加载中...
共找到 39,810 条相关资讯
Daniel Thorsson: Okay. Good morning all, and good evening, Jessica. It's Daniel Thorsson here from ABG, who will host this morning's conference call with BTS and the CEO, Jessica Skon. So very much welcome for all joining. Analysts have joined through a separate link, so you should be able to ask questions verbally in the Q&A session. I will open up for that in the end. But just saying welcome to Jessica, and feel free to go ahead and present the Q3 report. Thank you very much. Jessica Parisi: Super. Thank you very much, Daniel. Hello, BTS investors. Welcome to the Q3 report from BTS. We're not happy with the quarter. It was a tough quarter. At the group level, we grew 3%, but we had a profit decline of negative 16% if you adjust for foreign currency exchanges and negative 25% if you include the currency effect. So let's walk you through and kind of demystify what's behind the profit drop in the third quarter. There's really 2 big reasons. Number one is something I'm going to tell you about in North America and number two is negative currency effect. So North America, you can see the decline of SEK 10.3 million in the third quarter. One big reason for this, 65% behind North America's drop has to do with one particular customer engagement sold through our APG channel of a more traditional BTS product. And the reason why this was particularly painful is because it's kind of a pure license play, which means the value drops, the vast majority drops to the bottom line compared to our other services. And when you compare this license revenue through the APG channel in this quarter compared to a year ago, it had a significant impact on the profit. If you look at the impact of the weak dollar, it's about 28% behind North America's profit drop. If we look at BTS Other markets, it's really 2 things. One is we decided to increase our marketing investments. So we had a lot of client events and dinners and roundtables in the third quarter compared to a year ago. And then, of course, it's also the adverse currency impacts, which makes up 50% of the decline in BTS Other markets profit. And BTS Europe had a plus. They performed well. They increased their profit in the third quarter. They continue to do well. Still a tough market in Europe, but they've been performing quite strongly, and we do see some slowed growth happening or happening right now in the fourth quarter. So bottom line is the poor results and profit in the third quarter despite a 3% growth is because of the negative effect in currency and also the one client deal through the APG channel, but because it's a high license deal compared to a year ago, had a disproportionate impact on the profit. If we go to North America, our biggest market, which to remind you, we are in turnaround mode. We're 1 quarter in. We've changed the leadership team and put a lot of efforts into turning this market around. We see the turnaround still as on track. And on track for us means we shared with you last time that we expected to get back to growth in the first half of 2026. A couple of highlights to talk about BTS North America, that Phase 1 of our AI efficiency has been moved into full effect. The benefits of this in the third quarter is the underlying cost for BTS North America have been reduced by 2% and our revenue employee is up by 10% in the core business. We have also added more sellers into the third quarter. We have much higher win rates. I'm very proud of this. Just to give you a sense, at the lowest point in North America this year towards the end of the first quarter, our win rates were mid- to high 20%, which is pretty unacceptable. We are back up to our sweet spot of 61% win rates across all deals in the third quarter and 71% win rates across deals over SEK 500,000. We've also won some really new great strategic clients, both some of the new tech hypergrowth companies as well as in other industries. If you look at the profit performance of what I'd call [NAMS] organic profit outside of the APG channel and the profit that's sold through the channel, the profit was stable in the third quarter, even though the revenue was soft. So we're feeling good about that. Our Executive Coaching business continues to grow. It's very successful. That was from the Boda acquisition a couple of years ago. And then Sounding Board, the scaled coaching acquisition from the first quarter turned to profit in the third quarter as well. They're performing on plan. The integration is going well, and we continue to win very big end-to-end global coaching deals, which was the whole idea behind the acquisition. So yes, I mean, bottom line in BTS North America, we're still in the turnaround. No quick hit win 1 quarter in. Historically, when we have to turn around parts of the business, it typically takes 3 quarters. And right now, we feel like everything we're seeing in terms of top of the funnel activities and win rates and presence in the market, we believe that we'll be back to growth in the first half of 2026. BTS Europe continued to grow in the third quarter after a super strong start to the year, and they have a healthy margin. The demand is gradually slowing down to more kind of typical rates that you would see from a BTS business. And in the fourth quarter, we do think that the revenue is actually going to soften a bit. That said, they have a really strong pipeline. Their win rates are super competitive and high. Their activities were, I think, up 60% in the third quarter compared to Q3 a year ago. And so we feel pretty strong about Europe's 2026 start to the year. APG, which is the channel in BTS North America, which is getting a lot of attention in this quarter report. They continue to decline, slow market for them, reduced project scopes and the cancellation of licenses across some of their client base. As I mentioned to you, when BTS can sell our standard products through that channel, and typically, that's like a standard simulation that the clients will facilitate themselves, that's pure profit for BTS North America's business. And one of the things we've done, just given APG's decline over the last quarters plus the pain that we felt in the third quarter, we took some fast action. I shifted the APG's reporting structure to me since I'm in the North America market, and I can drive faster synergies and energy there again. And then we've bolstered the plan and how we're going to support APG through 2 of our major practice areas. If we look at BTS Other markets, we had I would say, more kind of macroeconomic impacts, specifically in Southeast Asia and specifically in Thailand, which contributed to slower growth than we were expecting in the third quarter, and we continue to see it being soft in the fourth quarter as well. Balancing to that though, however, in the third quarter and in the fourth quarter is strength in the Middle East business. We also expect the fourth quarter to be strong in our Spain business, Latin America and so forth. And as we mentioned, BTS Other markets did a lot of client events and dinners. They were very successful, very well received. They generated a lot of leads, and those will start to pay off in the first quarter. From an AI perspective, I'm really proud of this. Our AI services are continuing to grow at kind of hyper speed. Our bookings of AI-related adoption services have now reached 10.3 million year-to-date, which is up [482%] from the same period last year. Our Verity platform, which is part of the Wonderway acquisition a couple of years ago, bookings has now reached $4 million, which is 15x bigger than the same period last year and 33% growth from the second quarter. We are having a lot of fun right now in terms of meeting with clients and partnering with them, specifically on what we call bottoms-up kind of Grassroots AI innovation. So what we're seeing is a lot of companies are placing their kind of typical ways of looking at digital transformation, top-down AI bets, but we believe there's a lot of value to be unlocked bottoms up, and that value proposition is resonating very well in the third quarter. Specifically, we've also had some -- we had a really big breakthrough in the third quarter, which is going to have implications on our talent and organizational model moving forward. I mentioned to you in the last couple of quarters that our global simulation team had been experimenting with different AI tools. And we started to go live with our clients in the third quarter. That continued to rapidly expand around the world. And just actually in the last couple of weeks, we kind of hit the -- I don't know if it's the final breakthrough, but it's a big breakthrough across our most complex simulation platform. So we have officially completely redesigned or retrofitted how we build simulations across our practices. And this has strategic implications for how many people we have in our operations teams, how many people we're going to put on the client project teams, the economics for our clients. I announced this breakthrough to 90 of our existing [Technical Difficulty]in BTS North America, and they were absolutely thrilled to hear about the values for them. And so we're now moving from, I would call it, breakthrough AI value experimentation and innovation to scaling this new way of working globally. And we will start to see material P&L gains already in the first quarter. From an automation update, part of the reason why we made the Sounding Board acquisition in the first quarter was they have great tech platform, which would allow us to scale. So our movement of existing workloads over to their platform is on track. And we are continuing to do that through the first quarter. So additional savings in OpEx will be coming beginning in the second quarter of 2026. So for those of you who have been with us for a long time, you're very used to seeing the slide that we are used to average growth of 12% CAGR since 2001 and an average profit growth of 15% per year. It has been a tough year, specifically for one reason, that's BTS North America's core business, which is why we did the leadership change in early June, and that turnaround is on plan and progressing well. It's going to get a little tougher before we get back to the growth, but the plan is in the first half of the year, it's looking good. So given although we see clear signs of the operational improvements, and we have strong markets in Europe and most of the world, we do foresee revenue decline in BTS North America in the fourth quarter. So that fourth quarter dip, combined with continued currency headwinds is the 2 major reasons behind why we are lowering our outlook to be significantly worse than what we said previously. And with that, I'm sure there's clarifying questions and comments. So I'm all yours. Daniel Thorsson: Excellent. Wonderful, Jessica. I have a couple of questions in the beginning here, but I also tell the other analysts who have joined, just raise your hand, and I'll let you ask questions to Jessica as well, of course. First, a question on Europe here, somewhat softer demand into Q4 despite the strong year so far. Is there any particular market or sector behind the slowing trend in the fall or more the customer pipeline you are sitting on? Jessica Parisi: There's not a particular sector behind it, and it's not a particular office. Our London team's pipeline is a little bit softer than the others. But no, it's more that they had a really strong first half. And when we look at their full year performance, it's still going to be really good with great margins and growth and all of that. And to also kind of balance the softening in the fourth quarter, we do not believe that, that's going to carry over into 2026. The pipeline and the deals and the work that we have line of sight on already in the first quarter shows strong growth. So it's more like a softer end to a really big year for Europe. Daniel Thorsson: Okay. That's clear. And then on the U.S. market, some positive words on the U.S. tech sector here in the report. We can all follow the huge AI investments, of course. Is this what partly drives demand for you as well that the tech sector in general is more willing to do investments? Or are there any other drivers behind this comment? Jessica Parisi: No, it's a mixed [bag] with tech. We can already start to see kind of the new hyperscalers compared to the older tech who are still trying to compete for the growth rates that they've been used to. So in some cases, for example, we have one of our larger software clients who has just gone through a major reorg. And with that, we expect their spend with us in the fourth quarter to be down quite a lot. At the same time, we've just brought in new software tech clients that are more on the hyperscale side, and we expect that to ramp really quickly. So it's a mixed bag. Daniel Thorsson: I see. I see. In general, in the market, do you see any noticeable price pressure or price competition in some markets for like general management consulting services today? Jessica Parisi: Not really. I mean not so significantly. There is less interest in paying for content license which for us has never been a very big part of our business, but it's something that is affecting the training industry as a whole and any competitors who mainly have a content-first play. Our pricing compared to traditional consulting firms, especially on the AI implementation side is very affordable. So we are not seeing any pricing pressure there. We are not seeing pricing pressure on our new AI platforms and technology. One of the breakthroughs with all of the simulation redesign work we've been doing is we'll be able to build simulations faster. And so I do think we're going to see a shift in our client revenue perhaps less upfront because we can do it more quickly, but faster to deploy, right? And with the faster deploy, we will see the license and usage fees hitting quicker than normal. Daniel Thorsson: Yes, I see. That's clear. And then a clarifying question here on the guidance for 2025. You also include that revenue will decline as well as EBITDA. Is it also significantly worse on revenue? Or how should we think about that addition? Jessica Parisi: So no, we made a mistake and then we've already fixed it, and we'll be sending it. We were only relating to the earnings. It was a miss type. So top line for the full year, we still expect actually growth at the group level, just low single-digits growth. And yes, that was our mistake. So I'm sorry about that. Daniel Thorsson: No problem. That's very clear. Let's see if any of the other analysts would like to ask a question, we'll see how the format works here if they can raise their hand or just unmute. Let's see if Oscar or Johan, for example. Otherwise, we have a few from the chat. I'll take one for the chat, just try to shout out any of the other analysts. They seem to be joined correctly here at least. But we have a couple of questions from the chat Jessica. And then the first one on license sales. Can you elaborate on the dynamics within license sales? Is it related to smaller deal size or fewer deals in total as well? Do you think that you are losing some deals to competitors and why? And you also say that the lower license sales in Q3 was only temporary. Can you elaborate on that? Jessica Parisi: Yes. The particular license deal that was extra painful to us that was sold through the channel, that was really just to one customer, and it was for one of our standard training simulations [Audio Gap] before is still relevant in terms of clients not wanting to pay content license. So if we have any old content license deals out there, we don't have much, but those would be at risk. Now the growth of the Verity platform, the BTS simulation usage, some of our other AI platform offerings, that growth, that subscription growth will outweigh any decline in content license or product license revenue. But in Q3, it was just that one simple product through one customer. Daniel Thorsson: I see. That's clear. On one-offs, are there any one-offs in this quarter in Q3? And yes, what was the underlying EBITDA in that case? I think that you had like SEK 5 million in Q1 and SEK 14 million in Q2, if I remind correctly here, anything in Q3? Jessica Parisi: Probably just a tiny little bit of extra severance, but not much. Daniel Thorsson: No, exactly. You don't state anything in the report. And on the cost savings program, what's the status of this cost savings program? How much of the cost savings were realized in Q3? Jessica Parisi: Nearly all of them. Yes. So we'll get 100% live on them in Q4, but the majority were realized in North America in the third quarter. What's interesting is what we're going to do for this next phase now that we've had the final breakthrough in using new technology across all of our simulations. And we are very busy right now working through those implications. So -- but it really -- we just hit the next level of breakthrough just a week ago, and the teams are moving fast. But this will have implications across consultant teams, our digital enablement teams, operations, project managers. So I can't -- I don't have enough clarity right now to share with all of you what to expect, but we are working on it very quickly. Daniel Thorsson: I see. A linked question to that, in terms of number of employees going into 2026, do you expect this number to grow in '26? Or should we see top line growth coming from increased sales per employee rather? Jessica Parisi: Yes. We will bring in a few people here or there, probably revenue generators, but the total number of BTS employees will shrink in 2026. So we will have revenue per employee improvement, not just from what we've already done this year, but from a second wave as well. Daniel Thorsson: Okay. That's clear. And then also a question here. In Q4 '24, you mentioned that 2 large clients canceled their annual events, which affected revenues by negatively $2 million. Are those clients back with their annual events in Q4 '25 now? Jessica Parisi: No. They're not back. And one of them is also most likely going to be behind another major drop in the fourth quarter. So we're working on it right now. But yes, yes, that's -- one of them is why North America is going to have a tough time in the fourth quarter. That said, I can give a little more context. That's one of the tech companies that's gone through a major reorg, and have really changed their budgeting approaches, and they're not doing another big event in the first quarter this year. The number of large company sales kickoffs and events that we are doing, however, is up across North America, but the average revenue spend is down. So the team is really busy. The deal sizes are slightly smaller than they were last year. And that's -- I think that's just a reflection of clients want to do something still, but they're spending less. Daniel Thorsson: I see. A couple of written questions here from Johan Sunden. When during Q3 did the important licensing deal in North America fell away? And what is the risk that more important clients do the same going forward? Jessica Parisi: Yes. The third quarter, we found out about it in the last few weeks of the third quarter. We don't have that many other product license deals like that in the system. We have -- we don't have risk of that happening again in the fourth quarter. So I mean, yes, it's not something that's so frequent across our revenue base. And it's also the delta from Q3 last year with APG that made it particularly painful. Yes. So I don't see it as a particularly acute problem compared to the other things we're trying to do to get back to growth. Daniel Thorsson: I see. I see. And then a second question from Johan here. How was sales and marketing costs in Q3 isolated to the other markets business? I guess the question is how large share of sales and marketing are related to other markets roughly? Jessica Parisi: From a total sales and marketing spend? Daniel Thorsson: I guess so. Johan Sundén: Maybe I can clarify. More like how isolated the step-up in sales and marketing cost is for Q3 and if there will be a similar kind of step-up in Q4 and... Jessica Parisi: Yes, yes. No, isolated to Q3. Johan Sundén: Perfect. But you said that there was some [dealers] now in Q4 as well, right? Jessica Parisi: The Q3 is where most of the world did their increase in marketing events. I've been busy in North America in Q4 doing the dinners, but the expenses in most of the world that we're referring to was in the third quarter. Johan Sundén: Yes. Perfect. Yes, my final question is more like the AI breakthrough that you highlighted just during the presentation. Just curious to hear your some initial thoughts on kind of impact on unit economics. How has kind of feedback been from clients? Any worries that there will be fee pressures? And just curious to understand how the value created will be distributed. Jessica Parisi: I'll share with you exactly as I can see it at this moment. And it's wild how fast things are changing. And you all know this and you hear it probably from all your clients. But I just to give you a sense, like, I've been waiting for the team to figure out if we can do this across our biggest [SIMs]. And I got a phone call last week saying that Microsoft just released some new feature. And that feature is kind of the final missing piece, but no one could have dreamed that, that feature would have come out a week ago, right? It's just kind of the world we're living in right now. Client feedback is coming in 3 different ways. One is we're able to demo in our sales meetings a real [SIM], what we mean, a simulation of their business. And that demo is blowing their minds. Like they cannot believe that we're able to kind of visualize what they're expressing in their strategy in such a quick way. So it is helping us move deals forward faster and have really high win rates. So that's a good sign. Fee pressure has not hit us yet, and we are working through our -- updating our pricing guidelines around use cases because what I shared with 90 of our customers and many of them who have known us well, we're nodding the whole time. Yes, we can build these a lot faster and still have high fidelity. But for some instances, they'll choose not to do it faster because sometimes we get paid just to have the working sessions with their executive teams and align everybody through the process of modeling and simulating. Other times, the whole point is to get a simulation on as fast as possible. So when speed is of the essence, yes, the upfront build will be reduced. if it's a small simulation, just -- I mean, it might be reduced from SEK 100,000 to SEK 50,000 or something like that to build it. But the benefit for us is that we'll go straight into licensing. And usually, what clients have always wanted to do is get more usage out of it as opposed to have some of their budget going towards the upfront build. So we will reduce some of the upfront fees, but I don't -- it hasn't happened yet, and we'll see kind of deal-by-deal, but how we shift that. On the other hand, getting the subscription and the usage and prioritizing that over the customization, I think, is better economics for the firm and allows us to deliver more value faster. Look, from an internal perspective, there's 2 major changes. Before this, when we would build the simulations, we would basically first model it in excel with some other software, and then we would move it back and forth between the Mumbai team and they would build a different version of it or an updated skin or something would go back and forth. That whole step is gone. So now the team is just coding or vibe coding and do stuff right in front of the client together with the client. There is no need to go back and forth with other teams. We'll go from 7-person team to 2-person teams in terms of the design. So it's a pretty big implication. Daniel Thorsson: Good. We have a few written questions from Oscar Ronnkvist, SEB as well. First one, did any of the pushed out revenues in Q2 become realized in Q3 in North America? Jessica Parisi: It's interesting, yes. And the win rates are growing, and we're celebrating all of those as well. So it hasn't been a -- Q3 in North America did not feel like, oh, thank goodness, all that stuff materialized from Q2. It's been a balanced feeling of the work that got pushed plus the new client and logos that have been coming in. So I don't have the exact percentage of revenue in the third quarter that was from the push. I can get back to you if you'd like. Daniel Thorsson: Fair enough. The other question, I think it's related to Johan's question first on increased investments in other markets in the quarter and how temporary they are. But Oscar's question here is, can we assume an increased margin ahead in other markets because of lower investments? Jessica Parisi: Yes. Yes. Yes, you should in the fourth quarter, both better margins and revenue growth. Daniel Thorsson: Yes. Okay. Fair. And then we have another question from the chat as well. License sales were down last year in Q4, 33% year-over-year. So you should meet quite low comps this year in Q4. Do you think license sales will be lower year-over-year again here in Q4? Or could they recover a bit? Jessica Parisi: There's one deal that we've been doing every year in the fourth quarter that I do not think we are going to do again. And that deal is about $3 million in revenue. And it's not that we're losing the client. It's just that they cannot make the economics work right now given the cost pressures that they're under. So we're going to evolve from that way of working with them to scoping each individual project now for time and materials and subscription and all of that individually. So yes, if you think about that, even though that's a different partnering model, if you think of that as license, you're going to see one more drop in the fourth quarter from that particular client. Daniel Thorsson: Okay. That's very clear. I'm trying to scroll through the chat here. I don't think there are any further questions actually, and we got questions from all analysts, I could see join the call and some of the audience. So thank you very much, Jessica, for the presentation, and have a good night sleep, and we will talk later today, Swedish time and tomorrow for you. Jessica Parisi: Super. Thank you. Daniel Thorsson: Thank you very much all for joining. Jessica Parisi: Bye-bye.
Operator: Good morning, and welcome to the AB Dynamics plc Investor Presentation. [Operator Instructions] The company may not be in a position to answer every question it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to the management team. Sarah, Ed, good morning. Sarah Matthews-DeMers: Good morning. Welcome to the AB Dynamics 2025 Full Year Results Presentation. Thanks for joining us. I'm Sarah Matthews-DeMers, currently CFO, and from 1st of December, CEO. And I'm joined by Ed Haycock, our Director of Financial Reporting. I'll take you through the highlights before Ed takes you through the financial performance. I'll then provide an update on progress against our medium-term growth strategy and the outlook for next year. And then Ed and I will be happy to take questions afterwards. During the year, we made a strong start to delivering our medium-term growth plan, delivering operating profit and earnings per share growth of 15%, slightly ahead of upgraded expectations despite macroeconomic challenges in the second half of the year. Revenue increased by 3% with double-digit revenue growth in half 1, followed by a more challenging half 2 as timing of order intake was impacted by macroeconomic disruption. Encouragingly, customer activity improved towards the end of the year, and the group carries forward GBP 32 million of orders into FY '26, providing good trading momentum into the first half of the year. New product development continues at pace and in line with the technology road map for Testing Products in simulation markets. We received an order just prior to the year-end for the recently launched S3 Spin simulator, which has advanced capability for the growing road car market. Operating profit grew by 15%. Operating margin grew by 210 basis points to 20.3%, achieved through operational improvements and a richer mix of revenue, largely resulting from the timing of order intake and delivery. The operational improvements implemented in recent years have contributed to building a strong platform to support further growth. The benefit of the revenue mix is not expected to be repeated in FY '26. However, in the medium term, the Board is confident of achieving its sustainable margin target of greater than 20%. The group acquired Bolab, a niche supplier of electronics testing equipment in half 1. The integration is progressing as planned and performance is in line with expectations. Net cash at year-end was GBP 41.4 million after GBP 8.1 million of investment in acquisitions and other capital projects. Our strong operating cash generation and cash conversion of 106% supports further organic and inorganic investments. I'll now hand you over to Ed to take you through our financial performance. Ed Haycock: Thanks, Sarah. It's great to be able to present another set of strong financial results. I'll start by taking you through the group's performance, followed by a dive down into each of our three segments, and I'll finish by covering our key financial enablers for future growth. In FY '25, we are pleased to report strong financial performance, where we've continued our track record of delivering consistent revenue and profit growth, backed up by cash conversion. We have delivered significant operating margin expansion, resulting in 15% increase in operating profit to GBP 23.3 million, which represents a three-year compound annual growth rate of 19%. The effective tax rate reduced slightly to 18% due to a change in the geographic mix of profits. We expect this to trend back upwards in future years, in line with our medium-term guidance. EPS has increased by 15% to 80.3p, and we have proposed a 20% increase in the dividend, reflecting the Board's confidence in our financial position and prospects. Cash conversion of 106% and our three-year average cash conversion of 112% demonstrates that we are consistently able to turn these growing profits into cash. The order book at the year-end was GBP 32 million. This, combined with post year-end order intake and additional sources of recurring revenue, such as renewal of licenses, gives good visibility into FY '26. The 15% increase in operating profit was achieved through a combination of volume, sales, sales mix and operational improvements. The GBP 3.4 million increase in revenue dropped through to GBP 2 million increase in operating profit. Sales mix, which is impacted by the timing of order intake and delivery across our portfolio of products and services was favorable in FY '25, generating GBP 1.2 million increase to profit year-on-year. The net benefit of the operational improvements that we have continued to implement across the business has contributed to GBP 1.1 million increase in profit. The overheads increase of GBP 1.3 million includes the impact of the Bolab acquisition, inflation and increases to employers' national insurance contributions in half 2. Although the benefit of the revenue mix is not expected to be repeated in FY '26, the operational improvements have been embedded in the business and are expected to contribute to achieving our sustainable medium-term target margin of greater than 20%. Our cash conversion of 106% demonstrates a continuation of our track record of turning profits into cash despite the somewhat lumpy cash profile of our large simulator and SPMM contracts. We have achieved this by maintaining our focus on commercial contracting, inventory levels and ensuring a disciplined approach to cash management. We have reinvested this operating cash into the business with GBP 4.2 million invested in capital projects, including on new product development in line with our technology road map. The acquisition of Bolab for an initial GBP 3.9 million was funded through in-year cash generation. After returning cash to shareholders in the form of dividends, we had a significant net cash balance at the period end of GBP 41.4 million available to support strategic priorities. Moving on to the performance of each segment and starting with Testing Products, the group's largest segment. This includes driving robots and ADAS platforms, the large SPMM machines as well as Bolab's test equipment for electronic subsystems. Revenue increased by 7% with growth in robots and the contribution of Bolab offset by lower SPMM sales. The market drivers for Testing Products continue to support increased track testing activity levels with additional regulation and increased complexity of testing. The increase in margin was delivered through operational efficiencies in supplier quality and production layout together with the effect of revenue mix. In this segment, the timing benefit of revenue mix, which was driven by a higher proportion of high-margin robots and lower SPMM revenue is not expected to be repeated in FY '26. Testing Services includes our proving ground in California, on-road testing in China as well as powertrain and environmental testing in Michigan. Revenue increased by 8%, driven by strong growth in the U.S., where activity levels benefited from new regulatory requirements from the U.S. regulator, NHTSA. After a two-month delay for review by the incoming administration, these have now been confirmed with an implementation date of 2029. Strong customer relationships facilitated cross-selling of VTS' services to a major OEM to whom they were previously not able to gain access as well as initial sales being made to a number of new market entrants. A long-term Testing Services contract in China was renewed for delivery in FY '26 and beyond. Our Simulation segment includes our simulation software, rFpro, and driving simulators designed and manufactured by Ansible Motion. The decrease in revenue was driven by the timing of simulator order intake in the final quarter of the year, with macroeconomic disruption contributing to delays in customer order placement. Our range of driving simulators was expanded during the year with the launch of the S3 Spin, and we were pleased to receive the first order for this new product towards the end of FY '25. High-value simulator sales are individually material and revenue recognition continues to be impacted by the timing of order intake and delivery as does margin. The key enablers for the delivery of our growth plan include our great people with over 200 qualified engineers and technicians supported by an experienced team of professionals across sales, operations and finance. Having been with the group for just over a year now, I can personally attest to the breadth of industry knowledge and technical expertise among my colleagues. Our retention rate, which is circa 90%, is above industry averages, is testament to the investment that has been made in our people. Our cash conversion record, which we aim to continue at 100% through the cycle; our strong balance sheet, which gives us flexibility with GBP 40 million of cash and a GBP 20 million RCF facility. While we prefer to remain debt-free, our debt capacity at 2x EBITDA is now over GBP 50 million, which for the right acquisition, we could use for a short period and pay down from cash generation. And we will deploy this balance sheet in line with our capital allocation policy, which I'll cover on the next slide. Our capital allocation policy is unchanged, and we are pleased to demonstrate how this is supporting the year-on-year progression of the group's return on capital employed. Our first priority is to invest in organic R&D and CapEx, then M&A and finally, dividends. We have a disciplined approach to R&D and CapEx, assessing each potential project using structured financial and strategic criteria to ensure alignment with our medium-term growth plan. New product development is critical to our business to ensure our solutions meet the evolving technical requirements of our customers. Our technology road map for Testing Products is designed to address the opportunities of NCAP testing over the next five years based on the long-standing deep customer relationships we have with OEM R&D teams and service providers. Our road map covers both hardware improvements such as the speed and reliability of our ADAS platforms as well as software enhancements. Where appropriate, we will invest CapEx to increase production capacity, and we will complete our global ERP system rollout, having now embedded this in our core Testing Products business and driving margin improvement as a result. In M&A, we will continue to target profitable cash-generative businesses. Any transaction should be EPS accretive and meet or exceed our internal benchmarks on financial returns. Where this is not the case, we maintain a patient and disciplined approach to ensure we only invest when we can create long-term shareholder value. We have a progressive dividend policy, as shown by our track record of consistent double-digit dividend increases over the last 5 years. We will only consider returning capital to shareholders if we are holding surplus cash and acquisition multiples ever became unattractive. The graph on the right illustrates that we have deployed capital in a number of ways over the last 4 years in a disciplined manner and are now starting to see the benefits in the group's return on capital employed metric, which has increased to 20.2% in FY '25. I'll now hand over to Sarah to give an update on our growth strategy. Sarah Matthews-DeMers: Thanks, Ed. Having presented our medium-term growth ambition last November, I'm pleased to say we are on track to deliver in line with the plan. The graph demonstrates the compounding effects of delivering 10% organic revenue growth each year, expanding operating margins to 20% plus and investment in acquisitions, continuing our disciplined approach against well-defined acquisition criteria. This will deliver our medium-term aspiration of doubling revenue and tripling operating profit. I'm pleased to confirm that despite the change in CEO, you won't be surprised to hear there is no change to this ambition. I am fully committed to delivering the plan. In half 1 '25, we delivered an 11% increase in revenue, expanded our operating margin to 18.6% and completed the acquisition of Bolab. Half 2 was tougher following the macroeconomic uncertainty, which followed U.S.-led tariff changes and revenue growth slowed. However, through delivery of our continuing program of driving operational efficiency and cost control, aided by a positive mix impact, we delivered improvement in operating margin and operating profit slightly ahead of expectations. I'll give further detail on each of these elements in turn on the next slides. Our growth is supported by very long-term structural and regulatory growth drivers in four main areas: new vehicle models, new powertrains, consumer ratings and regulation. The first two relate to the wider automotive market and the third and fourth are linked to the rapid developments in safety technology for assisted and automated driving functions. and the increasing regulation and certification requirements in this area. During FY '25, our sales growth has been driven by industry advances in technology, the drive for efficiency by OEMs and increased complexity of testing. There are a number of well-publicized factors creating uncertainty in the automotive market. The impact of tariffs is causing disruption, but OEMs remain committed to R&D in order to remain competitive. In half 2, we saw the impact of many customers pausing to take stock and delaying procurement decisions while they determine how best to respond to tariff changes. The challenge to traditional automotive OEMs posed by the rise of new entrants is resulting in the need to innovate and develop faster, more cost-efficient methods of developing new models, giving rise to further opportunities for our simulation capabilities, which enable manufacturers to accelerate the efficiency and speed of development by allowing customers to test in a virtual environment. As the transition to EVs is occurring more slowly than originally forecast, there is renewed growth in hybrid platform development, and ICE vehicles are expected to be around for longer, supporting significant levels of activity in new platform development. The new U.S. regulation, FMVSS 127, mandating new requirements for automatic emergency braking that comes into force for cars sold into the U.S. from 2029 remains in place despite lobbying from the U.S. car industry and is beginning to drive development activity in the U.S. market. Combined with the extension of Euro NCAP testing to other vehicle categories, increases in the complexity of testing, safety regulation and the growth in active safety and autonomy provide tailwinds for growth. Our business is resilient against short-term market disruption, and our market drivers support double-digit revenue growth in the medium term and beyond. We are OEM agnostic in the sense that we supply to all major automotive OEMs with over 150 different customers, therefore, providing protection from downside risk from the current competitive environment between conventional manufacturers and Chinese EV makers. Our global diversified customer base and high-quality long-term customer relationships provide resilience. Our global footprint allows us to remain close to our customers and gives us flexibility in dynamic market conditions. We are powertrain agnostic. All new models need to be tested and certified, whether EV, hybrid or ICE, leaving us well placed whatever the mix between differing powertrains. We sell into R&D functions and the organizations independently conducting testing. We don't sell anything that goes into a production vehicle. Therefore, production volumes are not directly relevant to us. As OEMs seek to innovate and develop faster, more cost-efficient methods of developing new models, this will lead to a faster adoption of simulation and further opportunities for our simulation capabilities. In summary, all of these market drivers and our high-quality long-term customer relationships provide resilience against the challenging near-term dynamics in the automotive industry. and long term are moving in the right direction to support sustainable double-digit revenue growth across our business. Operating margin expansion will be achieved through delivering operational gearing as we scale the business. The investment we have put in means we have the capacity to deliver the next phase of growth without a corresponding step change in overheads. Simplifying the business, we are focusing on improving our supply chain, rationalizing the number and quality of suppliers to obtain discounts and improve quality and efficiency as well as rationalizing the number of product variations and combinations in the market. And standardizing our processes and procedures. We have already made many improvements in this area, but there is significant opportunity to streamline our manufacturing, improve design for manufacture and drive the benefits from our ERP system. In our main manufacturing facility in the U.K., we have delivered a net improvement of GBP 1.1 million through the implementation of a supplier quality management system and increasing quality testing at the subassembly level, leading to reduced rework and wastage. We have reduced direct labor input times through planning and layout improvements. And we have also rationalized the number of product configuration options. We have demonstrated a strong track record in delivering and implementing value-enhancing acquisitions, and this will continue to be an important area of focus for the group. Our pipeline includes a range of near-term opportunities and longer-term relationships. There are no changes to our well-defined strategic and financial criteria against which targets are screened. Importantly, we have the resources in place to execute transactions. The market is fragmented, consisting of a high number of small- to medium-sized businesses, which are filtered down into targeted approaches. These are usually off-market opportunities with vendors with whom we've built a relationship over a period of time, but are sometimes structured M&A transactions. We typically have several acquisition opportunities in various phases of the transaction process at any one time. We are looking for cash-generative businesses with high gross margins at reasonable multiples, which are EPS accretive and capable of achieving strong return on investment. Typically, targets will offer new products or service capabilities that can be sold through our existing international sales channels. In terms of geography, we're most likely to pursue opportunities in Europe and the U.S. while being mindful that given the current disruption, we will need to be comfortable that any business is resilient to changes in market conditions. During the year, we completed the acquisition of Bolab, which has been integrated into our testing products sector, opening opportunities for Bolab to access new sales channels. We continue to apply our highly disciplined and well-structured approach to deal execution, which led us to withdraw from a further transaction in the year. We are continuing to build relationships with a number of other targets. In summary, we have a promising pipeline and sufficient resources to take advantage of opportunities that arise. The group has made a strong start to delivering the medium-term growth plan, which we articulated in November 2024. Trading in the first half of FY '25 was strong with double-digit revenue and profit growth. Despite challenges in the second half caused by macroeconomic and political disruption, the group delivered full year profit growth of 15% and improved margin to 20.3% from a combination of operational improvements and revenue mix. Diluted EPS grew by 15%, and we have proposed a 20% increase in the dividend, reflecting the Board's confidence in the group's financial position and prospects. Our strong operating cash generation and cash conversion of 106% leaves us with GBP 40 million of cash, which supports further organic and inorganic investment. In terms of the outlook for FY '26, the group is OEM agnostic, powertrain agnostic and sells into automotive R&D functions, providing resilience against short-term industry headwinds. The group is also geographically diversified and supplies market-leading products, which are critical to our customers' future success. Encouragingly, underlying demand drivers remain strong and customer activity increased towards the end of FY '25. As a result, the group carries forward GBP 32 million of orders into FY '26, providing good trading momentum into the first half of the year. Whilst mindful that short-term macroeconomic disruption may continue into the first half of FY '26, the Board remains confident that the group will make further financial and strategic progress this year and expects to deliver FY '26 adjusted operating profit in line with current expectations with an expected bias towards the second half of the year. Future growth prospects remain supported by long-term structural and regulatory growth drivers in active safety, autonomous systems and the automation of vehicle applications, underpinning our medium-term financial objectives. To summarize our growth strategy and value creation plan, our ambition is to double revenue and triple operating profit over the medium term from our FY '24 baseline of GBP 20 million of profit through the compounding effect of 10% organic revenue growth, improving margins to 20% and beyond, converting these profits into cash with 100% cash conversion through the cycle and a self-funded acquisition spend of GBP 30 million to GBP 50 million per year. That concludes the presentation. We'll now go to questions. Operator: [Operator Instructions] I'd like to remind you that recording of this presentation along with a copy of the slides and the published Q&A can be accessed via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Can I please ask you to read out the questions and give responses where appropriate to do so, and I'll pick up from you at the end? Ed Haycock: Sure. So first question was a pre-submitted question. So no name with this one. The question is, the share price has been reducing daily for the last few months despite the financial results being in line with expectations. What actions are underway to boost investor confidence and reverse the recent trend? Do you want to take this one, Sarah? Sarah Matthews-DeMers: I'll take that one. So thanks. As you can see, we've been delivering our results. We've also set out the medium-term growth plan to demonstrate the opportunity for what the business can achieve. Unfortunately, redemptions do remain the biggest issue in mid-cap markets, which drives prices down. So we are setting out the opportunity to allow shareholders to be able to assess the opportunity for the business themselves. Ed Haycock: Next question is from [ Ivan ]. His question is, what was the operating margin, excluding the benefit of revenue mix? So in one of the slides, we showed the impact and we quantified that the benefit was GBP 1.2 million of operating profit. Broadly, that's around 100 basis points on the operating margin. The next question is from [ Paul ]. With cash rising and continued strong cash generation, how are you looking to balance reinvestment and product development, acquisitions and shareholder returns in your allocation strategy? Did you want to take that one, Sarah? Sarah Matthews-DeMers: Yes. So as we set out in our capital allocation policy, the first priority is always to invest in organic R&D because that is what gives us the best returns. And then following that, the next allocation that we look at is acquisitions. Again, that drives returns. We pay a relatively small dividend. So it's not stopping us investing in anything in the business that is driving returns. But I do think it is a good discipline to have that dividend payment and the fact that we're growing it each year helps to signal the Board's confidence in the returns going forward. Ed Haycock: We've had a question from [ Gerard ], which is, can you give some examples of how ERP investment improve performance. So yes, various examples of that, I guess. One area where we've seen a marked improvement is in procurement. So we've now got data to analyze on exactly how much we're spending across our supply chain, which we can use to then inform our commercial negotiations and negotiate discounts with our core suppliers. Equally, we're using it in planning and knowing exactly how much we need to order and when, which is driving out working capital efficiencies and ensuring we're sort of maintaining appropriate inventory levels. Sarah Matthews-DeMers: Great. Thank you for those questions. We'll pass back to Vini. Operator: Sarah, Ed, thank you for answering all those questions you've got from investors. And of course, the company can review all questions submitted today and we'll publish those responses on the Investor Meet Company platform. Just before redirecting investors to provide you with their feedback, which is particularly important to the company, Sarah, can I please just ask you for a few closing comments? Sarah Matthews-DeMers: Yes. I'd like to thank you all for joining us today. Operator: Sarah, Ed, thank you for updating investors today. Can I please ask investors not to close the session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This may only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of AB Dynamics plc, we'd like to thank you for attending today's presentation, and good morning to you all.
Operator: Welcome to 2020 Bulkers Q3 2025 Financial Presentation. Today's call is being recorded. [Operator Instructions] I would now like to introduce CEO, Lars-Christian Svensen. Please begin. Lars-Christian Svensen: Thank you, operator. Welcome to the Q3 2025 conference call for 2020 Bulkers. My name is Lars-Christian Svensen, and I'm joined here today by our CFO, Vidar Hasund. Before we begin the presentation, I would like to remind you that we will be discussing matters that are forward-looking. These statements reflect the company's current views regarding future events and are subject to risks and uncertainties. Actual results may materially differ from those anticipated. I will now proceed with the highlights of the quarter. We reported a net profit of $9.8 million and an EBITDA of $14.2 million. The gross TCE earnings for the quarter were approximately $35,100 per day. We declared a total dividend of $0.54 per share for the months of July, August and September, and the company used FFA to hedge 2 vessels at $33,700 per day from the 1st of August until 31st December. The company also signed agreements to sell vessels Bulk Sandefjord, Bulk Santiago and Bulk Shenzhen for a total consideration of $209 million with an agreed delivery to the new owners in Q1 2026. In subsequent events, we signed an agreement to sell the vessel Bulk Sao Paulo for a total consideration of $72.75 million with Q1 2026 delivery for this unit as well. For October, we achieved a time charter equivalent of about $36,000 per day and a dividend payout of $0.19 per share for the month. And with that, I will now pass the floor to Vidar. Vidar Hasund: Thank you, Lars-Christian. 2020 Bulkers reports a net profit of $9.8 million and earnings per share of $0.43 for the third quarter of 2025. Operating profit was $11.7 million, and EBITDA was $14.2 million for the quarter. Operating revenues and other income were $19.3 million for the third quarter. The average time charter equivalent rate was approximately $35,100 per day gross. Vessel operating expenses were $3.7 million and the average operating expenses per ship per day were approximately $6,600 in the third quarter. G&A for the third quarter was $1.2 million. 2020 Bulkers recognized approximately $0.5 million in management fee as other operating income in the financial statements. Interest expense were $1.9 million for the quarter. Shareholders' equity was $148 million at the end of the quarter. Interest-bearing debt was $112.5 million at the end of the third quarter and is nonamortizing until maturity in April 2029. Cash flow from operations was $12.2 million for the quarter. Cash and cash equivalents were $15.2 million at the end of the quarter. The company declared total dividends to shareholders of $0.54 per share for the months of July, August and September 2025. That completes the financial section. And now back to you, Lars-Christian. Lars-Christian Svensen: Thank you, Vidar. 2020 bulkers still have 6 scrubber-fitted Newcastlemaxes with an average age of about 5 years. All vessels are time chartered out on index-linked period contracts to solid counterparts. At each given time, we have the option to convert the vessels from index-linked to fixed rates using the forward FFA curve as a price metric, if we see value in the forward curve. This structure has been an integral part of the company's commercial strategy, which has led us to net profit every quarter since inception in 2019. Not only have we been positive, but we also paid out dividends to the shareholders in 65 consecutive months, which equals 163% of the total paid in capital. The company has an industry low cash breakeven of $11,500 per day for the entire fleet. Due to our vessels superior intake and speed design compared to a standard Capesize vessel, we only need the Baltic Capesize Index to be above $7,500 per day to make money. As you can see from the historical market graph, with the current company structure, 2020 Bulkers will generate a profit and healthy dividend capacity in almost any market. We take pride in our low cash breakeven, but even more pride with our structure linking it with a healthy dividend capacity. If the Baltic Capesize Index is $20,000 per day, we will yield 12%. If the index is $30,000 per day, we'll yield about 20%. And when the Baltic Capesize Index hits $40,000 per day, 2020 Bulkers will yield about 30%. Now let's move over to the market section. The Baltic Capesize Index is currently higher than the average from 2015 to 2024 and also higher than in 2023 and '24, respectively. The largest drivers have been increased bauxite exports from West Africa to China, but also strong iron ore exports from Brazil to China. Both legs are long-haul routes, which has provided a healthy market level and increased ton miles. The ton-mile story continues to move in the right direction after a significant drop at the end of Q4 '24. Ton-mile for Q3 for Capesize was up 2% year-over-year, driven by long-haul trades from the Atlantic to Asia. Bauxite from Guinea has surpassed positive expectations every month and is up 28% year-over-year and 15% in Q3 alone. Iron ore exports are continuing its positive trajectory with increased exports from both Brazil and Australia and coal remains subdued and is currently down 15% in Q3 year-over-year. In Q4 2024, we saw a decline in coal transported on Capesize and Newcastlemax, which led to weaker freight rates. We're still not close to transport the pre-Q4 '24 coal volumes on the larger sizes, but we are seeing more coal back on the Capes and Newcastlemaxes in the last 2 quarters. This is due to more activity on the grain trade for the Panamaxes, which has left more coal for our segments. We also see in 2025 that for the first time in history, more bauxite is transported on the larger sizes than coal, which marks an important shift in trade dynamics. Bauxite is now responsible for 16% of the total Capesize and Newcastlemax volumes. China's appetite for high-grade iron ore has exceeded even last year's record import numbers with a 4% increase year-over-year. As you can see from the left graph, the domestic Chinese iron ore production is trending down. Domestic iron ore production was down 3% year-over-year in '24 and down 1% to date in 2025. This may be another signal that Chinese domestic iron ore production is becoming less economical due to its low Fe content estimated around 20%. On the right graph, you can see that import volumes are on the rise with high-grade iron ore from the Atlantic being the main driver. The Chinese iron ore inventories down approximately 10% year-over-year, this indicates a healthy iron ore demand scenario, as we're soon wrapping up 2025. The first volumes from the Simandou mine in Guinea are currently being loaded according to our sources. This milestone represents another strong front leg from the Atlantic, which will continue to boost the ton-mile story. Over a 24-month ramp-up phase, the mine is targeting 120 million tonnes of high-grade iron ore per annum for the market. With the additional Vale capacity increase by 2026, we expect a total of 170 million tonnes of high-grade iron ore from the Atlantic, most of which will be exported to China. As shown on the right graph, comparing these volumes to the record low order book, the supply story strengthens further. The bauxite volumes have exceeded forecasted volumes by a land slide this year, a 28% increase in ton mile year-over-year and the world seaborne bauxite has had a 15% increase in Q3 2025. As the rain season is coming to an end in Guinea, we're positive to the bauxite story as we're entering the high season for this commodity in the coming quarter. Before we end today's presentation, we continue to highlight the historically low order book. We are at a 25-year record low, standing at 9.3% of the total existing Capesize fleet. Active shipyards are down 60% from the peak in 2008, making it challenging to build any meaningful capacity that could disrupt the favorable supply dynamics for the next few years. The visibility of additional capacity remains, and we continue to thank other shipping segments for their continued newbuilding additions. I will now pass the word back to the operator and welcome any questions you might have. Operator: [Operator Instructions] The first question is from the line of [ Patrick Talger ] from ABG. Unknown Analyst: A quick question in sort of the prospect after the 4 ships now is delivered to its new owners in Q1. Two ships left, what could you say about what is the right way employment, if any, for those 2? And in the event of the 4 being sold and the 2 remaining, what is your current plans for deploying those dollars coming from the ship sales, buying new ships, everything else in dividends or anything else? Lars-Christian Svensen: Thank you for the question. We are, though, 4 to 5 months away from the transaction being closed and money into -- in the account. So it's a bit too early to announce what we're going to do going forward when we have 4, 5 months of business as usual here. We're trying to optimize as much as we can, make as much money as we can in the meantime. And we take quite a lot of pride in being transparent and being shareholder-friendly, and we will naturally strive to continue that going forward as well. I do understand the question, but as always, we will notify the market if and when we buy or sell new ships. Unknown Analyst: Understood. Looking further into 2026, do you -- I remember if you sort of go back to, I think, it was in Q4 2023, you said that the first quarter in '24 would be not as weak as the market seems to expect. And at the time, that was a very accurate prediction. In terms of Q1 2026, do you think the bauxite volumes in combination with the Simandou volumes will counteract the normal very weak seasonality and particularly into February? Or will we see more or less the same as we saw in Q1 this year? Lars-Christian Svensen: Whoever had a crystal ball, but I'll try. I think Q1 is more interesting now than it's been for many, many years because the bauxite volumes are up high season, as you know, out of Guinea. We'll expect a lot of volumes going from there into China. And in the Simandou mine as well, we will experience more volumes in that particular window than we have done in the past. What's also quite alluring is that there is fairly dry in West Africa at that time of year. So we expect the volumes to keep on flowing. You obviously have the X factor from Brazil. Is it going to be a wet season? Is it going to be dry? But all in all, I think the historical Q1 doldrums will not have as much impact going forward and see a little bit more stable market across the quarters. I'm quite confident that Q1 will remain stronger in the years to come than what they've been in the past because of these new volumes and the ton-mile intensity of it all. Operator: [Operator Instructions] It does not look like we have any further questions from the telephone call. So I'll hand it back to the speakers. Lars-Christian Svensen: Thank you very much for listening in, and we look forward to speak to you next quarter as well. Thank you very much. Vidar Hasund: Thank you.
