first half. Data readout from that proof-of-concept study in CS that we have ongoing will be next year. And the NIU study, which is enrolling very nicely, is currently anticipated to read out or say, guided to the first half of '27, around the same time as potential registration of brepo and launch in DM. And then we submit the sNDA for NIU shortly thereafter, with potential further indications and so on to come. So that's brepocitinib. I'm sure we'll get some questions about it. And like I said, we'll talk more about that program and what it could represent commercially on the 11th. But suffice it to say, a tremendous quarter and something we're really excited to carry forward from here. Next up, I'll just recap the Graves' disease remission data that we put out earlier this quarter as well. Starting on Slide 16, with just a reminder, this is a very large patient population with a significant unmet need. And there's been -- I think this is an important point as people are doing their work here, a shift away from ablation over time as patients don't want to go through the surgical procedure or the radioactive iodine, but really a lack of new medical therapies that's left. Something like 1/4 to 30% of Graves' disease patients who are relapsed, uncontrolled on or intolerant ATD. So just a very high proportion of patients who are unable to get well controlled. As a reminder, on Slide 17, this is a bad disease. These patients are at much higher risk of cardiovascular events, much higher risk of preeclampsia, 4x higher risk of preeclampsia, and a 7x higher risk of thyroid cancer than the general population. So these patients are really sick or at a high risk of developing severe comorbidities. They often go on to develop thyroid eye disease. About 40% of patients go on to develop these eye symptoms, some of which get optic neuropathy and other issues that can be pretty significant for vision. And then there's a bunch of other complications here. 16% are diagnosed with thyroid storm, which has a -- in patients who had hospitalized for Graves' disease, 16% are diagnosed with thyroid storm, which has a 20% mortality rate. So again, potentially sort of very sick patients and again, a relatively high risk of thyroid cancer, including a high risk of progressive thyroid cancer. So a disease that makes people quite sick. Again, more to come on the 11th, but just wanted to highlight that fact. And then on Page 18, in addition to being a severe disease, it's a disease affecting a lot of people. And so you've got every year, call it, 65,000 newly diagnosed patients; of which 20,000 of those wind up in that sort of refractory bucket. And then there's 880,000 diagnosed U.S. patients, of which 330,000 in the prevalent population are walking around in that intolerant or unable to get well-controlled bucket. So there's just a huge patient population with a significant unmet medical need. What we showed earlier this year in the batoclimab study is a pretty interesting result. We showed real disease-modifying benefit in these patients. Of the 25 patients who came in at baseline, as a reminder, the way the study worked, patients were treated for 12 weeks of high-dose batoclimab followed by another 12 weeks of low-dose batoclimab and were then followed for another 24 weeks off drug entirely. And what we saw is after that first 12 weeks, 20 out of 25 of those patients were responders to therapy. After dropping to low dose after another 12 weeks, 18 out of 25 of those patients were responders. And truly remarkably, after being off drug for a further 6 months, 17 out of the 21 patients we were able to follow up with at week 48 were responders to therapy. So these are patients who were uncontrolled on standard of care at the beginning of the study, and 17 out of the 21 of them that we were able to follow up with remain responders to therapy, having been off drug for 6 months. So a pretty remarkable disease-modifying benefit. Of the off-drug responders on page -- the off-drug responders on Slide 20, nearly half of them were fully off ATDs, and over 75% of them were on only the lowest doses of ATDs or off ATDs. So not only were we able to deliver disease-modifying benefit for patients who are uncontrolled on ATDs before, we were able to significantly reduce or eliminate ATD need for those patients. Now this was underscored on Slide 21, not just by the sort of clinical data on T3/T4 and so on, which is obviously always what's most important to the patients. But you can also see it in the TRAb reductions on Slide 21. And as you can see, as you'd expect for FcRn therapy, these patients showed a rapid decline, both in general IgG and in TRAb levels, especially on high dose. The IgG levels came back a little bit as you'd expect during the lower dose period. And then what is maybe unique to Graves' disease or at least unusual among FcRn indications is while IgG bounces right back when you come off therapy and the only time points on this graph are week 24 and week 48. But by week 48, these patients were effectively back at baseline from IgG. The vast majority of these patients still had basically sort of reduced or no TRAbs. And that is a pretty remarkable finding around the durability of the benefit here. On Slide 22, the next period is absolutely stacked for us in 1402 with data coming in a variety of indications. D2T RA and CLE next year. The second part of the D2T RA study as well as Graves' and MG in 2027. And then Sjögren’'s and CIDP after. One small update just to flag for today, the TED study remains on track to conclude this year. Our last patient, last visit is very close to today. But we're going to hold off reporting the top line data from that first study in all likelihood until we see the top line data for the second study in the first half of next year. The evolving competitive landscape in TED and especially in Graves' disease has led us to take a more prudent path there. And so we're going to collect that data together and report it when we have it all. Moving on to the -- briefly to just a reminder of where we are on the LNP litigation, which I know some people are following. In the Moderna case, we are in a pretrial process around the narrowing of claims and defenses and around summary judgment, which is happening now. The judge is reviewing summary judgment briefings and there's sort of a calendar on the docket that we're hoping will take us through trial in March. The trial is scheduled for March and the first international proceedings are also expected in the first half of 2026. The Pfizer case is ongoing in discovery, and there was a favorable market ruling issued in September that certainly sets us up nicely for what we think we need to do from there. So I'll conclude before we go to Q&A with a brief financial update. Overall, a straightforward quarter from a financial perspective. Loss from continuing operations net of tax of $166 million. And cash, cash equivalents of $4.4 billion with no debt on the balance sheet. And obviously, a share count reflective of the significant share buybacks we've done over the last 18 months. So a strong position overall that, as I said, is expected to carry us through profitability. We've got more of our financials in here, and the catalyst sort of road map on Slide 28. But again, just a really exciting 6 months or 12 months behind us and a really exciting 12 months or 36 months ahead of us. So feeling great about where the business is, feeling great about just the significant transformation in our profile that we've been through in the recent months and looking forward to carrying that forward from here. Once again, as a reminder, we have an Investor Day in New York City for those that can make it in person on December 11, 2025, that registration link is live. It's in the presentation we put up as well as on our website. I hope to see many of you there to round out the year and talk about the future. So with that, I'll say thank you again for listening. Again, a relatively quiet earnings call, but not at all a quiet quarter. And I will pass it back over to the operator for Q&A. Thank you, everybody. Operator: [Operator Instructions] Our first question coming from the line of Dave Risinger with Leerink Partners. David Risinger: Congrats on all the progress, Matt, and looking forward to the event on the 11th. So my question is, could you please comment on what we should be watching next with respect to Pfizer litigation, so specifically in international markets and then in the U.S.? Matthew Gline: Thanks, Dave. I appreciate the question. And obviously, it's something that a number of people are watching. It's tough, as always, to comment on ongoing litigation. I have nothing to say about any potential timing of any kind of international cases. Look, it's a busier moment coming up. I think there should be a sort of scheduling process for the Pfizer case underway, and we should learn more about the exact time line, including hopefully a trial date in the near future. And I think that's probably what I would be most watching out for in terms of what's public at this point is just getting that schedule together and progressing from here. Operator: Our next question coming from the line of Brian Cheng with JPMorgan. Lut Ming Cheng: Matt, just two quick ones from us. How do you feel about argenx stepping into Graves' and whether that has any impact on your strategy of 1402? And then we have a quick follow-up. Matthew Gline: Thanks, Brian. It's a great question. And look, I think you heard my comment on the timing of the intended sort of production of the batoclimab TED data. Obviously, we're acutely aware of the competitive landscape in Graves' disease. And look, I think to make a gentle comment, whatever imitation is the finest form of flattery. I think it's great to see others recognizing the importance of Graves' as a disease. It's great to see more people working on treatment options for these patients. Obviously, in our Phase II study, we studied both high and low-dose batoclimab, and we saw a great benefit to the higher dose batoclimab in the study. And then also, we reported in the past data breaking out the patients between that 70% cutoff below and -- above and below 70% IgG reduction. And we had 3x as many patients getting off ATDs at the above 70% group than in the below 70% group. So we think we should have quite a competitive profile there. But most importantly, to be honest, it's a big patient population, there's a lot of sick people. And I think a rising tide there will lift all boats. And like I said, argenx is a formidable company with a wide following and has done a great job of execution. And I know there's at least some people out there who find it, although it might be frustrating to us validating of our strategy that they're following in our footsteps. And so we'll always take it. Thanks, Brian. Lut Ming Cheng: Great. And just one quick one. So on the Investor Day next month, just curious if you can talk about what do you want investors to get out of the Investor Day? Is this more of a broader recap of your current strategy? Or do you think that there will be some unveiling of completely new data or a new strategic direction at Roivant? Matthew Gline: Yes. Look, it wouldn't be a fun Investor Day if I reveal all of it now. But I think most importantly, this is just -- it's a moment of huge transformation for our business. I think the type of investors who are now along for the ride are different. And obviously, a lot of other things about the business are different. So I think we want to make sure we're telling that story fully that we're helping people see the course from a commercial perspective, from a patient need perspective in these indications so they can see at least the reasons why we are so excited about these indications about the certain nature of the blockbuster opportunity. There might be some other new things we're able to share by then in terms of updates or other things, but we'll see where we're at in a few weeks here or a month. But I think it will be an exciting opportunity to get together and take stock of the business and to talk a lot about the future and the opportunities in front of us. Operator: Our next question coming from the line of Samantha Semenkow with Citi. Samantha Semenkow: Just for Graves', when thinking about the remission data, is there any way to tease out the impact of starting on the high-dose batoclimab in that study? And how much that actually contributed to the remission rates you saw? I'm just wondering if there's anything that you could share that you were able to tease out from the data when you analyzed it so as we think about the competitive landscape. Matthew Gline: Yes. Look, thanks. That's a -- it's a great question. And I do think we're going to -- like I said, be a little bit careful about some of what we say here because of the evolving competitive landscape, and we're going to learn more about this from the hypothyroid TED patients and so on in that study as well. But look, I think in general, remission is about TRAbs getting normal for longer. And our view is that deeper IgG reductions are going to drive towards exactly that outcome. And so both in terms of the speed of responses that we saw in the VALOR trial and the depth of responses that we saw in the VALOR trial in terms of TRAb lowering, I think that's going to be a significant driver for us. So I think we feel good, put it this way, about our level of IgG suppression in that program at high dose. Thanks. It's a great question. Operator: Our next question coming from the line of Yaron Werber with TD Cowen. Yaron Werber: Great. Maybe a quick question. We've been getting a few questions about the ongoing preliminary -- the summary judgment against Moderna with respect to the U.S. government involvement in the EUP -- I'm sorry, EUA and whether the government ever took control of the vaccine for distribution and whether that made them a commercial party and whether that impacts their involvement and as a result, would potentially provide Moderna some venue to make an argument. Any thoughts about that, if you can comment at all would be great. Matthew Gline: Yes. Thanks, Yaron. And again, as usual, it's difficult to comment in depth about an ongoing litigation, and it's ultimately going to be the judge's decision on the 1498 question. I'll point out that the two things that are worth keeping in mind. One is the Moderna case in the U.S. -- Moderna sales of COVID vaccines in the U.S. in total is a bit less than half of Moderna's total global COVID vaccine sales, and Moderna's total global COVID vaccine sales are a bit less than half of the total, inclusive of Pfizer. And so -- and then what Moderna has claimed in their own briefings is that we asked for about $5 billion in damages in the U.S. case, and Moderna has claimed that a little bit less than half of those damages could be subject to 1498 in Moderna's view. And so I think you're talking about a little bit less than half of a little bit less than half of a little bit less than half of the total is the issue in summary judgment on 1498. Our position is pretty clearly laid out in our motions. And frankly, Moderna's position has also laid out in their motions. Obviously, we feel like we have a strong case to make here, but it's ultimately going to be up to the judge to determine. But I just wanted to sort of scope out the magnitude of the question as well. Operator: And our next question coming from the line of Prakhar Agrawal with Cantor Fitzgerald. Prakhar Agrawal: Congrats on the progress in the quarter. Maybe firstly, on Sjögren’'s disease. Recently, there has been a lot of excitement around Sjögren’'s market opportunity, especially with the recent data from Novartis' [indiscernible] drug, ianalumab. Maybe you can contextualize how FcRns can differentiate on ESSDAI scores of other specific endpoints? And do you think you could be first-in-class in this indication? And secondly, just quickly on brepo in DM, do you plan to apply for FDA's National Priority Voucher for brepo? Matthew Gline: Thank you. Those are both great questions. Look, I think on Sjögren's, we are also excited about the market opportunity. It's a large patient population with a very significant unmet need. And just a lot of people kind of going through it as it were. There have been a variety of therapeutic classes that have shown some benefit. Obviously, the in-class data was positive and the J&J data, in particular, showed that lower is better. So we think we have a real shot at best-in-class. We are working to launch as close to first-in-class as possible. I don't think we're here to commit that we'll beat our competitors. We obviously got a little bit of a head start on us, but I think we're trying to be kind of within a window small enough such that it shouldn't matter who comes first, and we can differentiate based on our profile. And I'll just say, I think -- first of all, I think the Novartis data was positive, but probably left room for even better as I think have all of the Sjögren's data produced to date. And I think the FcRn data to date has sort of been competitive with other classes of drugs. And so if our deeper IgG suppression yields a better benefit than other FcRns, I think we should have a truly important opportunity in the space. A lot of excitement about new therapies from KOLs and from our investigators. The unmet need is significant. The overall market is a significant number of patients. So it's a great place for us to be in our view. And then sorry, you asked about the CNPV program for brepo. We haven't said. Look, this is an orphan population with high unmet need. So I think we're thinking through all of the different ways we can get through FDA and out to patients as quickly as possible, and thinking about the puts and takes of them all, but stay tuned. Operator: Our next question coming from the line of Corinne Johnson with Goldman Sachs. Corinne Jenkins: Maybe following up on an earlier question about competitive intensity in Graves' disease. I think it goes beyond argenx in terms of number of companies that have announced plans there. So how are you thinking about the kind of competitive clinical landscape that's evolving? And what do you expect to inform sequencing decisions in that space over time? And then maybe separately, just on business development. Curious if you could give an update on what you're seeing on that front. Matthew Gline: Yes. Thanks, Corinne. Look, I think the first question -- and obviously, we see the competitive landscape. Similarly, there's a number of people trying different things which is exciting. It's exciting for Graves' space, it's exciting to be there. One comment about that is, I think we've watched the myasthenia gravis landscape play out, and there's a lot of competitive intensity and a lot of new mechanisms and also that FcRn has been: a, a pretty undisputed king so far; and b, that the first FcRn to launch with the quality of that data has been a tremendous head start. And we think we've built something similar in Graves' disease, which is a market obviously a multiple of the potential size of the MG market. So we feel great about our position, both from a timing perspective as well as a mechanism. It's a well-understood mechanism, FcRn. And it's pretty exquisitely well suited to treating the biology of Graves' disease. So you think about some of the other mechanisms outside of FcRns have something in common with ATDs, which is that at high doses, they will cause patients to go hypothyroid, which is a miserable thing as well. And so I think one of the great things about FcRn biology is other than maybe for a very short period of time, because what you're really doing is getting at the root cause of the disease with these autoantibodies, you're not going to like cause the thyroid to react in the other direction sort of directly. It's not like a TSHR targeted mechanism or something like that. And so I think that will be a big benefit to FcRn. The other thing that I think is maybe underappreciated in some communities about FcRns is just how safe and well tolerated they are. And I think in a Graves' patient population, that is going to be an important fact that I think will be great for FcRns as a mechanism. So I think that those will all be sort of good guides towards FcRns being important and early line therapy for these patients who can't manage it with standard of care today. In general, as I said, I think lots of activity in the space is actually going to be good for everybody. These are docs who haven't run a lot of clinical trials. These are docs who haven't had a lot of new treatment options. And I think the more voices there are out there talking about this stuff, the better we'll be able to get out to the patient population. So thanks. It's a great question. And then you asked for BD update. Look, we remain extremely well capitalized. We remain very excited about the opportunities for pipeline expansion. We are incredibly excited about the things we currently have in our pipeline. And obviously, you hear that in our voice. You see that in the way that we're talking about our data. Obviously, we're thinking about indication expansion for those programs and then always looking in the world for programs, especially programs that are of a size and scale that can move the needle against the backdrop of our existing pipeline. And I think we've got some exciting ideas. Operator: Our next question coming from the line of Dennis Ding with Jefferies. Yuchen Ding: We have two, if we may. Number one is on Pulmovant. So you guys will have Phase II PH-ILD data in the second half of next year. I guess, how confident are you about the translatability from PH to PH-ILD? And how should we think about that update and what's the positive delta on PVR? And secondly, on the LNP litigation, I'm curious if you've done any work on what percentage of the U.S. doses were given to actual federal government employees as we think about a middle scenario for summary judgment. Matthew Gline: Thanks, Dennis. I appreciate it. Both great questions. Thanks for the question about Pulmovant. We're obviously super excited about mosli. Look, I think you have correctly identified the risk that exists in the mosli data that is we don't have data in the PH-ILD patient population, and that's sort of the nature of this study. In general, PVRs have translated well. And so I think that's an important backdrop fact between these indications. And where they haven't, it's mostly been, for example, because of these V/Q mismatch issues associated with vasodilation in lung disease patients. And we think the format of mosli addresses that issue. So we are, I'd say, cautiously optimistic about that translation, but obviously, I feel a lot better when that Phase IIb data is in hand. And my hope is that we see pretty significant PVR reductions and pretty significant clinical benefit in those patients. So looking forward to that data in the second half of next year. That's another area where there's quite a lot of enthusiasm for the program and for new opportunities, especially with the overall growth from the prostacyclins in PH-ILD, leaving plenty of room for additional mechanisms. The other thing I'll point out is just the 38% PVR reduction we saw in pulmonary hypertension. Even if PVR reductions are for some reason a little bit lower in PH-ILD, obviously, there's still a lot of room for a very significant amount of benefit for these patients. Your second question, what percent of doses given to federal employees. I don't think our best estimates of that are in any of our motions. But I think you can imagine, as you think about the number of federal employees that it's a relatively small percentage. Yuchen Ding: Got it. And if I can sneak one more in about the LNP litigation. Maybe remind us what's the status in terms of the OUS trials. We're not that familiar with the OUS process. So I guess, can you remind us how many cases you filed, which one is the furthest along? And can you get an initial decision in 2026? Matthew Gline: Yes. So thanks, it's a great question. In the case of Moderna, we filed a number of OUS actions, including in the UPC in Europe as well as in Canada and Japan and a couple of other places. Those litigations are all ongoing. There are important hearings in 2026. And the nice thing about some of these European jurisdictions is they can move quickly. So it is possible that we would get outcomes of various kinds within 2026 in some of those jurisdictions and obviously look forward to saying more when there's more to say. Operator: And our next question coming from the line of Yasmeen Rahimi with Piper Sandler. Unknown Analyst: Congrats on a great quarter. This is Dominic on for Yasmeen Rahimi. We just had a question going into the TED data. Could you help us understand what you're thinking about with the expectations for the studies that are reading out here soon? And what do you hope to see to consider development considering the competitive landscape? Matthew Gline: Yes. Thanks. It's a great question. We're looking forward to having that data relatively shortly for sharing it next year. Look, I think the competitive bar in TED is relatively high with IGF-1Rs being pretty efficacious. That said, they certainly leave room from a safety perspective, et cetera. And so I think we're looking to see data that makes sense in the context of the competitive landscape there. The other thing that I think -- and this is part of the reason why we're focused on the sort of competition in Graves' disease, I think we'll learn a lot about hyperthyroid Graves' patients from this study as well as the possible ways in which Graves' and TED might interact with one another. And so I think we're looking forward to the data from that perspective as well. We'll obviously make a final decision on a launch in batoclimab once we've got the TED data in hand and in consultation with our partner. Operator: And our next question coming from the line of Douglas Tsao with H.C. Wainwright. Douglas Tsao: I guess, Matt, maybe as another follow-up on Graves' and TED. As you referenced, the two diseases are obviously sort of very interrelated with interplay. And I guess when we think about argenx, they will potentially come to market with VYVGART being both Graves' and TED hypothetically. Obviously, you have a big head start with 1402 in Graves'. So I'm just curious how you're thinking about potentially pursuing TED with 1402 versus, as you just noted, potentially thinking about batoclimab and the sort of disadvantage of maybe sort of coming at those dual markets with two different molecules. Matthew Gline: Yes. Look, thanks. It's a great question. And a couple of comments about this. One is it's -- we'll be speaking in the abstract now. We're going to know a lot more about the TED data that will inform the answer to this exact question, and we will be in possession of more information than anybody else will have at this moment in time on the sort of overall treatment landscape and on what FcRns can deliver. And so I think that will set us up really nicely to think about the possible options. They're totally different call point in terms of the physicians who treat these things and there are different stages of disease. And so I think they get treated at different times in different ways. And I think being able to talk to endos who are treating Graves' patients about the benefit in forestalling TED, for example, is an important potential thing to be able to discuss when we get to it. In terms of thinking about the sort of TED versus Graves' market dynamics, I'd say let's just wait and see what the TED data looks like, and then we can talk more about it. As a reminder, the Graves' population is meaningfully bigger and it's upstream of the TED population. And so I think there's a reason that was our first focus once we got into the clinic with 1402. Great question. Douglas Tsao: Okay. Great. And Matt, if I can, on a follow-up with brepo. Obviously, incredibly impressive results in DM. I'm just curious if you have given thought just given sort of somebody alluded to sort of the competitiveness in Sjögren's, have you ever thought of that as an indication because I think there is a mechanistic rationale and obviously, an oral option would be very attractive. Matthew Gline: Yes, thanks. I appreciate the question. Look, I think the short answer is we have thought pretty exhaustively about possible indications for brepo. We have a number that we think are exciting beyond what we've talked about. I think if you look at the indications we've chosen so far, they've been indications where we can really chart a market-defining course. And I think there are maybe more to do in that story. But the short answer is there's an embarrassment of riches in terms of the indication set available for brepo, and we feel very privileged with the data we have in hand for what we've got. As a reminder, it has worked almost everywhere it has been tested. And so I think we feel like it's a great molecule and with a lot of great places to go. Thanks for the question. Operator: Our next question coming from the line of Derek Archila with Wells Fargo. Hao Shen: This is Hao calling in for Derek Archila from Wells Fargo. I guess we have a question on brepo. We were at AACR. So very positive feedback from all the KOLs. So question is about really the competitive landscape. I guess we've seen VYVGART having data next year and the CAR-T is also starting their pivotal trials. How do you see the kind of the treatment paradigm evolve over the years? And brepo, do you have also plan to explore in other subtypes of myositis like IMM, [ ASMS ]? Matthew Gline: Yes, perfect. So look, I think on the competitive landscape, similar comment to, frankly, my comment in Graves', which is that I think it's a great opportunity to be able to get out in front of it. And obviously, first and foremost, the easiest and oral is always going to have a huge place. The majority of these patients are on oral therapy now. And so I think just like the overall profile that makes us unique. I'll say the CAR-Ts, that's not, in my opinion, going to play for the same patients mostly that we are. That's obviously a much different sort of intervention. And there's still plenty of open questions about benefit there. Look, I think that's also sort of a little bit about that landscape. FcRn could be a compelling option. Obviously, IVIg is used. But I'd say, first of all, it's good to have what we think of as a multiyear head start in DM. And we think the patient population that we have access to, given the nature of our therapy is really basically the entire DM patient population, which gives us a lot of room to go. So we think, again, similar to VYVGART and MG, we think we get to define that market and be the heart of it. And so I think that's all great. We also suspect that the data we have in DM specifically may be just the best overall, and that's the biggest part of the myositis market. Obviously, argenx is studying in other subtypes of myositis as well, and some of those may be more directly appropriate for an FcRn. As to your question about other subtypes of myositis for us, I'll just say again, we thought about a whole bunch of different places to go. There's a lot of exciting places to go, and we have an embarrassment of riches in terms of where we can take the molecule from here. Operator: Our next question coming from the line of Thomas Smith with Leerink Partners. Thomas Smith: Congrats on the progress. Just with respect to the TED program and the competitive landscape, could you comment on some of the data we recently saw from the IL-6 class, whether you think [indiscernible] is approvable with that data set and sort of your expectations for batoclimab relative to those results? And then secondly, is there any update you could provide from the overseas study that you're running with 1402? And any sort of timing guidance for when we might see data from additional indications from that study? Matthew Gline: Thanks. Those are, look, obviously, great questions. I'll say obviously not our place to make comments on the feasibility of other mechanisms. There was a notably high placebo response in the IL-6 study, which is something we've paid attention to. But overall, no specific comments on where that program goes from here. From a competitive landscape perspective, I think the competitive intensity in TED is real, as I said earlier. And the IGF-1Rs are efficacious, although they have safety and tolerability concerns associated with them. And so I think we're sort of focused on where we could play in TED. And then as we said a minute ago, thinking about Graves' an opportunity to impact the disease much earlier in its course. And I think that's an important thing the way that we are approaching that with 1402. On the sort of second overseas study, look, I think we, obviously, at this point, have a number of large registrational programs running in 1402 that are big global studies. We continue to like the option of small, fast POCs overseas and feeding that information into bigger studies. If and when we have anything to share from those ongoing efforts, we'll share it. But mostly, it's being used to inform either indication selection or design decisions of the bigger studies. Operator: And our next question coming from the line of Brandon Frith with Wolfe Research. Brandon Frith: This is Brandon on for Andy. Have you provided any analogs for the DM launch? And we're curious to know what to expect for the cadence out of the gate in longer term? Matthew Gline: Yes, perfect. Look, I think DM is an area with high unmet need, but also not a lot of novel therapies recently launched. So first of all, there aren't great analogs to look at, specifically in DM. And second of all, I think the appropriate course for any public company is to guide cautiously on launch speed and to say that we're going to do everything we can to get this drug out there and to get docs excited about it. And the thing that we're most confident in is that the overall market opportunity is large, that there is high unmet patient need and that when we get to peak penetration, there's a really big and exciting opportunity. Exactly how long it takes to get there, I think we're going to see is the answer, and we're going to do everything we can to make it as successful as we can. Obviously, the real value add is the stuff to get the long-term trajectory here right. So that's probably how I think about the launch. Operator: Our next question coming from the line of Sam Slutsky with LifeSci Capital. Gaurav Maini: Congrats on the quarter. This is Gaurav on for Sam for LifeSci. So just a question on Graves' here. Based on all the market research done to date, as you compare the uncontrolled Graves' disease opportunity versus what FcRns have shown in the MG market, I guess, how do you size these up? How are you thinking about the opportunity? Is it bigger, smaller, similar as we think about MG for FcRns? Matthew Gline: I mean, look, it's hard to -- the MG market has been tremendous. And so I think it's hard to call it one way or another. But obviously, there's a lot of uncontrolled Graves' patients, and it's an exciting place to be. And I think we have a real opportunity to build something big. There's just lots and lots and lots of uncontrolled patients is the answer. The other thing I'll say is we'll talk more about the commercial opportunity in Graves' disease on December 11. And I think we're excited with what we see. And I think we can make -- I think the most important thing is there are hundreds of thousands of patients for whom we could make a meaningful difference. and a lot of different ways for us to get into that market and establish different toeholds in places. And so we're looking forward to all of that. We're also learning, and I want to highlight this as an important advantage that we have from being first, so much about the Graves' opportunity by being out there with these docs enrolling patients in the study, looking out at what we're finding. And I think that competitive benefit is going to set us up really well to make sure we've got the right product on the market as well. Operator: There are no further questions at this time. I will now turn the call back over to Mr. Matthew Gline for any closing remarks. Matthew Gline: Thank you. Thank you, everybody, for listening this morning. Once again, a phenomenal quarter for us in terms of the results we delivered. And super importantly, looking forward to getting together on the 11th to talk about the future and address in further detail some of the very same questions we got on today's call. So I hope to see many of you there. And I hope you all have a great end to your year apart from that. Thanks very much, and have a good day. Operator: This concludes today's conference call. Thank you for your participation, and you may now disconnect. Goodbye.
