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Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Integrity Insurance Group Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this call is being recorded. But before we begin, please note that today's remarks may contain forward-looking statements, including comments about the company's outlook, strategy, plans and expected performance. These statements are based on current expectations and assumptions and are subject to risks and uncertainties that may cause actual results to differ materially. A full discussion of the risk factors can be found in the company's SEC filings, including its most recently filed quarterly report on Form 10-Q. Management undertakes no obligation to update any forward-looking statements. Furthermore, today's remarks may contain non-GAAP financial measures. A reconciliation of non-GAAP financial measures to their most comparable GAAP measures is included in the company's quarterly press release and can also be found on its website at www.aii.com. References to American Integrity or the company prior to the consummation of the IPO refer to American Integrity Insurance Group, LLC and after the consummation of the IPO, referred to American Integrity Insurance Group, Inc. With that, I'll turn the call over to American Integrity's Founder and Chief Executive Officer, Bob Ritchie. Please go ahead. Robert Ritchie: Thank you, Tiffany, and good morning, everyone. This is our third earnings call as a public company, and we're now fully in our stride, building on the success, broadening our reach and sharpening our focus. I'm pleased to be speaking with you to discuss our third quarter results and the initiatives that are advancing the value of American Integrity for all of our stakeholders. We are executing consistently, growing responsibly and strengthening the franchise. Our third quarter results are a continuation of a very strong year for American Integrity. Not only did we continue to deliver strong earnings, but our consistent profitable policy growth continues to set us up for future success. The environment has been favorable with a very benign cat and a non-cat loss backdrop. And this has been coupled with softening reinsurance rates and continued operating discipline. We remain focused on the drivers that we control: underwriting quality, expense discipline and thoughtful growth. So our performance remains durable and repeatable. Our growth initiative in the Tri-County region of Florida is underway and is gaining momentum. At the end of the third quarter, we had 26,493 policies in force in Tri-County, representing 6.5% of our book, well below our potential market share for an area, representing about 26% of the state's households. While most of this business came from the Citizens takeouts over the last year, our Tri-County voluntary policy writings are increasing, and we believe they will continue to grow meaningfully in 2026. This is a multiyear opportunity, and we're approaching it with discipline and capacity. Yet this expansion is more than policy growth. It reflects expanding trust among Florida homeowners who value stability and integrity in their insurer. We're also making progress reorienting our sales and production efforts to ramp up our writings of middle-aged homes. And in recent years, our mix of business has skewed toward new build homes. Given our conservative underwriting stance, our distribution advantages and our belief that prior to legislative reforms, the middle-aged homes business at that point was unlikely to meet our underwriting criteria. Post reform, entirely different story. We have reassessed this market, and we know there is now attractive business, in fact, some that we used to write that we will write again and that meet our underwriting standards. At the end of the third quarter, we had 32,202 HO3 policies in force. that we characterize as middle-aged homes, representing 7.9% of our portfolio compared to an estimated 25% of the statewide housing stock that meets the same criteria, hence, our bullishness in the growth potential. This represents another large addressable market and one that is underpenetrated currently by American Integrity, yet we're continuing what we have done decades before. We have started to write policies again on middle-aged homes, and we see solid potential, though we will remain focused as we always are, on stringent disciplined underwriting to ensure we are earning adequate risk-adjusted returns. Another exciting entry, we've launched our commercial residential product in October just a month ago, and this is designed to deliver comprehensive and reliable protection for Florida's condominium, townhome and residential homeowners associations. We expect our first writings in the fourth quarter, including a modest participation in the November 2025 Citizens takeout. So we're growing prudently, and we're leveraging early insights to refine the product and to scale it responsibly. We continue to have success growing our writings in Georgia and South Carolina, as we've talked about before. This is largely again through our homebuilder agent relationships. We'll also announce and we have announced that we're beginning to write in about a month, policies in North Carolina, so in December of this year. Having said that, Florida will remain our core market for years to come. I am confident to report that American Integrity remains strong and profitable while growing responsibly in the attractive Florida market. Years of investment and underwriting have positioned us to have the capital and market relationships that we expect will deliver strong, profitable, organic growth for years to come. Our progress this year reflects the power of the simple idea, discipline creates opportunity and opportunity creates lasting value. With that, I'll turn the call over to Jon to discuss operational execution and growth initiatives in more detail. Jon Ritchie: Thanks, Bob. I'll focus on how our disciplined execution this quarter positions us for sustainable growth into 2026. Starting with our results, we continue to grow in our core Florida market. In the third quarter, we wrote 25,985 new policies in the voluntary market, bringing our year-to-date total to over 78,000, representing a 25% increase over the same 9 months of 2024. Combined with retention levels reaching 82.8% this quarter, our voluntary policies in force has increased 19% over the past year to 315,000 policies. Overall, our policy count at September 30, 2025, stood at 406,000 policies, up 49% over the past year. While the Citizens takeouts in late 2024 and the first 3 quarters of 2025 contributed to this, so did our voluntary business. Going forward, we view Citizens takeouts as a modest contributor. Voluntary growth is the more predictable and we believe more significant driver. As Bob mentioned, we are seeing progress as we expand into South Florida and return to underwriting middle-aged homes. We have appointed a territory sales manager to lead the South Florida region and are actively growing our distribution in the region. For middle-aged homes, we are adjusting our product mix to be more competitive in this segment, which we believe we can do profitably given the changes in the Florida marketplace following legislative reform. Our pricing forms and appetite are aligned to compete and to win without compromising underwriting standards. Underlying our non-cat losses continue to be favorable. We are pleased to report that our non-cat losses continue to perform as expected. For every dollar of gross premium we earn, we are paying out about $0.17 in underlying non-cat losses, which is as expected for 2025. We believe this represents a strong ratio based on our underwriting focus and higher market share of newer homes. This has also been a favorable year for catastrophe losses thus far, and we are optimistic that we may have a season without a meaningful catastrophe loss for the first time in many years. That would be welcome news for Florida, our policyholders and our shareholders, and it would be constructive for our cap on in excess of loss renewals next year. With that, let me turn the call over to Ben to walk through the financials. Benjamin Lurie: Thanks, Jon. Our financial performance this quarter continues the steady trajectory we've built since the IPO. The theme is converting scale into earnings while maintaining discipline. Gross premiums written increased by 49% to $239 million compared to $161 million in the third quarter of '24. Gross premiums earned increased by 34% to $222 million compared to $165 million in the third quarter of '24. Net premiums earned increased by 28% to $52 million compared to $40 million in the third quarter of '24. The increase in gross premiums written, gross premiums earned and net premiums earned continued to be driven primarily by new and renewal policies written through the voluntary market and from our strategic participation in the Citizens takeout program, although that is anticipated to be a more modest part of our growth story going forward. Ceded premiums earned increased by 36% to $170 million compared to $125 million in the third quarter of last year due to the increase in gross premiums earned and the placement of our '25, '26 catastrophe excess of loss reinsurance program. The company purchased more reinsurance coverage compared to prior years, reflecting the increase in-force premium and total insured value. Net investment income increased 84% to $6.9 million compared to $3.8 million in the third quarter of '24, driven by an increase in invested assets, primarily due to the IPO proceeds and the growth in our in-force premiums. Losses and loss adjustment expenses increased 19% to $30 million compared to $25 million in the third quarter of '24, driven primarily by an increase in gross premiums earned, offset by the lack of catastrophe losses. Our underlying loss and loss adjustment expense ratio was 50% for the third quarter of '25 compared to 36% in the third quarter of '24. Year-to-date through 3Q '25, the underlying loss in LAE ratio was 37%, roughly flat from the 37% for the same period of 2024. As Jon indicated, our gross non-cat losses are coming in almost exactly at expectations for the year, although their expected quarterly fluctuations in our net results, largely driven by structural features in our quota share reinsurance arrangement. These ratios reflect normal quarterly variability and remain within our underwriting expectations. Policy acquisition expenses decreased 20% to $6.2 million compared to $7.8 million in the third quarter of '24, driven by slightly lower acquisition costs associated with Citizens takeouts and increased ceding commissions. Our expense ratio decreased by 10 percentage points to 25% for the third quarter of '25 from 35% in the third quarter of '24 reflecting enduring scale benefits and stronger ceding commissions. The combined ratio was 79% for the third quarter of '25 compared to 94% for the third quarter of '24. For the third quarter of 2025, our net income available to common shareholders was $13 million and adjusted net income was $14 million. Net income was $0.67 per diluted share and adjusted net income was $0.71 per diluted share based on weighted average common shares outstanding of approximately 19.5 million. Total shareholders' equity increased 95% to $316 million at September 30, 2025, compared to $162 million as of December 31, '24. Our book value per share at September 30, '25 was $16.14, up 28.2% from $12.58 at year-end '24. These results highlight our ability to translate growth into profitability and sustained margin improvement through structural not temporary gains. Our performance demonstrates that growth and profitability can advance hand in hand. I'll now turn the call back to the operator to open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of Michael Phillips with Oppenheimer. Michael Phillips: I guess I was hoping you could talk about any impacts you expect going forward on your core loss ratios from going after those middle-age roofed homes? Robert Ritchie: Sure. Jon, can you take that, please? Jon Ritchie: Yes. It's Jon here. No, we expect that certainly, the middle-aged home will perform in line with our expectations, probably not to the same extent of our new construction just given the loss cost there comparatively speaking, from a building standard. But given the premium that we're collecting, we feel very comfortable with where this is going to land once it settles back in for us. Michael Phillips: Okay, Jon. I guess unrelated second question would be, can you talk about how your experience that you gained over the years in your homeowners market from pricing actuarial, all that you do on that side, any learning that you can take from that, that translates into the commercial side as you go into that market? Does that help you in this, is it going to be more of a new thing for you to learn from? Robert Ritchie: Yes. This is Bob Ritchie. I want to assure you, we spent 18 months studying, developing, staffing and preparing both the filings, core expertise and underwriting sales and claims. And this has been well thought out, and it's a positioning not to make the sort of approach where this accentuates the top line dramatically, yet it will be a steady process. We'll begin with a very small takeout, and then we are also in the pipeline getting voluntary submissions. It will be meaningful, measured, profitable and all of our homework has been done. And none of that we're doing here would violate any of our underwriting terms or expected profitability. So we're bullish about it, yet it won't drive the needle in terms of top line. That wasn't the intent of it. The market is hard. There are some new entrants. It still is scarce in its capacity. We'll be protective of the submissions. And by the way, also very guarded on the distributors, only 65, 70 folks -- distributors that have the authority. So we've only appointed those that are experts in the business. I hope that helps. Michael Phillips: No, it does. Yes. One quick follow-up on that, Bob. When you say the market's hard, is there a difference between that and the different subsectors of what you're going to condo versus the HOA business? Robert Ritchie: Jon, can you take that? Jon Ritchie: Yes. So specifically for the HOAs, we still feel that the market is hard. And certainly, there's opportunity there. And as Bob said, the competitive landscape here in Florida is pretty scarce. So certainly, we do believe that the pricing environment for commercial HOA business that we're targeting, which are garden-style HOAs, we believe, is appropriate and attractive. Operator: Your next question comes from the line of Tommy McJoynt with KBW. Thomas Mcjoynt-Griffith: If we could spend some time talking about the underlying loss ratio, that would be helpful. And we look at the kind of the previous 3 quarters and the year-over-year swings that you've seen in that ratio, and there's been a good amount of volatility. And it sounds like you called out some structural features of the quota share, which adds some of that volatility, so could you help explain the mechanics of that? And importantly, help us think about modeling individual quarters next year for that underlying loss ratio. Robert Ritchie: Sure. Well, I have a plan, Ben Lurie will start out though. Ben, please. Benjamin Lurie: Absolutely. So I think the first thing to think about when you talk about our underlying losses is looking at them on a gross basis on gross premium because there's a lot of noise that comes through because of the quota share structure and our XOL program. And our underlying losses year-to-date are coming in at a 17.4% gross rate, so $0.17 out of every premium dollar goes to non-cat losses and that's exactly on line with our expectations for the year. If you were to strip out our quota share, then we have a 33% net underlying loss ratio for the year. So that's an easier way in those 2 statistics are an easier way to think about what our underlying loss ratio actually is. So when you talk about the structural issue with our quota share the idiosyncrasy of that is that in a period with no cats, we have a slightly higher underlying loss ratio. So from a modeling standpoint, when you have no cats, you can expect to see that happen. And if you're with cats, we're able to see an additional portion of our underlying losses to the quota share program. So that creates that variance that would be idiosyncratic to our program. Thomas Mcjoynt-Griffith: Okay. Got it. And so I guess just maybe to ask a follow-up here. If we think about always modeling sort of the next year period. And so if we were to think about the third quarter of '26 and we were to expect some baseline amount of catastrophe losses in there, that should mean that the underlying loss ratio should come down year-over-year? I just want to make sure I'm sort of understanding that correctly, and let me know if I'm wrong. Benjamin Lurie: No, that's exactly right. And then with the added element of our intention to our expectation to lower our quota share for next year. That kind of creates several moving pieces, and we'll communicate closely with you and the analyst community as we plan for next year so that you can think about how those impacts are going to flow through our financials. Thomas Mcjoynt-Griffith: Okay. Got it. And then staying on the loss ratio side, but looking at another component of it. The prior year net reserve development was a bit unfavorable in the third quarter. And we've seen small movements a few of the recent quarters. As we look across the personal lines industry space across property, we're seeing a lot of favorable development by peers. So what's driving the sort of the unfavorable development that you guys saw in 3Q and maybe even some of the other quarters as well? Benjamin Lurie: No, that's a good question. I'm sorry, Bob. Robert Ritchie: No, no. Please go ahead. Jon and I'll have an add-on, but Ben, you take it. Benjamin Lurie: Okay. Well, we saw the favorable development come through last year as the environment improved. And then we adjusted our underwriting accordingly. If you look at year-to-date this year, we've got about $1 million total of unfavorable development over the first 9 months. So that really comes in pretty much in line with expectations. Of course, there will be quarterly variance in that number, but we look at it as immaterial. We work with Ernst & Young in order to review our actuarial conclusions. And at the end of the day, we think they're doing a great job. Operator: Your next question comes from the line of Gregory Peters with Raymond James. Charles Peters: I guess I just wanted to close the loop on the underlying loss ratio, you said it runs on a gross basis outside of the reinsurance, the AOP is -- runs around 33%. Is that fairly consistent from first quarter to second quarter to third quarter this year? Or was there any variability in that gross AOP loss ratio from quarter to quarter to quarter? Benjamin Lurie: So the gross loss ratio is pretty consistent as far as our -- the dollars for -- the losses for every dollar of premium that we charge. What's affected that is the windfall from the Citizens takeouts that has a denominator effect. And that's the reason you've seen variance in the net results but at the end of the day, our underlying losses, as you say, have remained very consistent quarter-over-quarter. Charles Peters: Thanks for that clarification. I thought that was the case. I just wanted to -- just -- have you restate that. I want to go to -- I think you talked about the durability of what you're growing at your company and your long-standing track record. And I guess what I'm concerned about when I think about the longer-term durability is initiatives by the politicians to potentially, at some point, unwind some of the successful legislation that's helped curb some of the system abuses on the legal side. So considering the results are going to be good for the market this year, how do you think -- how are you going to reconcile the political motivations to lower or reduce some of those legislative benefits in the next year's legislative session? Robert Ritchie: Greg, this is Bob. Thank you for the question. Here's reality, takes 3 leaders to pass any reform or undo any reform. That's the governor, speaker of the house, and the Senate President. We're very close to all 3, and I can tell you with complete certainty that it only takes one, by the way, we have 2 of the 3 that clearly are in favor of continuing reform and not even hearing bills. The unpredictable could be the speaker of the house and any house bills. However, the Senate is firm, so is the governor's office. And I can tell you with conviction in these next series of years, these reforms are solid and they will not be undone. Hence, the reason we went public, hence, the reason that we're growing. Charles Peters: Excellent. Excellent. That's good. I guess the final cleanup question I had was you mentioned potential lower retention or lower reinsurance changes in 2026. Can I -- is there any meat that you can share with us on what you're thinking at this point in time? Or would you prefer to wait until the renewal time to give us more disclosure. Robert Ritchie: Obviously, we haven't gone to market yet. We know indications, though, based upon how the 1/1 renewals are happening based upon a likely loss-free year in Florida. With that, Jon, you can't give solid information, but you can give trends. Go ahead. Jon Ritchie: Yes. I would say, Greg, that directionally, we view the reinsurance capacity and pricing environment in a favorable or through a favorable lens. Certainly, for us, we'll first enter this market as we renew our catastrophe bonds, which will be in January. And all indications both on the ILS side and the traditional side is capacity and appetite for Florida is ample. And certainly, as Bob said, a loss-free year is going to be favorable for the entirety of the Florida market. Benjamin Lurie: Now Greg, to the extent your question is also about quota