Operator: Hello, and thank you for standing by. My name is Mark, and I will be your conference operator today. At this time, I would like to welcome everyone to the Allurion Third Quarter Earnings Call. [Operator Instructions] Thank you. Now I would like to turn the call over to Tara Brady. Please go ahead. Tara Brady: Good morning, and thank you for joining us. Earlier today, Allurion Technologies, Inc. issued a press release announcing financial results for the quarter ended September 30, 2025, and provided a business update. You can access a copy of the announcement on the company's website at investors.allurion.com. With me on the call today is Shantanu Gaur, Founder and Chief Executive Officer. Before we begin, I would like to inform you that comments mentioned on today's call contain forward-looking statements within the meaning of federal securities laws. Actual results may differ materially from those expressed or implied as a result of certain risks and uncertainties. These risks and uncertainties are described in detail in our Securities and Exchange Commission filings, including our annual report on our Form 10-K filed on March 27, 2025, as amended by amendment #1, thereto filed on August 19, 2025. Our SEC filings can be found through our company website at investors.allurion.com or the SEC's website. Investors are cautioned not to place undue reliance on such forward-looking statements, and Allurion undertakes no obligation to publicly state or release any revisions on these forward-looking statements. In addition to the company's GAAP results, management will also provide supplementary results on a non-GAAP basis. Please refer to the press release issued today and the accompanying supplementary financial data tables for a detailed reconciliation of GAAP and non-GAAP results, which can be accessed from the Investor Relations section of the company's website. Please note that this conference call is being recorded and will be available for audio replay on our website under the Events and Presentations section on our Investor Relations page shortly after the conclusion of this call. And with that, I will turn it over to Shantanu. Shantanu Gaur: Good morning. And as always, thank you for joining us today. Before discussing our third quarter results, I would like to begin by sharing what we believe are several exciting updates regarding the FDA approval process for the Allurion Smart Capsule. As you may recall, in June, we submitted the fourth and final module of our PMA submission to the FDA. Since June, we have passed several critical milestones on our way to a potential FDA approval. In July, FDA completed its acceptance and filing reviews, and we entered the substantive review phase. In August, we successfully passed our pre-approval inspection with 0 findings. The preapproval inspection is designed to assess the company's systems, methods and procedures to ensure that the quality management system is effectively established. The inspection covered compliance with regulatory requirements, process quality and documentation standards. There were no observations raised and no Form 483 issued. In October, the company underwent a Bioresearch Monitoring or BIMO inspection. The BIMO inspection is designed to assess the company's clinical trial systems, methods and procedures to ensure data integrity. Again, there were no observations raised and no Form 483 was issued. In October, we held our Day-100 meeting with FDA, and we were quite pleased with the outcome. After reviewing our PMA submission, FDA did not request any additional human clinical data. We believe this is a very positive sign that we are entering the final stages of the review process. We believe passing these inspections with no observations and completing the Day-100 meeting in this manner are major milestones for Allurion on our path toward FDA approval, are testaments to our commitment to upholding the highest quality standards and are indicative of our readiness to serve the U.S. market. In light of these developments, we have begun to advance our own launch preparations internally and intend to share further updates on upcoming calls. Shifting now to the third quarter. Revenue was $2.7 million, reflecting the restructuring we conducted in the third quarter to refocus our efforts on accounts and distributors who promote metabolically healthy weight loss as part of a comprehensive obesity management strategy that includes combination use of the Allurion program with low-dose GLP-1s. We were pleased with our performance in the third quarter despite the restructuring that we conducted in August and the seasonality we often observed due to the summer months. In my recent conversations with our customers, it is becoming clear that GLP-1 discontinuation can be a rich source of new patients for Allurion. Some customers have indicated that half of their Allurion patients have previously tried a GLP-1, validating our hypothesis that by focusing on accounts that offer multiple modalities of care, we can have access to a steady supply of patients. Even among clinics that offer exceptional follow-up to their patients who are taking GLP-1s, over half of these patients churn after 1 year. As a result, we continue to believe that the pivot we executed last quarter will lead to long-term growth and refinement of the strategy that we could utilize out of the gate in the U.S. market, especially if GLP-1 prices continue to drop in the future. Operating expenses were $10.9 million, a decrease in expense of 29% compared to the prior year. Operating loss was $9.6 million and narrowed by 22% compared to prior year. Adjusted operating expenses were $8.4 million, a decrease in expense of 42% compared to the prior year. Adjusted net operating loss was $6.9 million and narrowed by 39% compared to the prior year. These improvements reflect the improved efficiencies we have been able to gain from the restructurings we have conducted over the past year. We expect our new strategy to continue to bear fruit in the fourth quarter as we onboard new distributors who meet our criteria, and we have been encouraged by the results we have already seen in quarter so far. As we announced previously, we also plan to restructure our balance sheet and are on a path to being debt-free. We have entered into a transaction to exchange all outstanding debt for convertible preferred equity and concurrently announced a private placement financing that strengthens our financial position. As we pursue FDA approval and plan a U.S. launch of the Allurion Smart Capsule, we wanted to have a clear path to being debt-free, and this transaction provides that path. The private placement further strengthens our balance sheet, helping to position us to achieve future catalysts and we were very pleased to have participation from key existing stockholders and our strategic partner who has deep expertise in obesity. With this stronger balance sheet, I believe Allurion is better positioned to increase value for shareholders in the short and long term. I would like to now turn to the other 2 aspects of our strategy that we discussed on our last call, namely retooling our R&D pipeline and manufacturing capabilities in collaboration with our strategic partner and bolstering our clinical pipeline with additional data on combination therapy. We are pleased to report that we are exploring the development of a drug-eluting balloon in collaboration with our strategic partner. While this is a long-term project, the potential could be massive. First, eluting GLP-1 medications in a controlled release manner could be a game changer for obesity therapy. Delivering GLP-1s through an intragastric balloon directly addresses the adherence challenges of GLP-1 use, which we believe will become even more apparent with once-daily pills, while directly combining 2 independent mechanisms of action into a single therapy. Such an innovation could be the ideal therapy for the nearly 50% of patients who stopped using GLP-1s before achieving any clinical benefit. Second, and perhaps more importantly, the drug-eluting balloon could become a platform to deliver a wide array of medications, supplements and microbiome enhancers that are important for gut health and the treatment of chronic gastrointestinal diseases. We believe this project also dovetails nicely with our intention to create a longer-lasting device that remains in the stomach beyond 4 months. We have also now begun process validation of a new R&D and manufacturing line in collaboration with our strategic partner. This line has the potential to expand our current capacity, reduce cost and accelerate the implementation of design changes in the future. Regarding our clinical pipeline, we have completed submissions of the combination therapy protocol to the Institutional Review Boards or IRBs for approval, fielded questions from the IRBs and made the necessary changes to the protocol. We believe that the protocol we are testing in this study where patients will receive the Allurion Smart Capsule, start on 0.25 milligrams of semaglutide at the end of balloon therapy and scale up, if needed, to 1.0 milligrams of semaglutide over the subsequent 8 months directly addresses the issues related to high doses of GLP-1s and provides a compelling future clinical pathway for the U.S. market. I will now turn the call over to Tara Brady, our Interim Chief Financial Officer. Tara? Tara Brady: Thank you, Shantanu. Our revenue for the third quarter of 2025 was $2.7 million compared to $5.4 million for the same period in 2024. The year-over-year decrease in revenue was primarily due to the restructuring that took place in the third quarter. Gross profit for the third quarter was $1.3 million or 49% of revenue compared to $3.1 million or 58% of revenue for the same period in 2024 and included $0.1 million in restructuring costs. Gross profit for the third quarter was negatively impacted by the reduction in revenue in the period and lower production volumes, which resulted in less manufacturing labor and overhead being absorbed into inventory costs. Sales and marketing expenses for the third quarter were $3.1 million compared to $5.2 million for the same period in 2024 and included $1.1 million in restructuring costs. The reduction in expense was primarily driven by increased operating efficiency in the restructuring initiatives implemented previously. Research and development expenses for the third quarter were $2.0 million compared to $3.2 million for the same period in 2024 and included $0.5 million in restructuring costs. The reduction was primarily driven by reduced costs related to the AUDACITY trial and restructuring initiatives implemented previously. General and administrative expenses for the third quarter were $5.8 million and included $0.9 million in restructuring costs compared to $7.0 million for the same period in 2024. Adjusted general and administrative expenses for the third quarter of 2025 were $4.9 million compared to $6.1 million for the third quarter of 2024. The reduction year-over-year was primarily driven by previous restructuring initiatives. Loss from operations for the third quarter was $9.6 million compared to $12.3 million for the same period in 2024. Adjusted loss from operations for the third quarter of 2025 was $6.9 million, excluding onetime restructuring costs of $2.7 million. Adjusted loss from operations for the third quarter of 2024 was $11.4 million, excluding onetime financing costs of $0.9 million. The reduction was driven by restructuring initiatives implemented previously. As of September 30, 2025, cash and cash equivalents were $6.1 million, not including the private placement financing of $5 million. I will now turn the call back over to Shantanu. Shantanu Gaur: Thanks, Tara. We believe the Allurion program is the only solution for obesity management that has consistently demonstrated significant and immediate weight loss while maintaining or increasing muscle mass. In combination with low-dose GLP-1s, we believe the clinical benefit increases even more with higher levels of adherence to GLP-1s, and we are confident that by pivoting to this approach, we will capitalize on the success of GLP-1s and set Allurion up for long-term success. We are thrilled with the progress we have made in a short period of time with the FDA and remain bullish on the overall U.S. market opportunity. As we onboard new partners outside the U.S., we believe we can unlock synergies with GLP-1s. In my own travels and conversations with physicians on the front lines of obesity care, even those with outstanding wraparound support have rates of discontinuation of GLP-1s above 50%. We believe this population of patients represents a substantial opportunity Allurion. And finally, as we explore next-generation R&D and manufacturing initiatives with our new strategic partner, we have begun to view the Allurion Smart Capsule as more of a platform technology that could deliver drugs of all kinds, not just GLP-1s to address adherence issues that are inherent to pharmacotherapy. We believe that with this approach, we could build a new standard of care in not only obesity management but also across several other disease areas, and we are looking forward to proving this out in the future. With that, operator, please open up the call for questions. Operator: [Operator Instructions] And our first question comes from the line of Joshua Jennings with TD Cowen. Joshua Jennings: Shantanu, congrats on the progress with the FDA process and just thinking about that progress. I wanted to start with just how you're taking the learnings from the international strategy to focus on accounts that offer comprehensive obesity care and how that's informing potential U.S. commercial strategy? And any update just on how Allurion plans to attack the U.S. market once approval is in hand. Shantanu Gaur: Thanks for the question, Josh. Certainly, we're learning a lot from what we are doing internationally, especially after we made this most recent pivot in our strategy. What we're seeing in our direct accounts is that as accounts embrace and utilize GLP-1s more and more, they are creating new patients as those GLP-1 patients discontinue and then look for alternative therapies. I was in Ireland a few weeks ago discussing this concept with one of the best GLP-1 clinics in the entire country of Ireland. And even with exceptional care, with multidisciplinary support across nutrition, physical activity, exercise, even psychological support, this particular clinic still had a churn rate over 50% at 1 year. So half of their patients were churning off of GLP-1s, regaining weight and then coming back, looking for another therapy. And we're seeing this across the board in all of the international markets that we operate in. So that's one learning that we're going to apply in the U.S. market, and we've already begun to map out which clinics in the United States fit the bill in terms of utilizing the GLP-1s and also being equipped to potentially deploy the Allurion Smart Capsule. In our international markets as well, we're seeing the same uptake in distributor markets where the distributors have access to accounts that are providing comprehensive obesity care. And we intend over the next couple of months to strike some new partnerships with distributors in certain regions that clearly have embraced GLP-1s in combination therapy and are seeing in their own businesses, how those patients filter through the funnel and get other therapies down the line. Joshua Jennings: And just thinking about the international push and the strategic pivot, the solid third quarter revenue results, can you help us just think about the progression from here just as we're thinking about modeling 4Q in 2026, just how international revenues could shape up over the next 12 to 24 months? Shantanu Gaur: Yes. Great question. What we're seeing right now in the fourth quarter is continued growth in the direct markets where we are seeing an embrace of combination therapy and GLP-1s. Similarly, in our distributor markets, where we have either launched a new distribution partner or refocused our existing distributors on our new strategy, we're seeing some nice momentum there as well. So I would expect in the fourth quarter sequentially to grow compared to Q3. And then moving into 2026, I do expect that sequentially we should be able to continue to grow the top line revenue for the business as more and more of these clinics start to embrace GLP-1s in combination therapy. The other thing that we're starting to see is that as new GLP-1 agents come to market or as prices drop, we see that there's more utilization of GLP-1s. And ironically, there is actually more discontinuation because many of these new agents or less expensive agents are being delivered without the appropriate care. So I actually expect that this trend that we are seeing now in 2025 should continue into 2026. And coming back to your point on the U.S. market as well, Josh, with some of the new initiatives from the Trump administration that are resulting in a reduction in price in GLP-1s in the U.S. that should drive more uptake in the U.S., which in turn should drive a higher churn rate and even more patients who are looking for alternative therapies after they stop their GLP-1 and regain the weight. So these are some of the tailwinds that I see now finally behind our backs as we head into 2026. Joshua Jennings: Appreciate that. And just lastly, you're talking about Allurion Smart Capsule and potentially transforming to a platform technology with drug delivery. Any other details to share just in terms of time lines of the development program? And then any other elements of the pipeline that you want to highlight in terms of development projects for the platform? Shantanu Gaur: Thank you. When we think about the Smart Capsule as more of a platform, there's actually a whole universe of molecules and even gut microbiome enhancers that could be alluded off of our balloon in a controlled release manner. And what we're finding, especially as GLP-1s proliferate and some of these other pharmaceuticals that are delivered through DTC services where the follow-up is pretty limited, adherence has become the #1 issue for pharmaceuticals. And with a capsule like ours that turns into a balloon that last inside the stomach for 4 months, we can solve that adherence issue for patients over a 4-month period. We're also reinitiating the work that we had started a year ago or so on a longer-term balloon that's intended to last in the stomach well beyond 4 months. And the vision there potentially as a platform could be you swallow -- a patient swallows a Smart Capsule of ours, it remains in the stomach for, say, 12 months. And over that 12-month period, drug therapeutic or gut microbiome enhancer is alluded over time. And in that scenario, you could imagine a patient being able to swallow a capsule once a year and really not have to worry about taking their medications or managing their obesity since they have an intragastric balloon inside their stomachs. So that is a longer-term project, and we are really thrilled to be initiating it right now. But when you combine that drug elution approach with a longer-term intragastric balloon, the opportunities actually become sort of endless in terms of how many different therapeutics or small molecules we could potentially elute in patients with various different chronic diseases. Operator: [Operator Instructions] There is no further questions at this time. And I will now turn the call back over to Shantanu Gaur for closing remarks. Shantanu? Shantanu Gaur: Thank you, operator. As we close our call today, I'd just like to extend my thanks to everyone who joined us today, particularly all of my fellow Allurions who are building this next generation of Allurion. And of course, our loyal shareholders. The collective belief that all of you have in our mission and commitment to our company has really been unwavering. And I believe through that commitment, we have set ourselves up for long-term success. We really look forward to updating all of you on our progress in the next quarter, and thank you all. Have a great day. Operator: That concludes today's call. You may now disconnect.
Operator: Hello, and welcome to the Andean Precious Metals Third Quarter Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Amanda Mallough, Director of Investor Relations. You may begin. Amanda Mallough: Thank you, operator, and good morning, everyone. Thank you for joining Andean Precious Metals for the conference call to discuss our financial and operating results for the 3 and 9 months ended September 30, 2025. Our press release, MD&A and financial statements are available on both SEDAR+ and our corporate website at andeanpm.com. Before we get started, I would like to point out that during today's call, we may make forward-looking statements as defined under the Canadian securities laws. Please refer to our cautionary statements and forward-looking information and risk factors contained in our MD&A and other filings. With us on today's call are Alberto Morales, Executive Chairman and CEO; Yohann Bouchard, President; Juan Carlos Sandoval, Chief Financial Officer; and Dom Kizek, Vice President, Finance and Corporate Controller. Following management's prepared remarks, we'll open the line for questions. And with that, I'll turn the call over to Alberto. Alberto Morales: Thank you, Amanda, and good morning, everyone. The third quarter was a strong period for Andean, marked by record revenue, record earnings, record liquid assets and record earnings per share. We delivered revenue of $90.4 million, adjusted EBITDA of $36.8 million, net income of $43.7 million or $0.29 earnings per share, the highest in the company's history. These results reflect the combination of strong metal prices, disciplined cost management and higher consolidated production versus the previous quarter. Importantly, we generated $11.2 million of free cash flow and increased liquid assets to $121 million, up from $82 million a year ago. Operationally, San Bartolome delivered another excellent quarter, benefited from higher silver production, higher silver prices and continued efficiency. Golden Queen faced a short-term production impact related to the leach cycle timing and the team moved quickly to recondition the sale and optimize the process. Looking ahead to year-end, we expect San Bartolome silver production to be within the high end of its guidance, offsetting the lower production at Golden Queen, which was impacted by the leach cycle timing, although showing improvements into the initial part of Q4. On a consolidated basis, production is expected to finish near the lower end of the guidance with a solid cost and margins performance at both assets, maintaining a robust financial performance despite production variances. Our focus on cost and capital discipline continued to pay off. Total CapEx was just $0.6 million in the quarter, and we expect our year-end CapEx to be in line with our guidance. In November, we also filed a base shelf prospectus, qualifying up to $200 million of securities over 25 months, giving us the flexibility to access capital markets efficiently when needed. This is a strategic step that strengthened our long-term optionality. Overall, this was a very strong financial quarter despite production variances, highlighting the resilience of our portfolio, our financial discipline and the capability of our people across both jurisdictions. With that, I will hand it over to Yohann to review operational and explorational performance. Yohann Bouchard: Well, thank you, Alberto, and good morning, everyone. So let's start with production. Andean delivered just under 25,700 gold equivalent ounces in Q3, bringing year-to-date production to about 71,400 gold equivalent ounces. That's a 6% increase over the previous quarter, thanks to a strong contribution from San Bartolome. At San Bartolome, the operation continued to perform extremely well. Mill throughput averaged roughly 4,100 tonnes per day with 85% silver recovery. Production totaled 1.4 million silver ounces or about 15,600 gold equivalent ounces. Cost performance was strong. Cash gross operating margin came in at $16.13 per silver equivalent ounces and our gross margin ratio was 43.8%, both near the upper end of guidance. Increasing our purchase volumes and consistent processing supported these healthy margins. At Golden Queen, production was slightly below 10,100 gold equivalent ounces. This reflects the impact of leaching cycle timing, which temporarily slowed recovery in one of our leach sales. The team acted quickly, reconditioning the sale, optimized our blending and lowered the solution application rate to mitigate fine vertical migration. Despite lower ounces produced, our cash costs were $1,623 per ounce and all-in sustaining cost was $1,807 per ounce, both well within our guidance range. As we move into Q4, we expect consolidated production to finish near the lower end of our full year guidance with all financial metrics trending within our guidance range. We also made strong progress in our exploration program at both operations. At Golden Queen, the Phase 3 program has been extended to 8,100 meters after encouraging drilling results at the Hilltop and Starlight Vein areas. Recent assays include intersection of up to 1.67 gram per tonne gold and 20 grams per tonne silver over 5.9 meters, confirming continuity and potential extension along strike. This program is focused on extending mine life by extending Main Pit 2 and defining new near-mine resources. At San Bartolome, we advanced our partnership with COMIBOL securing exploration permits and social licenses across multiple oxide targets. The shallow core drilling program of 5,500 meters started earlier in Q4. The goal is to test roughly 800,000 tonnes, creating 150 to 250 grams per tonne silver. Ultimately, this will help extend mine life and fully utilize the planned 5,000 tonnes per day capacity without major capital investments. Operationally and strategically, we're in a strong position with exploration adding meaningful future potential. With that, I will pass it over to J.C. for financial review. Juan Sandoval: Thank you, Yohann and good morning, everyone. From a financial standpoint, Q3 2025 was the strongest quarter in Andean's history. Revenue reached $90.4 million, driven by higher silver production and strong realized prices of $3,448 per ounce of gold and $40.09 per ounce of silver. Gross operating income increased to $36.8 million and income from operation was $30.7 million. We generated EBITDA of $58 million and adjusted EBITDA of $36 million, net income of $43.7 million and earnings per share of $0.29 fully diluted, each a record for the company. Free cash flow was $11.2 million, supported by strong operating performance and lower capital spending. CapEx totaled $1.1 million in the quarter. Our balance sheet significantly strengthened this quarter. Total assets grew to $370.8 million, while total liabilities fell to $145.2 million, reflecting debt repayment and higher working capital. Liquid assets rose to a new record high of $121 million, up from $82 million at the same time last year and $81.6 million at year-end 2024. Our financial position remains strong. We continue to have a negative net debt position and significant cash reserves. Combined with the recently filed base shelf prospectus, Andean has the flexibility to pursue further growth opportunities. With that, I'll turn it back to Alberto for closing remarks. Alberto Morales: Thank you, J.C. To close, I want to highlight that Q3 reinforced everything that we have been building on, a resilient cash-generating business, a clean balance sheet and a clear path to pursue transformative initiatives. As this slide shows, we are well positioned for continued growth with robust financial, maintaining financial flexibility, evaluating selective opportunities to build further growth and value creation through advancing exploration programs across both of our assets. We delivered record financial results and meaningful exploration progress. San Bartolome continues to perform consistently. Golden Queen is returning to normal production parameters, and both assets are well positioned for a stronger fourth quarter. We look ahead, we remain focused on executing safely, maintaining cost discipline and advancing our organic growth pipeline. With our financial flexibility, exploration upside and a disciplined team, Andean is well positioned for continued success into 2026 and beyond. Thank you all for your continued support. Operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from Omeet Singh with SCP Resource Finance. Omeet Singh: Congrats on the quarter. I had a question on CapEx. You were mentioning that CapEx will be hitting roughly guidance for the year. I know in Q3 was a lot lower than the prior 2 quarters. Could you speak to what types of CapEx spending you envision for the fourth quarter? Because I think at this run rate, correct me if I'm wrong here, but it will come in significantly below guidance. Juan Sandoval: Omeet, it's J.C. Thanks for your question. So this quarter, it was just in relation to our CapEx spending plan. But as we've said, our plan is to -- we will be within the guidance, within the average of our guidance by the end of the year. Omeet Singh: Okay. Appreciate that. And if I may, I'd like to ask another question. The second one would be in relation to inventory, which increased significantly, obviously, quarter-on-quarter. I'm assuming that's related to the percolation issue this quarter? And should we expect that to come off in Q4 or early next year? Is that the right way to be thinking about it? Yohann Bouchard: Yes, Yohann here. Thanks for the question. Yes, you're absolutely correct. I mean, with the -- I would say, the issue that we had with -- in our Cell 11, I mean, the inventory is still there. And we really use a prudent approach to resume leaching. So I mean, the main contributor to that is we leach using really a slower rate applying solution. And for sure, I mean -- and we see and saw it that our production is coming back slowly but sustainably, and we're expecting it to -- I mean, we pretty much came back at this moment to the production rate that we have in Q1 and Q2, and we're setting the tone to increase further in the beginning of next year. And as you know, I mean, those ounces cannot be recovered over a single quarter, but they're going to be recovered over a longer period of time. So you're absolutely correct on your assumptions. Operator: The next question comes from Allison Carson with Desjardins. Allison Carson: My first one is a bit of a follow-up with the CapEx. I think there was a negative growth capital expense this quarter. Could you just give more color on what that was? Dom Kizek: Allison, Dom here. We adjusted our CapEx metric this quarter to be on a cash flow basis, so that was just a catch-up. And then just to further J.C.'s comment, we are expecting to be within the guidance range at the end of Q4. And some of those projects are going to be including a new heap leach pad that we're starting to build up. Allison Carson: Okay. Great. And then it sounds like everything is working well back at Golden Queen and the leach cycling is improving. If this issue arises again, do you think you'll be able to resolve the issue with less of an impact to production? Yohann Bouchard: I'm not so sure to understand the question, sorry. Allison Carson: Sorry, it sounds like everything at leach cycle is improving following the issues that you had in Q3. If you have more issues with the mine particles in clay again, based on going through this time, do you think that you should be able to resolve the issue quicker with less of an impact to production? Or could this still have another big impact to production in the future? Yohann Bouchard: Thank you for that. I mean I think that we took a lot of action to make sure that it will not happen again. But I would say that, that was more related to an operational problem. And for sure, I mean, we question the way that we blend and everything that we did upstream of leaching. But all the extra measure that we took and also, I mean, we're considering that we're going to also commission a new agglomeration drum in December and looking at also a fine bypass next year to mitigate that project further before the clay hit the HPGR, I believe that we're going to be in really good shape to mitigate such a problem going forward. So absolutely. But again, we took many actions, and we still have other action to take, not only like improving our processes, but also improving the equipment and also doing proper investments to mitigate such of issues. Allison Carson: That's great. And then my last question is just I was wondering if you could talk a little bit about the election results in Bolivia and how you expect that to impact San Bartolome, if at all? Alberto Morales: Yes, Allison. The elections in Bolivia, as probably you have read on some of the editorials, the new President is more center-driven than the previous governments. We believe that there will be -- or at least the rhetoric that they've been using is that they are basically changing the tone of the philosophy that it's been ruling the government from being more of a stream left towards the center and welcoming further investments. Under that tone, if that was to materialize, certainly, I think that the international markets will view very favorably if they were to be opening themselves up for further investments. And most importantly, that may also or at least in order to pursue further initiatives to promote that. It may include some initiatives on legal reforms, tax reforms, but it's too early to tell but we're cautiously optimistic, but I will still keep the word cautious. Allison Carson: So congratulations on a great quarter. Operator: The next question comes from Ben Pirie with Atrium Research. Ben Pirie: Alberto, Yohann, J.C. congrats on another good quarter. Just a couple of quick questions. Most of mine have been answered. But Yohann, I guess, given the improvements you've been making and are continuing to make to the leaching system and the grinding circuit, can you talk about potential increases in recovery? Is there any opportunity there and that goes with the new leach pad as well? Yohann Bouchard: I would say -- I mean, the recovery is mostly is directly related to the way that -- I mean, we apply solution and making sure that the solution reached all of the little corner, I would say, of the leach pad. So -- and again, I mean, it took some time, I think, to recover from, I would say, the shortfall that we had because of the prudent approach and sustainable approach that we have undertook to apply the solution again. And we see it like week after week, production is increasing and it's still increasing at this moment in time. So -- and don't forget that the last 2 or 3 quarters, we put really high grade on the leach pad. And I mean, we start to see some benefits out of it. And basically, the other thing that I have to add to that, we're also contemplating the project to increase our capacity to the Merrill-Crowe. With very little investment, we can increase from treatment of 3,000 to 4,000 gallons per minute, and we're looking into it. So we would like maybe instead of deviating some of the solution to the low-grade pond, we would like to leverage that and send that to Merrill-Crowe that would also increase production. And that can be done within months basically. But overall, I mean, be certain that it's increasing. Production is increasing, recovery is increasing as well. And by the nature of the leach pad that recovery is like -- it's not like you're losing gold. It's just like postponing, I would say, the recovery of some gold in the following quarters. But for sure, our goal is to catch that water within a certain amount of time. and we'll get to that for sure. Ben Pirie: Right. Understood. And I guess in terms of drilling at Golden Queen, is everything progressing as planned? And are you guys still on track to report the updated resource in H1 '26? Yohann Bouchard: No, it's progressing really well, actually. I mean, as you know, I mean, we decided to invest further more. I mean we increased to 8,100 meters total drilling for this year. We add -- I mean, you saw the drill. We add that drill. That team is performing really, really well. We're looking to have a third drill before and at this moment. And we're going to keep drilling. I mean, nonstop until, I mean, we see some significant results. But everything at this moment still aligned to deliver like a technical report and reserve upgrade by the end of next -- of this year. So everything is going according to plan on that aspect. Ben Pirie: Perfect. And I guess just my last question, just given the higher gold prices over the last couple of quarters, is there any changes? Are you seeing any issues with the ore sourcing at San Bart? Yohann Bouchard: I think on that aspect it's interesting. We're doing a lot of progress with the 7 million tonnes agreement, and we start to do some drilling in one of those places like a few weeks ago, which is quite encouraging. We secure a lot of, I would say, agreement with the local community. And so it's going really well. And on top of that and outside of that 7 million tonne agreement, we are also negotiating with our community and it's really encouraging to see the momentum that's been created. But we're not publishing everything, all the new agreement that we're having up there. But I mean, I feel really good with the continuity of San Bart based on the, I would say, the expertise that we get at sourcing ore from third party. So it's -- and we have a solid reputation there. So it's going really well for us. I'm very pleased. Operator: This concludes the question-and-answer session. I'll turn the call to Alberto for closing remarks. Alberto Morales: Well, thank you, everyone, for joining, and we certainly look forward for Q4 and end of the year. And my thanks to all of you for your continued support. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
Operator: Hello, and welcome to the Andean Precious Metals Third Quarter Conference Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Amanda Mallough, Director of Investor Relations. You may begin. Amanda Mallough: Thank you, operator, and good morning, everyone. Thank you for joining Andean Precious Metals for the conference call to discuss our financial and operating results for the 3 and 9 months ended September 30, 2025. Our press release, MD&A and financial statements are available on both SEDAR+ and our corporate website at andeanpm.com. Before we get started, I would like to point out that during today's call, we may make forward-looking statements as defined under the Canadian securities laws. Please refer to our cautionary statements and forward-looking information and risk factors contained in our MD&A and other filings. With us on today's call are Alberto Morales, Executive Chairman and CEO; Yohann Bouchard, President; Juan Carlos Sandoval, Chief Financial Officer; and Dom Kizek, Vice President, Finance and Corporate Controller. Following management's prepared remarks, we'll open the line for questions. And with that, I'll turn the call over to Alberto. Alberto Morales: Thank you, Amanda, and good morning, everyone. The third quarter was a strong period for Andean, marked by record revenue, record earnings, record liquid assets and record earnings per share. We delivered revenue of $90.4 million, adjusted EBITDA of $36.8 million, net income of $43.7 million or $0.29 earnings per share, the highest in the company's history. These results reflect the combination of strong metal prices, disciplined cost management and higher consolidated production versus the previous quarter. Importantly, we generated $11.2 million of free cash flow and increased liquid assets to $121 million, up from $82 million a year ago. Operationally, San Bartolome delivered another excellent quarter, benefited from higher silver production, higher silver prices and continued efficiency. Golden Queen faced a short-term production impact related to the leach cycle timing and the team moved quickly to recondition the sale and optimize the process. Looking ahead to year-end, we expect San Bartolome silver production to be within the high end of its guidance, offsetting the lower production at Golden Queen, which was impacted by the leach cycle timing, although showing improvements into the initial part of Q4. On a consolidated basis, production is expected to finish near the lower end of the guidance with a solid cost and margins performance at both assets, maintaining a robust financial performance despite production variances. Our focus on cost and capital discipline continued to pay off. Total CapEx was just $0.6 million in the quarter, and we expect our year-end CapEx to be in line with our guidance. In November, we also filed a base shelf prospectus, qualifying up to $200 million of securities over 25 months, giving us the flexibility to access capital markets efficiently when needed. This is a strategic step that strengthened our long-term optionality. Overall, this was a very strong financial quarter despite production variances, highlighting the resilience of our portfolio, our financial discipline and the capability of our people across both jurisdictions. With that, I will hand it over to Yohann to review operational and explorational performance. Yohann Bouchard: Well, thank you, Alberto, and good morning, everyone. So let's start with production. Andean delivered just under 25,700 gold equivalent ounces in Q3, bringing year-to-date production to about 71,400 gold equivalent ounces. That's a 6% increase over the previous quarter, thanks to a strong contribution from San Bartolome. At San Bartolome, the operation continued to perform extremely well. Mill throughput averaged roughly 4,100 tonnes per day with 85% silver recovery. Production totaled 1.4 million silver ounces or about 15,600 gold equivalent ounces. Cost performance was strong. Cash gross operating margin came in at $16.13 per silver equivalent ounces and our gross margin ratio was 43.8%, both near the upper end of guidance. Increasing our purchase volumes and consistent processing supported these healthy margins. At Golden Queen, production was slightly below 10,100 gold equivalent ounces. This reflects the impact of leaching cycle timing, which temporarily slowed recovery in one of our leach sales. The team acted quickly, reconditioning the sale, optimized our blending and lowered the solution application rate to mitigate fine vertical migration. Despite lower ounces produced, our cash costs were $1,623 per ounce and all-in sustaining cost was $1,807 per ounce, both well within our guidance range. As we move into Q4, we expect consolidated production to finish near the lower end of our full year guidance with all financial metrics trending within our guidance range. We also made strong progress in our exploration program at both operations. At Golden Queen, the Phase 3 program has been extended to 8,100 meters after encouraging drilling results at the Hilltop and Starlight Vein areas. Recent assays include intersection of up to 1.67 gram per tonne gold and 20 grams per tonne silver over 5.9 meters, confirming continuity and potential extension along strike. This program is focused on extending mine life by extending Main Pit 2 and defining new near-mine resources. At San Bartolome, we advanced our partnership with COMIBOL securing exploration permits and social licenses across multiple oxide targets. The shallow core drilling program of 5,500 meters started earlier in Q4. The goal is to test roughly 800,000 tonnes, creating 150 to 250 grams per tonne silver. Ultimately, this will help extend mine life and fully utilize the planned 5,000 tonnes per day capacity without major capital investments. Operationally and strategically, we're in a strong position with exploration adding meaningful future potential. With that, I will pass it over to J.C. for financial review. Juan Sandoval: Thank you, Yohann and good morning, everyone. From a financial standpoint, Q3 2025 was the strongest quarter in Andean's history. Revenue reached $90.4 million, driven by higher silver production and strong realized prices of $3,448 per ounce of gold and $40.09 per ounce of silver. Gross operating income increased to $36.8 million and income from operation was $30.7 million. We generated EBITDA of $58 million and adjusted EBITDA of $36 million, net income of $43.7 million and earnings per share of $0.29 fully diluted, each a record for the company. Free cash flow was $11.2 million, supported by strong operating performance and lower capital spending. CapEx totaled $1.1 million in the quarter. Our balance sheet significantly strengthened this quarter. Total assets grew to $370.8 million, while total liabilities fell to $145.2 million, reflecting debt repayment and higher working capital. Liquid assets rose to a new record high of $121 million, up from $82 million at the same time last year and $81.6 million at year-end 2024. Our financial position remains strong. We continue to have a negative net debt position and significant cash reserves. Combined with the recently filed base shelf prospectus, Andean has the flexibility to pursue further growth opportunities. With that, I'll turn it back to Alberto for closing remarks. Alberto Morales: Thank you, J.C. To close, I want to highlight that Q3 reinforced everything that we have been building on, a resilient cash-generating business, a clean balance sheet and a clear path to pursue transformative initiatives. As this slide shows, we are well positioned for continued growth with robust financial, maintaining financial flexibility, evaluating selective opportunities to build further growth and value creation through advancing exploration programs across both of our assets. We delivered record financial results and meaningful exploration progress. San Bartolome continues to perform consistently. Golden Queen is returning to normal production parameters, and both assets are well positioned for a stronger fourth quarter. We look ahead, we remain focused on executing safely, maintaining cost discipline and advancing our organic growth pipeline. With our financial flexibility, exploration upside and a disciplined team, Andean is well positioned for continued success into 2026 and beyond. Thank you all for your continued support. Operator, please open the line for questions. Operator: [Operator Instructions] Your first question comes from Omeet Singh with SCP Resource Finance. Omeet Singh: Congrats on the quarter. I had a question on CapEx. You were mentioning that CapEx will be hitting roughly guidance for the year. I know in Q3 was a lot lower than the prior 2 quarters. Could you speak to what types of CapEx spending you envision for the fourth quarter? Because I think at this run rate, correct me if I'm wrong here, but it will come in significantly below guidance. Juan Sandoval: Omeet, it's J.C. Thanks for your question. So this quarter, it was just in relation to our CapEx spending plan. But as we've said, our plan is to -- we will be within the guidance, within the average of our guidance by the end of the year. Omeet Singh: Okay. Appreciate that. And if I may, I'd like to ask another question. The second one would be in relation to inventory, which increased significantly, obviously, quarter-on-quarter. I'm assuming that's related to the percolation issue this quarter? And should we expect that to come off in Q4 or early next year? Is that the right way to be thinking about it? Yohann Bouchard: Yes, Yohann here. Thanks for the question. Yes, you're absolutely correct. I mean, with the -- I would say, the issue that we had with -- in our Cell 11, I mean, the inventory is still there. And we really use a prudent approach to resume leaching. So I mean, the main contributor to that is we leach using really a slower rate applying solution. And for sure, I mean -- and we see and saw it that our production is coming back slowly but sustainably, and we're expecting it to -- I mean, we pretty much came back at this moment to the production rate that we have in Q1 and Q2, and we're setting the tone to increase further in the beginning of next year. And as you know, I mean, those ounces cannot be recovered over a single quarter, but they're going to be recovered over a longer period of time. So you're absolutely correct on your assumptions. Operator: The next question comes from Allison Carson with Desjardins. Allison Carson: My first one is a bit of a follow-up with the CapEx. I think there was a negative growth capital expense this quarter. Could you just give more color on what that was? Dom Kizek: Allison, Dom here. We adjusted our CapEx metric this quarter to be on a cash flow basis, so that was just a catch-up. And then just to further J.C.'s comment, we are expecting to be within the guidance range at the end of Q4. And some of those projects are going to be including a new heap leach pad that we're starting to build up. Allison Carson: Okay. Great. And then it sounds like everything is working well back at Golden Queen and the leach cycling is improving. If this issue arises again, do you think you'll be able to resolve the issue with less of an impact to production? Yohann Bouchard: I'm not so sure to understand the question, sorry. Allison Carson: Sorry, it sounds like everything at leach cycle is improving following the issues that you had in Q3. If you have more issues with the mine particles in clay again, based on going through this time, do you think that you should be able to resolve the issue quicker with less of an impact to production? Or could this still have another big impact to production in the future? Yohann Bouchard: Thank you for that. I mean I think that we took a lot of action to make sure that it will not happen again. But I would say that, that was more related to an operational problem. And for sure, I mean, we question the way that we blend and everything that we did upstream of leaching. But all the extra measure that we took and also, I mean, we're considering that we're going to also commission a new agglomeration drum in December and looking at also a fine bypass next year to mitigate that project further before the clay hit the HPGR, I believe that we're going to be in really good shape to mitigate such a problem going forward. So absolutely. But again, we took many actions, and we still have other action to take, not only like improving our processes, but also improving the equipment and also doing proper investments to mitigate such of issues. Allison Carson: That's great. And then my last question is just I was wondering if you could talk a little bit about the election results in Bolivia and how you expect that to impact San Bartolome, if at all? Alberto Morales: Yes, Allison. The elections in Bolivia, as probably you have read on some of the editorials, the new President is more center-driven than the previous governments. We believe that there will be -- or at least the rhetoric that they've been using is that they are basically changing the tone of the philosophy that it's been ruling the government from being more of a stream left towards the center and welcoming further investments. Under that tone, if that was to materialize, certainly, I think that the international markets will view very favorably if they were to be opening themselves up for further investments. And most importantly, that may also or at least in order to pursue further initiatives to promote that. It may include some initiatives on legal reforms, tax reforms, but it's too early to tell but we're cautiously optimistic, but I will still keep the word cautious. Allison Carson: So congratulations on a great quarter. Operator: The next question comes from Ben Pirie with Atrium Research. Ben Pirie: Alberto, Yohann, J.C. congrats on another good quarter. Just a couple of quick questions. Most of mine have been answered. But Yohann, I guess, given the improvements you've been making and are continuing to make to the leaching system and the grinding circuit, can you talk about potential increases in recovery? Is there any opportunity there and that goes with the new leach pad as well? Yohann Bouchard: I would say -- I mean, the recovery is mostly is directly related to the way that -- I mean, we apply solution and making sure that the solution reached all of the little corner, I would say, of the leach pad. So -- and again, I mean, it took some time, I think, to recover from, I would say, the shortfall that we had because of the prudent approach and sustainable approach that we have undertook to apply the solution again. And we see it like week after week, production is increasing and it's still increasing at this moment in time. So -- and don't forget that the last 2 or 3 quarters, we put really high grade on the leach pad. And I mean, we start to see some benefits out of it. And basically, the other thing that I have to add to that, we're also contemplating the project to increase our capacity to the Merrill-Crowe. With very little investment, we can increase from treatment of 3,000 to 4,000 gallons per minute, and we're looking into it. So we would like maybe instead of deviating some of the solution to the low-grade pond, we would like to leverage that and send that to Merrill-Crowe that would also increase production. And that can be done within months basically. But overall, I mean, be certain that it's increasing. Production is increasing, recovery is increasing as well. And by the nature of the leach pad that recovery is like -- it's not like you're losing gold. It's just like postponing, I would say, the recovery of some gold in the following quarters. But for sure, our goal is to catch that water within a certain amount of time. and we'll get to that for sure. Ben Pirie: Right. Understood. And I guess in terms of drilling at Golden Queen, is everything progressing as planned? And are you guys still on track to report the updated resource in H1 '26? Yohann Bouchard: No, it's progressing really well, actually. I mean, as you know, I mean, we decided to invest further more. I mean we increased to 8,100 meters total drilling for this year. We add -- I mean, you saw the drill. We add that drill. That team is performing really, really well. We're looking to have a third drill before and at this moment. And we're going to keep drilling. I mean, nonstop until, I mean, we see some significant results. But everything at this moment still aligned to deliver like a technical report and reserve upgrade by the end of next -- of this year. So everything is going according to plan on that aspect. Ben Pirie: Perfect. And I guess just my last question, just given the higher gold prices over the last couple of quarters, is there any changes? Are you seeing any issues with the ore sourcing at San Bart? Yohann Bouchard: I think on that aspect it's interesting. We're doing a lot of progress with the 7 million tonnes agreement, and we start to do some drilling in one of those places like a few weeks ago, which is quite encouraging. We secure a lot of, I would say, agreement with the local community. And so it's going really well. And on top of that and outside of that 7 million tonne agreement, we are also negotiating with our community and it's really encouraging to see the momentum that's been created. But we're not publishing everything, all the new agreement that we're having up there. But I mean, I feel really good with the continuity of San Bart based on the, I would say, the expertise that we get at sourcing ore from third party. So it's -- and we have a solid reputation there. So it's going really well for us. I'm very pleased. Operator: This concludes the question-and-answer session. I'll turn the call to Alberto for closing remarks. Alberto Morales: Well, thank you, everyone, for joining, and we certainly look forward for Q4 and end of the year. And my thanks to all of you for your continued support. Operator: This concludes today's conference call. Thank you for joining. You may now disconnect.