Karl Steinle: Good morning, everyone, and welcome to our earnings call on our results for the first 9 months of 2025. And as usual, our CEO, Clemens Jungsthofel; and CFO, Christian Hermelingmeier, will provide a brief overview of the business development so far in '25. And afterwards, Clemens will present the updated outlook for the current year. And as usual, we'll provide an initial guidance for the financial year '26. For the Q&A, we will be joined by Claude Chèvre and Sven Althoff. And with that, I hand over to you, Clemens. Clemens Jungsthofel: Thank you, Karl, and good morning from Hannover. So on the first slide, the business performance in the first 9 months was very satisfactory. The group net income of EUR 1.96 billion reflects a strong underlying profitability and additional positive tailwind from currency translation and from tax, adding up to more than EUR 400 million. The low tax rate, particularly in the third quarter, is mainly connected to the newly enforced change in the German corporate tax, resulting in a corresponding release in deferred tax liabilities. This not only left us in a comfortable position to increase the group net income guidance to around EUR 2.6 billion for the full year. In addition, we used the extra level of profits to further strengthen our company's balance sheet. We have added significant prudency to our P&C reserves. We've taken a more cautious view on certain pockets in our Life & Health portfolio, and we have realized more than EUR 300 million losses in our fixed income portfolio. All of this improves our already strong balance sheet and our confidence in future earnings growth. In P&C reinsurance, we have continued to grow our portfolio in an attractive rate environment. As in the first half, the refinement in the calculation for the non-distinct investment component does have a negative base effect on reported growth numbers. As it does not impact earnings, this is no cause for concerns at all, also not when comparing to our 7% growth target. So on an adjusted basis, the growth is close to 10% and therefore, clearly ahead of the 7% mark. The favorable underlying growth is also reflected, as you can see, in the increase in our new business CSM to now EUR 2.6 billion. The large loss experience in Q3 was rather benign, particularly on the nat cat side. Hence, the overall impact from large losses was well below our budget for the first 9 months. But as you know, as usual in this situation, we have booked the full year-to-date budget. Therefore, the reported combined ratio does not reflect the benign large losses. On the contrary, we have actually used the overall positive results situation to add further prudency to our P&C reserves with a corresponding effect on the reported combined ratio. Nevertheless, the reported 86% is well in line with our target, pointing to an even better underlying number. In Life & Health reinsurance, the revenue is growing moderately. The new business generation increased by 16% to EUR 575 million, including a favorable contribution in the third quarter. The Reinsurance service result of EUR 671 million reflects the overall positive business development and confirms that we are well on track to deliver on our target for 2025. The ordinary investment performance was very satisfactory against the backdrop of another strong quarter, including the positive tax effects, we have decided to accelerate the loss realization in our fixed income portfolio. After around EUR 60 million in the second quarter, we have realized another EUR 260 million in the third quarter to improve future investment returns and to increase the flexibility in our investment portfolio. Hence, the return on investment of 2.8% is deliberately below our target for the full year. Finally, the capitalization remained strong with a solvency ratio of 259%. In the third quarter, the operating capital generation was slightly above EUR 1 billion. We have also been successful in deploying capital. So the recognition of planned growth for 2026 had an impact of around 6 percentage points on the solvency ratio. Furthermore, the quarterly accrual of foreseeable dividends, including the update of our dividend strategy impacted the solvency ratio by minus 4.5 percentage points. Model changes had a minor positive impact. On the next slide, the shareholders' equity increased by 2%, driven by the strong 9 months results. A mitigating factor is a negative impact from currency translation within the OCI. The CSM increased by 2.1%, mainly reflecting the new business generated by both business groups, again, also here partly mitigated by negative currency effects. The risk adjustment decreased by 7.8%, mainly driven by some model refinements in P&C as well as a negative currency effect and a new retrocession in Life & Health. Altogether, the performance of both business groups and our strong balance sheet, including the CSM and including the risk adjustment, gives me considerable confidence in current and future earnings growth. The return on equity of 22% is a further confirmation of our success. And on that note, I hand over to you, Christian. Christian Hermelingmeier: Yes. Thank you, Clemens, and good morning, everyone, also from my side. So on the next slide, our P&C business is growing nicely on a diversified basis, including a strong contribution from structured reinsurance. The top line growth in the first 9 months is marked by the refinement in our accounting, resulting in a one-off effect when comparing the 2025 revenue to the previous year. Excluding this base effect, the FX adjusted reinsurance revenue would have increased by 9.5%, clearly supporting the target achievement. Importantly, there is no impact on earnings due to corresponding effects in the service expenses. Furthermore, the accounting impact on reported growth should decline in the fourth quarter. In the third quarter, the NDIC refinement continued to have an impact. Additionally, the timing of bookings for some larger treaties had an impact on the reported Q3 revenue. In this respect, we expect some catch-up effects in the fourth quarter. The combined ratio of 86% is well within the target range below 88%. The impact from large losses was EUR 459 million below budget, which has nevertheless been booked in full as usual. The unused budget should be sufficient to cover the expected losses from Hurricane Melissa, meaning that full Q4 budget is available for other losses in the fourth quarter. As Clemens explained, the underlying profitability was even stronger in light of the additional balance sheet strengthening with an increase in reserve prudency. However, we have added less to the reserve resiliency in Q3 compared to the previous quarters and have instead decided to use the better-than-planned result for active loss realization in our investment portfolio. The reason is that we feel very comfortable with the current level of reserves and saw a good opportunity to lock in higher interest rates to improve the contribution from investments in the years to come. Finally, the combined ratio includes a discount effect of around 9.5%. As usual, the increase in prudency for our reserves is biased towards long tail lines with a higher level of discounting. Overall, the discount effect is still higher than the interest accretion in the reinsurance finance result, but we continue to be very prudent on the reserving side as an offset. The investment result reflects an increased ordinary income and the loss realization for fixed income of around EUR 320 million. The currency result was significantly positive at EUR 219 million, driven by the weakening of the U.S. dollar over the course of the first half year. The main contributor to the P&C service result is the CSM release, reflecting the recent renewals in a very attractive market environment. As in 2024, the CSM release includes smaller catch-up effects due to a prudent release in previous periods. The experience variance includes our prudent reserving on the business earned from current underwriting years. The run-off result has been positive in most regions and lines of business. But as explained, we have used the strong underlying profitability and the overall strong result situation to add additional prudency to our reserves. This is the main reason why we are reporting a negative run-off result of minus EUR 465 million. Apart from this, the runoff result also includes our updated view on the Russia-Ukraine aviation loss and the moderate increase in the best estimate for some pockets of U.S. liability business. The loss component from new business is quite low, confirming the attractive rate environment in P&C reinsurance. The CSM growth of 7% reflects the favorable market environment and our success in the renewal period in 2025, resulting in a strong new business CSM of EUR 2.6 billion. On the next slide, in Life & Health, reinsurance revenue increased by 2.2% adjusted for FX. The revenue increased in Financial Solutions and longevity. In traditional business, revenue moderately decreased mainly in Greater China. The result for the 9 months of 2025 is based on favorable underlying profitability. Furthermore, the experience variance was positive in all reporting categories. Assumption updates for onerous business and a more cautious position with regards to our morbidity business had a negative impact in the reporting period. Altogether, the reinsurance service result of EUR 671 million is fully in line with our full year target. The investment result reflects a good ordinary income from fixed income and the negative impact of an equity participation of around EUR 30 million in the third quarter. Altogether, the EBIT contribution from our Life & Health business group was EUR 645 million. On the next slide, looking at the IFRS components of the service result, the CSM release is the main profit driver and within the expected range. The same is true for release and risk adjustment. The experience variance is clearly positive based on a diversified contribution by line of business. The main drivers for the loss component are assumption changes for onerous business and morbidity. This is particularly driven by the critical illness business in Greater China, where we have updated our assumptions and took a more cautious positioning, reflected in an increase in the risk adjustment. As Claude highlighted at our recent Investors Day, one should focus here on a more holistic and economic view on assumption changes and experience variance. Adding up the positive assumption changes in the CSM and the change in loss component as well as the experience variance, the total deviation from initial assumptions of our diversified portfolio is positive year-to-date. The CSM development on the right side is clearly impacted by currency effects. The CSM generation, which includes the new business CSM and extensions on existing contracts, amounted to a favorable EUR 585 million based on a diversified contribution from financial solutions and our traditional business. Changes in estimates are driven by updated assumptions for our longevity business. Altogether, the total CSM would have increased by 5.2%, excluding the currency effects, nicely ahead of our 2% target. On the next slide, the development of our investments was very satisfactory. The ordinary investment income reflects the continued rollover in a higher yield environment and a strong operating cash flow. Inflation-linked bonds contributed EUR 110 million. Additionally, the contribution from alternatives was very solid. And as explained, we have used the overall result situation to accelerate the realization of losses in our fixed income book in the third quarter. In total, we are looking at the realized fixed income loss of EUR 324 million for the first 9 months. The corresponding higher locked-in interest rates will support a further increase in investment income in the coming years, and the lower level of unrealized losses will increase the flexibility for our asset managers, both helpful in the overall trading environment. The impact from the change in ECL and the fair value of financial instruments remained moderate. All in all, the return on investments of 2.8% is deliberately steered below the initial 3.2% target due to the realization of losses in our fixed income portfolio. So no concern at all as the main group target for 2025, the net income is not only maintained, but has even been increased, including an adjusted lower target for the ROI. At this point, I would like to point out that depending on the business development in the fourth quarter, I would not rule out further opportunistic steps with an eye on the remaining level of unrealized fixed income losses of more than EUR 2 billion on our balance sheet shown at the bottom of the slide. Apart from the strong movement in fixed income, you can see that the unrealized gains within the OCI have changed materially in the category others. This reflects the sale of our stake in Viridium, concluding a highly successful financial investment for Hannover Re. To conclude my remarks, the business performance in the first half of the year was very satisfactory. The positive impact from currency and tax has been used to further strengthen our balance sheet and improve future investment returns. We are well positioned to deliver on our increased target for 2025. And on that note, I'll hand back to you, Clemens, for the comments on the outlook. Clemens Jungsthofel: Thank you, Christian. So despite the significant increase in reserve prudency and the realization of fixed income losses, the reported group net income of close to EUR 2 billion after 9 months is running nicely ahead of our plan. Consequently, we have increased the target to EUR 2.6 billion. The new target assumes a full realization or full utilization of our large loss budget at year-end. As of today, we do have significant budget available to cover potential losses in the remainder of the year. In case not all of this is used by year-end, this might provide the option to continue realizing some fixed income losses and additional flexibility for the assumption setting in our annual reserve review. These comments also need to be considered looking at the updated target for the combined ratio, which is expected to come in below 87% and the ROI target, of course, of around 2.9%. The expectation for the Life & Health service result remains unchanged. And as explained, the FX adjusted growth in P&C revenue is influenced by the refinement in the NDIC calculation. Excluding this effect, the 7% target remains unchanged. And again, this effect does not have any impact on earnings, hence, no reason for any concern here. Altogether, we are confident that we will achieve a net income of EUR 2.6 billion, higher than initially anticipated for the year. Furthermore, I'd say there are probably more upside risks than downside risks for the delivery on our guidance, potentially also providing options to further improve the basis for future earnings growth. So future earnings growth brings us directly to the guidance for the financial year 2026. The new group net income target for 2026 is at least EUR 2.7 billion. This is an increase of 12.5% compared to the initial guidance for 2025. So you can see this as a strong commitment to continued earnings growth also in a slightly more challenging market environment. Looking at the underlying drivers, we expect further growth. Our P&C business, excluding structured reinsurance, is expected to grow in the mid-single-digit percentage range. The reason why we have excluded structured reinsurance here in our guidance is the transactional character of the business. So individual treaties can be a bit bulky. And for 2026, we have an indication for some reductions in session rates on the one hand. And we do continue to see a strong pipeline for new business on the other hand. The combined effect is not easy to predict, and hence, we have decided to exclude this part of our activities from our top line guidance. All in all, it is possible that the revenue development in structured reinsurance might be less dynamic in 2026 than the average of previous years. The combined ratio target for the total P&C business is below 87%. This is an improvement compared to the below 88% target for this year despite the expectation of some softening of rates in the underwriting year 2026. One reason for this is the discount effect, which is expected to be around 9% to 10% in 2026. This is rather stable compared to this year, but higher than initially expected for 2025, so providing some uplift compared to the previous target. Furthermore, the pricing environment is expected to remain on an attractive level overall. So this means that the quality and the profitability of our portfolio will remain strong. As explained earlier, our underlying combined ratio is running well ahead of our target in 2025. This means that also the new target of below 87% does leave room for some pricing pressure, not only in 2026, but also going forward. With regards to our reserving, we feel very comfortable with the overall confidence level of our reserves. The option of adding less to reserve prudency compared to previous years adds further confidence in the ability to deliver on our target. Based on the successful new business generation in 2025 and a healthy pipeline looking forward, we anticipate an increase in reinsurance service result to around EUR 925 million in Life & Health reinsurance. The assumed CSM and risk adjustment release remains unchanged compared to this year at around 11% to 13% for the CSM and 6% to 8% for the risk adjustment. Furthermore, our strategic midterm target for the CSM growth of around 2% remains valid. The return on investment is expected to reach around 3.5%. So altogether, the new guidance highlights Hannover Re's successful and lean business model, our ability to grow and our very strong balance sheet. So this concludes my remarks, and we would be happy to answer your questions. Operator: [Operator Instructions] The first question comes from the line of Shanti Kang from Bank of America, Merrill Lynch. Shanti Kang: So the first one was just on the Q3 model refinements that you made in P&C. Could you just give us some color on what was driving those for this quarter? And then my second question is just going into the renewal period in January, what you're sort of expecting from conditions there? And then my last question is just on the guide for 2026 of that less than 87% combined ratio, and that's got the higher discount rate between 9% and 10%, as you mentioned. What's really driving that assumption? Has the duration of the book changed? Or are you assuming continued long-tail reserve releases? I'd expect that to come down with rates. So any color there would be helpful. Christian Hermelingmeier: Yes, thanks for the question. So I'll take the first one, the Q3 model refinement in the P&C book that relates to the risk adjustment. So there have been some seldom combinations of contracts where the risk adjustment just by the methodology that is applied in the data was larger than the expected losses and the cash flow for the losses. And so we refined that in capping the risk adjustment to the maximum amount of the lost cash flow, so to erase the outliers that we figured out we have here and there in the book. That's basically everything. So no reference to the underlying business itself. Sven Althoff: And when it comes to the renewals, Shanti, I mean, as we said on previous occasions, we are expecting a broadly similar market momentum compared to what we have seen in 2025. We have not seen too many firm order terms from the renewals yet. So there are too few data points to give you an update on that expectations. So from that point of view, we are still expecting similar momentum, as I said, which would be mostly on price and stable on retention levels and terms and conditions. Clemens Jungsthofel: Shanti, it's Clemens here. So on the last one, on the underlying drivers for the 87% combined ratio guidance for 2026, a couple of points here. One is the discount rate, as you mentioned, but there are a couple of other drivers that have led us to go for a slightly lower combined ratio. One is that we -- and it's not that we expect portfolio composition. So we do expect growth rather on a diversified basis also as we go into 2026. It's a reflection on that, we still believe that the quality and the profitability of our portfolio will remain strong even if there is more pricing pressure as we go into 2026. So it's also not led to the fact that we have changed or will change our reserving approach. The prudent reserving approach is unchanged. However, just adding a bit less to the overall confidence level will already have an impact on our -- on the combined ratio. So overall, this is basically a reflection also of the fact that we have seen that the underlying combined ratio was strong in '25, and that has led us to that decision. Operator: The next question comes from the line of Andrew Baker from Goldman Sachs. Andrew Baker: First one, sorry, just to go back to the combined ratio target for '26. I guess, if I look at the '25 original guidance, sort of the less than 88%, you add back in the discounting of 6% to 7%, you get to sort of less than 94% to 95% undiscounted. And my understanding was, and correct me if I'm wrong here, this was sort of a through-the-cycle assumption. And then if I look at the updated guidance, so the less than 87%, you add back in the 9 to 10 points for the discounting, you're sort of less than 96%, 97%. So I guess a couple of points deterioration on the undiscounted. I hear what you're saying in terms of some of that pricing. But I guess I thought that was in the original target. So maybe just help me think through or should I be thinking about that undiscounted combined ratio or not? And then I guess, as you're looking at the 9% to 10% discounting for next year, is this still in excess of the [ iffy ]? And if so, should we expect sort of further prudent building within the less than 87% for next year? Clemens Jungsthofel: Andrew, just briefly, I'll start and then probably Christian can also complement. And that is, in fact, the discount and the, let's say, the management of the volatility of the discount, which we have done in the past, also have a compensating effect. So that had an impact on our underlying combined ratio last year. As you know, we -- it was a tailwind when you compare the discount impact versus the unwind of that discount. And we have also -- we've always taken the approach to not take advantage of that tailwind, but increase our loss assumptions in roughly in the sort of size of that delta. That has also fed into our 2026 combined ratio assumptions. So there is -- and I'm just looking at Christian, there is still expected to be a slight tailwind. So therefore, that will also have an impact on the combined ratio in our assumptions. So there is a smoothing impact overall if we look at the combined ratio. Christian Hermelingmeier: Yes, Andrew, and I can absolutely confirm this view going forward. So as Clemens also briefly mentioned, we think with our combined ratio guidance more over the cycle and midterm, so this has not changed here. So this is no short-term impact from changing interest rates. This is really just the overall balance of profitability and the positive impact that we currently still see. We are in 2025, around 2% of this tailwind. This is well covered by our very prudent and conservative reserving. Operator: We now have a question from the line of Kamran Hossain from JPMorgan. Kamran Hossain: Two questions. The first one is just on the decision-making process around some of the financial steering in the quarter. I hear what you're saying on taking -- adding a little bit less prudence into the reserves and doing more on kind of realizing losses and therefore, allowing the fixed income to, I guess, returns to pick up going forward. What's the decision-making behind that? Was there really -- is it an either/or? Could you do kind of more -- could you have done more reserving and less realized losses? Or is this a sign that you're reaching the top of what might be like an acceptable level of prudence in your reserves to auditors so you can't really add that much more, so you're choosing to do other things. The second question is just on the guidance on the [ HA ]. This is not a complaint at all. I can't remember in all my years when you've guided above consensus, so clearly very positive. But why now? You talked about -- over the course of the last couple of years, you talked about keeping the combined ratio stable. I think earlier in the year, we heard it might have been 88% for the medium term, and now it's moving to 87%. Just trying to understand kind of why now. And is the 87% now the medium-term guidance of it's not going to get worse than that for the medium term? Christian Hermelingmeier: Yes. Thank you, Kamran. Christian here. I'll take the first one. So you asked for the decision-making process, and there is no fixed rule. There is no automatism and there's also no either/or. So we have to assess the business, look at the development, and we can pronounce one measure over the other or we could balance both, and I would explicitly not rule that out for the future. So here, as we are already at a quite comfortable reserving level for our P&C business, we decided to focus more and act a bit opportunistically to lock in the higher interest rates. But this is -- and I want to emphasize this, there is no sign at all that we reach the maximum level of reserves or something like this. So there is still room to continue with our very prudent reserving approach also in the future, and we will see how this is used also for the rest of the year. Clemens Jungsthofel: Kamran, just on the overall guidance for 2026 and to add a bit of color here. So you should still see this guidance, the way we come up with the overall guidance has not changed at all compared to previous years. So you should still see this guidance in light of having built in some resilience, some level of prudency into that overall guidance also for 2026. I think this is a reflection of a strong underlying result, both coming [indiscernible] and Life & Health. It has allowed us, particularly in the third quarter, as you would have noticed come to realize some losses on the fixed income side, as you said, that will, of course, come through over the next 1 or 2, 3 years. So given the duration of the portfolio, we will see some of that increased run rate in our fixed income portfolio already into next year. So that has driven a bit our overall guidance for 2026. On the combined ratio, in particular, this is also a reflection of that we've seen a strong underlying combined ratio this year. Then we have the discount impact again, which is smoothened to some extent by way of not taking full advantage. And overall, we wanted to bring it, in fact, to a more realistic combined ratio. Still no change in prudency when it comes to our reserving approach, but we do this consider as a more stable combined ratio, a consistent combined ratio also over the midterm. So through the cycle, that's how you can read it. Operator: The next question comes from the line of Chris Hartwell from Autonomous Research. Chris Hartwell: Just a couple of quick questions. First one is on the Life side. New business appeared quite strong in the quarter. Just wondering if you could give a little bit more color on that. And secondly, probably a little bit of an extension to the previous question from Kamran. You commented that the target for 2025 is not a reflection of the loss benefit so far. And I guess I was a bit intrigued by your comment around more upside risk than downside for forward earnings guidance, particularly given, I guess, the historical nature of finding either realized losses or prudence or so on. So I was just again wondering on your sort of thought process if Q4 does or doesn't throw up anything particularly exciting on the loss front? And if I can have a sort of part B on that second one. You also sort of commented about Melissa being sort of contained within budget. But given how much budget you have still available from the first 9 months, that seems to put a number in the range of like 0 to almost EUR 500 million. So I was wondering if you can give a little bit more color on your Melissa exposure. Claude Chevre: Yes. Maybe let me -- it's Claude here. Let me start with the Life & Health question on the new business. This is really, as Christian already alluded to, it's the result of one -- mainly the result of one bigger transaction that we have written in Q3. And as you know, the new business CSM Life & Health is transactional, and this is really depending on some bigger transactions. This is the case here in Q3. Clemens Jungsthofel: Chris, on the guidance for 2025. So if we were observing another benign fourth quarter, mentioned there's still quite some budget left for the fourth quarter. So if that would be the case, as Christian said, I think there are mainly 2 things that we will consider at year-end. One is, of course, further realization acceleration of fixed income unrealized losses, which will support future earnings growth. Second, we do feel comfortable with our reserve level now. I think we significantly built reserve resiliency over the last couple of years, but there's still some room to increase those further. At the same time, I wouldn't fully rule out that some of that potential tailwind that we might see touch wood on Q4 would also have an impact on the P&L. But again, that's something to consider late in the year. Sven Althoff: Yes. And then on Melissa, Chris, it's Sven, I don't have a number for you yet. It's still early days. So we are still gathering all the information. But to narrow the range a little bit for you, if you look at the EUR 450 million unutilized budget for Q3, we are not expecting Melissa to use all of this EUR 450 million. On the other hand, we expect this to be a 3-digit loss for our share. And Jamaica, from a territory point of view, is where we have a slightly above average market share. So I hope that gives you a little bit of color, but we don't expect that the EUR 450 million unutilized budget is fully used for Melissa. Operator: We now have a question from the line of Darius Satkauskas from KBW. Darius Satkauskas: Can you tell us what was the market impact in the quarter in your Solvency II ratio? And then the second question is, I know you sort of carried the reserves in Life & Health as best estimate. But obviously, you're quite conservative in your assumptions. So I'm just wondering how much of the new business loss component impact in Life & Health would you attribute to building prudence in regards to China morbidity and what was needed due to the underlying trends? Christian Hermelingmeier: Darius, Christian, I'll take the first one. On Solvency, if I got you right, you asked for the impact of the -- market impact on the Solvency ratio. And there, I can say that the impact of risk-free rate and spreads together were rather neutral. Claude Chevre: And this brings us to your question on the Life & Health loss component. I mean the new business loss component, as we said, is very small. It's just about EUR 10 million. And the rest of the loss component that you were referring to the Chinese morbidity business, Greater China morbidity business is approximately 50% of this is coming from the Chinese morbidity business. Darius Satkauskas: So my question is more, should we see it as sort of reserve strengthening? Or is there an element of prudence in that number? And how much... Claude Chevre: Sorry, I got you. No, it's really an element of prudence. We did it via the risk adjustment. So it is pure prudency. Operator: The next question comes from the line of Iain Pearce from BNP Paribas. Iain Pearce: The first one was just on the insurance revenue in P&C. Obviously, that was quite a big miss. But if you could just give us a walk so we can understand sort of the different contributing factors because how much was NDIC, how much FX and how much was due to some large contract impacts that I think you flagged? And also, can you give us some guidance for how much NDIC impact you would expect in Q4? And if there's any expected to roll into Q1, Q2 next year as well? And then the second one was just on the discounting benefit, obviously slightly higher discounting benefits for next year. Could you just explain sort of why you're expecting that given where interest rates are? And then the third one, just on the tax rate in the quarter, that was obviously very low. Could you just give us a bit of an expectation as to what drove that and if anything to go forward to think about with tax rates? Christian Hermelingmeier: Okay. Iain, I'll take the 3 questions here. So first, on the insurance revenue in P&C, just to give you the walk again. So we had an FX impact of roughly 2%, and the NDIC impact was year-to-date around 7.5%. And I mean, you can do the math yourself, I know, but it's roughly EUR 1 billion of impact. And I would expect that we see not the same amount for the fourth quarter. It will go down substantially. And for Q1 and Q2 the next year, I would virtually expect that it's just -- yes, not substantial or relevant anymore. And the last impact that I mentioned was the timing of booking of some larger contracts. And this is an amount of a bit more than EUR 100 million, so 0.5 impact on the gross rate in P&C. The next question was regarding the discount rate. And here, yes, you referred to the capital markets and where rates currently are. But here, you have to see that we are talking about the earn-through of the interest rate. So we look not just at the very current renewals, but we look at more or less 2 to 3 underwriting years that we see here in the earnings pattern. And so we still see some catch-up for the interest rate environment. The last question referred to the high -- or the low tax rate, so a high one-off impact here. And this is the coming reform of the German corporate income tax. So to remind you all, starting in 2028, the corporate income tax in Germany will be lowered by 1 percentage point each year for consecutive 5 years. And this is the reason why we could release a substantial amount from our deferred tax liability that we carry under IFRS. And so this is a bit more than 8 percentage point positive one-off impact. And yes, as I said, it's a one-off. Operator: The next question comes from the line of Vinit Malhotra from Mediobanca. Vinit Malhotra: Some hopefully, 3 quick ones, sorry. In the combined ratio, I'm just curious, the slightly lower prudence in 3Q, where obviously, 3Q was also as, let's say, good a quarter as 2Q. And maybe it's a little bit of a follow-up here. But you said, obviously, you had no compulsion, no restrictions on reserving and prudence. And I'm just curious, was there any reason that you kept the prudence a bit lower in Q3? So that's the first question. Second question is on the top line for next year. I mean, from your comments about structured, which I understand is hard to predict. But if you could just comment what's changing in that area? Why is it that -- why do you think that this is becoming a little bit of a may be a headwind even to the growth, if my understanding of your comment is correct. And lastly, this kind of step-up in realizing bond losses, I think in the CMD or Investor Day of last month, we talked about maybe 10 basis points of pickup in yield. With these measures, could we expect that to kind of go up a little bit because that's hopefully the motivation behind that? Christian Hermelingmeier: Yes. Thank you, Vinit, for your questions. And I'll comment on the first one. So you asked for the lower prudency reserves in Q3 stand-alone. And I can see there are no restrictions that drove our decision here. But I would look more for the full 9 months of the year. And as you know, this already increased our resiliency in the reserves substantially. So from the overall view, it was a good opportunity to now shift a bit more to focusing on the investment side and use opportunistically the realization of hidden losses to increase the resiliency here and fuel a bit the future earnings by that measure. And maybe I directly jump to the third one and take that also. So as you said, and I elaborated on that on the Investors Day, we expect just from the rollover from our investment book, roughly 10 basis points increased running yield each year going forward. And you are completely right with your assumption by the over EUR 300 million of realizations we did in the 3 months. This will give another upside of around 7 to 8 basis points would be my rough guess. And this is already also reflected in the new guidance on the ROI. We started in 2025 with a guidance of 3.2%, and now we face 3.5% for 2026. And one of the drivers here is exactly the realization of losses. Sven Althoff: Yes, Vinit, and then on the structured side, and please keep in mind, the guidance we have given is for '26 only. It's not an over-the-cycle statement we are making on the structured side. But I mean, some of the buying when it comes to risk remote reinsurance can be transitional. So when we have looked at the guidance for next year, we had a few clients telling us that they will reduce their sessions. That does not necessarily mean that our market share will reduce more the opposite, very often in a situation where a client is reducing the session, our signed line is protected better compared to the average. But nonetheless, given reduced sessions, we have a little bit of a headwind. On the other hand, we can say that the demand for structured products is still strong. So we have a very good pipeline. We have already closed a few transactions, but as part of the pipeline, there are still quite a number of deals where the negotiations are not such that we can say with 100% confidence that we will close the transaction. And therefore, given the bulkiness of the business, to be on the cautious side, we have decided to let you know that the guidance is for the traditional business only, and that we have to wait and see the outcome on the structural side of things. Operator: The next question comes from the line of Will Hardcastle from UBS. William Hardcastle: The first one is coming back, I'm afraid, on the uplift in discount rate, 3 percentage points year-on-year. It's a really large uplift. I appreciate you said to Iain's question, it's a 3-year rolling on locked-in rates. Is there anything else underneath that's caused that? It seems like a huge jump. The second one is it's really tough to unpick the combined ratio guide year-on-year. I guess you're saying it's more of a cross-cycle guide almost. Is that right? And you're willing to say -- are you willing to say essentially that you'd be operating better than that cross cycle underneath the bonnet at the moment and for 2026? I'm just trying to work it out because you've improved at 1 point. There's 3 points more discounting benefit. You're suggesting that reserving prudency won't need to be as much additions either. So you might have something like 5 points of improvement year-on-year just from those things. So I'm trying to back out essentially what's the year-on-year deterioration that you're assuming in it from an underlying level. Are you able to help us out on that? Christian Hermelingmeier: Yes. Thanks, Will. And let me start looking at the discount again, and that's absolutely true. That's a substantial move if we just compare the numbers. But as I said, there are different elements here driving this. And one is the earn through we see here, I already mentioned from the different up to 3 underwriting years. And of course, we also see the reserve increases and the reserve actions here. So as we added and not just expect this for 2025 and the numbers on reserve and prudency buildup also for 2024, this is predominantly done in the long tail and very long tail lines as there is also the most substantial portion of the reserves. And of course, this also drives the duration of the overall portfolio a bit and gives another increase a bit like self-feeding on the discount increase. So it's not the one driver. It's really a composition of that. And last, I would also mention that as we now have quite some experience on IFRS 17 and IFRS 9, I think we are also bit more confident in doing forecasts and trying to utilize our models and our predictions with the methodology here. Clemens Jungsthofel: Will, and on the combined ratio, yes, as you mentioned, it is a mix of certain factors that are all meant together when we looked at it to bring us, in fact, to a running combined ratio, a guided combined ratio that is to be viewed over the cycle, really midterm to bring us to a more stable number. Again, one of the driving factors is the discount rate, yes, but also potential pricing and rate movements as we go into 2026. So it's also a reflection on the quality diversification of the book, of course. So hence, the underlying combined ratio has been very strong in 2025. So you should also see this combined ratio being, again, a bit more realistic. However, it gives also room for pricing dynamics as we go into 2026 or even beyond that. William Hardcastle: So I guess just to verify on that, do you think 2026 is likely a better than cross cycle, all else equal? Clemens Jungsthofel: On the combined ratio, you mean or? William Hardcastle: Yes, on that versus 87%. Clemens Jungsthofel: Yes. I mean the underlying combined ratio is expected to be below the 87%, of course. But again, it allows for some prudency depending on how the renewal goes, how the pricing environment will change. Operator: We now have a question from the line of Roland Pfaender from ODDO BHF. Roland Pfänder: Two questions on Life side, please. You had quite solid results on the Life new business in this quarter. Could you talk a little bit about the composition? Was it more mortality, longevity or financial solutions in the end? Then secondly, reinsurance service result, you added EUR 50 million towards '26 in your guidance. Is this entirely fueled by a better loss component? And maybe you could elaborate a little bit about your expectations regarding loss component going into next year? Claude Chevre: Yes. Thank you very much. It's Claude talking. So you talk about the new business CSM and in particular about Q3, I guess. Again, I said it before already, it's driven by one larger transaction, and this transaction is coming from the financial solutions business. So that's the question to your first -- the answer to the first question. Then afterwards, the increased reinsurance services of EUR 50 million is mainly driven by the increase of our business in general. As I told you probably in the Investors Day, I don't know whether you were there, with the size of our portfolio, you always have to expect some loss component, additional loss component, the same as you can expect some experience variances and changes in estimates. We have obviously included some prudency in this figure that we have shown there, but still it's coming really out of the growth of the Life & Health business. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Clemens Jungsthofel for any closing remarks. Clemens Jungsthofel: Yes. Thank you very much for your interest this morning. Just to reiterate, I guess, overall, the new guidance highlights Hannover Re's successful and lean business model. That lean business model will support further efficient growth in the future, together with our strong -- very strong balance sheet, I'd say, that will allow us to grow our earnings throughout the cycle. And together with these capital returns, this will sustainably create value for our shareholders. And with that, thank you again, and speak soon.