share, it's been our communication to the market and our expectation that we're going to reduce our use of quota share gradually over time in order to keep more of this profitable premium on our books. We have not yet determined the exact amount of reduction that we're going to do at the end of the year because we're going to balance that against our other growth initiatives that we see in front of us and optimize for what we think is the best path forward, but as we start to make those decisions, we will communicate that to the market. Operator: Your next question is from Paul Newsome with Piper Sandler. Jon Paul Newsome: I want to touch on the reserve development, just one more time. And maybe you could talk a little bit more about the changes that you did make. And would that change, the historic pattern of what we should expect respectively, I guess a question to ask the question a little differently. Most companies sort of have a bias towards favorable development over time. And so when it goes negative, that's a signal that there's something you want to talk about. But there are a few companies, Progressive would be a great example, that don't, that actually shoot for sort of 0. And so variations -- small variations around 0, up and down are normal. Maybe you could talk about sort of what changes you made? And then where would you push yourself in the spectrum of folks in terms of the overall philosophy of reserves? Jon Ritchie: Yes, I would say -- go ahead. Go ahead. Benjamin Lurie: No, Jon, sorry, you go ahead. Jon Ritchie: I would say, look, we have seen favorable reserve development on our non-catastrophe underlying losses, and that has continued for a series of quarters. And then that was partially offset by some unfavorable catastrophe development. But the core book of business that we're underwriting to, we're continuing to see positive development in terms of gross loss ratio being in target of what we would have expected. And prior year development being favorable for that underlying core book of business that we're underwriting for non-cat losses. Robert Ritchie: And I can say this to you, Paul. We have a fellow, [ full ] fellow that runs our actuarial department, at not 1, but 2 outside folks that look at where we're going here. We're very happy both with how we forecast, how we manage the book, where the trends are going. And most importantly, here's the operative thing, how our inventory of catastrophe lawsuits has not only plummeted but nearly evaporated. And so with that, given the volatility of Florida, we're best-in-class in terms of how we have stayed safe, secure and solvent during the crisis and how we're growing after the crisis, and I'm very pleased with it. Jon Paul Newsome: Great. And maybe as a second question, a different one. Any additional thoughts on expansion state-wise beyond the ones that you mentioned already? Jon Ritchie: Yes. Currently, the only additional state that we're expanding into is the one that we mentioned earlier on the call is in North Carolina. Again, that's driven by capacity needs from our new homebuilder agents and on a stand-alone basis, the business that we're writing or will write in North Carolina and the business we have written in South Carolina and Georgia is a profitable business, but it also is giving us buying power back here in our home state of Florida to get more share of wallet from those builder agents. But to answer your question concisely. No, there's no immediate plans beyond the North Carolina announcement. Robert Ritchie: We have -- look, I'm very pleased. I'm very, very pleased with our success in South Carolina, the Palmetto State, very pleased. I'm very happy with Georgia. I'm happy how we have not only any of these markets, but done it thoughtfully with all the internal and external homework. However, we're a Florida-based company. There are so many opportunities right in our backyard, and the 4 minimal ones are Tri-County, middle-age homes. Operator: Your next question is a follow-up from Tommy McJoynt with KBW. Thomas Mcjoynt-Griffith: I just wanted to clarify one thing around the underlying loss ratio. I think you pointed to it being on a gross basis, 17% year-to-date. How does that compare to the prior year 9-month period? Jon Ritchie: That would have been fairly on point from the 9-month period from last year. We've seen the last 2 calendar years or 18 months, if you will, be pretty consistent with our gross non-cat loss ratio. So we're very pleased with it, and the year-to-date number of 17.4% is absolutely almost on the point of our projection of 17.3%. So we're really happy with how the book is performing. Robert Ritchie: And that's a function, obviously, we can talk loss ratio. I prefer to talk about pure premium, frequency and severity. Severity is modestly up for the industry because of inflation is not 0. Frequency has dropped like a rock for the industry and more so for us. Hence, the reason that this gross loss ratio is so admirable given the trend that have happened here. Thomas Mcjoynt-Griffith: Got it. And do you have any expectations for what -- as we think about the next 9 to 12-month period, if that gross loss ratio trend should diverge much from the 17% number that it's been trending at, either better or worse given the underlying input. Robert Ritchie: Ben, do you want to tackle that one? Benjamin Lurie: No Tommy, you should expect it to go up, call it a point over the next 12 months. That will be a mix of inflation, the impact of the Citizens book and whatnot. But the change will be muted, but we want to be conservative in our projection. Operator: That concludes our question-and-answer session. I will now turn the call back over to Bob Ritchie for closing remarks. Robert Ritchie: Thank you, Tiffany, and thank you to all of you for these in-depth questions. They've been very impactful. Appreciate your support. We continue to be well positioned to deliver strong growth and profits for investors, our team, our technology platform, and importantly, our distribution network and our balance sheet have never been stronger. As I've mentioned, we have significant room to profitably grow our market share as we expand into markets very thoughtfully, but especially here in Florida as we prudently introduce new products. This will sustain our growth for years to come. The foundation we built is anchored in integrity, focus and resilience and it positions American Integrity to thrive in any market environment and to continue delivering long-term shareholder value. We're pleased with the progress we've made, but even we're more focused on what lies ahead. Every leader, every employee is focused. And so the best measure of our success, in my view, is the confidence of our partners, our policyholders and our investors that is placed in us each and every day. We're excited about the opportunities ahead and look forward to updating you on our fourth quarter on our next call. And I appreciate your time. Thank you. Operator: Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
James Lorimer: Good morning, ladies and gentlemen. Thank you for standing by, and welcome to the DCM Third Quarter Fiscal 2025 Financial Results Conference Call. My name is James Lorimer, the CFO of DCM, and I'm pleased to be hosting today's call. Joining me on the call today is Richard Kellam, our President and Chief Executive Officer. Following our prepared remarks, we will be moderating a Q&A session. As a reminder, this conference call is being broadcast live and recorded. We'd also like to remind everyone that Richard and I are available after the call for any follow-up questions that you may have. Before we begin, I'll remind everyone that we will be referring to forward-looking information on today's call. This information is subject to certain risks and uncertainties as outlined in the forward-looking information disclosure in our press release and more fully within our public disclosure filings on SEDAR+. We will post a brief message from Richard along with highlights of our results in our -- on Q3 2025 on our website in the form of an infographic. This presentation will also be added to our website for your reference, along with the post-view recording and transcript. Our detailed information is available on our website and SEDAR+. Please follow us on LinkedIn to keep up to date with other business developments. And I'll now turn the call over to Richard. Richard Kellam: Thank you, James, and good morning to our shareholders. Any shareholders that are joining us from other markets, good afternoon and good evening as well. Plan to do today is just hit the highlights of our results. As James said, all the details will be put on our website, Talk a little bit about new business development, have a look at our continued priorities for 2025, and then turn it over to Q&A. So having a look at a summary or highlights of our quarter, I'd say, overall, the results are very much in line with what we forecasted and what we expected as we continue to manage through some market uncertainty. Looking at this first column on the left here, highlights of our Q3. Adjusted EBITDA was in line with what we expected. Margin came in a little higher than a year ago, 11.7% versus 11.6%. And overall EBITDA value was $12.3 million versus $12.6 million, so pretty much in line as I said with what we expected. And our revenue was slightly off versus a year ago, but it was significantly decelerated, shall we say, versus quarter 2. Even with the sustained macro headwinds, we were minus 3.1%. So again, pretty much in line with what we had forecasted. Gross margin slightly lower than a year ago, and that's really due to the reduced fixed cost overhead recovery we get in our factories. We'll see that snap back as we get revenue back into our facilities. The market uncertainty continues to remain. Certainly, the economic and tariff uncertainty is negatively impacting our business confidence. Several, I'll call it, discretionary marketing events or marketing spend has been reduced during the year. Again, we'll see that confidence kind of rebuild as we progress into next year. There's been a direct and an indirect impact from the Canada Post labor disputes. Canada Post is a large client of ours. So that's the direct. The indirect, obviously, are our other clients that are using mail as part of their marketing efforts, right, especially direct mail and personalized direct mail. So the rotating strikes that we're now in are certainly not helping that. Air Canada, another client of ours, obviously, that strike impacted some of our workflow, especially on the operational side on the quarter. But what I can tell you is the team has done a fantastic job at managing overhead and really mitigating the impacts of lower client spending. You'll see that in our favorable SG&A. Over on the third column, we are advancing our digital and our AI platforms. Our CCM, our customer communication management platform, was named on the Aspire leaderboard. So a lot of confidence in that platform, I'll share a little bit more detail later. We launched our AI-powered contentcloud digital asset management solution, and we're getting some good success with that, early stage in the market. And then we've picked up a couple of new Flex customers, 1 significant financial services client that we're just working to onboard now. So some good -- definitely some good momentum in our digital solutions. And then M&A remains a focus for us. The pipeline continues to grow with market activity that remains robust. Certainly, the macro uncertainty is creating opportunities and providing some incentive on the sell side. Seeing a lot of that activity in the market right now. And we are, and James will share a little later on the deck, that we're well capitalized to transact if we see opportunities that we want to act on. Okay. So a little bit more detail, just kind of unpacking the highlights a little bit. As I said, revenues, pretty much in line with what we expected, deceleration over the prior quarter. From a decline perspective, minus 3.1%. We were about $3.4 million shy a year ago. As I said, kind of the Air Canada, the Canada Post events certainly impacted that, but pretty much what we forecasted. And certainly, the new business development efforts that we have in market offset any other headwinds that we experienced from other clients. And again, we'll talk about that a little bit later in the deck here on the progress we're making on new business. Overall gross profit, as I mentioned, really due to reduced volume in our facilities affected our fixed cost overhead recovery, hence, the margin at 23.4% versus 25.8%. So again, slightly down versus what we delivered a year ago, but pretty much in line with what we had forecast for the quarter as well. Adjusted EBITDA, 11.7% versus 11.6%, as I mentioned earlier. Slightly down over a year ago. Slightly up as a percentage, slightly down over a year ago. So pretty decent EBITDA delivery given some of the headwinds that we experienced on the revenue line. James, do you want to talk about our balance sheet? James Lorimer: Sure. Good quarter in terms of free cash flow. Our net debt came down from $87.5 million at the end of quarter 2 to $80.6 million. Our net debt to EBITDA, just below 1.9x, actually 1.87x. So a nice improvement there. Our excess availability under credit facility has increased nicely as well. We had a little over -- just about $17 million of excess availability as well as $3.7 million of cash. With the accordion facility we have that's undrawn, we have over $40 million of total credit available. So we believe we're well capitalized, not only for our operations, but also to pursue M&A opportunities. Richard Kellam: Okay. Having a look at new business. First, I'm going to just talk a little bit about our CCM360 platform. This is customer communication management platform. We've been working on this for about 7 or 8 months and getting good traction in the market right now. It does everything from electronic form capture, intelligent document processing, digital data, document routing, secure encryption, robust composition engine and data-triggered customer communication. So you think about full loop, we call it 360, right, from capture to delivery. And it's a fully AI-enabled solution. The electronic capture is AI enabled. The intelligent document processing backbone is all AI enabled. The digital data document routing is AI enabled. So really using AI capabilities to simplify this workflow and, more importantly, to be able to capture information effectively and be able to use it for effective marketing programs. So we're starting to get some very good client traction. The recent win we secured is as a result of this product that we've built. So great success. We'll see a lot more of that as we progress into this quarter and, importantly, into next year, we've got a very active pipeline. As I mentioned, we launched our contentcloud, which is a fully AI-enabled digital asset management solution. We had launched a product called ASMBL about 1 year, 1.5 years ago. And this is a rebranding with some significant additional features and functions. It's very active on intelligent automation and some agentic AI as well. So new to market. We've already secured a few clients on this platform, and we've got a very active top-of-funnel program right now. So we'll be able to report a lot more activity on this as we progress through the next couple of quarters. So very excited about this launch and off to a great start. We shared this with the -- our shareholders, I think the last quarter -- the last couple of quarters, we are all-in on growth. And again, that decline of around minus 3% would have been greater if we didn't -- if we hadn't built this growth muscle. So we're getting some good momentum on new wallet share as well as new business. New logo penetration as well, our team is all-in on growth. We've got a lot of active opportunities, a high number of proposals out there. Our number of value wins has gone up. About 22% of our value and opportunities have come from new logos. Our win rate has certainly accelerated versus 2024. I will say that time to revenue in our business is long. So you'll see some of that revenue flow in end of the year and, importantly, into next year as well. I mean if we win a deal now, we wouldn't see revenue until next year, as an example, especially if it's large enterprise. So we're pleased with the progress we're making. And as I mentioned, our tech or our IA -- AI, rather, enabled solutions, we've got top of funnel right now around $7 million in opportunities in funnel for those digital solutions that we see down on the bottom-right of this slide. So good progress on our new business development and are all-in on growth initiatives. Priorities for 2025. Again, we've unpacked these with shareholders several times. We're consistent with what we reported last quarter: maintain focus on profitable, organic growth; deliver return on new capital investments; continue to drive gross margin improvements through operational efficiencies, and we've delivered several operational efficiencies. And again, once we see revenue flow back into our facilities, we'll see that gross margin improve. And then demonstrate our agility and adaptability to navigate these uncertain environments, leveraging our scale, increasing our -- or managing that capacity we've got in our network, and then expanding our product mix and skills and capabilities to drive that profitable growth over time. Those are our priorities. James, do you want to talk about our return to shareholders? James Lorimer: Sure. We recently declared our third quarterly dividend of $0.025 per share, that will be payable at the end of December to shareholders of record in mid-December. This, of course, in addition to the special dividend that we declared earlier this year of $0.20 per share. Current price, we're trading at about a 7.5% dividend yield based on the annualized quarterly dividend that we've been declaring. Richard Kellam: Okay. So closing, we are certainly in very good control of our business. You can see that our SG&A has improved considerably despite some of the headwinds that we're experiencing in the marketplace. But again, we've all lived through tough environments before, and we will see that turn. We've got a great new business development effort, new business development program in place. We've got strong operational performance. Our cash flows are solid, as you saw from James. Our new business development, as I said, our initiatives are kind of the best we've had in years. We're all-in on growth. We certainly have a proven track record of execution. We are well positioned to pursue any opportunistic M&A that may come our way. Of course, we've got an experienced leadership team, kind of best-in-class or world class in the industry. And we're well capitalized, as James said, with over $41 million in available capital. So we're well positioned to take advantage of market opportunities as they arise. And certainly, we'll see this -- some of the headwinds we've experienced turn at some point, and we'll be able to capitalize on those opportunities. All right. So that's the summary of the quarter, and we'll turn it over to any questions that our shareholders may have. James Lorimer: Thanks, Richard. We'll now take questions from the audience. [Operator Instructions] We have a couple of questions here. Let me go with Noel Atkinson, please. Noel Atkinson: This is Noel Atkinson from Clarus Securities. Nice to see that the year-over-year results are starting to go the right way here. You mentioned in your prepared remarks about the deep new business pipeline. Is that mainly print? And can you talk about like what are you seeing by like areas or verticals? And are you winning market share from foreign providers or weakened competitors? Whatever you can provide for detail on that, that would be helpful. Richard Kellam: Yes. I'll provide as much detail as I can, Noel. Good to hear from you. Great question. So we have an active CRM pipeline. I won't tell you the value of it, but it's sizable. And it's across our print, our tech-enabled solutions as well as our pure-play SaaS solutions and digital signage as well is part of it, as well as resales. We buy printers and scanners for hospitals as an example. So it's all of that together, print obviously being the sizable portion of it. And on the print side, I'll tell you where the biggest opportunities are. Certainly, labels. We've had really good success on labels, and that's a growing sector in the marketplace. Large format, which has been a growing business for us in 2025. And we see a lot of new business development opportunities there as well as we close out this year and move into next year, and we've won several this year as well. Packaging, especially on the folding carton or paperboard side, we're quite small in it, but it's a growing opportunity for us. So it will be in a kind of 3 -- and then, of course, digital, but those would be 3 or 4 areas that are very active in our pipeline right now. Our forms business is declining slightly. Not a whole lot of new business opportunities in forms. That's a business that we kind of manage for cash flow, Noel. Good business for us and it spins us some good cash flow, similar to our rolls business. And yes, as I said, we've got -- I already gave you the number on our pipeline for some of our pure SaaS and digital solutions. So I don't know if that answers your question. Maybe second, I think you had a second question, which was around verticals. Obviously, given the large format, a lot of eyes in retail and QSR. So a lot of opportunities there in our pipeline to build that out over time. And then interestingly enough, our BCS business, that's the kind of transactional mail business, James. It's roughly kind of flat to a year ago, which is understandable. And that's an opportunity for us to kind of win or grow share as that market certainly has some headwinds. Transactional mail is not growing from an industry perspective, it's sort of declining at