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: 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: Welcome to 2020 Bulkers Q3 2025 Financial Presentation. Today's call is being recorded. [Operator Instructions] I would now like to introduce CEO, Lars-Christian Svensen. Please begin. Lars-Christian Svensen: Thank you, operator. Welcome to the Q3 2025 conference call for 2020 Bulkers. My name is Lars-Christian Svensen, and I'm joined here today by our CFO, Vidar Hasund. Before we begin the presentation, I would like to remind you that we will be discussing matters that are forward-looking. These statements reflect the company's current views regarding future events and are subject to risks and uncertainties. Actual results may materially differ from those anticipated. I will now proceed with the highlights of the quarter. We reported a net profit of $9.8 million and an EBITDA of $14.2 million. The gross TCE earnings for the quarter were approximately $35,100 per day. We declared a total dividend of $0.54 per share for the months of July, August and September, and the company used FFA to hedge 2 vessels at $33,700 per day from the 1st of August until 31st December. The company also signed agreements to sell vessels Bulk Sandefjord, Bulk Santiago and Bulk Shenzhen for a total consideration of $209 million with an agreed delivery to the new owners in Q1 2026. In subsequent events, we signed an agreement to sell the vessel Bulk Sao Paulo for a total consideration of $72.75 million with Q1 2026 delivery for this unit as well. For October, we achieved a time charter equivalent of about $36,000 per day and a dividend payout of $0.19 per share for the month. And with that, I will now pass the floor to Vidar. Vidar Hasund: Thank you, Lars-Christian. 2020 Bulkers reports a net profit of $9.8 million and earnings per share of $0.43 for the third quarter of 2025. Operating profit was $11.7 million, and EBITDA was $14.2 million for the quarter. Operating revenues and other income were $19.3 million for the third quarter. The average time charter equivalent rate was approximately $35,100 per day gross. Vessel operating expenses were $3.7 million and the average operating expenses per ship per day were approximately $6,600 in the third quarter. G&A for the third quarter was $1.2 million. 2020 Bulkers recognized approximately $0.5 million in management fee as other operating income in the financial statements. Interest expense were $1.9 million for the quarter. Shareholders' equity was $148 million at the end of the quarter. Interest-bearing debt was $112.5 million at the end of the third quarter and is nonamortizing until maturity in April 2029. Cash flow from operations was $12.2 million for the quarter. Cash and cash equivalents were $15.2 million at the end of the quarter. The company declared total dividends to shareholders of $0.54 per share for the months of July, August and September 2025. That completes the financial section. And now back to you, Lars-Christian. Lars-Christian Svensen: Thank you, Vidar. 2020 bulkers still have 6 scrubber-fitted Newcastlemaxes with an average age of about 5 years. All vessels are time chartered out on index-linked period contracts to solid counterparts. At each given time, we have the option to convert the vessels from index-linked to fixed rates using the forward FFA curve as a price metric, if we see value in the forward curve. This structure has been an integral part of the company's commercial strategy, which has led us to net profit every quarter since inception in 2019. Not only have we been positive, but we also paid out dividends to the shareholders in 65 consecutive months, which equals 163% of the total paid in capital. The company has an industry low cash breakeven of $11,500 per day for the entire fleet. Due to our vessels superior intake and speed design compared to a standard Capesize vessel, we only need the Baltic Capesize Index to be above $7,500 per day to make money. As you can see from the historical market graph, with the current company structure, 2020 Bulkers will generate a profit and healthy dividend capacity in almost any market. We take pride in our low cash breakeven, but even more pride with our structure linking it with a healthy dividend capacity. If the Baltic Capesize Index is $20,000 per day, we will yield 12%. If the index is $30,000 per day, we'll yield about 20%. And when the Baltic Capesize Index hits $40,000 per day, 2020 Bulkers will yield about 30%. Now let's move over to the market section. The Baltic Capesize Index is currently higher than the average from 2015 to 2024 and also higher than in 2023 and '24, respectively. The largest drivers have been increased bauxite exports from West Africa to China, but also strong iron ore exports from Brazil to China. Both legs are long-haul routes, which has provided a healthy market level and increased ton miles. The ton-mile story continues to move in the right direction after a significant drop at the end of Q4 '24. Ton-mile for Q3 for Capesize was up 2% year-over-year, driven by long-haul trades from the Atlantic to Asia. Bauxite from Guinea has surpassed positive expectations every month and is up 28% year-over-year and 15% in Q3 alone. Iron ore exports are continuing its positive trajectory with increased exports from both Brazil and Australia and coal remains subdued and is currently down 15% in Q3 year-over-year. In Q4 2024, we saw a decline in coal transported on Capesize and Newcastlemax, which led to weaker freight rates. We're still not close to transport the pre-Q4 '24 coal volumes on the larger sizes, but we are seeing more coal back on the Capes and Newcastlemaxes in the last 2 quarters. This is due to more activity on the grain trade for the Panamaxes, which has left more coal for our segments. We also see in 2025 that for the first time in history, more bauxite is transported on the larger sizes than coal, which marks an important shift in trade dynamics. Bauxite is now responsible for 16% of the total Capesize and Newcastlemax volumes. China's appetite for high-grade iron ore has exceeded even last year's record import numbers with a 4% increase year-over-year. As you can see from the left graph, the domestic Chinese iron ore production is trending down. Domestic iron ore production was down 3% year-over-year in '24 and down 1% to date in 2025. This may be another signal that Chinese domestic iron ore production is becoming less economical due to its low Fe content estimated around 20%. On the right graph, you can see that import volumes are on the rise with high-grade iron ore from the Atlantic being the main driver. The Chinese iron ore inventories down approximately 10% year-over-year, this indicates a healthy iron ore demand scenario, as we're soon wrapping up 2025. The first volumes from the Simandou mine in Guinea are currently being loaded according to our sources. This milestone represents another strong front leg from the Atlantic, which will continue to boost the ton-mile story. Over a 24-month ramp-up phase, the mine is targeting 120 million tonnes of high-grade iron ore per annum for the market. With the additional Vale capacity increase by 2026, we expect a total of 170 million tonnes of high-grade iron ore from the Atlantic, most of which will be exported to China. As shown on the right graph, comparing these volumes to the record low order book, the supply story strengthens further. The bauxite volumes have exceeded forecasted volumes by a land slide this year, a 28% increase in ton mile year-over-year and the world seaborne bauxite has had a 15% increase in Q3 2025. As the rain season is coming to an end in Guinea, we're positive to the bauxite story as we're entering the high season for this commodity in the coming quarter. Before we end today's presentation, we continue to highlight the historically low order book. We are at a 25-year record low, standing at 9.3% of the total existing Capesize fleet. Active shipyards are down 60% from the peak in 2008, making it challenging to build any meaningful capacity that could disrupt the favorable supply dynamics for the next few years. The visibility of additional capacity remains, and we continue to thank other shipping segments for their continued newbuilding additions. I will now pass the word back to the operator and welcome any questions you might have. Operator: [Operator Instructions] The first question is from the line of [ Patrick Talger ] from ABG. Unknown Analyst: A quick question in sort of the prospect after the 4 ships now is delivered to its new owners in Q1. Two ships left, what could you say about what is the right way employment, if any, for those 2? And in the event of the 4 being sold and the 2 remaining, what is your current plans for deploying those dollars coming from the ship sales, buying new ships, everything else in dividends or anything else? Lars-Christian Svensen: Thank you for the question. We are, though, 4 to 5 months away from the transaction being closed and money into -- in the account. So it's a bit too early to announce what we're going to do going forward when we have 4, 5 months of business as usual here. We're trying to optimize as much as we can, make as much money as we can in the meantime. And we take quite a lot of pride in being transparent and being shareholder-friendly, and we will naturally strive to continue that going forward as well. I do understand the question, but as always, we will notify the market if and when we buy or sell new ships. Unknown Analyst: Understood. Looking further into 2026, do you -- I remember if you sort of go back to, I think, it was in Q4 2023, you said that the first quarter in '24 would be not as weak as the market seems to expect. And at the time, that was a very accurate prediction. In terms of Q1 2026, do you think the bauxite volumes in combination with the Simandou volumes will counteract the normal very weak seasonality and particularly into February? Or will we see more or less the same as we saw in Q1 this year? Lars-Christian Svensen: Whoever had a crystal ball, but I'll try. I think Q1 is more interesting now than it's been for many, many years because the bauxite volumes are up high season, as you know, out of Guinea. We'll expect a lot of volumes going from there into China. And in the Simandou mine as well, we will experience more volumes in that particular window than we have done in the past. What's also quite alluring is that there is fairly dry in West Africa at that time of year. So we expect the volumes to keep on flowing. You obviously have the X factor from Brazil. Is it going to be a wet season? Is it going to be dry? But all in all, I think the historical Q1 doldrums will not have as much impact going forward and see a little bit more stable market across the quarters. I'm quite confident that Q1 will remain stronger in the years to come than what they've been in the past because of these new volumes and the ton-mile intensity of it all. Operator: [Operator Instructions] It does not look like we have any further questions from the telephone call. So I'll hand it back to the speakers. Lars-Christian Svensen: Thank you very much for listening in, and we look forward to speak to you next quarter as well. Thank you very much. Vidar Hasund: Thank you.
Operator: Good morning, ladies and gentlemen, and welcome to ICL Third Quarter 2025 Earnings Call. [Operator Instructions] This call is being recorded on Wednesday, November 12, 2025. I would now like to turn the conference over to Peggy Reilly Tharp. Please go ahead. Peggy Tharp: Thank you. Hello, everyone. I'm Peggy Reilly Tharp, Vice President of Global Investor Relations for ICL Group. I'd like to welcome you, and thank you for joining us today for our earnings conference call. This event is being webcast live on our website at icl-group.com. -- and there will be a replay available a few hours after the live call and a transcript will be available shortly thereafter. Earlier today, we filed our reports and our presentation with the securities authorities and the stock exchanges in both Israel and the United States. Those reports as well as the press release and our presentation are also available on our website. Please be sure to review the disclaimer on Slide 2 of the presentation. Our comments today will contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are based on management's current expectations and are not guarantees of future performance. The company undertakes no obligation to update any information discussed on this call at any time. We will begin with a presentation by our CEO, Mr. Elad Aharonson, followed by Mr. Aviram Lahav, our CFO. After the presentation, we will open the line for a Q&A session. I'd now like to turn the call over to Elad. Elad Aharonson: Thank you, Peggy, and welcome, everyone, to our third quarter 2025 earnings call. Since our last report, we have begun to witness significant positive actions in Israel, the cease fire, the return of the hostages and the renewed focus on stability and peace. I'm sure you join us in looking forward to a new normal in the Middle East. Here at ICL, we are also looking forward to executing against our new strategic principles. In our earnings release, we included some details, and I will be sharing more information following our quarterly review. As a result, our call today will be longer than usual. I want to thank you in advance for your patience, and I look forward to your questions. Now if you please turn to Slide 3 for a brief overview of the quarter. Sales were $1.853 billion, up 6% year-over-year. For our specialties-driven businesses, sales of $1.461 billion were up 3%. Consolidated adjusted EBITDA was $398 million. This amount improved 4% year-over-year and was up 13% on a sequential basis. In the third quarter, adjusted diluted earnings per share were $0.10. Operating cash flow of $308 million improved nearly $40 million sequentially. In general, the quarter was in line with expectations. Overall prices continued to improve in the third quarter. Trends were generally consistent across the end markets we serve. However, sentiment and performance varies by region. Let's start with a review of our divisions and begin with our Industrial Products business on Slide 4. For the third quarter, sales of $295 million were down slightly year-over-year. However, EBITDA improved on an annual basis and came in at $67 million. Overall, results were in line with the first half of the year as expected. For flame retardants, performance was mixed. Sales of phosphorus-based products improved. However, bromine-based sales were impacted by continued softness in the construction end market. Other end markets remained stable, including clear brine fluid sales to the oil and gas industry. Specialty Minerals reported strong results for the third quarter with good demand from the food end markets. Turning to third quarter results for our potash division on Slide 5. Sales were $453 million with EBITDA of $169 million. Our average potash price for the third quarter was $353 per ton. This improved 6% on a sequential basis and was up nearly 20% year-over-year. Potash sales volume of 1,046,000 metric tons in the third quarter were roughly stable on an annual basis. Importantly, we saw a sequential increase in potash production. During the third quarter, we continued to maximize the profitability of our potash resources. Whenever possible, we prioritize potash supply to the best global market. For this quarter, my commentary around potash goes beyond our financial results. If you will turn to Slide 6, I wish to address a matter that has resulted in some questions from investors. As you know, last week, we signed an MOU with the state of Israel regarding the Dead Sea concession. First and foremost, we view this MOU as a positive and proactive step. It is expected to provide long-term regulatory clarity and business certainty. It also allows ICL to responsibly prepare for the conclusion of the current concession in 2030 and also positions us for the awarding of the new concession at that time. Importantly, we believe this agreement will improve the terms of the future concession and that we remain the leading candidate to be awarded the new concession and to extract the greatest economic value out of it. The situation required a careful review and choice between 2 alternatives, and I will now explain our rationale. The state made it clear that it plans to launch a competitive tender as required by law. It also insisted of the legal transfer of the assets upon expiration as stipulated by law. The law grant us the right of first offer and the right to compensation for the assets. We determined it was prudent to reach an informed upfront agreement rather than potentially face prolonged disputes or unilateral actions by the state of Israel, including by legislation affecting our rights. Now that the tender is open to all and the value has been placed on our assets, we believe the process will result in overall fairer and more attractive new concession terms. In addition, we believe we have achieved 2 critical certainties. First, we secured compensation of approximately $2.54 billion plus sold harvesting costs amounting to hundreds of millions of dollars if we were not to win the concession. We also established certainty on the timing of this payment. Without the MOU, the end of the concession might have resulted in transfer of the assets without full and immediate compensation. Also, it is important to mention that the agreements regarding the asset value are not expected to have a material impact on our financial results. Second, we avoided the possibility of extended legal proceedings, preparing for and partaking in any complex legal action would have potentially disrupted the day-to-day operations essential for managing a global company. We favored the test of upfront consensus over potentially lengthy disputes and legal proceedings. And once the terms of the future concession are published, we will review them and determine if they are economically viable. We continue to believe that ICL is the most suitable candidate to be awarded the future concession. We currently intend to participate in the process once it begins, assuming, of course, that the terms are economically viable. At ICL, we have been operating the Dead Sea site for more than 100 years. Our knowledge is far deeper than any other potential bidder. -- will possess accumulated proficiencies and practical operational experience. These and other advantages position ICL as a proven entity with the capabilities to manage this unique and complex opportunity. Now turning back to our quarterly update with a review of the Phosphate Solutions division on Slide 7. Strong quarter sales of $605 million were up 5% on an annual basis. Sales improved on higher specialty volumes and higher commodity prices. EBITDA of $134 million was in line with the prior quarter, but down slightly versus the prior year as expected. Overall, profitability was impacted by higher raw material costs, especially for sulfur. Specialty Food Phosphates delivered its strongest quarter in 2 years with continued strategy execution. In China, our YPH joint venture benefited from both higher prices and volumes and an increase in demand for battery materials. Overall, Phosphate Specialties performance was as expected with most regions remaining stable. However, softness continue in Europe, a trend that is expected to linger into the fourth quarter. This brings us to our Growing Solutions business division on Slide 8. Third quarter sales of $561 million improved 4% year-over-year. Our continued strategic focus on global specialty solutions, which have been customized for regional customers helped to drive annual and quarterly improvement. This was the case in both North America and Europe. In both regions, we saw continued solid execution of our growth plans. Sales in Asia improved in the third quarter, but rising raw material costs impacted profit. This trend is likely to extend into the fourth quarter. In Brazil, the overall market was under pressure and faced a variety of difficulties. Soy prices remained low and in some areas, there were significantly lower yields. Interest rates for farmers increased across the board as did brand. For ICL, both sales and profit decreased in Brazil. This was the result of lower volumes due in part to reduced farmer affordability, but also as raw material costs increased. Farmers are in wait-and-see mode and have deferred their decision-making. This has resulted in pressure on premium products and renewed competition in general. Overall, growing Solutions product trends in the third quarter were positive. However, farmer affordability on a global basis remained under pressure. And while continue to gain share in the market, we still have room to grow. And with that, I would like to turn the call over to Aviram for a brief financial overview before I share an update on our guidance and our new strategic principles. Aviram Lahav: Thank you, Elad, and to all of you for joining us today. Let us get started on Slide 10 with a very quick look at quarterly changes in key market metrics. On a macro basis, global inflation rates came down on average as did interest rates, so 2 positive indicators. However, global industrial production and U.S. housing starts both decreased versus the prior quarter. For fertilizers, the picture was more mixed. Both the grain price index and farmer sentiment decreased on a quarterly basis. However, farmer sentiment was up significantly year-over-year. Over the same time frame, potash and phosphate prices improved. There was also an increase in ocean freight rates, a reversal from the relatively stable trend of prior quarters. One of the other indicators we track is the price of Chinese bromine, which is relevant to industrial products and prices continue to improve in the third quarter. Durable goods are also an indicator for this business, and they picked up as well. We also follow remodeling activity as this is a good metric for both Industrial Products and Phosphate Solutions, while roughly flat on a sequential basis, it improved year-over-year. As Phosphate Specialty Solutions are an important part of the food and beverage end market, we also track these trends, which increased both through August and significantly year-over-year. If you will now turn to Slide 11 for a look at our year-over-year sales bridges. For the third quarter, sales were up $100 million or 6% with potash, Phosphate Solutions and growing Solutions all demonstrating growth. Turning to the right side of the slide, you can see $127 million benefit from higher prices this quarter, which was partially offset by lower volumes. On Slide 12, you can see our third quarter EBITDA, which improved 4% versus the prior year. Similar to sales, we saw higher prices and lower volumes. Once again, we saw a significant increase in raw material costs. Before I turn the call back over to Elad, I would like to quickly share a few highlights on Slide 13. Our balance sheet remains strong with available resources of $1.6 billion. Our net debt to adjusted EBITDA rate is at 1.4x, and we delivered operating cash flow of $308 million. Once again, we're distributing 50% of adjusted net income to our shareholders. This translates to a total dividend of $62 million and results in a trailing 12-month dividend yield of 2.8%. And with that, I would like to turn the call back over to Elad for a review of our guidance and our strategic outlook. Elad Aharonson: Thank you, Aviram. Before moving to an overview of our new strategic principles, I would ask you to turn to Slide 15 and a review of our 2025 guidance, which we are maintaining. For our specialties-driven businesses, we continue to expect EBITDA to be between $0.95 billion to $1.15 billion in 2025. For potash sales volumes, we continue to expect this amount to be between 4.3 million and 4.5 million metric tons. So until this point, we have talked about the third quarter and the Dead Sea concession. Now after 8 months as ICL's CEO, I would like to share with you how I see the company's future and where I would like to lead it in the next few years. Over that time, we see 3 megatrends taking shape, and these are shown in Slide 17. First, in a world with growing population and increasingly strained resources, the pressure for food availability is escalating. Second, many nations have realized the necessity of preserving resources in order to ensure the access to food and minerals. Third, in a world of deglobalization, geopolitics and trade wars, the importance of being a company with global reach and local customization is becoming even more critical. We see ICL as a strategic player capable of addressing these trends. On Slide 18, you can see that approximately 70% of our business addresses the issue of food availability. ICL also benefits from access to key mineral resources, mainly potash, phosphate and bromine. While potash is frequently thought of as our largest mineral, in terms of sales, it is actually a second to phosphate. And we are well represented geographically across Europe, North and South America and Asia, both in terms of sales and production. This enables us to provide global reach with local empowerment, which is especially important as more countries are turning inwards in the search for critical solutions. but we know we can do more to maximize our resources and positioning. And that is why ICL is preparing to embark on its next chapter. Over the past several months, we completed a comprehensive review of the company, and you can see an outline of this process in Slide 19. We worked with our team and other experts to examine every aspect of ICL. We began by looking back at our results over the past 5 years. While we have had some good successes, we also experienced some misplaced opportunities, which became distractions to our core businesses. Next, we looked at the future and reviewed the challenges and opportunities ahead. With so many changes on the horizon, we needed to analyze the long-term healthiness of our current businesses and work to identify future growth engines. For this exercise, we looked both within our core and at new potential segments. For each specialty business, we reviewed market momentum, including top trends, market size and the value of the business. We also analyzed our competitive position and our unique value proposition. At this point, we discovered that many of our businesses are at the core of ICL. They are stable and successful contributors, and we will work to maintain these businesses and improve their competitive position. However, our research also showed that some of our businesses might not be as good of a fit to our future. This led us to reach the key takeaways on Slide 20. First, we will expand in the markets that are within our core and where we have significant growth potential. While we carefully examine growth opportunities outside our core, we concluded that we are already participating in very attractive markets. Second, we will extract value from the markets where we are already leaders. For these businesses, we will focus on maintaining our position while driving cost and profitability. Third, we plan to examine businesses that are either not synergetic or have low potential. We will also consider redirecting our resources to focus on better aligned opportunities. This brings us to Slide 21 and our 3 strategic principles. The first is profitable growth, targeting specialty crop nutrition and Specialty Food Solutions. The second is relating to maximizing and improving the businesses that we have identified as core to ICL, and this includes our phosphate, potash and bromine resources. The third is dedicated to portfolio optimization and cost efficiency. All 3 of these principles will benefit from our willingness to embrace new technologies like AI and our deep history of innovation. When combined, this renewed strategic approach will allow ICL to shape its own future. I would now like to share more about this future and our overall strategy going forward. The review we completed helped us to identify 2 distinct businesses, which you can see on Slide 23. We believe Specialty Crop Nutrition and Specialty Food Solutions have the potential to be significant growth engines for ICL. These are 2 areas where we already have deep experience and broad exposure and the future looks bright. To help share our vision, I would like to dive a bit deeper into each principle. Let's begin with our 2 growth engines, Specialty Crop Nutrition and Specialty Food Solutions. As you know, ICL's Growing Solutions segment is already a global leader in specialty Crop Nutrition with room to grow and become even more dominant in this space. On Slide 24, you can see that in 2020, our Specialty Crop Nutrition sales were $1 billion with EBITDA of approximately $60 million. Since that time, we have expanded geographically, enhanced our operations and logistics, completed multiple acquisitions and improved our R&D efforts. As a result, in 2024, we delivered Specialty Crop Nutrition sales of $2 billion. EBITDA increased more than 3x to approximately $200 million, and we are on track to continue this trend. But our research has shown that there is still room to grow. This is due to expected changes in the market and the overall macro environment, including global food security, which I already mentioned. As you can see on Slide 25, the population has doubled since the '70s, but the land meant to feed it has remained unchanged. Thanks to increased use of specialty fertilizers, which help improve yields, there is still enough food. The importance of specialty fertilizers is expected to increase as agriculture production efficiency and sustainability remain critical to food security. Specialty crop nutrition products are the answer. As you can see in Slide 26, this market is expected to grow at 6% rate from $32 billion in 2024 to more than $45 billion in 2030. Here at ICL, we are already well positioned to capture this growth. This is thanks to our broad portfolio of global specialty solutions and our significant regional presence. And going forward, we plan to target the areas on Slide 27 with a distinct focus on global reach with local empowerment. We will target strategic acquisitions, including bolt-on opportunities to expand our product capabilities. We also intend to develop a leading position in the growing areas of biostimulants, nutrient fuel efficiency and organic and recycled products. Our efforts in these areas will be augmented by changes in our portfolio mix, which are designed to drive sales in more profitable product categories. And this work has already begun in Europe. We will also drive sustainable and profitable expansion into high-growth geographies such as India, China and Brazil. These expansions will be through targeted capital investments and will be both by acquisition and on an organic basis. Turning now to Slide 28 and our second growth engine, Specialty Food Solutions, which is part of our Phosphate Solutions segment. We are already leading the $1.5 billion phosphate food specialties market. However, this represents a small piece of the total food ingredients pie worth approximately $150 billion and growing at an expected rate of more than 6% over the next 5 years. On Slide 29, you can see how well we are positioned in the functional food ingredients market. However, we plan to move beyond the relatively narrow field of phosphate-based ingredients and to extend our reach into new target markets. As you know, ICL is already participants in many food end markets. In 2024, our Specialty Food Solutions sales totaled more than $0.5 billion. We are confident that we have the assets and the capabilities to expand deeper into the robust food ingredients market. However, we want to be sure we do so in focused, strategic and successful manner. As a result, we analyzed a wide array of possibilities and looked at each based on both attractiveness in general and fit with ICL. These efforts led to our focus on 4 distinct functional food ingredients. These markets will provide us with exposure to approximately $35 billion in value and expected average 5-year growth rate of approximately 6%. On Slide 30, you can see that we are well positioned to capture the expected growth in these markets. We will be able to leverage our existing global footprint. This includes production, innovation and sales locations across key and growing regions. Our specialty food solutions already cater to 7 out of the top 10 biggest global food companies, as shown on Slide 31. This is in addition to more than 2,000 other customers, and all of them demand quality and consistency from their partners. When it comes to Specialty Food solutions, ICL possess a unique combination of technical functionalities, robust infrastructure and category expertise shown on Slide 32. We expect to leverage these strengths as we expand deeper into functional food ingredients. To grow in these markets, we intend to focus on the areas where we believe we can reach a market leadership position. On Slide 33, you can see that this includes preservatives and leavening agents, among others. As part of these efforts, we will aggressively target acquisitions and other opportunities that leverage our existing assets. This includes our people, global footprint, customer base and Sterling reputation. Over the next 5 years, we are looking for organic growth rate of more than 6%. This growth will complement our strategic acquisitions. We expect to achieve this goal through solutions that provide existing customers and new food and beverage companies with bundled solutions. This overall approach to profitable growth by targeting specialty crop nutrition and specialty food solutions will allow us to significantly advance our business while reducing risk. It enables us to drive expansion while still staying close to our core businesses. which brings us to our next principle on Slide 34, maximizing our core businesses. This includes our potash segment, our Industrial Products segment and our commodity phosphate operations. Let us first start with potash on Slide 35. Earlier, we talked about the concession, but I want to reiterate that we are preparing to win the next Dead Sea concession. This is part of our ongoing strategy as we continue to believe ICL is the most suitable candidate. In parallel, we will continue to work on operational excellence and to maintain our competitive cost position. At the Dead Sea, we intend to return production rates to pre-war levels. In Spain, we expect to increase production to all-time highs as the turnaround at this location continues. The second of our core businesses found on Slide 36 is our Industrial Products segment, a stable and profitable part of ICL. We already serve as a global market leader in bromine. We intend to maintain that position and to continue developing new bromine and flame retardant applications. This is in addition to meeting customer demand from the various specialty end markets we serve. Our third core business is the nonfood-related portion of our Phosphate Solutions segment, which is shown on Slide 37. This includes our stable and profitable industrial phosphate solutions, which are part of a growing market with strong demand. Not only is our Phosphate Solutions segment fully integrated, which provides cost advantages, we are also the only Western manufacturer operating in China. Our production there is interchangeable and serves both our growing solutions business and our phosphate commodities and specialties customers. I would like now to turn to Slide 39 and our final principle, optimization and efficiency. As part of this work, we intend to optimize our efforts and focus our resources on the opportunities best aligned with our core businesses. This will result in the examination of some businesses that have fewer synergies and lower potential. As part of our portfolio optimization efforts, we have shifted our approach to LFP battery materials shown on Slide 40. While we will remain a provider of raw materials to battery customers, we will not be moving further downstream into cathode active materials. This means we will be discontinuing our planned global LFP expansion, and this includes construction of the previously announced project in St. Louis, U.S. and in Spain. After a careful review of shifting external dynamics, it became apparent that this was the best course of action for ICL. With increasing level of investments on one hand, lower-than-expected prices on the other hand, proceeding with our LFP battery materials projects would have embedded our ability to develop other businesses. So at this time, we believe directing our most significant investments into our 2 growth engines will provide greater shareholder value. In addition to optimization, we also plan to drive efficiency and increase productivity across our entire business. As you can see in Slide 41, we expect to improve efficiency by transforming ICL into an AI-driven organization. AI will be embedded into the core of our decisions, processes and products. We will not just be adopting isolated AI tools, we will rethinking how ICL innovates, operates and delivers value. We also expect to use AI to help drive the significant operational efficiencies shown on Slide 42. Our key focus areas and targeted initiatives encompass operations and maintenance, including labor costs, logistics, supply chain and procurement and product line optimization. Before we begin the Q&A, I would like to turn to Slide 43 and review our 3 principles one final time. The first is profitable growth, targeting specialty Crop Nutrition and Specialty Food Solutions. The second is relating to maximizing and improving the businesses we have identified as core to ICL. The third is dedicated to portfolio optimization and cost efficiency. As you can see on Slide 44, at ICL, we are moving beyond our legacy and are now actively shaping our future. We have a clear and resilient strategy focused on growth, productivity and efficiency. We have aligned with global trends and are guided by a focused strategy, and we are ready to turn today's opportunities into sustainable and profitable growth for the future. Before we move to Q&A, I would like to thank all of our employees around the world for another good quarter. As employees of ICL, we are more than just a company. We are a global community connected by purpose and grounded in the values of humunity, respect, resilience and responsibility. And with that, I would like to turn the call back over to the operator for Q&A. Operator: [Operator Instructions] Our first question comes from the line of Ben Theurer with Barclays. Benjamin Theurer: So obviously, a lot to unpack here. And I'd like to pick up on some of these strategic highlights that you've presented over the last couple of minutes and really want to understand a little bit what you're seeing in terms of future potential in those 2 major areas, thinking of especially Crop Nutrition and Food Solutions. So starting off on Crop Nutrition, and you've nicely highlighted this, how you've achieved bigger -- basically a doubling in sales, but more than a tripling on EBITDA. So the margin still looks though below what some of the traditional businesses or the legacy businesses would be. So I just want to understand how you think about that business over time from a margin contribution as you evolve and grow that on Specialty Crop Nutrition. And then on Food Solutions, you've highlighted that you've talked about you want to expand beyond what might be phosphate-based. So can you help us maybe understand a little bit if that's more an M&A-driven idea, if that's a partnership? What are the things that you can do in order to expand beyond what is phosphate-based solutions? Those were my 2 main questions. Elad Aharonson: Thank you, Ben. Great questions. And let me answer the first one first. So as for Specialty Crop Nutrition, so the potential is huge, and I do agree with you that even though we tripled the EBITDA in the last few years, still there is room for improvement. And in that respect, what we intend to do is, first, there are some R&D efforts that we invested in, in the last 2, 3 years that will bring fruits in the coming 2, 3 years. It takes time. And that brings some very unique solutions in which -- of which we can take premium prices that are really unique. But on top of it, there is another -- another effort, and that's about the portfolio mix. When we are talking about specialty fertilizers or specialty crop nutrition, it's not everything the same. And within this scale of different portfolio products, there are products with much better profitability like biostimulants, control release fertilizer and more unique stuff. On the other hand, there are less profitable products. I'll give you one example. That's a product based on polysulphate from Boulby mine in the U.K. And what we are doing now, and we start this journey in Europe already and we saw the results in Q3, but it's just the beginning of the journey is to change this to switch the mix of the portfolio to more profitable products. And I believe it will bring us to EBITDA mid-double digit. And that's our target in that respect on top of the growth itself, which will come from organic growth, but also M&A. So that's about the specialty crop nutrition. As for the food ingredients, this is a different story. We have a business of $500 million, give or take nowadays within the functional food ingredients. However, we are very focused on a subsegment of this, which is the phosphate-based solution. And we saw that very similar, very close by, we have some bigger potential market of $35 billion, which is the functional food ingredients, which are not only phosphate and that's what we are targeting. It will be based on 2 parallel efforts. One, organic growth in our labs, in our R&D labs and with our own workforce, we can do much better once we unlock this other market. But on top of it, for sure, we are going for acquisitions. Some of them will be more strategic, some of them will be bolt-on, but it will not be only organic growth. It will be also in nonorganic or M&A-based growth. And we are open also for partnerships. Aviram Lahav: If I may, Ben I would like to add one thing that from time to time in meetings, I pointed out, and it's quite strange that strange or not strange that in the specialty fertilizers world, the country, for instance, the crop protection world, there is no global powerhouse. -- is what we see is an opportunity to build a global powerhouse in specialty fertilizer. Now the analysis can be that such a global strong body did not grow because maybe regulatory was not harsh at this stage. But if you think about it over time and the capability of such a global powerhouse to take things from one region to another, from one country to another to develop centrally portfolio and then disseminate it in various countries, I believe that you can see the potential that ICL from this point onwards will become significantly bigger. It can go from strength to strength. I think that if you look in the future, and it's not quarter-over-quarter, but a little bit deeper into the future. there should be and there will be a very central point for such a body. That's something that strategically I would point out, and I think it's worthwhile. That's interesting. On the food, I have [indiscernible]. Benjamin Theurer: Okay. Very clear. And then just one real quick 1 as we look into, I mean, obviously, you're kind of like on track delivering everything and you've reiterated the guidance. But you've highlighted a few things, particularly in South America, pharma sentiment affordability. So I just want to understand how much might have been just more of a timing issue? What not has happened? May have shifted into the fourth Q? And what is really underlying on a sentiment base, just the availability of credit. How challenging is the situation right now in South America? Aviram Lahav: I think when you say South America, you probably mean that more specific in Brazil, even though South America as a whole, in Argentina, there's a different story going on right now. Other countries are in different shape, but specifically in Brazil, I believe at this stage is quite a unique situation where, obviously, a very, very good and successful agricultural country, has a few factors that are leading hard on it. The credit side is significant, credit available to farmers and the chain, as they call it, is tight, the ability to export to China will probably be hampered to a degree by what is happening between the U.S. and China, specifically talking about. So the interest rate, the real interest rate is being kept very high interalia because the Bank of Brazil, who is really independent, believe it or not, is at war with Lula and especially as they enter an election year. And all these things together lead us, and I think what's important to say that I think are a very responsible company, and we are working on this constantly. And yes, we could have sold significantly more if we had more propensity to let further credit evolve. We are taking the market that we believe is the right one. We are examining all the time. And yes, to a degree, there's some. However, I do believe that over time this will probably be resolved. Not sure Q4 is a cue that is happened. But definitely, going forward, I think it will be because Brazil has been and will be the #1 country in the world for agriculture. There's no question about that. So I think that's probably the essence. Operator: And the next question comes from the line of Laurence Alexander with Jefferies. Kevin Estok: This is Kevin Estok on for Laurence. So thank you for really diving into your top priorities in specialty crop nutrition, Food Solutions. I guess my first question is sort of in the same vein as one of the -- one aspect of the previous analyst. And I guess you mentioned biostimulants, but I was wondering if you could share what else was in your pipeline currently? And maybe how much of your assumptions are around sort of acquiring incremental capabilities? And maybe how ICL was positioning itself against its competitors in these spaces. Elad Aharonson: Okay. So as you probably know, in the last few years, we already acquired 5 companies in this segment, the growing solutions, specialty fertilizers. And we intend to acquire more. One effort is to expand to some new territories and the other one is to put our hand on some new technology, which is obvious. As for the portfolio itself, I already mentioned, we are moving towards biostimulants, both botanic-based biostimulants and microbial based. So this is one element. The other one is nutrient use efficiency. So we are, I think, leader in controlled release fertilizers. Now we are bringing the new generation biodegradable controlled release fertilizers and also in the liquid and water soluble fertilizers that includes biostimulants, this is another area. There are some other developments that from commercial perspective, I would not like to disclose at this point, but we are working on. We have a very strong R&D teams across the globe, and we'll bring some news in the near future. Again, the portfolio mix will be changed and the profitability, the gross profit of this new portfolio will be much better than the existing one. It will not be made in one time. It will take time, but we are on our way. Kevin Estok: Got it. And just for my second question is basically on some of the weaker end markets, industrial and construction. I guess I was just wondering if you were seeing any green shoots there yet. And maybe what your thoughts were around, I guess, what it takes to turn the bulk end market? Aviram Lahav: Yes. It's Aviram. I think that there's quite a segregation between the different markets. I think in the electronics side, we are seeing better trends. First of all, you see in the end of the day, we switched obviously to the value or volume, and we see that the prices quite significantly better. In China, China is the main driver. So the electronics, I think it's turned the corner. It's not as high as it was in the days of the corona, but it's better, and this is -- we are actually enjoying this side. On the housing, I believe that there's a long way to go. First of all, housing is much more geographic. In the U.S., I think you know the market very well. It's is okay, but not that great. In China, on the other hand, there are most significant issues. Again, they come from too much that was done at the time and a lot of credit stories that are there. So this is a market which will probably come around slower, but all in, if you look at how the division is performing, it is performing well. You can see the results and the shift to value and really leading the market is nice for us. Operator: And the next question comes from Joel Jackson with BMO Capital Markets. Joel Jackson: I'll ask a few questions. Maybe first, short some -- maybe just first, a short-term question. Can you talk about your major businesses here in Q4 and talk about how each 1 is faring versus Q3 or whatever you want to say. Aviram Lahav: Look, I think I'll take it for a minute, but Elad obviously, will expand and give you his thoughts which are important. But look, we are confirming our guidance that has a lot after caretaking. We are there. We see in Q4 will probably be okay. But as now, there's the logic and continuation of what we're seeing right now, but I think that on a trajectory. I don't see something major changing. Okay. Elad Aharonson: Joel, I'll say things that maybe obviously, potash prices, keep the same prices, give or take. Phosphate prices also remain same level, relatively high, good same level. However, sulfur cost is going up. So margin will be affected by that. Bromine prices a bit higher. I think right now, it's about 3,600 something like that in China. So prices will remain relatively strong. However, cost mainly of sulfur, it's an issue. And the rest, I don't see any drama. Joel Jackson: That's for sure. And I guess the potash business is pretty stable. Pricing was down, volume pretty stable, margin stable? Is that fair for Q4? Elad Aharonson: Yes. Yes. We made progress on potash production quantities in the last few months. We are very happy with the improvement. It's like post war improvement, I would say. But by the way, not only in Israel, in Spain, regardless of or no wars in Spain as far as I know, but still, we see an improvement in new product in Spain. So quantities on production are going up, which is an upside. Joel Jackson: Okay. And then on the new strategy, which I have a lot of elements of strategies that has been presented by last decades of CEOs and CFOs in corporates, what tangibly in 2026, should we expect to see from ICL to start hitting your milestones for your strategic -- new strategic priorities? What tangible milestones should we see in 2026? Elad Aharonson: So let me go back to the first part of your sentence or question. So it's not exactly the same strategy. When it comes to specialty fertilizers, I agree with you, and we are going to accelerate, but we are on track. And as we showed, we already doubled the top line and triple the EBITDA and by improving the mix and some additional acquisitions, I think we'll get better. On the other hand, when it comes to specialty food solutions, the functional ingredients, this is a different strategy. In the past, it wasn't a growth engine for the company. We take now a different direction. We are going to expand it. We are going to accelerate the growth. We believe in this segment. And again, the change is that we are not only looking it as an outlet for phosphate and staying at the phosphate-based solutions, we are going to address the bigger market of the food ingredients of the -- sorry, functional food ingredients, which is much bigger market, more than 20x bigger than the phosphate-based solution, which is part of it. And that will be done, as I mentioned, also by acquisitions I hope we'll have some news about it in the coming few quarters. So that could be a change. On the other hand, we changed or the other part of the strategy that was about LFP cathode material. Yes, we are going to remain as a raw material provider to the battery industry, but we are not going to go one step downstream and get into this huge investments in the dynamic of the current market. So in that respect, we changed the direction. Joel Jackson: Thank you for correcting me on some of that. I appreciate it. Finally, obviously, we all saw what happened last week with the MOU. You've laid out the transparency of it now and can you talk about what do you think the market has gotten wrong on ICL last week as this news came out? Elad Aharonson: Yes. That's a great point. I'll say, honestly, I think it's -- we have 2 dimensions here. One is the MOU itself. Is it good or bad? I can elaborate. I already talked about it during the presentation. I think it's good and positive step to ICL, more certainty, more clarity. We know what we get. And most important, I think it doesn't hurt our chances to be the next concession owner. But on the other side, we'll get better terms for the next concession better than the option that we were source or the only player on the field. And I can elaborate, but I know very well the dynamic with the state of Israel. If we were the only one to play in this game, the terms would have been much, much more severe. So that's -- in that respect, it's a good sign. I think part of the surprise was because people realized for the first time that the concession is going to end in 2030. Now everyone knows it or knew it, but it becomes a little bit more real. Still, I think with all the caveats, I think ICL has great chances to be the next concession owner. But not less important, I think this step will make sure that the economical terms will be much more reasonable than what it could have been. Aviram Lahav: Let me, if I may, just to add about the value of the assets. In the end of the day, we at replacement costs believed and believe that the value of the assets is obviously as high as we noted. And of course, we always said that there are different methods of calculation, et cetera, et cetera. . But the perception in the market was that this value is so high that it will basically deter every new bidder. Now that in itself is, in a way, is a semi-cooked idea because in the end, as Elad said, okay, I suppose that there is no other bidder, and we are the sole game in town what would be the conditions of the new concession. And that is something that I fully agree it was sort of sidetracked and not taken into account. Now I'm saying again, the value of the assets, we believe that replacement obviously is much higher, but we do get an insurance policy that if we walk away, by the way, if we want the concession has a very, very high likelihood than we would have, we will want it to know if it makes sense. What we have now is certainly that if 1 reason or another, we do not have it, then we have a minimum agreed upon threshold, which we will get and we will see the money at the end of the current concession. This could have been very different otherwise. So when you put it all, we actually were very, very positive, very positive about this arrangement. The market, on the other hand, as you say, for differently, maybe didn't factor it in, maybe was deterred by the difference in the price between the $3 billion and the $6 billion, and it can be quite a lot of the things put together. I think it was, to a large extent, laterite tell that indeed, obviously, it's 4 years a quarter from now, but still there is an event at the end of March 2030. Probably that's a constant. Operator: And I'm showing no further questions at this time. I would like to turn it back to for Elad Aharonson closing remarks. Elad Aharonson: Okay. So again, the way we see it, a good quarter for ICL and also, we wanted to spend some time with you today give our feedback on the MOU about the concession and mainly on at least the highlights of the strategy. So thank you for taking the time. and we are in other channels for more questions. Thank you very much. And maybe the last sentence, I'd like to thank very much the ICL employees all across the world, for dedicated work and very nice achievements. So thank you all the ICL employees. And thank you all, and see you next time. Operator: Thank you. And this concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the B3 Earnings Results Presentation for the Third Quarter of 2025, where Andre Milanez, B3's CFO, will discuss the results along Fernando Campos, Investor Relations Associate Director. [Operator Instructions] As a reminder, this conference is being broadcast live via webcast. The replay will be available after the event is concluded. Fernando Tavares de Campos: Hello. I'm Fernando Campos from B3's Investor Relations team, and it's a pleasure to welcome you to another earnings event where Andre Milanez, B3's CFO, and I will analyze the results of the third quarter of 2025. Andre will start by providing an overview of the quarter. Andre? Andre Milanez: Thank you, Fernando. Well, the third quarter once again reaffirmed the strength and efficiency of our business model. Even in a challenging period for the equities and derivatives markets, we saw a 2% revenue growth compared to the same period last year, growth that was driven by areas that demonstrate robust resilience even though -- even in tough macroeconomic scenarios, such as the ones we have been going through. I would like to highlight the solid growth of 21% in Fixed Income and Credit, 18% in Data Analytics and Solutions, and 13% in Technology and Platforms, results that reflect our ability to capture opportunities in areas adjacent to our core business. Our expenses during the quarter remained below the inflation for the period, proving the effectiveness of our budget management and commitment to efficiency. Net income reached BRL 1.3 billion, and earnings per share were up to BRL 0.24 per share which represented a 12% increase compared to the third quarter of last year, growth that was boosted by our buyback program executed during the period. Now Fernando will detail the operational performance, and I'll come back later with more financial highlights. Fernando? Fernando Tavares de Campos: Thank you, Andre. Regarding markets, I will start with the derivatives, which had a revenue that totaled BRL 888 million, a 7% decrease compared to the third Q '24, reflecting mainly the depreciation of the dollar against the Brazilian real, which impacted revenues from FX and foreign currency interest rate products. The ADV totaled BRL 9.3 million, an 80% decrease compared to the third quarter last year due to the lower activity in interest rates in BRL and FX markets, a result of the reduced volatility during the quarter. On the other hand, RPC revenue per contract grew 11%, in line with the volume reduction. For another quarter, OTC derivatives showed strong performance with growth in both issuances and outstanding volumes. Now talking about fixed income, which remains a highlight of our revenue, showing strength in challenging scenarios. The segment's revenue grew 21% compared to the same period last year with the corporate debt market consolidating itself as the main financing alternative for Brazilian companies and the search for interest-linked assets gaining even more relevance in this challenging scenario. In equities, despite the high interest rate environment impacting the ADTV, which totaled BRL 22 billion, a 6% decrease compared to the same period last year, there are some highlights mainly in BDRs, which saw volumes growing by impressive 41% in the period. Alongside ETFs and listed funds, these instruments represent 16% of the cash equities market ADTV in the third quarter in '25 versus 14% in the same period last year. The small margin recovery that we saw quarter-on-quarter was not enough to offset the volume decline, resulting in a 10% decline in the segment's revenue, which totaled BRL 518 million. Highlights of the other segments include in the Data Analytics Solutions, growth in the vehicle financing and 18% in increase in revenue from platforms and analytics with a strong presence of recurring revenues, especially in the Credit, Loss Prevention and Insurance verticals. In Technology and Platforms, the funding industry continues to expand, mainly related to the fixed income and reflected in an increased use of our technology solutions and the registration and custody of fund quotas, strengthening our market support services. Now Andre will talk about B3's financial performance and strategic advances. Andre? Andre Milanez: Thank you, Fernando. Well, as I did mention in the beginning, our expenses remained under control, growing below inflation, even with the impact of the annual adjustment of salaries and benefits as well as increased IT spending during the quarter, which were partially offset by reductions in third-party services and reversal of legal provisions. This reinforces our discipline and ongoing pursuit of efficiency and more predictability in terms of our expense behavior. Our recurring EBITDA reached BRL 1.7 billion in the quarter, 1% above the third quarter of '24 with a 69.5% margin. In financial results, we successfully completed a BRL 2.6 billion debenture issuance with a very competitive cost of CDI plus 0.45% per year and a 5-year term, which allowed us to early redeem the seventh issuance with a positive impact in terms of net present value even considering the nonrecurring effect that we had in the quarter of around BRL 23.5 million as a result of the early redemption that was recognized in the period. The distributions for the quarter, they totaled BRL 1.3 billion with BRL 875 million in share buybacks and BRL 403 million in interest on capital. Year-to-date, we have already repurchased 125 million shares, representing around 2.5% of the share capital and around 1/3 of the 2025 buyback program. In our innovation agenda, we have launched the Tesouro Selic B3 Index, a benchmark for treasury financial bills performance and the Gold Future Index, tracking the Gold Future contract, new offerings that expand our portfolio of solutions and reinforce our commitment to the market. Finally, we advanced in our strategy as an infrastructure for the credit journey, announcing the acquisitions of Shipay and CRDC, both acquisitions strengthening our presence in the trade receivables market. The acquisition of Shipay was completed in October, while CRDC's acquisition is still pending regulatory approval. Thank you for your trust and partnership on another quarter for our company. Operator: The floor is now open for questions. [Operator Instructions] Our first question comes from Kaio Prato with UBS. Kaio Penso Da Prato: I have one question on top line that -- actually, I would like to divide in 3 subsegments, if I may, please. First is on Platform and Analytics. It grew almost 20% year-on-year, and you mentioned that it was driven by Credit and Insurance vertical, if I'm not wrong. But I just would like to get a sense if you can share a little bit more details on that? And if we can consider that this level should be more sustainable going forward. The other line that showed strong performance, in my view, was Market Support Services that grew almost 30% in the year. So I'm not sure if this