Operator: Ladies and gentlemen, welcome to the Voestalpine Publication First Half Business Year 2025-'26 Conference Call. I'm Mortz, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Peter Fleischer. Please go ahead, sir. Peter Fleischer: Thank you very much. Good afternoon, ladies and gentlemen, for our first half 2025, 2026 results announcement. With me is our CEO, Herbert Eibensteiner; and the CFO, Gerald Mayer. We will give you a brief overview of what has happened in the first half, and we will be very happy to answer your questions afterwards. Herbert Eibensteiner: Yes. Good afternoon, ladies and gentlemen. Let me start with a brief introduction of Voestalpine, for those who don't know us. Voestalpine is a global special metals and steel and industrial group. What we combine is this production and processing and engineering competence. And from this expertise, we develop innovative special solution to our customers to improve their competitiveness and that makes us the leading partner for high-tech industries with high entry barriers, such as railway systems, automotive or aerospace. And we are stock-listed since 1995, and we are committed to value creation for our shareholders. Let me start with the global economic environment in the first half of the year. And what we see is that North America, we're still relatively robust economic growth, a lot of investments in the technology sector. Now I would say, industry is -- industry development is a bit lower at the moment. When we look at Europe, we have this subdued economic development. And at the moment, we are somewhat between cautious optimism and continuing uncertainty. When we come to Asia, mostly China is important for us, a relatively stable economic development this growth in China is supported by high export in the rest of the world. We will talk about tariffs afterwards. And we see a weaker development of the domestic economy. In South America, Brazil for us, very important. We see a reduction of the economic environment, why we have high interest rates and a very strong competition from Chinese import. This is a country with no trade restrictions and a target of the Chinese exports. What are the highlights of this first half? For sure, the U.S. tariffs, which is led to uncertainty in the economy worldwide. And what we see, I have mentioned that before, this is noticeable in North America as well with a more cautious investments in industrial business so far. We can see that at the moment. For Voestalpine, these tariffs -- we are affected by these tariffs. We can say this is manageable for us. And we see a high double-digit EBITDA impact for this business year coming from the U.S. tariffs. So all in all, the major economic trends are unchanged. We have, I would say, we delivered a very solid result for this first half year, considering the environment we are in, the earnings are as expected. We had a strong cash flow development and balance sheet is very solid. So far, Gerald will elaborate on that later on. All our reorganization and efficiency measures are very well on track. And decarbonization, greentec steel projects are on time and on budget, so far, so good. And what we see at the moment is we can expect a tailwind from the announced EU safeguard measures and CBAM, and the implementation will be from our perspective in the next year. We'll discuss that anyway afterwards. The outlook and the guidance is unchanged. So all these activities and impact from the tariffs included in the guidance, but it's unchanged. So only 4 interesting project that you know that we -- besides tariffs. There are also projects in Voestalpine. So we had the groundbreaking for a new R&D project. So in the R&D laboratories, we see that we can produce hydrogen-based pig iron, and that's the reason why we want to start to erect a demonstration plant in Linz and we have already started, start of production will be in 2 years in 2027. And after 2 years, we know if this process is competitive. And we are -- we do that with very good partners with Primemetals, it's an engineering company in Rio Tinto, you know Rio Tinto, anyway. So because I will touch this high bay warehouse topic afterwards. So we got the major project in Turkey for a logistics service provider, start of production, end of this year and completion in 2027. Just to give you some figures. This is 250 meters long, 90 meters wide, 40 meters high, more than 11,000 tonnes of steel profiles. So that's these high-bay warehouses we are building, and this market is still growing and high profitable for us. But we also think about our capacity expansion in the U.S. We have contracts with 2 international truck OEMs in the U.S. production for the U.S. market for site members. So production facilities completed, we are delivering the machines so far, and we will start production in summer 2026. By the way, we do the same business in Europe in Belgium for European OEMs. And on the right-hand side, our Railway System business just as an example because it's coming from Austria, we got the contract for the Koralm tunnel, which is the sixth longest tunnel in the world, 33 kilometers, top speed 250-kilometer per hour, and this is a very interesting project with 290-kilometer rails and 235 high-speed turnouts on this way from Graz to Klagenfurt. So this is the example of projects we are doing, not only in Austria but all over the world. Let me come to the divisions. Steel Division, very strong performance of our flat steel business in a relatively difficult market, why we are high utilized in this business, we have good orders, good production and we have projects in our heavy plate business. And the demand from the automotive sector is and was very good and also from the energy sectors and other markets remains stable on the existing level, I would say, when it comes to building mechanical engineering and so on which is on lower levels. General market sentiment has improved after the announcement of the EU safeguard measures and the U.S. tariffs is not very important for Steel Division. It's negligible for this division. And when you look at the EBITDA margin, it's more than 13% so far. I come to the High Performance Metals Division. So it's a bit different. We have lower demand with reduced utilization of all our special steel mills worldwide, tooling and industrials muted and also in Europe, especially intense competition. This was the reason why we sold Buderus, oil and gas is lower by low exploration activities. And aerospace, which is the bigger part of this division, very strong. We got new orders, and we see a continued upward trend. We do a lot of reorganization. They are streamlining their global sales network. We have working capital measures there. And intense efficiency and cost-cutting programs in execution, and we see the first positive results in the course of the second half of the year. And the U.S. tariffs here, yes, again, affected, but manageable most affected, the Swedish and Brazilian special steel mills. But EBITDA margin of 7.6% is, I think, very solid in this given environment. Metal Engineering is -- Railway Systems continue with very strong performance. And I will touch that in the next slide. We see a mixed picture in our industrial systems business, and we have also implemented efficiency programs, wire is stable on very low levels, I would say. And we see also a very low demand from seamless tubes and welding consumables, worldwide business is relatively stable on solid levels. And this seamless tubes business is most affected in our Voestalpine Group by this tariff and has a negative impact. So we have to reduce volumes in this business. But still 9.1% EBITDA margin and the most important contributor to this result is Railway Systems, which is an integral part, the biggest part of Metal Engineering. And also, I would say, a business which is a driver of our long-term growth strategy. Turnout systems, we are a world market leader there with 60% of sales of railway systems. We see all over the world a very good demand in all our relevant markets, rail technology, 30%. It's a more European business, strong, stable demand in Europe. Fixation, new business for us, but important solid development in Europe, particular in CEE. And signaling, fast-growing business, and it's very important to get such complex project, as I've mentioned before in Koralm Tunnel. It has a very stable demand and trends in Europe and also a growing business in Middle East and with this 10% -- more than 10% EBITDA, the biggest contributor. Metal Forming Division, automotive components, lower production in Europe. So it's the division, which is most affected by the lower car production. We have reorganization projects in execution, Tubes & Sections, overall, solid, demand slowed a bit after the summer, but we will see an improvement until the end of the year. Precision Strip, surprisingly improved in the course of the first half of the year. So I think they developed quite well under the given environment. And as I mentioned before, Warehouse & Rack Solutions, very strong development and the order book for the next 2 years is very strong. And in this division we have no relevant impact from the tariffs. And the EBITDA level is below the average of the group with 6.3%. And now I would hand over to Gerald to lead us through the figures. Gerald Mayer: Yes, ladies and gentlemen. Herbert provided an overview of the latest developments in our markets and business divisions. In the following minutes, I will outline how these developments are reflected in our financials. And I would like to start with this overview. Revenues declined by EUR 450 million or 5.6%. All 4 divisions contributed less operationally compared to the previous year of the total degrees about EUR 300 million attributable to lower price levels in particular and EUR 150 million are related to the sale of our former subsidiary, Buderus Edelstahl. Despite the decline in revenue, our results are above the first half of '25, '25. Yes, and in particular, High Performance Metals Division achieved stronger contributions. This, of course, was also related to the sale of Buderus where we had a one-off impact last year of EUR 81 million. Steel Division was fairly stable. Metal Engineering and Metal Forming Division recorded lower earnings. As a result our margins have improved. On the one side, of course, we had lower revenues. On the other side, we have this increased result levels. Of course, this resulted then in increased margins. Our interest income is -- and if you do the math here, you will see that it is stronger than last year, more than EUR 20 million roughly related to a significantly reduced net debt position. And this, combined with lower interest rates supported our interest income. So profit before tax at EUR 278 million compared to EUR 248 million last year. Profit after tax, you see an increase there of 8.6%. So this is below this plus EUR 12 million in profit before tax. The reason is -- the main reason is that we saw a higher tax rate there. And this is linked to losses we had in Germany and the U.S. and in Brazil that we did not recognize deferred tax assets. I prepared 2 bridges. The first one you see on the Slide 14. You see the half year comparison and the impact of pricing, so means minus EUR 270 million, which was more or less, let's say, 2/3 of it was compensated by lower raw material prices. So the gross margin -- in gross margin, we lost roughly EUR 80 million. So this is what you can see in this slide, in this bridge. And this EUR 80 million were more or less completely associated to our Steel Division. There is a minor impact also from Metal Forming in HPM Division and the Metal Engineering is plus/minus 0. You see a positive impact from mix and volume. Volume is, in particular, associated to a strong performance in Steel Division, where we had stronger volumes in the first half compared to the previous year in HPM division. volumes were down slightly, and we saw some negative mix impact in Metal Engineering Division. But all in all, it adds up to plus EUR 45 million. Miscellaneous, plus EUR 39 million. As I mentioned here on this slide, there we, of course, have the positive impact, EUR 81 million from Buderus sale last year, this one-offs, we communicated 1 year ago. And of course, there are also included negative impacts from U.S. tariffs, cost inflationary items and also, of course, a positive impact from cost reduction programs, CIP programs and so on. Last time, I prepared the bridge according to our divisional organization. You see here that Steel Division was very strong, by the way, also in the first half last year. It was very strong in Q1 last year. And this year, the full first half was very strong, and in particular, second quarter was very solid. You see the increase of EUR 87 million in HPM division, mainly associated to what I mentioned before, means the one-off from the sale of Buderus last year, which had a negative impact. The environment as Herbert discussed is still difficult, but our measures are working out quite well. And so we are a little bit above operationally the prior year level. Metal Engineering, down EUR 61 million. We have 4 business units in there. Of course, for all of them, it's a little bit weaker than it was last year in the first quarter, but -- in the first half. But the main impact, of course, come from Tubulars business where we are highly affected by the tariff situation in the U.S. and in our wire division, we are somehow suffering from weaker markets. Metal Forming is down EUR 23 million compared to prior year. We have some headwinds in the markets in our Tubes & Sections business, also still in Automotive Components business, we're also restructuring that area. Herbert also talked about that before. What was very strong again was Warehouse & Rack Solutions. And as we heard before, also in Precision Strip, we have some positive developments there. So in EBITDA, we are slightly above prior year level. And I would say, given the environment, a satisfying performance. Cash flow statement, Slide 16, I would say, a very positive development there. Cash flow from results, EUR 687 million compared to EUR 481 million. Of course, we had a positive contribution of a higher net result there on the one side. On the other side, we have lower interest rates and interest payments. On the one side, our debt is down. Interest rates came down. On the other side, we also -- we issued a bond last year and EUR 20 million of these payments for interest in the second half and last year, definitely, the bulk of this was in the first half. It's EUR 20 million out of that. Prior year, we also had a one-off there. We had interest payments for prior periods in there of more than EUR 100 million. So this was a burden to this prior year cash flow from results. Very strong again is our changes in net working capital, plus EUR 96 million there. So we managed in the last 12 months to release more than EUR 500 million of our net working capital there. And then also as roughly EUR 50 million are associated to lower inventory levels out of this EUR 96 million. Cash flow from operating activities, this adds then up to EUR 783 million compared to EUR 346 million prior year, it means more than doubled this number. Cash flow from investing activities, EUR 510 million last year, EUR 490 million this year, roughly. So you see there that we are not at the run rate where we perhaps -- or you assume perhaps that we are. So our outlook is still EUR 150 million for the year as a whole. We are on time and on budget, doing -- and I'm talking about our greentec steel or as we call them Transnet projects, our decarbonization projects in Linz and Donawitz. And as I mentioned before, our guidance for this year still will be EUR 100 million, EUR 150 million. So there is more to come until end of this year. So this adds up then to free cash flow for this period of EUR 300 million, and this is one of the best performances we had for our first half of Voestalpine. Yes. Having said that, we still, of course, have a solid equity base there with an equity of EUR 7.5 billion, equity ratio of 49%. Gearing ratio came down to roughly 20%. And as I also mentioned here, so there are no major redemptions until end of this year. So everything is solid. And yes, we can build on that for all the future challenges we have. Herbert Eibensteiner: So let me come to the outlook. For the rest of the year, you know that the uncertainty is still there in the course of this U.S. tariffs and all the weak economies in Europe. So the existing trends in the major economies will more or less continue, mechanical engineering, construction, consumer goods at low level, but stable automotive industry is divided also for the rest of the year. Components is muted and with all the restructuring measures, and we see solid demand for the Steel Division, for high-quality steel. And energy market is mixed, exploration is very low, and our OCTG business is affected by the tariffs anyway. But what we see is for the remainder of the year, good projects from pipeline business. And as I mentioned before, ongoing good development in railway systems, in aerospace and in warehouse technology and all the reorganization projects are well on track. We will see, especially in High Performance Metals and even more in Metal Forming the first positive results to the -- at the end of the year. And we think that the announced safeguard measures will lead to a more positive view for the upcoming year for the Steel Division and the negative effects included in the guidance as far as we know at this time. And that's the reason why we confirm our guidance, and we expect an EBITDA between EUR 1.4 billion and EUR 1.55 billion for Voestalpine till the end of the year. I'm happy, thank you for your attention, and we will be happy to answer your questions. Operator: [Operator Instructions] And the first question comes from Tristan Gresser from BNP Paribas. Tristan Gresser: I have 2. The first one, if you could discuss a little bit the ongoing contract negotiations with OEMs. Are they taking place earlier or later this year? Do you think there is a potential for a triple-digit increase for next year? And if you could just remind us how much of your steel portfolio is now on annual contract? And how much of that is renegotiated in January? That would be my first question. Herbert Eibensteiner: We have roughly 2 million tonnes in auto, and 40% of that is annual contracts. So this is the figure we are talking about. At the moment, I would say we are just at the beginning of the negotiations. And I think it's -- when you look at the steel prices in the course of the years, we have now a very positive momentum for the next year. Normally, OEMs would ask for a reduction. And now we are fighting that we get more, that's clear. But you can imagine that at this time, with the fantasy of CBAM and safeguard, it will be a very tough negotiation and wouldn't be surprised that we wouldn't -- that we will -- or we won't have a final result at the end of December, I would count for January. So I think it's -- they are very, very tough discussions, I assume. Tristan Gresser: Okay. No, that's very clear. And my second question is on the steel action plan. If tomorrow, the European Commission mandates that 60% of steel in public procurement should now be European-made low carbon steel. How big of an impact is it? Is that a game changer, how big it is for the industry, how big is public procurement in general for steel in Europe, but also for you, more particular for your own business, would it have an impact? And if you can elaborate a bit on that, that would be great. Herbert Eibensteiner: In general, we have this 3 parts of -- how should I say, positive things in our environment, this is safeguard, this is CBAM and this green market activity. So all in all, I think it's positive for the steel -- for the Steel Division. And the public markets, we are not really in the building industry or not that much in the building industry. But when it comes to a green steel market, this is a very positive for us because we are we will be one of the first who can provide, in 2027, green steel or CO2 reduced steel. So I think that will be a very positive for Voestalpine in particular. Tristan Gresser: Okay. And just a quick follow-up on automotive demand. Would you say public buying, public purchasing is a big share or a single-digit share of the total demand? Or any color there? Herbert Eibensteiner: Well, it's difficult. I think it's, at the moment, very difficult to say. Operator: The next question comes from Bastian Synagowitz from Deutsche Bank. Bastian Synagowitz: I'll start off with the Metals Engineering business and the rails business here in particular. So first of all, I'm wondering what is your conviction here on a rebound in the German rail sector next year. I guess this year, you're seeing a bit of a pause, I guess, due to the budget constraints. But do you see any early indications or evidence from projects or tenders coming up already at this point? That's my first question. Herbert Eibensteiner: Yes. There is business in the German market. We had a relatively good year in the German market and I think that we -- there are projects in -- also in the next years, we have booked, I think that we will realize that. But we know also that Deutsche Bahn is in a reorganization phase that we can -- we may face one or the other postponed projects that can be the case. But what we have heard that in this infrastructure program that a bigger portion than expected is allocated to railway infrastructure, and this will come in 2027. And this is a very positive news for Voestalpine knowing that we are a relevant supplier for this railway infrastructure packages. . Bastian Synagowitz: Okay. That's very clear. Then my next question is on your free cash flow, which I think has been very impressive this quarter. Now I guess the third quarter is usually a little bit weaker due to the working capital you typically absorb from your customers, which have a different financial year. So can you please give us a little bit of color. First of all, what do you expect for Q3 on the free cash flow side and whether the EUR 350 million free cash flow target for the full year is more a floor or a ceiling? And then maybe also related to this, is there any other item we need to consider for the cash flow this year? I guess you will have probably some restructuring expenses. And do you think that it is pretty safe to say that the year-end net debt will be at least on the level of the second quarter? And maybe also, I guess, what is your conviction here for also generating decent underlying cash flow next year? Gerald Mayer: I would like to take this question. First of all, I think many things went good and right in our first half of this year. Of course, as I also explained during my presentation, in terms of investing cash flow, cash flow from investing activities, we are not at the run rate to reach this EUR 1.15 billion until end of the year, but this is still our plan. So we will catch up there, and this will be a burden to our free cash flow in the second half of the year. Working capital, I think we achieved a lot there. We cannot assume that we simply double what we have in there or even doing more because we released roughly EUR 500 million or even more than EUR 500 million in the last 12 months. So this come somehow to a natural end, I would say. There is potential, potential, I would associate and relates to our HPM division, in particular, they are working hard on that side. So we will -- some releases -- see some releases there. To your question specifically, of course, for the 31st of December, we have many customers. It's their year-end, and we will see an impact. And after my 18 or 19 months here within Voestalpine, this is what I would like or can confirm. So we will see an impact there, which is a negative one in our Q3, that means 31st of December. And you ask specifically the question how I would qualify the EUR 350 million guidance. Is it a floor? I would say, as CFO, I would say, yes, it could be a floor, but there's still some uncertainty there. But I am positive that we will minimum reach this level and for the next year. So we are right now in the phase of doing our planning exercise, we guided for next year. I think it was in our last call, EUR 1.15 billion for CapEx as well. This is up to now unchanged. So I can confirm that. And having said that, we definitely target the positive free cash flow for next year. Operator: [Operator Instructions] The next question comes from Patrick Steiner from ODDO BHF. Patrick Steiner: Patrick Steiner speaking. One remaining from my side. Could you please share with us your view on the High Performance Metals Division. I mean, will you recover profitability to past margin levels? And if yes, how long will it take and what are, in your view, the main drivers to get there? Gerald Mayer: So also for the HPM division, we walked the talk, and as we said the last time, so this is still unchanged our plan. So we expect in the period of the next 3 years that we will see EBITDA levels again we had in the past, I mean EUR 350 million to EUR 400 million. This is our clear target there. The guys there are really working hard restructuring everything in full. This year, what we faced, as also Herbert deliberated was some headwinds also from the market, but the plan, the restructuring plan is absolutely on track, and this is definitely positive. And this is also the reason why they are where they are in terms of profitability in this first half because with this market, this difficult market, I would even have expected a weaker result. But they're doing well. And I'm positive at the end of this sort of crisis, we will see some recovery from the markets. We will do well and we will be on top again. So EUR 350 million to EUR 400 million in 3 years plus, this is what I would assume. Operator: So it looks like there are no further questions at this time. So I would like to turn the conference back over to Peter Fleischer for any closing remarks. Peter Fleischer: Thank you very much, ladies and gentlemen, for the interesting discussion and for your time. Anyway, anyhow, if you come up with any questions, please feel free to give either Gerald or myself a call, and I'm sure we will be able to continue the discussion. Thank you very much so far, and have a good day. Operator: Voestalpine, one step ahead. Ladies and gentlemen, the conference has now concluded, and we may disconnect. Thank you very much for your attendance. Goodbye.