low single digits. We've maintained pretty flat there or directly flat as a result of some share gain. So hopefully that gives you a little bit of color. Noel Atkinson: Yes, that's great. One more quick thing. Just in terms of if you're winning RFPs, taking share here, is it foreign providers or weakened competitors or your digital capabilities? Like what's been driving the wins here for you? Richard Kellam: Do you want to talk to that, James? James Lorimer: Yes. I'd say the RFPs are typically pretty complex, long processes, very detailed responses. Typically, there's a lot of requests around information security and what we're doing from a SOC 2 compliance perspective. We believe the investments we've made in the past several years, but particularly in the last couple of years, have really positioned us well in that market. And given our scale, it's certainly harder for some smaller players to have the same kind of IT security and infrastructure investments that we've been making. We have recently won some smaller jobs, some smaller business from some poorer, less well-capitalized smaller players in the market. So that's been a positive. We have seen a little bit of kind of international, some participants in a couple of sectors. Pretty isolated to kind of 1 or 2 sectors, but typically most of the competition is domestic. We are exploring a little bit more expansion into the U.S., leveraging some of our kind of unique capabilities across the board. So we expect that that could help offset some declines that we've seen in some of the kind of longer-run kind of forms types of businesses that we're in. I hope that helps. Richard Kellam: Yes. A little bit of business we picked up, Noel, on retailers -- U.S. retailers that may have been servicing their Canadian business out of the U.S., that, given some of the uncertainty of tariffs, want to service that business in Canada. So that's led to some opportunities. And as James said, one of the areas we are most successful in are clients that have a lot of complexity in their workflow and they may be using multiple providers, and we can help them simplify that complexity with some type of digitally enabled workflow solution and then consolidate that work into our environment. That's where we sort of find the most success. And then as James said, security is obviously an important one, right? Noel Atkinson: Okay. Great. Just one more for me. On the M&A side, are you looking for tuck-ins or transformational transactions? And then can you talk about are you looking to do these transactions to add customers or capabilities or geographies? Richard Kellam: You want to take that? James Lorimer: Yes. Good question. Definitely, we're seeing a lot of opportunities on the M&A front right now, Noel. It seems to be a very vibrant market. We're being very selective. The areas that we're really trying to focus in on are some of the growth markets that Richard mentioned earlier. So think about kind of large formats and kind of in-store signage. Think about labels, that's a big market. We have some capabilities in kind of paperboard packaging. We would like to kind of expand that through M&A as well as organically. But those would be probably the top kind of 3 areas that we're looking at. And then also just kind of complementary capabilities that might add some regional strength or regional capabilities to our kind of physical footprint of manufacturing plants. We have a question from Chris Thompson. Chris Thompson: Can you hear me now? James Lorimer: Chris, yes. Chris Thompson: Great. I just want a little more -- in the general overall Canadian market, your sales market, are you seeing the sales pressure, look like it's going to be visible, say, for the next couple of quarters or for the next year? Like what's the uncertainty of your sales pipeline in closing deals? Richard Kellam: Yes. It's a great question, right? We talk about this every day. It's unpredictable. We could have -- we have a great month and we forecast a solid month the next month, then we lose a couple of large activities out of our workflow, and obviously we go backwards on the month. So it's very unpredictable at this point. That's why we kind of stepped back on giving guidance until we get more clarity. You saw some improvements, obviously, in our quarter versus the prior quarter. That's due to the new business development that we brought in. And we're very active on doubling down on that new business. But in terms of the market, yes, it's still kind of uncertain and unpredictable at this point. Chris Thompson: Okay. And just looking at your tech-enabled subscription services being one of your focuses, it seems to be growing slightly year-over-year. It looks like there's a lot of seasonality in it. But do you think you're going to see more of an uptick on this next year? Or is it just going to be one of the slow growth you're going to -- and then you think you're going to build some momentum and hopefully it takes off more? James Lorimer: Yes. That's a good question, Chris. There's a number of things that are in that tech services bundle. Some of the offerings are very seasonal. So they tend to kind of ramp up in Q3 and -- sorry, in Q4 and particularly in the first quarter. And those largely relate to some of the big -- we charge professional services fees for programming and kind of getting ready for tax time and a lot of the big annual statements and programs that run in the first quarter. So that part of the business is a little bit seasonal. The balance, if we look at some of the tech offerings like contentcloud and Zavy, those are a little bit more kind of straight line from a -- we recognize revenue on kind of a SaaS basis for those. So as those businesses grow, you'll see an accelerated growth in those business lines. And then kind of separate sort of fee is Flex fees. And Richard mentioned that we won a new, fairly substantial client in the quarter. We are in the process of onboarding that. We'll recognize that revenue over the next 12 months. So that will be a nice little piece of business on top of that. So it will be a little lumpy in terms of the steps up with some of those larger things. Maybe a little bit more gradual with some of the smaller annual license fees from, say, a contentcloud or a Zavy. We have a hand up from Daniel Rosenberg. Daniel Rosenberg: Daniel Rosenberg from Paradigm Capital, James, Richard. My first question comes around just the flexibility in the business. It was nice to see the G&A come down relative to last year. I'm just curious, how much flexibility is inherently in the business as you think about macro ups and downs? James Lorimer: Yes. Good question. There's kind of 2 parts to the business broadly if you think about cost of goods sold and then SG&A. Our labor, there's certainly variable components to labor. When we're running hard, we'll add either temporary labor to help, for example, in certain things like getting fulfillment and other functions. The typical kind of fixed labor, so think about kind of pressman and warehousing and shipping and pre-press and all those functions, those are a little bit less variable because we can't really kind of run out and hire or downsize easily because it's a pretty unique skill set. From the SG&A side, we've got a number of levers. We've got a pretty decent-sized fixed overhead just from staff levels. We do have some variable components of spend on different functions. I guess, practically, R&D is kind of one of those. We've been pretty steady from an R&D perspective throughout this year compared to last year. But we're certainly looking as we've seen softness in our top line revenue this year compared to last year. And I think we've proven that we're pretty good at adopting where needed. So we try to be as flexible as we can within the typical kind of constraints of having good people and good talent. Daniel Rosenberg: And just turning to the pipeline, so you mentioned some sizable activity within it. I was just curious if you could speak to conversion around the pipeline. And then as a customer converts, how do you think about selling product sets, like 1 solution versus 2 solutions versus 3, and kind of the segmentation of your actual customer base as it fits the product set? Richard Kellam: Yes. I won't talk specifically to our conversion rate because that's sort of a competitive advantage that we have, but we certainly have a high conversion rate once we have the right lead. And obviously, we work through that lead gen into proposal. I will tell you that one thing we're very good at is cross-selling and upselling. So we may have a new client that comes in to our organization, could be, I don't know, a retail client that we're offering in-store solutions to. And then, obviously, we sell digital solutions or other print solutions to them as well. So our team is highly skilled at cross-selling and upselling. We don't have sales reps that specialize in one particular print technology. Our guys sell everything, right? Hence, the kind of enterprise solution that we bring to clients. So hopefully that answers your question. Not for me to be very specific, obviously, given it's certainly a competitive, I'd say, a competitive advantage that we have. Daniel Rosenberg: Understood. Appreciate the color. And then just when you think about the digital products, it sounds like you're staying certainly on top of AI implementations. I'm wondering if you could give any insight into, early days, but how customers are adopting usage. And does it impact at all how you think about pricing the products given these added features and benefits that AI is off of? Richard Kellam: Well, certainly, I mean, if I talk specifically about our contentcloud platform, it's fully AI enabled. So our clients that are using that are kind of all-in on that AI solutioning. In fact, I think, talking to a client, a CMO that we onboarded about a couple of months ago, and his comment, from him as well as his team, was like, "I can't believe we've lived without something like this for so long." So we made it super easy for them to manage their massive asset management base with auto-tagging, meta-tagging, using AI. So they can find and share stuff at ease and take a lot of time and waste out. So we've got high level of adoption in the AI solutions that we're bringing to clients today, whether it's in Zavy that helps kind of automate or better understand the effectiveness of their -- of social campaigns and provides recommendations to improve, whether it's digital asset management, contentcloud, on the whole auto-tagging and meta-tagging, or whether it's some of the work we're doing on CCM360, especially the intelligent document processing, being able to look at files and manage them effectively. Kind of similar to what we do with ASMBL, just a little bit more detail on the CCM360. So we've got -- obviously, the market is moving fast, but -- which is obviously leading to a lot of opportunities for us. But a high level of interest and a high level of adoption once we have the right conversations with the right people. Daniel Rosenberg: It sounds like you're using it really as a differentiator more than any kind of pricing type thing. And is that how I'm to understand it at this stage at least? Richard Kellam: Yes. I mean we don't talk about pricing, of course. But yes, we certainly allow it. We certainly use it to differentiate our offering in the marketplace, but there's a lot of AI activity in the market right now, right? So for us to keep pace with the market, we need to obviously lean into all the AI capabilities and make sure we demonstrate our capabilities in that space. Daniel Rosenberg: Great. Last one for me. So it was nice to see kind of the conversion of EBITDA into strong free cash flow here. Everything seems to be taking shape as you guys were done integrating the business. I was just curious around usage of capital, that M&A pipeline. Anything you could say about size of it or change in valuations? And then also you yourselves have a stock that's at quite an attractive price here. So usage of the NCIB, if you can speak to that, please? And I'll pass the mic. Richard Kellam: James? James Lorimer: Sure. Yes, I guess, first, with your last question, we have been kind of active on the NCIB. We bought, I guess, almost 265,000 shares back in the quarter. So we continue to kind of pick away in the market. Kind of priorities for us really in terms of capital utilization are the dividend and continuing that. Our CapEx needs are certainly much more modest now that we've integrated the Moore Canada business. So we'll end up probably about $5 million of CapEx, give or take a little bit, this year, and probably similar levels next year. And so the other kind of key priorities, continue to pay down debt, get feedback a little bit from the market that they'd like to see our net debt come down. But we're pretty comfortable with the path that we're on, so we'll continue to pay down debt as we go. And then opportunities for M&A, we're certainly looking at things that are accretive strategically. Given our kind of market price, we're being pretty -- very selective in terms of growth profiles and market opportunities that we're pursuing. But we do see some pretty interesting things in the market right now. All right. We have a question from [ Audrey Pelford ]. Go ahead, Audrey. All right, we seem to be having -- oh, there we go. Try now, Audrey. Okay. Maybe we can circle up after the call, Audrey. Richard Kellam: Sure. James Lorimer: I think that concludes the Q&A portion of today's call. Thanks, everyone, for joining and your interest in DCM. As a reminder, Richard and I are available after the call if you may have any follow-up questions. That concludes our call. I hope everyone enjoys the rest of their day. And you may now disconnect your lines. Richard Kellam: Thank you, everybody.
Millicent T.: Good evening and good morning, and welcome to Tencent Music Entertainment Group's Third Quarter 2025 Earnings Conference Call. I'm Millicent T., Head of IR. We announced our quarterly financial results earlier today before the U.S. market open. The earnings release is now available on our IR website and via Newswire services. During today's call, you'll hear from Mr. Cussion Pang, our Executive Chairman; and Mr. Ross Liang, our CEO, who will share an overview of our company's strategies and business updates. Then Ms. Shirley Hu, our CFO, will discuss our financial results before we open the call for questions. Before we continue, I refer you to the safe harbor statement in our earnings release, which applies to this call as we make forward-looking statements. Please note that we will discuss non-IFRS measures today, which are more thoroughly explained and reconciled to the most comparable measures reported under IFRS and our earnings release and filings with the SEC. [Operator Instructions] And please be advised that today's call is being recorded. With that, I'm very pleased to turn the call over to Cussion, Executive Chairman of TME. Cussion, please. Kar Shun Pang: Thank you, Millicent. Hello, everyone, and thank you for joining our call today. In the third quarter, we delivered another set of strong financial results, underpinned by the well-rounded performance of our online music business. Our ongoing innovations across content, services and live experience continue to fuel steady growth in our subscription business, while pushing momentum in non-subscription revenue, particularly in concerts and artist merchandise. Backed by our strong financial position and operational excellence, we are posted to further broaden our music service, unlock new growth opportunities and create greater value for artists, partners and users across the entire music industry. Now let me share some highlights from this quarter. First, we further enriched our content coverage to include more offerings in different music genres and languages. For example, in Pop music, we renewed the contract with dramas, a leading Korean naval and partnerships with [indiscernible] studio strengthening our collection of top hits. To better serve users' passions for game-related music, we partnered with Tencent Games to coproduce Atlas of Tomorrow, [indiscernible] the 10th anniversary theme song performed by JJ Lin for Honor of Kings performed as the final at the Honor of Kings' 10th anniversary co-creation night, the song quickly garnered over 600 million social media mentions within 2 weeks of its release, engaged 280 cultural and tourism authorities nationwide, standing out as one of the year's most impactful game soundtracks. We also collaborated with Blizzard Entertainment for the first time and introduced 50 original soundtracks from iconic game titles, including World of Warcraft, [indiscernible] and Hearthstone. To further Enrich Anime and K-pop music categories, we established strategic partnerships with renowned Japanese ACG label, King Records and Korean Label Serial, offering popular Anime songs and OSTs from his dramas such as Boys Over Flowers, [Heirs] Second, during the quarter, we successfully staged several large-scale international concerts and events, extending our reach beyond borders to tap into the international market opportunities. A prime example is the concert tour that we hosted for leading Korean artist, G-Dragon. G-Dragon 2025 World Tour, Ubermensch, building on our success in the second quarter. This time, we put on 14 additional show of shows for him across 6 cities, including Sydney, Melbourne and Kuala Lumpur, drawing over 150,000 attendees. The popularity of the tour lead to acceleration of live concert revenue growth, demonstrating our strength in delivering world-class entertainment experiences. Our annual flagship TMEA concert was another success and highlight for the quarter. The event featured 35 different artists and groups and drew more than 10,000 attendees, underscoring its strategic importance as a well-anticipated premier gathering within the music industry. Building on the momentum from TMEA, this year, we broke new ground and introduced another flagship concert IP, TME Live International Music Awards, TIMA, to celebrate the achievements of international artists and showcase their talents. The inaugural TIMA featured 22 global renowned artists and groups from China and a number of Asian countries, including famous [indiscernible] SMTR25, the 2-day events immersed over 20,000 attendees in a vibrant atmosphere. We also organized and delivered several major concert tools for well-known artists like [indiscernible] The success of these shows illustrates TME's strength and impact in [bottling] artist fan bases, especially through interactions with younger audience. For instance, in Guy's most recent shows in Chongqing, through integrated online and offline promotional resources, we helped him attract more than 40,000 attendees, up from 10,000 in a single event in the third quarter. This marked a successful upgrade in concert scale, moving from arena level to stadium level. Together, these remarkable events have laid a solid foundation for TME to continue to grow at scale as we further build out our performance pipeline, we are confident that there will be more exciting opportunities home and abroad to deliver large-scale and immersive live music experiences for users. Third, we continue to break new ground with artist partnerships, providing them with holistic support and leveraging our increasing promotional capability to enrich artist-centric offerings. For instance, during the quarter, we partnered with Tencent's hit title, Crossfire to produce new song COPDD by seamlessly integrating this song into the game ecosystem and allowing users to earn in-game items through listening task. We amplified its impact. The track sold to #2 on the QQ Music New Song chart within 2 days of its release. As another example, in this quarter, we premiered Lejiang's new digital album Rock the Heavenly Palace together with collectible cart packages. This innovative approach not only boosted participations, but also lead the album to rank among the top of the 2025 bestseller charts. The production and release of Bai Lu's first physical album, My Odyssey, featuring 2 distinct version designs marked another success. The album earned strong acclaim from fans and achieved outstanding sales performance. All of the above examples illustrate the power and flywheel of our content and platform dual engine, supported by our massive user base, fueled by expanding content ecosystem and constant innovation, we have reinforced the virtuous cycle, allowing us to design diverse services to address users' needs with user interactions deepening and community engagement strengthening, it boost the reach of quality content on our platform, and attracts more attention from artists and labels, both home and abroad, fueling the sustainable growth of our ecosystem. Last but not least, on ESG, for 7 consecutive years, we have proudly won the Music Garden Space Public Welfare Program, partnering with singers and teachers to support music education in rural areas. This year, we invited WeSing users to redeem their points accumulated through incentive [ads] to directly support the program, sparkling greater users' interest. Over 380,000 participants took apart. Looking ahead, we will continue to leverage our dual engine strategy, explore new opportunities and expand our reach. Building a seamless [ribbon] all-in-one music service platform for music lovers. Now I would like to hand it over to Ross for a deeper dive into our overall platform development. Ross, please go ahead. Thank you. Liang Zhu: Thank you, Cussion. Hello, everyone. Our music ecosystem continued to strive in the third quarter, benefiting from our profound user insights and operational excellence. As we focus on enhancing the value proposition for user, this quarter, we achieved a steady growth in [indiscernible] penetration and ARPPU. We are also building a diversified product portfolio catering to different user cohorts to effectively expand our platform's reach to a broader audience. To this end, our commitment