has some relation with the all-time high IBOVESPA that impacts the funds or not. If you can share more details on that and also how sustainable it could be going forward? And finally, the third is on securities lending. So this line also showed an interesting evolution on this type of revenue this year, almost 16% this quarter. Year-to-date, the growth is also good. So you mentioned in the press release about some operational improvements. If you can talk a little bit more about these improvements, what happened here would be good as well. Andre Milanez: Thank you for joining, Kaio. I'll start drawing some comments on securities lending, and then I'll pass on to Fernando to give you more details on the other revenue lines. But in securities lending, we have been working in several initiatives to help to unlock liquidity in that product. And I think what we have been seeing in terms of revenue as a result, it's already the beginning of some of those initiatives paying off and helping. I think we're still believe we're far from where we want to be in terms of where that product and that market should be, but we can also already see some improvements given some of those initiatives that we have been working with the market. So I think, one, potentially to highlight, we have been working very closely with the brokers to use the -- what we call the intermediation account after some improvements we've made on our platform to basically allow more of the retail position to be used as part of the sec lending product. That has helped to expand the volumes here. The automatic renewal of contracts another feature that was introduced also helps. More recently, we have initiated -- we launched the liquidity pool, which is aimed to increase liquidity and transparency, especially for the local buy-side participants. They are now more present on the screen of those products. And there's still a lot to be done. I mean we're still working in potential different models that could help to unlock volume from foreigners on that market. But I think what you're starting to see in terms of the revenue is a result of some of those initiatives that we have been introducing and have been taken in order to increase volume and liquidity for that product. Fernando Tavares de Campos: So talking about market supporting services here, I think the main impact comes from the development of the fixed income fund industry. And there, it's basically there was an increase in AUM of those funds that we charge Custody fees on it, so that is volume, and there was a price adjustment that we implemented on this fund called Custody. So that's basically the main reason. So this can be -- we can see -- I'm not sure -- I cannot predict in which level, but we can see that there is still room to grow here. Talking about Platform and Analytics in the vehicle and real estate, we do have a better scenario for loans in the auto vehicle industry, which has a positive impact, a direct impact on the revenues in that segment. And on the -- when you go to the analytics, which was the former Neoway, Neurotech, they exist, but they've been merged with us. I'd like to highlight 3 different segments in their -- in those business. First one, Loss Prevention. Loss Prevention basically grew because of the commercial efforts. So I think we have a nice set of products that it's easier to sell now. And I think we are developing a lot of products that are super interesting to the market. And I think the commercial efforts here are paying off. In Credit, Credit and -- I think here new products as well, so the development of new products, but also it's benefiting from products that are related to the auto vehicle finance that I mentioned before. So given that we are seeing a strong increase in that segment, there is a direct demand for products for Credit -- for Analytics, Credits that are related to it and Insurance as well, it's been positively impacted by the vehicles industry here. Andre Milanez: And just to finalize, Kaio, I think this is a good example to demonstrate that the investments and efforts that we have been putting into increasing potential avenues of growth for the company and diversification are starting to show better results, but also that there's still a lot that can be also done in the core business in terms of new features, product development, improve of liquidity. So that's why our strategy remains investing a lot in our core business to ensure that we continue to bring innovation and capture the growth that we will be seeing in the market, but also investing in other avenues of growth for the company and diversifying in the areas adjacent to our core business. Operator: Our next question comes from Yuri Fernandes with JPMorgan. Yuri Fernandes: Fernando, Milanez, I have a question regarding taxes in Brazil. We are seeing a lot of noise on a potential fintech tax to be debated in the coming days or weeks. And I'm not sure like if we should expect any impact for B3 from that? And if yes, if there are any measures that B3 could take to mitigate part of the impact on this potential headwind? And then I have a second question is just regarding markets, especially equities and derivatives that I think are the 2 lines that were a little bit more like luster this quarter. Especially on equities, we see a kind of a bottom, right, on individuals when we try to estimate the turnover velocity for retail, we also see new at very low levels. So, maybe if you can give us an outlook here if this is really the bottom with the, I don't know, Brazilian index getting back to all-time highs, like you are seeing better outlook for retail. So if you can comment just on if the bottom is here and what is your view for 2026 regarding those lines? I think derivatives is more about pricing than volumes per se, but I would appreciate any outlook you could provide. I know it's hard. These lines are volatile, but with lower rates, if you can give us some color would be good. Andre Milanez: Thank you for your question, Yuri. Let's start with taxes, which is always a tricky subject for us Brazilians. But we had a provisional measure that could potentially represent an increase in our taxation with the increase on the social contribution from 9% to 15%. As you know, that ended up not being approved by Congress. So it lost -- it expired before it became into force. But then we have a similar discussion now that was included together with the taxation of fintechs on bets in a project that is being discussed, if I'm not mistaken, at the Senate at this stage. So there is a chance that, that could be approved. We have been working to try to not have that approved because we do believe that we shouldn't be part of those measures to try to equalize banks and fintechs. We are not a bank. We are not a fintech. But there is a chance that, that could go through. What we have been doing and we were doing before that working in other measures that the company could try to take in order to at least try to partially offset potential impacts coming from those measures. They are not directly related, but were things that were -- how can I describe that? Maybe they were already in the books, and we decided to accelerate some of those given that context, but they would not be able to completely offset any negative impacts that could potentially come from that increase in taxation if that gets approved, which I would say, at this stage, seems that there is a good chance of that not going through. So we have to continue to monitor that very closely and try to work with policymakers and the industry to try to not have that being voted and approved. Regarding the ADTV and ADV, this is always a very tricky question. If you look besides the, let's say, the more very short term, there has been some stability on volumes around the '23, '24 mark. I mean, in some months, you will get slightly higher volume and others slightly lower, but they have been hovering around that level. Our impression is that this is kind of where we will stay until there is a trigger to pick up -- to see some pickup in activity. And that trigger potentially is interest rates coming down or a heavier and stronger allocation coming from foreigners, which has in part -- is in part what has been driving the appreciation that we have been seeing on the main index. So potentially for next year, we could see some improvement on volumes. But I think in order to see that really coming more strongly and in a more sustainable way, we will need to see interest rates coming down, right? So I think it is -- it can be positive for next year. The outlook can be positive, but to really see a recovery -- a more strong recovery and sustainable -- new sustainable levels, I think we also need to see interest rates coming down in order to achieve that. And in relation to the ADV, I mean, I think we are coming from a very high comparison base also last year. We saw some reduction on the Bitcoin future volumes as a result of the increase in margin requirements. We also -- if you recall, there was a lot of volatility on the interest rate curve last year that helped to see a lot of activity on derivatives trading for interest rates. But I think we might -- as we approach the beginning of another easing cycle, we could see some pickup also in volatility for the interest rate, which always benefits our derivative business. So I think in both cases, the outlook seems positive, even though not ideal given the reasons that I mentioned. Operator: Our next question comes from Renato Meloni with Autonomous research. Renato Meloni: I wanted to explore a little bit the pipeline of new products. And more specifically, I'm curious about how you're looking at the development of predictive markets globally. And if this is something that you would be interested in implementing, if there is space to implement this, if it's close enough to your business? And if there are any regulatory hurdles that you foresee that? Andre Milanez: The question is about prediction markets, right? Renato Meloni: Yes. Pipeline of products in general, but more specifically about predictive markets and your view there. Andre Milanez: Thank you, Renat, for the question. Look, we -- as we have been discussing, I mean, we remain very active in the pipeline of new products. As you know, we've launched several derivatives this year, not only derivatives, a lot of indices, ETFs, a new trading platform. So continuously bringing innovation and new products to ensure that the needs of our clients are being properly served and met remains one of our key priorities. We have also been testing new products and more innovative products as well. In terms of what we still have on the pipeline for this year, we should be launching still derivatives linked to the VIX -- Brazilian VIX Index, an index that we started to -- that we launched and started to publish last year. So it has been a year that the index is up and running, and we are planning on launching the derivatives based on that index. It is also on the pipeline to launch the options on Bitcoin. We already have the futures, a lot of ETFs and now the options as well. We will continue to advance in other types of products such as the zero-day expiry options, digital options and these sort of things, products that we are still -- or are starting to discuss with the regulators. As you know, for this -- for any products that we want to launch, we need to seek regulatory approval for that. And prediction markets could potentially be also on that agenda. I think we have already started those discussions, but they will come potentially after some of those initiatives that I did mention to you, such as the zero-day expiry options, the digital options, et cetera. But this is something -- definitely something that is in our agenda to explore and to discuss. Renato Meloni: Does the regulator see this as a positive? Does it have any considerations on you launching predictive market products? Andre Milanez: I think there is -- there are sometimes different opinions and views regarding this kind of products. But there's also -- I mean, we need to look at what has been happening not only here but outside Brazil. This is definitely a global trend that cannot also be ignored. So I don't think they have a definite view. But of course, they have concerns about this kind of products and things that we will work together with them to assess whether this can be addressed or mitigated in order to launch these kind of products. But that's the beginning of those discussions. So we don't have a clear view still around those products as of yet. Operator: Our next question comes from Eduardo Nishio with Genial Investment. Eduardo Nishio: Andre, Fernando, two questions from my end. The first is on expenses. You had a great result this quarter, basically flat expenses. Is that a trend that you will try to take for next year, if there is any major investments or initiatives for next year that we have to put into account, of course, excluding the revenue-linked expenses, your thoughts on that. And also an update, if you can, on competition, particularly the 2 local new exchanges, if you can give us a time line, testing, results. Anything you can share with us would be great. Andre Milanez: Thank you for your question, Nishio. Glad to hear from you. Look, regarding the expenses, right? So -- as we have been saying since the beginning of the year, this year, we have been working in order to better plan our expenditure throughout the year and therefore, have less volatility and give more predictability around the behavior of our expenses. We do have some seasonality, but not at the level that potentially we have seen in recent years. So part of our efforts this year was to work on how to better plan that kind of spending throughout the year. And I think we have been so far successful in achieving that objective. The reason why you're seeing -- so this quarter revenues almost flat in relation to last year is because we had a very -- last year, you had a much heavier second half of the year in relation to the first half. It's natural that the second half is slightly higher because that's where we get the annual adjustments on our salaries and other things, but it didn't have to be as volatile as it has been in recent years. So I think for this year, you can expect us to deliver the guidance that we gave, which is going to be a growth slightly above the inflation. And going forward, that remains our target and our commitment, trying to deliver cost growth around inflation, slightly above or slightly below. It's difficult to grow much lower than the inflation given the nature of our cost structure, given that we continue to invest in new initiatives in product development, in expanding our portfolio. So the mantra here has been to be able to continuously find efficiencies in our core business, in our mature products in order to generate funding for us to continue to invest in new initiatives, in expansion of portfolio and achieving that without necessarily having to grow our cost base much above inflation. So that has been the way we have been working in relation to that. And regarding competition, look, I don't have a lot of updates time line. I mean we have the information that we hear from market participants, both, initiatives are talking about potentially being launching by the second half of next year. I think they have been progressing. We don't have a lot of visibility in relation to our infrastructure, et cetera. But I think they are still working and trying to progress. That's -- I don't have a lot of news that I can share with you at this stage. Operator: Our next question comes from Pedro Leduc with Itaú BBA. Pedro Leduc: Question this quarter, especially in September, I believe that you guys performed some adjustments on the market incentives for market makers, HFTs. I believe you did some fine-tuning on the way -- I'm not going to say that you price, but the way your programs there work with different types of participants. From the outside, I know it was only just 1 month, but we see a different behavior there on the revenue per contract in equities. We also saw some volumes as a backfire maybe. Can you talk to us a little bit on how you saw this happening on the ground and maybe what we can expect its consequence to be also on the fourth quarter onward? Fernando Tavares de Campos: Thank you, Pedro, for the question. So from what we look, and I mentioned this on the last call, we didn't expect a lot of impact. We thought that -- from the back test that we run, we thought that the impact would be neutral, and that's a little bit of what we saw. I know that there is some -- I think the volumes are low because the market is kind of -- it's a challenging scenario for macro -- in the macro scenario, but we haven't seen a significant impact from the changes that we did mainly on the market maker programs. And we did dug a lot deeper on that. We are entering the ticket -- from ticket to ticker, to -- from stock to stock to try to understand the impacts of it. And we haven't seen a different performance on the volumes of tickers that we incentivize from the ones that we don't. So in our understanding that's a sign that there wasn't a direct impact from the changes in market making programs in the volumes. All the other products, all the other changes, I think they are being -- they were implemented. They are successful. Like I said, we didn't saw a lot of impact on the margins, but we have received positive feedback from clients. And we -- I think it made our operational leverage even clearer. So we are able to share more of that -- more volumes with the market. So I think that's pretty much it. Pedro Leduc: Any particular comment on the revenue per contract or trading margins that we're seeing in equities? Andre Milanez: So for the future, I mean? Pedro Leduc: Yes, a little bit on what happened this quarter sequentially and for the future. Fernando Tavares de Campos: So yes, sure. So on the margin -- on the trading margin in equities, we did see a performance that was kind of similar to what we saw. We just had lower volumes. So we had a little bit more prices. And like I mentioned, this will be more visible from now on that we have this kind of discount per institution. So -- and that's a trend that we should see. On the RPC, we didn't make significant adjustments on any contracts on this quarter. So I think here, we have an impact from the -- like it's -- yes, on the mix and we did havean impact from the lower -- the devaluation of the USD against the BRL. This has an impact on the FX contracts and the interest rates in USD contracts. So that impacts. But on all the other things, I think, are performing the way that we thought it would. Operator: Our next question comes from Daniel Vaz with Safra. Daniel Vaz: Just trying to put a context here. We are right now maybe with a weaker dollar, right, the context is of a renewed emerging market appetite, at least for now. So we started to hear, again, some companies maybe preparing for an IPO or for any follow-on given this renewed interest in the emerging markets or Latin markets. So -- however, on the other side, the local funds remain a lot under pressure. We see a lot of outflows on the industry and retail also, I think someone mentioned the turnover velocity is very low because the appetite is pretty much shifted toward the tax-exempt, right, fixed income instruments. So my question is, it seems likely that some of the IPOs could be -- could end up listing abroad as we've seen in the past, like Nubank, for example. So is B3 prepared for this next window, maybe '26 or '27, I don't know, of IPOs, if there is any window? And any meaningful progress or new initiatives that could serve like a silver bullet to attract these listings, like the key listings, mainly on the tech, whatever, to the local markets, like to your market instead of going like to NYSE, to NASDAQ? Andre Milanez: Thank you for the question, Daniel. Look, we are ready for -- to receive these companies when there is a window of opportunity here. With conversations that we have directly with some of those issuers, potential new issuers with investment banks, I would say there are around potentially 100 companies that could be candidates for an IPO within 12, 18 months. Some of those are already ready when the opportunity presents itself, others working to get ready to be prepared. And I think as we have been saying, listing abroad, it's potentially going to be an alternative for a few companies, companies that have -- there are not, I would say, Brazilian companies, but that I have a level of international exposure that is very high or companies that are tech companies. That has been the case not only for Brazil, but for other jurisdictions as well. So you see big English companies, German companies deciding to have their primary listing in the U.S. I think that's natural given the size and the relevance of the U.S. market. And it will be -- it will make sense for some very specific companies that have those attributes that I did mention. In those cases, of course, we will work to have a dual listing or to have BDRs and try to have some of that volume in Brazil. But those are going to be exceptions and not the general rule. I think for the vast majority of the Brazilian companies, the listing in the local market, in the domestic market, it's what will make more sense. We've seen companies that during that very specific window that we had between -- around 2021, regretting that decision, some of them coming back. We had the example of a tech education company that ended up delisting in the U.S. and redomicile their listing here. We have also been working very close with the regulators in initiatives that could try to make the access to the capital markets easier. We have the so-called FÁCIL program starting next year. I believe that can also be an interesting opportunity for small-sized companies. I think in the beginning, we will see that potentially helping companies that want to access the local DCM market, but that could potentially be also an interesting alternative when conditions are more favorable for an IPO for the equities market for these companies to access the ECM market using that new regime for the small companies to use that regime. So I think we are very, very confident with that, I think the main question remains when that window of opportunity will present itself. And then in order for that to become a reality, there are primarily external factors, economic factors that are completely outside of our control and the control of the companies. But we are very -- looking at that very closely. We are very close to these new issuers, but I think that's how we are seeing that moment in that environment. Operator: Our next question comes from Antonio Ruette with Bank of America. Antonio Gregorin Ruette: So my first question goes on M&A. You mentioned in the past that you already did your -- the 2 big acquisitions that you needed to make that was Neoway and Neurotech. I would like to ask if you still believe that that's the case. And how do you see M&A today? Could we continue to see small acquisitions? Or are you considering that -- that's -- there's is a line of business and that maybe you would benefit from a big one? And also a second question here, I would like to follow up on the question I did last quarter on the electronic trading of fixed income. I'd like to ask if you guys did any improvement in that sense on platforms or in order to bring more volumes to your platform, Trademate. Okay, that's it for me. Andre Milanez: Thank you, Antonio. So the first question -- sorry, was regarding... Fernando Tavares de Campos: M&As. Andre Milanez: M&As, right? Sorry. Look, I think that remains being the case. I think the 2 large M&As that were in our radar, in our pipeline were executed. As I have been saying, the big focus since then has been on execution of that strategy, particularly on data. M&A remains a potential alternative that we could use to achieve some of our -- or to deliver some of our strategic objectives that we have. There is always a consideration if we should maybe for -- if we want to increase our offering and offer a new product, a new service, there is always a consideration if there is room for us to develop that internally to do a partnership, if -- sometimes to do an M&A. That remains being the case. So in the 2 recent cases of these smaller sized acquisitions, those were capabilities that the company didn't have and that we understood that it would make more sense for the company to acquire those capabilities rather than trying to develop that internally. We have been doing a lot of -- besides M&As, a lot of partnerships as well. And I think that will remain being one of the alternatives that we will have to achieve our strategic objectives. But at the moment, there is not a large size M&A or at least not of the size of what these 2 companies were on the radar. Regarding the Trademate our platform, we have been seeing improvements on that, especially on the government bond market. We have been breaking record after record in terms of volume. I think the last time that we reached the record was the end of last week or beginning of this week. There is still a lot to be captured in terms of how much of the trading activity is happening on screen is electronified, but we are starting to see progress. This is already represents -- I don't recall from the top of my head now the percentage, but it has been increasing. Besides the platform, we have also been investing in liquidity provider programs, market making programs also to increase liquidity on the platform. It's a journey. It will take some time, but we will starting to see improvements on that. So that remains being one of the areas also of focus for us. Operator: Our next question comes from Tito Labarta with Goldman Sachs. Daer Labarta: Two questions also. One, a bit of a follow-up, I guess, on the previous question on M&A because you did do 2 small acquisitions, Shipay and CRDC in the quarter. I think maybe you answered it, but I guess these are more capabilities that you wanted to fill in. Any other color you can provide on what the opportunity you see with those 2 acquisitions are? And then my second question on the Bitcoin futures, you made some changes to the product. I think you mentioned to try to improve liquidity, it did impact trading volumes, I guess, in the short term. But -- yes, just how do you think about those changes? Do you think the Bitcoin futures can become more relevant? You talked about Bitcoin options, something that you can also begin to offer just thinking about that opportunity and what potential upside that could bring? Andre Milanez: Thank you for your question, Tito. As I said, I think those 2 companies were -- we identified as part of our discussions and our strategy on the receivables market. Shipay particularly was a company that we had already been working on a partnership. And given how things were progressing and the potential that we were seeing on that, we thought it would make more sense to have that company with us. It brings features that we plan to offer as part of our solution for the credit receivables, especially on payments, which will also be an important feature when this new market is working. But we also have seen potential opportunities of leveraging from that -- from those skills and capabilities in order to launch new products or improve or add new features to existing products of the company. I think it's -- the biggest focus now has been on the receivables market on that, but we also see potential for that acquisition to help generating -- to generate value in other parts of our business as well. And with CRDC, which is, by the way, we just need to recall that this is yet subject to regulatory approval. On the case of Shipay, that has already been achieved. But in the case of CRDC, this is still ongoing, still pending. But on CRDC, we saw there besides some of those solutions that they already have and that will complement our offering on trade receivables, they also have a capability of reaching a part of potential clients or players in that market that we are not used to deal with. So the commercial association and CRDC will help to increase the reach that our solutions will have, especially with small and midsized companies, commercial stores, et cetera. So that's where CRDC fits into that strategy. As I said, in the previous response, M&A remains being a way of us achieving some of our strategic objectives. It is not a strategy per se, but a way of achieving some of those. And as a result, that remains on the radar for the company. But at the moment, small-sized acquisitions to -- as add-ons or additional features to some of the initiatives that we have been developing. Fernando Tavares de Campos: On Bitcoin futures, like we mentioned, we did some adjustments on collateral requirements on the second quarter asked by the regulator. So obviously, this had some negative impact on volumes. But we think -- we still consider the product a success. It's part of the strategy of having a more, a full set of products for the retail, retail-oriented products in derivatives, which Andre mentioned before. We do have products, derivatives on other cryptocurrencies. And we -- it is still a big part of what we plan to do with this retail-oriented products portfolio in derivatives. So I think that's pretty much it. Operator: Our next question comes from Brian Flores with Citi. Brian Flores: We have seen that non-listed markets, Data and Technology, as you mentioned, it's central to your diversification strategy given the high volatility of listed equities. So I just wanted to see if you could recap what new product rollouts could we see, particularly for digital assets, crypto-based products? And also, if you could elaborate a bit on what are the margin expectations of these new ventures compared to the current portfolio? Fernando Tavares de Campos: So Brian, can you repeat the first one? So what can we do to enhance the other segments there besides markets, that's it? Brian Flores: No. Basically, the diversification strategy, right? We have seen that non-listed markets and also Data and Technology are very key to the whole diversification strategy. So just wanted to understand which new products we could see, particularly on digital assets and crypto. And if you could elaborate on the margin profile of these ventures. Fernando Tavares de Campos: Sure. So on Data -- on crypto, I think we have already -- I don't think we have any other futures plan in the upcoming months. We think we have 3, the 3 largest contracts -- the 3 largest cryptocurrencies we have the future here. So I think that's in crypto by itself, the [indiscernible] derivatives, I don't think we have anything planned for the near future. Regarding Data, Data, it's a set of small initiatives. So we don't have like a big super bullet of products in many of the segments that we have. And when you break down the growth, it's a lot of small things that we are doing. So we are working really close with clients to develop products and solutions to them to kind of customize solutions for those. Obviously, when you look at midterm or longer term, I think we're going to have the data that we have are going to cross paths with the AI discussions that we are seeing. So it's something that we are already looking at our strategic planning how those paths will cross at some point in the future, how can we monetize and enhance all the data that we have as a source for AI tools. I don't think we're going to see that on the short term, but it's the discussions that we are having within the company that can be really huge in the few -- in the long term. So that's a little bit tough. What we're seeing on the short term, I think it's the development of products really close -- working really close with clients, which has been the -- what's been supporting this impressive growth that we are seeing in Data and Analytics in the last quarters. Andre Milanez: And Brian, this -- I think it's worth for you to understand that we are not selling data here. We are actually selling data solutions that are helping clients to resolve problems, right? So we have certain verticals that we have been working on Sales and Marketing, Loss Prevention, Credit, Insurance. There are several examples of those solutions that we have been developing, leveraging from the data that we end up producing as part of our core business on the trading, on the fixed income market, on the infrastructure for financing unit, all of those business activities that we have ended up producing a lot of data and in some cases, unique data, and we are leveraging on that to deliver data solutions that can add a lot of value to our clients. So there's a lot of potential to continue to expand not only on the portfolio of new products and solutions, but also on the penetration of those solutions amongst client segments, et cetera. And that goes beyond the traditional set of clients that the company typically has, right? Regarding margins, the standard or the average for the industry is typically margins around 30% to 40%. That's where we will aim at, at some point. But in the near and the short-term, we are basically deciding to invest more growth at the expense of profitability, but ensuring that this business or that business unit is generating cash, right? It's not burning cash. We don't want to see growth at the expense of generating losses or burning cash. But we are, at this stage, not really trying to maximize profitability. We do believe that there is still a lot of potential for growth before we can start to work in maximizing profitability on those businesses, on those initiatives. Operator: Our next question comes from Carlos Gomez-Lopez with HSBC. Carlos Gomez-Lopez: Congratulations on your EPS growth. So 2 very brief ones. First, on the ForEx, you mentioned that you have been hurt by the appreciation of the real versus the U.S. dollar. Could you quantify that to the extent that you can? I'm sure you have done studies. How much do your earnings move with ForEx moves? And can you mitigate that if you expect that the real is going to strengthen further? And second, in terms of your buyback, you still have, I believe, it's 65% of your program open. The stock is now at BRL 14. You tend to be quite savvy in terms of choosing between paying dividends or IOC or buying back stock. What's your inclination today? Fernando Tavares de Campos: So Carlos, thank you for your question. Regarding your first question, the FX. We have close to 15% of our revenue that are linked to the USD. We do have the derivatives contracts that I mentioned, which moves -- the prices of those contracts are linked to the USD. So when there is a strengthen in the real, you're going to see the prices dropping. And we have the part of the market data that we sell to vendors that are also linked to USD. So that comprised of close to 15% of our total revenues -- 10% to 15% of our total revenues, but we do have a debt that are -- that is linked to the USD, and we do have a cash flow hedge account that kind of offset those impacts on the revenue per se, not on the prices. So Andre can talk about the second question. Andre Milanez: So regarding the buybacks, right, when we announced the buyback program last year, I mean, we were in an environment where the share price was extremely depreciated. We have been executing a lot of the buyback. And basically, as we have always been saying, we will move the proportion more towards buybacks or dividends, depending on market conditions, on share price, on multiples, level of discount compared to our peers. That's what's going to be driving, and this is very dynamic. So having said all of that, I think we -- I don't expect us to execute the whole buyback program, given that the share price has responded a little after we've announced the buyback program at the beginning -- at the end of last year, but we will execute -- continue to execute buyback. Basically, if the share price goes down, we will accelerate the execution of the buyback. If the share price appreciates, we will slow down until there is a point where potentially we will stop buying back shares and the difference is going to be delivered back to shareholders through dividends. So that's how we have been managing that, and that's how you should expect to continue to see us dealing with that equation between buybacks and IOC and dividends. Carlos Gomez-Lopez: We understand that, and we think that's exactly right. So the question is at BRL 14, are you still buying? Or this is a level in which you are more inclined to give more dividends? Andre Milanez: No, we're still buying at that level. Less shares at a lower pace, but we're still buying. And you can see that on the results that we publish every month. So you can track our -- the execution of our buyback program... Fernando Tavares de Campos: Monthly... Andre Milanez: Monthly... Fernando Tavares de Campos: On our website. We do have all the volumes and all the prices and the average price there. So you can -- it's super easy to track. Carlos Gomez-Lopez: Very good. And finally, on the ForEx, so I understand the impact on the revenues and you say that you have that hedge. So on your operating margin, is there in the end, a net impact of the foreign currency or it's on the top line? Fernando Tavares de Campos: It's basically on the top line. Carlos Gomez-Lopez: All right. So your net income should not be too much affected by where the currency goes. Fernando Tavares de Campos: No. Operator: This concludes today's question-and-answer session. I would like to invite Andre Milanez to proceed with his closing statements. Andre Milanez: Well, I just wanted to thank you all for your trust and support. We remain committed and focused on our clients on delivering what they need, bringing innovation and new products to the market. That remains being our focus. I would also like to invite you all to our Annual Investor Day, our B3 Day. which will take place on the 16th of December. So more than welcome to join us on a moment where we will discuss a little bit of the strategy of the company, present to you some of the achievements that we have seen during the year and talk a little bit about the future and how we are seeing the development of our market and our company. So it's a very interesting opportunity to be with us. So we're more than welcome to join us on the 16th of December. And with that, I finish this call. I hope to see you all soon. Bye-bye. Operator: That does conclude B3's presentation for today. Thank you very much for your participation, and have a nice day.
Operator: Good afternoon, everyone, and a warm welcome to the Verbio earnings call for the first quarter of the fiscal year 2025, '26. Today's speakers are Olaf Troeber, CFO of Verbio; and Alina Kohler, Head of Investor Relations and Corporate Strategy. They will walk us through the company's performance, touching on key milestones and current market trends. But before we dive in a quick housekeeping note. The conference is being recorded. [Operator Instructions] Let me pass the word to Ms. Kohler and Mr. Troeber. The floor is yours. Olaf Troeber: Thank you, Harald, and good day, everyone. Welcome to Verbio's earnings conference call. We will be discussing our first quarter 2025, '26 financial and operating results. I'm also delighted to welcome Alina Kohler, Head of Investor Relations, who is joining me today. Slide, please. Yes, we've got a bit of a problem with the slide, give me a second. We are there. Okay. So for that one, we achieved a record biodiesel production in our first quarter. Biodiesel production reached close to 167,000 tonnes and the capacity utilization rate was close to 94%. Meanwhile, ethanol production grew by 10% year-on-year to 154,000 tonnes. This was purely driven by the ramp-up in Nevada and efficiency gains at our ethanol plant in South Bend, Indiana. Biomethane production grew by 24% year-on-year, also thanks to Nevada. Our EBITDA increased strongly to EUR 15.4 million from minus EUR 6.6 million. The year-on-year increase was driven by the main segments. Higher coproduct revenues and favorable developments in commodity forwards and ForEx valuations supported our results. The North American business also contributed positively produced developments, as outlined before. The increase in net debt primarily reflects negative free cash flow stemming from reduced operating cash driven by working capital and investments in our strategic projects. The working capital effects mainly reflect a lower reduction in receivables and a decrease in payables, both related to cut-off date effects. The strategic investments in the amount of around EUR 20 million include investments into the specialty chemicals unit here in Bitterfeld as well as inventory production plant in South Bend, Indiana. Overall, the development of net financial debt is in line with the planned temporary cash outflows related to inventory changes and the investment program. The equity ratio remained at 58%, and well, it's -- hence, it's at a comfortable level. Overall, these results are reassuring. We haven't fully reached our goals yet but the progress towards Q2 strengthens our confidence in the path ahead. Next slide. Here, you can see our gross margin per tonne of liquid fuels versus the sales volume weighted reference spread. Yes, but the spread is basically the difference between the biofuel price and the feedstock cost per tonne of biofuel. Overall, and that shows the capabilities of Verbio. We achieved a greater premium versus the market in Q1 '25, '26 compared to Q4 the previous year, '24, '25 and Q1 last year. This was supported by co-product revenues and the nonrecurrence of inventory write-downs and lower cost and net realizable value impacts. Our coproducts generate additional value and reduce the effective cost base compared to producers of the main product alone. Year on -- yes, quarter-on-quarter, Verbio also benefited from positive market momentum that gives you a sense of our position in the market. Let's now move on and see how the segments performed. I will begin with a quick overview of EBITDA development across the quarters. What stands out, again, is that a Biodiesel segment shown as the dark green bar continues to deliver strong earnings support. This increase in EBITDA to EUR 22.6 million in the Biodiesel segment was primarily due to an improved gross margin. Also, we managed to cut our losses by more than half in the Bioethanol and Biomethane segment to minus EUR 9.5 million, which is represented by the light green bar. Year-on-year, this has been driven by the positive development in North America. Earnings below the gross margin improved mainly because last year's negative effects from the weak U.S. dollar, open commodity positions did not reoccur. Quarter-on-quarter, one-offs, including write-downs on inventory, which had discussed during our earnings call in September did not repeat. The other segment shown in the green, which harbors our logistics and trading activities reported an EBITDA of -- can you mute? Alina Kohler: Oh, sorry. Olaf Troeber: I will repeat it. So the other segments shown in the green, which comprise our logistics and trading activities reported an EBITDA of EUR 2.3 million and reflects, in particular, the positive development of our commodity forward contracts. Now let me hand over to Alina, and I will be back to give you the financial outlook later on. Alina Kohler: Thank you, Olaf, and apologies for the microphone again. And good afternoon to everyone else. Let me walk you through the segment performance, focusing on how things have developed quarter-over-quarter. In the Biodiesel segment, which I want to start with, as you should see on the slide, can we please? Yes. There we go. Thank you. In the Biodiesel segment, we have generated revenues of EUR 244 million in the first quarter which is in line with the previous quarter or Q4, as you can see in the chart on the left side. Our production volumes increased slightly while sales volumes, which are not depicted here in the chart, remain stable. This underpins the steady market demand that we're seeing for our product as well as our consistent operational performance. Our EBITDA also grew quarter-over-quarter, thanks to a slight improvement in the gross margin. And now let me give you some more market context, and we will have a look at the reference charts. Does that work? There we go. There, we have it. On the left, you can -- apologies for the technical issues we're having here. On the left, you can see the biodiesel spread chart, which shows the difference between biodiesel prices and rapeseed oil prices per tonne of biodiesel. And as you can see, the spread has widened during our first quarter. On the right side of the slide, we show how the biodiesel and rapeseed oil prices have driven this development specifically. As always, and we mentioned that during each conference call, we have these charts do not reflect our sourcing strategy but rather give us a good indication of how the broader market has moved. We -- on the other hand, we typically purchase our rapeseed oil 2 to 3 months in advance. That's just as a heads up. So with that, let's move to the Bioethanol and the Biomethane segment. We recorded an increase in revenues to EUR 191 million, which is a new quarterly record for us. And this record has been driven by an increase in sales volumes, specifically for biomethane. On the slide, we usually say RNG, which is short for renewable natural gas, and the recovery in the markets. So the biomethane production actually also reached a new record at 336 gigawatt hours for the first 3 months and this is a utilization rate of 68%, whereas the production volumes for bioethanol fell slightly in comparison with our last quarter so Q4 due to maintenance work we had to do here in Europe. Overall, our bioethanol utilization stood at 77%. The significant increase in earnings that you can see in the chart on the right side is primarily driven by the positive development in North America and the nonrecurrence of one-off items, which Olaf had just discussed a minute ago. Let us now move to the reference graphs. And here, it's a bit more interesting than what we've seen with the biodiesel. So again, the reference graph, they illustrate how ethanol market spreads have moved and what has been driven that price-wise. Like with biodiesel, they don't mirror our exact purchasing or our feedstock strategy. We show wheat on the slide, but mostly, we can also use corn, for example, or triticale, anything that's available and that comes cheaper than wheat in -- due to availability, for example. So this is rather indicative for the market. Looking at the price chart on the right, you can see that ethanol prices actually jumped during our first quarter, but wheat prices fell slightly, thanks to a strong harvest. So this move in ethanol prices was likely due to short-term imbalances in the market. However, looking ahead into 2026, the fundamentals should also remain strong for ethanol. A key factor here that we're seeing is the transposition of RED III in the Netherlands, which restricts the use of denatured ethanol. So what is denatured ethanol? Denatured ethanol is ethanol that is treated with additives to make it unfit for human consumption. Undenatured ethanol, on the other side, is pure ethanol, and that's what's typically produced here in Europe. So that's also what we produce here in Europe. By restricting denatured ethanol, the regulation reduces the supply that's available mainly from North America, which then helps support the ethanol prices in Europe. European producers like us also benefit from higher import duties for undenatured ethanol, which then limits the competitiveness of ethanol imports and strengthens the domestic market prices. So overall, all of these factors should create a favorable market environment as we had into 2026. Coming now to the U.S. market, you will find some similar -- sorry, there we go. Coming out to the U.S. market, you will find some similar charts as ethanol prices bounced back by about USD 0.30 per gallon, which is roughly EUR 80 per tonne in August and September from the summer lows that have -- we have been seeing specifically in our Q4. The increase was supported by tighter supply, and you can see this increase in the chart on the right-hand side. Meanwhile, the corn prices stayed relatively low, thanks to good weather also and larger yields. Hence, quarter-on-quarter, market spreads improved strongly, as you can see on the chart on the left-hand side again. So year on the year, the market spreads were nevertheless slightly behind as the summer market remained below its usual seasonal pickup, which also carried into our first quarter or calendar Q3 and that we had discussed in a bit more detail in our last earnings call. So with the fall maintenance done now and peak summer driving also behind us, ethanol prices are now closer to historical levels again. So last but not least, let me now turn to the GHG quota price development. Here we go. And here, you can see that prices have increased over time. Much of the movement that we have witnessed has been driven by news and discussions around the RED III transposition in Germany. Since the first draft was released at the end of June, we have seen an increased market activity and further policy clarifications have then strengthened the confidence in the sector. One of them being the ministerial agreement that has been reached confirming that double counting will now be eliminated. This change is actually like really a positive step for the market, especially combined with the restriction of the production of -- protection of trust, excuse me, which we call the [Foreign Language] here in Germany. Also, as some of you may have already seen in the news, the adoption of the new draft in the cabinet has been delayed multiple times now. But importantly, ministries still expect retroactive application. And while these delays have temporarily shown activity -- sorry, slowed the activity in 2025, which we see here in the graph which was just shown there, the 2026 demand has particularly remained very strong, and prices only know one way and that is up. It's also encouraging that a new draft version has been leaked, which also some of you might have seen, I think it has -- it was covered in the press also on Monday, which we actually overall feel very positively at this time. And now with that, I hand back to Olaf for the financial outlook. Olaf Troeber: Thank you, Alina. Well, let's come to our guidance. It might disappoint some of you, but our guidance remains unchanged. We expect to achieve an EBITDA in the high double-digit million range in the financial year, '25, '26. I'm not going to walk through the detailed assumptions, which we already discussed during our full year earnings call 6 weeks ago. The strong bioethanol market works in favor, but we are still early in the year and eagerly awaiting the German decision regarding the RED III. While overall, the preliminary information will look promising, as discussed by Alina, we don't want to get ahead of ourselves. And I believe you got the message and the message is clear. The next is the improved results and lower investments compared to the previous year are expected to lead to at least a balanced free cash flow and a moderate reduction in net financial debt year-over-year as outlined in the September call. CapEx is under tight control as we have demonstrated this quarter, working capital will be optimized through the year. And now with this, we would like to open the line for the Q&A. Thank you. Operator: Thank you for these insights, and we will now move on with the Q&A session. [Operator Instructions] So let's dive in. And we go for the first question. Olaf, Alina, how are the new contract negotiations going? If we see the development of the GHG quotas, shall we expect that the EBITDA will increase significantly in Q1, Q2 and 2026? Olaf Troeber: Well, we concluded a few contracts already at market prices, but the large chunk of agreements will be done beginning of December, rather mid-December or concluded beginning December, mid-December. And EBITDA increase -- well, I outlined it with my comments regarding the guidance. We are rather a little bit more on the cautious part. What I can say, overall, the downside risk is reduced, the upside potential has been increased. But so far, we stick with our guidance. Operator: That's said, I mean the next question is going into the similar direction. The guidance is conservative. Are we expecting adjustments in the EBITDA to the levels of EUR 120 million to EUR 160 million? Olaf Troeber: No further comments. Operator: No further comments. So for the time, there's no further question in the line, but I can see that somebody is typing. So let's wait a moment. And let's have a look on the U.S.A. and the business there. Can you provide more color on the outlook in the U.S.? And what assumptions underlying your current forecast for market pricing and earnings? Olaf Troeber: So Alina? Alina Kohler: Yes. I think most important is the utilization at Nevada because that's, in the end, driving our increase in EBITDA year-over-year in North America. And with that, we stick to what we have said just in our last earnings call that we still expect the full utilization in Q4, and we're on track to reach that. We have actually a very good utilization at this point of time. In terms of market pricing, we have looked at historical data there and are pretty much on par with historical margins. Operator: And still waiting for the next questions. And here we go. Can we run through the potential impact on this year's guidance if bioethanol spreads stay at this level? Olaf Troeber: Well, I mean that's a simple mathematic calculation. We provide the volumes we produce per quarter and per year and then simply multiplied by the increase we have seen the last 6 weeks. The point is why I'm stressing this that we are not going to adjust our guidance. The year has 52 weeks. And we are seeing just 6 weeks now elevated bioethanol prices. And if this is going forward, we, of course, have to adjust our guidance. But for the time being, we had 6 weeks of elevated bioethanol prices or bioethanol rather -- bioethanol margins. But we also had 2 weeks of compressed or lower biodiesel margins. So right now, as I pointed out, the downside risk decreased and the potential -- upside potential increased, that's all. Operator: Thank you for answering this question. Maybe let's have a look again to the Nevada plant. How is ramping up going on? And is it almost to its peak levels of 90%? Olaf Troeber: Well, I had a call -- first of all, Alina already provided some color on this one. I had a call yesterday with Dr. Lüdtke in Nevada, he is on the path. So we are in the -- yes, as we planned. We reached the 80% already of capacity utilization, not on an hourly basis rather on a daily, and now we are getting to a weekly basis and peak capacity utilization was temporarily also exceeding the 80%, but not for a longer time. So nothing of concern right now. And I hope that we really achieve the 100% stable capacity utilization beginning of spring, summer next year. Operator: Thank you for answering this question. Moving on to the next one. In which area are you currently focusing your management capacities, in particular? Which areas require your greatest attention and where should we, as investors, focus our attention in particular? Olaf Troeber: Well, we clearly communicated our focus. Our focus is on the -- yes, more or less stable production with respect to the existing plants, also capacity -- increase in the capacity utilization of our German plants, getting more out of the raw materials. So it's all what you can do on a common basis without facing larger investments. With respect to the U.S., we also clearly communicated that our focus is on making our investments profitable. So the main focus is right now on Nevada but not reflecting the South Bend ethanol plant. So it's really focus on these ongoing process. I forgot one. It's the ethenolysis plant in Bitterfeld. So we are also making progress there. And yes, as Alina outlined, we also had a larger chunk of investments there already. And I'm quite confident that we complete the investment mid end of next year and then starting with the ramp-up phase. What you should have in mind as an investor, well, it's always the RED III development quota prices. We are quite dependent. We had a cautious planning regarding the quota prices. So if they may go up substantially, there is an upside potential. Also what one of the investors mentioned before, the margins with respect to bioethanol remain that high. I don't expect it. But if they remind that high, that would also have a positive impact. And with respect to the U.S. business, well, as long as you stay within our plan, then everything is fine. Operator: Let's have a closer look to the U.S. activities. How smoothly are your U.S. operations running at the moment? And do you anticipate any technical challenges in the upcoming winter period? Olaf Troeber: Well, we managed last winter quite nicely. We had some minor technical issues, but the plant was running through the entire winter time, both South Bend and Nevada. So with increased production, you produce more heat. So the likelihood of facing any technical issues will decrease, but you never can be certain. I mean, there might be a [ metal ] hitting one of our facilities or whatever. But really, the likelihood is small that something might happen. Right now, we are making progress, everything maybe at a lot of people there taking care of all the insulation of all the external heatings. So from a common perspective, the plant should be safe. So that's U.S. Operator: Speaking about the U.S., what are the current share -- what's the current share in the European markets, speaking in percent, of U.S. ethanol imports, which might be diminished next year? Olaf Troeber: We have a figure... Alina Kohler: I don't have it on top of my head, but volumes that came from the U.S. to Netherlands for around 450,000 -- sorry, 450 million tonnes and -- sorry, 450,000 tonnes. And Netherlands in the U.K., we're the only markets that could receive denatured ethanol here in Europe. Operator: Okay. Moving on to India. Could you say a few words about the market there? What's going on in India and your activities? Olaf Troeber: Well, nothing substantial. Nothing changed substantially in India. We are collecting the straw, we are producing the biomethane capacity utilization has increased a bit. We are positive on EBITDA but still not there where we would like to be. So no negative -- I would say no negative news from India, all with respect to India. Operator: Okay. Quite quick answer. Let's move on to the next question. Rapeseed oil prices have risen sharply since June 2025. Do you see any risk to EBITDA for Biodiesel segment? Olaf Troeber: I mean if you would go back a little bit in the presentation, you can see that we are talking about spreads. It doesn't matter if the rapeseed oil price increases, doubled whatever, you're always talking about a margin. And if I have the figures in mind correctly, then the rapeseed oil price right now is approximately EUR 1,080 or EUR 1,090 per tonne and the biodiesel IME price is EUR 1,240. So it's a good margin. And we're just talking about margins and not a price development of one lag of our spread. So the margin is okay, regardless where the raw material price is. Operator: Okay. Thank you for this. The next question. Let's have a look. There we go. Within the next 3 years, does Verbio plan to invest in a new plant in other countries outside Europe? Olaf Troeber: Yes, we would like to. But as outlined before, we currently, we focus on our current projects. It doesn't make sense to have so many projects not completed. So we focus on Nevada. Here, the ethenolysis plant and just keep in mind, there's also a plant in South Bend where we face a larger investment with respect to the biomethane facility. So the answer right now would be no. We are not going to purchase another plant in somewhere else. Operator: Okay. Thank you. And let me check the question. Olaf Troeber: But still it depends on the price. Operator: Of course. There get -- so another question, but thank you for the information, Olaf and Alina. And as far as I can see this could maybe conclude our session for today if there are no further questions coming in. But I can see again that somebody want to type. There we go. Let's open the topic with the RED III. How important is RED III for Verbio's outlook and which parts of the framework, do you expect to benefit your business the most? Olaf Troeber: Alina? Alina Kohler: Yes. So most important is the fraud prevention. And we have the inspection of plants also outside of Europe in the new draft, but also the old draft, which is very important, then what we had highlighted in the call as well is the abolishment of the double counting, which has always been a good idea, like Claus also mentioned during our last call, but unfortunately, the way that it was implemented hasn't been exactly going how it was planned. And then what's also important for us is the [indiscernible] that's going away, which is not part of the RED III, but it comes together as a package basically. And all of those things that really help the fraud to stay out of the biofuels market is what's important for us. Of course, the mandate itself is critical but it's very ambitious anyways. And then in the new draft, they have even higher the mandate. So that's why we are like very optimistic going forward. Operator: Okay. Thank you for this answer. And as far as I can see, there is no further question. And so I guess this concludes our call today. Just waiting a brief moment. Olaf Troeber: Well, on just a side note, maybe one other investor is still eager to type a question. So what I would like to summarize is simply, we had now many, many quarters of headwind. And I'm happy or a little bit relieved that we face now a decent tailwind for our business and just wait a little bit, give us the chance to demonstrate what we are capable of. I think the Q2 should be a good quarter. So look forward and see how it might affect our guidance later on, but not now. Any questions, Harry? Operator: No, no further questions, but I guess there were some good and final remarks, I would say. So thank you all for the insightful questions, and a big thank you to Alina and you, Mr. Troeber. To all participants, we appreciate your time and the interest in Verbio, and we kindly ask you to share your feedback with the company, so a short e-mail has been sent to your Inbox for this purpose, and we really would appreciate if you give us a feedback. And with this, I want to say goodbye from my side, but I'm now handing over back to you for some final statements, Alina, Mr. Troeber. Olaf Troeber: Well, I already made my final statement. I really appreciate you guys listening to our conference call. Also, thanks for the questions. And Harry, really thank you. Much appreciate your support, the completed work here, managing, moderating, everything. So I wish everyone a good day, hopefully, a sunny day, and then move forward. Thank you. Alina Kohler: Thank you.