Operator: Ladies and gentlemen, thank you for standing by. I am Jota, your Chorus Call operator. Welcome, and thank you for joining the National Bank of Greece conference call to present and discuss the third quarter 2025 financial results. At this time, I would like to turn the conference over to Mr. Pavlos Mylonas, CEO of National Bank of Greece. Mr. Mylonas, you may now proceed. Paul Mylonas: Good morning, everyone. Welcome to our 9 months 2025 financial results call. I'm joined by Christos Christodoulou, Group CFO; Greg Papagrigoris, Group Head of IR. After my introductory remarks, Christos will go into more detail on our financial performance, and then we will turn to questions and answers. Before we turn to our presentation on the 9-month financial results, let me briefly describe our operating environment, a key driver of our performance. Greece's economy remains on a superior growth trajectory, displaying resilience and adaptability in a highly uncertain external environment with geopolitics, protectionism and fiscal challenges in several countries to name just a few sources of uncertainty. Moreover, I am confident that the positive momentum of the Greek economy will continue, reflecting both fiscal and monetary policy support and solid corporate and household fundamentals, leading to increasing fixed capital formation and buoyant exports on the one hand and healthy private consumption and demand for housing on the other. In fact, leading indicators are overwhelmingly aligned in this regard. Let's turn briefly to the fundamentals of the corporate and household sectors, starting with corporate. Business turnover and profits remain on a steady upward trend with gross fixed capital formation, excluding construction, reaching an all-time high, indeed, near European levels, reflecting high capacity utilization rates in both services and industry as well as favorable credit conditions. Indeed, in the first 9 months of 2025, net credit to enterprises has expanded by about EUR 6 billion and is set to accelerate considerably into the fourth quarter, aided by positive seasonality. As regards service and goods exports, tourism is on track to hit a new record high this year while goods exports have held up well despite external headwinds, evidencing the competitiveness of the Greek corporate sector. Turning to households. Labor market conditions remain robust with rising employment supporting household income and consumption and the reduction in the unemployment rate to a 17-year low, boosting consumer confidence. Furthermore, real wages have surpassed pre-COVID levels and continue to grow. Looking forward, an additional boost to activity will arise from the normalization of Greece's primary surplus from last year's 4.7% of GDP to an expected 3.6% in 2025 and a budgeted 2.8% in 2026, mainly through tax cuts to the middle class. Furthermore, public spending through the RFNs and the public investment budget is expected to reach 6.5% of GDP in 2026, from nearly 6% this year with the related CapEx remaining close to all-time highs for the next couple of years. I believe the above described an economy with sound fundamentals, able to overcome external headwinds and result in GDP growth exceeding 2% for the next couple of years, thus requiring significant financing from the banking system. Now let me turn to our financial results. Against the backdrop of sharp benchmark rate normalization, 200 basis points off from the peak and 150 basis points lower in average terms in the first 9 months of 2025, we continued to deliver a solid financial performance in line with our recently upgraded full year 2025 financial targets. Specifically, our profit after tax in the 9 months reached EUR 1 billion. And our return on tangible equity for the same period stood at 16.1% or 15.6% if we normalize for trading income. And if one adjusts for our large capital buffers, return on tangible equity increases to over 20%. I would like to focus on 5 noteworthy points regarding our P&L. First, the NII was broadly flat quarter-on-quarter in Q3, and this quarter should be considered the trough with NII gradually picking up from the fourth quarter unless there's a further ECB rate cut. Key to the success has been the strong loan expansion combined with the reduction in our cost of funding. As regards to the former and the second point I want to emphasize, our stock of loans has expanded by 12% year-on-year or EUR 1.8 billion since the beginning of the year. Factoring in a strong pipeline of over EUR 2 billion of corporate disbursements, which have been approved and a good amount is expected to be disbursed by year-end as well as a sizable pipeline of not yet approved projects, we are confident that we will exceed our recently revised target for a net loan expansion of over EUR 2.5 billion for this year, moving closer to the EUR 3 billion mark rather than the EUR 2.5 billion mark. Third point, fees. They turned in a strong performance despite the impact of state measures. A key driver was a successful distribution of investment products, resulting in continued mutual fund market share gains, executing effectively on our plan to increase fee income to support our core income overall as market rates decline. The highlight in corporate fees is the increased sale of treasury products. An overall observation is that cross-sell efforts for both retail and corporate sides of the business has been steadily improving. Fourth point, our costs, which reflect continued investment in human capital and our goal to be technological and digital leaders at a pan-European level. Regarding the former, we are onboarding new talent as well as rewarding our people with remuneration to match productivity and to provide appropriate incentives. Regarding technology, investment reflects the depth, breadth and speed of change, including the replacement of our core banking system. OpEx also reflects the delayed impact of inflation, the shift to cloud services, the extra burden from regulatory requirements and the care we take with cybersecurity and a tightening labor market for skilled services. Nevertheless, we're achieving a cost-to-income ratio in line with our guidance and one that remains at the low end of the European banking spectrum. Finally, as regards to credit quality, our cost of risk comprising purely of credit risk charges stood at 41 basis points in the 9 months against a revised target of 45 basis points for the full year, reflecting extremely benign asset quality trends. Our goal in this area is to have prudently attained class-leading coverage ratios across stages while at the same time gradually normalize our cost of risk. On this front, there is clearly upside. A few words on another competitive strength of NBG, our capital buffers. Our CET1 ratio reached 19% in September, up by 70 basis points year-to-date, the highest capital creation among our peers despite accumulating for a 60% payout. It is important to remind the investment community of our strategy regarding this excess capital. First, it enhances our strategic optionality as regards to incremental organic growth, including participations in international syndicates in areas of our comparable expertise. Second, it allows us to search for value-accretive opportunities. Third, it allows us to enhance distribution to our shareholders. In this context and in view of a sector-leading payout ratio in the domestic market of 6%, we are distributing EUR 200 million in the form of an interim dividend, again, the highest among Greek peers. The distribution will take place on November 14. A final point, at the time of our full year 2025 results and following the completion of our business and capital plans, we will announce our final payout ratio. Looking ahead, we are well positioned to build further on our strong momentum. Our focus remains on building the foundations for sustainable growth through continued investment in technology and human capital, enhancing the banking experience for our customers through digital transformation and building a stronger and more innovative bank for the future. Our solid capital base, disciplined execution and clear strategic vision give us confidence in our ability to deliver continuous value for our shareholders, supporting Greece's energy transition, infrastructure development and innovation ecosystem. With that, I would like to pass the floor to our Group CFO, Christos, who will provide additional insight to our financial performance before we turn to questions and answers. Christos, over to you. Christos Christodoulou: Thank you, Pavlos. Let me start with the key highlights of our profitability on Slide 13. Our profit after tax for the 9 months of 2025 reached nearly EUR 1 billion after having absorbed the bulk of benchmark rate normalization in our net interest income. This produced a return on tangible equity of 16.1% before adjusting for excess capital or 15.6% normalized for the strong trading gains in the first half of the year, boding well with our full year guidance of over 15%. This performance demonstrates the resilience of our top line to lower interest rates, underpinned by solid loan growth and the sustained momentum in fees. From an earnings per share perspective, we generated an EPS of EUR 1.4 on a normalized basis, aligning with our full year guidance. Going into more detail on Slide 17. Our net interest income came in at EUR 527 million in the third quarter of the year from EUR 531 million in the previous quarter, with the 9-month NII standing at a solid EUR 1.6 billion, down 9.8% year-on-year, reflecting market interest rates moving lower by more than 150 basis points year-on-year. Our net interest margin for the 9 months stood at 284 basis points, comfortably supporting our full year target of 280 basis points. Encouragingly, net interest income in Q3 was only marginally lower quarter-on-quarter as rates normalization decelerated, likely denoting the trough, assuming market rates stabilized at current levels. Quarterly net interest income evolution was supported by the sustained loan growth, the ongoing repricing of our time deposits as well as by the positive contribution of deposit hedges. As shown on Slide 19, term deposit yields dropped by 11 basis points quarter-on-quarter to 154 basis points, leading our total deposit cost to 29 basis points and the total funding cost to just 59 basis points, both at the lowest level in the Greek space. As regards to fee income on Slide 22, year-on-year growth stood at 8% or 14%, excluding the negative impact from state measures on payments. Corporate fees were up by 13% year-on-year, led by lending fees increasing by 30% on the back of strong loan origination. Retail fees were also up by 11% year-on-year on a like-for-like basis, spearheaded by the strong momentum in investment products, up by an impressive 74% year-on-year, driven by strong mutual fund inflows and reflecting our successful cross-selling. Notably, as shown on Slide 8, our market share in mutual funds increased by 3 percentage points year-on-year as time depositors continue to switch towards fee-generating mutual funds, driving our retail funds under management up by EUR 2.2 billion or 34% year-on-year to EUR 8.6 billion. Moving to operating expenses on Slide 23. Costs were up by 6.5% year-on-year, normalizing for variable pay accruals in 2024, allowing for continued investment in human capital through the onboarding of new talent and skills as well as rewarding performance and productivity. Our depreciation charge reflects our sector-leading investments in IT and digital infrastructure, including the replacement of our core banking system with nears completion, delivering multiple benefits in our efficiency, commercial effectiveness, customer experience and cyber-risk security. Moving to G&A. This reflects higher customer experience-related costs and delayed impact from inflationary pressures. All in all, the resilience in our top line, along with our discipline in costs kept our 9-month cost-to-income ratio at low levels by European standards just over 33%, well within our full year guidance of circa 35%. As regards credit risk, benign asset quality trends continued in the third quarter of the year. Our cost of risk dropped further to 37 basis points in Q3, reaffirming our strategy for gradual normalization and limited volatility while we maintained leading coverage levels across stages by European standards. Cost of risk for the 9 months of 2025 came in at 41 basis points, well inside our full year guidance of less than 45 basis points. On Slide 15, our sector-leading capital position, a key comparative strength of NBG enhances our strategic optionality. In the 9 months, our strong profitability drove our core Tier 1 ratio to 19%, 70 basis points higher year-to-date post a payout accrual of 60%, implying a capital surplus of 500 basis points over our internal core Tier 1 capital target of 14%. Similarly, our total capital ratio stood at 21.8% with our MREL ratio at 28.5%, 170 basis points above our MREL target of 26.8%. Factoring in our strong capital generation in the 9 months, we are distributing an interim dividend of EUR 200 million on November 14, the highest in the domestic market. And as Pavlos mentioned earlier, we will be finalizing the payout level for 2025 with our full year financial results. Now let me walk you through the highlights of our balance sheet summarized on Slide 14. Our performing loan book was up by a solid 12% year-on-year, up EUR 1.8 billion year-to-date. This strong performance reflects loan disbursements of EUR 5.7 billion during the first 9 months of the year, 10% higher year-on-year, mainly driven by corporates allocated across key sectors of the economy, including energy and renewables, infrastructure projects, hotels, shipping and transportation. Loan origination dynamics were positive in the retail segments as well with disbursements up by 14% year-on-year to EUR 1.2 billion, driving retail performing exposures 3% higher year-on-year, putting an end to a long period of retail disintermediation as shown on Slide 18. As regards to the fourth quarter of the year, our strong corporate pipeline of approved yet to be disbursed credit in excess of EUR 2 billion, coupled with additional credit coming in, are set to accelerate performing loan expansion considerably, allowing us to exceed our full year target for a loan expansion of over EUR 2.5 billion, moving closer to the EUR 3 billion mark. That, along with positive dynamics on time deposit and repricing and mix will allow Q4 net interest income to edge higher quarter-on-quarter, assuming no further rate cuts. In any case, net interest income recovery will be more evident starting 2026. On the liability side on Slide 19, deposit balances increased by EUR 1.4 billion year-on-year, mainly driven by deposit inflows in low-cost core deposits, up by EUR 1.8 billion year-on-year, leading to a positive mix effect with 81% of our deposits being core. Our class-leading liquidity and funding position, as shown on Slide 21, manifests in a liquidity coverage ratio of 249%, among the highest in Europe, complemented by a loan-to-deposit ratio of 64%, while our ample net cash position is set to fund increasing exposures in interest-bearing assets. Turning to asset quality on Slides 24 to 26. Our group NPEs amounted to just EUR 0.9 billion, reflecting marginal NPE inflows, translating into an NPE ratio of 2.5%. Our leading coverage levels across stages comprise yet another strength of NBG's balance sheet. Summing up, in the 9 months of 2025, we delivered a strong performance with net profit of nearly EUR 1 billion, equivalent to a return on tangible equity of 15.6% before adjusting for excess capital. Looking into the last quarter of the year, we are set to deliver a set of results that comfortably fulfill our targets, putting the theme of lower interest rates behind us as we enter 2026. Leveraging this solid performance and the strength and resilience of our business model, we intend to continue on a disciplined and value-enhancing capital deployment path, balancing increased shareholder distributions with capturing growth opportunities, maintaining strategic optionality and positioning the bank for sustainable growth, greater innovation and long-term value creation. And with that, I would like to open the floor for questions. Operator: The first question comes from the line of Kemeny Gabor with Autonomous Research. Gabor Kemeny: Two questions from me, please. Costs, I believe your recurring cost growth of 6.5% is towards the high end or just above the high end of the range you indicated in your midterm strategy. I would be interested to hear your thoughts on the trajectory from here. If there are any incremental spending -- if there's any incremental spending left on the core banking system or in turn, if you expect any savings from the new system to become visible? And the other point on capital deployment, yes, 19% CET1 ratio, very strong. You are running with close to EUR 2 billion of excess capital by my estimate. So how long would you be willing to run with such very strong excess capital -- or ask the question differently, come Q4, the end of year results, would you consider any action beyond a slightly higher ordinary payout depending on your M&A pipeline? Paul Mylonas: Okay. Thanks for the questions. You're right on costs. It's on the high end of the range we gave. Q4 will probably be the same. Just keep in mind that 2025 was the first year, a long time, we didn't do a voluntary exit scheme. We plan to do so in early 2026. So that will offset some of these trends that you're seeing. Capital deployment. In my remarks, I said that we will tell you any changes in our payout use of excess capital at that time. So please -- until then, there is no change to what we said. Operator: The next question comes from the line of Novosselsky Ilija with Bank of America. Ilija Novosselsky: So two for me, please. So first, there seems to be a bit of a wave of bolt-on acquisitions within Greece. So some of your peers have been quite active in that space. So I just wanted to ask you, especially given that you have a large capital buffer, are you thinking in that direction? So do you think there are some meaningful targets? And if yes, what are you looking for? And number two, if I look at Page #17, and I see your components of NII. So there's been two components of NII increases, which are, number one, your securities; and number two, your deposits, including your NMD hedges. So your securities portfolio, I see is now 28% of your assets. So do you have scope to increase it further? And how should we expect NII from securities to perform from here? And two, your deposits, your term deposits, you stated the new production is at 120 basis points, and there's 16% of your domestic deposits total. So can we expect that you'll get much more benefit in 2026 as well? Paul Mylonas: Let me start with the first question. Christos will take the second. Bolt-on acquisitions, clearly, we're looking for value creation, not transactions for transaction's sake. So within the space of Greece that there are not that many potential. And I clearly will not talk about the bancassurance space, given what's going on there with us there. So within Greece, there isn't that much of a bolt-on acquisition that would require any meaningful capital requirement. Christos. Christos Christodoulou: Okay. I'll take the second question, Ilija. So on NII. So first of all, let me repeat what I said in my remarks that we were happy to see a deceleration in the decrease of the NII reduction quarter-on-quarter, just EUR 4 million in absolute terms from Q2 to EUR 527 million. Securities has been supporting our NII for a long time. So we are currently at around EUR 21 billion in terms of volumes. Opportunistically, we could be seeing to increase a bit more. But I would say if you want the ball figure, what you see currently of an NII from securities in the area of EUR 160 million is a good point of reference. And with regards to deposits, we are enjoying on that front, an improvement in our NII costs. It's EUR 14 million improvement versus the previous quarter. It's about half and half from time deposit repricing and mix. And the other one is coming from our deposit hedges. So there is still some upside to be seen. You picked it nicely. Our new production is coming in at 120 basis points. So from the levels that we are here, which is a blended mix, of course, of also foreign time deposits as well, there is some upside to be seen in the next quarters and in 2026 as well. Operator: The next question comes from the line of Butkov Mikhail with Goldman Sachs. Mikhail Butkov: I have a question on provision releases in this quarter. I think based on page -- on one of the page in the appendices, yes, Page 45, you had likely a significant provision release this quarter. We calculate EUR 51 million on profit before tax basis in this quarter. Can you maybe elaborate on what this was related to? And also considering your high NPE coverage ratio of over 100% now, which is well above, I think, the averages in Europe? Do you see scope for more provision releases in the next quarters, considering healthy asset quality position? And what is your strategy and policy related to that? Christos Christodoulou: Okay. So on the first of your two questions on the provision releases. So what we had this quarter, we recognized a benefit from a sale of an NPE portfolio that we closed in Q3, Project Etalia, about EUR 200 million GBV of NPEs. That resulted in a result that was better than the provisions that we had accumulated. So that led to the release that you see, and we included in one-offs so that we don't create any volatility in our cost of risk. That's it. On the second question with regards to our coverage levels. So yes, you see us strategically normalizing our cost of risk in an efficient and timely manner. There is upside, as the CEO said in his remarks, to be achieved there as well. What we are doing is we are trying to have high provision coverage, not only in our Stage 3 loans, which, as I said, are just below EUR 1 billion as we speak. We're trying to be prudent in our new generation of loans, and that's how we preserve this high level of coverages. But yes, the strategy is to lower our cost of risk going forward because the coverages that we enjoy can come a bit down. Mikhail Butkov: And may I also follow up on your one-off cost in this quarter? Maybe could you unpack the key items there since you, I think, didn't release the detailed financial statements yet just for us to have the full color on what is included in that line? Christos Christodoulou: Yes. As you can see, it's mostly 0. We don't have any deviation between profit before and after one-offs. The fact is that the benefit that we have from this NPE portfolio sale is effectively counter affected by the donation that we had for the Marietta Giannakou school donation, which is in the area of EUR 25 million. So that effectively cancel out the positives with the negatives. Operator: The next question comes from the line of Demetriou Alex with Jefferies. Alexander Demetriou: So just on NII, if we think about the asset side and lending yields, with rates now stabilizing, how much longer will it take the repricing lag to come through and we start to see stable loan yields? And just secondly, on the retail side, could you provide any color you're seeing on the mortgages and disbursements at the moment? Christos Christodoulou: Okay. On the first question, while we believe that the trough quarter for NII is Q3, we have to say that there is still some repricing coming in from the lowering market rates, but that is counter affected by the loan growth. So I would say, assuming that the average Euribor will be some basis points lower in 2026, you will continue to see some pressure on the loan spreads going forward and the loan yields in general. With regards to mortgages, we've been experiencing an increase in our disbursements. And given the fact that the repayments that we had to realize from the disbursements that we had in the early 2000s was effectively up the growth. For a few quarters in a row now, we've been seeing mortgages growing as a portfolio, and we expect that this is going to be the trend going forward as we are optimistic about the growth in this sector of retail. Operator: The next question comes from the line of Garrido Luis with Bank of America Merrill Lynch. Luis Garrido Regalado: Two questions from me, please. One, on your senior preferred debt. Is it reasonable to assume that the stack of senior preferred debt will increase meaningfully as you reduce your CET1 ratio towards your target? And if so, how quickly do you think that will happen? And secondly, just to come back to the securities book and the growth in non-Greek government debt. Can you give a bit of color on what type of assets you've been investing in to fuel that growth? And what are the criteria that you think about when growing that book? Christos Christodoulou: Okay. On the first question, as you may have seen from the presentation in the remarks, we are currently enjoying 170 basis points of excess versus our MREL target of 26.8%. Our MREL issuance plan has to do with two things. First of all, refinancing existing instruments and the second, obviously, supporting our growth. So the way that we use issuance of MREL instruments, senior preferred bonds going forward has to do with our capital deployment strategy to answer to your -- the second part of your first question. So that's to be seen in the following quarters and years. On the securities book, we are quite prudent, I would say, in where we invest. So whatever is not Greek sovereign bonds, it's EU sovereign bonds. We are mostly positioned in held to maturity in terms of accounting recognition. And to the extent that we invest in shorter-term bonds like T-Bills, then we also accounting-wise, classify them under our head to collect and sell portfolio. But we don't have any exotic, let's say, bonds in our securities book. Operator: The next question comes from the line of Boulougouris Alexandros with Euroxx Securities. Alexandros Boulougouris: Just a quick question regarding the strong pipeline of disbursements you mentioned in the fourth quarter. Could you give us a bit more color? Is it -- I assume it's mostly large corporates, maybe a bit the sectors. You already mentioned about mortgages, a gradual improvement, but if you give us a bit more color on the corporate side? Paul Mylonas: Yes, I'll take that one. The loans that are approved and disbursing are mostly requiring construction and we disburse as the construction occurs. It's certainly mostly in the project finance space. Energy, various construction projects, building of hotels, hospitality, I think those are the ones that are ones that are taking more time to fully disburse the approved credits. Alexandros Boulougouris: Okay. Is there any maybe color on how you see 2026 in terms of credit growth, I mean, similar trends as we are seeing in 2025 could continue? Paul Mylonas: Absolutely. Good question. I give a macro introduction every time because the bank does well when the macro is good. And the macro is very good. So I think that there will be continued investment. And in a bank-centered system like Greece, there will be loan growth, again, similar strong strength in the corporate. And there will be additional support coming from, as I mentioned earlier, and Christos has just mentioned from retail. So I think that 2026 will see similar strong growth -- very strong growth as we saw in 2025. Operator: The next question comes from the line of Skhirtladze Salome with Bloomberg. Salome Skhirtladze: I have two questions on the IT expenses. As long as you are almost near end of your IT system upgrade, shall we expect lower IT-related spending next year? And how would you break down the major digital-related spending? And on the assets under management side, if you could summarize your strategy, how you envision gaining market share in this space and whether the asset under management rising trend is pressuring the deposit growth or could pressure deposit growth going forward? Christos Christodoulou: Okay. On the first question on the IT expenses. So first of all, as we said, the core banking system upgrade is coming to an end in the early months of 2026. So we've recognized the bulk of the burden from the IT expenses there. We see that we've reached, let's say, the peak of our IT expenses. But nevertheless, we should not underestimate the need for keeping up to standard with the technological advancements that are taking place. That includes cybersecurity, as the CEO said, AI as well and trying to find ways to improve customer experience and also be more efficient. So while we are disciplined on cost, we are trying to spend EUR if we can make EUR 3 out of this. On the assets under management, we've been recognizing, as we said in our remarks, about 3 percentage points of market share increase as we speak. We have been revamping our offering as well as our operating model. We are also making investments in terms of our digital offering in AUMs. And despite the fact that we've been transitioning a lot of our time depositors to mutual funds, we still see a growth in our deposit franchise. To give you some more color with regards to our AUM flows, about 90% of the flows have to do with pure net flows. 55% of that is from our own depositors and the rest are from the market and about 10% from growth comes from revaluation. So the strategy is paying off, and we'll continue on that front as well. Paul Mylonas: And I think it's also important to note that in terms of the core savings franchise for retail, that has not been affected by this strategy on mutual funds. Operator: The next question comes from the line Nigro Alberto with Mediobanca. Alberto Nigro: One quick one on potential capital allocation. What do you think about Cyprus and if you see some opportunities there? And the second one, what kind of bancassurance reorganization you are thinking going forward? Paul Mylonas: Clearly, on the second question, you'll have to wait. We are in a situation right now where we cannot discuss bancassurance, as you can well imagine. And also on Cyprus, I think there's no comment to be made on that either. Operator: Ladies and gentlemen, there are no further questions at this time. I will now turn the conference over to Mr. Mylonas for any closing comments. Thank you. Paul Mylonas: Thank you all for joining us for the call. I think there's a trip to London to meet investors in the next few weeks. So we look forward to meeting you in person and having further conversations. So thank you very much for joining us, and we are available for questions or clarification that you may have.
Operator: Good day, ladies and gentlemen, and I warmly welcome you to today's earnings call of the q.beyond AG following the publication of the Q3 figures of 2025. We are delighted to welcome CEO, Thies Rixen; and CFO, Nora Wolters, who will guide us through the presentation and the results in a moment. [Operator Instructions] And with that, I would like to hand over to you, Mr. Rixen. Thies Rixen: Yes. Thank you very much. Good afternoon to all of you. I'm happy -- Nora and myself are happy to present the Q3 numbers. Headline has returned to profitability, what we aim for this year, so positive net income for the group. And Q3 is first milestone to reach it. And our -- all what we see is that it will be also the case in Q4. We will present you the numbers right now and give you a little bit of an outlook what will happen until end of the year and how do we start or how do we manage next year. Nora has most of the workload concerning the figures. So I hand over to her, and Nora will present the figures of Q3. Nora Wolters: Thank you, Thies. Welcome from my side. As you can hear, my voice is not so strong as it normally is. I apologize for that. And so let's start with Q3. 2025 is a very special year for q.beyond. We focused action in a stagnant environment. And in this situation, we returned to profitability as we announced. So let's use a quote of Ralph Waldo, "those who know the destination will find the way." And this is our clear message we deliver. If you look to the key figures, it shows a significant improvement. Again, the EBITDA increases. We have a positive consolidated net income and an increased free cash flow as well. So we deliver and we are on track. How do we consider the current development? You see 2 sides of a coin. The confirmation of our strategy is seen in the figures. We see the increase of efficiency and resilience. Additionally, we took advantage of a tax windfall resulting from the Plusnet transaction. On the other side of the coin, we suffer from economic underperformance, and we are affected, for example, by the situation of the German small- and medium-sized enterprises who delays and stop tenders. Additionally, we do not see the EUR 1 billion package from the German government in any tender. So the weak economy affects us as well. You cannot always write into the slip stream. So q.beyond has a clear focus on profitability, and that is seen in our numbers. First of all, I'd like to start with the revenue. We have a resilient business model that is stabilized in a challenging environment as well. Concerning the revenue, we waived off low-margin revenue in the end of last year. So it is not a surprise for us because we planned more profitable revenue instead of an increase. Additionally, our data center is not selling in the same speed as we hoped. So there's a reluctance to make decisions among small- and medium-sized enterprises as well. On the other side, we noticed an increase of our order entry. In Q3, we almost had twice as high as the last quarter of 2024. Concerning the year-to-date, we have an increase of 8% concerning our order entry book. So it's a great basis for the next year. On this slide, you see the former quarters and the view of 2025. As you see, we always have a very strong last quarter. And this is what we expect for 2025 as well. We focus on consultancy and development services, and we noticed a strong demand on AI solutions, picking up noticeably and implementation of tools. For example, our private enterprise AI is already sold and increases in development. On the medium term, there will be use of technology as well along the entire value chain. So if you look, for example, as SAP, there's a prioritization of companies in the S/4 migration for the next 3 years. So we expect a strong Q4, which is important if you look at the guidance later. We report 2 segments, Consulting and Managed Service. I would like to start at first with Consulting. In this quarter, we doubled our earnings. The margin grew up, and you see a remarkable improvement in our earnings. The measurable upskilling in the last year of the q.beyond Academy and the systematic performance management is very visible in our improvement. Additionally, we had a lot of contract extension and won new customers. Our second segment is Managed Services. It is relative stable of margin despite of reduced revenue. As I mentioned before, we focus on high-margin business. So additionally, we invested in our portfolio q. and AI cases. So you see a lower margin in this quarter. On the other hand, we have the same situation in Consulting, an increasing booking of contracts. So we are based very well for the next year. 2024 has a clear goal for us, a positive consolidated net income. On the slide, you see the P&L with the most important positions. What is important to know, we consistently invest in AI, especially our private AI -- private enterprise AI and develop our portfolio q. We are proud first customers take place in the private enterprise AI. And so we make significant progress in AI and improvement for our customers and their benefits. Another positive effect we had is the tax windfall, which you see in the other operating result as well. Furthermore, I'd like to point out that we make at the moment many digitalization projects. As you may know, we invest in a new ERP system and in 2 other digitalization projects. This is an amount of more than EUR 1 billion that we invest in processes and improvement for the next years. Our last financial figure is the free cash flow. Traditionally, Q3 is a very weak quarter. In the whole year-to-date, the free cash flow is about EUR 3.6 million, so it's increasing as well. It has to be regarded that we had higher expenses for investment in digitalization this year and reduced liabilities as well. Our net liquidity is among EUR 41.3 million this year. So that means a lot of possibilities for us for share buybacks, dividends or M&A. At the moment, there's no final decision. We want to take advantage of all this possibility and we'll inform you of the next steps. So sustainable success comes from sticking the course in difficult times. We are very proud to confirm our guidance today. My message is very clear. As you see on the slide, all of our financial figures will be reached at the end of the year. The revenue will be at the lower end of the guidance and the EBITDA and the consolidated net income as expected. So it's a great message for you. We are on track, we deliver. And well, we are looking very positively for Q4. And with this message, I leave it to Thies. Thies Rixen: Yes. Thank you, Nora. So what's the plan for this year and also for next year? So we will -- point number one is profit over growth. This is the case, will be the case also for the future. Near and offshoring, we are now at 20% or will be at 20%. In the national delivery capacity, let's say, 30% is the near-term goal. On top of it, we will start -- we hired sales people for the Baltic market as for the Spanish market. So we expect the first revenues to come maybe this year, for sure next year. And we expect, let's say, an impact -- the first impact in Q3, Q4 concerning the top line next year. So automation is driven by AI. Nora mentioned it. So we invested this year in the foundation of it. So we're in a data hub, a new ERP system so that we can use AI because now we are -- end of the year, we will be fully digitalized. There, we invested on top of the EUR 1 million we invested in the foundation, we invested again in AI for us and also for customer -- for the customer platform and in competencies so that we have a share of the AI revenue next year. This is 3 and 4 -- number three and four. And number five is we also start to invest heavily in our portfolio upgrade, mainly for Managed Service, which we call internally q., so this means AI in every service. So tool chain -- AI tool chain in every service and on top of this, all what is security needed and all what is needed from the regulation for banks, insurance companies or others like this NIS or DORA -- in the DORA or NIS framework. So with that, we will be able to drive efficiency and also to win businesses. When we look at our order entry, we see 8% more than last year. Compared to last year, we are aiming for, let's say, EUR 180 million order entry this year, which will be for q. beyond a record figure. Our midterm goal remains unchanged. We will -- let's see where we end up this year, 7% to 8% EBITDA positive net income for the group and then we will aim for 10%. The new strategy 2028, we will release Q1 next year for the next 3 years over '26, '27, '28. And in this period, we try to reach 10%. With that, we'd like to close this conference call and happy to get your questions. Thank you very much. Operator: [Operator Instructions] And with that said, I can already see one question in our chat box. Let me read it out loud. Is the tax windfall profit of EUR 2.8 million in the EBITDA and the EBIT number included? If so, adjusted EBITDA and EBIT is much weaker, correct? Nora Wolters: Yes, it is. Thies Rixen: So what is included -- it's included. I'd like to take a broader picture. So we had several effects out of the Plusnet transaction in 2019. And you can't -- we all know that. It's in tax questions, it's not easy to say. So they are included. On the other hand, we have to cope with a weak economy and weak customer demand on plus we invested. We invested, as we said, in the AI foundation in AI cases and in the portfolio, which will help us in the future. So yes, there's a windfall. This is included in the numbers and it helps us in Q3, but all the investments we took will help us in Q4 and so on. So in Germany, we say, look, I can't translate it, but it's in business sometimes. It's on the right side of the corner, the impact. Operator: [Operator Instructions] We do have a risen hand as well. Mr. Nilsson. Fredrik Nilsson: I want to start with the future outlook here. I mean despite having perhaps a slightly softer quarter this time adjusted for that one-off, I mean, you sound quite optimistic about both next quarter and also looking into next year with the order book and so on. I mean do you think that is enough to show positive revenue growth despite the focus on profitability? Thies Rixen: Yes, we will show some growth. I mean we will -- I think the market -- there was a lot of reluctance in the last quarters. We all suffer from it. There are a lot of deals postponed. They cannot be postponed forever. So at some point in time, there will be investments and this will, let's say, drive our numbers. So -- and for next year, we will see growth. It will be not double digit, for sure, but there will be growth. And the market -- let's see where the market is heading. 3% to 5%, I think, is realistic. Let's see where we end up in the final numbers for next year. It's hard to say, to be honest. But we are not -- we have done this revenue cut this year where we cut it out, let's say, bad revenue. So this will not happen again. And on this foundation, this basis, we will grow the business next year. Fredrik Nilsson: Okay. Great. And also, I mean, taking off the one-off in this quarter, I mean, you need a quite substantial improvement in Q4 in order to reach your guidance, and you seem quite confident in reaching that. So could you perhaps elaborate a bit what underlying drivers that will take you there in addition to seasonality? Thies Rixen: Yes. It's -- every year the same structure. There will be several impacts. There are a lot of projects, which will be built where the work is already done, where we get the revenue and profit. This is one effect. Then there is a higher utilization overall, plus there are some license deal, especially in the SAP arena, where we -- if we close them, then we -- then this revenue equals profit. So this is, let's say, every year, this is the same rhythm. And this will help us as in last year or the year before to have much more better numbers than in the quarters before. Operator: [Operator Instructions] We have not received any further questions in the meantime. Are there any, please put them into our chat box or raise your hand. I think Mr. Rixen, Mrs. Wolters, everybody seems perfectly happy. There are no questions so far. And with that said, we just received a question. Was the investment of EUR 1 million done this quarter? Thies Rixen: Yes, there are 2 investments. There's one we did, which was included in the plan. This was the foundation. And then the other investments have been done in the quarter. And when we sum it up, it's another -- it's above EUR 1 million. So there's EUR 1 million over EUR 1 million. We never disclosed this. I think the whole is in the foundation, digitalization foundation and another has been done in the quarter. Operator: The same person has another question concerning that topic. Was this CapEx or OpEx? Thies Rixen: OpEx. Operator: Correct. Thies Rixen: And this is for the future. This is something where we will have the impacts -- the positive impacts in the future. It's mainly OpEx because we use our own consultants, our own technology specialists to build tool chains, processes. For example, the features for the AI platform, which we released was in Q2 April. So we optimized or we put some more features in it, and this will hopefully help us in the future. Operator: There are no further questions so far. [Operator Instructions] But I think there are no further questions. And I would say, therefore, we come to an end of today's earnings call. Thank you for your participation and your questions. If there are any further questions that arise at a later time, please do not hesitate to contact Investor Relations. A big thank you also to you, Mr. Rixen and Mrs. Wolters, for your presentation and for taking the time to answer the questions. We wish you all a good remaining week. Goodbye, and see you next time. Thies Rixen: Thank you. Goodbye. Nora Wolters: Bye.