to harnessing AI to elevate users' experiences continue to import us to remain at the forefront of delighting music users. First, on system integration, we were among the first to support Apple's Liquid Glass mode in iOS '26 and introduced Liquid Glass themes and players on Android for optimized visual effects and better interactions. We also fully adapted our app for HarmonyOS with core music features now largely aligned with what we offer on Android. Second, we upgraded player interactive features and AI-powered functionalities. For example, we embedded more enlighting designs and tokens on the playback page, creating delightful thread across new touch points, which also proved effective in new song promotions. We also pioneered multimode sound transition feature, Automix, offering seamless remix and a more immersive streaming experience. To effectively deepen engagement, we expanded our AI-powered [lyrics] card feature, newly covering over 200 leading artists. The card collecting process is full of [threats ] and fun, driving sharing among users and increased user activeness. Our upgraded AI assistant allows users to generate a personalized playlist with just one type or easily create their own original music. This has significantly lowered the barrier to creative expression and helped increase content consumption through recommendation. We are here to serve and delight. As a result, users can unlock additional tools to and perks from our multipoint membership offerings, whether a freemium user, a deeper value add member or a standard subscriber. We provide a different services to cater to the distinct needs of users. In fact, recently, we started to see an increasing values of freemium users upgrading to add members, which also led to increased time spent. For those looking to experience the [IRT] made service, our SIP offers an unparalleled range of freemium features, which have been crucial in driving SIP adoption rate and average spend. Its penetration and ARPPU expanded both year-over-year and quarter-over-quarter as we introduced new privileges and innovative services that strengthened its value proposition and inspire the music appreciation in new ways. A new highlights to share. First, Premium Sound qualities remain our key draw for [indiscernible] as we accelerated its results. QQ Music newly introduced DTS Booming External Speaker became the top convention driver among audio qualities. Viper Ultra Sound 2.0 Kugou Music with its improved sound quality, sound [clarity] and reduced data usage also proved to be highly effective in retaining [SVIP] loyalty. Second, our insight into content and user propelled us to provide creative offerings, which in turn helped boost [SVIP] uptake. For example, the digital album, an integral part of our content ecosystem remains effective at [SVIP] commission. Members highly appreciate their privileges access to digital albums alongside limited edition, collectible [NFC] cards. Notable collaborations this quarter include [indiscernible] self-titled Japanese EP, which significantly boosted [SVIP] commissions. Another example is Starlight cards. In the third quarter, we rolled out new Starlight cards featuring popular artists such as Fiona Sit, Asper, Idol, and Things in Times [Shinei Nouzen] which instantly became a big draw. We have also expanded artist partnerships to include more international musicians, including [indiscernible] Japan's [indiscernible] Western artist [Jake] replicating our success domestically. We recently expanded our Starlight card offerings to the Hong Kong and Thailand market through our music platform [indiscernible]. Third, we rolled out several target initiatives to reinforce the artist fan connection and strengthen user loyalty through [bubble]. We expanded our artist rotors by onboarding over a dozen musicians from domestic labels such as Huxia, [NexT1DE] and [Ride] giving more fans the chance to interact directly with their favorite artists online. This in turn attracted broad, broader user base. We leveraged AI to further localize the bubble features and functionalities, leading to improved user retention. The new and upgraded features include in-app translation and speak to text capabilities empowered by large AI models as well as desktop [short cars] for quickly and spontaneous access. We also launched limited edition budgets to celebrate key artist moments such as new sound release, birthdays and debut anniversaries. This compliment by [indiscernible] perks helped strengthen emotion ties between artists and fans, resulting in improved retention and engagement. In summary, we are pleased with the progress we have made in enhancing the value of an increasingly diverse user base. Moving forward, we remain committed to further enhancing our core strength and platform efficiency. We are well positioned to continue to shape the industry from music creation to enjoyment. With that, I would like to turn the call over to Shirley, our CFO, for a deep dive into our financials. Min Hu: Thank you, Ross, and greetings, everyone. Let me now turn to our financial results. In Q3 2025, our total revenues grew 21% year-on-year to RMB 8.5 billion, marking the highest revenue growth since Q1 2021. This was resulted from continued growth momentum in music subscriptions, together with robust growth in offline performances, advertising services and artist-related merchandise sales. Online music revenues grew over 27% year-on-year to RMB 7 billion. Music subscription revenues grew 70% year-on-year to RMB 4.5 billion in Q3 2025 driven by continued growth in monthly ARPPU and subscriber base. Monthly ARPPU reached RMB 11.9 this quarter compared to RMB 10.8 in the same period of last year, primarily driven by expansion in SVIP membership program. This quarter, we continue to broaden and strengthen the SVIP benefits. For example, QQ Music newly introduced the DTS Booming External Speaker and we expanded Starlight cards with more popular artists, both are features to drive SVIP adoption. Additionally, our multiprolonged membership offerings across ADS membership, standard memberships and SVIP membership also contributed to improved user engagement and conversation. All of these efforts have laid down the foundation for the health growth of our subscription business. Advertising revenue continued its strong growth trajectory on a year-on-year basis, primarily driven by more diversified product portfolio and innovative [ad] formats such as ad-supported model. Offline performances and artist-related merchandise sales delivered triple-digit year-on-year revenue growth this quarter in Q3. We successfully hold multiple concerts, both domestically and internationally. In overseas market, we hosted 14 shows for G-Dragon across 6 cities, achieving robust ticket sales. In domestic market, we successfully hosted concerts for high-profile artists such as [indiscernible]. In addition, we provided a concert-related merchandise sales during the concert, which opened more artist connection opportunities and in turn, contributed to the revenue growth in artist-related merchandise sales. Social entertainment service and other revenues were RMB 1.5 billion, down by 3% year-on-year. Our gross margin in Q3 2025 was 43.5%, up 0.9 percentage points year-on-year. The increase was mainly attributable to strong growth in music subscription and advertising revenues alongside a lower revenue sharing ratio in social entertainment services. At the same time, new growth areas such as off-line performances and artist-related merchandise sales have lower gross margin. The revenue mix shift may cause gross margin fluctuations in different periods. Diversification in revenues offers the possibility for further growth in our revenue and gross profit and help us cultivate a more comprehensive one-stop music services ecosystem. Moving on to operating expenses. They amounted to RMB 1.3 billion, representing 15.5% of our total revenues in Q3 2025 compared with 70.4% in the same period of last year. Selling and marketing expenses were RMB 216 million, up by 18% year-on-year, primarily due to higher content promotion expenses and channel spending. We keep monitoring market conditions and increase spending as needed with financial discipline. General and administrative expenses were RMB 1.05 billion, up by 5% year-on-year, primarily due to growth in employee-related expenses. Our effective tax rate for Q3 2025 was 70.7% and remained relatively stable compared with ET in the same period of 2024. We accrued withholding income tax of RMB 118 million this quarter. For Q3, our net profit increased by 29% to RMB 2.2 billion and net profit attributable to equity holders of the company increased by 36% to RMB 2.2 billion. Non-IFRS net profit increased by 28% to RMB 2.5 billion and non-IFRS net profit attributable to equity holders of the company increased by 33% to RMB 2.4 billion. Our diluted earnings per ADS this quarter was RMB [1.38] up by 37% year-on-year. And the non-IFRS diluted earnings per ADS was RMB 1.44, up by 33% year-on-year. As of September 30, 2025, our combined balances of cash, cash equivalents, term deposits and short-term investments were RMB 36.1 billion as compared to RMB 34.9 billion as of June 30, 2025. This combined balance was impacted by the repayment of USD 300 million for the same year unsecured lots in Q3 2025 and it was also affected by changes in the exchange rate of RMB to USD at different balance sheet dates. Looking forward, we will put more efforts in IP cultivation and self-product content while keeping product innovation to foster a vibrant and comprehensive music ecosystem. With solid growth in our core business and increased product diversification such as offline performance and artist-related merchandise, we are well positioned and are confident in the high-quality growth of our business. This concludes our prepared remarks. Operator, we are ready to open the call for questions. Millicent T.: [Operator Instructions] And the first question comes from the line from Morgan Stanley, Liu Yang. Yang Liu: I would like to ask about the fourth quarter this year and the 2026 outlook for the business. Unknown Executive: [Interpreted] Thank you so much for your questions. And with our holistic high-quality growth strategy, we delivered another quarter of strong results on both of the top and the bottom line. We continue to lead the industry in music consumption and creation, and we are confident to deliver good results. On the music subscription side, our multipronged membership offerings lead to better caters to users' diverse needs. Number of paying users and ARPPU grew steadily, while user retention and time spent remained healthy. SVIP penetration and ARPPU increased year-over-year and quarter-over-quarter. In addition, I would like to point out that the newly launched ad memberships also gained momentum, which will help us to unlock greater value from the freemium users as well. On the non-subscription side, our One Stop music entertainment service platform will continue to drive users demand and business growth. First, on the advertising side, our diversified and innovative ad formats continue to create value for advertisers and users. So it will continue to drive steady business growth in quarter 4. Second, on the fast-growing live concerts business, we have already achieved a significant breakthroughs [found] and aboard, which will contribute to a triple-digit year-to-year revenue growth. Last, on the fan-based economy, we have explored a variety of new product combinations and service formats, which will effectively helping artists and music labels to further unlock commercial value. So in short, for the year 2025, we remain hopeful to deliver strong performance of our online music services to further driving good revenue and profit growth of the company. Looking ahead to 2026, we are committed to implement our platform and content ecosystem dual engine strategy. With the strong foundation that we have built together with the new initiatives, we expect sustained healthy growth in our music subscription business, although at a slightly slower rate given its high base. Non-subscription businesses contribution to the group performance will continue to increase and is expected to grow faster than the subscription business. Millicent T.: And then the next question comes from Goldman Sachs, Lincoln. Lincoln Kong: A very solid quarter in the third quarter. So I just want to quickly touch on the industry landscape here, especially for the music streaming business. I think recently, there is a bit of a market concern [indiscernible] over some music app competition in terms of the faster MAU ramp-up or potential high budgets for purchase of music content. So I just want to wonder management thoughts, do you see anything changed in terms of the competition landscape at all? And also our strategy to further enhance our leadership in terms of the content differentiation, our user mindset and overall service offering to consumers. Unknown Executive: [Interpreted] well, thank you very much. Thanks for your question. Regarding the competition, I think we still have the same competitors in the music industry and including Soda Music as well as NetEase music and also Soda Music and the [indiscernible] music. For sure, we also noticed the growth from Soda music. [Interpreted] Well, for TME, we always believe the competition is normal, and this is also what we see from the past to now. And this year also marks the 20th anniversary of QQ Music. And along the way for our development, we have already encountered many competitions. Regarding the competition, I'd like to touch upon platform and content, the 2 perspective. Regarding the platform, I think for music application is still a traditional business. And the business is based on the streaming business, where traditionally, we do have the recommendation, where our asset management maintains that same and most important and critical user experience for us regarding the streaming business. I think our competitive edge still rests with our music library, along with the user asset management that has been accumulated for so many years. But at the same time, you can also see that TME still lead the industry regarding the sound quality and sound effect, where we also continue to provide the sound quality, the lossless sound quality to the market. We also continue to engage with the high sound-quality equipment for music fixtures, including the HiFi and continue to engage the earpiece and the loud speaker high-quality sound effects, fixtures and equipment to further extend our content coverage. Where you can see, besides those basic products within TME, we have already further extended our business to provide a more enriched and diversified music experience to our users. Especially from our recent performance on the Starlight Card, along with our user badge as well as Bubble, we do have the e-app audience and the fans interaction, which will yield very positive results, which are not exist for any other competing products. Where at the same time, regarding the social entertainment business and our leasing product still show great potential and advantage regarding commercialization and rather have the Earth-Like or a okay events, which also yield very positive results. This can also help to consolidate our transitional business advantage. Well, I think a majority of people just pay attention to the changes on our mobile applications, where for any music product, you have to still keep an eye on the user rate as well as content coverage on multiterminal and multi-devices. You can say that at our PC end, and we still have a huge subscriber base. And also for the in-car service, we have a very high penetration ratio especially recently, we're actually leading the music publications by working with Harmony OS. You can see based upon our product innovation, optimize user experience and continued innovation and we'll still be able to pioneer and lead the market development. Regarding the patent or the copyright for TME, we always provide the most complete and high-quality application content in the whole industry. Besides releasing different genre of the songs, the most important thing we did for the past few years is continue to engage and cocreate many different musical content with music creators in our industry. Besides working for different genres of the songs, and recently, we also started to follow and work with Tencent Games and Tencent Video to create their top-notch IP for the co-creation of the OST songs. So you can see that our cooperation with Tencent Games and Tencent Video, and actually delighted the user and also be quite popular among the user, where more importantly, we continue to afford the comprehensive partnership with our partners, not only for the traditional song cooperation, but also for the co-creation of the content, including the Earth-Like concert as well as the fan-based economy, and we also made multiple extensions of collaboration with the partners. What we do is to provide the most comprehensive and high-quality content to our users. So you can say that now we do have the well-established platform with very robust content creation. We are adopting the 1 body with 2 wing strategy. That is indeed our largest competitive edge and the differentiation compared with other competitors, and we're also going to continue to integrate the platform and content for further development. That is also good for our IP protection and also continue to drive the subscription business development, which will be ultimately positive for our future business growth. So indeed, the industry is facing furious competition, but we're still very confident for our future development. Millicent T.: And the next question comes from Alicia Yap from Citigroup. Alicis a Yap: Congrats on the solid results. I have a question regarding the music concert. So can management share with us what would be your 2026 pipeline for the music concert. So how should we be thinking about modeling the revenue growth from music concert merchandising and also the digital album sales because -- so what are the challenges and opportunities on pursuing music concerts business and also to ensure the sustainable steady long-term growth? Unknown Executive: [Interpreted] And you see that for the Earth-Like performance or concert, this is actually a commitment for TME to go for, and we also have a long-term investment for that, especially for the past few years, I will just share with you what we did from a few perspectives. First of all, regarding the artist tour and we still organize the top artist tour for the most popular artist in our industry, where at the same time, we also invite the top artists to come and to stage the Earth-Like concert, where internally, we also have our own proprietary IT, including TMEA as well as TIMA. So for TME, we did a comprehensive resources investment and substantial resources allocation to make sure we continue to advance the Earth-like performance. Actually the Earth-Like performance not only help us to build our experience, but also continue to further debate with our partners. For example, in the prepared remarks, I have already mentioned what we do for G-Dragon, the South Korean artist. We have stage, he's on an Asia Pacific region tour. And that this can actually help us to further accumulate experience, but at the same time, it also hit a great success in Asia Pacific region. And such experience from the tour events can also be replicated and introduced into other large-scale Earth-Like concert and performance. So we are very happy and satisfied with what we have been achieved. Can say that besides organizing more top artists for tours and performance and we're also going to leverage our own proprietary IP, including TMEA and TIMA to continue to improve our performance in organizing the Earth-Like performance and concert. This also showcases our unique advantage because TME will be able to integrate our online and offline music resources and continue to further deepen our collaboration with the musical ecosystem. In that way, we can also make sure that our audience will enjoy a high-quality music experience and that can also become our competition advantage and differentiation. So by organizing such top artists performance, we also hope that we will provide more performance privilege as well as privilege to the fan-based economy to our user. This can also help to promote the SVIP subscription business development, where at the same time, we will be able to provide our users a more comprehensive and immersive experience by staying with TME. Well regarding the fan-based economy, and we also continue to further improve our service to the fan groups and community by providing the primary privilege to them, which has proven to be very popular among our fans. For example, I have already shared with you the G-Dragon Asia Pacific tour. The merchandise sales from that tour proved to be quite successful. This is also what we continue to do by providing the primary privilege to our users. Millicent T.: And the next question comes from Jefferies and Thomas Chong. Thomas Chong: My question is about our subscription services. Given that we have been strengthening our ARPPU growth, while we are maintaining our steady net adds. I just want to get some color with regard to how we should think about our 2026 growth driver for the subscription services. How should we think about the growth momentum for ARPPU and net adds? I'm just wondering if we are seeing the competitive dynamic environment in terms of the competition. Would there be any changes in terms of the growth driver, ie., we launched more lower-priced packages to drive the subscriber growth and the ARPPU may not be as fast as what we previously expected. And on the other hand, when we look into our SVIP subscribers and the penetration, can management talk about the goal in 2026? Unknown Executive: [Interpreted] Regarding our overall target for 2026, I think we're still going to register a very steady growth for the subscriber base. And it may -- regarding the growth driver, it may come in from the following aspects. First of all, still leveraging the high-quality content for business groups. We're still going to provide the high-quality content by working with our IP partners to continue to provide the high quality and unique content to our users. Well, the second growth driver may come from the content privilege because starting from 2026, we're going to export the new boundaries besides the traditional music content, we're also going to pursue the boundary for the Starlight Cards, the Earth-Like concert as well as the merchandise, because my colleague used to mention with regarding the content, we not only do the music content, but also continue to develop all the peripherals for merchandise to continue to pursue a sustainable business growth. Another key growth driver for the subscription business will be raised with the functional privileges, including the sound quality, sound effect, the ringtone editing as well as the AI-empowered sound writing. This can actually be the differentiated function we offer to the market. So generally speaking, we're still going to continue to consolidate and innovate on both content and the functionalities. In that way, we will be able to further grow the size of our subscription business and also achieving ARPPU growth. You can say that regarding the second part of your question, the low-priced package, and this is not something new to us, and we have already seen such thing for many years. And especially, we have already been prepared for that especially, you can see the freemium model, and that is a model we have started from 3 years ago. So you can see that from the fundamental business logic and regarding how we consider the growth of the user, we, first of all, have the free-to-use service user and then they go for ad-supported mode and then we do have the regular user, and then they will be upgraded to SVIP. It's a multi-prolonged membership in order to help to further grow our user size. You can say that, especially for ad-supported mode, even if it is also being provided by other competing products in the market. But if you take a look at the commercial data, especially the monetization efficacy of a single DUA actually makes the TME triumph other competitors. So in other words, we already have a very good experience in balancing between commercialization efficiency and user retention. We're responding to the final part of your question that is regarding to SVIP, and I think I have already said that in the prepared remarks, SVIP continues to be a critical part of our business. And for the penetration ratio and ARPPU for SVIP, they're still growing or even commented a good growth as what we expected. Well, regarding the year of 2026, I think the key driver for SVIP, besides providing the subscription and high-quality content, we're also going to have and forge comprehensive partnership with our IP partners to continue to drive SVIP risks. Millicent T.: And the next question coming from Maggie Ye from CLSA. Yifan Ye: This is regarding the gross profit and gross margin. So in light of the potential revenue mix change, thanks to very robust growth in off-line performance as well as artist-related merchandise. How should we think about the profitability of these initiatives and their impact to our overall trend in gross profit as more as margins? Unknown Executive: [Interpreted] From what we see now regarding our online music business, and we still maintain a continued growth for subscription business and advertisement business. But from the content cost structure and efficiency side, we continue to do the optimization. And I truly believe our subscription and advertisement business growth will continue to benefit the GP margin. But for sure, as you may notice, advertisement business, we're in kind of seasonalities and first seasonalities were indeed bring the fluctuations to the GP margin. You can say that we continue to drive the development of applied performance as well as to grow the merchandise for audit, and we will need to make further investment on the audit-related IP, then in the initial stage of the business development, it will indeed have some negative impact on the GP margin. Well, as you can see that for those businesses, it can actually help to take care of the users' diversified musical needs and the consumption values from a single user will surely be more elevated. While at the same time, we also provide comprehensive music service, along with the copyright and the Artist IP in order to further improve the efficiency of the cost. Well, for the long run, we hope our investment will help to drive the effective growth in both revenue and gross profit as a whole. At least from what we see now in Q4 of this year, there will still be continued growth for the monthly revenues for both the advertisement business and the subscription business. Where we are approaching to the end of this year, the contribution from the sales of the Earth-Like events as well as the artist related merchandise will contribute that to the overall revenue. So in that reason, the Q4 GP margin would be elevated compared with Q3. We look into the year of 2026. And as we continue to build our confidence over the subscription business and advertisement business, along with investments in the Earth-Like events, along with the artist, the merchandise, our revenue or the revenue may differ or fluctuate due to the seasonality reason. But overall speaking, we're still very confident for our 2026 revenue growth and Q3 margin growth. Profit margin growth. Millicent T.: So thank you, everyone, for joining us today. If you have any further questions, please feel free to contact our IR team. And this concludes today's call. Thank you very much again, and look forward to seeing you on next quarter. Goodbye. Unknown Executive: Thank you. Goodbye. [Portions of this transcript that are marked [Interpreted] were spoken by an interpreter present on the live call.]
Operator: Good morning, ladies and gentlemen, and welcome to GreenFirst's Third Quarter of 2025 Results Conference Call. [Operator Instructions] During this conference call, GreenFirst representatives will be making certain statements about future financial and operational performance, business outlook and capital plans. These statements may contain forward-looking information or forward-looking statements within the meaning of Canadian securities law. Such statements involve certain risks, uncertainties and assumptions, which may cause GreenFirst's actual or future results and performance to be materially different from those expressed or implied in these statements. Additional information about these risks, factors and assumptions is included in GreenFirst's MD&A and annual AIF, which can be accessed on the company website or through SEDAR. [Operator Instructions] I will now pass it over to Joel Fournier to begin the management presentation. Joel Fournier: Thank you very much, Joanne, and good morning, everyone, and welcome to our Q3 2025 earnings call. I'm Joel Fournier, the Chief Executive Officer of GreenFirst. Today, I'm joined by Peter Ferrante, CFO; and Michel Lessard, our President. So we ended up the quarter with a negative EBITDA of $47.2 million. However, the loss is mainly due to selected adjustments. First, we had a $33.8 million duty adjustment related to an underpayment from AR6 for duty paid in 2023. The second item is we recorded an NRV provision of $8.2 million as market dropped sharply from [ $508 per thousand ] board feet in July right down to $420 by the end of September. And the third item is we had to take a downtime at our Chapleau mill to install the new saw line, and this impacted the results by $4.6 million. Without those 3 adjustments, GreenFirst would have been close to breakeven EBITDA for the quarter. I just want to mention that the Chapleau downtime is now behind us, and we're commissioning -- we're going through the commissioning of the new line right now. We expect to see the full benefit in the first quarter of 2026. All those adjustments mentioned affected our cost of goods sold negatively as well. That said, excluding the NRV and the downtime impact we had during the quarter to install mainly the line at Chapleau, our cost per unit would have been better than previous quarter. On a positive note, SG&A remained on target at $32 per thousand board feet in Q3, which is below both last year and our year-to-date average. Another factor that affected us in the quarter was the increase in the duty rate in mid-August, which went up to 35.16% for all export to United States. The increase in duty, along with the uncertainty around potential new tariffs during the quarter created some hesitation with our customers. As a result, our sales volume declined to 93 million board feet compared to 109 million in Q2. This lower sales volume also reflects a reduction in production as Q2, as some people recall, was a record quarter for output, while Q3 was impacted by the installation of the new saw line at Chapleau. As of Q3, we have not paid any new tariff. However, for Q4, we are now subject to a 10% tariff on U.S. export from Canada. This follows Section 232 from United States U.S. Administration, which resulted in the 10% tariff, a measure that is currently being challenged in court. Finally, from the recently announced federal government support as it related to Canadian company impacted by both duty and tariff, GreenFirst is exploring how this new program will help our business going forward. I would like to give to people some highlights Q3 2025 versus Q2 2025. From a sales volume perspective, like we already mentioned, we ended up at 93 million versus 109 million compared to Q2, and it was impacted by market uncertainty and lower production due to the installation of the line at Chapleau. From a production perspective, we were lower. We finished the quarter with 90 million mfbm versus Q2 at 116 million. The main reason for the lower production is what I said. It's because we installed a new saw line at Chapleau and we had to take some downtime to do the installation. In addition to that, we did have also small downtime at Hearst and Kapuskasing, maintenance-related. Due to market uncertainty, we could not have had a better timing to install the new saw line at Chapleau. If people recall, we mentioned that we wanted to do capital expenditure off-cycle. So we did not have better time to install the line at Chapleau this quarter because market was not good. On the quality side, we continue to see improvement in our wood quality versus 2024 as our product mix keep improving. NRV, we did increase significantly from Q2 to Q3. Q2, we had a provision of $400,000 in Q2, and in Q3, this went up to $8.2 million. SG&A, as already mentioned, we continue to be better than our announced $40 per thousand target last year, and we ended up the quarter with $2.9 million in SG&A expense. In terms of cash position, at the end of the quarter, our excess liquidity improved from $22 million from last year Q3 to $27 million this year. The company continued to manage the cash tightly. I would like to discuss a little bit -- I mentioned the line at Chapleau a couple of times. I would like to discuss a little bit about our capital expenditure and continuous improvement plan. So the previously announced $50 million for Phase 1 capital invested program aimed to improving company cost structure, GreenFirst is proceeding only with selected strategic projects. As communicated in Q1 and Q2 this year, the main focus has been the installation of the new saw line at Chapleau. While the downtime of the mill impacted Q3 results to install the line, it was necessary to complete the installation at the optimal time when market conditions were low. It's not good to install a new saw line when the market is very good because it will increase your loss. In addition, we installed a new planer mill and completed a major upgrade to the boiler and cogeneration plant at Chapleau sawmill. So these projects are now in the ramp-up phase now, and we are already showing up and we're already showing up promising results in terms of revenue and cost improvement so far. Subsequent to quarter end, starting mid-October, the Chapleau line started up, and we are making steady progress each week. In the most recent Sunday shift, last week, we processed 2,000 logs in a single shift, which is in line with the ramp-up target. The cogen and the boiler modification had already seen an increase in drying capacity by around 10% and the new planar mill is incrementally increasing production every single week. We expect the saw line to be fully commissioned by the end of December, and we will be ready when the market turn around. Overall, we have committed to invest approximately $28 million at the Chapleau site to improve the site. These projects are expected to improve mill profitability with a payback period of under 3 years. Once completed, the mill will be well on its way to become a top quartile operation. We are planning to organize an investor tour in Q2 2026 with a focus on seeing the new saw line in Chapleau in operation. We will share more detail to the exact date very shortly. We will continue to focus on factors within our control and pursue opportunity to improve the business by focusing on continuous improvement. I would like to talk a little bit about market. Q3 market was a challenging quarter. So some customers because of all the uncertainty, adopted a very cautious approach in response of the recent duty increase and the uncertainty around U.S. tariff during the quarter, which are now in effect in Q4 this year. Our sales volume, as already mentioned, was 93.3 million in fbm, a decrease of 17 million compared to previous quarter. The lower sales volume was mainly due to broader market headwinds and downtime at the Chapleau mill that translate into lower production or less finished goods available to sell. While housing starts fell below expectations, we continue to see strong pull-through from for lumber from our key home center customer. In August, total housing starts in Canada reached 1.3 million units, down 8.5% from July and 6% from August last year. Recent interest rate reduction are encouraging, but they did not materially impact Q3. On the capacity side, several curtailment announcements were made during Q3, mostly taking effect into Q4 this year. Around 50 sawmills will be impacted, removing approximately 400 million to 500 million mfbm from the North American market. With this announcement, we anticipate a positive movement in terms of sales volume. This is a significant drop in capacity in North America. Pricing conditions were challenging as well with Western base price falling from $508 per thousand at the start of the quarter down to $420 at the end of September. Despite all those challenges, there remain a major underbuilt situation in both U.S. and Canada. As announced in previous quarter, the Canadian federal government has introduced measures to increase housing start to 500,000 units per year, which should support lumber demand going forward. GreenFirst is well positioned to capitalize on these initiatives from the government. For Q4, however, we remain cautious in our forecast, anticipating only modest price increase driven by recently announced competitor curtailment. In the short-term, we expect demand to remain relatively flat, while capacity decrease should help balance the market a little bit. On a positive note, we have development shortly -- we had development shortly after quarter end in October regarding the government support for Kap Paper. In addition to this announcement, we received interest from other chip customers to increase the volume. So those 2 news really helped the residue situation. Finally, I would like to say that GreenFirst will remain committed to continuous improvement as a core strategy to enhance business performance. At the same time, we will maintain a prudent and disciplined approach to cash management to ensure the company is well positioned to navigate potential economic headwinds and emerging market challenges. I will pass over to you, Peter, for the financial section. Thank you. Peter Ferrante: Thank you, Joel, and good morning to everyone. Please refer to our cautionary language regarding forward-looking information in our Q3 2025 management discussion and analysis. The company reported a net loss of $57.4 million in the third quarter of 2025 with an adjusted EBITDA of negative $47.2 million on total revenues of $70.2 million. Excluding the $39.6 million adjustment resulting from the finalization of duty rates in relation to 2023 duties paid, which includes both a $33.8 million in duty liability and a $5.9 million in related interest, net loss would have been $17.7 million and adjusted EBITDA would have been negative $13.4 million. For the 3 quarters ended September 27, 2025, reported a loss for the third quarter, a loss of $66.1 million, along with an adjusted EBITDA of negative $47.3 million on total revenues of $226.6 million. Net loss and adjusted EBITDA both impacted negatively by the finalization of duty rates in relation to 2023 duties paid as was just explained. Revenue decreased by 17% quarter-over-quarter compared to Q2 2025, driven by a decrease in shipments of approximately 17 million board feet or 15%, resulting from a volatile lumber market experiencing macroeconomic headwinds such as elevated interest rates, labor shortages and geopolitical uncertainty. In addition, revenues were negatively impacted by a price decrease of $17 per million board feet or 2%, reflecting a drop in benchmark prices in the back half of Q3 2025. Near-term volatility is likely to continue with higher duty rates on Canadian lumber to the U.S. along with Section 232 tariffs totaling 45% Sales of chips and other byproducts dropped by $1.1 million to $5.3 million versus $6.5 million in Q2 of 2025. This was due to lower volume of sales and a drop in average selling price. For the third quarter ended September 27, 2025, the company reported cost of sales of $75.6 million compared to $80.1 million for the second quarter ended June 28, 2025, a decrease of approximately $5 million or 6%. This decrease in cost of sales was primarily driven by a 15% decrease in shipment volumes, offset by the downtime of the installation of the Chapleau large log line and selected other downtimes and curtailments. Additionally, in the current period, the company recorded a provision for the net realizable value of inventory of approximately $8.2 million related to decreases in benchmark prices. Lumber production for the third quarter of 2025 was 91 million board feet compared to 116 million board feet in the second quarter of 2025. This decrease primarily attributable to the reduction in production experienced during the period is in relation to the capital project installation at Chapleau, which are expected to return to normal levels in Q4 2025 with increased production in Q1 2026. During the third quarter of 2025, the amount of duties needed on our shipments of softwood lumber into the U.S. totaled $8.9 million, which is up $700,000 from the second quarter of 2025. Although shipments in the U.S. were down $12.6 million during the quarter versus prior quarter, duties paid on shipments did not decrease as much since our duties rates rose from 14% to 35% starting August 2025. In addition, during the third quarter of 2025, we recorded a $33.8 million duty liability related to the finalization of the countervailing duty and antidumping rates by the United States Department of Commerce following Administrative Review 6 for the 2022 duty period. Selling, general and administrative expenses for the third quarter of 2025 totaled $3 million compared to $4.6 million in the second quarter of 2025. This decrease is primarily attributable to noncash expenses recorded during the second quarter. The combination of these factors during the third quarter of 2025 resulted in a negative EBITDA of $47.2 million or $13.4 million, excluding the duty liability discussed previously versus a negative $5.2 million in the prior quarter. Under the amended and restated credit agreement, the company's maximum borrowing capacity under the revolving portion of the credit facility is $60 million and the equipment financing portion is $25 million. The company has made net borrowings of $19 million on a year-to-date basis ended September 27, 2025, against the revolving portion of the credit facility. Of this $19 million, $6.5 million was drawn during this quarter. As at September 27, 2025, there were $14.1 million of outstanding letters of credit issued, which reduces the amounts available to be drawn under the revolving credit facility. As such, approximately $27 million was still available to be drawn. Additionally, the company had net aggregate amount of $11.6 million drawn under the equipment financing portion of the credit facility in the term -- in the form of a term loan and an additional $13.4 million was available to be drawn. As a company, we continue to manage our liquidity through the volatile lumber markets and harvesting season, which requires significant investments in raw materials. We do this prudently by maintaining tight inventory management at the mill level, supplemented by drawdowns against our asset-based lending facility to cover seasonal expenses. Our lending facility, which was amended and extended to September 2028 is secured by borrowings against our inventory and receivables. As a result of higher levels of inventory, those help support our credit facility during the harvesting season. This concludes my remarks, and I will pass it over to Joel. Joel Fournier: Thank you very much, Peter, and I want to thank everyone for joining the call. We will now answer any questions that have come through. Thank you. Operator: [Operator Instructions] Joel Fournier: This is Joel here. We have one question. Could you share the company perspective on the recently announced increase in duty and additional tariffs? I will let Michel Lessard, our President, to answer