Operator: Good day, and welcome to the Kolibri Global Energy's Third Quarter 2025 Financial Conference Call. [Operator Instructions] Please note this event is being recorded. It is advised that participants that this conference is being recorded today on November 12, 2025. This call will be available on the company's website at www.kolibrienergy.com. Here is a disclaimer. This call may include forward-looking information regarding Kolibri's strategic plans, anticipated production, capital expenditures, exit rates and cash flows, results and other estimates and forecasts. Forward-looking information is subject to risks and uncertainties, and actual results will vary from the forward-looking statements. This call may include future-oriented financial information and financial outlook information. which Kolibri discloses in order to provide readers with a more complete perspective on Kolibri's potential future operations and such information may not be appropriate for further purposes. For a description of the assumptions on which forward-looking information is based and the applicable risks and uncertainties and Kolibri's policy for updating such statements. We direct you Kolibri's most recent annual information form and management's discussion and analysis for the period under discussion as well as the Kolibri's most recent corporate presentation all of which are available on Kolibri's website. Listeners should not place undue reliance on forward-looking information. Kolibri undertakes no obligation to update any forward-looking future oriented financial or financial outlook information other than as required by the applicable law. I would now like to turn the call over to Mr. Wolf Regener, the President and CEO of Kolibri Global Corporation. Thank you, and over to you. Wolf E. Regener: Thank you, Myron, and thank you, everyone, for joining us today. With me on today's call is also Gary Johnson, our Chief Financial Officer. As I'm sure you're aware, we released our third quarter 2025 results this morning, and I'm happy to say that we're very pleased with what we've achieved this quarter, where we continue to build on our last few years of great results in multiple ways. Production from the field has been going well with our third quarter of over 4,250 barrels of oil equivalent per day. That's up from the second quarter of this year of 3,200 BOE per day and also an increase of over 40% from the third quarter of 2024. Other operating expenses remaining low, with just over $7.15 of BOE. It would have been even lower at $6.57 of BOE if we exclude the onetime production tax adjustments from the prior periods. Despite of the oil prices being lower, our line of credit was reaffirmed at $65 million from our banking syndicate led by Bank of Oklahoma. And we're in the middle of fracture stimulating the 4 new wells that we expect to come on production in early December, which are expected to further increase our production, where we're expecting to exit the year at an all-time high production rate. So things are going very well. With that, now I'll turn the call over to Gary to discuss our financial results. Gary? Gary W. Johnson: Thanks, Wolf, and thanks to everyone for joining the call. I'm going to go over a few highlights for the quarter and September year-to-date results, and then we'll take questions at the end. All amounts are in U.S. dollars unless otherwise stated. As you will see from the results, we continue to increase our revenue and cash flow year-over-year despite the price declines we have experienced in 2025. I'll start with the third quarter comparisons. Average production was up 40% and to 4,254 BOE per day compared to 3,032 BOE per day in the prior year quarter. The increase was due to production from the wells that were drilled in 2025. Revenue was up 15% to $15 million in the third quarter of 2025 due to the higher production, which was partially offset by lower prices, which were down 18%. Adjusted EBITDA reached -- sorry, $11.1 million compared to $10.1 million in the prior year quarter, which was an increase of 9% due to the higher revenue, which was partially offset by an increase in operating expenses due to the increase in production. Our net income was $3.6 million and basic EPS was $0.10 per share in the third quarter of 2025 compared to $5.1 million or $0.14 per share -- basic share in the prior year quarter. This decrease was due to a $1.8 million negative swing in the noncash unrealized mark-to-market adjustments on our hedges between the third quarter 2025 and the third quarter of last year. The increase we added revenues was offset by the increase in depreciation expense and operating expense due to the increase in production. Netbacks for the quarter decreased 23% to $30.84 per BOE compared to $40.01 per BOE in the prior year quarter, due primarily to the lower prices. Operating expense was $7.37 per BOE for the quarter compared to $6.63 per BOE in the prior year third quarter, which was an increase of 11%. Which was due to reassessed production tax adjustments, which added $0.80 per BOE to the third quarter 2025 number. Excluding those adjustments, operating costs would have been $6.57 per BOE, which was a 1% decrease from the prior year. Now moving on to the year-to-date September results. Average production was up 22% to 3,851 BOE per day for the 9 months ended September 30 compared to 3,154 BOE per day in the comparable prior year period. Revenue was up 2% to $42.1 million compared to $41.2 million in 2024, due to the higher production, which was partially offset by lower prices, which decreased by 16%. Adjusted EBITDA increased by 3% to $31.6 million compared to $30.5 million in 2024 due to the increase in revenues, which were partially offset by higher operating expense due to the increase in production. Net income was $12.2 million, with basic EPS of $0.34 per share, which compares to $12.5 million and basic EPS of 35% per share last year as the higher depreciation and operating expense from the increase in production offset the increase in revenue. Netbacks from operations decreased 17% to $32.86 per BOE compared to $39.78 per BOE last year due to lower average prices. Operating expense was $7.20 per BOE for the year-to-date September compared to $7.84 per BOE in the prior year period, which was a decrease of 8%. In October, our credit facility was redetermined at the same $65 million borrowing base. Our net debt at the end of September was $42.8 million, and we had $18.5 million of available borrowing capacity. Since we started our stock buyback program in September of last year, we have repurchased a total of about 568,000 shares. We will continue to repurchase additional shares to enhance shareholder value as our working capital allows. And looking back over the last several years, our average production has increased by almost 300% since the end of 2021 as we continue to demonstrate the value of our deal. As Wolf said, when the last 4 wells of our 2025 drilling program start production in December, we expect to exit the year with record high production, which should lead to a further increase in production in the first quarter of 2026. And with that, I'll hand it back to Wolf. Wolf E. Regener: Thanks, Gary. As Gary laid out, we had a very solid third quarter, while oil prices were lower, our revenue and cash flow is still increasing year-over-year, and we're looking to continue the success we've had over the last few years. The company has had quite the growth. And with the activity we have going on, we're looking to continue that. Along with the production revenue and cash flow growth, we're intending to continue returning capital to shareholders in the form of share buybacks, where we've started buying back the shares, as Gary mentioned, over about 570,000 shares. Our plan is to continue to grow all value for shareholders, and we'll continue to get the word out about the company to shareholders and potential shareholders. This actually concludes the formal part of our presentation, and we'll be happy to answer any questions you may now have. Operator: [Operator Instructions]We have the first question from the line of Steve Ferazani from Sidoti. Steve Ferazani: Wolf, if I want to ask about the timing of the 4 new wells, I know you've drilled 2 wells, you're also going to simultaneously complete 2 others you previously drilled, where is that timing-wise? When are you expecting production this year? Wolf E. Regener: Good to hear from you. Yes, so we're on schedule with where we thought we would be now. We're in the middle of fracture stimulating the wells. Everything is going well on that. And we look to see that production coming on in early December. So everything is moving along. Steve Ferazani: As far as you updated your guidance in early October. Any changes, any thoughts to the expectations sort of gets us to about a 1x leverage year-end. Any of those numbers change significantly? Or are you still comfortable with around 1x net leverage year-end? Wolf E. Regener: Yes. I know that we should be right in that number. And then I think as we put in our guidance, we're expecting to pay down $8 million to $10 million in the first quarter just because the timing of when we're spending all this money bringing these other wells online. Andrew Louis DeAngelis: Got it. That's helpful. Can you give us an update on the Forguson well? I know you mentioned it in the press release, just where you are with that and how that might impact your thoughts on drilling in the East side in the future? Wolf E. Regener: Yes. So we'll keep monitoring where it is. Production has been fairly flat on it. And so we'll see as more fracture stimulation fluid comes back to see how flat that actually stays. I don't see us drilling another well over there where we dropped to do today with oil. Great timing on putting our financials as oil drops 4%. So yes, we're in the high 50s, I can't see us drilling well over there for a while, we made higher prices of these numbers. So we'll just see where it turns out to be here in another month or 2, but it will definitely take higher prices in order to do other activites over there. So we definitely -- we won't be focusing on it, let's put it that way. We've got a new presentation up on the website too, which shows the other potential that we have, not only the Eastside but these other things as well. [indiscernible] more information that's out there and then also people kind of tend to forget about the T-zone. So I put that back on there. I think that's a proven table that is in the reserve report. Steve Ferazani: I'll check it out. It sort of leads into -- I know it's only November. I know things changed and the market has been volatile. Can you provide any color to what's going to guide your thinking on a 2026 drilling program? Wolf E. Regener: Sure. I mean I'll speak for just myself and Gary, what we're likely to be recommending to the Board will depend on where prices are in December or early January, right? I didn't quite expect the drop here today. I thought we were at the lows and coming up already. So it looks like it's going to take a little bit longer. So really, I think from our point of view, we'll probably be recommending something more along the lines of keeping production kind of flat to where we end up here near the end of the year. The lower the prices are, the less capital you kind of want to put in the ground, but you want to make sure you're still flat to slightly growth, I think. And that's at least my view of it. So we'll have a good Board discussion about it, and we'll see where we end up in the long term. Steve Ferazani: The October hedges, you sort of changed how you're approaching that? And I'm assuming that's a reflection on pricing. It looks like around -- it looks like October was primarily $50 puts. Can you talk about your -- the shift? Wolf E. Regener: Yes. Just -- I mean, the forward curve is so bad that it's hard to even put collars in place on that. I'd hate to see us cap up because I think oil is going to turn around. We want to protect for the downside still in our bank that makes us do a certain amount of hedges. And so I'm grateful that we can do some puts so that our upside isn't capped. Just where the costless collars were, it just made more sense to put puts in place rather than having a very low cap on prices going forward because I don't know if it's going to take 2 weeks, a month or 6 months, but I'm sure prices are going to turn around. They can't stay down there. I don't think anybody in the world wants that on the producer [indiscernible] that way. Steve Ferazani: That's fair. Gary, you mentioned that the higher OpEx, it sounded like there was a tax adjustment. Can you just give us a brief explanation on what that was? And is that onetime only? Gary W. Johnson: It is onetime only. This is a true-up of production taxes. Our purchaser reassesses costs sometimes going back, they're allowed to do that. So they did that adjustment. So with that, like I said, a onetime thing that we don't expect. I mean, it could happen again, but it's not going to be a recurring thing. It's just a onetime. Wolf E. Regener: One clarification is in Oklahoma, the purchaser pays the gas and NGL taxes not the producer. And so that's why the accounting had accrued for a chunk of it, but a piece of it that tend to be higher at the -- than what was accrued for. Steve Ferazani: That's helpful. So general trends on... Wolf E. Regener: [indiscernible] Taxes in that way, we'd know right away. Steve Ferazani: I don't like to talk about taxes in general. So if we back that out, general trend, you're comfortable with being able to continue if production is up that OpEx per barrel should typically trend down over the long term? Wolf E. Regener: Yes. Yes. I'd kind of keep it flat in this range where we're at. If you set dollars, you're probably conservative on what we're doing. So... Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Wolf Regener for closing remarks. Wolf E. Regener: Thank you, again, everyone, for participating and always happy to answer questions at any time. Feel free to contact us and reach out. So thank you, everyone, for the time, and have a good rest of your day. Operator: Thank you. The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good morning, and good evening, ladies and gentlemen. Thank you for standing by, and welcome to the Dingdong Limited Third Quarter 2025 Earnings Conference Call. Please note that this event is being recorded. I will now turn the conference over to the first speaker today, Nicky Zheng, Director of Investor Relations. Please go ahead, sir. Nicky Zheng: Thank you. Hello, everyone, and welcome to Dingdong Third Quarter 2025 Earnings Call. With me today are Mr. Changlin Liang, our Founder and CEO; and Mr. Song Wang, our CFO. You can refer to our third quarter 2025 financial results on our IR website at ir.100.me. You can also access a replay of this call on our IR website when it becomes available a few hours after its conclusion. For today's call, management will go through their prepared remarks, which will be followed by a question-and-answer session. Before we continue, I would like to refer you to our safe harbor statement in our earnings press release, which also applies to this call as we will be making forward-looking statements. Please note that all numbers stated in the following management's prepared remarks are in RMB terms. And we will discuss non-GAAP measures today, which are more thoroughly explained and reconciled to the most comparable measures reported in our earnings release and filings with the SEC. I will now turn the call to our first speaker today, the Founder and CEO of Dingdong, Mr. Liang. Liang Changlin: Hello, everyone. Thank you for participating in Dingdong's Q3 2025 Earnings Call. As of Q3 2025, Dingdong has maintained profitability under non-GAAP standards for 12 consecutive quarters and under GAAP standards for 7 consecutive quarters. Despite a higher baseline compared to the same period last year, revenue has achieved year-over-year growth, which marks the seventh straight quarter. This sustained expansion and steady achievement of profit targets fully demonstrating our strategic resilience and execution excellence amid the current complex market and competitive landscape, providing strong momentum for advancing our long-term strategy. Next, I'll review the key highlights of Q3 operations and share our insights and outlook for the business. In Q3 2025, Dingdong reported a GMV of RMB 7.27 billion and a revenue of RMB 6.66 billion, both increasing slightly year-on-year. This marked Dingdong's highest ever quarterly GMV and revenue. Non-GAAP net profit was RMB 0.1 billion with a profit margin of 1.5%, while GAAP net profit was RMB 0.08 billion with a margin of 1.2%. Building on the strong growth seen in Q3 2024, we continue to sustain our growth momentum and stay profitable. This year, the company has made notable progress with its good product system. A series of good products has effectively enhanced user [ retention ] and repurchase rates while also significantly supporting overall GMV growth. For instance, in September, SKUs classified as good products comprised 37.2% generating 44.7% of total GMV, a rapid jump from January. When the 4G strategy was launched and the share of good products SKUs was 14.1% and their GMV contribution was 16.4%. The growing number of these good products has attracted more users to place orders on Dingdong. In Q3, the monthly order conversion rate increased by 1.6 percentage points year-over-year and the number of monthly ordering users grew by 4.1%. Additionally, good products have further strengthened user [ mind share ]. The average monthly order frequency reached a record 4.6x in Q3, up 4.9% year-over-year with member placing an average of 7.7 orders per month, a 1.3% year-on-year increase. From a regional perspective, the GMV in Jiangsu, [ Chongqing ] and [indiscernible] continued its steady upward trend this quarter, increasing by 1.4% year-over-year. Shanghai as the strategic core markets maintained stable operations, leveraging its high penetration rate to support the region's overall growth. Meanwhile, Jiangsu and [ Chongqing ], which are still in the phase of rapid market penetration, sustained strong growth with GMV rising 3.6% year-over-year. Of the 19 cities in the region, excluding the recently expanded cities of Chongqing and [ Chuzhou ], 9 cities delivered growth of over 10% with Guangzhou performing exceptionally well with growth exceeding 60%, reflecting significant consumption potential. These results clearly indicate that the market demand in Jiangsu and Zhejiang is still largely untapped. The existing mature cities, operational capacity and the expansion potential in new cities together present substantial opportunities for future growth. In Q3, building on our ongoing implementation of the 4G strategy of good users, good products, good services, good mindset, we introduced a new development framework called One Big, One Small, One World to guide the company's next stage of growth. One Big emphasizes our high-volume top-selling product strategy. Building on the initial successes of our good product strategy and approach, we are now dedicated to developing a top-selling product system. We believe that a deep understanding of products arises not only from economies of scale, but also from the structural opportunities discovered through refined operations, which is precisely the long-term significance of our top-selling product strategy. Unlike bestsellers, small but beautiful products prioritize user value and unique experiences over scale. Conversely, high-volume top-selling products prioritize market fundamentals such as sourcing raw materials, category resilience and scalability. At Dingdong, we set clear standards for creating blockbuster products. They must possess core competitiveness, ideally with universal appeal for potential for wide consumer appeal. By systematically analyzing production resources, efficiently managing supply chains and brand building, these products are well positioned for operational success and growth. Additionally, blockbuster products should align with existing channels, meet genuine consumer needs and have low loss rates, coupled with high market scalability. During the 100-day summer campaign from June 21 to September 30, over 100 top-selling products were developed, laying a strong foundation for our high-volume top-selling product strategy. The One small in one Big, One small, One World refers to establishing frontline fulfillment stations in smaller cities and expanding into those markets. Our warehousing network is already dense in key areas like Shanghai, [ Suzhou and Hangzhou ]. Building on this, we plan to focus on -- our expansion on smaller and medium-sized cities in the Jiangsu Zhejiang and Shanghai regions, such as [indiscernible] and [indiscernible], which we launched this quarter. These cities tend to experience a decline in traditional retail, yet their consumers demonstrate strong purchasing power, especially in discretionary spending in food categories. As living standards rise and consumption habits evolve, local residents increasingly value product quality and health, creating a significant opportunity for high-quality fresh groceries. In exploring markets in small- and medium-sized cities, we have developed a systematic approach to market expansion, continuously refining it through real-world operations. Compared with mature cities, we have made specific adjustments to our city entry strategies, user acquisition methods, product configurations and performance metrics. Our core focus is on dining and coffee table leisure scenarios in small cities, aiming to offer consumers high-quality, reliable and affordable products. This strategic direction has proven to be a key breakthrough for us in today's highly competitive market environment. By the third quarter, we had opened 40 new frontline fulfillment stations this year, including 17 in the third quarter. successfully expanding into small city markets such as [ Chongming Island ] in Shanghai, [indiscernible] in [ Nantong ], [indiscernible] in [ Chuzhou ]. By exploring and developing small city markets in Jiangsu, [ Dongguan ] and Shanghai, we have found a clear strategic path to breakthrough and sustainable growth in an increasingly competitive environment. Finally, the One World in One Big, One Small, One World strategy refers to the expansion into international markets. By leveraging our robust domestically developed fresh grocery supply chain, we are confident in our ability to grow overseas. We have formed partnerships with top-tier partners like FairPrice in Singapore, DFI in Hong Kong, [indiscernible] and Hong Kong [ CV Mall ]. We're also pleased to see the large number of fresh groceries and packaged foods developed by Dingdong have been widely embraced by overseas consumers. Now let me share with you our outlook for Q4 2025. Industry-wide competition in the instant retail sector is intensifying with both platforms and off-line merchants increasing their investments to gain market share. This has led to a rise in overall market competition. Nevertheless, building on the One Big, One Small, One World framework introduced in Q3 and leveraging our strength in supply chain, product development and IT systems bolstered by sustained profitability and solid cash reserves, Dingdong is confident in forging a unique quality focused, efficient and resilient growth path through intense competition and in maintaining last year's [ scale ] and non-GAAP profitability in Q4. That concludes my remarks. Thank you. Now I invite our CFO, Wang Song, to discuss the company's financial status. Song Wang: Thank you, Mr. Liang. Hello, everyone. Before I present our financial performance, please note that all figures are in RMB. In Q3, 2025, Dingdong reported revenue of [ RMB 6.66 billion ], marking a 1.9% year-over-year growth and maintaining positive growth for 7 straight quarters. Non-GAAP net profit reached RMB 0.1 billion with a 1.5% net profit margin, while GAAP net profit was RMB 0.08 billion with a 1.2% margin. We had net operating cash inflow of RMB 0.14 billion in Q3, the ninth consecutive quarter of positive cash flow. By the end of Q3, after deducting short-term borrowings, our actual cash owned increased to RMB 3.03 billion. Next, let's review the specific financial results for Q3. Revenue for Q3 reached RMB 6.66 billion, marking a 1.9% year-over-year increase. GMV was RMB 7.27 billion, up 0.1% compared to the previous year. The scale growth maintain -- mainly stemmed from a general rise in order volume, which increased by 2.2% year-over-year in Q3. This quarter, our B2B business continued to grow steadily with revenue expanding by 67.4% year-over-year, and its revenue share rose by 1.9 percentage points year-over-year. Gross profit margin was 28.9%, down 0.9 percentage points year-over-year. The decline in gross profit narrowed on a quarter-over-quarter basis. During the quarter, the company maintained its focus on its good product strategy by refining its product lineup, emphasizing flagship items and increasing the supply of high-quality goods. It continued to enhance its supply chain system by prioritizing high-quality products that meet market demand while systematically phasing out slow-moving goods with low user preference. This high-quality in, low-quality out approach enabled the company to focus core categories, thereby enhancing overall product competitiveness. At the same time, in a highly competitive instant retail environment, the company actively managed gross profit margins, rewarding consumers, improving market access for high-quality products and steadily expanding its user base and market reputation. The fulfillment cost ratio was 21.5%, up by 0.1 percentage points compared to last year. Although the overall fulfillment cost ratio stayed stable year-over-year, we continue to prioritize service improvement. This quarter, our on-time delivery rate reached 97%, up by 1.5 percentage points from the previous year. The product negative review rate was 0.04% and rider negative reviews were at 0.02%, each decreasing by 0.01 percentage points annually. The average fulfillment time for instant orders was 36.3 minutes, down by 1.4 minutes year-over-year. These results highlight our ongoing efforts to optimize services, enhance user experience, build user trust and generate long-term value. The sales and marketing expense ratio was 1.9%, a decrease of 0.3 percentage points year-over-year. Going forward, we'll strengthen our top-selling product strategy, making it a core growth driver and traffic generator. By focusing resources on mind share penetration and efficient conversion, we will continuously enhance the overall return on marketing investment. Combined G&A and R&D expenses represented 4.9% of revenue, similar to the same period last year. We'll maintain our focus on R&D investment in food research, agricultural technology and data algorithms. Additionally, we'll continuously enhance our product development capabilities and strengthen digital integration throughout the entire supply chain. We recorded a non-GAAP net profit margin of 1.5% with a net profit of RMB 0.1 billion. Meanwhile, our GAAP net profit margin was 1.2%, amounting to RMB 0.08 billion this quarter. As of the end of Q3, the total of cash, cash equivalents, short-term restricted funds, short-term investment and long-term wealth management products stood at RMB 3.94 billion. We maintain efforts to improve capital efficiency and optimize our financing structure. After deducting short-term borrowings, our net equity funds hit a record high of RMB 3.03 billion, up RMB [ 0.08 billion ] from the previous quarter. That concludes our presentation for today. Operator, we can now proceed to the Q&A session. Operator: And our first question today will come from [ Erica Chau ] of Jefferies. We can move on to our next question. our next question will come from Yang Bai of CICC. Yang Bai: The instant retail market remains highly competitive and fresh groceries are at the heart of this battlefield. Industry giants like Alibaba, [ Meituan ] and Dingdong are all making significant investments. How does Dingdong view the current competitive landscape? What challenges does it bring? And are there new opportunities behind it? Unknown Executive: Thank you for the question. Indeed, competition in instant retail has never been quiet. Fresh groceries are not only the most competitive part of the market, but also the most valuable. We constantly ask ourselves how can we not just survive in competition but grow meaningfully through it. We observed that the mainstream approach in today's market still revolves around price competition using subsidies and discounts to drive short-term traffic and scale. This may work in the near term, but it's not sustainable long term. At Dingdong, our path is to build differentiation proactively guided by 2 major strategic paths. First, on the user side, we firmly execute our 4G strategy. Our philosophy is simple, yet powerful. Good products attract good users. We're not chasing mass traffic, but focusing on building a high-quality user base through differentiated products and experiences. In the short term, this may not create explosive growth, but in the long run, it leads to healthier compounding growth. When the market eventually returns to the fundamentals of value and efficiency, this foundation will become our strongest moat. Second, on the supply chain side, we follow the principle of 1 inch wide, mile deep. We focus deeply on our core areas going all the way to the source from direct sourcing at farms, to in-house R&D and production and from warehousing and logistics to digital and AI infrastructure, whether it's developing best-selling products, investing in food innovation or strengthening traceability, IT and AI systems, all these efforts aim to build a supply chain capability that is uniquely [ Dingdong ]. This strength doesn't show overnight, but it becomes the most resilient and hardest to replicate assets in the long run. In summary, we're committed to a long-term path. Beyond short-term battles over price and scale, we focus on long-term battles of efficiency and capability. As the market becomes more rational, those who truly possess supply, product and organizational strength will outlast the cycle and win the future. We believe that our patience, discipline and long-term investment today will become our core competitiveness tomorrow. After the noise is fade, time will ultimately stand on our side. Thank you. Operator: Our next question today will come from [ Erica Chu ] of Jefferies. Erica Chu: Let me translate my question. First of all, congratulations on the company's continued excellent performance this year -- this quarter, especially considering the extremely fierce competition in the instant retail market. Could you elaborate on the aforementioned top selling product strategy, especially -- specifically in conjunction with the top sellers from this year's third quarter summer sales campaign? Unknown Executive: Thank you for your question. The strong performance of our top-selling products this summer has reinforced our long-term commitment on product-driven growth. Previously, we build products mainly through a channel lens, but now we're shifting from a channel distributor mindset to a product manager mindset, moving from a Dingdong perspective to a full chain perspective. This requires us to think and act as comprehensive product managers, designing every product's full life cycle from its origin to the hands of the consumer. We're no longer just selling products but create products that truly resonate with users. Fresh groceries are naturally nonstandardized, highly perishable and seasonal. To address this, we harness digital and IT technologies to expand our management scope and efficiency, eliminate intermediaries, reduce procurement costs and lower spoilage rate through standardized quality control, thereby improving the overall profitability of our supply chain. Unlike the small but beautiful products that are limited in scale, our top seller approach focuses more on stability, controllability and economies of scale. This consistency is key to earning user trust. a top-selling product that reliably offers a high-quality experience and maintains a stable supply will deepen brand recognition in the minds of our users, resulting in increased repurchase rates and stronger brand loyalty. Our systematic approach to developing top-selling products involves assessing a category like foods across 6 key dimensions: market size; supply chain capabilities; product competitiveness; operational efficiency; channel fit and profitability. We carefully select the most promising targets and then scale them across the country or even into international markets by leveraging centralized procurement, standardized quality control, tiered processing and large-scale fulfillment, we're able to significantly reduce costs and losses, therefore, enhancing product value. Furthermore, this process has helped us build a comprehensive set of replicable system capabilities covering origin selection, planting, harvesting, processing, warehousing, transportation and end user sales, establishing a standardized supply chain framework. This enables us to better control the upstream supply chain, ensuring Dingdong's products are uniquely differentiated and virtually irreplaceable. The summer campaign results validated our strategy. For example, [indiscernible] generated nearly RMB 15 million in GMV, marking a 22-fold increase year-over-year with notable growth in user repurchase rates and a low-quality complaint rate of just 0.84%. Similarly, the new product, [ uiwei Li ] achieved RMB 9 million in GMV, experiencing significant increases in revenue and repurchase rate. These figures show that distinctive high-quality individual products that resonate with consumers can strengthen brand identity and serve as key drivers of sales growth. Therefore, we believe that the top-selling product strategy is more than just a sales tactic. It's long-term approach to developing capabilities. This strategy enables us to create a sustainable competitive advantage centered on products, emerging brand appeal with the benefits of scale. Thank you. Operator: This concludes our question-and-answer session. I would like to turn the conference back over to management for any closing remarks. Nicky Zheng: Thank you again for joining our call today. If you have any further questions, please feel free to contact us or request through our IR website. We look forward to speaking with everyone in our next earnings call. Have a good day, and have a good night. Operator: The conference has now concluded. We thank you for attending today's presentation, and you may now disconnect your lines.