Florian Martens: Good morning, media representatives, esteemed guests, colleagues and coworkers. I would like to welcome you to the annual press conference of Infineon Technologies AG. Thank you so much for having found the time to attend today so early. All of the members of the Board and management are participating. Our CEO, Jochen Hanebeck; our Chief Financial Officer, Dr. Sven Schneider; Elke Reichart, CDSO; Andreas Urschitz, Chief Marketing Officer; Alexander Gorski, Chief Operating Officer. Mr. Hanebeck will start to give you an overview of the current fiscal year and forecast for the fiscal year that has just begun. The entire Board, of course, will be here to field any questions you may have. For all journalists, who are following us via the live stream, you're welcome to submit written questions. The question tool will be shown on your display on the screen. [Operator Instructions] So having said that, I'd like to hand the floor to Jochen Hanebeck. Please go ahead. Jochen Hanebeck: Thank you. Esteemed members of the press, esteemed viewers. Welcome to Infineon's annual press conference here on our site in our video studio and on our live stream. We are glad you could join us. Infineon met expectations in the 2025 fiscal year despite challenging macroeconomic and geopolitical conditions. The year was characterized by prolonged weakness in the majority of our target markets and customers and distribution partners have significantly reduced their inventory levels. In view of geopolitical instability and the ongoing turbulency of tariffs, our customers are cautious about the future development of demand. This has led to last-minute ordering behavior for semiconductors. In addition, unfavorable currency effects have slowed our revenue growth for several quarters now. Given the ongoing geopolitical and tariff-related uncertainties, it is difficult to predict how strong and how broad the upturn in the semiconductor markets will be in the 2026 fiscal year. Therefore, we are adopting a prudent outlook. Our priorities at Infineon remain unchanged. Firstly, we are leveraging existing opportunities for profitable growth and are expanding our production capacities in a very targeted manner to this end. Secondly, we are making focused and forward-looking investments in future technologies and in our expertise. Thirdly, we are keeping our expenditures under control. We remain confident on our medium- to long-term development. We are making good progress on improving our cost competitiveness. At the same time, we are accelerating innovations with clear customer benefits and strengthening our position in growth markets such as software-defined vehicles and AI data centers. I'll come back to this. Infineon is well positioned for a coming market upswing. Before we look ahead, let us first take a brief look at our business development in the past fiscal year. In the fourth quarter, group revenue increased to EUR 3.943 billion. This is an increase of 6% compared to the previous quarter despite a stronger headwind due to the weaker U.S. dollar. The exchange rate rose from USD 1.14 to USD 1.17 per euro. As expected, the fourth quarter was the strongest in the 2025 fiscal year in terms of revenue. We were able to increase the segment results to EUR 717 million. This segment result margin reached 18.2% compared to 18.0% in the previous quarter. This slight improvement is mainly due to higher sales volume. This enabled us to compensate for the unfavorable currency development. For the 2025 fiscal year, revenue amounts to EUR 14.662 billion. This is a decrease of 2% compared to the 2024 fiscal year. The weaker U.S. dollar was an important factor in this development. At constant currencies, our revenue would have remained almost stable compared to the previous year. This is a respectable result for a fiscal year that was characterized by substantial inventory corrections on the part of customers and by unprecedented trade conflicts. The segment result margin reached 17.5% after 20.8% in the 2024 fiscal year. Hence, the margin was in the forecasted high teens percent range. We were able to partially offset price declines, negative currency effects and rising idle costs with positive margin effects from our structural improvement program step up. The free cash flow was minus EUR 1.051 billion. The adjusted free cash flow, which excludes investments in large front-end buildings and major acquisitions such as Marvell's Automotive Ethernet business amounted to plus EUR 1.803 billion. This corresponds to approximately 12% -- 12.3% of revenue. All 3 figures, revenue, margin and free cash flow were in the lower range of our target operating model applicable during cyclical downturns. In a world full of uncertainty, Infineon remains on course. This is primarily due to the commitment of our teams worldwide. On behalf of the entire Management Board team, I would like to thank all our employees for their strong performance. Their commitment, passion and collaboration are key to Infineon's success even and especially during challenging times. Together, we have achieved much. And together, we are also tackling the current fiscal year, creating new things and shaping the future of our company. Esteemed viewers, our dividend policy is aimed at paying out an unchanged dividend even in the event of stagnating or declining earnings. We will propose a stable dividend of EUR 0.35 per share to Infineon's shareholders at the upcoming Annual General Meeting. We want our shareholders to participate appropriately in Infineon's success. And at the same time, we want to maintain the financial leeway necessary to further develop our company for the future. By doing so, we are focused on promising growth areas, especially in the field of artificial intelligence. AI will continue to drive the structural need for semiconductors and the demand for our solutions in the coming years. AI functionalities are indeed evolving at an incredible pace. They are changing industries and penetrating all areas of life. Generative AI, which can generate images, text, code and more, is increasingly being complemented by agentic AI, artificial intelligence that can perceive, reason, plan and act. And the next big development step is already in sight. Physical AI. It enables autonomous systems, for example, cars or humanoid robots to perceive and understand the physical world and carry out complex actions. The use of AI requires enormous computing power that far exceeds the capacities of existing data centers. These requirements are increasing rapidly. Even before 2030, capacities of 1 megawatt and more per IT rack will be required. To put this into perspective, 1 megawatt is equivalent to the power of around 500 clothes irons. The large U.S. tech companies, in particular, are driving the construction of specialized AI data centers worldwide. These data centers are reaching power levels in the gigawatt range. So we're talking about the power of 500,000 irons and upwards. 1 gigawatt is roughly equivalent to the full load of a nuclear power plant reactor unit. Meta, Amazon, Alphabet and Microsoft plan to invest over USD 300 billion in AI technologies and infrastructure this year. The announced projects alone represent an estimated output of up to 10 gigawatts. More will follow suit. Power is the backbone of every AI data center. There is no AI without efficient power electronics. We supply fitting and scalable power solutions for the entire energy conversion chain from the power grid to the AI processor in the data center. Infineon is a clear leader in this field. We are also rapidly developing our range of efficient and scalable solutions at fast pace. In doing so, we are working closely with leading companies in the industry. An excellent example is our collaboration with NVIDIA in the development of a centralized 800-volt power supply architecture for future AI data centers. The new system architecture significantly improves energy-efficient power distribution in the data center and enables an even more efficient power conversion directly at the AI chip. As a technology leader, we want to shape the rapidly growing market in the coming years. The fact that our solutions address an urgent and growing demand is also reflected in our business performance. We were able to almost triple our revenues from power supply solutions for AI data centers in the 2025 fiscal year, reaching over EUR 700 million. This is around EUR 100 million more than we had forecast despite negative currency effects. We are also raising our revenue forecast for the 2026 fiscal year from EUR 1 billion to around EUR 1.5 billion, which would mean more than doubling the revenues of the previous fiscal year. We also expect dynamic medium-term growth in this area. We expect the addressable market for Infineon to reach EUR 8 billion to EUR 12 billion by the end of the decade. In addition, AI is increasingly developing beyond centralized cloud systems. Edge AI, the intelligent processing and analysis of data directly in the device or in its immediate vicinity is becoming an important driver for our business. Infineon supports developers of edge AI applications with a complete system based on our specialized microcontroller, PSoC Edge, which combines machine learning, advanced human machine interaction, low energy consumption and integrated security. Added to this are our complementary sensor portfolio and our own edge AI development platform, DEEPCRAFT. By doing so, we offer a comprehensive set of hardware and software solutions for easy implementation of AI functionalities in IoT devices. Our customers can either develop their own AI models from scratch or integrate ready-made models and solutions into their products, thereby reducing time to market. As already mentioned, we are on the verge of the next big technological step in AI evolution, physical AI. Take cars as an example. With the trend towards software-defined vehicles, the automotive industry is paving the way to a new era of mobility. Software supported by AI is at the heart of the vehicle. This enables new automated driving functions and enhanced safety features. Issues can be resolved without the need for a visit to the car repair shop simply via software updates over the air. Software-defined vehicles lead to a new level of flexibility and efficiency. However, the necessary change of vehicle architecture is complex. Conventional electric and electronic vehicle architectures with a large number of distributed control units in the vehicle will not be enough. The automotive industry is, therefore, moving towards a more centralized approach. Infineon is playing a key role in this development. We are working together closely with many customers and partners to drive the development of software-defined vehicles around the world. In addition to our system expertise, we benefit from our global market leadership in automotive semiconductors. We have consistently expanded our position in recent years. Our rapidly growing business of microcontrollers for automotive applications has contributed significantly to this development. These products are becoming increasingly important for controlling various critical vehicle functions in software-defined vehicles. We want to expand our leading position in microcontrollers for the automotive industry. The acquisition of the automotive ethernet business of the U.S. company, Marvell Technology, which we successfully completed last summer was strategically important to this end. Ethernet is a key technology in software-defined vehicles. The technology is a perfect addition to our existing product portfolio. In combination with our AURIX microcontroller, it lets us offer a comprehensive product range that includes both communication solutions and real-time control. In addition to the car, ethernet technology is also essential to promising applications in the Internet of Things, especially for humanoid robots. Esteemed viewers, Infineon is shaping the future with solutions that deliver added value to the economy and society. One technology with great potential for value creation is quantum computing, likely the next disruptive technology to follow artificial intelligence. Quantum computers use the laws of quantum mechanics to solve certain particularly complex tasks much more than -- much more efficiently and quickly than conventional computers can. This opens up completely new possibilities in various application areas from materials research to developing new drugs and optimizing supply chains. At Infineon, we have key competencies for quantum computing. Our strategic partners include Quantinuum, a company in which NVIDIA also holds a stake and IonQ, the quantum company with the highest market value at present. Together, we are now taking the technology from the lab into application, pushing the boundaries of quantum computing. I'd like to offer deeper insight by sharing voices from our partners in academia and industry. Please take a look for yourself. [Presentation] Jochen Hanebeck: You heard it. Quantum computing is no longer a distant vision. It is becoming a reality. Quantum computing and artificial intelligence are 2 of the most exciting and forward-looking technologies of our time. Above all, their interaction promises enormous progress in areas where conventional computers are reaching their limits. These 2 key technologies reinforce each other. Firstly, artificial intelligence accelerates quantum computers by improving error correction, calibration and control of quantum hardware. This removes major hurdles to the scaling of quantum computing. At the same time, quantum computers accelerate AI by generating precise output data that serves as the basis for AI, for example, in developing new molecules for drugs, batteries and catalysts. Other potential applications range from optimization problems in logistics to cybersecurity and financial analysis. Quantum computing, therefore, does not replace AI, but rather expands its possibilities, thus opening new perspectives for data-driven innovations. And here, you can see one of our wafers with trapped ion quantum processors, which we are already developing and delivering to our lead customers. Three things are crucial for industrial-grade quantum computers, the quality of the qubits, replicability and scalability. Our quantum platform and our semiconductor production bring precisely these characteristics to the quantum ecosystem. For our customers, this means a clear path from research to application. A complete picture of quantum computing also includes a look at cybersecurity. Powerful quantum computers will be able to break established encryption methods within a few years, an enormous security risk for ID documents and payment cards for software-based devices and applications, for example, in industry, vehicles and aerospace. In particular, durable products with long development cycles are at risk. That's why we are already supporting our customers today with solutions for post-quantum cryptography based on the principle of protecting data today that must remain confidential tomorrow, so in the quantum age. And we back this up with certified security. Infineon is the first manufacturer worldwide to receive the Common Criteria certification for the implementation of a post-quantum cryptography algorithm on a security controller. Common Criteria is an internationally recognized standard that independent experts use to systematically test and certify the security of IT products. Thus, we are sending a strong signal of trust and security at the highest level. Esteemed viewers. Before moving on to our outlook for the 2026 fiscal year, a note for our guests on site. Following this press conference, we cordially invite you to visit our exhibition in the Cubis foyer. You will have the opportunity to discuss the topic of quantum computing in greater depth with our experts. Richard Kuncic, Head of our Power Switches business line; and Clemens Rössler from our Ion Trap Systems team will be happy to assist you. Many thanks to both colleagues. Now to our expectations for 2026. We continue to operate in an environment in which short-term or last-minute ordering behavior limits the transparency of demand trends. This makes predicting business development for an entire fiscal year, a challenging task. Inventories in the supply chains have largely normalized. It is end customer demand that will determine the extent and pace of the recovery in the semiconductor markets. We anticipate that the volume growth will return over the course of the fiscal year and that we will see a gradual upturn. In the current first quarter, we expect revenues of around EUR 3.6 billion. This forecast is based on an exchange rate of USD 1.15 to the euro. The segment result margin will be in the mid- to high-teen percentage range. This would correspond to a revenue decline of around 9% compared to the previous quarter, above our typical seasonality. We see a short-term risk that some automotive suppliers and manufacturers will reduce their inventories to no longer viable levels by the end of the calendar year. We also expect our industrial customers to reduce their inventories very significantly towards the end of December. However, market transparency is low. Therefore, we must consider a certain range of possible outcomes for the 2026 fiscal year. In our base case, we anticipate moderate revenue growth. The negative effects of the expected usual price declines and unfavorable currency developments are likely to slow down revenue growth. We expect a U.S. dollar to euro exchange rate of 1.15. This is a weaker dollar compared to the average exchange rate of 1.11 in the 2025 fiscal year. According to our rule of thumb, this effect will reduce our revenues by around EUR 400 million. The market environment remains mixed. We are cautious regarding the automotive semiconductor market in the view of various factors. We expect trade and tariff conflicts to have a negative impact on vehicle prices and customer demand. Growth in the electric vehicle market in China is likely to slow now that the share of electric vehicles in new car sales has exceeded 50% and government subsidies are being reduced. Momentum in Europe is likely to increase, while in the U.S., it will probably slow considerably due to the expiration of tax incentives. As a result, some Western manufacturers are postponing the launch of several new electric vehicle platforms in favor of combustion models. However, the outlook for software-defined vehicles is more favorable. We expect market momentum to accelerate from the second half of the fiscal year as increasingly more software-defined models come on to the market. This development means that more and more semiconductors are being installed in vehicles. We see a mixed picture for industrial applications. Macroeconomic uncertainty is delaying the recovery in demand for industrial drives. Similarly, there are still no signs of an upturn in air conditioning systems or household applications. In renewable energies, record levels of solar and wind energy installations are forecast for 2025, particularly in China. However, growth in this market is likely to slow down in the future. We do not expect other world regions to fully compensate for this development. Nevertheless, we see the structural semiconductor demand for the expansion of energy infrastructure is increasing. A higher share of renewable energy in the overall energy mix and investments in AI data centers in various parts of the world would necessitate a significant expansion and strengthening of the power grid. As already mentioned, we expect to more than double our revenues with our power supply solutions for AI data centers to around EUR 1.5 billion in the current fiscal year. Growth momentum in consumer-related applications is still subdued. Overall economic risks are dampening both consumer confidence and corporate spending. Thus, demand for IoT and security solutions also remains weak. Now to our profitability outlook. The segment result margin in the 2026 fiscal year is expected to come in at a high-teen percentage range. The positive effect of volume growth will be offset by unfavorable currency developments and the usual price declines. We expect further positive effects from our step-up program as an increasing number of our measures take effect. At the same time, the high level of cyclical idle costs in our production facilities is likely to proceed only very slowly. We are planning investments of around EUR 2.2 billion for the 2026 fiscal year. A focus area will be finalizing the construction of our smart power fab in Dresden and equipping it in time to meet strongly growing customer demand for AI, our AI power solutions. We are making good progress with the construction of the smart power fab. In October, we reached the ready for equipment milestone. We are ahead of our schedule and expect to be able to officially open the factory in summer 2026. Free cash flow adjusted for investments in front-end builders is expected to be around EUR 1.6 billion, and the reported free cash flow is expected to be around EUR 1.1 billion. Esteemed viewers, let me summarize. Firstly, Infineon has met expectations in the 2025 fiscal year despite challenging macroeconomic and geopolitical conditions. In the current fiscal year, we expect a gradual market recovery and moderate revenue growth. Secondly, artificial intelligence is driving semiconductor demand. Our revenue from power solutions for AI data centers is growing rapidly. We continue to develop our portfolio of efficient and scalable solutions at high speed. Thirdly, quantum computing is becoming the next potentially disruptive technology. We are shaping the quantum age with semiconductor solutions for industrial-grade quantum computing and post-quantum cryptography. Thank you for listening. Together with the Management Board team, I will now be happy to answer any questions you may have. Florian Martens: [Operator Instructions] So let's get started. I see that we have Joachim Hofer from Handelsblatt. Joachim Hofer: That's fine already. Your question has already been answered. I would like to know about the Nexperia case, what are the ramifications for you, for your business, either positive or negative? And I'd also like to know whether you have an opinion on whether fundamentally, this means anything for you and for the world, mainly the fact that China is expanding and perhaps what other conclusions you could draw from that. Unknown Executive: Well, the case that has been covered in the last couple of weeks by the media and has made headlines demonstrates, first of all, once again, the realization that semiconductors are not just in time products, this applies to standard semiconductors as well as the entire other portfolio components such as power switches and the power semiconductors. In the supply chain, you need inventories in order to make sure that these 2 value creator chains of the automotive industry on the one hand and the semiconductor industry on the other hand are decoupled from each other because when such situations occur, you see what could happen. And you can also have natural catastrophes and other disasters that you have to be resistant to. So that's very important. Now what does that mean for Infineon? Well, on the one hand, production lines actually did grind to a halt, it would affect us as well because sales would therefore tank. But at the same time, you can take a different view. This could be a wake-up call to industry to take a very close look at inventories. As a matter of principle, we at Infineon are extremely resilient in our setup, thanks to our manufacturing landscape. As a result, at some areas we were able to help. However, the overlap in products between Infineon and Nexperia is rather limited. The second question, the geopolitical ramifications. Well, geopolitical environment remains the big unknown in our business. There is no blueprint that we can draw on from the past. We simply have to follow developments day in, day out. Basically speaking, however, here again, Infineon is set up quite resiliently, thanks to its manufacturing footprint, especially in Europe and Southeast Asia. We also have manufacturing partners in the United States and in China. However, having said that, this is a topic that Timon again, leads to new or can lead to new disruptions. And on a daily basis can be quite eventful. Florian Martens: We have a question that is quite similar that comes from Mrs. [indiscernible] from Bloomberg that has come through the live stream. It also relates to Nexperia, Jochen. You have received to replace Nexperia chips? How far will you be able to do so -- have done so? How long these processes are? Please, could you answer in German? Jochen Hanebeck: Yes, as I just said, the overlap in our portfolio between Nexperia and Infineon for the affected semiconductors. We must not forget that not all semiconductors of Nexperia were affected. It's quite limited. And therefore, here and there, we were able to help out a little bit. But basically, we also welcome the fact that apparently, the situation has eased and auto manufacturing has taken up again. Florian Martens: I think that also answers the second question from Mr. [indiscernible] that was asked through the stream and we can, therefore, come back to the room. This is Verner from Spiegel. Unknown Attendee: Yes, I have a follow-up question on that. In your speech, you said that you expect some automotive suppliers to reduce their inventories to a level that is no longer sustainable. And that doesn't really tie in very well. Now haven't they learned their lessons since the Nexperia crisis? Jochen Hanebeck: Well, this is the difficulty that we face, isn't it? Some companies in the automotive supply chain are in difficult economic conditions. We also have to look at how their capital tied up due to their inventories. That is always an issue for them, and they always have to take a very close look at that. I can only call on everyone -- in difficult economic times not to let your inventories fall below critical levels because should there then be a reinvigoration of the market, and that doesn't just have to come from the automotive industry, it could come from other sectors as well, then potentially, you can run into problems, the type of which we witnessed a couple of years ago. Florian Martens: Thank you very much, Mr. Hao. I see you raised your hand. You are from [indiscernible]. Please go ahead. Unknown Attendee: Yes, I wanted to ask you that very question, but I have another question. You said that the auto suppliers are -- have quite tight wallet. But you say that -- of course, they have to supply the automotive manufacturers and make sure that their inventories are good. Do you see any critical situations given this situation and now the capacity underutilization of your factories, what level is it at right now? And how high were the idle costs in the past fiscal year? Jochen Hanebeck: I will handle the first part of the question. Basically, it would be the most sensible thing if everyone involved in the value chain kept their inventories at such a level that they had a certain buffer. We do that. We have an inventory reach that is about 30 days higher than necessary, at 150 days. Normally, we would have a reach of 120 days. We're talking about EUR 1 billion in capital that is tied up in this manner. Of course, it would make a lot of sense if the Tier 1 and the OEMs were dedicated in the same manner so that such buffers could be established, which, by the way, in Japan are absolutely customary. With respect to capacity underutilization and idle costs, I'd like to hand the floor to my colleagues. Unknown Executive: Just briefly on utilization. Right now, we are at about 80% capacity utilization. The forward-looking trend is improving, especially in the 300-millimeter sector within the scope of the gradual improvement in the market. Yes, and perhaps I can say something about the idle costs. Indeed, this is a very negative contribution to our profitability. In the past fiscal year. We're talking about just under EUR 1 billion in terms of idle costs corresponding to roughly 600 basis points, so 6% point margin headwind. We now assume that we're going to go back to about EUR 800 million, which is still quite a lot higher than the level that we normally have in terms of cyclical idle costs. This fiscal year, we're talking about 400 basis point headwind that are factored into the margin. Florian Martens: Thank you. We would now like to switch topics. Mrs. Maier, we will get to you in a minute, but Mr. [indiscernible] has a follow-up question with respect to AI data centers, an issue that we are all concerned with and the growing market, and the EUR 8 billion to EUR 12 billion, how much is supposed to be assigned to Infineon. Unknown Executive: Well, the starting point right now is that Infineon is already in a leading position in this market for AI data centers. Roughly speaking, we're talking about, if you look at -- along the entire power supply chain, 30% to 40% market share. Looking forward, we will do everything we can in order to stay in this range. So I think that you can do the math in terms of the potential for Infineon depending on whether we're at EUR 8 billion or EUR 12 billion. That remains to be seen. Florian Martens: Thank you very much. Mrs. Maier, you had a question as well. We'll continue here in the studio. Unknown Attendee: Yes, I would like to -- I'm Angela Mya, The Market NZZ. I would like to ask you about the idle costs as well. This is being stretched out over years now. Did you do your math wrong. When is the upswing going to set in, the upswing that you planned with that is? In other words, when are we going to see a margin above 20% again? Other competitors have a margin clearly above 20%, but you are still below that. And that's what you're planning for this next fiscal year indicates as well. Maybe you can give us some insight into that. Unknown Executive: Yes, thank you for that question. Let me begin with the fundamental categorization. It is important to look at the structural growth drivers and to believe in them which we do and Mr. Hanebeck was well eloquent in his speech on addressing this. The factories are being completed right on time. We have a very good track record back then when we constructed villa 300 millimeters, we were right on track. If you look at the smart power fab in Dresden, once again, we're doing the right thing at the right time. Of course, we can't always manage to do that. But you're right, we were more optimistic 2 years ago and 3 years ago with respect to our growth prospects. But the topics surrounding the geopolitical situation and tariffs weren't known back then. What it may also be relevant in this respect is the following. We are growing this year. We are experiencing volume growth, but the growth is strongly driven by AI, we're adding capacities here. We're basically sold out in this year. We don't have any idle