that question. Michel Lessard: Thanks, Joel. For sure, it's not a good news to have a 10% tariffs in addition to the 35.6% duties that we're already paying that you mentioned also previously. Also, the other thing is we don't know yet what will happen with the other 10% that has been announced by President Trump in reaction to the publicly made by the province of Ontario. But on that, we believe that it will not impact the industries part of CUSMA, such as GreenFirst is part of. So that being said, so we're hoping that the lumber industry will be in the top priority of Prime Minister Carney in his discussion with the President Trump. We hear our Prime Minister talking about steel, aluminum, cars, energy, but not enough about the lumber industry. So we have to continue to work with this team, with the Prime Minister and also with the province of Ontario. They need to be sensitive about also the situation of the lumber industry. And for sure, we'll continue to push on them also to get the best settlement and outcome also for the company as soon as possible. In the meantime, we continue to explore different market opportunities. Joel Fournier: Okay. This is Joel again. We have 2 questions that are similar here. The first one is, could you provide some insight into current demand level and pricing? And the other question is the company reported both a drop in sales and production versus the previous quarter. Can you talk a little bit more what's behind that? So I will answer those 2 questions. So the first one, overall, Q3 pricing was slightly lower than Q2, but we started the quarter with a strong and continue to experience a significant decline between July and September. So price were up -- price were good at the beginning of the quarter, and then it was a steady decline through the quarter. The uncertainty related to tariff and high interest rate in U.S. have had a negative impact on demand. However, the recent announcement from the Federal Reserve to reduce interest rate was encouraging. With that said, we did not see a significant impact on lumber demand in Q3 yet. We shipped, like I said earlier, 93 million fbm in the quarter. This volume was largely driven by our long-term relationship with key home center customers, which we believe will minimize demand uncertainty and will bring more stability for the company. In fact, we're looking to continue to grow that business. At the same time, the sales were lower than previous quarter, mainly due to downtime, in particular, the line -- the Chapleau mill in order to install the new large log line that will bring more benefit shortly. There's still a significant shortage in new housing build in North America, which should provide more demand for lumber in the upcoming months. In regards to the second question, so I'll continue here and answer it as well. The drop in sales was due to lower lumber demand driven mainly by uncertainties surrounding higher duty rate and potential U.S. tariff that is now in place in Q4. In addition to the market uncertainty during the third quarter, the lower sales volume was impacted by lower production, again, mainly driven by the -- like I said, the Chapleau mill for the installation of the new line. The good news is that we continue to grow our sales with big box store, like I mentioned, and we had a record quarter in Q3, reflecting the long-term partnership. Okay. We do have another question here. In terms of your liquidity, we noticed that the outstanding letters of credit have increased compared to previous quarter, which appear to negatively impacting your excess liquidity. Can you provide some additional context? I will let Peter, our CFO, to answer that question. Peter Ferrante: Yes. Thanks, Joel. So yes, the increase comes from the annual requirement to place 30 bonds equal to 10% of the upcoming year's anticipated duty payments. As you know, duty rates have increased to approximately 35% for the upcoming period. Everybody knows in today's environment, many surety bond companies also request to put a letter of credit to support the surety bond, which was the case for us. In the interim, we are working with various financial institutions with regards to how we can obtain support for these letters of credit, hoping that we could increase our excess liquidity position. Joel Fournier: This is Joel again. We do have another question. Can you provide an update on the CapEx related to the Chapleau large log line? I will answer this question. Like I already mentioned, as always, we're taking a prudent approach for the CapEx expenditure. We did finish installing the large log line at Chapleau, the new planer mill and the refurbished cogeneration plant at our Chapleau sawmill. We are currently in ramp-up mode and everything is moving along as expected. We're expecting the combination of this project to have a positive impact on the mill profitability profile going forward. The large log line will increase production, reduce cost and will bring great benefit overall to the company EBITDA. As an added benefit, we are closely working to get part of the project financed by the provincial government to reduce cost of the total project. We do have another question here. Can you explain a little bit more about the feasibility study for the torrefied pellet and biochar plant that will help the residue situation potentially? I will let Michel answer the question. Michel Lessard: Thanks, Joel. As you know, and I mentioned that to the previous calls also, the pulp and paper industry remains very challenging with the closure of 3 major mills over the last 2 years in Ontario and also the one in Temiscaming in Quebec from Rayonier. As such, we continue to look for alternative way to use also the byproducts from our sawmills and also to enhance the value of them. In other words, we would like to be less dependent on the pulp and paper industry. So we completed our first study to install a biochar and also to pellet plant in Chapleau, and that showed also very good results. So we are now proceeding with a deeper analysis to review the business case. And at the same time, also, we are looking further opportunities for each of our sites. We're also working with the partner and also potential customers with who we have LOIs in place. We cannot disclose any more details at this time, but we should be able to provide an update during the upcoming quarters. Joel Fournier: We do have another question here. Following the Prime Minister announcement of the $1.2 billion in federal support program for the softwood lumber industry, does the company anticipate benefiting from this program? I will let Michel, our President, to answer the question. Michel Lessard: Thanks. Yes, the answer is yes. So we're certainly anticipating benefits of this announcement regarding lumber industry. So mainly for the 3 following communicated items that has been made in last August 5th by the Prime Minister. So first one is about the $700 million in loan guarantees. Second one is about the $500 million in for market diversification. And the third one is about the 500,000 new homes per year over the next decade. So for now, we've just received details regarding the loan guarantees program, and we're working to get access to it. So based on program, the company could get access up to $20 million. So it's a very interesting program. For the other ones, we are still waiting for details, but we anticipate that it will be beneficial for us for sure. Again, hoping that we will get these details soon and we are in touch also with the federal government, again, to get access to it as soon as possible. Okay. So we do have 2 other questions here. Just want to make sure -- this is a question. I just want to make sure I understand the duty piece correctly. GreenFirst doesn't have a cash cost expenses for duty. It's paid by the importer customer. So the impact of duty during the quarter should be just lower revenue. The company could have a liability in the future if you flip from overpayment to underpayment. Is that accurate? I will let Peter, our CFO, to answer that question. Peter Ferrante: I'll break this answer in 2 pieces. So first part of the question with regards to cash expenses for duties. And so it's actually paid by us. So we are the importer into the U.S. We pay the duties by the time of importation. So that answers that question. And the company could have a liability in the future if you flip to overpayment. So we're currently in -- when you look at Administrative Review 6, we made payments on average of 20% in the first part of the year, followed by 8%. And when Administrative Review 6 came in play, it came in at 35%. So we were in an underpayment situation for Administrative Review 6, but we filed the necessary appeals moving forward. Hopefully, I've answered that question. Joel Fournier: We do have another question. What would the quarter have looked like if Chapleau was operational? I'm trying to determine whatever we expect the mill to generate cash next year if lumber prices are the same next year. So I will answer that question. First off, if we look at Q3, we had we had major onetime adjustment. First off, like we recorded a negative EBITDA, but mainly it was due to the $33.3 million duty adjustment, which is noncash. But also we had an NRV provision of $8.2 million. So this is one of -- it's one of the biggest NRV we had with GreenFirst. And also, the downtime at the line at Chapleau impacted us with $4.6 million. So without the NRV and without the downtime at Chapleau, let's assume we keep running the mill, we would have been very close to breakeven EBITDA, which is very encouraging from my perspective. If I think ahead and I think only about the Chapleau mill, -- the initial -- we're commissioning the line right now and the initial results are very promising. So we expect if -- first off, I will answer the first part of the question. So if the mill at Chapleau was running during quarter, our cost would have been below expectation. The main -- the downtime that we had at the Chapleau mill didn't impact our cost as long as the NRV. So without those 2 items, our cost would have been better this quarter versus last quarter. Looking ahead, when we're done with the commissioning of the line at Chapleau, in today's market, we believe the mill will be positive cash flow going forward after we're done with those CapEx. Okay. So we don't have any more questions. I would like to thank all the participants on the call, and thank you very much. Have a good day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating, and we ask that you please disconnect your lines.
Operator: Good morning, ladies and gentlemen, and welcome to Stingray Group's Q2 2026 Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 12, 2025. I would now like to turn the conference over to Mathieu Peloquin. Please go ahead. Mathieu Peloquin: Thank you very much, [Foreign Language]. Good morning, everyone, and thank you for joining us for Stingray's conference call for the second quarter of fiscal 2026 ended September 30, 2025. Today, Eric Boyko, President, CEO, Co-Founder; and Marie-Helene Fournier, Interim CFO, will be presenting Stingray's operational and financial highlights. Our press release reporting Stingray's second quarter results was issued yesterday after the market closed. Stingray also issued a press release to announce the acquisition of TuneIn Holdings, which will be discussed on the call. This press release as well as the MD&A and financial statements for the quarter are available on our Investor website at stingray.com and on SEDAR+. I will now provide you with the customary caution that today's discussion of the corporation's performance and its future prospects may include forward-looking statements. The corporation's future operations and performance are subject to risks and uncertainties, and actual results may differ materially. These risks and uncertainties include, but are not limited to, the risk factors identified in our press release announcing the TuneIn acquisition and Stingray's annual information form dated June 10, 2025, which is available on SEDAR+. The corporation specifically disclaims any intention or obligation to update these forward-looking statements, whether as a result of new information, future events or otherwise, except as may be required by applicable law. Accordingly, you are advised not to place undue reliance on such forward-looking statements. Also, please be advised that some of the financial measures discussed over the course of this conference call are non-IFRS. Refer to Stingray's MD&A for a complete definition of reconciliation of such measures to IFRS financial measures. Finally, let me remind you that all amounts on this call are expressed in Canadian dollars unless otherwise indicated. With that, let me turn the call over to Eric. Eric Boyko: Merci, Mathieu. Good morning, everyone, and welcome to our second quarter conference call for fiscal 2026. What a busy day we're having. Today marks a pivotal moment for Stingray as we're not only reporting solid Q2 results but also announcing the second largest acquisition and the largest U.S. acquisition in the corporation's history, TuneIn Holdings, creating an audio streaming and advertising powerhouse. This transformative acquisition is expected to greatly expand Stingray's global digital audio footprint, video footprint and accelerate its growth in streaming services and bolster its advertising offering. But before sharing with you more of the major highlights, let's review Stingray's continued achievement for the second quarter. Stingray's momentum accelerated with organic growth of 16.7% in Broadcast and Recurring Commercial Music, largely driven again by rapidly increasing FAST channel sales, where we have unmistakenly become the leading provider of music, ambience and music entertainment channels. During the quarter, we further expanded our premium advertising network by securing a second partnership with LG for additional supply and ad inventory. They will join Vizio in a growing portfolio of partners and we anticipate adding a lot more in the next year. We significantly diverse our FAST channel portfolio in Q2, launching 29 channels with Amazon Fire TV in the U.S., 7 on Roku USA and U.K. This builds our success on our recent Roku launch in North America, which are generating over 50,000 listening hours a day or 1.5 million a month. When we're looking at advertising revenue for the quarter, we achieved a remarkable growth of 55%, significantly surpassing our 40% target. This outstanding performance was driven by year-to-year revenue increase in Retail Media and, again, strong growth in our FAST channel sales. A couple of weeks ago, we announced the acquisition of DMI, a leader in music branding and in-store audio advertising. This represents a strategic transaction for Stingray because it expands our U.S. retail network by 8,500 Walgreens locations, and we reached 33,000 locations across North America. For the first time now, Stingray is officially the pharmacy network. We cover all pharmacies across U.S. and Canada. They consolidate our leadership position within the in-store audio advertising market and helps global brands reach and engage consumer in their shopping journey. We are pleased to welcome the DMI team to Stingray. And last, for the in-car entertainment segment, we recorded a double-digit revenue growth increase in the second quarter as new vehicles have progressively replaced older fleets. With the recently announced launch of the advanced karaoke experience for BYD vehicles, we expect this trend to continue. Altogether, revenues from our Broadcasting and Commercial Music division grew by 33% to $80 million this quarter, while Radio revenues declined less than 1% to $32.4 million. Our latest Numeris PPM ratings for summer 2025 highlight our strong momentum in Canadian radio, showing significant growth in our key markets. On a consolidated basis, we delivered growth of 21% to $113 million in sales, which is a record, and adjusted EBITDA improved by $16.3 million to $39.5 million. Now tuning to our TuneIn acquisition, a good play of words. Now turning our focus on the TuneIn acquisition. Given the strong progress we're making with key growth pillars and our strong free cash flow, we believe the timing is right to announce the second largest acquisition in the corporation history, TuneIn Holding. This acquisition will further strengthen Stingray's position as a global leader of audio and video entertainment and digital advertising sales. TuneIn is a pioneer in audio streaming content, serving 75 million active listeners each month and providing access to 100,000 radio stations and podcasts and music channels. With over 600 hours –- 6 million -- 600 million hours of listenership per month, we are the third most listened to channel in the world after our friends at the YouTube video and Spotify. TuneIn's digital content is distributed across more than 200 platforms in 100 countries and fully integrated in 50 in-car audio systems. Equally important, and probably what we're most excited, TuneIn has redefined the art of programmatic advertising via its strategic ad channel partners, reaching audience across our platform with innovative audio, display and video ad products. It's a growing ad segment, represents more than 70% of its revenues, with the rest coming from premium subscription. We are crafting an unmatched audio/video ecosystem by merging Stingray extensive technology infrastructure and content distribution capabilities with TuneIn's expertise in monetization, advertising technology and diverse content offering. We're partly excited about expanding our reach in the automotive sector, where TuneIn and Stingray have both established strong integration with leading manufacturers. We are confident that this highly transformative acquisition supported by the cost synergies within the next 12 months of closing will supplement our robust internal growth in digital advertising with our CTV and retail media offering and our car offering, delivering solid margin over time and building shareholder value. Overall, the transaction carries an enterprise value of up to $175 million, $125 million paid out at closing of the transaction by the end of '25 and an amount of $29 million to be paid post-closing. The deal is subject to the regulatory authorities of customary closing conditions. TuneIn is expected to generate an estimate of $110 million of revenues this year and $30 million of U.S. EBITDA, plus with a $10 million of synergies that we expect to come. TuneIn will continue to operate under its existing brand and be led by the existing management team. Combined business are expected to generate $560 million of revenues on a pro forma basis and an over $200 million pro forma adjusted EBITDA as of December LTM. We also expect our free cash flow to increase by 50% and to be above $2 per share. I'll conclude on our balance sheet, which remains solid even after these 2 pivotal transactions. We expect after closing of this transaction that our debt-EBITDA will be around 2.8, and we expect to deliver and be below 2 by December of next year or in the next 12 months. Reflecting our strong financial performance and our confidence in future cash flow generation, I am pleased to announce that the Board has approved a 13.3% increase in our quarterly dividend, raising it from $0.075 to $0.085. This decision underscores our commitment to delivering sustainable long-term value to our shareholders. I will now turn the call to Marie-Helene for a fantastic financial overview of the quarter. Marie? Marie-Helene Fournier: Thank you, Eric. Good morning. [Foreign Language]. Revenues reached $113.3 million in the second quarter of fiscal 2026, up 21% from $93.6 million in Q2 '25. The year-over-year growth was mainly driven by greater FAST channel revenues and higher equipment sales related to the acquisition of the Singing Machine. Revenues in Canada rose 5.2% to $51.5 million in the second quarter of '26. The growth can mainly be attributed to higher equipment and installation sales related to digital signage. Revenues in the U.S. grew 57.9% year-over-year to $51.9 million in Q2 2026, reflecting higher FAST channel revenues and greater equipment sales related to the acquisition of the Singing Machine. Revenues in other countries decreased 16.2% to $9.8 million in the most recent quarter. The year-over-year decline was mainly due to lower subscription revenues. Looking at our performance by business segment, Broadcasting and Commercial Music revenues increased 32.8% to $80.9 million in the second quarter of '26. The growth was primarily driven by high FAST channel revenues and greater equipment sales related to the acquisition of the Singing Machine. For their part, Radio revenue decreased 0.9% to $32.4 million in Q2 due to lower national airtime sales, mostly offset by higher digital revenues. In terms of profitability, consolidated adjusted EBITDA improved 16.3% to $39.5 million in the second quarter. Adjusted EBITDA margin reached 34.9% in Q2 '26 compared to 36.3% in the same period in 2025. The increase in adjusted EBITDA dollars year-over-year can be attributed to higher revenues, partially offset by greater operating expenses, mostly due to higher cost of sales. By business segment, Broadcasting and Commercial Music adjusted EBITDA grew 24.8% to $31.2 million in the second quarter of 2026. The year-over-year increase was primarily driven by higher revenues. Adjusted EBITDA for our Radio business decreased 7.2% year-over-year to $10.2 million in the second quarter of 2026. Adjusted EBITDA for this segment was negatively affected by a higher proportion of digital revenues, which carry a greater cost of sales. Control over fixed costs helped minimize overall cost increases. In terms of corporate adjusted EBITDA, it remained stable at a negative $1.9 million in the second quarter of 2026. Stingray reported net income of $11.8 million or $0.17 per diluted share in the second quarter of 2026 compared to $5.8 million or $0.08 per diluted share in Q2 2025. The improvement was