Operator: Good morning, and welcome to Local Bounti's Third Quarter 2025 Earnings Conference Call. At this time, I'd like to turn the conference call over to Jeff Sonnek, Investor Relations at ICR. Please go ahead. Jeff Sonnek: Thank you, and good morning. Today's presentation will be hosted by Local Bounti's Executive Chairman, Craig Hurlbert; and President, Chief Executive Officer and Chief Financial Officer, Kathleen Valiasek. The comments made during today's call contain forward-looking statements within the meaning of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. All statements other than statements of historical facts are considered forward-looking statements. These statements are based on management's current expectations and beliefs as well as a number of assumptions concerning future events. Such forward-looking statements are subject to known and unknown risks and uncertainties that could cause actual results to differ materially from the results discussed in the forward-looking statements. Some of these risks and uncertainties are identified and discussed in the company's filings with the SEC. We'll also refer to certain non-GAAP financial measures today. Please refer to the press release, which can be found on our Investor Relations website investors.localbounti.com, for reconciliations of non-GAAP financial measures to their most directly comparable GAAP measures. And with that, I'd now like to turn the call over to Craig. Go ahead. Craig Hurlbert: Thank you, Jeff, and good morning, everyone. I want to start by expressing my gratitude to the entire Local Bounti team for their exceptional execution this quarter. What makes Q3 particularly noteworthy isn't just our operational achievements, it's the fundamental shift we're seeing in how the market views controlled environment agriculture. We believe we have reached an inflection point and Local Bounti is positioned at the center of it. Three years ago, conversations with major retailers were exploratory and measured; today, they're active strategic discussions about long-term supply partnerships. Retailers who once questioned CEA viability are now designing supply chains that assume its permanent infrastructure. They're actively looking for the right partners who can deliver consistent quality and innovation at scale. This shift from if to how much and how fast, represents the market validation we've been charging towards. And it's why we're being deliberate about the partnership structures that create long-term value, not just near-term revenue. And with that, I will now turn the call over to Kathy. Kathleen Valiasek: Thank you, Craig, and good morning, everyone. Third quarter results demonstrate our operational momentum is building as planned. We delivered 19% year-over-year revenue growth, improved our adjusted EBITDA loss year-over-year and completed critical facility upgrades. Our Texas automated harvesting system is now operational and the Georgia Tower upgrades are driving further yield improvements. What makes this quarter particularly significant is how our execution is converging with the market shift, Craig just described. Let me start with Texas because completing this transition successfully was our critical Q3 milestone. We finished the facility reconfiguration in late July and reached full harvestable capacity in early August, essentially doubling the productive output of that facility. The automated harvester is now fully operational and the efficiency gains are quantifiable and significant. From July to October, we've increased labor productivity by approximately 19%, measuring pounds [ produced ] per labor hour while simultaneously reducing our direct labor cost per pound by approximately 17%. These improvements demonstrate the scalability of the company's Stack & Flow Technology as volume increases. This operating leverage will be especially impactful as the Texas facility is now sold out on a run rate basis, which will help us accelerate toward our broader goal of enhancing our consolidated cash flow. On yield improvements and cost optimization, we're seeing tangible results across the network. We completed tower upgrades in Texas and Washington in early September. These upgrades are designed to achieve better climate control through the stack phase to enhance production efficiency and increase yield capacity across our Stack & Flow Technology platform. We expect to complete optimization in the fourth quarter of 2025 and anticipate yield increases of more than 10% to follow. These are not incremental tweaks. They're structural improvements to our production efficiency that will continue ramping as the systems optimize. In connection with these ongoing yield improvement efforts, our previously filed patent application in 2022 titled: Optimizing Growing Process in a Hybrid Growing Environment using Computer Vision and AI continues to advance, and we are now anticipating that this patent will be issued in the coming months, perhaps as early as next month. We have been utilizing computer vision at all of our facilities to analyze plant growth data in conjunction with environmental data to identify patterns that drive improved consistency and yield with great results. And I want to commend the team on their relentless pursuit of efficiencies, which is remarkable. We're also advancing our seed cost reduction program at our Texas and Washington facilities with the implementation continuing in the third quarter of 2025 and further implementation expected in the fourth quarter and throughout 2026. Building on previous successful implementations at our Georgia facility that have demonstrated meaningful cost reductions, this program is designed to optimize seed costs while maintaining the high-quality standards that Local Bounti customers expect. We've made tremendous progress optimizing our operations, which is validated by nearly $8 million in annualized cost reductions that we've actioned through the first 9 months of the year, spanning both COGS and operating expenses. Looking ahead, we have targeted additional cost reduction initiatives in the range of $1.5 million to $2 million annualized to be actioned in the fourth quarter of 2025 and realized in the first half of 2026 with additional measures to follow in 2026. We believe these actions represent sustainable improvements to our cost structure that will compound as we scale and are a critical piece to our path to positive adjusted EBITDA. Now let me talk about what's happening commercially because this is where Craig's inflection point comment becomes really tangible. I want to commend Dane Almassy's leadership as our new Chief Commercial Officer as well as that of our entire commercial team. They're executing at an incredibly high level amid our operational improvements, driving both new door expansion and deeper penetration with existing partners. In fact, several key accounts have doubled month-over-month as a result of our added capacity and new product introductions. One area where the team is focusing is rightsizing our price pack architecture to better align with marketplace needs. We're working on packaging formats that increase product visibility, putting what we grow front and center for consumers. This demonstrates our confidence in our quality and addresses what shoppers consistently tell us they want, the ability to see the fresh premium leafy greens they're buying at the point of purchase. As these initiatives progress through the development and retail reset cycles, we believe there'll be meaningful differentiators in how we compete. On the distribution front, we're excited about our Walmart expansion in the Pacific Northwest, launching our new 10-ounce Romano Caesar family-sized salad kit across 89 stores on October 13. This is more than a new SKU. It's a proof point for our regional facility strategy and our ability to deliver product innovation that meets consumer demand. The Pacific Northwest has historically struggled with consistent access to fresh, locally grown greens. Our Washington facility solves that, delivering harvest to shelf in days versus the weeks plus conventional supply chains require. The packaged salad market is expected to grow at 8.6% annually through 2029, and the family-sized format addresses robust consumer demand in this underserved segment. Following this Pacific Northwest launch, we're planning to roll out the same product to customers across the southern states from our Texas facility in early 2026, extending our geographic reach in this fast-growing category. The Walmart expansion is part of our broader commercial story. The launch of the Romano Caesar Kit is just the next step in our growth and increases our footprint in 89 of the 191 stores carrying premium baby leaf products. We also continue to service the 13 Walmart distribution centers out of our California and Texas facilities with Conventional Living Butter Lettuce. During the third quarter, we also expanded distribution of our salad kit line across additional regional retailers in the Pacific Northwest, demonstrating ongoing demand for convenient and fresh meal options. In the home delivery channel, we successfully launched 4 new Grab-and-Go offerings with a leading partner, increasing the depth of our assortment and further positioning ourselves for growth in the direct-to-consumer segment. Additionally, we entered into an agreement to pack private label, Living Butter Lettuce, for Markon Cooperative, which serves as the purchasing, logistics, information and marketing partner for its 5-member distributors and their North American foodservice customers. This partnership highlights the trust and credibility Local Bounti has established with its partners. As Craig briefly touched upon at the beginning of the call, what's different now versus 6 months ago is the nature of our conversations with retailers. We're seeing strategic partners actively helping us to expand our footprint with major customers. We're getting earlier visibility into their deployment time lines and reset schedules. The velocity of engagement reflects market recognition that CEA has crossed the threshold from emerging technology to essential and permanent infrastructure. Let me just repeat that. CEA has crossed the threshold from emerging technology to essential and permanent infrastructure. Beyond volume growth, we're focused on product mix optimization. The new product launches we're executing, family-sized salad kits, expanded Living Butter Lettuce offerings, private label partnerships carry more attractive margin profiles than our base business. As these ramp through late Q4 and into 2026, they become important levers for improving our overall unit economics and will help us drive toward our goal of achieving positive adjusted EBITDA. Turning to our third quarter results. Our third quarter revenue increased 19% to $12.2 million, driven by increased production from our Georgia, Texas and Washington facilities. Sequentially, revenue growth was constrained by the Texas transition work through July, but that facility is now positioned to contribute meaningfully going forward. Our adjusted gross margin percentage was approximately 29%, excluding depreciation and stock-based comp and other noncore items. With Texas at full capacity in Q4 following our work on harvest automation and optimizing our product mix and as our tower upgrades mature across all facilities, we expect that over time, our adjusted gross margin will increase as a percentage of sales. Our adjusted EBITDA loss was $7.2 million, which improved from $8.4 million in Q3 of last year, representing a meaningful year-over-year progress. With Texas now operating at full capacity and our cost initiatives reaching full run rate, we expect an improved adjusted EBITDA performance in Q4. Notably, our Q3 net loss improved to $26.4 million from $34.3 million prior year, primarily reflecting lower interest expense from our Q1 debt restructuring. Now turning to our balance sheet. We ended the quarter with cash and cash equivalents and restricted cash of $12.7 million. The $10 million convertible note we closed in August, paired with $10 million in debt reduction was strategically significant. It wasn't just capital. It was our existing strategic investors doubling down at an inflection point while simultaneously improving our balance sheet. We also closed an equipment leasing transaction that we expect to provide cash of approximately $2 million in the coming weeks. Combined with the March restructuring, where we brought in $25 million in new equity and amended our debt agreement to defer cash payments until April 2027, we've transformed our capital structure in 2025. This capital structure transformation provides us with added financial flexibility to be strategic with partnerships and growth investments. Looking ahead, let me provide perspective on Q4 and our trajectory heading into next year. Revenue growth and product mix optimizations are key levers to achieving positive adjusted EBITDA, which we continue to expect in early 2026. Let me break down the drivers that will get us there. First, volume and mix. As our new value-added product launches ramp through late Q4 and particularly to the first half of 2026, they improve our overall unit level economics. Second, operational efficiency. The tower upgrades across Georgia, Texas and Washington, combined with automated harvesting in Texas and our seed cost reduction programs are improving our cost structure. These initiatives take time to reach full productivity. We're seeing early benefits now, but the full impact materializes as the systems optimize into 2026. And third, cost discipline. The nearly $8 million in annualized cost reductions we've actioned through the first 9 months of the year, spanning both COGS and operating expenses plus the additional $1.5 million to $2 million we're implementing through year-end represents sustainable structural improvements that flow directly to adjusted EBITDA as revenue scales. Taking all of this together, we expect a theme of ongoing sequential improvement in adjusted EBITDA loss rates over the coming quarters with an aim to achieve positive adjusted EBITDA in early 2026. We're pacing our growth alongside retail partner development schedules to ensure we're building sustainable, profitable revenue. To close, Q3 represents a foundational quarter where we completed critical infrastructure investments, particularly Texas reaching full capacity, demonstrated commercial traction with strategic launches like Walmart in the Pacific Northwest and continue to improve our cost structure year-over-year. We're entering Q4 with more operational capacity, better unit economics being built into our operations and stronger commercial momentum than at any point in our history. The market inflection Craig described is real, and we're positioning Local Bounti to capitalize on it while building for long-term durability. That concludes my prepared remarks. Thank you for joining us today and for continued interest in Local Bounti. Operator: Ladies and gentlemen, that concludes today's conference call. We thank you for attending. You may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the European WAC Center third quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today. Tom Kim, Chief Financial Officer, please go ahead. Tom Kim: Good morning, everyone. Thank you and welcome to European WAC Center's third quarter fiscal year 2025 earnings call. On today's call, Chris Morris will provide an update on the company's performance and discuss additional details regarding progress made on our priorities. Then I will discuss our third quarter results and fiscal 2025 outlook. Following the prepared remarks, we will be able to take questions. Before we start, I would like to remind you of our legal disclaimer. We will make certain statements today which are forward-looking within the meaning of the federal securities laws, including statements about the outlook of our business and other matters referenced in our earnings release issued today. These forward-looking statements involve a number of risks and uncertainties that could cause actual results to differ materially. Please refer to our SEC filings as well as our earnings released issued today for a more detailed description of the risk factors that may affect our results. Please also note that these forward-looking statements reflect our opinions only as of the date of this call, and we take no obligation to revise or publicly release the results of any revision to our forward-looking statements in light of new information or future events. Also during this call, We will discuss non-GAAP financial measures which adjust our GAAP results to eliminate the impact of certain items. You will find additional information regarding these non-GAAP financial measures and a reconciliation of these non-GAAP to GAAP measures in our earnings release. Our live broadcast of this call is also available on the investor relations section of our website at investors.waccenter.com. I will now turn the call over to Chris Morris. Chris Morris: Thank you, Tom, and good morning, everyone. Thank you for joining us to discuss European Wax Center third quarter 2025 financial performance. In Q3, we delivered system-wide sales of $238.2 million, 20 basis points of sales growth, and $20.2 million in adjusted EBITDA. I've now been with European Wax Center for 10 months, and it's clear we've made meaningful progress in laying a strong foundation for growth and profitability. While we still have work ahead, we are in a much stronger position than when we began this journey, thanks to the dedication of our franchisees, associates, and our refreshed leadership team. 2025 is a pivotal year of transformation dedicated to strengthening and accelerating the fundamentals that power our business model. Over the past several months, we've refined our acquisition messaging, deepened our use of data to unlock actionable insights, and partnered even more closely with our franchisees to drive local impact. This year, my senior leaders and I have doubled the amount of stores we visited in the past, meeting directly with more franchisees and in-center teams, listening to their perspectives, recognizing what's working and witnessing firsthand the passion and discipline that shape our incredible guest experience. While transformations take time and progress is rarely linear, we believe our core business is stable focused, and positioned to capture growth ahead. Over the past several quarters, we've worked to become a smarter, more agile organization, one with sharper visibility into what's driving performance and the ability to adapt quickly when challenges arise. This focus has strengthened our ability to identify opportunities sooner, act decisively, and translate learnings into measurable progress across the business, which I will highlight today. Very importantly, we're reaffirming our full-year financial guidance, reinforcing the strength and resiliency of our model. I am confident we are headed in the right direction, and every action we take is anchored in three clear strategic priorities. Driving sales through traffic growth, improving four-wall profitability for our franchisees through operational excellence, and pursuing disciplined, profitable expansion. I will expand on our progress in each of these areas before turning the call over to Tom to deliver our Q3 financial results. Turning first to traffic growth among both new and existing guests powered by continued investment in a robust data-driven marketing engine. Over the past year, we've taken a hard look at our marketing tactics. Testing, learning, and optimizing how we reach and convert guests across channels to drive visits, and deepen engagement. We've eliminated underperforming tactics and doubled down on those driving results. While much of this work has been about building a durable foundation and putting those insights to work to accelerate momentum in the next year, our disciplined test and learn approach is already improving efficiency and returns. For existing guests, we're seeing clear signs of progress. Retention is stable quarter over quarter, fewer guests are lapsing, and engagement in our WAC Pass program remains strong, which is an enduring source of strength for us. Within our guest base, visit frequency remains our largest opportunity for growth. During the quarter, we launched even more structured guest lifecycle campaigns, building on the successes from Q2. We also introduced new franchisee reporting on their guest frequency, enabling them with actionable center-level data. This reporting helps them identify key controllable traffic drivers, pinpoint performance gaps, and quantify the impact of specific actions to improve results. It provides clear visibility into what's within their control, turning data into actionable insights and accountability. It went live in Q3, and we're already seeing strong franchisee engagement. At the beginning of 2025, we prioritize marketing contactability as an important frequency enabler for existing guests, and over the course of the year have materially improved the percentage of guests that we are able to contact via SMS or email. With this improved access to our guests, we now more directly managing risk and opportunities on frequency. Through this process, we gained valuable insight into which guest outreach tactics are replicable and scalable. Our focus now is on relevance, creating consistent, personalized communication with guests that more directly speak to our guests about what matters to them. We believe that this tailored approach will continue to help convert less frequent guests into high frequency visitors and deepen engagement across our existing guest base. Turning to new guest acquisition, which remains a top priority and key to returning to sustainable traffic growth. While we're still not seeing the levels of new guest growth we would like to, we continue to focus on the things we can control in an evolving macro environment and are encouraged by the progress we've made. In Q3, we've leveraged our enhanced data insights to identify actionable opportunities that allowed us to more effectively target and attract new guests. Additionally, our improved capabilities allowed us to pivot and refine the rollout of regional marketing pilots. Together, these learnings enabled us to quickly refine our processes and scale guest acquisition through paid media within the quarter. Given the importance of word of mouth in our categories, we have also refocused the network on our referral program, a powerful and cost-effective channel for new guests. Looking ahead to Q4, the overhaul of our influencer strategy to reach prospects more authentically and at scale that began in Q3 will be a key focus. We've partnered with a new influencer agency, and the content we've produced is already showing a 75% improvement in efficiency related to our prior influencer content. Our execution of a National Eyebrow Day activation included our new influencer strategy on top of a PR media push, which helped us break through at new levels. The campaign delivered more than 75 million impressions and drove a 53% lift in unique website visitors. Finally, we're excited to have brought on a new brand agency partner to help refine our brand and better connect with high-value audiences. Together, we've completed foundational work, including site visits and surveys, all aimed at deepening our understanding of our positioning and what will resonate most with guests going forward. While this initiative was scaled meaningfully in 2026, it's already shaping how we think and act today. As I've said before, there's still work to be done, but we're far better positioned from both a sales and traffic perspective than we were a year ago, thanks to the insights and learnings we've gained. Moving on to our next priority, driving for all profitability for franchisees through operational excellence. We continue to believe that the greatest opportunity ahead of us lies inside our centers. In August, we welcomed Angela Jaskolski as our new Chief Operating Officer. While her work is only beginning, Angela has already taken a more granular look at in-center operations and has been active in the field working closely with franchisees to demonstrate how elevating the guest experience can meaningfully impact center performance. One of Angela's key priorities is digging deep into the factors within a center's control, which we know have a direct impact on sales and retention. Her team is focused on ensuring franchisees have the tools, insights, and resources they need to strengthen operations and ultimately improve profitability. We believe this disciplined focus on center controllables is critical to driving stronger unit economics and delivering a consistent, high-quality guest experience across the system. In addition, performance in Q2 and Q3 confirms the role of franchisee engagement and hands-on support in driving performance. We've continued to expand in-center coaching and training resources to ensure every franchisee can access and implement best practices consistently while also exploring ways technology can unlock additional upside at the unit level. These learnings from 2025 are shaping a comprehensive operational strategy for 2026 focused on closing training and infrastructure gaps, enhancing build support and franchisee engagement, and driving greater consistency and stronger center profitability across our network. Finally, our third priority is grounded in advancing a disciplined development approach that supports thoughtful, profitable expansion. Under the leadership of Kurt Smith, our new chief development officer, we've completed a deep network analysis to help us prepare for the remainder of 2025 and 2026. Our development and operations team have also launched a focused effort to strengthen unit economics, mitigate future closure risk, and improve network health. Through our analysis, we've identified centers that are ramping more slowly and determined where we believe targeted action can make the greatest impact, especially in attractive markets. We're working directly with these franchisees to strengthen performance through targeted operational support, training, and local marketing. Improving unit economics across the system remains essential to reducing closure risk over the long term. As we continue this work, we now expect total closures to be between 35 and 40 for the year compared to our prior estimates of 40 to 60. This reflects both timing shifts and anticipated closures and the traction we're seeing in our strategic initiatives with franchisees as we thoughtfully assess which centers should remain in the system. Looking ahead, our focus turns to 2026. where we're working closely with franchisees to refine development plans that reflect the timing of 25 closures and continued progress on our strategic initiatives. Our class of 2026 openings are taking shape and we believe we remain on track to return to positive net center growth by year end as development momentum builds throughout the year. We continue to prioritize new centers and markets with strong demand and solid unit economics to support sustainable, profitable growth. Encouragingly, our 2025 class continues to ramp above pre-pandemic levels, underscoring the commitment of our franchisee partners and the effectiveness of our grand opening playbook. And we're applying those insights in an effort to set our 2026 openings up for success. As we look to finish the year strong, I'm confident in the path we're on and the progress we're making. We are confidently taking action, having built the better data, sharper insights, and a clearer view of what's within our control to keep the system healthy and moving forward. We're using that visibility to make smarter decisions, focus on the levers that matter most, and drive consistent execution across the business. While results can fluctuate quarter to quarter, we believe The work we're doing now is building lasting strength and setting the stage for sustained growth. We have the right leadership, the right strategy, and the discipline to stay focused on what drives performance. The momentum is building and the opportunity to head is significant. I've never been more confident in where we're headed. With that, I'll turn it over to Tom to walk through our Q3 financial results and share more about our outlook for the year. Tom? Tom Kim: Thank you, Chris. Before I begin my remarks, I'd like to remind everyone that our discussion of growth rates on this call will refer to the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024. Now to our results. We delivered another solid quarter, underscoring the progress we're making on our strategic priorities in this pivotal transitional year. Our performance reflects disciplined execution, a strong business model, and a continued momentum in the initiatives that are strengthening our foundation for sustainable growth. Saints Door sales grew 20 basis points year over year. System-wide sales decreased 0.8% to $238.2 million, driven primarily by the impact of closed centers. As we continue to build out our marketing and operational capabilities under our new leadership team, we are gaining clear visibility into what's driving performance, and where targeted actions can strengthen guest engagement and traffic. Comp trends were strong through July and mid-August, before softening in the latter half of August and September. This was driven in part by short-term factors within our control that we've since addressed. The utilization of our enhanced data insights has already informed changes across the system, and we expect to see the benefits reflected in mature center traffic over the coming months. We ended Q3 with 1,053 centers, down 1% year-over-year. We opened three growth centers during the quarter and closed nine, resulting in six net closures, which was better than our expected closure range of 15 to 16, driven by a shift in the timing of anticipated closures and the progress we're making in our strategic initiatives with franchisees. Total revenue of $54.2 million decreased approximately 1.2 million, or 2.2%, primarily driven by lower contributions from wholesale product and retail revenue as a percentage of system-wide sales. As expected, gross margin increased modestly to 73.3%, in part due to a higher mix of royalty, marketing fees, and product margin improvements. SG&A expenses decreased $4.5 million to $13 million, primarily driven by timing of payroll and benefits, professional fees, and marketing spend. Advertising expense decreased $0.8 million due to the timing of spend within the fiscal year. Adjusted EBITDA of $20.2 million increased 9.6% from $18.4 million in the prior year period. Adjusted EBITDA margin increased 400 basis points to 37.2%. This reflects our continued focus on profitability, cost discipline, and operational efficiency, all of which contributed to significant margin improvement. Q3 results also benefited from the timing of certain operating expenses, including marketing and technology spend tied to our strategic initiatives, which will shift into the fourth quarter. Net interest expense increased to $6.5 million from $6.3 million in the prior year, and income tax expense increased to $2 million from $0.8 million last year. Adjusted net income increased 14.2% to $10.7 million from $9.3 million last year. Lastly, as a housekeeping item, as of November 7, 2025, there were 43.7 million Class A common shares outstanding, and 20.7 million potentially dilutive shares related to Class B shares and outstanding equity awards. Turning now to the balance sheet. Our $40 million revolver remains fully undrawn, and we ended the quarter with $73.6 million in cash and $387 million outstanding under our senior secured notes. Our net leverage ratio at quarter end was 3.9 times and would have been approximately 3.7 times, excluding the $16.1 million in stock buybacks executed over the trailing 12 months, which includes $0.4 million in excise tax related to 2024 buybacks. As of quarter end, we had $4.1 million remaining under our current $50 million share repurchase authorization. Our franchise model continues to produce consistent free cash flow, providing us both the flexibility and financial strength to maintain a disciplined capital allocation strategy. In Q3, year-to-date, operating activities generated $45.2 million in net cash compared to $2.2 million of investing cash outflows. Our whole business securitization structure remains a source of stability, allowing us to meet debt obligations safely, invest in the brand, and maintain a healthy balance sheet in a dynamic macro environment. Turning now to our current outlook for the balance of 2025. Starting with our unit expectations for the year, we are narrowing our closure range to between 35 and 40, which reflects timing shifts in anticipated closures and progress made on our initiatives to strengthen the health of our network in partnership with our franchisees. We continue to expect 12 gross openings in 2025, resulting in 23 to 28 net center closures for the full year. Moving to our financial outlook. As we've discussed in prior quarters, our guidance for 2025 reflects a balanced view of our transformation progress and the expected timing benefits from our strategic initiatives. As we approach the end of the year, our results are tracking within our previously communicated outlook, enabling us to reaffirm our financial guidance for the year. We continue to expect system-wide sales of $940 to $950 million, and same-store sales to be flat to up 1% for the full year. Our adjusted EBITDA outlook remains unchanged at $69 to $71 million, reflecting continued discipline execution and cost management. Full-year revenue remains in the range of $205 to $209 million, reflecting stable transaction trends and initiatives to support franchisee health. While we continue to see steady progress across our strategic priorities, new guest acquisition remains pressured and we expect to see more improvement in 2026. We continue to plan for advertising expenses slightly above 3% of system-wide sales. On tariffs, we've continued to stay ahead of potential impacts by partnering closely with our suppliers and further diversifying our sourcing. These ongoing efforts to optimize our supply chain give us confidence in our ability to manage cost pressures and maintain our EBITDA outlook. Finally, we continue to expect adjusted net income between $31 million and $33 million, reflecting an approximately 23% effective tax rate before discrete items. In summary, our financial guidance remains unchanged, and the progress we've made to date gives us confidence that we're on track for the remainder of the year. The strategic groundwork we've established from strengthening franchisee alignment and enhancing guest analytics to refining our marketing playbook is beginning to take hold. We're encouraged that these initiatives are reinforcing the foundation of our business and positioning us for sustainable long-term growth. As we continue to execute with focus and discipline, we expect to see greater consistency and stability in our top-line performance. We remain confident in our ability to navigate 2025 within our expectations and position the brand for meaningful growth in 2026. With that, operator, please open the line for questions. Operator: Thank you. As a reminder, to ask a question, please press star 1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star 1-1 again. We ask that you please limit yourself to one question and one follow-up. Scott Siccarelli with Truist. Your line is now open. Josh Young: Hey, good morning. This is Josh Young on for Scott. So it sounds like the revamped marketing efforts are showing solid early results in terms of re-engaging some of those less frequent guests. Can you just give us any quantification in terms of the lift that you're seeing there, and how do you think that can look as we move into 26? Yep. Chris Morris: Hey, Josh. This is Chris. Yeah, here's what I can tell you is... We are seeing, so there are three main things that we're focused on on top line growth. One is marketing tactics aimed right at existing guests. Two is a focused effort on new guest acquisitions. And three is ops execution. So your question is more around existing guests. We have seen quite a bit of ability now that we have developed robust reporting around our guest behavior and we're able to group our guests into a certain set of routines, we have more insight than ever before into how to intercept those guests to drive behavior going forward. Adding to that has been our focused effort partnering directly with our franchisees to grow our contactability number. So when we started the year, we only had the ability to contact about 38% of our guests. Today we have 60%. We have an ability to contact 60% of our guests. And so, as you can imagine, that just gives us so much more opportunity to engage with our guests, and we know when we do that we have a greater chance of being able to drive behavior going forward. And so, through that effort, we have been able to, through a focused effort, to take a non-routine guest and start to drive them into routines. And we are seeing an improvement in our frequency. I don't, you know, I really don't want to get into the habit of disclosing, you know, specific frequency numbers across all those different bands, but I can tell you that we've seen meaningful progress in that ability, and it gives us a lot of confidence as we move forward. Josh Young: Got it. That's helpful. Thank you. Yep. Operator: Thank you. Our next question comes from the line of Dana Telsey with Telsey Advisory Group. Your line is open. Dana Telsey: Hi. Good morning, everyone. As you talked about the cadence of the quarter, what did you notice about your core consumer? How is it different? How is it the same? What are you seeing from Wax Pass sales and how is that trending? And regional trends, anything California versus other areas? And then I just have a follow-up. Chris Morris: Okay. All right. Good morning, Dana. Yeah, this business just continues to be very stable. Wax path sales, we're seeing a slight uptick on a year-over-year basis in wax path sales. When we look at our total core guest, our core guest, it's very stable. It's been stable throughout the entire year. So, you know, we're not seeing any meaningful movement there. And so that gives us, you know, that stability just reinforces our confidence as we move forward. Our big opportunity is everything that I just walked through with Josh. Our big opportunity going forward is to build on that stability by, one, engaging with our existing guests to drive more frequency, two, partnering with our operators to drive more new guest retention, and three, to continue to build on all the success that we've seen on our marketing tactics around new guest acquisition. So when all that comes together, we believe we're going to be poised for long-term sustainable growth because we're starting from such a strong position of strength. Not many brands have the stability that we have in this brand. In terms of regional differences, we've actually seen throughout the year, we've seen some improvement in California where we continue to see more weakness in is in areas like New York, Philadelphia, DC. But having said that, I'll tell you, it's not a situation where you have three or four markets pulling down the entire company. We see relative consistency across the entire country. But if there's more weakness than one area or the other, it's those three areas, New York, Philadelphia, and DC. But we've seen some improvement in California. Dana Telsey: Got it. And then just on the center openings and closings as you move forward, thoughts on more closings, less closings, openings? Is there any difference in cost of opening, different construction or configuration of a center that you're looking for, and how you're thinking about closings go forward? Thank you. Chris Morris: Yes, sure. So we are in the throes right now of building out our business plan for 2026 and partnering directly with our franchisees on what those business priorities are. And so in February, the next time we get in front of all of you, we will provide guidance on exactly how we see 2026 playing out. What I can tell you is we're very pleased that we're now narrowing the range on closures. We started the year saying 40 to 60, and now we're saying 35 to 40. And some of that is timing. So some of those closures are moving into 2026, and some of it is just improving the partnership with our franchisees and starting to make progress on our initiatives. So we do expect closures next year. We're still in the process of sizing that up. What I can tell you is with respect to NCOs, we continue to target that by the end of 2026, we will return to net positive growth from that point forward. So that's consistent. We've been saying that from the beginning of 2025, and we still believe we're on track to do that. So the way that'll play out next year is, There'll be closures in the beginning of the year, but then when we move to the end of the year, we'll be in a positive position. And you have to remember that when we started, basically our NCO development was on pause. So in order to go from something that's on pause to returning to growth, there's a lag time. We're working closely with our franchisees on sizing up what growth looks like next year and We're pleased with that pipeline and how that's shaping up, and I'll share more of that with you in February. Operator: Thank you. Our next question comes from the line of Jonathan Kopp with Baird. Your line is now open. Alex Conway: Yeah, good morning. This is Alex Conway on for John. If I could just ask again about the units. As you just mentioned, cutting the guidance for closures for this year, what are you still seeing out of the units that are having to close? What are the main holdups, and what's really giving you that confidence that those pressures are going to alleviate by the second half of next year? Chris Morris: So the units that are closing are low-volume units, and they've been low-volume units from day one. Uh, and the reason they're low volume is just a variety of different reasons. Um, you know, bad real estate, uh, you know, bad market, um, you know, in some cases, you know, uh, franchisees just had, you know, some other, uh, unique circumstances that they were managing through, but, but it's mainly, it's just all low volume units. And, uh, and so we've worked closely with them and to understand, You know, what's the, you know, where is this unit? How is this unit performing? What are the chances that we can get it back up to profitability? And we just had a number of units that when we went through that exercise, we did not feel like that, you know, that it made sense for those units to continue to open. It's ultimately the franchisee's decision, but we're partnering directly with the franchisee to, you know, assess that situation. Um, lease expiration date really plays a big role in this, you know, because obviously the franchisee is still on the hook for the lease if they close before the expiration date. And so we're, um, as we've kind of sorted through our portfolio, we've, uh, first understood the financial performance and then also understood lease expirations. And that's how we've, uh, been able to kind of get our arms around the risk of closure, uh, here in 2025. And as we look for 2026. In terms of, you know, our confidence that, you know, by the end of 2026, you know, we'll be back into NCO positive growth territory is, you know, we've got, you know, we really have our arms around just the overall health of the portfolio, and so we feel confident that we have a good grip on where the communication and partnership with our franchisees just continues to get better and better. And so that gives us confidence that we're not going to be surprised in a material way. And then secondly is we are seeing a lot of green shoots throughout the business. And so as our team has dug in and worked directly with our franchisees, it's becoming very clear where the opportunities are. And what has me excited is Not only do we know where the opportunities are, but there is a shared passion across the network for addressing those opportunities. So we're seeing improvement in our ability to target existing guests to drive frequency. We're seeing improvement in our ability to effectively scale our acquisitions on new guest acquisitions. And we have alignment on what we need to do operationally and improved reporting to highlight where the opportunities are. And I just believe the combination of all that is going to put us in a position to where we can really start seeing some improvement into 2026. Alex Conway: Great. Thanks for all that, Keller. And then maybe just as a follow-up on the modeling side, it seems like through the first three quarters you drove decent EBITDA growth year over year. And obviously, guidance is showing that below for the full year. Are there any unique factors to Q4 that we should be thinking about that's kind of causing the lower year-over-year growth? Tom Kim: Thanks, Alex. So, what we comment is we still believe in the full-year guidance that holds relative to top line with our comp trajectory and what we're seeing in the system. And then on the bottom line standpoint, as we've guided and reiterated to the EBITDA, that still holds as well, and we're very confident in delivering against that. Now, when you take the two components of top line and bottom line and what that implies, you can see that from a yearly standpoint, the adjusted EBITDA target ranges in that 34% range. When you look at and take a step back and look at the whole year as a whole, and this is what you're calling out. There are some timing situations going on that will play out through the year, but we are very confident as you look through the modeling and you level out through the year to those targets and the bottom line implication, that that's the dynamics that will play out in Q4. Operator: Thank Thank you. As a reminder, to ask a question at this time, please press star 1-1 on your touchtone telephone. Our next question comes from the line of Simeon Goodman with Morgan Stanley. Your line is now open. Simeon Goodman: Hey, good morning, everyone. First, I want to ask about new guest acquisition. It seems like it's a big, big piece of the three-pronged approach. Can I ask what your hypothesis is on what is holding it back? If there's anything regionally, it's broader marketing if there are certain markets that are just more mature. So why has that been tougher than you've expected to turn? Chris Morris: A combination of factors. One, just having robust data, having the right data analytics to gather the right insights to then know what decisions to make and how to pivot. Our team... I've been with the company now for 10 months, and then I feel very fortunate that I've been able to attract an incredibly talented group of individuals. Those individuals have onboarded and then started to not only develop the reporting, but then to develop the tactics to test and learn to get better and better. And so a lot of it is just knowing exactly how to drive the most effectiveness through marketing dollars. And I think, again, that's one of the reasons why we are so enthusiastic about where we are at this stage in our journey because all that work that we've been doing over the last several months is now really starting to take hold and we feel much smarter and we're seeing the results of that improved intelligence actually making an impact on our ability to scale. So just being able to build all that out has taken some time. I would say our brand, you see us, I mentioned in the prepared remarks that we hired a new brand agency to work with us closely on developing a brand identity that will help us make more progress in high-valued acquisitions. And so we think that there's a big opportunity to just inject new life into the brand. And we're doing that in close partnership with our franchisees as well, just so we can use, leverage all their years of experience with this brand to help guide that. But we're very excited about that work. And that's underway right now. And we will be, you'll start seeing that show up in the market in 2026. So a combination of the right intelligence along with a freshened, lively brand brand aimed at high-valued acquisitions, we think that combination is really going to pay off. Simeon Goodman: Okay. And thanks for that. And the follow-up is, can you give us a sense of guest count versus ticket in the quarter? And then what is the right model or mode for the business? Is it flat guest count, I'm sure you'd want it up, but can it be flattish and then you can grow with price or it has to be positive guest count with some level of price as well? Chris Morris: Our reporting practices are we don't provide that level of granularity, that breakdown. But to answer the second part of your question, ultimately we want to drive traffic into the centers. We believe that is our very sharp focus is to generate long-term sustainable traffic count growth. Uh, I do think in the realities of the business, uh, we can't do that just alone. We have to also be mindful of ticket. And so we're trying to take a really balanced approach. Uh, so this will never be, you know, you're not going to see our team driving traffic, uh, through promotions, um, you know, a deep discount and promotional type of tactic. we're going to be very conscious of attacking both sides of that. So ultimately, we want to get to long-term sustainable traffic count growth along coupled with smart ticket growth. And that ticket growth can come in the form of price increases as well as add-ons. So as we are focusing on building out the reporting, the capabilities to be able to engage with our existing guests, it puts us in a better position to deliver a message to that guest in a way that's going to resonate to drive more incremental spending, either through services or retail product. And so that's, you know, ultimately that would also drive ticket. So it's not just going to be price. It's going to be a combination of all of those. So that was a long way of saying we're going to take a balanced approach. Operator: Thank you. And I'm currently showing no further questions at this time. I'd like to now turn the call back over to Chris Morris for closing remarks. Chris Morris: All right. Thank you, everyone. Thank you for your time today and your support. We look forward to sharing with you our progress update in February and walking through our plans for 2026. Have a great day. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Hello, and thank you for standing by. Welcome to FTC Solar's Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you would need to press 11 on your telephone. You would then hear an automated message advising your hand is raised. To withdraw your question, please press 11 again. I would now like to hand the conference over to Bill Michalek, Vice President of Investor Relations. Sir, you may begin. Bill Michalek: Thank you, and welcome to FTC Solar's Third Quarter 2025 Earnings Conference Call. Before today's call, you may have reviewed our earnings release and supplemental financial information, which were posted earlier today. If you have not reviewed these documents, they are available in the Investor Relations section of our website at ftcsolar.com. I am joined today by Yann Brandt, the company's President and Chief Executive Officer, Cathy Behnen, the company's Chief Financial Officer, and Patrick Cook, the company's Head of Capital Markets. Before we begin, I remind everyone that today's discussion contains forward-looking statements based on our assumptions and beliefs in the current environment and speaks only as of the current date. As such, these forward-looking statements include risks and uncertainties, and actual results and events could differ materially from our current expectations. Please refer to our press release and other SEC filings for more information on the specific risk factors. We assume no obligation to update such information except as required by law. As you would expect, we will discuss both GAAP and non-GAAP financial measures today. Please note that the earnings release issued this morning includes a full reconciliation of each non-GAAP financial measure to the nearest applicable GAAP measure. With that, I'll turn the call over to Yann. Yann Brandt: Thanks, Bill, and good morning, everyone. I'm glad to be with you again to share the continued and exciting progress that FTC Solar is making to position the company as a leading single-axis tracker provider in the market. A path that continues to be clearer every day for us through the technology we bring to the market that is looking for additional competition. It was one year ago that I joined you for my first earnings call as CEO of FTC Solar. I'm pleased to say that over that year, the company has been on a recovery and growth trajectory, and our third quarter results represent a great mark of traction and continuation of that progress. Third quarter revenue and adjusted EBITDA both came in above the high end of our guidance ranges. Adjusted EBITDA was at the highest levels in five years and one of the best in company history. Compared to a year ago, third quarter revenue was up 160% and represents our highest quarterly revenue level in eight quarters. More importantly, we are continuing to improve our positioning, strengthen our balance sheet, improve our daily execution, and enhance our product innovation, resulting in faster speeds of installation for our customers. All of this while gaining traction with existing and key new customers. We remain on an impressive growth trajectory. 2026 is setting up nicely, and I see our long-term upside as even greater than I did a year ago or even just three months ago, especially as we continue to execute. On execution, we have been working to enhance all aspects of our daily operations, working to make the business better, stronger, and more resilient each day. We're continuing to optimize our global supply chain, including for geographic capability, flexibility around tariffs, and reducing landed costs. We're also increasing our capabilities at our Alpha Steel facility to best support customer domestic content needs while increasing access to 45X credits. We're ensuring that we're engaging with customers early and often, understanding their needs, and creating value for them. And we're optimizing our product roadmap and providing customer service that goes the extra step. Speaking of progress, I'd like to take a moment to share a bit of insight into some of the steps involved as FTC Solar looks to move up the market share leaderboard. We've been doing these things since I joined, but there's quite a bit of activity that happens below the surface and may shed some light on why we highlight qualitative traction in our presentations. Since we've launched our 1P Pioneer tracker, we have embarked on the process to secure purchase orders. That process involves several layers, approvals from IPPs that will own the project, focus on how we deliver service, O&M software platforms like SunOpps and SunPath. This ABL process is about the long-term operations of the site. In the past year, Pioneer has been vetted and added to dozens of approved vendor lists. EPCs have similar vendor approval lists that focus a bit more on how the product is procured, designed, delivered, and installed. EPCs are learning one by one not only how easy and fast our tracker is to install, but also how robust our supply chain is. I may be biased, but I also find that we have the most responsive team in the market, led by seasoned solar professionals that have decades of relationships in solar, something that I'm very proud of. Just this quarter, we were approved for procurement by one of the largest EPCs in North America. MSAs don't just make for good PR. It means that two companies typically negotiate agreements for procurement, making it easier for us to contract when the project's near the start of construction. This quarter, we highlighted an MSA with one IPP, but we also have non-volume-based agreements with large EPCs that make contracting easier in the future. We hope to share some exciting developments on that front as we move ahead. As we go through these processes, one thing we notice is that our tracker does best when people see it and touch it. Every company talks about how fast they are, but when people see it and have that moment, it tends to be quite impactful. And that has led to some positive traction for us post-RE Plus. Since then, we've been hosting EPCs at our Austin demonstration facility so they can install it for themselves and see how easy it is. We've also built demonstration rows at operation centers for EPCs, an important step forward towards contracting. Starting this quarter, we're taking the show on the road with a new demonstration trailer. Now that some of the regulatory noise has lessened, we see many opportunities to capture new business, thanks to the benefits and labor that we provide that are so badly needed by our customers. We track this progress internally, and we'll continue to give you updates as we take the steps to make FTC Solar the market leader I know that it can be. On the product front, we believe that we have what is unquestionably the fastest and easiest to install tracker in the marketplace. This is not from some third-party study that backs into results, but from the actual measurement of workers installing our tracker. Today, FTC Solar's independent row 1P architecture, where each row is controlled by a single motor, is aligned with the majority of the market and is the future of the industry. It is also significantly cheaper to install without expensive electrical work to power heavy-duty multi-row motors. Independent row 1P architecture has been known for benefits in uptime, ground access, maintenance, and slope adaptability, leading to higher production for asset owners when matched with the right software. As these benefits become more important and as developers increasingly utilize software to optimize individual row positioning to capture up to 4% additional output, we believe the share of the market will only continue to improve. Matched with center-mounted slew drives, only a few tracker vendors, including FTC Solar, have both slew drives and single-row architecture, and we believe we have the best solution. Our constructability, which can be built from piles to mounted modules with an efficiency of 0.053 labor hours per module, we believe is unmatched in the solar industry, and there is at least 20% more labor savings to be had. Already at 0.053 labor hours per module, we believe we are nearly two times faster to install than our largest peers. In fact, we recently posted a video on LinkedIn showing a crew of four installing a 75-module row in less than an hour, and I would encourage everyone to view it. This efficiency is driven by our innovative Python clips, our slide and glide rails, and open trunnion design, and power cinch clips. And this productivity is something that any customer crew can achieve with our tracker, and I encourage every EPC to review this for themselves. This is crucial as labor shortages are increasingly a pinch point for the industry and are expected to continue. And as labor continues to increase as a proportion of total project cost, and as the industry looks to increase the use of robotic solutions, including for construction, we believe our trackers are better suited there as well. With fewer fasteners and overall fewer components to be installed, clear robotic interface advantages, including hardware-free module placement and consistent geometric reference points, our tracker allows modules to glide and hold into a proper position, self-supported and aligned. Once you slide the module to the rail, it is fixed there and ready to take cinch clips, which can be done with one hand or one robotic actuator. There's no need to hold on both ends, no need to move back and forth to align bolts, no need to hold multiple bolt components, and no need to twist or turn anything, which means it dramatically reduces the human or robot labor and complexity relative to competing solutions. Over the past few quarters, I've shared with you all of the great progress we have made in taking the great underlying 1P platform and expanding our product lines to ensure we have the right products to meet customer needs across their portfolio. This has included adding solutions for high wind zones up to 150 miles an hour, compatibility across module types, the ability to make module changes late in the design cycle, terrain-following features to reduce and eliminate the need for land grading, and introducing the widest range of stow in the industry at up to 80 degrees to maximize hailstow flexibility and customization. And we're continuing to innovate. Last quarter, I told you about our next-generation extra-long tracker for 2,000-volt systems, which will enable reduced EVOS and O&M costs while increasing power capacity by 33%. Today, I'll share with you that we're also introducing a washerless tracker, which is exactly what it sounds like. We're eliminating the need for washers for any connections. It may sound simple, but it takes the part countdown by an additional 15% or more on a tracker that we already believe has fewer parts than competing solutions, furthering our mission to make the most constructible trackers on the market, reducing labor time and complexity. Through continued innovation in R&D and software, our goal is to be twice as fast as our largest peers. We see this innovation push through our long-term agreement and our mission to add to the more than 7.5 gigawatts of MSAs we have added over the past year, the most recent being the 1-gigawatt agreement we announced in Q3 with Livona Renewable, which has a first project expected to begin in early 2026. Supported by our strong and expanded product line and a strengthened balance sheet, we have seen a meaningful step forward in our discussions with customers and prospects. In the US, our largest market, our pipeline has expanded with more customers and larger projects. This includes many new prospects, and notably new and renewed discussions with multiple industry leaders, including tier-one EPCs. We're gaining visibility, we're getting more access, and more projects are available for us to win. Internationally, we are also continuing to make progress, strengthening our team, building up relationships, and advancing pipeline and project discussions. We hope to have much more to share on the customer front in the coming weeks and months. So as I look back on the past year, it's possible I didn't fully anticipate everything that was going to happen on the regulatory and legislative front, which included uncertainties around ITC 45X and tariff adjustments, just to name a few. And the net result of these things did push some expected new business to the right. But overall, we have been on a steady recovery over the past year and are in a greatly enhanced position with adjusted EBITDA hitting the highest levels in five years. Quarterly revenue levels were up 160% year over year and at their highest levels in eight quarters. We have new cash on the balance sheet and additional capacity with a financing arrangement, our product offering is more compelling and complete than ever, with a great deal of features added. And I'm confident that our growth will continue, including as we convert the 7-plus gigawatts of MSAs. We have made great progress over the past year, and to me, this is just the start. I often tell the team, don't judge us based on where we're starting, but rather where we're going. So look at all that we have accomplished in one year, the product, the balance sheet, the MSAs, the pipeline. Now looking ahead, we position our technology as an independent row tracker with slew drive. This is the dominant technology, same as the market leader, and structurally advantaged in our view. Checking the boxes and expanding the market with our software suite and 80-degree hailstow. Of course, the market leader has significant volume advantages. So does the market value innovation? It does, and not all trackers are created equal. There is a great new innovation in IP, and the market wants more competition. Where our trackers excel perhaps the most is in constructability. Can great technology that is a labor accelerator like ours gain traction in the market that will face only increasing labor constraints? We believe so. We have been getting on the AVLs of more top developers and EPCs, further expanding our customer and prospect list. In addition to our current momentum, gaining only a small portion, even 5% of the top developer projects to start, would provide an incredible growth rate and a long runway for us. And as we grow, we gain those volume advantages to become even more efficient and give back more to our customers who can now complete more projects with the same amount of labor using our tracker and have a healthier, more competitive tracker market. We have done a great deal to prepare the company and lay the groundwork, and now more than ever, I believe the company is in a position to do great things, lock in many new projects, and reap the rewards of the great work and innovation. And we're aiming for a top market share position that is now possible. I have never been more optimistic about the long-term potential of the business, and I look forward to providing you with continued updates on our progress in the months ahead. With that, I'll turn it over to Cathy. Cathy Behnen: Thanks, Yann, and good morning, everyone. I'll provide some additional color on our third quarter performance and our outlook. Beginning with a discussion of the third quarter, revenue came in at $26 million, which is above the top end