costs that are allocable to AI power supply. And the same applies to AI defined microcontrollers. These tasks are outsourced and that doesn't help us, and that's the reason why our idle costs aren't reducing as fast as we would like them to. With respect to the margins, I already demonstrated in the impact that, that was just the effect of the idle costs. On top of that, there's a positive effect from the fall through, revenue generates some positive results. And of course, that would put us easily above the 20% that you mentioned. Unknown Attendee: And when is this going to happen? Unknown Executive: Well, the markets -- when the markets play to our strengths. We depend to a certain degree on that. So final demand and inventory management are going in an opposite direction. So that's a little difficult right now. Florian Martens: The next question also deals with a growth trend that we described, the software-defined vehicle. Matthias [indiscernible] from Blick from Switzerland asks when will the Marvell Ethernet segment contribute to revenue? And what influence will it have on the segment result margin in the future? Sven? Sven Schneider: Yes. Well, with respect to Marvell in the middle of August, we acquired the company. So that was in 2025. There were no notable ramifications there. In 2026, we expect EUR 200 million in terms of revenue from this business, and this is a positive business in terms of profitability. So it would make a positive contribution to the group margin. And strategically, speaking, if I may add, this is extremely important because our expertise in automotive microcontrollers will be married with the technology for communication in the future. We expect wonderful synergies in terms of architecture, but also, of course, in terms of positioning our products with the customers. At a global level, I must add Marvell already has a wonderful design win pipeline that is built up over the years in the run-up to the acquisition, and we can build on that. Florian Martens: Thank you very much. We're going to come back to the room. Christoph Dernbach from DPA. Christoph Dernbach: Yes. I hope I didn't miss anything, but I can't remember what you might have said about the U.S. tariffs, how much they might have cost you in the past quarter and fiscal year? Unknown Executive: Well, the direct tariffs that relate to semiconductors are not really that material. The tariffs that are really effective are the ones that are imposed by China for imports into the U.S.A., but they hardly affect us at all. And the investigation according to Section 232, the outcome of this investigation is entirely open. However, there are some indirect impacts, which you can see reflected in the sales volume figures in the United States also experienced by European players. And this does have a tangible impact on us. Florian Martens: Okay. We'll stay in the room. Mrs. Verner has another question. Please go ahead, madam. Unknown Attendee: I have a follow-up question with respect to the data centers that we touched on already. There are a number of wonderful announcements in Germany, for instance, Google appears to be set to make a big investment. But is that sufficient from your point of view, if you compare the EUR 300 billion that are being invested in the United States and China? Doesn't it seem to be a drop of water in the bucket. What do you believe is actually necessary in Europe to have a chance in this place? Unknown Executive: Well, the sums announced in Europe can only be a first step. Of course, you can break things down into AI infrastructure for learning. And the inference. Of course here, the necessary infrastructure costs are lower. The question is, however, shouldn't Europe become involved in the foundational models, and I'm sorry for using English terms all the time. From where I stand, there is clearly a vector. That means we're going to run into dependencies in Europe. Florian Martens: Okay. Maybe, Mr. Hofer, you have a follow-up question on that. Joachim Hofer: Yes. No, not really. It doesn't really tie into that, not quite. That's okay. Your fitness program. I would like to have some more information about that. What effect has it had, if you look at headcount, it remained essentially flat. Maybe headcount increased through Marvell. Give us some insight into that, perhaps. And now in the United States, do you think you're at a disadvantage relative to domestic competitors because we do have a very strong wave of patriotism in that country. What is the situation in the United States? Unknown Executive: Okay. With respect to the last question, we don't feel anything from this at all. To the contrary, in California, if you look at the major AI infrastructure drivers, we are a supplier that is held in high esteem, an extremely high esteem, I must say. What we are feeling is that in the geopolitical arena, the American value creation chains and the Chinese value chains are slowly separating from each other. But I believe that our esteem in AI and autos and in the future, increasingly grid infrastructure is very good. Unknown Executive: Hope, let me answer the question that you asked about the fitness program step up. Step up to us is a program which ensures improvements in the competitiveness. From a structural point of view, we are well on track. We're actually ahead of plan. We are shooting for a sum in the high triple-digit-million-euro range, which is going to be broken down into a number of different areas, the contribution that we achieved in the [ last ] fiscal year was 50% of this figure. We believe that 2/3 of this figure will be achieved in this fiscal year and then that will be at 100% in 2027. 1/3 of the measures relate to personnel 3/4 are efficiencies, productivity improvements, digitization issues. And you asked us about headcount. You're correct. On the one hand, we have reduced headcount, but new people have joined the Infineon family through the acquisition of Marvell and some of the HR topics will be remanaged. We will move from high-wage countries to best-cost countries, but we have to build up the business in those countries first. So we will have some trickle-down effects in the next quarter. Florian Martens: I think that the question asked by Mr. [indiscernible] in the stream has been answered as well. He is asking about further plans to reduce headcount after [indiscernible]. Unknown Executive: No, we don't have any further plans. But if we look at the market, we have to keep on monitoring the dynamics to determine what our portfolio, our product portfolio or our fab portfolio is still fitting with our goals and where we want to be in the market, but we don't have any further plans right now. Florian Martens: Mrs. Maier, you raised your hand. Unknown Attendee: Yes. I haven't heard anything about China today. Perhaps you could tell us once again what the revenue share was in the past fiscal year and what it's going to be like in this coming fiscal year. I think it is probably going to drop in the auto market. Will this affect Infineon in China? And perhaps you can tell us something about the momentum of competition there. The Chinese chip manufacturers are on a strong upward trend. And Infineon, nevertheless, has always managed to command a very good position on the market. Do you think you can defend it? Unknown Executive: Mr. Urschitz will start and then maybe Sven. Andreas Urschitz: Okay, with respect to the share of revenue generated in China, I'll start with Greater China, including Mainland China and Taiwan. In the past fiscal year, we were at a 38% share of revenue. 29% -- 29 percentage points were achieved in Mainland China. So relative to 2024, in China, we have grown in terms of revenue share. This is in part due to the Chinese leading role in decarbonization and digitization trends, very exciting markets when it comes to automotive electronics and maybe I can make a forward-looking statement here and what we plan for the future in this respect? Well, on a large scale, the share of revenue is going to be maintained in this range in 2026 as well. Sven Schneider: Yes. And perhaps there are 2 more points that we should raise here, the 29%. About 1/3 of it goes back into exports as a car or a smartphone, for example. So here, we believe that the value chains will continue to shift. If you would ask me today about a longer-term -- or for a longer-term outlook beyond 2026, well, then I would say that this share may drop somewhat in China. Of course, there are Chinese competitors. There are applications that have existed in the past as well, which achieve price points that make no sense for us whatsoever. That's why it's all the more important for us to look at topics like AI and regions such as the United States, Korea and Japan and to build up our business there. In the past, we've been very successful at doing this. However, it is quite clear that our corporate strategy in this respect now is to have the broadest possible footprint on a global basis. A good example of this is our automotive business, which has equal shares of the markets in Europe, Japan, China. It's a little bigger in Korea, and it's a little smaller in the U.S.A. So our goal is to have a good equilibrium over all the regions that we are active in. Florian Martens: Thank you very much to the management team for the answers. Thank you, dear colleagues and coworkers for all of the questions that you've asked. I don't see any more questions in the pipeline in the stream, and I don't see any people raising their hands here in the room. So all I can say now is thank you for attending the annual press conference. We hope that you have a wonderful strong final dash towards the end of the year. The holiday season is around the corner. We're very happy to have hosted you here. Thank you for showing interest, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Florian Martens: Good morning, media representatives, esteemed guests, colleagues and coworkers. I would like to welcome you to the annual press conference of Infineon Technologies AG. Thank you so much for having found the time to attend today so early. All of the members of the Board and management are participating. Our CEO, Jochen Hanebeck; our Chief Financial Officer, Dr. Sven Schneider; Elke Reichart, CDSO; Andreas Urschitz, Chief Marketing Officer; Alexander Gorski, Chief Operating Officer. Mr. Hanebeck will start to give you an overview of the current fiscal year and forecast for the fiscal year that has just begun. The entire Board, of course, will be here to field any questions you may have. For all journalists, who are following us via the live stream, you're welcome to submit written questions. The question tool will be shown on your display on the screen. [Operator Instructions] So having said that, I'd like to hand the floor to Jochen Hanebeck. Please go ahead. Jochen Hanebeck: Thank you. Esteemed members of the press, esteemed viewers. Welcome to Infineon's annual press conference here on our site in our video studio and on our live stream. We are glad you could join us. Infineon met expectations in the 2025 fiscal year despite challenging macroeconomic and geopolitical conditions. The year was characterized by prolonged weakness in the majority of our target markets and customers and distribution partners have significantly reduced their inventory levels. In view of geopolitical instability and the ongoing turbulency of tariffs, our customers are cautious about the future development of demand. This has led to last-minute ordering behavior for semiconductors. In addition, unfavorable currency effects have slowed our revenue growth for several quarters now. Given the ongoing geopolitical and tariff-related uncertainties, it is difficult to predict how strong and how broad the upturn in the semiconductor markets will be in the 2026 fiscal year. Therefore, we are adopting a prudent outlook. Our priorities at Infineon remain unchanged. Firstly, we are leveraging existing opportunities for profitable growth and are expanding our production capacities in a very targeted manner to this end. Secondly, we are making focused and forward-looking investments in future technologies and in our expertise. Thirdly, we are keeping our expenditures under control. We remain confident on our medium- to long-term development. We are making good progress on improving our cost competitiveness. At the same time, we are accelerating innovations with clear customer benefits and strengthening our position in growth markets such as software-defined vehicles and AI data centers. I'll come back to this. Infineon is well positioned for a coming market upswing. Before we look ahead, let us first take a brief look at our business development in the past fiscal year. In the fourth quarter, group revenue increased to EUR 3.943 billion. This is an increase of 6% compared to the previous quarter despite a stronger headwind due to the weaker U.S. dollar. The exchange rate rose from USD 1.14 to USD 1.17 per euro. As expected, the fourth quarter was the strongest in the 2025 fiscal year in terms of revenue. We were able to increase the segment results to EUR 717 million. This segment result margin reached 18.2% compared to 18.0% in the previous quarter. This slight improvement is mainly due to higher sales volume. This enabled us to compensate for the unfavorable currency development. For the 2025 fiscal year, revenue amounts to EUR 14.662 billion. This is a decrease of 2% compared to the 2024 fiscal year. The weaker U.S. dollar was an important factor in this development. At constant currencies, our revenue would have remained almost stable compared to the previous year. This is a respectable result for a fiscal year that was characterized by substantial inventory corrections on the part of customers and by unprecedented trade conflicts. The segment result margin reached 17.5% after 20.8% in the 2024 fiscal year. Hence, the margin was in the forecasted high teens percent range. We were able to partially offset price declines, negative currency effects and rising idle costs with positive margin effects from our structural improvement program step up. The free cash flow was minus EUR 1.051 billion. The adjusted free cash flow, which excludes investments in large front-end buildings and major acquisitions such as Marvell's Automotive Ethernet business amounted to plus EUR 1.803 billion. This corresponds to approximately 12% -- 12.3% of revenue. All 3 figures, revenue, margin and free cash flow were in the lower range of our target operating model applicable during cyclical downturns. In a world full of uncertainty, Infineon remains on course. This is primarily due to the commitment of our teams worldwide. On behalf of the entire Management Board team, I would like to thank all our employees for their strong performance. Their commitment, passion and collaboration are key to Infineon's success even and especially during challenging times. Together, we have achieved much. And together, we are also tackling the current fiscal year, creating new things and shaping the future of our company. Esteemed viewers, our dividend policy is aimed at paying out an unchanged dividend even in the event of stagnating or declining earnings. We will propose a stable dividend of EUR 0.35 per share to Infineon's shareholders at the upcoming Annual General Meeting. We want our shareholders to participate appropriately in Infineon's success. And at the same time, we want to maintain the financial leeway necessary to further develop our company for the future. By doing so, we are focused on promising growth areas, especially in the field of artificial intelligence. AI will continue to drive the structural need for semiconductors and the demand for our solutions in the coming years. AI functionalities are indeed evolving at an incredible pace. They are changing industries and penetrating all areas of life. Generative AI, which can generate images, text, code and more, is increasingly being complemented by agentic AI, artificial intelligence that can perceive, reason, plan and act. And the next big development step is already in sight. Physical AI. It enables autonomous systems, for example, cars or humanoid robots to perceive and understand the physical world and carry out complex actions. The use of AI requires enormous computing power that far exceeds the capacities of existing data centers. These requirements are increasing rapidly. Even before 2030, capacities of 1 megawatt and more per IT rack will be required. To put this into perspective, 1 megawatt is equivalent to the power of around 500 clothes irons. The large U.S. tech companies, in particular, are driving the construction of specialized AI data centers worldwide. These data centers are reaching power levels in the gigawatt range. So we're talking about the power of 500,000 irons and upwards. 1 gigawatt is roughly equivalent to the full load of a nuclear power plant reactor unit. Meta, Amazon, Alphabet and Microsoft plan to invest over USD 300 billion in AI technologies and infrastructure this year. The announced projects alone represent an estimated output of up to 10 gigawatts. More will follow suit. Power is the backbone of every AI data center. There is no AI without efficient power electronics. We supply fitting and scalable power solutions for the entire energy conversion chain from the power grid to the AI processor in the data center. Infineon is a clear leader in this field. We are also rapidly developing our range of efficient and scalable solutions at fast pace. In doing so, we are working closely with leading companies in the industry. An excellent example is our collaboration with NVIDIA in the development of a centralized 800-volt power supply architecture for future AI data centers. The new system architecture significantly improves energy-efficient power distribution in the data center and enables an even more efficient power conversion directly at the AI chip. As a technology leader, we want to shape the rapidly growing market in the coming years. The fact that our solutions address an urgent and growing demand is also reflected in our business performance. We were able to almost triple our revenues from power supply solutions for AI data centers in the 2025 fiscal year, reaching over EUR 700 million. This is around EUR 100 million more than we had forecast despite negative currency effects. We are also raising our revenue forecast for the 2026 fiscal year from EUR 1 billion to around EUR 1.5 billion, which would mean more than doubling the revenues of the previous fiscal year. We also expect dynamic medium-term growth in this area. We expect the addressable market for Infineon to reach EUR 8 billion to EUR 12 billion by the end of the decade. In addition, AI is increasingly developing beyond centralized cloud systems. Edge AI, the intelligent processing and analysis of data directly in the device or in its immediate vicinity is becoming an important driver for our business. Infineon supports developers of edge AI applications with a complete system based on our specialized microcontroller, PSoC Edge, which combines machine learning, advanced human machine interaction, low energy consumption and integrated security. Added to this are our complementary sensor portfolio and our own edge AI development platform, DEEPCRAFT. By doing so, we offer a comprehensive set of hardware and software solutions for easy implementation of AI functionalities in IoT devices. Our customers can either develop their own AI models from scratch or integrate ready-made models and solutions into their products, thereby reducing time to market. As already mentioned, we are on the verge of the next big technological step in AI evolution, physical AI. Take cars as an example. With the trend towards software-defined vehicles, the automotive industry is paving the way to a new era of mobility. Software supported by AI is at the heart of the vehicle. This enables new automated driving functions and enhanced safety features. Issues can be resolved without the need for a visit to the car repair shop simply via software updates over the air. Software-defined vehicles lead to a new level of flexibility and efficiency. However, the necessary change of vehicle architecture is complex. Conventional electric and electronic vehicle architectures with a large number of distributed control units in the vehicle will not be enough. The automotive industry is, therefore, moving towards a more centralized approach. Infineon is playing a key role in this development. We are working together closely with many customers and partners to drive the development of software-defined vehicles around the world. In addition to our system expertise, we benefit from our global market leadership in automotive semiconductors. We have consistently expanded our position in recent years. Our rapidly growing business of microcontrollers for automotive applications has contributed significantly to this development. These products are becoming increasingly important for controlling various critical vehicle functions in software-defined vehicles. We want to expand our leading position in microcontrollers for the automotive industry. The acquisition of the automotive ethernet business of the U.S. company, Marvell Technology, which we successfully completed last summer was strategically important to this end. Ethernet is a key technology in software-defined vehicles. The technology is a perfect addition to our existing product portfolio. In combination with our AURIX microcontroller, it lets us offer a comprehensive product range that includes both communication solutions and real-time control. In addition to the car, ethernet technology is also essential to promising applications in the Internet of Things, especially for humanoid robots. Esteemed viewers, Infineon is shaping the future with solutions that deliver added value to the economy and society. One technology with great potential for value creation is quantum computing, likely the next disruptive technology to follow artificial intelligence. Quantum computers use the laws of quantum mechanics to solve certain particularly complex tasks much more than -- much more efficiently and quickly than conventional computers can. This opens up completely new possibilities in various application areas from materials research to developing new drugs and optimizing supply chains. At Infineon, we have key competencies for quantum computing. Our strategic partners include Quantinuum, a company in which NVIDIA also holds a stake and IonQ, the quantum company with the highest market value at present. Together, we are now taking the technology from the lab into application, pushing the boundaries of quantum computing. I'd like to offer deeper insight by sharing voices from our partners in academia and industry. Please take a look for yourself. [Presentation] Jochen Hanebeck: You heard it. Quantum computing is no longer a distant vision. It is becoming a reality. Quantum computing and artificial intelligence are 2 of the most exciting and forward-looking technologies of our time. Above all, their interaction promises enormous progress in areas where conventional computers are reaching their limits. These 2 key technologies reinforce each other. Firstly, artificial intelligence accelerates quantum computers by improving error correction, calibration and control of quantum hardware. This removes major hurdles to the scaling of quantum computing. At the same time, quantum computers accelerate AI by generating precise output data that serves as the basis for AI, for example, in developing new molecules for drugs, batteries and catalysts. Other potential applications range from optimization problems in logistics to cybersecurity and financial analysis. Quantum computing, therefore, does not replace AI, but rather expands its possibilities, thus opening new perspectives for data-driven innovations. And here, you can see one of our wafers with trapped ion quantum processors, which we are already developing and delivering to our lead customers. Three things are crucial for industrial-grade quantum computers, the quality of the qubits, replicability and scalability. Our quantum platform and our semiconductor production bring precisely these characteristics to the quantum ecosystem. For our customers, this means a clear path from research to application. A complete picture of quantum computing also includes a look at cybersecurity. Powerful quantum computers will be able to break established encryption methods within a few years, an enormous security risk for ID documents and payment cards for software-based devices and applications, for example, in industry, vehicles and aerospace. In particular, durable products with long development cycles are at risk. That's why we are already supporting our customers today with solutions for post-quantum cryptography based on the principle of protecting data today that must remain confidential tomorrow, so in the quantum age. And we back this up with certified security. Infineon is the first manufacturer worldwide to receive the Common Criteria certification for the implementation of a post-quantum cryptography algorithm on a security controller. Common Criteria is an internationally recognized standard that independent experts use to systematically test and certify the security of IT products. Thus, we are sending a strong signal of trust and security at the highest level. Esteemed viewers. Before moving on to our outlook for the 2026 fiscal year, a note for our guests on site. Following this press conference, we cordially invite you to visit our exhibition in the Cubis foyer. You will have the opportunity to discuss the topic of quantum computing in greater depth with our experts. Richard Kuncic, Head of our Power Switches business line; and Clemens Rössler from our Ion Trap Systems team will be happy to assist you. Many thanks to both colleagues. Now to our expectations for 2026. We continue to operate in an environment in which short-term or last-minute ordering behavior limits the transparency of demand trends. This makes predicting business development for an entire fiscal year, a challenging task. Inventories in the supply chains have largely normalized. It is end customer demand that will determine the extent and pace of the recovery in the semiconductor markets. We anticipate that the volume growth will return over the course of the fiscal year and that we will see a gradual upturn. In the current first quarter, we expect revenues of around EUR 3.6 billion. This forecast is based on an exchange rate of USD 1.15 to the euro. The segment result margin will be in the mid- to high-teen percentage range. This would correspond to a revenue decline of around 9% compared to the previous quarter, above our typical seasonality. We see a short-term risk that some automotive suppliers and manufacturers will reduce their inventories to no longer viable levels by the end of the calendar year. We also expect our industrial customers to reduce their inventories very significantly towards the end of December. However, market transparency is low. Therefore, we must consider a certain range of possible outcomes for the 2026 fiscal year. In our base case, we anticipate moderate revenue growth. The negative effects of the expected usual price declines and unfavorable currency developments are likely to slow down revenue growth. We expect a U.S. dollar to euro exchange rate of 1.15. This is a weaker dollar compared to the average exchange rate of 1.11 in the 2025 fiscal year. According to our rule of thumb, this effect will reduce our revenues by around EUR 400 million. The market environment remains mixed. We are cautious regarding the automotive semiconductor market in the view of various factors. We expect trade and tariff conflicts to have a negative impact on vehicle prices and customer demand. Growth in the electric vehicle market in China is likely to slow now that the share of electric vehicles in new car sales has exceeded 50% and government subsidies are being reduced. Momentum in Europe is likely to increase, while in the U.S., it will probably slow considerably due to the expiration of tax incentives. As a result, some Western manufacturers are postponing the launch of several new electric vehicle platforms in favor of combustion models. However, the outlook for software-defined vehicles is more favorable. We expect market momentum to accelerate from the second half of the fiscal year as increasingly more software-defined models come on to the market. This development means that more and more semiconductors are being installed in vehicles. We see a mixed picture for industrial applications. Macroeconomic uncertainty is delaying the recovery in demand for industrial drives. Similarly, there are still no signs of an upturn in air conditioning systems or household applications. In renewable energies, record levels of solar and wind energy installations are forecast for 2025, particularly in China. However, growth in this market is likely to slow down in the future. We do not expect other world regions to fully compensate for this development. Nevertheless, we see the structural semiconductor demand for the expansion of energy infrastructure is increasing. A higher share of renewable energy in the overall energy mix and investments in AI data centers in various parts of the world would necessitate a significant expansion and strengthening of the power grid. As already mentioned, we expect to more than double our revenues with our power supply solutions for AI data centers to around EUR 1.5 billion in the current fiscal year. Growth momentum in consumer-related applications is still subdued. Overall economic risks are dampening both consumer confidence and corporate spending. Thus, demand for IoT and security solutions also remains weak. Now to our profitability outlook. The segment result margin in the 2026 fiscal year is expected to come in at a high-teen percentage range. The positive effect of volume growth will be offset by unfavorable currency developments and the usual price declines. We expect further positive effects from our step-up program as an increasing number of our measures take effect. At the same time, the high level of cyclical idle costs in our production facilities is likely to proceed only very slowly. We are planning investments of around EUR 2.2 billion for the 2026 fiscal year. A focus area will be finalizing the construction of our smart power fab in Dresden and equipping it in time to meet strongly growing customer demand for AI, our AI power solutions. We are making good progress with the construction of the smart power fab. In October, we reached the ready for equipment milestone. We are ahead of our schedule and expect to be able to officially open the factory in summer 2026. Free cash flow adjusted for investments in front-end builders is expected to be around EUR 1.6 billion, and the reported free cash flow is expected to be around EUR 1.1 billion. Esteemed viewers, let me