driven by better operating results and an unrealized gain on the fair value of derivative financial instruments. These factors were partially offset by the higher performance and deferred share unit expense related to an increase in the corporation's share price. Adjusted net income totaled $21.9 million or $0.32 per diluted share in Q2 2026 compared to $16.7 million or $0.24 per diluted share in the same period in 2025. The increase was mainly due to higher operating results and lower interest expense, partially offset by a greater income tax expense. Turning to liquidity and capital resources. Cash flow from operating activities totaled $24.3 million in Q2 compared to $19.2 million in Q2 2025. The year-over-year increase reflects higher operating results. Similarly, our business also generated a significant year-over-year increase in adjusted free cash flow. In the second quarter of 2026, it totaled $28.4 million compared to $21.1 million in the same period in 2025. The improvement can be attributed to higher operating results and lower interest rate. From a balance sheet standpoint, Stingray had cash and cash equivalents of $15.1 million at the end of the second quarter and a credit facility of $336.3 million. The credit facility consists of a $500 million revolving credit line, of which $162.1 million was available. After the quarter, we also finalized the financing for the TuneIn acquisition. We secured an additional USD 150 million term loan and extended our credit facility maturity by 1 year to November 2029. Total net debt at the end of the second quarter of '26 stood at $321.1 million, down $4.8 million from the end of last quarter as we continue to reduce our debt level. Combined with improved adjusted EBITDA over the last 12 months, our leverage ratio improved to 2.13x at the end of the quarter from 2.72x in the same period last year. Finally, we repurchased 311,500 shares for a total of $3.1 million during the second quarter under our existing NCIB program, which was renewed for another 12 months. We also made dividend payments of $5.1 million in the quarter to reward shareholders. As Eric mentioned earlier, our commitment to delivering shareholder value remains a top priority. In recognition of our strong performance and positive outlook, the Board has declared a quarterly dividend of $0.085 per share. This represents a 13.3% increase and reflects our confidence in our ability to generate sustainable cash flow for the long term. This ends my presentation. I will now turn the call over to Eric. Eric Boyko: Merci, Marie. Thank you, everyone, for your time and remarks today. I think we're ready for our questions from our team. And again, we didn't have a chance, but thank you. Also, welcome to the TuneIn team. Very excited to have -- TuneIn is about 105 people. So very happy to have a larger family, and excited on working together and maintaining the high momentum that we have right now. So with this, we'll go to the question part. Merci. Operator: [Operator Instructions] With that, our first question comes from Aravinda Galappatthige with Canaccord. Aravinda Galappatthige: Congrats, Eric and the team, of the acquisition in the quarter. I'll start with a question or a couple of questions on TuneIn. First of all, can you give us a sense of what TuneIn's sort of revenue and profitability trajectory has been? I mean, clearly, the valuation multiples are attractive, but a sense of what the trend has been in recent years in terms of growth. And secondly, with respect to how it can help with your longer-term ambitions in car, can you just maybe connect that for us and then maybe help us understand how TuneIn can contribute to those aspirations that you have? Eric Boyko: Two good questions. So their sales this year are -- they're $110 million. It's $80 million of advertising, $30 million of subscription. Right now, advertising is growing by 40% year-over-year, a very strong, aggressive advertising model. In terms of trend, they're finishing the second half of the year. So from June till December, the run rate is at $20 million EBITDA. So the run rate now is at $40 million. So they're really finishing the year strong. So we expect to start the next year very good. So excited about that trend. And we expect, again, strong, again, advertising sales growing by, again, 30%, 40%. Right now, the model is really well leveraged. The car. The car is for sure is what's most exciting. We are talking to 20 car manufacturers. TuneIn is talking also to 20 car manufacturers. The homerun or the holy grail is, I would say, every car manufacturer wants to monetize their audio system. For years, they were not making money with radio. For years, they never got a penny from XM Sirius (sic) [ SiriusXM ]. You saw the move about GM taking away Apple CarPlay. You saw the move of Tesla taking away FM. The cars want to monetize that segment. So we believe that we are well positioned to own what we call OEM radio. So I believe that every car manufacturer in the world, from GM -- GM, BYD, Ford, Toyota, our friends in Germany will have their own OEM radio. They'll call it Ford Radio. They'll call it Toyota Radio. And in there, you're going to have the Stingray music channels, just like XM Sirius (sic) [ SiriusXM ]. You're going to have the TuneIn player, and you're going to have access to the beautiful Stingray Karaoke. So I think the both of us coming together, we're really positioning ourself to be a global dominant player. And I wouldn't be surprised that in the next 5, 10 years that Stingray and TuneIn will be embedded in every car manufacturer in the world. Aravinda Galappatthige: Can I just clarify your comment about EBITDA, the EBITDA run rate at TuneIn? Did you say $40 million -- you hit a run rate of $40 million? And are you referring to U.S. or Canadian? Eric Boyko: Yes, U.S. So the run rate for the second half of the year, so from June till December of this year, the run rate is at $20 million. So the run rate at the second half is $20 million actually. Aravinda Galappatthige: Understood. Okay. And just maybe one last thing on the dividend. I mean, it was a significant increase in the dividend. Are you -- I mean, how should investors kind of look at this? Are you sort of suggesting that you want sort of Stingray to be a growth plus income story where there is growth, but also your -- the returns to shareholders will remain as strong as opposed to just sort of a heavy investment theme? I mean I just wanted to understand that because it's been a while since you raised your dividend. I wanted to understand the signaling here. Eric Boyko: Our deal with TuneIn is increasing our free cash flow by 50%. Our LTM free cash flow is at $1.40. We always said to the market we want to be between 20 to 25. We want to be kept in that range. But right now, with our free cash flow expected to be well above $2, we're still at a very -- at $0.34, we're still at a very low end compared to free cash flow above $2. So we'll see where the business goes. And again, like I'm mentioning, we expect that closing to be at 2.8 of debt-EBITDA and to be below 2 by December of next year in the next 12 months. So very accretive deal. Also, we don't -- I know we don't talk about it much, but TuneIn had $200 million of tax losses. So we're recuperating USD 25 million of tax losses that we can use starting right now. Operator: And the next question comes from the line of Drew McReynolds with RBC Capital Markets. Drew McReynolds: Congrats on the acquisition. Just a couple of follow-ups here, Eric. Just in terms of advertising and EBITDA, like obviously quite good. On the subscriber side, can you just provide an update on kind of what those revenues or sub trends look like? And also, can you just elaborate on TuneIn's ad platform and monetization expertise? Just want to kind of better understand what their better mousetrap is relative to kind of your current capabilities. Eric Boyko: A very good question. So subscription -- the model of TuneIn in the last 5 years, and a great job by management, was to stay away from subscription and move towards advertising. So we expect -- right now, subscriptions are decreasing by about 5% per year. Our focus is not on subscription. Our focus is on monetizing every hour of listenership. And that's why we're seeing such very strong advertising growth of 40% and that will be for the future. So decreasing subscription, focusing on advertising. What they've developed is they have the reach. They have the ad -- they call it an ad stack. I don't want to get into details. But they're able to monetize very well both audio and video, and that's what we're excited. We have over right now because of our deals with LG and Vizio, what we call backfill. But we don't like it. We call it the advertising network. We have over $100 million of inventory right now that is unsold. So for the first project, and we've already started this morning, TuneIn will help us sell this unsold inventory on our FAST channels. Then, as you know, in retail media, we do a great job, but we have over $400 million of unsold inventory in retail media. TuneIn also right now is going to be helping us sell this unsold inventory. And we also have a lot of audio inventory like we have LG Radio, we have our Stingray Music app. So we have a lot of audio inventory that also TuneIn and the cars will start monetizing. so we see TuneIn as a great monetizing machine for Stingray that can be implemented right away. The positive sales synergies of this deal, we expect them to be anywhere from $20 million to $40 million. The margins right now, we can't elaborate, but that is -- we're more excited about the positive sales synergies of TuneIn selling on our platforms than we are about the OpEx synergies. Drew McReynolds: Yes. Okay. No, that's good context. And maybe last one and then I'll pass the line. Obviously, on the Broadcast and Commercial Music recurring revenue, very strong organic and the advertising within that obviously strong as well. Just -- can you just for modeling purposes kind of level set here? Is this all kind of sustainable here into Q3, just obviously putting TuneIn's impact aside? Eric Boyko: Yes, that's -- we have to be careful. Q3 last year was also very, very strong. So let's get back after the call for that one. Because last year, we had a very strong Q3. So I want to be careful with the -- again, for the year -- now you can imagine that all of the advertising sales will go in the same line and all subscription of TuneIn will go in the same broadcasting unit. But let's talk offline for that. I agree there'll be a lot of modeling to do with the TuneIn deal. Operator: And the next question comes from the line of Jerome Dubreuil with Desjardins. Jerome Dubreuil: Congrats on what looks like being a fantastic deal so far. You touched, Eric, on the subscription aspect. I'm not going to be putting too much time into that. But I'm wondering, in terms of the general momentum of the platform, if you can maybe discuss other growth metrics maybe in terms of monthly active users, just to assess the general momentum? And appreciating that it seems that by this -- this management team has been putting more efforts into margin [indiscernible]. Eric Boyko: Yes. One point that's surprising about TuneIn, which we were very -- and by the way, we've been talking to TuneIn for the last 3 years. So it's been a long deal in the making, discussion, partnership. So of TuneIn's listenership of 600 million, 80% is outside the U.S. 80% of their listenership is outside the U.S. But in terms of revenue, 95% of the revenues come from the U.S. market. An average hour in the U.S. will generate $0.08 to $0.10 an hour. If you look at Europe, TuneIn is not getting $0.003 because the programmatic advertising system is much more sophisticated in the U.S. and Canada and not as strong in Europe yet. So one of the key strengths here for us is in the future when we start monetizing that 80% of listenership across the world, which we'll be investing with both TuneIn -- and we'll need that advertising for the car business, a lot of the cars are in Europe -- we have a strong savings account for the next 5 years for us to increase that $0.003 in Europe and the rest of the world and to bring it to the $0.08, $0.10 range of the U.S. So that also is a very exciting growth portfolio for us. And the market will get there. Just -- we see the same thing with FAST channels. We sell -- our revenues per hour are much stronger in the U.S. and Canada and Australia than they are in Europe for now or in LatAm. So we're excited about that growth. Jerome Dubreuil: Awesome. Second question for me is I want to touch on the second backfill deal that you announced with your results. I'm wondering if we should be expecting kind of a similar financial profile of the second backfill deal than what you have been discussing last quarter on the first one. Eric Boyko: So with the backfill, we've -- I would say we're right now doubling to tripling our inventory. Like I said, I think we have – we are very -- right now, our biggest issue is the fill rate. We really need to build that machine that TuneIn has. And so, we're excited to see and we'll be able to quickly announce to the market what that -- how quickly we'll be able to fill all that inventory that we're getting from our TV manufacturers. We got Vizio, we have LG. We have 2 more coming on board. And now with the TuneIn monetizing machine or the mousetrap, like one of you called it, we're very excited to see how we can increase our fill rate, which is still very low. Jerome Dubreuil: Great. And maybe last -- a quick clarification for me on the back of Aravinda's question in terms of the run rate of $40 million EBITDA in the second half of the year. Is there any seasonality dynamics that we should be considering? Or it's just a great momentum on the EBITDA for them as well? Eric Boyko: What happened is that their machine -- TuneIn was able with their -- they're so efficient that TuneIn is now selling to third parties. So we help iHeart fill their -- some of their inventory and we help third parties fill their inventories, and you'll see deals being announced. So they're so efficient that they're even allowed to sell on third parties. And I must say that, that trend will not stop because we're getting a lot more third parties approaching us to be their advertising partner. And that is a very lucrative business. And the more reach you have, the more you get advertisers. And that seems to be the model and we're very excited about the prospect of the advertising growth. Operator: And the next question comes from Stephanie Price with CIBC. Stephanie Price: Congratulations on the TuneIn acquisition. I just wanted to ask a little bit more about the USD 10 million in synergies. It sounds like you're expecting significant revenue synergies from the deal. Is this embedded in the $10 million? Or is that primarily cost synergies that you're talking about with that? Eric Boyko: Yes. It's -- we're looking at about -- we have about $10 million in OpEx synergies that will surely come over time just because of the way the companies are structured. As you can imagine, we have a lot of different functions. But what we're most excited are the COGS. Just in music rights, because we're much more of a music company -- we have about $4 million in savings in music rights just because we pay less margin. TuneIn is a third party. So we have big savings on music. And we have a lot of savings we see with ad servers. So there's another $5 million to $10 million in COGS savings, which, for us, will apply very quickly. So we're excited to establish those 2 in the next 12 to 18 months. But generally speaking, TuneIn is doing great. Their sales are double digit. Their EBITDA is more than double digit. I explained the run rate, in the second half of the year at $20 million EBITDA. So we're looking at much more of COGS savings, a bit of OpEx of certain position because there's duplication. And we haven't monetized yet, but -- the positive sales synergies that we see from this deal. Stephanie Price: And maybe I'll touch on the other acquisition you announced post quarter end of DMI. Maybe you could give a little bit more color about what that acquisition brings to Stingray's Digital Media platform... Eric Boyko: Yes. DMI in terms of financial – yes, DMI a very small -- it's a much smaller tuck-in. We told the market $6 million in sales, $2 million EBITDA. What we don't know is that DMI Group had a sales force. They have a strong sales force. We have a sales force in retail media. Like we always say, our fill rate is low. So we're excited that their sales force that they were selling only in Walgreens, will be selling in CVS, will be selling in Kroger, will be selling in Albertson and all the other stores. And we're excited. We already are -- we've already put in the last couple of weeks a lot of our sales in Walgreens. So we're getting a double sales positive. So we're more excited about that synergy, the positive sales synergies about this deal. And also, right now, we're the only retail audio media in the U.S. and Canada. So we really have positioned ourselves. Now our challenge is how do we quickly increase our fill rate. And one of the strategy is to work with TuneIn's partner and with their national sales force and their sales team. So excited to see how much TuneIn can help monetize all of this new location or inventory we have. Operator: And the next question comes from the line of Tim Casey with BMO. Tim Casey: Eric, can you talk a little bit about the monetization you're seeing on TuneIn now in terms of radio stations versus some of the video platforms that are on there, the sports deals, the podcast? Is this a play on local radio? Or is it on some of these other platforms? Because I'm presuming like the sports side would be lower margin because of the rights issues and whatnot. And then with respect to the growth, which sounds very strong, is there any investment you have to make in terms of technology or OpEx to drive that, that isn't there, that isn't in the model right now? Eric Boyko: So a very good question. So they're able to -- in music rights, so whenever -- when you rebroadcast a radio station, there's no cost of goods sold because you're really just distributing. When you have our music channels like our -- the Stingray music channels, we pay about $0.03 an hour. So they're able to monetize both radio and they have TuneIn channels, which are like 70s and 80s at about $0.08 to $0.10 an hour. So that for us is great news because we're able to really monetize all that. They're doing it with different -- when you go on the app, they have pre-rolls, they have muted videos, and they're able to really well monetize both products. So it's exciting. And we'll get more in details of the different strategy for monetization. So -- and now good news -- TuneIn has a very extensive force of engineers. They have over -- like over 80 engineers in their team, about 40 in the U.S., 40 in Ukraine. They're very sophisticated. This company was built from the Palo Alto area. So I must say very impressive, robust. So for now, the biggest thing is there's not much to do with connecting their pipes. And they have about like 50 pipes of advertisers -- I won't go on the names and all the technology -- to our product and our inventory and how we speak to advertisers to explain how they can have access now to the Stingray inventory, our FAST channel retail media. So there is no investment to be done right now in terms of building a special technology project. So it's really just continuing what we're doing already. So that's why it's a quick integration. Tim Casey: Would you not have to compensate the radio stations for the rebroadcast? I don't imagine that would be a huge number, but would there not be some sort of -- would they not generate revenue from this? Eric Boyko: Yes, I won't go into exact details. But the answer is, when you rebroadcast, we do pre-rolls and then it's still the ads of the radio station that plays. But while you're playing -- while you're listening to Boom FM in Toronto and you listen to Boom on TuneIn, you have display banners, there's banners and display video. And those display video, they are muted. So you still listen to that channel while you're getting advertising. So that's why it is very, very -- their system is very -- creates a lot of revenue per hour. And I think, Tim, you had a good question. I think someone is -- in terms of the owners, TuneIn was owned by 40, 50 shareholders. It wasn't owned really by a PI Group. They had -- their shareholders were a lot of the big names coming from California and from Eric Schmidt, a lot of CEOs, CEO of -- even iHeart was an investor, the CEO of Salesforce. A lot of big names that you would know their names, but not me because I'm not as good. And also good news -- also Tom Hanks was one of their shareholders. So I'm happy. I'm supposed to -- I will have the chance to meet Tom Hanks. He has a few audio channels with us. So I'll let you know if ever I see Tom Hanks, Tim. Operator: And I'm showing no further questions at this time. I would like to turn it back to Eric Boyko for closing remarks. Eric Boyko: Okay. Thank you. I know it's a long call. We had a lot to cover with both the quarter and our 2 acquisitions. So thank you everyone for your questions and, again, the analysts for your support. And we talked to you a lot about –- we talked to a lot of you last night. So you guys really work full time. In summary, we're confident that TuneIn acquisition is a perfect fit to further Stingray's growth in its key pillars with significant expertise in ad monetization and a perfect companion to our in-car product offering. We are looking forward to sharing our progress in coming quarters. On behalf of the entire Stingray team, thank you for joining us on the conference call. We look forward to speaking with you following the release of our third quarter results for fiscal 2026. Have a great day. [Foreign Language]. Operator: Thank you. And this concludes today's conference call. Thank you all for joining. You may now disconnect.