of our guidance range of $18 million to $24 million. The outperformance versus our expectation was largely driven by a pull forward of material production to meet customer demand that was originally expected in Q4. The quarterly revenue level represents an increase of 30% compared to the prior quarter and an increase of 157% compared to the year-earlier quarter, fueled by higher product volumes. GAAP gross profit was $1.6 million or 6.1% of revenue, compared to a gross loss of $3.9 million or 19.6% of revenue in the prior quarter. Non-GAAP gross profit was $2 million or 7.7% of revenue, marking the company's return to positive gross margin for the first time since late 2023. This turnaround was driven by the additional revenue I mentioned, which was at a higher margin. This quarter's results compared to a non-GAAP gross loss of $3.5 million in the prior quarter and $3.9 million in the year-ago quarter. GAAP operating expenses were $9.3 million. On a non-GAAP basis, operating expenses were $8 million. This compares to non-GAAP operating expenses of $8.1 million in the year-ago quarter and $500,000 in the prior quarter. Moving to GAAP net loss, as you may know, the warrants which were issued as part of our recent capital raise are subject to liability rather than equity accounting and therefore require us to reflect changes in the warrant fair value each quarter in our GAAP financials. Essentially, if our share price goes up during the quarter, it will show as a non-cash loss, and conversely, a share price decline would show as a gain. The positive share price appreciation we saw in the third quarter drove an increase in the fair value of the warrant liability of about $16 million. This is a non-cash charge that does not reflect the underlying business performance and will be excluded for purposes of adjusted EBITDA but does impact our GAAP financials. So including that, GAAP net loss was $23.9 million or $1.61 per diluted share, compared to a loss of $15.4 million or $1.18 per diluted share in the prior quarter and a net loss of $15.4 million or $1.21 per diluted share post-split in the year-ago quarter. Adjusted EBITDA loss was $4 million, which excludes a net of approximately $20 million for the change in fair value of the warrant liability as well as certain transition and special stockholders meeting costs in September 2025 and other non-cash items. This represents our best adjusted EBITDA loss since 2020 and a substantial improvement from adjusted EBITDA losses of $10.4 million in the prior quarter and $12.2 million in the year-ago quarter. As Yann noted, during the quarter we strengthened the balance sheet by closing our previously announced term loan financing, which was $37 million before fees. As you may recall, this was part of an overall $75 million financing facility with the remaining $37.5 million in funding available to the company as may be needed in the future upon mutual agreement between the company and the investors. So overall, very good progress on the financial side, with some of the best numbers we've seen in many quarters as well as new cash on the balance sheet. We are energized by the progress and remain focused on delivering long-term value. Finally, one subsequent event to note following the quarter end, we acquired a 55% interest in Alpha Steel, which was owned by our joint venture partner. As you may know, Alpha Steel is a manufacturing joint venture partnership established by the companies in 2023 to manufacture steel components, including torque tubes, rails, and other items. Following the close of the transaction, which occurred this week, FTC Solar became the sole owner of Alpha Steel, giving the company full control over a key contributor to our domestic content capability and unlocking additional profit potential while ensuring full compliance with the guidance included in the OBBB. Alpha Steel was modestly profitable in the third quarter. And while we haven't given overall guidance for 2026 yet, we would expect Alpha Steel to be accretive to adjusted EBITDA. This acquisition is expected to drive lower COGS, improved gross margin, and higher adjusted EBITDA. With that, let us turn our focus to the outlook. Our targets for the fourth quarter call for the following: revenue between $30 million and $35 million, which at the midpoint would represent another 25% growth sequentially. Non-GAAP gross profit between $3.8 million and $8.2 million or between 12.7% and 23.4% of revenue, which even at the low end would represent our highest gross margin as a public company. Non-GAAP operating expenses between $8.2 million and $9 million, and finally, adjusted EBITDA between a loss of $5.4 million and breakeven. At the midpoint of this range, it would also represent our best results as a public company. In 2026, we expect to continue our growth trajectory and we'll plan to provide additional detail on our next call. With that, we conclude our prepared remarks, and I'll turn it over to the operator for any questions. Operator? Operator: Thank you. Then wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from the line of Philip Shen with ROTH Capital Partners. Your line is open. Philip, check to see if you're on mute. Philip Shen: Yes. Sorry, I was on mute. Congrats on the strong quarter. Congrats on the bookings as well. I was wondering if you could share a little bit more about the booking with Livona in terms of, and I know you gave a lot of detail already, but how much more could there be beyond even what you guys have shared? And then talk to us about the international bookings that might be coming and the other activity you're having with customers? Thanks. Yann Brandt: Thanks, Phil. Appreciate the comment there. Look, I think Livona is indicative of a little bit of the type of clientele that we've been working hard on. You know, working on developments in the early stages and especially projects like this where it's a developer that has a tremendous track record in previous endeavors and now has several projects that we ultimately wrapped into this gigawatt MSA. You know? And I think just from a standpoint of the team at FTC Solar, and something that's akin to what we're working on with many developers is helping them maneuver the process. Right? You know, we have obviously, experience in project finance. You know, our core expertise in supply chain, and helping those projects get to close. So that's where we've been hard at work there. Obviously, there's a tremendous appetite for energy and generation coming from these solar developments. So sometimes it's just as you know, straightforward as getting the projects to the point of construction. And we have been investing in supporting folks like Lavona in early stages of design, where many of our peers won't. Right? They will wait for the project to get to RFP. But we'll spend time in design and helping them get the project to this standpoint, and that's borne good fruit. On the international front, we're, you know, I think we're quite optimistic. A couple quarters ago, obviously, we announced a 100-plus megawatt project in Australia that we've been working on. And we think that's a strong market. Australia in particular because of the labor constraints and the labor costs, an FTC Solar solution in that one case ended up being millions of dollars cheaper to install. And, you know, we're continuing that notion. Looking at additional markets where we might have a product solution, but always making sure that we have a value proposition. But, you know, ultimately, the tracker market really has a lot of customers that have this global portfolio. Right? It is not uncommon for me to spend time with a customer internationally that's working on a project in the US. Or a US customer that's acquiring a project internationally. So it is becoming quite a bit of a global supply chain. You know, both global on the procurement part, but also on the customer support portion of it. Philip Shen: Great. Thanks, Yann. And great job to you and the team for getting to gross margin positive and looking strong. So you've given a Q4 guide, but I was wondering to what degree could you give us some commentary on how you expect things to either margins or revenues to trend through '26 or through '26. I know you don't have an official guide, but insofar as you can give us some qualitative commentary or even quantitative, that would be fantastic. Thanks. Yann Brandt: Yeah. No. I think, look. As I said in my prepared remarks, I'm very optimistic about where we're heading. Right? We're looking to take share of the overall 1P tracker market, obviously, coming into the space as the latest entrants focus, you know, with built on innovation and having a little bit of a different mousetrap for EPCs and IPPs to consider, especially EPCs that are looking at labor savings and schedule constraints. You know? So while quantitatively not much to give you on 2026, you know, I think it's fair to say at this point that we expect to be adjusted EBITDA positive for the full year in 2026. You know, I'm optimistic about where we'll be on both margins and revenues. You know, our focus has been on just execution day after day, I think the third quarter results speak to that. We hope to continue that trend. And when we have, you know, more guidance to give, we certainly will. Philip Shen: Okay. Thanks. Just to put a little bit here, Yann. Do you think you guys remain gross margin positive through Q1 and Q2? Yann Brandt: Yeah. I don't think I'm going to leave it at where I think we'll be for the year. You know, thinking that it's fair to say that we'll be adjusted positive for the full year. As soon as we have definitive numbers to give for, you know, any period of time, Q1, Q2, we certainly will. Philip Shen: Okay. Great. Thanks, Yann, and I look forward to more good news ahead. Thanks. Yann Brandt: Yeah. Appreciate it. Thanks, Phil. Operator: Our next question comes from the line of Sameer Joshi with H.C. Wainwright. Your line is open. Sameer Joshi: Yeah. Good morning. Thanks for taking my call. Congrats on all the great progress. Just a couple of questions from me. The $37.5 million that was drawn down and the or rather the remaining that is expected to be drawn down, are there any plans to do that now that you have almost $25 million cash on hand? Nearing positive adjusted EBITDA? Yann Brandt: You know, right now, we're focused on the business. Thank you for the question. Right now, we're focused on the business. You know, I think, you know, it's nice to have the facility. It certainly is helpful with customers that are looking at FTC Solar's balance sheet, you know, so that it's been helpful in the conversations to advance our commercial efforts this quarter. I think right now, we're continuing to focus on the blocking and tackling of, you know, getting our bookings in, you know, continuing to work on our execution, you know, just sort of the story that third quarter results tell, that certainly the trend line, but it's I would characterize it as it's nice to have the facility and, you know, the additional cash that we've been able to bring in at the end at the beginning of the quarter and, you know, we'll see how the execution goes from here. Sameer Joshi: Understood. A couple of quarters ago, you had announced a five-gigawatt five-year, sort of a master agreement. Are you seeing a sort of pull forward from that and maybe it may be completed in less than five years by Recurrent Energy? Yann Brandt: Let me give the framing of all of our MSAs, which now stand at over 7.5 gigawatts, you know, these are the investments that we've been making and helping developments get to the, you know, get to the start of construction or notice to proceed. You know? And we expect many of which and some MSAs have started to roll projects into our bookings and revenue. So that's certainly nice to see. And, you know, it's an important tool for us because it is a, you know, it is a relationship between two parties. And it's not just as I said in my comments, you know, for good PR. It takes a lot of the back and forth in terms of the actual procurement contract and brings it to the forefront. Right? We know where we sit in terms of the relationship contractually. And it allows us to contract more quickly. But, fundamentally, you know, all business, especially the solar business, is built around relationships. You know? It's not hard to see that there's, you know, in most MSAs, it's built around, you know, people trusting people and, you know, the relationships that we've all collectively had at FTC Solar over the past couple of decades with other solar professionals. So we do, you know, there's a lot of enthusiasm, especially from my spot, on, you know, sort of burning off and leveraging those MSAs and bringing those gigawatts through. But also increasing the number of MSAs that we possibly enter into with others, you know, both people that we're currently looking, you know, talking to about it. And those that already have signed MSAs. And I will say because, you know, it's sort of a sideline on my comments, you know, not all MSAs have gigawatts attached to it. Right? It's the relationship can be non-volumetric, especially with EPCs. Because it does set this, you know, preferred vendor type of relationship where we know and have reviewed collectively what the terms and conditions would be of a purchase order. So we, you know, spending more time with, you know, top-tier EPCs, including EPCs that are really growing quite nicely in the solar space. There's such a need for, you know, with all of the labor constraints, there's also quite a bit of, you know, new EPCs that are growing, you know, significant volumes that we're spending time with. Bringing to our demonstration facility, etcetera. So we're quite bullish on the use of the MSAs. And see the customers really appreciate those as well. In some cases, even, you know, bringing projects into exclusivity under those MSAs. So it's all progressing quite nicely. In building the, you know, the mid-funnel that will ultimately lead to more backlog and bookings. Sameer Joshi: Thanks for that color. That was really helpful. May I squeeze one last one on working cash management accounts receivables, are substantially elevated. Does that mean part of the answer is, the answer that you gave is that responsible for this high AR? Yann Brandt: Yeah. I'll let Cathy give a little bit of color. But just, you know, obviously, you know, if you kind of compare where we were and where we are, you know, having run manufacturing businesses in the past, there's always going to be a little bit of a linear relationship between, you know, the growth on the top line and, you know, the rest of the balance sheet, but I'll let Cathy give a little bit of color. Cathy Behnen: Thanks for the question. Yes. That is it really reflects kind of the increase in the active activity that we're seeing. And as our projects go through the production and execution phase, you'll see that, that timeline continues to grow with the growth in the revenue. Sameer Joshi: Understood. Thanks a lot, Cathy. Thanks for taking my questions. Yann Brandt: You bet. Thanks, Sameer. Operator: Thank you. Ladies and gentlemen, as a reminder to ask a question, our next question comes from the line of Jeff Osborne with TD. Thank you. Most of our questions have been asked, but just a couple of questions on the Alpha Steel joint venture. Did the historical ownership structure of that, Yann, impact any bookings? And potentially this now 100% owned by you, would that free up anything? Were any folks proactively or preventatively concerned about FIAC rules? Implementation? Yann Brandt: Yeah. That's a good question, Jeff. It wasn't a, you know, over concern or question. You know, I think it was a good housekeeping for us. You know, it does create, you know, an additional lever for us in terms of operating of the site, especially, you know, as the company grows, you know, pushing the volume through Alpha Steel. But, you know, with the global supply chain, it's another tool for us. You know, obviously, we have a lot of contract manufacturing around the world for project-based both in the US and external. But certainly now, you know, it creates a 100% certainty for the market knowing that FTC Solar is the owner of Alpha Steel and, you know, sort of our domestic torque tube manufacturing, some of the ancillary parts and fasteners that we're looking to increase the capacity of Alpha Steel for, you know, will give us additional access to 45X credits, but, you know, also make it easier for folks around, you know, their project-level regulatory compliance, etcetera. Jeff Osborne: Got it. That's helpful. Maybe just two other quick ones. I might have missed it, but did you folks or Cathy disclose what the tariff impact is on the business, just given all that's going on with tariffs and then potential Supreme Court involvement there? Yann Brandt: We did not. Most I think previously, we have talked about tariffs and contractually the pass-through to customers. You know? And I think the commentary I said on previous calls is, you know, tariffs do create pressure on project-level CapEx. Right? So if the cost increases back to the customer, you know, there needs to be some flexibility to the PPA. So we've certainly seen, you know, offtake agreements have to, you know, take a little bit longer to negotiate. You know, obviously, when the tariffs came into effect, we were a little bit smaller as the business in terms of volume. So we were able to maneuver pretty easily with our global supply chain. But, you know, so we've never disclosed the tariff number itself. You know, for the most part, really just a pass-through to the overall project supply chain. Jeff Osborne: Got it. And the last one I had is just, I think two of your three competitors have made significant M&A around piles, foundations, etcetera, trying to differentiate on different characteristics of terrain. Versus you folks are leaning into the installation time, 2,000 volts, etcetera. What's your thoughts as it relates to your competitiveness as it relates to difficult soils or frozen soils, rocky terrain, sloped terrain, etcetera? Yann Brandt: Yeah. It's a great question. And, you know, just to kind of give a little bit of color, you know, obviously, you know, the tracker itself really comes into two parts, right, which is, you know, where we are, you know, as the tracker system itself and then the foundations as a separate. You know, for us, the thing where we're differentiated quite substantially is our top of pile loads are significantly less than all of our peers. And there's a couple of, you know, sort of structural reasons, but the way that our system is designed and built, you know, actually does come up at times where we are the better tracker for foundations that one of our peers may own. You know, for the most part, still available to, you know, still available to our customers. Most piles, the relationship between the foundation companies actually doesn't usually sit with the, you know, with the tracker vendor like ourselves. It sits with the end user themselves that are trying to find the right solutions. But there's, you know, there's quite a deep portfolio of foundation solutions in the market. You know, I certainly hope that our peers are, you know, recognize the advantages for their customers, you know, for that at times would want one of their solutions. And wouldn't, you know, sort of leverage that to their sole advantage. I think that would be bad for the way that customers would view their relationship overall. It really speaks to, you know? And I'm going a little bit off script here, but we need a healthy market dynamic. Right? And competition in the market is really inherently important. You know, I've always viewed the solar industry as such, and I made it in the comments is that the customers want healthy competition. But overall, we haven't had any issues around, you know, access to foundations. There are several solutions for each problem. And we've been able to maneuver it. But our focus has been just having a really wide product portfolio. Obviously, 1P releasing the 80-degree hailstow. You know, having the best top of pile loads in the market, but also, you know, really helping customers where their pain point is, which is labor. Right? 0.053 labor hours per module is not an insignificant KPI productivity KPI for EPCs. It is nearly two times faster than what I've been told personally folks have with some of our peers. You know, those are real hours. Those are real possible schedule, you know, reductions that are going to be both CapEx helpful, but also the ability for margin expansion at the EPC level. So that's why we're seeing a lot of EPCs take a look at us and the opportunities they have in leveraging the constructability. You know, and then further down the road, the advantages we have structurally with robotics, etcetera, where, you know, these third parties are coming up with incredible solutions that we'll be able to leverage into. You know, that our customers will be able to leverage into installing the tracker even faster. Jeff Osborne: Perfect. Appreciate the detail. Yann Brandt: You bet. Operator: Thank you. I'm showing no further questions in the queue. Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Ladies and gentlemen, thank you for standing by. Welcome to Legend Biotech's Third Quarter 2025 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would like now to turn the conference over to Jessie Yeung, Vice President of Investor Relations and Finance. Please go ahead. Jessie Yeung: Good morning. This is Jessie Yeung, Vice President of Investor Relations and Finance at Legend Biotech. Thank you for joining our conference call today to review our third quarter of 2025 performance. Prior to this call, we issued a press release announcing our financing results for the quarter. You can find the press release on our IR website at legendbiotech.com. Joining me on today's call are Ying Huang, the company's Chief Executive Officer; Alan Bash, the company's President of CARVYKTI; and Carlos Santos, the company's Chief Financial Officer. Following the prepared remarks, we will open up the call for Q&A. We have our President of R&D, Guowei joining the Q&A session. During today's call, we will be making forward-looking statements, which are subject to risks and uncertainties that may cause our actual results to differ materially from those expressed or implied here within. These forward-looking statements are discussed in greater detail in our SEC filings, which we encourage you to read and can be found under the Investors Section of our company website. In addition, adjusted net income or loss is a non-IFRS metric. This month, IFRS financial measures is in addition to and not a substitute for or superior to measures of financial performance prepared in accordance with IFRS. There are a number of new locations related to the use of these non-IFRS financial measures versus the closest IFRS equivalents. However, we believe that providing information concerning adjusted net income or loss and adjusted net income or loss per share enhances and investors' understanding of our financial performance. We use adjusted net income or loss as a performance metric that guides management in its operation and planning for the future of the business. We believe that adjusted net income or loss provides a useful measure of our operating performance from period to period. Our press release includes IFRS to non-IFRS reconciliation for these measures. With that, I will now turn the call over to Ying. Ying Huang: Hello, everyone. Thank you for joining us today. The third quarter was marked by significant milestones that I will elaborate on momentarily. And we are looking forward to presenting new data at the Annual American Society of Hematology meeting in December. During the third quarter, CARVYKTI net trade sales were approximately $524 million, which is an 84% increase year-over-year. We have now treated over 9,000 patients with CARVYKTI, and our launch remains the strongest CAR-T launch to date. In the U.S., the majority of our utilization is in the earlier line setting. Additionally, we continue to see a lot of excitement about our long-term survival data presented at ASCO on CARTITUDE-1. As a reminder, 1/3 of patients with heavily pretreated relapsed/refractory multiple myeloma remain alive and progression-free for 5 years or more after being treated with CARVYKTI. This is especially impressive considering that today's bridging protocol did not exist at the time of the CARTITUDE-1 trial, and patients in the trial had received a median of 6.5 prior lines of therapy. Ever since our CARTITUDE-1 results were first presented in 2020, we have been setting new standards for efficacy in CAR-T for multiple myeloma. We're now changing that standard to curative potential. In fact, a recent article from Nature stated that 1/3 of the treated individuals had no evidence of detectable myeloma after 5 years without further therapy, an outcome widely thought of as a prerequisite to consider using the term cure. This kind of efficacy for heavily pretreating patients is unprecedented in the field of multiple myeloma. On the regulatory front, the FDA recently approved an update to include CARVYKTI's overall survival benefit in this label. This was based on an analysis from the Phase III CARTITUDE-4 study showing a statistically significant improvement in overall survival for CARVYKTI compared to the standard of care therapy in patients with relapsed refractory multiple myeloma after 1 to 3 prior lines of therapy. Importantly, CARVYKTI is the only approved CAR-T in multi-myeloma with a demonstrated overall survival benefit in this label, which represents another step forward towards educating the physician community on CARVYKTI's unique profile as we work to bring CARVYKTI to more second-line patients in need across the United States. We expect label updates such as these and previous REMS updates will continue to improve the patient experience and enhance access in both community and academic settings. In fact, I want to share findings from a recent survey that was presented at the International Myeloma Society Meeting, where 237 patients and 267 physicians were represented across U.S., U.K., Spain, France, Germany, Italy, Japan and Brazil. In terms of what patients value when selecting a new line of treatment overall survival was clearly the most important attribute for patients. Also on the topic of survival, we are pleased that there will be two oral presentations on CARVYKTI at this year's upcoming ASH meeting. Before we dive deeper into this, I want to highlight that there will be an oral presentation at ASH on LCAR-G39D, our first-in-class allogeneic gamma delta T CAR-T cell therapy targeting both CD19 and CD20 in adults with relapsed/refractory B-cell non-Hodgkin's lymphoma. As you may have seen in the abstract, we are pleased that preliminary efficacy showed an encouraging response rate and sustained durability in patients. Turning to the CARVYKTI oral presentations. Based on the CARTITUDE-4 subgroup analysis, 80% of patients with standard risk cytogenetics were progression-free and off treatment at 2.5 years. In patients with standard risk disease who achieved MRD-negative CR at 1 year, this rate increased to 100% -- the low rate of progression events in CARVYKTI treated patients with standard risk cytogenetics shows the profound benefit of a single infusion in this population. z. In the second oral presentation on CARVYKTI, based on correlated biomarker data, longer PFS is associated with better immune fitness at baseline and stronger immune responses post CARVYKTI infusion. As observed in peripheral blood and within the tumor microenvironment of patients with relapsed refractory multiple myeloma in CARTITUDE-1 and CARTITUDE-4 studies. The peripheral immune fitness was more pronounced in patients with one and prior line of therapy versus three prior lines of therapy and beyond, where deterioration plateaued. Similarly on this topic, on the next slide, featuring data we presented at ASCO, you can see that while CARVYKTI has a favorable benefit risk profile across all different subgroups and lines of therapy, its PFS improvement diminishes with each line of therapy, which is why it's important to follow the latest International Myeloma Working Group guidelines on obtaining CAR-T therapy as early as first relapse. This slide also contextualizes the significance of our efficacy data from CARTITUDE-1, where there were 6.5 million prime lines of therapy and CARVYKTI still demonstrated a median PFS of 35 months. As we approach 10,000 annualized dose manufacturing capacity, we continue to extend our leadership in cell therapy through further advancing the field of CAR-T in multiple myeloma. We recently initiated another study called CARTITUDE-10, which is a Phase II multi-cohort trial to further characterize the efficacy and safety of cavity, which speaks to our commitment to investigating new product goals. Furthermore, a recent blood paper on effective bridging strategies across 20 centers found that among the 119 patients who proceeded to CAR-T therapy after receiving [indiscernible] including 98 patients receiving CARVYKTI. Not only were these deep responses, sustained soluble B-cell maturation energy decline and consistent CAR-T expansion. There were also no cases of peripheral neuropathy, parkinsonism, or colitis reported. As we focus on educating the physician community on our overall survival benefit based on the extensive CARVYKTI data that's been generated. We're also taking the opportunity to remind physicians about the latest research on bridging therapy and ALC monitoring as well as the most recent IMWG guidelines on CAR-T. In a few moments, you'll hear from Alan on how we and our partner, Johnson & Johnson, are bringing CARVYKTI to more multiple myeloma patients in need. In light of the demand, we continue to see across the U.S. and overseas we are moving full steam ahead on our capacity expansion plans. On a final note, on CARVYKTI before we turn to our pipeline, we continue to expect to complete enrollment for CARTITUDE-5, 6 this year. We believe the CARTITUDE-5 and 6 trials are key to moving CARVYKTI into the frontline setting. Looking ahead at our long-term growth, in addition to looking forward moving carve into the frontline. We remain focused on solidifying our leadership in cell therapy more broadly. We are making progress in new indications such as solid tumor and NHL programs. as you have seen with the data at recent medical conferences. Additionally, we are looking forward to the ribbon-cutting ceremony tomorrow for our new research facility in Philadelphia, where in vivo delivery will be one of its key focuses, positioning us well to pursue this area of innovation. We remain excited about this new frontier of cell therapy. To sum up, Legend is the largest stand-alone cell therapy company with over 9,000 CARVYKTI patients treated as we forged the path to cure. With a cash position of nearly $1 billion, we are investing in our core differentiators in cell therapy and remain focused on delivering operational efficiency in order to ensure durable long-term growth. We continue to anticipate achieving profitability for CARVYKTI by the end of 2025 and company-wide profitability in 2026, excluding unrealized foreign exchange gains or losses. And with that, I'll pass it over to Alan to provide an update on CARVYKTI. Alan Bash: Thank you, Ying. CARVYKTI remains the undisputed leader of CAR-T sales in a single quarter with net trade sales of $524 million during the third quarter. In addition to being the highest selling CAR-T ever, CARVYKTI has also achieved a CAGR of 111% since launch, which is unmatched in this class. Despite these record-setting numbers, we continue to believe there is significant opportunity for further market penetration for CARVYKTI, given the magnitude of the addressable multiple myeloma market opportunity for CAR-T. While we are continuing to expand our footprint of authorized treatment centers in the U.S. The next frontiers of growth are also expected to come from expanding our presence in the community setting in the U.S. and expanding our market leadership outside the U.S. Diving deeper into our performance this quarter, CARVYKTI net trade sales grew 84% year-over-year and 19% from the second quarter. Our global growth was driven by continued share gains and site expansion. U.S. net trade sales of $396 million grew 53% year-over-year and 11% quarter-over-quarter. Quarter-over-quarter growth in the U.S. was primarily driven by continued strong demand with 60% utilization in earlier-line settings. Regarding our performance outside the U.S., we had sales of $128 million which is nearly 5x the amount over the same period a year ago and represents a 58% increase quarter-over-quarter. Our performance outside the U.S. was driven not only by continued growth in Germany, but by strong launches in Spain and Belgium. In terms of supply tailwinds to further build upon our CAR-T market leadership in multiple myeloma, I would like to provide some incremental updates since the second quarter. We are proud to announce that our manufacturing network growth and continued efficiencies mean that we are now able to fully supply the demand and there is no longer a wait for patients. We expect both supply and demand will continue to expand together to help ensure a seamless customer experience. In the U.S., we are currently in the final stages of the expansion of the Raritan facility that will significantly expand capacity to support continued U.S. market growth. As it relates to supporting growth outside the U.S. I am pleased to announce that our Tech Lane facility recently initiated commercial production. This is an important milestone for serving patients in Europe to meet the increasing demand. Turning to demand drivers. First, of course, is the recent unprecedented long-term survival data that we presented at ASCO on CARTITUDE-1, second is our demonstrated overall survival benefit, which has now been added to the U.S. label. We are focused on educating both treating and referring physicians in the academic and community settings on how CARVYKTI is the first and only multiple myeloma cell therapy via a single infusion to significantly extend overall survival versus standard therapies and on our long-term survival data. In the community setting, we continue to raise awareness, drive referrals and educate oncologists and nursing staff on managing patients once they transition back to their offices. And as Ying mentioned, we are also educating them on the IMWG guidelines and the importance of treating eligible patients as early as possible to take advantage of T cell fitness and potentially improve survival outcomes. Lastly, in the U.S., the number of authorized treatment centers now stands at 131 sites across the U.S., with about 1/3 of our sites being community and regional hospitals, which serve an important need in the community setting. We are also pleased with the discussions we've had with many stakeholders about the need to bring CAR-T even closer to the community and with adoption by community networks or practices. Our early experience with Virginia Oncology associates indicates that this is an area of large need and opportunity. Currently, we estimate that 80% of myeloma patients live within 5 miles of a CARVYKTI authorized treatment center. While that is strong coverage, we think we can do even better over the next 1 to 2 years. And outside the U.S., we will continue to benefit from the new launches. And with reference to new markets, we are proud to say that we have currently launched in markets around the world. With the help of our partner, Johnson & Johnson, we have activated 246 treatment sites. We continue to be excited about bringing CARVYKTI to more eligible patients in Denmark, Sweden, Belgium, Luxembourg, Spain, Portugal Saudi Arabia and the private markets of Israel and the U.K. With the approval of commercial production at our Tech Lane facility, we are well on our way to being able to treat over 10,000 patients on an annualized basis around the world. Now it's time to take a closer look at the financials. So I'll turn the call over to Ying as we provide a warm welcome to Carlos. Ying Huang: Thank you, Alan. As many of you already know, in August, we announced that Carlos Santos who's joining Legend as our new Chief Financial Officer. I'd like to extend my gratitude to Jessie Yeung for her outstanding leadership and significant contributions in guiding our finance organization prior to Carlos arrival. Carlos joins Legend from AstraZeneca where he held various positions over the last 10 years, including CFO for U.S. oncology, CFO of Latin America business and acting Aria VP of the Latin America Commercial unit. His extensive experience in the biotech sector and wealth of financial leadership expertise will be invaluable as we continue to execute on our commercial and clinical plans and seek to attain company-wide profitability in 2026. We are pleased to welcome Carlos to our executive team. Carlos Santos: Thank you, Ying. And good morning, everyone. I am very excited to join Legend at this pivotal moment in its global development and growth. After my first 3 months here and visiting our Tech Lane facility, I can confidently say that there is a clear vision and path for Legend to be the global leader in cell therapy. I also see a strong path to profitability through our revenue growth and operational efficiency. First of all, CARVYKTI continues to grow at a strong rate with net sales up 84% year-over-year in the third quarter. And as Alan mentioned, we have a number of tailwinds that should continue to generate demand in the vast multiple myeloma market. I believe there's a significant opportunity for growth in the community setting, especially with our unique outpatient administration advantage, which provides physicians with flexibility. As Ying has mentioned previously, both CARTITUDE-5 and CARTITUDE-6 approvals have the potential to significantly expand the opportunity for our already proven commercial therapy, CARVYKTI. In terms of Legend's operational efficiency, our operating expenses as a percentage of revenue have significantly improved over the last 12 months due to our focus on disciplined expense management and increasing automation throughout our organization, and we continue to look at ways to further unlock efficiencies. Drilling deeper into our third quarter, we delivered solid financial results with CARVYKTI net sales up 84% year-over-year. Total revenues were $272 million, driven by collaboration revenue growth of 84% year-over-year. In Q3, we delivered a $40 million net loss, but was $19 million on an adjusted net loss basis, after excluding items that are not representative of the company's core business, such as $15 million in stock-based compensation. Importantly, our operating loss of $70 million in the same period 1 year ago was reduced by 38% to a $43 million operating loss during the third quarter. This meaningful improvement in operating results was driven by our operational efficiency and disciplined expense management. Even though we continue to invest in our robust pipeline and supporting the second-line indication launch and our manufacturing capacity. Our third quarter gross margin on net product sales remained consistent at 57%. As expected, R&D expense on an IFRS basis grew slightly to $113 million or 42% of revenue, while SG&A on an IFRS basis grew 10% from the prior year to $87 million in the third quarter or 32% of revenue. Overall, we have made significant progress on operating cash flow generation as evidenced by our $29 million in cash flow from operations this quarter and we are continuing to make strides towards profitability. Our adjusted diluted earnings per share was a negative $0.05 compared to a negative $0.11 for the same period last year. Now turning to capital allocation. We have maintained a strong balance sheet with approximately $1 billion in cash and equivalents and time deposits. We will continue to prioritize disciplined expense management as we fund our operating and capital expenditures, including future innovation until we achieve company-wide profitability, excluding foreign exchange gains and losses, which we anticipate in 2026. In summary, our third quarter results demonstrate continued commercial execution supported by CARVYKTI's unique clinical outcomes along with increased operational efficiency. We are also pleased with our progress towards pioneering next-generation cell therapy treatments as we leverage our unique innovation model to maximize our cell therapy platform. And now it's time to take your questions. Operator, we're ready for the first question, please. Operator: [Operator Instructions] The first question comes from Gena Wang with Barclays. Huidong Wang: Carlos, congratulations on the new position. since you closed the remarks, maybe I will ask you. I know 2026, we should start to see positive cash flow and if given the robust revenue that CARVYKTI could generate. You actually in 2026, there could be very decent in full cash. So maybe I wanted to ask you with this increased cash in hand, what will be the best way to prioritize the cash and then in terms of the pipeline assets? And then I have a very quick question regarding the ASH abstract. I do know both J&J and Legend actually withdraw a presentation of a comparison between IMAGINE-1 and CARTITUDE-1. So maybe, Ying if you can or Alan, if you can give a little bit more insight regarding the rationale behind it? And then lastly, very quickly regarding the Raritan site. I know you did say like a second half, that should be complete completion of expansion. And given we only have less than 2 months left. Should we expect everything is on track? Is the -- I know that the last step would need to be signed off by the FDA. And should we expect that should happen before year-end '25? Carlos Santos: Okay. Thank you, Gena. This is Carlos. In terms of your inquiry about how we're going to allocate cash given our profitability expected in 2026. I would say that first and foremost, we want to maximize our CARVYKTI franchise. So this is our priority in terms of capital allocation. And as you know, we've been making significant capital investments in manufacturing and expanding our network. At the same time, we will also continue to significantly invest in our CAR-T platform. We're going to be looking into every opportunity to accelerate our existing programs that will strengthen our market leadership in CAR-T, including business development. Alan Bash: And the yes, let me answer the other two questions. In terms of Raritan, the plan is very much on track to be able to have the facility expansion completed, and we've already started the submission process for that. So everything is on track for us to head into 2026 with the annualized doses for 10,000 doses, and that is complemented by, of course, as you know, the news we announced around the commercial production in Tech Lane. So now we have all four nodes operating on a commercial basis. I did want to just address your question on the abstract. So there was a poster from ASH that was withdrawn and due to the limited data available for ANIDA cell in the public domain at this point, the abstract was drawn in alignment with the authors, and we are looking forward to future opportunities to share the data. Operator: And our next question will come from Terence Flynn with Morgan Stanley. Terence Flynn: I just wondered -- I know you provided us with the ATC numbers, both in the U.S. and rest of world now. But as you look into 2026, where do you think those can go realistically? And then on the manufacturing capacity, again, great to hear all the progress there. You mentioned the 10,000 unit number now. Again, when you kind of complete all of these ongoing efforts, where should that number end up approximately? Alan Bash: So regarding the ATC as you mentioned, we're at 131. Actually, we have an update. We have 132 sites in the U.S. So combine that with the OUS, we're past the 250 mark for total number of sites, and that's a recent update. We continue to update this every single day as we watch it. And to your question about where it could go in '26, we have our sights on continuing to expand, for example, making sure that we have full coverage in the 160-plus sites that some of the competition has. So as you hear from competitors around their network, we're very confident that in 2026 by the time they are launched that we'll be able to have coverage in the same vein. I will also add that as we look even ahead, the total number of sites in the U.S. that have either started to do CAR-T or have seriously expressed interest and have started the process is something in the 180 number of sites, [ Mark ]. And we believe that we are well on track to be able to get there over time and then continue to expand further into the community setting. I will also address your question about the plan beyond 10,000. So with all four nodes in the network, that being in the U.S., obviously, Raritan, the expansion there, Novartis, which continues to ramp for us and deliver and of course, in Europe with the increasing demand in Europe, we have the Tech Lane facility now coming online with full commercial production and Obelisc continuing to drive production, as well and gaining efficiencies. This is a network that we believe will enable us to get eventually to 20,000 doses annualized. And that's through not only continued ramp in all four of the nodes but also continued efficiencies, lowering the out of stack, improving the manufacturing success rates. Operator: And our next question will come from Eric Schmidt with Cantor. Eric Schmidt: As you move from a supply-constrained environment to a demand-constrained environment, what do you think the most important things are that you need to do to mobilize demand to fulfill your new supply and how quickly do you think you can get to essentially near full utilization of the 10,000 doses? Thank you. Alan Bash: This is Alan again. So in terms of accelerating demand, we have a number of plans in place to be able to do that. First of all, it's all about making sure that physicians around the U.S. and around the world, really fully appreciate the benefits of treating earlier. And that's something that we have certainly gotten traction on, whether that's data that's coming out in the real world or some of the app flow-throughs that you see in presentations. There's a broader and greater appreciation for the fact that efficacy is better when you treat in earlier lines the safety, the incidence of neurologic events and other adverse events is lower when you have patients treated in the earlier lines. You have improved T cell fitness, which is another aspect to have closer that's going to be at ASH. And as you see from the ASH posters, we also have data that clearly suggests that at the out spec rates are lower. So where everything is better earlier, and that's a key message that we'll continue to drive not only with the current authorized treatment centers, but also the referred in the community. Just to add one more point. We have a network as we talked about and the footprint today, but our community strategy is really based on not only continuing to leverage the 1/3 of sites that are in the community, the 1/3 of sites in our current network at our community and regional hospitals, but also driving referrals from the physician practices that are not in the network. And then ultimately, we're having conversations with some of the large practices such as the one you saw from our announcement earlier in the year in VOA to enable the community to actually start to administer CAR-T themselves. Eric Schmidt: And any sense on when you get to full capacity? Alan Bash: Well, I think as we said today, we are -- our capacity is now meeting the demand in the marketplace. And as we're going to be increasing capacity, we'll also be increasing the demand as well. Eric Schmidt: I meant in terms of having almost 10,000 doses to dose in the near future. Do you think there's a time line to utilize that capacity? Alan Bash: Well, I think we'll be able to achieve those goals in 2026, and that translates into the consensus revenues that we see in 2026 or that have been issued for 2026. So we're very much on track for that. Ying Huang: Eric, this is Ying. Maybe I'll tell you that from where I sit, the latest data suggests that we're really running at nearly 100% capacity utilization at all four nodes right now. So we continue to expect that all four nodes will be utilized at very high capacity next year as well. Thank you. Operator: And our next question will come from Jessica Fye with JPMorgan. Unknown Analyst: This is [ Dana ] on for Jess. I really have just one question here. I wanted to ask you if you guys could throw some color on anything that would be watching out for at ASH from a competitive standpoint? Alan Bash: I think in the absence of information -- sorry, it's Alan here. It might be the absence of information that is most relevant. We're fully ready and prepared to compete with a potential [ BC ] of a CAR-T that's coming out potentially next year. But I will say that we haven't seen the Kaplan-Meier curve from ANIDA Cell yet. So it's quite hard to know what that data is going to look like. But I will say that we're going to continue to be raising the bar on efficacy we have a significant advantage in terms of the efficacy that we've seen in the CARTITUDE-4 population in the subgroups in the earlier lines in CART-4 and over the next year, we're going to be also demonstrating the fact that just as we did in CAR-T. CARTITUDE-1 that CARTITUDE-4 has the long-term durability that physicians and patients are asking for. So we're very comfortable with the data that we're going to be presenting in terms of efficacy, and it's really just a question of when we might see that data from competition. Guowei Fang: Yes. And this is what -- on the pipeline side, we are also going to release early clinical data for our internal [indiscernible] platform. And this is a product with a unique design and unique CMC process. We see a highly manageable safety profile and good expansion in oncology patients. The preliminary efficacy show encouraging response rate and also importantly, sustained durability. Operator: And our next question will come from Jon Miller with Evercore. Jonathan Miller: I'd love to dial in more on the community progress that you've made -- specifically in the VOA network, have you been treating patients there already? How has the uptake been going in that patient network? Do you have plans to expand beyond the Virginia network near term? And when you say that 1/3 of your sites are regional or community centers, I mean, I assume most of that is regional centers. Can you talk a little bit more about adoption expectations in the communities specifically as we head into '26? Alan Bash: Sure. Yes. So let me unpack that a little bit. We think about the community strategy on a number of paradigm. The first is the fact that we have in our current network, as you mentioned, sites that are already community and regional hospitals. And it's a mix because sometimes a large regional hospital will be servicing a community, and that's what we mean by that group. It's about 1/3 of the 130 or so space that we currently have. And we see that, that segment of our network is already contributing about past the growth that we see. So it's a very healthy, robust part of our network. It's going to continue to grow and it's going to continue to serve the community at large. The second part of the strategy is around engaging community physicians who are referred and we've been doing that over the last many months with our partner, J&J, we have sales teams and medical teams who are engaging fully with the referring network. We're building a lot of good information there for them. We're communicating on the profile we're communicating on the fact that referring earlier is better, and we're gaining traction there as well. The third leg of the journey, if you will, is then going to the community networks, and you mentioned VOA. So just to answer your question, yes, we have started to treat patients at VOA. The feedback has been positive so far. We're also learning a number of things about just how these community networks will need to be supported throughout their experience of coming online, but there is definitely plans to engage not only with VOA and continue to grow that network but also to engage with other practices throughout the next several months and into 2026. Jonathan Miller: And when you think about the community-specific practices here, I mean, I guess I'm asking about your ability to dose in settings where your potential competitors absolutely would not be able to dose at least not first, not just referring to academic centers, but folks getting treated in the community where competitors don't have reach. Can you talk about how that will evolve in '26? Alan Bash: Well, I think we're laying the groundwork for having that -- having all that presence in the community, but also to your point, we have about half of our current patients are treated in the outpatient setting. And by virtue of the fact that we have a median onset of the CRS in the clinical studies at 7 days. That means that increasingly, practices are comfortable with making sure that physicians can dose patients in the outpatient setting, they can be monitored. And then if they need to be readmitted for one reason or the other, they're able to do that afterwards. And in addition, as we've discussed before, the removal of the REMS is also an important tailwind because it's been enabling patients to have only 2 weeks of local modeling before they're able to go back home. And then also it removes the driving description of 8 weeks, and that's now down to 2 weeks. So that's another important factor for patients being able to get dosed get infused and then be able to be monitored more close to home and get back with their lives. Operator: And the next question will come from Yaron Werber with TD Cowen. Unknown Analyst: This is [ Dana ] on for Yaron. n an amazing quarter. I have a question on the ASH abstracts. I think there were two abstracts from Mayo and Moffitt suggesting that prophylactic dex doesn't seem to reduce the risk of delayed neurotox with CARVYKTI. And given those results, how are you thinking about adjusting your strategy for mitigating delayed neurotox? Are you considering any alternative regimens or thinking about amending any Phase III protocols? Ying Huang: This is Ying. I'll answer this question. So obviously, if you look at both the presentations asset, you see that ALC remains a very predictive marker. However, the dexamethasone prophylaxis may not be sufficient. And in fact, recently, you have seen publications from real-world studies, including the blood paper that was published in August, right? So we think that the most important factor is you need to treat those patients with high tumor burden with effective bridging regimen. And you will see actually quite a few assets coming out in the ASH next month, that various centers are using different recipes or different regimens. But again, all the commonality suggests that you have to use an effective bridging therapy. In fact, one of the PIs from Mayo, right, Dr. Lin recently said at IMS that you have to switch to a different effective regimen if the first one does not work. So the critical factor here is we have to bring the tumor burden down. And once you do that, you will not see adverse events such as neurotox colitis or CRS. So that is actually a trend we're seeing. Like I said, you will see more real-world data and also more presentations at ASH about this. Operator: And the next question will come from James Shin with DB. James Shin: I got a couple on CARTITUDE-10. I see fludarabine is being removed, but is there any change to cyclophosphamide dosing? And assuming this looks, I guess, to Legend standards, will this be somehow added to the label or formally, I guess, approved by the FDA and can be adopted broadly? Ying Huang: James, this is Ying. So you're right. We and our partner, Johnson & Johnson, recently initiated a Phase II study called CARTITUDE-10. And the first cohort would evaluate the fludarabine-free regimen for lymphodepletion. The reason being that we know fludarabine has been established as a neurotox factor here. So we'd like to see whether we can actually achieve similar level of lymphodepletion without using fludarabine. So that is already up and running. We're enrolling and dosing patients now. Now on your second question, we have to generate the data first. And of course, if the data is positive, we would potentially take that to the FDA to see if that could be included in the label. But right now, it's premature to say anything about the label inclusion. James Shin: Can I ask one more on the primary being MRD? Was that any insight from the FDA? And do you have any insight on MRD becoming formally a surrogate? Ying Huang: Yes. So James, regarding MRD as a potential registrational endpoint, we're continuing our discussion with the FDA. And also, we'd like to see under which setting in which line potentially can margin activity be an endpoint. But you have to stay tuned. And when we have more to say, we'll disclose about that. Operator: Thank you. the next question is going come from Justin Zelin with BTIG. Justin Zelin: I was curious if you could give us an update on outpatient administration, what percentage of patients are you seeing dose in the outpatient setting? And any update on the contribution of revenue from earlier lines versus later lines? Alan Bash: Yes. So I think I mentioned this earlier, outpacing based on claims data is about 50% of the patients currently and we continue to expect that will be growing over time. Although as we onboard new sites, sometimes they tend to start with patients in the inpatient. So the growth of the site network is also a little bit of a drag on the outpatient overall mix, but those sites that have converted into outpatient are doing so with good success, and it's enabling additional capacity at each site and efficiency. To answer your second question, we see about 60% of our overall scripts coming from the second through fourth line population. That does continue to grow, albeit a little bit more slowly than we had anticipated, but we see that evolution continue, and in fact, the fastest-growing part of that mix is in the third line. So what that tells us is that increasingly, there is adoption, there is acceptance and there's enthusiasm for bringing CAR-T and CARVYKTI specifically into the earlier line setting based on the CARTITUDE-4 data. Operator: And the next question will come from Mitchell Kapoor with H.C. Wainwright. Unknown Analyst: This is Katie on for Mitchell. Regarding your guidance for profitability by 2026, what milestones and roadblocks are kind of underpinning that? And what should we be keeping an eye on to understand if you're on track to hit that goal? Carlos Santos: Yes. Thank you, Katie. Our view on profitability has not changed. We actually expect to have profitability for CARVYKTI this year in 2025 and enterprise-wise or for Legend as a company in 2026. This is underpinned by our significant growth for the [ factor ] for CARVYKTI, and our management of operating expenses resulting in positive free cash flow in the year of 2026. Again, as we've mentioned, we have significant tailwinds in our revenue growth, and this should serve us well for profitability next year. Operator: And the next question will come from Ash Verma with UBS. Ashwani Verma: So just maybe like I'm trying to understand if I mix between the second to fourth line that you commented on third line you said there's a post comment. Can you give us a sense of how much is that? And just secondly, on the Majestic III data, like top line is available now, but just curious how that can start to impact the second line opportunity for you in any way? Alan Bash: Yes. So we wouldn't break down -- we're not going to break down the split between how much is coming from each line. But I think it is important that all of the lines of therapy on an absolute basis are growing. We're getting more and more patients in the second line, more and more patients than third, et cetera, et cetera. We also happen to be getting more patients in the later lines. That's just by virtue of the demand for CARVYKTI across all lines, and that's why the mix continues to be about a 60-40 split between the earlier lines of CARTITUDE-4 and the CARTITUDE-1 populations. But again, the -- where the growth we're seeing most pronounced is in the third line, and that's because, again, physicians are recognizing that they want to try to get patients with -- into CARVYKTI treatment as quickly as possible post first relapse or perhaps second relapse. Ying Huang: Ash, I do want to answer a question about Majestic III. First of all, we're really pleased that there could be potentially another regimen for patients in second line with multiple myeloma. And secondly, I want to point out that the commercial opportunity for this addressable market is very large. You're looking at about 80,000 to 100,000 patients in that segment. And thirdly, I think we are targeting potentially a different segment here, right? Because if you look at CARVYKTI, we want to emphasize that CARVYKTI has unmatched unprecedented survival data and also with durability. It's also a onetime treatment. So there is a certain patient population who really prefer that kind of a convenience, right, brought by a onetime infusion without further need for any other medication for myeloma. So that is how I view this market, and we don't really expect MAJESTIC III. Data will really impact the uptake for CARVYKTI in second line. Operator: And our next question comes from Clara Dong with Jefferies. Unknown Analyst: This is [ Jenna ] on for Clara. Could you give us some comments on your strong international growth? Maybe elaborate on -- where are you seeing the strongest demand and uptake now versus where do you see higher growth potential after Tech Lane comes on? And going into '26 and beyond, how do you foresee the Tech Lane capacity impact market share? Alan Bash: Yes. Outside of the U.S., which is obviously led by our partner, J&J, there's been strong uptake in Germany, Spain and Belgium, in particular, as well as the other markets that have launched. Many of the European markets to really see the value here of a onetime infusion, the durability that you get with the PFS and OS benefit as truly providing a strong value not only to patients but also to the health system. So there's a lot of support for using CARVYKTI earlier in the treatment paradigm, and that's encouraging. We continue to advance the launches that we've already had in the 14 markets around the world, which we listed in the presentation. And we're very excited to have Tech Lane now online from a commercial standpoint to enable the supply both between Tech Lane and Obelisc together, we'll be able to meet the capacity demand for the growing European launches. Operator: And our next question will come from Sean McCutcheon with Raymond James. Sean McCutcheon: A couple of quick ones from us. You noted improving out of spec rates. Can you speak to the trend as you see more real-world patients in the earlier line setting and ongoing efforts to push that out of spec lower? And any commentary on what you think is a feasible kind of minimum steady state there? And then secondarily, can you speak to any early impact of loosening REMS requirements through auto CAR-T and whether you're seeing an uptick in referrals for earlier line patients? Alan Bash: Yes. There is an abstract at ASH that's reviewing about 3,000 patient records for out of spec. And the out-of-spec rate is somewhere in the 6% to 9% accorded abstract and in fact, it's lower in the earlier lines. So it's very consistent with what we're hearing around earlier is better. is very consistent with the fact that the T cell is stronger in the earlier patients, and that's enabling a better dose and better viability and lower out of spec. And we'll continue to drive that down over time across all the nodes in the network, and we believe that, that's going to be very competitive with other products on the market. In terms of the REM, it's a little bit early. We're hearing sort of a mix of reactions from sites. One is that this is great news for patients and that it is enabling patients to get back home more quickly. Other sites are taking a little bit more of a wait-and-see approach in saying they're going to decide on a patient-by-patient basis. which patients were able to go back and which patients they want to keep more close to home. But it's going to be a consultation. The bottom line is it's a burden lifted and it's one that is enabling a more robust conversation about the fact that we can extend the benefit and the efficacy we see with CARVYKTI to more and more patients. Operator: I show no further questions at this time. I would now like to turn the call back over to Ying for closing remarks. Ying Huang: Thanks, everyone, for joining today's call. As you can see, we had a really strong quarter, and we continue to expect another strong quarter in the fourth quarter, as well as a very strong year in the next year, 2026. So I just want to say that we look forward to seeing everyone here at ASH because we and James are very confident about the efficacy of CARVYKTI and in fact, we will publish the data in an oral presentation of some data. That's not including the ASH abstracts. And we strongly believe that the data at ASH will raise the bar even further for efficacy. So we look forward to seeing everyone in Orlando. Thank you. Operator: Thank you. That does conclude today's conference call. Thank you for participating, and you may now disconnect.