summarize. Firstly, Infineon has met expectations in the 2025 fiscal year despite challenging macroeconomic and geopolitical conditions. In the current fiscal year, we expect a gradual market recovery and moderate revenue growth. Secondly, artificial intelligence is driving semiconductor demand. Our revenue from power solutions for AI data centers is growing rapidly. We continue to develop our portfolio of efficient and scalable solutions at high speed. Thirdly, quantum computing is becoming the next potentially disruptive technology. We are shaping the quantum age with semiconductor solutions for industrial-grade quantum computing and post-quantum cryptography. Thank you for listening. Together with the Management Board team, I will now be happy to answer any questions you may have. Florian Martens: [Operator Instructions] So let's get started. I see that we have Joachim Hofer from Handelsblatt. Joachim Hofer: That's fine already. Your question has already been answered. I would like to know about the Nexperia case, what are the ramifications for you, for your business, either positive or negative? And I'd also like to know whether you have an opinion on whether fundamentally, this means anything for you and for the world, mainly the fact that China is expanding and perhaps what other conclusions you could draw from that. Unknown Executive: Well, the case that has been covered in the last couple of weeks by the media and has made headlines demonstrates, first of all, once again, the realization that semiconductors are not just in time products, this applies to standard semiconductors as well as the entire other portfolio components such as power switches and the power semiconductors. In the supply chain, you need inventories in order to make sure that these 2 value creator chains of the automotive industry on the one hand and the semiconductor industry on the other hand are decoupled from each other because when such situations occur, you see what could happen. And you can also have natural catastrophes and other disasters that you have to be resistant to. So that's very important. Now what does that mean for Infineon? Well, on the one hand, production lines actually did grind to a halt, it would affect us as well because sales would therefore tank. But at the same time, you can take a different view. This could be a wake-up call to industry to take a very close look at inventories. As a matter of principle, we at Infineon are extremely resilient in our setup, thanks to our manufacturing landscape. As a result, at some areas we were able to help. However, the overlap in products between Infineon and Nexperia is rather limited. The second question, the geopolitical ramifications. Well, geopolitical environment remains the big unknown in our business. There is no blueprint that we can draw on from the past. We simply have to follow developments day in, day out. Basically speaking, however, here again, Infineon is set up quite resiliently, thanks to its manufacturing footprint, especially in Europe and Southeast Asia. We also have manufacturing partners in the United States and in China. However, having said that, this is a topic that Timon again, leads to new or can lead to new disruptions. And on a daily basis can be quite eventful. Florian Martens: We have a question that is quite similar that comes from Mrs. [indiscernible] from Bloomberg that has come through the live stream. It also relates to Nexperia, Jochen. You have received to replace Nexperia chips? How far will you be able to do so -- have done so? How long these processes are? Please, could you answer in German? Jochen Hanebeck: Yes, as I just said, the overlap in our portfolio between Nexperia and Infineon for the affected semiconductors. We must not forget that not all semiconductors of Nexperia were affected. It's quite limited. And therefore, here and there, we were able to help out a little bit. But basically, we also welcome the fact that apparently, the situation has eased and auto manufacturing has taken up again. Florian Martens: I think that also answers the second question from Mr. [indiscernible] that was asked through the stream and we can, therefore, come back to the room. This is Verner from Spiegel. Unknown Attendee: Yes, I have a follow-up question on that. In your speech, you said that you expect some automotive suppliers to reduce their inventories to a level that is no longer sustainable. And that doesn't really tie in very well. Now haven't they learned their lessons since the Nexperia crisis? Jochen Hanebeck: Well, this is the difficulty that we face, isn't it? Some companies in the automotive supply chain are in difficult economic conditions. We also have to look at how their capital tied up due to their inventories. That is always an issue for them, and they always have to take a very close look at that. I can only call on everyone -- in difficult economic times not to let your inventories fall below critical levels because should there then be a reinvigoration of the market, and that doesn't just have to come from the automotive industry, it could come from other sectors as well, then potentially, you can run into problems, the type of which we witnessed a couple of years ago. Florian Martens: Thank you very much, Mr. Hao. I see you raised your hand. You are from [indiscernible]. Please go ahead. Unknown Attendee: Yes, I wanted to ask you that very question, but I have another question. You said that the auto suppliers are -- have quite tight wallet. But you say that -- of course, they have to supply the automotive manufacturers and make sure that their inventories are good. Do you see any critical situations given this situation and now the capacity underutilization of your factories, what level is it at right now? And how high were the idle costs in the past fiscal year? Jochen Hanebeck: I will handle the first part of the question. Basically, it would be the most sensible thing if everyone involved in the value chain kept their inventories at such a level that they had a certain buffer. We do that. We have an inventory reach that is about 30 days higher than necessary, at 150 days. Normally, we would have a reach of 120 days. We're talking about EUR 1 billion in capital that is tied up in this manner. Of course, it would make a lot of sense if the Tier 1 and the OEMs were dedicated in the same manner so that such buffers could be established, which, by the way, in Japan are absolutely customary. With respect to capacity underutilization and idle costs, I'd like to hand the floor to my colleagues. Unknown Executive: Just briefly on utilization. Right now, we are at about 80% capacity utilization. The forward-looking trend is improving, especially in the 300-millimeter sector within the scope of the gradual improvement in the market. Yes, and perhaps I can say something about the idle costs. Indeed, this is a very negative contribution to our profitability. In the past fiscal year. We're talking about just under EUR 1 billion in terms of idle costs corresponding to roughly 600 basis points, so 6% point margin headwind. We now assume that we're going to go back to about EUR 800 million, which is still quite a lot higher than the level that we normally have in terms of cyclical idle costs. This fiscal year, we're talking about 400 basis point headwind that are factored into the margin. Florian Martens: Thank you. We would now like to switch topics. Mrs. Maier, we will get to you in a minute, but Mr. [indiscernible] has a follow-up question with respect to AI data centers, an issue that we are all concerned with and the growing market, and the EUR 8 billion to EUR 12 billion, how much is supposed to be assigned to Infineon. Unknown Executive: Well, the starting point right now is that Infineon is already in a leading position in this market for AI data centers. Roughly speaking, we're talking about, if you look at -- along the entire power supply chain, 30% to 40% market share. Looking forward, we will do everything we can in order to stay in this range. So I think that you can do the math in terms of the potential for Infineon depending on whether we're at EUR 8 billion or EUR 12 billion. That remains to be seen. Florian Martens: Thank you very much. Mrs. Maier, you had a question as well. We'll continue here in the studio. Unknown Attendee: Yes, I would like to -- I'm Angela Mya, The Market NZZ. I would like to ask you about the idle costs as well. This is being stretched out over years now. Did you do your math wrong. When is the upswing going to set in, the upswing that you planned with that is? In other words, when are we going to see a margin above 20% again? Other competitors have a margin clearly above 20%, but you are still below that. And that's what you're planning for this next fiscal year indicates as well. Maybe you can give us some insight into that. Unknown Executive: Yes, thank you for that question. Let me begin with the fundamental categorization. It is important to look at the structural growth drivers and to believe in them which we do and Mr. Hanebeck was well eloquent in his speech on addressing this. The factories are being completed right on time. We have a very good track record back then when we constructed villa 300 millimeters, we were right on track. If you look at the smart power fab in Dresden, once again, we're doing the right thing at the right time. Of course, we can't always manage to do that. But you're right, we were more optimistic 2 years ago and 3 years ago with respect to our growth prospects. But the topics surrounding the geopolitical situation and tariffs weren't known back then. What it may also be relevant in this respect is the following. We are growing this year. We are experiencing volume growth, but the growth is strongly driven by AI, we're adding capacities here. We're basically sold out in this year. We don't have any idle costs that are allocable to AI power supply. And the same applies to AI defined microcontrollers. These tasks are outsourced and that doesn't help us, and that's the reason why our idle costs aren't reducing as fast as we would like them to. With respect to the margins, I already demonstrated in the impact that, that was just the effect of the idle costs. On top of that, there's a positive effect from the fall through, revenue generates some positive results. And of course, that would put us easily above the 20% that you mentioned. Unknown Attendee: And when is this going to happen? Unknown Executive: Well, the markets -- when the markets play to our strengths. We depend to a certain degree on that. So final demand and inventory management are going in an opposite direction. So that's a little difficult right now. Florian Martens: The next question also deals with a growth trend that we described, the software-defined vehicle. Matthias [indiscernible] from Blick from Switzerland asks when will the Marvell Ethernet segment contribute to revenue? And what influence will it have on the segment result margin in the future? Sven? Sven Schneider: Yes. Well, with respect to Marvell in the middle of August, we acquired the company. So that was in 2025. There were no notable ramifications there. In 2026, we expect EUR 200 million in terms of revenue from this business, and this is a positive business in terms of profitability. So it would make a positive contribution to the group margin. And strategically, speaking, if I may add, this is extremely important because our expertise in automotive microcontrollers will be married with the technology for communication in the future. We expect wonderful synergies in terms of architecture, but also, of course, in terms of positioning our products with the customers. At a global level, I must add Marvell already has a wonderful design win pipeline that is built up over the years in the run-up to the acquisition, and we can build on that. Florian Martens: Thank you very much. We're going to come back to the room. Christoph Dernbach from DPA. Christoph Dernbach: Yes. I hope I didn't miss anything, but I can't remember what you might have said about the U.S. tariffs, how much they might have cost you in the past quarter and fiscal year? Unknown Executive: Well, the direct tariffs that relate to semiconductors are not really that material. The tariffs that are really effective are the ones that are imposed by China for imports into the U.S.A., but they hardly affect us at all. And the investigation according to Section 232, the outcome of this investigation is entirely open. However, there are some indirect impacts, which you can see reflected in the sales volume figures in the United States also experienced by European players. And this does have a tangible impact on us. Florian Martens: Okay. We'll stay in the room. Mrs. Verner has another question. Please go ahead, madam. Unknown Attendee: I have a follow-up question with respect to the data centers that we touched on already. There are a number of wonderful announcements in Germany, for instance, Google appears to be set to make a big investment. But is that sufficient from your point of view, if you compare the EUR 300 billion that are being invested in the United States and China? Doesn't it seem to be a drop of water in the bucket. What do you believe is actually necessary in Europe to have a chance in this place? Unknown Executive: Well, the sums announced in Europe can only be a first step. Of course, you can break things down into AI infrastructure for learning. And the inference. Of course here, the necessary infrastructure costs are lower. The question is, however, shouldn't Europe become involved in the foundational models, and I'm sorry for using English terms all the time. From where I stand, there is clearly a vector. That means we're going to run into dependencies in Europe. Florian Martens: Okay. Maybe, Mr. Hofer, you have a follow-up question on that. Joachim Hofer: Yes. No, not really. It doesn't really tie into that, not quite. That's okay. Your fitness program. I would like to have some more information about that. What effect has it had, if you look at headcount, it remained essentially flat. Maybe headcount increased through Marvell. Give us some insight into that, perhaps. And now in the United States, do you think you're at a disadvantage relative to domestic competitors because we do have a very strong wave of patriotism in that country. What is the situation in the United States? Unknown Executive: Okay. With respect to the last question, we don't feel anything from this at all. To the contrary, in California, if you look at the major AI infrastructure drivers, we are a supplier that is held in high esteem, an extremely high esteem, I must say. What we are feeling is that in the geopolitical arena, the American value creation chains and the Chinese value chains are slowly separating from each other. But I believe that our esteem in AI and autos and in the future, increasingly grid infrastructure is very good. Unknown Executive: Hope, let me answer the question that you asked about the fitness program step up. Step up to us is a program which ensures improvements in the competitiveness. From a structural point of view, we are well on track. We're actually ahead of plan. We are shooting for a sum in the high triple-digit-million-euro range, which is going to be broken down into a number of different areas, the contribution that we achieved in the [ last ] fiscal year was 50% of this figure. We believe that 2/3 of this figure will be achieved in this fiscal year and then that will be at 100% in 2027. 1/3 of the measures relate to personnel 3/4 are efficiencies, productivity improvements, digitization issues. And you asked us about headcount. You're correct. On the one hand, we have reduced headcount, but new people have joined the Infineon family through the acquisition of Marvell and some of the HR topics will be remanaged. We will move from high-wage countries to best-cost countries, but we have to build up the business in those countries first. So we will have some trickle-down effects in the next quarter. Florian Martens: I think that the question asked by Mr. [indiscernible] in the stream has been answered as well. He is asking about further plans to reduce headcount after [indiscernible]. Unknown Executive: No, we don't have any further plans. But if we look at the market, we have to keep on monitoring the dynamics to determine what our portfolio, our product portfolio or our fab portfolio is still fitting with our goals and where we want to be in the market, but we don't have any further plans right now. Florian Martens: Mrs. Maier, you raised your hand. Unknown Attendee: Yes. I haven't heard anything about China today. Perhaps you could tell us once again what the revenue share was in the past fiscal year and what it's going to be like in this coming fiscal year. I think it is probably going to drop in the auto market. Will this affect Infineon in China? And perhaps you can tell us something about the momentum of competition there. The Chinese chip manufacturers are on a strong upward trend. And Infineon, nevertheless, has always managed to command a very good position on the market. Do you think you can defend it? Unknown Executive: Mr. Urschitz will start and then maybe Sven. Andreas Urschitz: Okay, with respect to the share of revenue generated in China, I'll start with Greater China, including Mainland China and Taiwan. In the past fiscal year, we were at a 38% share of revenue. 29% -- 29 percentage points were achieved in Mainland China. So relative to 2024, in China, we have grown in terms of revenue share. This is in part due to the Chinese leading role in decarbonization and digitization trends, very exciting markets when it comes to automotive electronics and maybe I can make a forward-looking statement here and what we plan for the future in this respect? Well, on a large scale, the share of revenue is going to be maintained in this range in 2026 as well. Sven Schneider: Yes. And perhaps there are 2 more points that we should raise here, the 29%. About 1/3 of it goes back into exports as a car or a smartphone, for example. So here, we believe that the value chains will continue to shift. If you would ask me today about a longer-term -- or for a longer-term outlook beyond 2026, well, then I would say that this share may drop somewhat in China. Of course, there are Chinese competitors. There are applications that have existed in the past as well, which achieve price points that make no sense for us whatsoever. That's why it's all the more important for us to look at topics like AI and regions such as the United States, Korea and Japan and to build up our business there. In the past, we've been very successful at doing this. However, it is quite clear that our corporate strategy in this respect now is to have the broadest possible footprint on a global basis. A good example of this is our automotive business, which has equal shares of the markets in Europe, Japan, China. It's a little bigger in Korea, and it's a little smaller in the U.S.A. So our goal is to have a good equilibrium over all the regions that we are active in. Florian Martens: Thank you very much to the management team for the answers. Thank you, dear colleagues and coworkers for all of the questions that you've asked. I don't see any more questions in the pipeline in the stream, and I don't see any people raising their hands here in the room. So all I can say now is thank you for attending the annual press conference. We hope that you have a wonderful strong final dash towards the end of the year. The holiday season is around the corner. We're very happy to have hosted you here. Thank you for showing interest, and have a good day. [Statements in English on this transcript were spoken by an interpreter present on the live call.]
Operator: Greetings, and welcome to the Caesarstone Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Brad Cray of ICR. Thank you, and you may begin. Brad Cray: Thank you, operator, and good morning to everyone on the line. I am joined by Yos Shiran, Caesarstone's Chief Executive Officer; and Nahum Trost, Caesarstone's Chief Financial Officer. Certain statements in today's conference call and responses to various questions may constitute forward-looking statements. We caution you that such statements reflect only the company's current expectations and that actual events or results may differ materially. For more information, please refer to the risk factors contained in the company's most recent annual report on Form 20-F and subsequent filings with the SEC. In addition, on this call, the company will make reference to certain non-GAAP financial measures, including adjusted net loss income, adjusted net loss income per share, adjusted gross profit, adjusted EBITDA and constant currency. The reconciliation of these non-GAAP measures to the most directly comparable GAAP measures can be found in the company's third quarter 2025 earnings release, which is posted on the company's Investor Relations website. On today's call, Yos will discuss our business activity and Nahum will then cover additional details regarding financial results before we open the call for questions. Thank you. And I would now like to turn the call over to Yos. Please go ahead. Yosef Shiran: Thank you, Brad, and good morning, everyone. Thank you for joining us to discuss our third quarter 2025 results. We are rapidly advancing the transformation of our business model to focus on innovation, product development and marketing, while we continue to be deeply involved in the production and quality control activities with our production business partners. We are investing in strengthening the Caesarstone brand, expanding our porcelain offering and enhancing our R&D capabilities. As part of this strategic transformation and following careful evaluation, we have decided to move our production to our global manufacturing partners and close Bar-Lev manufacturing activity in order to further optimize our production footprint. This strategic action is intended to increase competitiveness, improve our profitability and cash flow, enhance service and drive additional cost savings. These actions are expected to generate annualized cash savings of approximately $22 million and bring total savings since 2023 to over $85 million. Since launching our transformation strategy in 2023, we have fundamentally reshaped Caesarstone. Currently, over 70% of our production is sourced through global partners. And upon completion of the Bar-Lev closure, we will reach 100% outsourced production, excluding porcelain, where we continue to operate and invest in our plant in India. These actions are necessary steps in reinforcing our competitive position and enabling a return to positive adjusted EBITDA in the third quarter of next year. But our transformation goes beyond manufacturing efficiency and cost savings. We are building a company focused on innovation, brand strength and customer value creation with a lighter capital production assets. In addition, our porcelain business represents an important growth factor. And in September, we signed a share purchase agreement to acquire the remaining shares of Lioli, bringing our ownership to 100%. This acquisition further strengthens our position in this expanding category and enables us to capture new market opportunities. To conclude, Caesarstone is a different company. We are more agile, more innovative and better positioned to scale efficiently as we move forward towards profitable growth over the long term. I now turn the call over to Nahum to review our financial results. Nahum Trost: Thank you, Yos, and good morning, everyone. Looking at our third quarter results. Global revenue was $102.1 million compared to $107.6 million in the prior year quarter. On a constant currency basis, third quarter revenue decreased by 5.7% year-over-year, primarily due to lower volumes, reflecting continued global economic headwinds and competitive pressures. We have seen revenue levels stabilize in recent quarters, which is encouraging. Breaking down our regional performance. In the U.S., sales were down 10.9% to $46.7 million. The decline was driven by persistent softness in the market and competitive pressures. Canada sales decreased by 10.8% on a constant currency basis with similar market dynamics as the U.S. Australia improved this quarter with sales up 8.5% on a constant currency basis, our first year-over-year growth in this market since the silica ban implementation. This reflects early recovery and the successful launch of our zero silica collection. EMEA delivered strong performance with sales up 12.4% on a constant currency basis, driven by growth in both indirect distributor channel and our direct business. Our expanded presence in Germany contributed positively. Israel sales increased by 2.5% on a constant currency basis as market conditions continue normalizing. Now looking at our third quarter P&L performance. Gross margin in the third quarter was 17.3% compared to 19.9% in the prior year quarter. The decline was primarily due to lower volumes and production, which resulted in lower fixed cost absorption and costs associated with ramping up new products. These factors were partially offset by benefits from the transfer of production to our global network. Operating expenses in the third quarter were $33.7 million or 33% of revenue compared to $25.4 million or 23.6% of revenue in the prior year quarter. Excluding legal settlements and loss contingencies and restructuring and impairment expenses, operating expenses were $29.7 million or 29.1% of revenue compared to $30.2 million or 28.1% in the prior year quarter. In absolute dollars, we reduced expenses by approximately $0.5 million with the higher percentage primarily driven by lower revenues. Adjusted EBITDA in the third quarter was a loss of $7.9 million compared to a loss of $4.1 million in the prior year quarter. Finance expenses was $1.8 million compared to finance income of $0.3 million in the prior year quarter, primarily due to foreign currency exchange rate fluctuations. Adjusted diluted net loss per share for the third quarter was $0.40 on 34.6 million shares compared to adjusted net loss per share of $0.24 in the prior year quarter on 35 million shares. Turning to our cash and balance sheet. As of September 30, 2025, we had cash and short-term deposits of $69.3 million and total debt to financial institutions of $2.6 million for a net cash position of $66.7 million. Now let me provide important context on several items. The Bar-Lev facility closure that Yos mentioned will generate significant onetime charges and ongoing savings. We expect noncash impairment expenses of $40 million to $45 million and cash costs of $4 million to $8 million beginning in the fourth quarter of 2025 and continuing through 2026. These estimates exclude a potential noncash write-down on the facility lease, which runs through 2032 and which we plan to sublease. Once fully implemented, we expect annualized cash savings of approximately $22 million with additional potential savings from subleasing the facility. Combined with prior cost reductions, our total annualized savings will exceed $85 million compared to 2022. Separately, with regard to our Richmond Hill site, discussions are progressing with a potential buyer to acquire the site at a price that is approximating its book value. Regarding U.S. tariffs. We continue to monitor the impact of existing and proposed U.S. tariffs affecting various countries and product categories that are currently in a wide range on the majority of imported products. Approximately 48% of our revenues during the first 9 months of 2025 were generated in the U.S. market, served by our global production network. We are in continuous dialogue with our manufacturing partners to optimize our supply chain and recently announced a price increase in the U.S. market in order to mitigate the increased cost of goods imported to the U.S. In addition to these tariffs on September 15, 2025, a petition was filed with ITC by a U.S. quartz manufacturer alleging serious injury caused to the entire U.S. domestic industry by imports of quartz surface products, seeking hard quartz of the quantity of court surfaces products that can be imported into the U.S. and/or tariffs of up to 50% on all quartz surfaces products that are imported into the U.S. from any country. Hundreds of objections were received to this petition by U.S. domestic businesses, including fabricators, and the process is in a very early stage. On legal proceedings, as of September 30, 2025, we had 514 lawsuits alleging silica related injuries. This included 43 in Israel, 151 in Australia and 320 claims in the U.S. We have recorded a $46 million provision representing our best estimate of probable losses with $24.3 million in insurance receivables. In the U.S., during 2025, we won one case, which remains under appeal and settled another. In 2024, we received one adverse verdict, which is also currently under appeal. Remaining U.S. claims are in early stages, our loss is only reasonably possible. Given the complexity and the preliminary nature of these matters, we cannot reasonably estimate potential losses beyond our current provision. We and certain insurance carriers initiated proceedings in July 2025 regarding interpretation of our insurance coverage. These proceedings are in early stages. We are also encouraged by a recent legislative development in the U.S. In September, a bill titled the Protection of Lawful Commerce in Stone Slab Products Act was introduced in the House of Representatives. The proposed legislation aims to ensure that manufacturing and distributors are not held liable for injuries caused by unset fabrication or alteration performed by third parties. While it remains in early stages and there is no guarantee of adoption into law, we see this as a constructive step towards restoring fairness and balance across the stone product supply chain. Before we conclude, let me reinforce a few key points. Third quarter results reflect stabilizing trends in our top line compared to recent quarters. The structural transformation of our business is proceeding in line with our plan. Combined with over $85 million in cost savings, we have fundamentally repositioned Caesarstone for a long-term growth, and we have a line of sight to reach positive adjusted EBITDA in the third quarter of 2026. With that, we are now ready to open the call for questions. Operator: [Operator Instructions] There are no further questions. This concludes the question-and-answer session. I would like to turn the conference back over to Yos Shiran for any closing remarks. Yosef Shiran: Thank you for your attention this morning. As we close out 2025 and move into 2026, our team remains focused on executing our transformation plan and positioning Caesarstone for sustainable, profitable growth. We appreciate your continued support and look forward to updating you on our progress next quarter. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect. Thank you.
Operator: Ladies and gentlemen, welcome to the Voestalpine Publication First Half Business Year 2025-'26 Conference Call. I'm Mortz, the Chorus Call operator. [Operator Instructions] And the conference is being recorded. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Peter Fleischer. Please go ahead, sir. Peter Fleischer: Thank you very much. Good afternoon, ladies and gentlemen, for our first half 2025, 2026 results announcement. With me is our CEO, Herbert Eibensteiner; and the CFO, Gerald Mayer. We will give you a brief overview of what has happened in the first half, and we will be very happy to answer your questions afterwards. Herbert Eibensteiner: Yes. Good afternoon, ladies and gentlemen. Let me start with a brief introduction of Voestalpine, for those who don't know us. Voestalpine is a global special metals and steel and industrial group. What we combine is this production and processing and engineering competence. And from this expertise, we develop innovative special solution to our customers to improve their competitiveness and that makes us the leading partner for high-tech industries with high entry barriers, such as railway systems, automotive or aerospace. And we are stock-listed since 1995, and we are committed to value creation for our shareholders. Let me start with the global economic environment in the first half of the year. And what we see is that North America, we're still relatively robust economic growth, a lot of investments in the technology sector. Now I would say, industry is -- industry development is a bit lower at the moment. When we look at Europe, we have this subdued economic development. And at the moment, we are somewhat between cautious optimism and continuing uncertainty. When we come to Asia, mostly China is important for us, a relatively stable economic development this growth in China is supported by high export in the rest of the world. We will talk about tariffs afterwards. And we see a weaker development of the domestic economy. In South America, Brazil for us, very important. We see a reduction of the economic environment, why we have high interest rates and a very strong competition from Chinese import. This is a country with no trade restrictions and a target of the Chinese exports. What are the highlights of this first half? For sure, the U.S. tariffs, which is led to uncertainty in the economy worldwide. And what we see, I have mentioned that before, this is noticeable in North America as well with a more cautious investments in industrial business so far. We can see that at the moment. For Voestalpine, these tariffs -- we are affected by these tariffs. We can say this is manageable for us. And we see a high double-digit EBITDA impact for this business year coming from the U.S. tariffs. So all in all, the major economic trends are unchanged. We have, I would say, we delivered a very solid result for this first half year, considering the environment we are in, the earnings are as expected. We had a strong cash flow development and balance sheet is very solid. So far, Gerald will elaborate on that later on. All our reorganization and efficiency measures are very well on track. And decarbonization, greentec steel projects are on time and on budget, so far, so good. And what we see at the moment is we can expect a tailwind from the announced EU safeguard measures and CBAM, and the implementation will be from our perspective in the next year. We'll discuss that anyway afterwards. The outlook and the guidance is unchanged. So all these activities and impact from the tariffs included in the guidance, but it's unchanged. So only 4 interesting project that you know that we -- besides tariffs. There are also projects in Voestalpine. So we had the groundbreaking for a new R&D project. So in the R&D laboratories, we see that we can produce hydrogen-based pig iron, and that's the reason why we want to start to erect a demonstration plant in Linz and we have already started, start of production will be in 2 years in 2027. And after 2 years, we know if this process is competitive. And we are -- we do that with very good partners with Primemetals, it's an engineering company in Rio Tinto, you know Rio Tinto, anyway. So because I will touch this high bay warehouse topic afterwards. So we got the major project in Turkey for a logistics service provider, start of production, end of this year and completion in 2027. Just to give you some figures. This is 250 meters long, 90 meters wide, 40 meters high, more than 11,000 tonnes of steel profiles. So that's these high-bay warehouses we are building, and this market is still growing and high profitable for us. But we also think about our capacity expansion in the U.S. We have contracts with 2 international truck OEMs in the U.S. production for the U.S. market for site members. So production facilities completed, we are delivering the machines so far, and we will start production in summer 2026. By the way, we do the same business in Europe in Belgium for European OEMs. And on the right-hand side, our Railway System business just as an example because it's coming from Austria, we got the contract for the Koralm tunnel, which is the sixth longest tunnel in the world, 33 kilometers, top speed 250-kilometer per hour, and this is a very interesting project with 290-kilometer rails and 235 high-speed turnouts on this way from Graz to Klagenfurt. So this is the example of projects we are doing, not only in Austria but all over the world. Let me come to the divisions. Steel Division, very strong performance of our flat steel business in a relatively difficult market, why we are high utilized in this business, we have good orders, good production and we have projects in our heavy plate business. And the demand from the automotive sector is and was very good and also from the energy sectors and other markets remains stable on the existing level, I would say, when it comes to building mechanical engineering and so on which is on lower levels. General market sentiment has improved after the announcement of the EU safeguard measures and the U.S. tariffs is not very important for Steel Division. It's negligible for this division. And when you look at the EBITDA margin, it's more than 13% so far. I come to the High Performance Metals Division. So it's a bit different. We have lower demand with reduced utilization of all our special steel mills worldwide, tooling and industrials muted and also in Europe, especially intense competition. This was the reason why we sold Buderus, oil and gas is lower by low exploration activities. And aerospace, which is the bigger part of this division, very strong. We got new orders, and we see a continued upward trend. We do a lot of reorganization. They are streamlining their global sales network. We have working capital measures there. And intense efficiency and cost-cutting programs in execution, and we see the first positive results in the course of the second half of the year. And the U.S. tariffs here, yes, again, affected, but manageable most affected, the Swedish and Brazilian special steel mills. But EBITDA margin of 7.6% is, I think, very solid in this given environment. Metal Engineering is -- Railway Systems continue with very strong performance. And I will touch that in the next slide. We see a mixed picture in our industrial systems business, and we have also implemented efficiency programs, wire is stable on very low levels, I would say. And we see also a very low demand from seamless tubes and welding consumables, worldwide business is relatively stable on solid levels. And this seamless tubes business is most affected in our Voestalpine Group by this tariff and has a negative impact. So we have to reduce volumes in this business. But still 9.1% EBITDA margin and the most important contributor to this result is Railway Systems, which is an integral part, the biggest part of Metal Engineering. And also, I would say, a business which is a driver of our long-term growth strategy. Turnout systems, we are a world market leader there with 60% of sales of railway systems. We see all over the world a very good demand in all our relevant markets, rail technology, 30%. It's a more European business, strong, stable demand in Europe. Fixation, new business for us, but important solid development in Europe, particular in CEE. And signaling, fast-growing business, and it's very important to get such complex project, as I've mentioned before in Koralm Tunnel. It has a very stable demand and trends in Europe and also a growing business in Middle East and with this 10% -- more than 10% EBITDA, the biggest contributor. Metal Forming Division, automotive components, lower production in Europe. So it's the division, which is most affected by the lower car production. We have reorganization projects in execution, Tubes & Sections, overall, solid, demand slowed a bit after the summer, but we will see an improvement until the end of the year. Precision Strip, surprisingly improved in the course of the first half of the year. So I think they developed quite well under the given environment. And as I mentioned before, Warehouse & Rack Solutions, very strong development and the order book for the next 2 years is very strong. And in this division we have no relevant impact from the tariffs. And the EBITDA level is below the average of the group with 6.3%. And now I would hand over to Gerald to lead us through the figures. Gerald Mayer: Yes, ladies and gentlemen. Herbert provided an overview of the latest developments in our markets and business divisions. In the following minutes, I will outline how these developments are reflected in our financials. And I would like to start with this overview. Revenues declined by EUR 450 million or 5.6%. All 4 divisions contributed less operationally compared to the previous year of the total degrees about EUR 300 million attributable to lower price levels in particular and EUR 150 million are related to the sale of our former subsidiary, Buderus Edelstahl. Despite the decline in revenue, our results are above the first half of '25, '25. Yes, and in particular, High Performance Metals Division achieved stronger contributions. This, of course, was also related to the sale of Buderus where we had a one-off impact last year of EUR 81 million. Steel Division was fairly stable. Metal Engineering and Metal Forming Division recorded lower earnings. As a result our margins have improved. On the one side, of course, we had lower revenues. On the other side, we have this increased result levels. Of course, this resulted then in increased margins. Our interest income is -- and if you do the math here, you will see that it is stronger than last year, more than EUR 20 million roughly related to a significantly reduced net debt position. And this, combined with lower interest rates supported our interest income. So profit before tax at EUR 278 million compared to EUR 248 million last year. Profit after tax, you see an increase there of 8.6%. So this is below this plus EUR 12 million in profit before tax. The reason is -- the main reason is that we saw a higher tax rate there. And this is linked to losses we had in Germany and the U.S. and in Brazil that we did not recognize deferred tax assets. I prepared 2 bridges. The first one you see on the Slide 14. You see the half year comparison and the impact of pricing, so means minus EUR 270 million, which was more or less, let's say, 2/3 of it was compensated by lower raw material prices. So the gross margin -- in gross margin, we lost roughly EUR 80 million. So this is what you can see in this slide, in this bridge. And this EUR 80 million were more or less completely associated to our Steel Division. There is a minor impact also from Metal Forming in HPM Division and the Metal Engineering is plus/minus 0. You see a positive impact from mix and volume. Volume is, in particular, associated to a strong performance in Steel Division, where we had stronger volumes in the first half compared to the previous year in HPM division. volumes were down slightly, and we saw some negative mix impact in Metal Engineering Division. But all in all, it adds up to plus EUR 45 million. Miscellaneous, plus EUR 39 million. As I mentioned here on this slide, there we, of course, have the positive impact, EUR 81 million from Buderus sale last year, this one-offs, we communicated 1 year ago. And of course, there are also included negative impacts from U.S. tariffs, cost inflationary items and also, of course, a positive impact from cost reduction programs, CIP programs and so on. Last time, I prepared the bridge according to our divisional organization. You see here that Steel Division was very strong, by the way, also in the first half last year. It was very strong in Q1 last year. And this year, the full first half was very strong, and in particular, second quarter was very solid. You see the increase of EUR 87 million in HPM division, mainly associated to what I mentioned before, means the one-off from the sale of Buderus last year, which had a negative impact. The environment as Herbert discussed is still difficult, but our measures are working out quite well. And so we are a little bit above operationally the prior year level. Metal Engineering, down EUR 61 million. We have 4 business units in there. Of course, for all of them, it's a little bit weaker than it was last year in the first quarter, but -- in the first half. But the main impact, of course, come from Tubulars business where we are highly affected by the tariff situation in the U.S. and in our wire division, we are somehow suffering from weaker markets. Metal Forming is down EUR 23 million compared to prior year. We have some headwinds in the markets in our Tubes & Sections business, also still in Automotive Components business, we're also restructuring that area. Herbert also talked about that before. What was very strong again was Warehouse & Rack Solutions. And as we heard before, also in Precision Strip, we have some positive developments there. So in EBITDA, we are slightly above prior year level. And I would say, given the environment, a satisfying performance. Cash flow statement, Slide 16, I would say, a very positive development there. Cash flow from results, EUR 687 million compared to EUR 481 million. Of course, we had a positive contribution of a higher net result there on the one side. On the other side, we have lower interest rates and interest payments. On the one side, our debt is down. Interest rates came down. On the other side, we also -- we issued a bond last year and EUR 20 million of these payments for interest in the second half and last year, definitely, the bulk of this was in the first half. It's EUR 20 million out of that. Prior year, we also had a one-off there. We had interest payments for prior periods in there of more than EUR 100 million. So this was a burden to this prior year cash flow from results. Very strong again is our changes in net working capital, plus EUR 96 million there. So we managed in the last 12 months to release more than EUR 500 million of our net working capital there. And then also as roughly EUR 50 million are associated to lower inventory levels out of this EUR 96 million. Cash flow from operating activities, this adds then up to EUR 783 million compared to EUR 346 million prior year, it means more than doubled this number. Cash flow from investing activities, EUR 510 million last year, EUR 490 million this year, roughly. So you see there that we are not at the run rate where we perhaps -- or you assume perhaps that we are. So our outlook is still EUR 150 million for the year as a whole. We are on time and on budget, doing -- and I'm talking about our greentec steel or as we call them Transnet projects, our decarbonization projects in Linz and Donawitz. And as I mentioned before, our guidance for this year still will be EUR 100 million, EUR 150 million. So there is more to come until end of this year. So this adds up then to free cash flow for this period of EUR 300 million, and this is one of the best performances we had for our first half of Voestalpine. Yes. Having said that, we still, of course, have a solid equity base there with an equity of EUR 7.5 billion, equity ratio of 49%. Gearing ratio came down to roughly 20%. And as I also mentioned here, so there are no major redemptions until end of this year. So everything is solid. And yes, we can build on that for all the future challenges we have. Herbert Eibensteiner: So let me come to the outlook. For the rest of the year, you know that the uncertainty is still there in the course of this U.S. tariffs and all the weak economies in Europe. So the existing trends in the major economies will more or less continue, mechanical engineering, construction, consumer goods at low level, but stable automotive industry is divided also for the rest of the year. Components is muted and with all the restructuring measures, and we see solid demand for the Steel Division, for high-quality steel. And energy market is mixed, exploration is very low, and our OCTG business is affected by the tariffs anyway. But what we see is for the remainder of the year, good projects from pipeline business. And as I mentioned before, ongoing good development in railway systems, in aerospace and in warehouse technology and all the reorganization projects are well on track. We will see, especially in High Performance Metals and even more in Metal Forming the first positive results to the -- at the end of the year. And we think that the announced safeguard measures will lead to a more positive view for the upcoming year for the Steel Division and the negative effects included in the guidance as far as we know at this time. And that's the reason why we confirm our guidance, and we expect an EBITDA between EUR 1.4 billion and EUR 1.55 billion for Voestalpine till the end of the year. I'm happy, thank you for your attention, and we will be happy to answer your questions. Operator: [Operator Instructions] And the first question comes from Tristan Gresser from BNP Paribas. Tristan Gresser: I have 2. The first one, if you could discuss a little bit the ongoing contract negotiations with OEMs. Are they taking place earlier or later this year? Do you think there is a potential for a triple-digit increase for next year? And if you could just remind us how much of your steel portfolio is now on annual contract? And how much of that is renegotiated in January? That would be my first question. Herbert Eibensteiner: We have roughly 2 million tonnes in auto, and 40% of that is annual contracts. So this is the figure we are talking about. At the moment, I would say we are just at the beginning of the negotiations. And I think it's -- when you look at the steel prices in the course of the years, we have now a very positive momentum for the next year. Normally, OEMs would ask for a reduction. And now we are fighting that we get more, that's clear. But you can imagine that at this time, with the fantasy of CBAM and safeguard, it will be a very tough negotiation and wouldn't be surprised that we wouldn't -- that we will -- or we won't have a final result at the end of December, I would count for January. So I think it's -- they are very, very tough discussions, I assume. Tristan Gresser: Okay. No, that's very clear. And my second question is on the steel action plan. If tomorrow, the European Commission mandates that 60% of steel in public procurement should now be European-made low carbon steel. How big of an impact is it? Is that a game changer, how big it is for the industry, how big is public procurement in general for steel in Europe, but also for you, more particular for your own business, would it have an impact? And if you can elaborate a bit on that, that would be great. Herbert Eibensteiner: In general, we have this 3 parts of -- how should I say, positive things in our environment, this is safeguard, this is CBAM and this green market activity. So all in all, I think it's positive for the steel -- for the Steel Division. And the public markets, we are not really in the building industry or not that much in the building industry. But when it comes to a green steel market, this is a very positive for us because we are we will be one of the first who can provide, in 2027, green steel or CO2 reduced steel. So I think that will be a very positive for Voestalpine in particular. Tristan Gresser: Okay. And just a quick follow-up on automotive demand. Would you say public buying, public purchasing is a big share or a single-digit share of the total demand? Or any color there? Herbert Eibensteiner: Well, it's difficult. I think it's, at the moment, very difficult to say. Operator: The next question comes from Bastian Synagowitz from Deutsche Bank. Bastian Synagowitz: I'll start off with the Metals Engineering business and the rails business here in particular. So first of all, I'm wondering what is your conviction here on a rebound in the German rail sector next year. I guess this year, you're seeing a bit of a pause, I guess, due to the budget constraints. But do you see any early indications or evidence from projects or tenders coming up already at this point? That's my first question. Herbert Eibensteiner: Yes. There is business in the German market. We had a relatively good year in the German market and I think that we -- there are projects in -- also in the next years, we have booked, I think that we will realize that. But we know also that Deutsche Bahn is in a reorganization phase that we can -- we may face one or the other postponed projects that can be the case. But what we have heard that in this infrastructure program that a bigger portion than expected is allocated to railway infrastructure, and this will come in 2027. And this is a very positive news for Voestalpine knowing that we are a relevant supplier for this railway infrastructure packages. . Bastian Synagowitz: Okay. That's very clear. Then my next question is on your free cash flow, which I think has been very impressive this quarter. Now I guess the third quarter is usually a little bit weaker due to the working capital you typically absorb from your customers, which have a different financial year. So can you please give us a little bit of color. First of all, what do you expect for Q3 on the free cash flow side and whether the EUR 350 million free cash flow target for the full year is more a floor or a ceiling? And then maybe also related to this, is there any other item we need to consider for the cash flow this year? I guess you will have probably some restructuring expenses. And do you think that it is pretty safe to say that the year-end net debt will be at least on the level of the second quarter? And maybe also, I guess, what is your conviction here for also generating decent underlying cash flow next year? Gerald Mayer: I would like to take this question. First of all, I think many things went good and right in our first half of this year. Of course, as I also explained during my presentation, in terms of investing cash flow, cash flow from investing activities, we are not at the run rate to reach this EUR 1.15 billion until end of the year, but this is still our plan. So we will catch up there, and this will be a burden to our free cash flow in the second half of the year. Working capital, I think we achieved a lot there. We cannot assume that we simply double what we have in there or even doing more because we released roughly EUR 500 million or even more than EUR 500 million in the last 12 months. So this come somehow to a natural end, I would say. There is potential, potential, I would associate and relates to our HPM division, in particular, they are working hard on that side. So we will -- some releases -- see some releases there. To your question specifically, of course, for the 31st of December, we have many customers. It's their year-end, and we will see an impact. And after my 18 or 19 months here within Voestalpine, this is what I would like or can confirm. So we will see an impact there, which is a negative one in our Q3, that means 31st of December. And you ask specifically the question how I would qualify the EUR 350 million guidance. Is it a floor? I would say, as CFO, I would say, yes, it could be a floor, but there's still some uncertainty there. But I am positive that we will minimum reach this level and for the next year. So we are right now in the phase of doing our planning exercise, we guided for next year. I think it was in our last call, EUR 1.15 billion for CapEx as well. This is up to now unchanged. So I can confirm that. And having said that, we definitely target the positive free cash flow for next year. Operator: [Operator Instructions] The next question comes from Patrick Steiner from ODDO BHF. Patrick Steiner: Patrick Steiner speaking. One remaining from my side. Could you please share with us your view on the High Performance Metals Division. I mean, will you recover profitability to past margin levels? And if yes, how long will it take and what are, in your view, the main drivers to get there? Gerald Mayer: So also for the HPM division, we walked the talk, and as we said the last time, so this is still unchanged our plan. So we expect in the period of the next 3 years that we will see EBITDA levels again we had in the past, I mean EUR 350 million to EUR 400 million. This is our clear target there. The guys there are really working hard restructuring everything in full. This year, what we faced, as also Herbert deliberated was some headwinds also from the market, but the plan, the restructuring plan is absolutely on track, and this is definitely positive. And this is also the reason why they are where they are in terms of profitability in this first half because with this market, this difficult market, I would even have expected a weaker result. But they're doing well. And I'm positive at the end of this sort of crisis, we will see some recovery from the markets. We will do well and we will be on top again. So EUR 350 million to EUR 400 million in 3 years plus, this is what I would assume. Operator: So it looks like there are no further questions at this time. So I would like to turn the conference back over to Peter Fleischer for any closing remarks. Peter Fleischer: Thank you very much, ladies and gentlemen, for the interesting discussion and for your time. Anyway, anyhow, if you come up with any questions, please feel free to give either Gerald or myself a call, and I'm sure we will be able to continue the discussion. Thank you very much so far, and have a good day. Operator: Voestalpine, one step ahead. Ladies and gentlemen, the conference has now concluded, and we may disconnect. Thank you very much for your attendance. Goodbye.
Operator: Welcome to the RADCOM Limited Results Conference Call for the Third Quarter of 2025. [Operator Instructions] As a reminder, this conference is being recorded and will be available for replay at the company's website at www.radcom.com later today. On the call are Benny Eppstein, RADCOM's CEO; and Hadar Rahav, RADCOM's CFO. Please note that management has prepared a presentation for your reference that will be used during the call. If you have not downloaded it yet, you may do so through the link in the Investors section of RADCOM's website at www.radcom.com/investor-relations. Before we begin, I would like to review the safe harbor provision. This conference call will contain forward-looking statements. Forward-looking statements in the conference call involve several risks and uncertainties, including, but not limited to, the company's statement about its commitment to deliver solutions that are transforming the assurance landscape, continued adoption and investment in AI and 5G as well as other favorable market trends, the resilience of the company's operating model and the value of its AI-driven assurance solution, providing lowering total cost of ownership and enabling comprehensive observability across customer networks, converting the company's robust pipeline into revenue, expanding the company's current installed base, levels of investment and advancing the company's strategic partnerships, expectation for initial revenue from certain partnerships and timing thereof as well as its full year 2025 revenue guidance, expectation with respect to margin and expenses and future growth, momentum opportunities and profitability. The company does not undertake to update forward-looking statements. The full safe harbor provisions, including risks that could cause actual results to differ from those forward-looking statements are outlined in today's press release and the company's SEC filings. In this conference call, management will refer to certain non-GAAP financial measures, which are provided to enhance the user's overall understanding of the company's financial performance by excluding noncash stock-based compensation that has been expensed in accordance with ASC Topic 718 financial income, expenses related to acquisitions and amortization of intangible assets related to acquisitions, non-GAAP results provide information helpful in assessing RADCOM's core operating performance and evaluating and comparing the results of operations consistently from period to period. The presentation of this additional information is not meant to be considered a substitute for the corresponding financial measures prepared in the accordance with the generally accepted accounting principles. Investors are encouraged to review the reconciliation of GAAP to non-GAAP financial measures, including the quarterly earnings release available on our website. Now I would like to turn over the call to Benny. Please go ahead. Benny Eppstein: Thank you, operator, and good morning, everyone. The third quarter was a record quarter for RADCOM, marked by strong growth and further evidence of our scalable and profitable business model. We are deepening deployments with existing customers while continuing to develop new opportunities in the market. Operators are increasing their investment in 5G stand-alone networks and AI operation, AIOps to enhance efficiencies, improve the customer experiences and reduce costs. As the market evolves, RADCOM holds strong competitive edge with our field-proven next-generation assurance platform, RADCOM ACE. Turning to Slide 7. I'd like to give a brief overview of the Q3 results. For the third quarter of 2025, RADCOM achieved record revenue of $18.4 million, representing 16.2% year-over-year growth with continued profitability, expanding profit margins and positive cash generation. We achieved record non-GAAP operating income of $3.8 million, representing 20.9% of revenue. This is the highest since 2017, reflecting both the scalability of our model and the disciplined execution across our operations. Our results demonstrate a strong balance between growth and profitability as evidenced by significant margin expansion. Importantly, we generated a positive cash flow of $5.1 million and ended the quarter with cash balance of $106.7 million and no debt. Our strong balance sheet positions us well for continued investment and strategic flexibility as we pursue both profitable organic expansion and targeted inorganic growth. Turning to Slide 8. At the broader market level, RADCOM is well positioned to capitalize on the strong and durable tailwinds driving telecom spending. AI native network are rapidly evolving, enabling operators to deliver superior customer experiences. At the same time, they offer new opportunities to improve operational efficiency. To capture this value, operators need trusted data and deep telecom domain expertise to power AI use cases and ensure end-to-end network observability. These dynamics give us a distinct advantage built on years of investment in assurance innovation, telco domain AI and strong ecosystem partnerships. It's aligned perfectly with our strategic and product road map. As AI innovation accelerates, a second major shift is taking hold across the telecom landscape. Operators are doubling down on customer experience as a core driver of retention, reduced churn and long-term revenue growth. To compete effectively, they need real-time visibility across network operations, enabling them to detect issues and anomalies before they impact subscribers proactively. These trends align directly with our value proposition to deliver end-to-end intelligent cloud-native solutions that provide granular insights into users and services at highly cost-effective rate. These capabilities offer significant savings compared to competing solutions. We believe this positions us strongly for new opportunities to demand for customer experience insights and intelligent service assurance continues to rise. Turning to Slide 9. Let me speak to our partnership strategy. The third quarter performance underscore the continued success of our strategy. We are deepening our strategic partnership with NVIDIA, ServiceNow and system integrators. This helps strengthen our technology leadership, expand our market reach and enhance customer retention. We are focusing on developing an Agentic AI-powered automation layer with our partner systems, which will enable networks to communicate autonomously and complete complex workflows and business processes. We anticipate initial revenue contributions from these partnerships in 2026. In the third quarter, we also completed the integration of RADCOM AIM, our AIOps solutions with ServiceNow service operation management platform. Our solution is now certified and available as a connector in the ServiceNow store. This enables continuous real-time network monitoring and supports advanced use cases such as intelligent anomaly detection and complaint validation. It also offers a comprehensive 360-degree view of network data for automated workflows, enhancing service quality and operational performance. Turning to Slide 10. We recently launched our next-generation high-capacity user analytics solution powered by NVIDIA BlueField-3 data processing units or DPUs. RADCOM is the first network assurance vendor to capture speeds up to 400 gigabyte per second on a single server. This solution demonstrated a reduction of up to 75% in operational costs in field trials compared to traditional network probes. Furthermore, it provides complete visibility without requiring any compromises due to cost constraints. In essence, the solution delivers real-time analytics at a fraction of the cost, a key enabler for 5G assurance and AIOps. This innovative DPU-based solution is seamlessly integrated into our comprehensive automated service assurance platform and Agentic AI framework, which drives business processes across care, service management and network orchestration. This empowers operators to capture and process massive volumes of network traffic efficiently, bridging the gap between engineering and customer-facing teams. Our NVIDIA DPU-powered high-capacity user analytics solution is now in the lab and field trials with key customers, showing promising momentum. RADCOM is also advancing its Argentic AI solution with accelerated computing to provide telecom operators with real-time actionable customer and service insights. These innovations enable telecom operators to automate network for enhanced efficiency, superior service quality and sustained long-term value. Our Agentic AI architecture enable us to expand our addressable market by reaching operators at a time when demand for proactive analytics-based network visibility is rising. In our customer engagements, we're seeing a clear industry shift, particularly in Europe, but also across other regions. Some operators are accelerating their network modernization plans, recognizing the strategic importance of moving from legacy monolithic solutions to advanced cloud-native platform that leverage AI to automate operations. We've seen this trend firsthand with customers such as Norlys and more recently, 1Global. This positive momentum reflects the growing demand for innovative future-ready assurance solution, further solidifying RADCOM's position as trusted partner for operators seeking to enhance network performance, efficiency and competitive advantage. As noted on Slide 11, we recently announced a new partnership with 1Global to deploy RADCOM ACE, enhancing customer experiences across Europe, North America and Asia and supporting more than 43 million connections. RADCOM ACE will provide voice and data monitoring, enabling precise and highly efficient troubleshooting across all required protocols. We also secured a business expansion with one of our existing customers. This progress underscore our land and expand strategy. As we demonstrate our value proposition, we are well positioned to grow as our customers expand their network and manage increased network traffic. Let me now speak to our installed base. Turning to Slide 12. AT&T continues to add subscribers and RADCOM continues to support their net add gains, providing real-time assurance for service quality and user experience. Rakuten Mobile continues to expand its 5G footprint, surpassing 9 million subscribers in Japan and demonstrating increasing momentum in one of the world's most mature mobile markets. The operators continues to rely on RADCOM assurance solution as part of its effort to deliver scalable, reliable, high-quality performance across its fully virtualized cloud-native network. Across our customer base, we're seeing broader deployments and deeper integration of our AI-powered capabilities. These solutions are enabling operators to achieve new level of automation, performance and efficiency. Go-to-market activities. As noted in Slide 13, we attended many key industry events in Q3, including DT Campus, Innovate Americas, Network X and others, where we met with potential and current customers and business partners. Our cutting-edge solution continued to receive strong recognition from leading industry bodies. Most recently, our Argentic AI solution, RADCOM Predictive Complaint Resolution was honored with Best AI/ML Innovation Award at the Global Connectivity Award in London. The prestigious awards saw us outperform prominent global vendors and operators. Such industry validation underscores our technology leadership and reinforces the differentiated value we deliver to our customers and stakeholders. Turning to Slide 14. As we look ahead, we believe that the current trends, combined with improving capital conditions will drive sustained investment across our customer base, continuing to fuel growth opportunities for RADCOM. Our focus remains on: one, converting a strong pipeline into revenue and looking to expand our current customer base even further; two, deepening strategic partnerships to drive innovation and expand our addressable market opportunity; three, investing in AI and automation to maintain our leadership, driving lower total cost of ownership for real-time network intelligence; and four, delivering consistent profitability and cash generation as we expand our global footprint. In conclusion, the third quarter marked another milestone for RADCOM, achieving record results, strong execution and expanding opportunities across the AI-driven telecom ecosystem. We entered the final quarter of 2025 with strong momentum and clear visibility toward our full year outlook of 15% to 18% revenue growth, underpinned by disciplined execution, technology leadership and growing customer adoption. We will provide full year 2026 guidance when we release our fourth quarter results. Before I hand the call over to our CFO, Hadar Rahav, to review the financial results in detail, I'd like to take a moment to share an update. As announced last week, Hadar will be leaving RADCOM after supporting the transition to our incoming CFO, Hod Cohen, during the first quarter. On behalf of the entire company, I want to thank Hadar for her outstanding leadership and many contributions over the year that helped strengthen RADCOM financial foundation and growth. We're grateful for her dedication and wish her the very best in the next chapter. We are also pleased to welcome Hod, a highly accomplished finance executive with deep experience in the telecom industry. We're confident he will build on this strong foundation and help drive our continued success. Hadar, over to you. Hadar Rahav: Thank you, Benny, and good morning, everyone. As a reminder, unless otherwise noted, I will discuss non-GAAP results. Reconciliations between GAAP and non-GAAP measures are provided in our press release and presentation. Additionally, all comparisons are on a year-over-year basis unless otherwise noted. Please turn to Slide 16 for our financial highlights. RADCOM delivered another quarterly record in revenues with total revenue of $18.4 million, up 16.2% year-over-year. Simultaneously, we continue to effectively manage expenses while growing our strategic investment in sales and marketing. As a result, we delivered significant improvements in margins and record profitability. The gross margin in the quarter was just over 77%. Please note that our gross margin may vary based on the revenue mix. Our strong gross margin reflects a more favorable revenue mix with a lower proportion of third-party cost elements. We believe this level of gross margin will be sustained in the fourth quarter. Our non-GAAP gross R&D expenses for the third quarter were $4.7 million, up 11.6% year-over-year. This increase reflects our focus on deepen collaborations, driving innovation and expanding our portfolio. We plan to continue our strategic R&D investments to deliver advanced intelligent solutions with an emphasis on agent-to-agent and multi-model workflows while supporting our strategic partnerships and productization plans. During the quarter, we received a grant of $189,000 from the Israel Innovation Authority, consistent with the same quarter last year. Of this amount, approximately $130,000 is related to programs from the prior years. As a result, we expect the grant in the fourth quarter to be approximately $50,000. Our net R&D expenses for the third quarter of 2025 were $4.5 million, an increase of $483,000 compared to the third quarter of 2024. Sales and marketing expenses were $4.6 million, an increase of 15.4% compared to the third quarter last year, reflecting our intentional investment to grow our sales presence. We expect a gradual increase in sales and marketing in the coming quarters to support a growing pipeline and expand our presence in high-value regions. Non-GAAP operating margin was $3.8 million, beating the record we achieved in the second quarter with an operating margin of 20.9%. Non-GAAP net income was $4.9 million or $0.29 per diluted share, the highest in the company's history compared to $3.7 million or $0.23 per diluted share last year. On a GAAP basis, as shown on Slide 19, our net income for the third quarter of 2025 was $3.5 million, an increase of 54% year-over-year. GAAP earnings per share were $0.21 per diluted share compared to $0.14 per share last year. We ended the third quarter of 2025 with 319 employees. Turning to the balance sheet on Slide 23. We closed the quarter with record cash, cash equivalents and short-term bank deposits of $106.7 million, supported by a $5.1 million positive cash flow in the third quarter, driven by our strong operating performance. That concludes our prepared remarks. Thank you, and I will now turn the call back to the operator for your questions. Operator: [Operator Instructions] The first question is from Arjun Bhatia of William Blair. Arjun Bhatia: For the newly launched high-capacity user analytics solution, what are the early feedback from customers so far? And what are you most excited about? Benny Eppstein: Thanks for the question. We're super excited about it. It's currently in a couple of field trials. We see great performances, and we see targeting this to materialize in 2026. But so far, we are very happy with the performance we see in the field. Arjun Bhatia: All right. Helpful. And in terms of -- you mentioned expansion within existing customers this quarter. What trends are you seeing overall in terms of expansion within your existing customers? And in particular, what are the specific expansion efforts from these customers are you seeing in terms of adding to their existing stack? Benny Eppstein: Are you talking specifically about the NVIDIA piece or generally speaking? Arjun Bhatia: I think both. So if you could kind of narrow down first and then broader picture, overall, what trends you're seeing, that would be great. Benny Eppstein: Sure. Overall, we see pretty good buildup of a solid pipeline through the year right now, also building towards the end of this year. We're still targeting a double-digit growth, and we still see more and more opportunities coming up until 2026. Operator: [Operator Instructions] The next question is from Ryan Koontz of Needham. Ryan Koontz: I wanted to ask about your visibility as it relates kind of looking into next year. It sounds like you're feeling a little more confident. Can you give any color there around visibility? And as you look ahead into next year, any major renewals or anything coming up that would make you concerned about maintaining your current run rate of revenue into '26? Benny Eppstein: We're still targeting -- thanks, Ryan. But we're still targeting double-digit growth for next year. We do see a lot of new opportunities coming up in the market for us specifically to the move the cloud native and the 5G stand-alone piece is driving a lot of transformation on the customer side. And then obviously, the line of spend, we still see some activities within our customers that need to consolidate certain applications, and we're going to support that. So overall, I think we can continue to support the double-digit growth also in 2026. Ryan Koontz: That's great. Great to hear. In terms of earnings leverage next year, it sounds like you're planning to spend a little more on the sales and marketing line. Any other puts and takes you'd point out on leverage, '26? Benny Eppstein: Yes, marketing and R&D, yes, that's right. Ryan Koontz: Great. And maybe last one, just a macro question about 5G core. It certainly sounds like we're starting to see some real deployments out there, at least in the U.S. Can you validate that view? And also any updated thoughts on the other kind of geographies in APAC or EMEA around 5G core deployments stand-alone? Benny Eppstein: Absolutely. We see good momentum on 5G core stand-alone Open RAN as well through U.S., Europe and some areas in Japan and Asia. And it is driving a lot of the activities, as I mentioned earlier, moving -- having a cloud-native application to support the troubleshooting and customer experience. The NVIDIA piece is really driving full user population visibility, and this is also driving a lot of excitement on the customer side. Operator: This concludes the RADCOM Ltd. Third Quarter 2025 Results Conference Call. Thank you for your participation. You may go ahead and disconnect.