Operator: Thank you for standing by. At this time, I'd like to welcome everyone to Katapult Holdings Third Quarter 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Jennifer Kull, Vice President, Head of Investor Relations. You may begin. Jennifer Kull: Welcome to Katapult's Third Quarter 2025 Conference Call. On the call with me today are Orlando Zayas, Chief Executive Officer; Nancy Walsh, Chief Financial Officer; and Derek Medlin, President and Chief Growth Officer. For your reference, we have posted materials related to today's call on the Investor Relations section of the Katapult website, which can be found at ir.katapultholdings.com. Please keep in mind that our remarks today include forward-looking statements related to our financial guidance, our business and our operating results as noted in the earnings release and slide deck posted to our website for your reference. Our actual results may differ materially. Forward-looking statements involve risks and uncertainties, some of which are described in today's earnings release and our most recent Form 10-Q and which will be updated in future periodic reports that we file with the SEC. Any forward-looking statements that we make on this call are based on our beliefs and assumptions today, and we disclaim any obligation to update them. Also during the call, we'll present both GAAP and non-GAAP financial measures. Non-GAAP financial measures should be considered supplemental to and not replacements for or superior to our GAAP results. A reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures is included with today's earnings release and is available on the Investor Relations section of the company's website. Finally, all comparisons are year-over-year unless stated otherwise. With that, I will turn the call over to Orlando. Orlando Zayas: Thank you, Jennifer, and welcome, everyone, joining us this morning. Before I jump into reviewing our Q3 progress, I want to take a few moments to discuss some of the highlights from our recently announced capital investment from Hawthorn Horizon Credit Fund. We filed an 8-K last week that detailed the $65 million investment that Hawthorn has made in our business. This investment allowed us to pay off our term loan in full, repay a portion of the amounts outstanding under our revolving line of credit and will also allow us to invest in growth opportunities. We're very excited about this transaction. We believe this investment will create a more efficient capital structure and provide more stable foundation for us to grow successfully executing on our operating strategy. We're also excited to welcome our new directors, including Derek to our Board and look forward to their input as we continue on our journey to create value for all our stakeholders. Please refer to the 8-K we filed with the SEC on November 3 for more details on the transaction. Now let's move on to Q3 results. When we entered 2025, we had 3 near-term priorities: one, increase top-of-the-funnel activity; two, find new ways to interact with our loyal and engaged customer base and enhance their user experience, and three, evolve our balance sheet and capital structure to create a strong foundation for growth. While we have an important holiday season ahead of us, I'm very pleased with the progress we've made against these objectives. Derek will review our operating progress in greater detail, but let me walk you through a few proof points that will show how well we've executed year-to-date. Regarding top of the funnel activity, one very important marker of our progress is our application growth. Through the first 3 quarters of 2025, we grew applications by 76%. This growth has positively impacted our business in several ways. Let me highlight 2. First, this application growth is a direct contributor to our ability to expand our customer base. During the first 3 quarters of 2025, we've grown unique new customers by 35% compared with 2024. And this includes nearly 47% growth in the third quarter. This is the fourth quarter of accelerating growth for this metric. Given our track record of high repeat rates, bringing new customers into the Katapult marketplace can create significant downstream value. This influx of new customers, coupled with our strong repeat rate, allowed us to grow our total customer base a little more than 30% during the third quarter. Second, in addition to attracting applicants, we are also growing Katapult app engagement. In the third quarter, monthly active users or MAUs grew nearly 49% when compared with activity in the third quarter of 2024. As we look down our engagement funnel, we believe that application growth and increasing engagement are 2 leading indicators for future conversion rate expansion and gross originations growth. As we've extended our consumer reach, our team has also done a terrific job of providing best-in-class experience to our existing customers. As a result, we sustained very strong NPS and repeat customer rates. During Q3, our NPS was 64 which was up year-over-year and 55.3% of our gross originations came from repeat customers. And our repeat customers are becoming increasingly valuable to the Katapult ecosystem. During the third quarter, LTV for this cohort of customers increased by about 5%. Our financial model gains even more power as it scales. And our success this year has established that we have the right product market fit to attract new consumers and the right offering to retain their loyalty. With this evidence in hand, we are confidently turning our focus to optimizing this top-of-funnel growth and pursuing strategies that should allow us to make our growth more profitable. The next 12 months will be a critical time for Katapult as we focus on our goals of growth and profitability. We believe we have laid the foundation cracking the code on accelerating top-of-funnel activity, streamlining our cost structure to reach a key inflection point. Nancy will speak in greater detail about how our evolving operating strategy is creating opportunities to both sustained growth while driving towards a higher margin profile. Before I turn the call over to Derek to review how we are approaching our next phase of growth, priorities and execution strategies, let me hit a few more highlights from our Q3 results. During the third quarter, we grew gross originations 25.3% and revenue 22.8%. Both of these results were within our outlook range. We also delivered $4.4 million in positive adjusted EBITDA, which was above our $3 million to $3.5 million range. With this quarter's performance, we now have delivered 3 consecutive years of gross origination growth and 10 consecutive quarters of revenue growth. We're so excited about the track record we've built and believe it's a testament to the strength of our product offering and our team's strong execution. The Katapult marketplace is thriving. We continue to generate new gross originations for our merchants and are allowing more and more customers to access the durable goods they need. During the third quarter, we saw strong growth for both total app originations and KPay originations. During Q3, total app originations, which are originations that start in our app but may be consummated elsewhere, grew 44% to $39.3 million. This means that approximately 61% of our gross originations started in our app marketplace. KPay originations, which are a subset of total app originations were $26.4 million and grew 66% year-over-year. We have grown quarterly KPay originations by more than 50% each quarter since we launched the feature in late 2022. Our marketplace performance is fueled in equal parts by the value we bring to our merchants and to customers. Merchants love Katapult because we help them capture incremental market share as well as wallet share. In the third quarter alone, we set nearly $13 million of gross originations to our merchants, further solidifying our role as a unique growth partner. Customers love us because we're obsessed with providing best-in-class customer service and we offer fair, transparent pricing they need to make their budgets work. Recently, we enhanced our user experience with new features, including access to higher lease lines for certain customers a new auto pay feature and a PayPal payment option. We want to deliver a wonderful holiday season for our customers, and we believe we are well positioned to do so. With that, I'll turn the call over to Derek to discuss our operating progress in more detail. Derek? Derek Medlin: Thanks, Orlando, and good morning to everyone. I want to echo Orlando's sentiments. We're very proud of the results we've delivered this year. We're executing well against each one of our core initiatives, and are looking forward to a great fourth quarter. Let's start with a few highlights of the progress we've made against our consumer engagement initiative. When we entered 2025, we set our sights on meaningfully increasing top-of-funnel activity, and that's exactly what we've done. As Orlando mentioned, total Katapult applications, which includes those coming in from direct, waterfall or app Marketplace and KPay increased 76% during the first 9 months of 2025 and grew 80% in the third quarter alone. We feel confident that we have the breadth of referral sources and acquisition channels in place to continue driving this top-of-funnel activity. But applications are just 1 ingredient in a full funnel ROI-positive customer acquisition strategy. We are very pleased with the growth we've seen in this area, but we cannot directly control the credit quality of the majority of the applications we receive, and over the last few months, we have seen application quality trend slightly downward. What we can influence however, is conversion. And to drive conversion higher, we are optimizing in 2 areas: underwriting and promotional activity. Let's start with underwriting. As it impacts the types of promotions we offer to consumers. Late in the third quarter, we tightened our underwriting decision in a few targeted areas, and this is already delivering positive results. We are already seeing the credit quality of our preapproved consumers as well as converted customers begin to trend up. We believe this tightened posture will also enable us to do an even better job of putting the most compelling pricing promotions in front of our best customers, which should be a driver of conversion rate expansion and have a positive impact on write-offs over time. While early, we have already begun to see our conversion rates increase, and we would expect this to continue as we further refine our pricing strategies. Our marketing strategy is also fueling our continued growth and is highly complementary to our pricing and underwriting strategies. When we launched the Katapult app in late 2022, we created a communications channel that would allow us to engage with consumers more directly. As we build scale on the app, we steadily increased the number of touch points and interactions with consumers, primarily through e-mail and SMS. Cross-shopping activity, where a customer has 2 or more current leases and these leases are with 2 or more different retailers continue to increase year-over-year. By this measure, cross-shopping customers who entered into multiple leases with more than 1 retailer grew about 64% year-over-year and represented about 13% of our gross originations during the quarter. Having more than 1 lease in cross-shopping are hallmark behaviors of an existing customer, and this was one of the key drivers of our increasing LTV among returning customers. Next up, let's dive into our app marketplace and KPay performance. As a reminder, when we talk about app marketplace performance, we are referring to the activity and originations that begin in our app and this includes transactions completed with KPay. Our marketplace allows Katapult to be a brand partner to our merchants. This means that even if a customer starts their journey in our app, they are able to interface with our merchant partners brands, websites and user experiences seamlessly allowing Katapult to become an extension of their brands. Customers then have the option to complete their transactions on a merchant partner site or within our app, giving them choice in their shopping journey. Since we were able to track their journeys, all of this activity is included in our total app marketplace performance data allowing our merchants and other partners to understand the impact of our marketplace can have on their growth. During Q3, the number of gross originations in our app marketplace grew approximately 62% year-over-year driven by the factors we've discussed earlier, healthy repeat customer activity, robust conversion, cross-shopping and our targeted marketing campaigns. These activities are helping us to bring more and more participants to our marketplace. A few quarters ago, we talked a bit about our efforts to increase our wallet share with customers by highlighting the availability of lease lines for lower-cost durable goods at or around the $300 mark. This quarter, KPay transactions of this size increased as a percentage of our total KPay-leased portfolio. Given our continued gross originations growth by both dollars and the number of leases, we believe we are successfully taking wallet share and that we are truly becoming a shopping destination for nonprime customers. KPay transactions continue to grow at robust rates. As a reminder, KPay and related activity refers only to those leases that are originated using our KPay feature to checkout. KPay growth originations grew 66% during Q3, which represented 41% of total gross originations. As it approaches 50% of our total originations, KPay has become an increasingly important driver of our business and one that we have direct control over. This is why we are so excited to see engagement with our app continue to increase. Orlando already mentioned our MAU growth. This growth has been supported by more than 1.2 million unique downloads and since the beginning of 2025, our app has been opened more than 11 million times. This engagement also drove our KPay unique customer count, which grew by about 76% year-over-year. This was also accompanied by another year-over-year increase in quarterly KPay conversion rate. Beyond the marketing and strategic pricing initiatives and the new features and functionality that Orlando highlighted earlier, we continue to look for other opportunities to surprise and delight our app users. For example, consumers can now lease from Apple, our most recent addition to our growing list of KPay enabled merchants. We believe we are executing well across our growth initiatives, including our strategies to engage with our merchants. During Q3, direct and waterfall merchants accounted for approximately 59% of total gross originations and gross originations from this group of merchants grew about 6%. If we exclude the home furnishings and mattress category from our direct and waterfall growth originations, our direct and waterfall gross originations grew approximately 42% year-over-year. Our team continues to execute strategies that compel merchants to want to do more with us. During Q3, we added approximately 46 new direct or waterfall merchants or merchant pathways to our ecosystem. As a reminder, pathways include new or existing merchant partners that launch a new website or an in-store experience that includes Katapult as a direct or waterfall LTO offering. These pathways provide new ways for consumers to discover and engage with our offerings. We also continue to work with our merchant partners to implement a variety of promotional strategies and future functionality focused on driving conversion and consumer engagement. We've already talked a bit about various pricing and lease line strategies that we're working on independently but we have also partnered with key merchants to deploy these strategies in combination with dynamic promotions. We continue to closely monitor the success and health of our top 25 merchants. This quarter, this cohort of merchants once again grew robustly. Gross originations grew 25% in Q3. We are also closely watching emerging macroeconomic trends and analyzing our potential impact on our non-prime consumers. Currently, we see the looming shadow of continued inflation as well as general market delinquency data that suggests non-prime U.S. consumers are finding it more challenging to meet their financial commitments, such as the much publicized data that we've all seen for car loans and repayment trends. We are also trying to assess the impact that the government shutdown is having on our core consumer. While each of these macroeconomic indicators and developments factor into our planning for underwriting and marketing, we don't run our business based strictly on these data. We rely on the tremendous amount of real-time Katapult specific data points to inform our underwriting and credit decisioning policies. So while we have already implemented a round of tightening as we discussed earlier, we also have a variety of scenario plans in place that will allow us to react quickly to new data and actions as they materialize. Our team is doing a great job of executing our strategy. We believe we are on track to deliver a great Q4 and look forward to helping our customers and merchants have a terrific holiday season. With that, I'll turn it over to Nancy for an update on our financial results and outlook. Nancy? Nancy Walsh: Thanks, Derek, and hello to everyone joining us this morning. We are moving full steam ahead on a number of operating initiatives that we believe will have a positive impact on our long-term P&L, and we are excited about the future. Let's start with a few insights on our top line performance. We have now grown gross originations for 12 consecutive quarters. Gross originations grew 25.3% to $64.2 million which was within our outlook range. We estimate that we experienced a minor headwind to growth related to the tightening discussed earlier in our prepared comments. In addition, if we exclude home furnishings and mattress gross originations, Q3 gross originations grew 50% year-over-year. You have heard us discuss our strong application growth, which we believe will translate into continued gross originations growth. Despite the tightening and impact of the home furnishings and mattress category, we grew the number of pre-approvals by nearly 60%, which translated to a 61% increase in total approved application dollars. As we continue to refine and improve our conversion funnel, we believe we have the ingredients necessary to sustain and accelerate top line growth. As Derek noted, gross originations for our top 25 merchants grew 25% during the quarter, and we're beginning to see an inflection with our largest merchant Wayfair, we saw total gross originations, which includes KPay originations grew slightly year-over-year during the third quarter. On the revenue front, we also had another great quarter. We delivered $74 million or 22.8% growth in Q3, which is in the middle of our outlook range and marked the tenth consecutive quarter of year-over-year growth. Gross profit for Q3 was approximately $14.6 million, an increase of approximately 21.8% compared with $11.9 million last year and gross margin was 19.7% compared with 19.8% gross margin in Q3 2024. Write-offs as a percent of revenue were 9.9%, up 60 basis points from Q3 2024 performance and within our 8% to 10% target range. Given the early impact we've already seen from our recent tightening, we believe we are taking the right steps to drive write-offs down in future quarters. Moving on to expenses and profitability. Our disciplined approach to expense management, coupled with our top line growth is at the center of our financial model. This philosophy fuels our decision-making, and it is a core component of our long-term growth strategy. This approach allowed us to deliver another quarter of positive adjusted EBITDA above our outlook range. We believe we are well positioned to further improve upon this performance. Let me walk you through some of the puts and takes that impacted Q3 adjusted EBITDA. We've previously talked about our front-loaded lease depreciation and the impact rapid growth has on in-quarter gross profit. This noncash expense drives cost of sales higher. Total operating expenses were down 26.3%. We remain committed to fiscal discipline even as we strategically invest in our growth initiatives. Excluding underwriting fees and servicing costs, which are variable, depreciation and stock-based compensation expense, which are noncash expenses, and excluding costs related to the settlement of litigation, transaction-related costs and debt refinancing, our Q3 fixed cash operating expenses were $7.5 million, a 21.4% decrease compared to last year. During the third quarter, income from operations was $2.5 million, a substantial improvement compared with the $4.4 million loss from operations in Q3 2024. Overall, our continued focus on fiscal discipline and top line growth allowed us to deliver $4.4 million in positive adjusted EBITDA for Q3, which exceeded our outlook range. We are proud of the progress we have made on this front and believe we have the right strategy, initiatives and discipline in place to deliver continued growth. Turning to the balance sheet and cash flow. As of September 30, 2025, we had total cash and cash equivalents of $9 million, which included $5.6 million of restricted cash. As Orlando mentioned, we recently finalized a $65 million transaction with Hawthorn Horizon Credit Fund LLC. Under the terms of the transaction, they have purchased 35,000 shares of our newly created Series A convertible preferred stock with an initial conversion price of $12.32 per share and 30,000 shares of our newly created Series B convertible preferred stock with an initial conversion price of $11.39 per share. We have already used approximately $35.1 million of the proceeds to repay our term loan in full and approximately $6.9 million to reduce the outstanding amounts drawn on our revolving line of credit or RLOC. The reduction to our RLOC has allowed us to reduce our advance rate from 99% to 90%, and this reduction will result in interest expense savings over time. And with the retirement of our term loan, we believe we may have the potential to negotiate more favorable terms for our revolver if we refinance in the future. As of the end of the third quarter, we had $79.6 million in outstanding debt on our revolving credit facility. Moving on to cash performance. Cash generated from operations for Q3 2025 was $800,000, a significant improvement compared to $4.1 million of cash used for operations in Q3 2024. This year-over-year change was primarily due to changes in working capital. Turning to our Q4 2025 and full year 2025 outlook. As Derek mentioned, we're navigating a complicated macroeconomic environment, and it's difficult to predict the impact to our core consumers over the near term. In addition, we are also comping against robust growth in Q4 2024 when we achieved 11.3% gross origination growth. Based on our quarter-to-date results and given the uncertainties created by recent macro trends and events, we believe it is prudent to take a more conservative approach to our expectations for the fourth quarter, which are as follows: gross originations are expected to grow in the 15% to 20% range. This includes about 1 percentage point headwind related to the tightening we did late in the third quarter. Gross originations, excluding the home furnishings, and mattress category are expected to continue to grow at a much faster pace than our overall growth originations. Revenue growth in the range of 21% to 23% and approximately $2 million of adjusted EBITDA. Based on our Q4 outlook, we are tempering our 2025 outlook for gross originations, revenue and adjusted EBITDA. We expect gross originations to grow between 20% and 23%. We expect revenue in the 18% to 20% range and that we will deliver between $8 million and $9 million in positive adjusted EBITDA which will represent between 60% and 80% year-over-year growth for this metric. Before we close, I'd like to offer a bit of perspective on the near-term future. While I'm not ready to offer an official outlook for 2026, I do believe that we will continue to see robust growth next year. Based upon the work and results we've delivered this year, we would project gross origination growth of at least 20% for the full year. We are so grateful to our team who continue to work tirelessly to help Katapult reach its potential. We are proud of what we are achieving together and look forward to delivering an incredible holiday season for our merchants and customers alike. Operator: Ladies and gentlemen, that concludes today's call. Thank you for joining. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Riskified Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 11 on your telephone. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Chet Mandel, Head of Investor Relations. Please go ahead. Chet Mandel: Good morning, and thank you for joining us today. My name is Chet Mandel, Riskified's Head of Investor Relations. We are hosting today's call to discuss Riskified's financial results for the 2025. Participating on today's call are Eido Gal, Riskified's Co-Founder and Chief Executive Officer, and Aglika Dotcheva, Riskified's Chief Financial Officer. We released our results for the 2025 earlier today. Our earnings materials, including a replay of today's webcast, will be available on our Investor Relations website at ir.riskified.com. Certain statements made on the call today will be forward-looking statements related to, without limitation, our operating performance, business and financial goals, outlook as to revenues, gross profit margin, adjusted EBITDA profitability, adjusted EBITDA margins, and expectations as to positive cash flows, which reflect management's best judgment based on currently available information, and are not guarantees of future performance. We intend all forward-looking statements to be covered by the Safe Harbor provisions contained in the Private Securities Litigation Reform Act of 1995. These forward-looking statements reflect our expectations as of the date of this call, and except as required by law, we undertake no obligation to revise this information as a result of new developments that may occur after the time of this call. These forward-looking statements involve risks, uncertainties, and other factors, some of which are beyond our control, that could cause actual results to differ materially from our expectations. You should not put undue reliance on any forward-looking statement. Please refer to our annual report on Form 20-F for the year ended 12/31/2024, and subsequent reports we file or furnish with the SEC for more information on the specific factors that could cause actual results to differ materially from our expectations. Additionally, we will discuss certain non-GAAP financial measures and key performance indicators on the call. Reconciliations to the most directly comparable GAAP financial measures are available in our earnings release issued earlier today, and also furnished with the SEC on Form 6-K and in the appendix of our Investor Relations presentation, all of which are posted on our Investor Relations website. I will now turn the call over to Eido. Eido Gal: Thanks, Chet, and hello, everyone. We've built solid momentum this year, driven by disciplined execution and focus across the business. That progress is especially clear in our third quarter results, where we delivered a meaningful turnaround in non-GAAP gross profit, improving from a 4% decline in the first half of the year to 5% growth in Q3. While the first half of the year reflected some temporary softness, the actions we took during the period have laid the foundation for a higher gross profit trajectory and expanding profitability in 2025 and beyond. Looking ahead, we expect an even stronger step up in the fourth quarter, supported by improved technical model performance and the seasonally stronger, traditionally lower-risk holiday period. We've continued to invest heavily in our machine learning capabilities, enhancing key features and expanding our autonomously trained model program to reinforce our market-leading technology. So far in 2025, we have shifted approximately 70% of our models from manual to autonomous training, and 100% of the autonomously trained models now outperform their previous manual production models. We believe that this automation will allow us to continue scaling the business with high leverage. Our autonomous program allows for real-time retraining when early fraud signals appear, freeing up our data scientists to focus on developing new features that further boost performance. On the revenue side, our push into more nondiscretionary categories continues to deliver. I want to highlight the strong momentum in our money transfer and payments category, which grew 100% in the third quarter. We believe we are on track to nearly double the absolute revenue dollars in this for full year 2025 as compared to last year. This growth is being driven primarily by new business activity. Both our top new logo won and the largest upsell during the third quarter were in this category, and we believe that merchants in this vertical, where transaction speed and superior fraud capabilities are paramount, are increasingly recognizing the performance and ROI that Riskified offers. We also returned to meaningful adjusted EBITDA margin expansion in the third quarter, improving by roughly 560 basis points year over year. Aglika will cover we expect a further step up in our Q4 margin, approximating a 15% adjusted EBITDA margin, reflecting the operating leverage of our model, the scalability of our platform, and the efficiency gains achieved over the past few years. Beyond financial performance, we executed well against our 2025 product roadmap. It's now been several quarters since we launched an adaptive checkout, the advanced configuration of our chargeback guarantee engine. Adaptive checkout uses AI to raise conversion rates by adding friction only when it's truly needed and removing it where exemptions apply. The results have been impressive. One US ticketing merchant increased total conversion by 5% by using selective one-time password friction to recover declined orders. In EMEA, an electronics merchant lifted conversion by 26% by removing unnecessary 3D secure friction through Riskified exemption and preauthorization analysis. As adoption grows, adaptive checkout continues to raise the bar for intelligent risk management and positions us to capture more share in the global e-commerce market. We're also very focused on the rise of agentic e-commerce. Our research shows that many shoppers already use AI somewhere in their shopping journey, but very few complete purchases through large language models today. As AI agents begin making purchases on behalf of consumers, critical data that fraud teams depend on can disappear, reintroducing many of the risks merchants have worked hard to eliminate. The result can be higher chargebacks, disputes, and policy abuse. We're positioning Riskified to help merchants navigate this shift safely through a combination of strategic partnerships, innovative technology, and enhanced infrastructure. Our collaborations bring together fraud prevention expertise with secure agentic protocols to deliver accurate decisions and better business outcomes in this new e-commerce environment. As we head towards the end of the year, our third quarter has provided momentum as we approach the peak year-end holiday season. Our internal data continues to show resilient consumer spending, with October tracking in line with our expectations. We are seeing solid performance in our three largest categories: tickets and travel, fashion and luxury, and money transfer and payments, which collectively represent more than two-thirds of our GMV. Assuming steady activity through the year-end, we're cautiously optimistic for another healthy holiday season. Combined with a solid first nine months of performance, we have the confidence to raise the bottom end of our revenue guidance for the second consecutive quarter. In conclusion, our global platform continues to lead in the e-commerce fraud and abuse prevention market. Our team remains focused on executing on the large new business opportunities ahead, and we are on track to close out the year strong and to enter 2026 with solid momentum, a healthy new business pipeline, and confidence in our growth trajectory. I will now turn it over to Aglika. Aglika Dotcheva: Thank you, Eido, and everyone for joining today's call. Our GMV for the third quarter was $37.8 billion, $108.4 billion for the first nine months, reflecting a 97% increase year over year, respectively. We achieved record third quarter revenue of $81.9 million, up 4% year over year. Revenue for the first nine months of $245.3 million increased 5% year over year. Our GMV and revenue growth during this quarter was primarily driven by continued new merchant and upsell activity. Our largest category, tickets and travel, grew percent during the third quarter, driven primarily by strong new business wins and upsell activity, offset by softness in our tickets and live events vertical. This is primarily due to tougher second half comparable periods versus 2024's record level of activity. Anticipated momentum heading into the end of the year travel saw strong growth in Q3, due to both new business wins and stronger same-store sales growth. The overall net effect is expected to result in similar year-over-year growth rates in the fourth quarter. Our fashion and luxury category grew 13% during the third quarter, which was supported by continued momentum in new business activity and improvements in some of our largest merchants in this category, partially offset by continued same-store sales pressure, particularly within our high-end fashion sub-vertical. We're confident that this category will continue to grow for the year, supported by a strong pipeline of new business opportunities that are expected to close in the fourth quarter and some anticipated micro steadiness in the high-end fashion support vertical. Our money transfer and payments category achieved 100% year-over-year growth in the third quarter. This growth was driven by the new business activity, which continues to be a key area of expansion. As anticipated, we saw year-over-year declines in our home category, which contracted by approximately 70%. I'm encouraged that in the fourth quarter, we expect to revert to year-over-year growth in this category as we lap the dynamic that impacted the first nine months of 2025. In the United States, revenue declined 12% year over year, primarily as a result of the contraction in our home category. Encouragingly, we continue to grow across all of our other regions. During the third quarter, APAC grew approximately 55% year over year, while other Americas, which represents Canada and Latin America, grew approximately 18% year over year, primarily driven by momentum in new business and upsell activity, with particular strength in the travel vertical. EMEA grew approximately 19% year over year, with the strongest performance concentrated in our fashion and luxury, tickets and travel, and money transfer and payments verticals, supported by both new business and upsell momentum. Overall, we believe that our continued international growth reflects ongoing progress in capturing market share. Our non-GAAP gross profit of $41.5 million increased 5% year over year in the third quarter. This translates to a non-GAAP gross profit margin of approximately 51%, an improvement of 1% from the same period in the prior year. Our third quarter 2025 margin represented a step up from 50% in the first half of the year. The year-over-year growth was driven by meaningful improvements in our core machine learning models, along with the contributions of new product revenue. This improvement was offset by the ramping of merchants in new categories, in particular, with the money transfer payments category, which has experienced very strong growth in 2025. Overall, I'm encouraged that four of our last five cohorts expect an average of 5% year-over-year improvement in our chargeback to billings, demonstrating the success in our machine learning platform. As a reminder, I encourage you to continue analyzing our gross margin on an annual basis, given individual quarters can vary due to various factors, including the ramping of new merchants and the risk profiles of transactions approved. I'm encouraged about the sequential progress we have made throughout the year, and continue to target an annual non-GAAP gross profit margin target of 52%. Moving to expenses, we continue to manage the business in a focused and disciplined manner. Total non-GAAP operating expenses were $36 million for the third quarter, down from $38.7 million in the prior year, largely due to several one-time positive impacts in the period. Our non-GAAP operating expenses as a percentage of revenue for the third quarter declined year over year from 49% to 44%, reflecting ongoing leverage in the business model. We anticipate having quarterly non-GAAP operating expenses of approximately $39 million in the fourth quarter. We achieved positive adjusted EBITDA of $5.6 million in the third quarter, a record for the third quarter. This represented approximately 560 basis points in margin expansion or a margin of approximately 7%. Based on our implied guide for the fourth quarter, which I will touch on shortly, we expect a large step up in margin on a sequential basis and our fourth quarter adjusted EBITDA margin to approximate 15%. Moving to the balance sheet, we ended the third quarter with $325 million of cash deposits and investments, and we continue to carry zero debt. We maintain a healthy cash flow model, achieving quarterly free cash flows of $13.4 million in the third quarter. For the first nine months, we achieved $22.4 million in free cash flow, and based on current conditions, 2025, we now expect over $30 million of positive free cash flow for the full year. In the third quarter, we repurchased 5.2 million shares for a total price of approximately $25.3 million. For the first nine months of the year, we repurchased 14.2 million shares for a total price of approximately $69.2 million. As a result of this buyback activity and our ongoing commitment to prudent dilution management, we continue to expect shares outstanding to decline by at least 5% year over year. We believe that our strong balance sheet and liquidity position are strategic assets that provide us with the flexibility to navigate a range of operating environments. We intend to remain disciplined and thoughtful in how we deploy capital to create long-term shareholder value. Now turning to our outlook. As a result of the solid first nine months of the year, and cautious optimism around the upcoming holiday season, we're improving the bottom end of our revenue range for the second consecutive quarter to now anticipate revenue of between $338 million and $346 million, or $342 million to the midpoint. As a result of our disciplined and expected margin expansion in the fourth quarter, we now expect our adjusted EBITDA guidance to be between $21 million and $27 million, or $24 million to the midpoint. I'd like to wrap up by thanking the Riskified team for their hard work and execution this quarter. I'm encouraged that we meaningfully improved our results versus the first half of the year, and I believe that we are well-positioned to continue this momentum in the fourth quarter. The foundation we are building positions us for continued growth ahead, which will allow us to deliver ongoing value to our shareholders. Operator, we are ready to take the first question, please. Operator: Certainly. To be announced. To withdraw your question, please press 11 again. And our first question will come from Connor Pasquali of Truist Securities. Your line is open, Connor. Connor Pasquali: Great. Good morning, team. This is Connor Pasquali on for Terrell Frederick Tillman. Thank you for taking my questions. The first one, just wanted to ask on the momentum as you exit this year. So just as we kind of think about the mix expectations exiting 2025, how are you thinking about the growth outlook as it relates to expanding with existing merchants via upsell and cross-sell versus continuing to drive new business strength? Eido Gal: Yeah. I think we'll see a continuous strong performance on both sides. We always kind of have a new cohort of merchants that we're onboarding that we're selling the platform to. But also really focused on gaining net new clients really consistent with how it's been working in prior years. Connor Pasquali: Okay. Great. That's helpful. And then maybe just spoken about the money transfer and payments categories being a strong driver of expansion this year. And new merchant activity has been really a key driver there. Just moving into 2026, are there any other emerging verticals that could be important for us to watch next year? As you maybe have started to gain momentum with some of the new merchants and do you think about prioritizing resources to go after certain verticals? Thank you. Eido Gal: Sure. So when we think about, you know, kind of expanding our market, we really do make a concentrated effort to go after specific verticals that we think are large in size, and have, you know, our product is a good fit for them. As we've continued to expand the product, you know, whether it's through policy account secure or CPMS, the different permutations of the chargeback product, we think that there's more value to different categories. We also tend to have a geographic view where we kind of say, hey. What other regions are there? Where we can kind of penetrate further? And that also leads us to think about the categories in those regions. And probably also some other thoughts and internal deliberations we have are more M distribution. You know, what is the value of going slightly more mid-market than the enterprise focus we have now? How do we get better distribution via partnerships? So as we kind of go through the 2026 planning cycle, those are all thoughts that we have and, you know, kind of going through. Operator: And our next question will be coming from Cristopher David Kennedy of William Blair. Chris, your line is open. Cristopher David Kennedy: Yeah. Good morning. Thanks for taking the question. When you think about the or can you give us an update on the revenue contribution from the non-chargeback guarantee products for 2025? Eido Gal: Yes. So far, it's continued to be very strong, over 100%. Continue to be very pleased with the uptick in the market reception to that. It's been instrumental and very helpful, and kind of gaining longer-term contracts with our existing clients at renewal. It's been helping us win, you know, new business at a higher rate. So overall, really pleased with, you know, being able to develop additions that generate meaningful ROI to our clients. Cristopher David Kennedy: Great. Thank you for that. And then you talked about some of the investments in machine learning and driving efficiencies with your business. I mean, when you add that with the non-chargeback guarantee products, any way to think about the long-term margin profile of Riskified as you go forward? Thank you. Eido Gal: I think it just varies so much based on the mix of the different products. To us, it's just really focusing on how do we generate gross profit dollars an increasing amount and driving that number higher. Thanks. Operator: And our next question will be coming from William Alfred Nance of Goldman Sachs. Will, your line is open. William Alfred Nance: Hey, thanks for taking the question. I just wanted to follow-up on the last question on the gross margin. It sounded like you've had some recent model improvements that have led to several prior cohorts outperforming. As we think about the trajectory of gross margins into next year, is that something we should be thinking about in terms of year-over-year gross margin improvement? And it also sounded like maybe money transfer was a small offset to that. So just how are you thinking about kind of those puts and takes on the gross margin into 2026? Thank you. Eido Gal: You definitely characterized it correctly, right? We saw that the ramping of new categories, specifically the money transfer and remittance in some of the newer geographies, you know, kind of was a headwind in H1, and that's of the modeling improvements that we made during the first half helped improve performance not only there but also across the rest of the portfolio. And we would anticipate that to kind of flow through in performance into Q4 and beyond. At the same time, I do anticipate additional headwinds from newer regions and newer categories as well. So I think that dynamic will stay constant. William Alfred Nance: Okay. That's helpful. And then maybe just one for Aglika. I was wondering if you could elaborate on the one-time expense impact that you mentioned in the script on 3Q? And you could just share a couple more details on what drove that. Thank you. Aglika Dotcheva: Yeah. Sure. Thank you for the question, Will. So with any given quarter, there's always ins and outs, specific for this quarter, we saw some positive impact related to some payroll adjustments more around vacation accrual and reserve duties, specifically for our Israeli office. And maybe some movements of some events. But as we kind of shared in our prepared remarks, I do expect a range of around $39 million and change or $39 million for Q4, and that's a better representation of the run rate of the OpEx. William Alfred Nance: Appreciate all the color. Thanks, guys. Operator: And our next question will be coming from Ryan Tomasello of KBW. Ryan, your line is open. Ryan Tomasello: Hi. This is Juan on for Ryan, and thanks for taking the questions. How do you envision the potential for growing stablecoin adoption and stablecoin payment rails to alter the fraud management landscape? And is the company currently exploring any opportunities to capitalize on this? Eido Gal: Sure. I think as we think about stablecoins, crypto, and agentic, you know, kind of more broadly, we see that these are introducing additional complexity to our merchants and added requirements what they need to be able to support. And we've found historically that whenever this added complexity is, you know, gonna present it to the merchant, it both introduces new vectors of fraud. And it makes it more challenging for them to solve it on a standalone basis requiring an outside partner. So, you know, kind of year to date, what we've been seeing is that these have been kind of net positive drivers for the business. And we anticipate that to continue. Ryan Tomasello: Right. And just to double click on that, you called on the prepared remarks an increased emphasis on those agentic commerce solutions. Has this driven any kind of notable uptick in inbounds or new business discussions in general? Eido Gal: Yeah. I mean, when you think about the complexity that merchants face when they try to solve this, right? Like, a merchant suddenly gets a transaction for five big screen TVs. They have no idea where this transaction came from. They have limited data. And we're really helping them both identify that this came from, you know, kind of an agentic shopper on behalf of someone else. They need to be able to understand, hey. Is this, you know, kind of a hallucinating LLM that's ordering five big screen TVs, or is this a reshipper, or is this a legitimate customer? And when you think about the stack that we have, you know, the capabilities we've developed for about the detection, which are helpful in identifying these commerce agents, the capabilities we have around our policy suite of products, which are helpful in, you know, kind of identifying specific agents, result in more, service-related chargebacks or what type of policies you wanna enable to them. And, obviously, just the risk engine with, you know, kind of via our network is able to much better differentiate in these limited data points this actually a good transaction, or is this a stolen credit card being used here? Would say that, you know, in reality, we're only seeing a handful of transactions right now. But merchants are definitely thinking about how to adapt to this new paradigm so it's helping from a conversation perspective. Ryan Tomasello: Great. Thank you. Operator: And our next question will be coming from Clark Joseph Wright of D. A. Davidson. Your line is open, Clark. Clark Joseph Wright: Thank you. Just wanted to maybe touch on the notable sequential increase in GMV this quarter versus historical trends for what we typically see in 3Q. What are the key factors that drove this? And does the money transfer payments growth reduce your typical seasonality trends that we've seen? Aglika Dotcheva: Yeah. Thank you for the question. When I think about our model, the GMV is kind of like an output of some of the revenue inputs. Having said that, we've shared before that we do expect it to be spread between the GMV growth and the revenue growth, and I think kind of heading into the second half of the year, this is kind of, like, more evidence. And actually, more aligned with what we've seen historically. It is great to see the GMV growth kind of, like, getting back to close to double digits and, overall, expect about the performance. Clark Joseph Wright: Got it. Then maybe I'll just be a better one for you. But, you know, you've there's been disciplined expense management, and maybe this builds off of some of the prior questions that have been asked around operating leverage. But would love to kind of understand how you're able to continue to invest while continuing to see operating expenses relatively flat, and the fact that you're guiding to a flat in 4Q. And then I guess that builds also off of, you know, comment around being able to invest in capacity. So I guess how are you measuring your, you know, your expense guardrails while all kind of managing to this margin expansion story that you're gonna continue to see in 2026? Aglika Dotcheva: Yeah. I'm happy that we're able to continue to. As we kind of shared in the beginning of the year, we're focused on our expense and making sure that we kind of stay within the total annual guide. Besides that, there's always ins and outs between the quarter. So this quarter appeared to be kind of relatively low compared to other quarters. But Q4 is expected to be higher, and within that, within every single quarter, there's always been some out. We continue to invest in areas that are related to growth-generating areas and continue to optimize areas that are more like on the operational part of the business. That has been a focus of us. Earlier on in the year, we kind of shared some of the offshoring activities that we've been kind of, like, taking over and we've been executing really well there as well. So all in all, there's a lot of going in the single quarter, but happy that we're able to show this focus on the numbers as well. Eido Gal: Yeah. And maybe just to add a bit of my perspective there. We recently started going through or kind of mid-process of the 2026 product planning. And we've actually increased our development capacity by almost 50%. And that's a combination of, you know, kind of being average to being able to leverage, you know, kind of better cost locations, but also reducing kind of some consistently thinking KTLO work in other areas. So we are con, you know, constraint breeds creativity. How can we, you know, do more with less? I'm really proud of what the team has been able to achieve in that area. Clark Joseph Wright: Thank you. Appreciate that. Operator: And our next question will be coming from Timothy Chiodo of UBS. Timothy, your line is open. Timothy Chiodo: Great. Thank you. A really helpful blog post that you put out a few weeks ago around I just wanna talk in there, you mentioned almost two paths for the payment to be received by the merchant. One is the payment token is received. The other is the payment comes through one of the wallet providers, and you specifically mentioned two pass-through wallets in Apple Pay and Google Pay. So two parts. Was hoping, number one, you could just recap for everyone the varying kind of, like, who takes on the liability and why in those two different paths. And you called this out a little bit in the blog. And then maybe more importantly, the second one, just from an industry perspective and what you're seeing, do you expect the wallet share of overall checkout within that channel to be roughly the same higher, or lower than it is on the, call it, the traditional website checkout? Thanks a lot. Eido Gal: Sure. Happy to take that. So I think just simply with the payment token, we think the liability more often would not would sit with the merchant. Whereas if it goes through the digital wallet, more often than not, it would sit with the issuing bank. And sorry, Tim. What was the second part of that question? Timothy Chiodo: Sure. Nick's. So let's just I'm just gonna make up a fake number. But let's say there's in all of e-commerce, let's just say that all of digital wallets made up 20% of checkout, would you expect that through the agentic channel through sort of like a chat GPT user interface that the digital wallet share of checkout would be higher than that 20, about that same 20 that it is on regular websites. Or maybe lower than that 20? And then why would that why would it be higher, lower, or the same? Eido Gal: I think that's a really interesting question I would need to think about in much deeper. The reality is that to date, there's only been, you know, kind of a handful of transactions. Now, obviously, there's potential it's for it to grow further, but based on that, it wouldn't know, it would be more of a guess than a database answer, which is know, what I would prefer to provide to you. Timothy Chiodo: Okay. Thank you. Operator: And our next question will be coming from Reginald Lawrence Smith of JPMorgan. Your line is open, Reggie. Reginald Lawrence Smith: Hey. Good morning. Thanks for taking the question, and nice to see the acceleration in GMV. You know, kind of a follow-up on the agentic theme. The previous question. You know, I'd love to get your view on you think about both the opportunities and the threats. As it relates to e-commerce on your business? And by that, I mean, paint a picture for me where agentic increases the demand for your services and maybe another where it could possibly reduce it? I'm just trying to understand, like, the there, the bull face agentic, and how it relates to Riskified and your services. Then I have one follow-up. Eido Gal: Sure. Happy to take that. So the positive scenario, which is kind of similar to what I outlined before, is that merchants now need to deal with increasing complexity with agentic transactions. They need to understand that this is an agentic shopper. That's difficult. We can help them with that. They need to understand not only is this an agentic shopper, is it a legitimate one or a fraudulent one? We can help them with that. After they even understood that it's a legitimate one, they need to understand if, you know, it fits the various policies that they have, and they probably wanna create some unique policies for agentic shopping so we can help them with that. So I think in this scenario, it's a net positive for us because there's a lot of complexity, and we're good at solving complexity for our merchants. It's a complex world right now where you have a multitude of standards. Right? It's not like there's one standard. There's standards with an s. And if a single merchant is trying to solve all those problems, it's a huge issue for them. So I think to me, that's the most likely outcome and what we're seeing kind of so far merchants preparing for. The more negative potential could be if that more transactions move away from enterprise e-commerce. So I think, you know, some of the kind of blue-chip names that we work with. If people don't shop on their site anymore, and go to various kind of agents and do an end-to-end purchasing within that LLM environment. Reginald Lawrence Smith: That makes sense. And I guess two quick follow-ups. One, is there an opportunity to actually provide a to the AI labs then secondarily, we've gotten a lot of questions the last couple of months about 2026 EBITDA targets. And, you know, I guess, light of the gross margin and the operating leverage and the accelerating GMV growth, I'd love to hear how you guys are feeling about those targets in 2026, those EBITDA margin targets that you laid out previously, feeling better, worse than maybe a few months ago? Any color you can provide there would be helpful. Eido Gal: Sure. Happy to take that. So look, I think, obviously, the LLM providers can, of course, be Riskified clients. And, like, we help others, we can help them manage the fraud. So that's a clear and easy number one. With regards to number two, you know, we're happy that we're targeting 50% margins in Q4. And I think we're really proud of the progress that we've made over the past two to three years since we set out this guidance for next year, and we continue to, you know, plan for double-digit growth next year. At the same time, I do think that some of the merchant events that happened in 2024 does mean that kind of the 15% margin would be pushed out by a few quarters. But, you know, kind of similar to what's already reflected in sell-side expectations. Reginald Lawrence Smith: Perfect. Thank you so much. Eido Gal: Thank you. Operator: I'm showing no further questions at this time. I would now like to turn the call back to Eido for closing remarks. Eido Gal: Thank you, everyone, for joining our call, and we look forward to updating you on the progress in a few months. Thanks. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.