Mikko Keto: Good morning from Copenhagen and welcome to the FLS Quarter 3 Earnings Call. I'm extremely upbeat about the IFRS result and where we are at the moment. And if we really reflect where we are coming from, we are fairly close to completing the major transformation of the company. And I'm especially happy about service and PCV performance, which are now at a good level, 80% of the business. 80% of the business is high margin, low risk recurring with a fantastic growth potential. Also another major milestone has been closing of the cement sale. So that is a major milestone for the FLS. For the quarter, we are extremely proud about the service development. Service orders increased organically 10% and the positive market momentum will continue. And we're also looking at this positive development would continue in quarter 4. And then also that we will highlight our growth ambitions in service in our Capital Market Day in quarter 1. When we look at the product business, we've done lots of portfolio pruning over the last 2, 3 years. We stopped taking material handling orders. We closed down the business. We don't do any conveyors. So we focus only on high-technology products with the big aftermarket potential. It has been quiet on that side in terms of orders, but we are extremely busy with the engineering orders and engineering work that we do for the future orders. PCV, fantastic performance year-to-date, 9 months. not so high on the quarter because of lack of the project orders. But one of the best developments in PCV has been that we are converting a lot, we continue to be successful converting brownfield third-party installed base out and replacing third-party pumps for the FLSmidth KREBS pumps. So that is a big success in that part of the business. We are in the low end of the guidance in terms of revenue for the year, but we will deliver EBITDA result that we promised to the market. There are also positives regarding cash flow that Roland will highlight that has been asked about some of you in the past. Good progression in all sustainability targets. And you also see a highlight, which is part of our product strategy. We sold the largest filter tailing system in the world during the quarter. And that also plays our product strategy that we want to be a leader in all core products, typical large heavy equipment for the big mines because they generate a big aftermarket for us. So that is one example that -- of the big wins, which on the headline number is not so significant, but then huge generation of the aftermarket in the coming years. Overall market is same as in the previous quarter. We see both service and PCV market remaining stable, and we can continue growth in both of those segments, incremental growth in the coming quarter and then hopefully then also in the next year. But we will highlight the growth strategy for those in the Capital Market Day. Engineering activities higher than maybe for a very long time. We have engineering orders for projects that have not been sanctioned. In practice means, that we know that what product orders we will get in -- when the project is sanctioned, but it also means that we don't know exactly timing because it depends on customer releasing the project. Still a good level of activity in gold and -- but the headline value of a small coal project is always smaller so that it's $10 million, $20 million type of business there. We've turned the corner in service. And now we start to see growth in service and we continue building on that one. We've done lots of changes to the service business this year. And we expect that there will be a big payback now that start to be visible then in the future. But times are that the updated organization and the improvement in many areas starts to pay off. So we see order intake growth despite -- there has been no project-related orders because if you get project-related orders, it means that you sell project spare parts, wear parts, we haven't had any support from that one. So it's really organic through service growth for the existing installed base. And therefore, I'm really happy about that one. Service profitability. It's a bit on the low side because of the lower revenue months, but a good baseline for services in around 20% EBITDA. And then there will be slight variations, as we discussed last time, depending on volume, low volume, high volume type of quarter. So there will be some variation. But for me, the baseline for FLSmidth service is around 20%. We talk about that product market activity is slow at the moment. But of course, there's a big, big underlying trend in critical minerals. There will be a shortage of copper in the coming years, and we see a fantastic potential for this business when the market will come back. And we have a good position in -- especially in big copper plants. If you think about copper market in the world, about 20 mines, we generate about 40% of the world copper. And then if you turn that what it means to us, it means that roughly 70% of the world copper goes through our gyratory crushers. And we will be giving some of the more data on this one than in the Capital Market Day. But big copper critical minerals is where we play. And when that market will come back, you will see trend changing in the product business. But you need to also bear in mind that we focus on quality of the order intake means that , we don't do third-party content through our books. We don't do EPC. We don't do any loss-making material handling business. We don't do conveyors, we don't do stackers. We don't do reclaimers, all that is gone because that is bad business and no aftermarket. So everything what we have in the order intake of products is there to generate aftermarket. And again, relationship between product business and then service and PCV is about 20% product business, 80% high-profit low-risk recurring business in our books. This will be still a swing in the coming quarters. But we've done a cost out in product business line. We rightsized the organization. We are taking about 250 to 300 people out from the organization. but we focus on having core engineering capability to support all our important products. Because of low volume, this will be swinging, but the target is that this business will be breakeven on a steady state towards end of next year. As I said earlier, the organization is super busy. They are doing engineering orders, engineering for future projects. So we know that there will be what we described, catch-up bottle impact at some point of the future, maybe towards end of next year when we start to see the new capital orders coming in, projects being released sanctioned by the customers. PCV is our best business. This is the most valuable part of FLSmidth. And how we are running PCV is that it's a stand-alone business, high level of independence, go to market is independent from the rest. Synergy element in FLS is that we can sell pump cycles valves as a part of the project bundles and then sometimes sharing the service facilities between the service business line. But it is a very independent business. So it's independent go-to market, independent support, independent manufacturing customer support and sales. And if you look at -- despite the slowest quarter, if you look at the year-to-date performance, 9% organic, we're actually doing really well here. This I'm really, really proud of this business. Now I have a live feed from head of this business pattern. Whenever we are converting out significant competitors, I always get a Whatsapp message from him. And we in the head office and also in the PCV, we always celebrate this conversions because that is meaning that we are gaining market share. We don't see any prospect of significant variation going forward in PCV, EBITDA margin, it's stable and it's all about how fast we can grow the business. low-risk, high-profit business. And these numbers, including both capital products and also service. Then handing over to Roland for more detailed financials. Roland Andersen: Thank you for that, Mikko. And adding up the 3 business lines, which is now our continued business, yields revenue of DKK 3.4 billion, almost DKK 3.5 billion, 34.7% in gross margin. And netting out our operating income and also our transformation separation cost is with one-off nature. Our adjusted EBITDA equals DKK 530 million and an adjusted EBITDA margin of 15.3%. Profit and loss from our continuing operations after tax and finance is then DKK 298 million adding discontinued total profit for the period for the group is DKK 394 million. Our gross margin compared to same quarter last year is up. It's driven by better mix, obviously, also a better mix within the business lines and also compared to last -- same quarter last year, our noncore activity segment is obviously out of the numbers. SG&A cost is on a good trend downwards as we have talked about for a while now. Now it sits in the numbers and the total DKK 664 million in the continuing business includes our transformation and separation costs of DKK 52 million in Q3. All that means that our underlying earnings in combination continues. So we are now at 15.3% EBITDA margin for the quarter, absolutely in line with our expectations. Our net working capital is flattish Q-on-Q. We have had a good one on trade receivables collections, and we have, so to speak, spent that in building inventory up, especially in the service business line, but also a bit in the PCV and we expect that most likely to continue in Q4. So our net working capital ratio on the continuing business of 12.4%. Also, again, in Q3, we had a healthy cash flow. Cash flow from operating activity is DKK 478 million and netting of investments, a free cash flow of DKK 358 million, so a couple of good quarters, cash flow-wise, the last 2 quarters. That means that our leverage remains low, 0.6x like we had it last quarter. And at the same time, our share buyback program is progressing well. We are bit more than half done yesterday, and we will continue steaming forward with that . As Mikko mentioned, we have adjusted our guidance to the lower end of our previous guided interval on revenue. So previously, we guided DKK 14.5 million to DKK 15.0 billion, and we are now saying we will be in the lower end of that range, so around DKK 14.5 billion. The adjusted EBITDA margin of 15.0% to 15.5% remains unchanged. And when we talk about adjusted EBITDA, we are excluding transformation and separation costs of around DKK 200 million for the full year in '25, and we are also taking out what we call the operating net income of one-off nature. And this year, this has been sell-off of a few sites and service center in small site in Turkey and a few other bits and pieces we took over from Teekay that is now starting to leave the balance sheet. And with that, I'll give it over to Q&A. Operator: [Operator Instructions] Our first question comes from Chitrita Sinha with JPMorgan. Chitrita Sinha: I have 3 questions, please. My first question is just regarding the comments and release on execution in the quarter. And just wondering what level of confidence you have for Q4 deliveries and then 2026 as well. Mikko Keto: The -- you mean release basically revenue, how well we do revenue in the fourth quarter. Chitrita Sinha: Yes, exactly, yes. Mikko Keto: We expect that service to improve. It was a low revenue quarter for service, and we were building backlog book-to-bill and we are expecting service to improve in revenue and PCV to do well as well. So normalize that there wouldn't be built up on the book-to-bill so much on fourth quarter. Chitrita Sinha: Okay. Understood. And then my second question is just on the product orders. I mean -- of course, it can be quite lumpy and talking about some softness there. But even taking into account the India order, I guess, the underlying order intake was weaker than the DKK 500 million to DKK 800 million that you've previously spoken about. I mean looking into Q4, maybe even into '26, I mean, is the DKK 500 million to DKK 800 million still the ballpark that we should be thinking about? Or perhaps could the range be a bit lower? Roland Andersen: Yes. Thank you for that. I think that range was before the business line split right. So that included the capital part that now sits in PCV. So I think it's important to remember that DKK 100 million to DKK 200 million sits in PCV on a quarterly basis roughly. And that means that DKK 500 million to DKK 800 million is now maybe closer to DKK 400 million to DKK 700 million or so. Chitrita Sinha: Okay. Really clear. And then my final question is just on the pump cycles and bulk business. Just could you give the magnitude of the order in this comparison period just so we can understand the underlying development? Roland Andersen: Yes. I think that's a rough guess, right. So we have included comparison numbers to the extent that we can. But maybe DKK 100 million that is of large nature or so. Mikko Keto: So service and conversions continue at a good rate, and we were missing a bit of that boost from projects where PCV is part of the bundle. Operator: Our next question comes from Christian Hinderaker with Goldman Sachs. Christian Hinderaker: My first question is on modernization where you've talked about -- talked about some adverse timing effects. I guess first off, can you remind us the scale of that within service over a typical year? And then do those third quarter effects in any way relate to some of the product production issues that are facing customers Grasberg, QB, Cobre Panama, et cetera. I guess just curious why growth there is soft when your nearest peers growing double digits in that area and calling out quite a strong backdrop. Mikko Keto: I think how we do the services that we don't have a multiyear contracts in our books. So we like the kind of steady going. So as I said earlier, how we book things is transactional. We don't like to book kind of multiyear contracts at [indiscernible] because then it creates a kind of fluctuation in order intake. So our business is mostly spare parts, wear parts, and then there has been modernization like kind of modernization of mill, for example, that we are doing in South America replacing kind of critical parts of the mill sales and that of things. So it's -- so how we do things is that we try to kind of keep it steady rather than kind of a booking multiyear contracts at 1 go because we -- service would be stable. So that's one thing regarding our philosophy of bookings. But the business is wear parts and spare parts. And of course, a big part of the spare parts, there's element which goes to modernization and typically that part of the spare part, what we call capital spares, because you are refurbishing upgrading mill maybe once in every 10, 15 years, not more often. So in spare parts, recurring is, in rough terms, maybe 70% and the capital spares, which are often part the modernization is 30%. So that is viable part of the service business. So regarding the sites, Corporate Panam was biggest PCV customer in our books. So that was -- when a site is still not active, I think for 2 years or more, it was a big loss for PCV, but we have recovered that one. So that, of course, year-on-year comparison, no impact anymore. Then Grasberg is customer wow, so that will impact our service and PCV business in '26, but we are -- we believe that we can compensate Grasberg kind of lack of business because of the disaster they at the site. And then QB2, we actually very active at the site, helping customers to kind of fix some of the underlying issues. So we actually do a lot of work for QB2 in helping customer to resolve the technical challenges, what they had at the site. So maybe only one which is Anakam, which is HPGR customer, it has a less of an impact because it's HPGR service site for us. So it's mainly the biggest impact is Grasberg, and we believe that in APAC area, we are able to compensate for the increasing other businesses in the region. Christian Hinderaker: You mentioned success in the pump field trial conversions. I just wonder if you can elaborate on that in terms of the composition of those wins in terms of regional mix or metals exposure. Mikko Keto: I think we are typically working in the major sites. So our strong presence is in the large kind of typically most common is copper site in South America, that's the most. And we are focused on converting large pumps where our performance basically is superior against the other competition. So we have quite a good success for the mill discharge pumps which is the large pump part after the mill, which is highway rate, higher aftermarket. So we are focusing on kind of high-value conversions. So it's typically where we are strong. Otherwise, we have a good presence at the site, which is a big copper. Christian Hinderaker: And maybe just some extension there. Obviously, PCV, you've made a lot of progress in terms of improving that product in recent years and obviously seeing some wins, which is nice. I guess just curious about as you seek to grow that business and indeed, maybe other peers have sort of followed suit in terms of strategy? How do we think about pricing in that segment going forward? Mikko Keto: Don't see any pricing pressure because conversions are always technical decisions. It's never a price decision because for the mining side, it's not a big kind of CapEx or item to replace the pump and you can convert it to OpEx as well. So it's -- we don't have any pricing pressure on the conversions. Pricing prices only if the pumps are part of the project bundle and there's a pricing pressure for the full bundle. So that's the only case where there's pressure. And regarding our go-to-market, I think it's different from the competition because, as I said, it's -- you can think almost as an independent business is the most valuable part of FLS. We run it independently with the synergy in capital sales, in the project sales, [indiscernible] sometimes sharing same service asset as the rest of the service. But if you look at the pumps, it's independent business, and that's how you should run it we'll soon see in capital sales as soon as sharing some of the assets. But you can look at it as an independent business. Operator: Next question comes from Christian Thalin with SEB. Christian Thålin: Yes Mikko, you mentioned that the service revenue was low in Q3 and you expect that to pick up. So again, we see service orders up quarter-on-quarter, but revenue down. Can you just elaborate a bit on what's slowing it down in the third quarter? Mikko Keto: We made a massive transfer of the current resources to the shared service locations and there was a little bit longer time in certain admin part of the business, so executing orders. So it's something that we knew this is going to happen, but it's -- but it's nothing significant. So underlying business in terms of supply chain performs well in terms of our sub-suppliers or for supply chain. And I would say the slowness in internal order execution some impact, but it's -- we knew that when you change the operation model, there's always a small slowness there, but it has been fixed. And therefore, there's nothing underlying issues in execution of a service in terms of revenues. Christian Thålin: Okay. So here in the beginning of Q4, you were back at sort of a normalized execution level again? Mikko Keto: Yes, we expect that we recover. I don't have an exact number in my mind. And of course, we don't even know it, but we don't have a kind of significant -- we don't have underlying execution issues in service. So the supply chain is in a good shape. Christian Thålin: Fair enough. And then my other question was just on the impact of high gold and copper prices. So just curious whether this increased cash flow to your customers is having any impact on your direct dialogue with customers. And equally, you mentioned this record high engineering activity, to what extent do you think that's influenced by very high measure prices? Mikko Keto: So inside our baseline numbers, if you look at the full year, and we don't announce smaller contracts, there's quite a lot of activity in gold. And one area where we see is Africa and Central Asia, which are kind of -- where more and more small gold mines are developed. And of course, then the CapEx for smaller gold mines is always less, but we have good position there. So we have number of totally new customers in Central Asia. And in those customers, typically that if you help them to build a plant, then it supports the kind of healthy aftermarket in the coming years. So behind the kind of slowness in copper, which is the big numbers. We've seen healthy activity in gold, and there are new gold mines popping up here and there. And typically, licensing is easier because the footprint is smaller. And now they are coming up in the regions where the licensing is faster and permitting is faster. That's why we're highlighting the Central Asia as a region and Africa where the activity is high. Well, copper is still in waiting, and we are a leader. That's a sweet spot to us. Pickup, as I said, if you would calculate how much of the world copper goes through our equipment and our kind of crushing and milling, we have outsized market share there compared to the rest of the kind of mining. And when the copper will come back, we have a huge benefit that we are incumbent existing supplier to most of the big copper mines. So typically have a significant benefit and high chance of winning expansion if your existing supplier to the kind of previous 2 lines. So and most of the engineering activity costs for the -- at the moment where we are really busy is copper plant expansions, adding a line, adding capacity. So that's where the activity is high at the moment. But we don't know when customers will sanction release the projects, there has been continuous delays. But typically mining industry, everybody does it at the same time. When it starts to happen, then that's why this part is super cyclical. But in the meanwhile, we focus on 80% of the business, which is service and PCV. And we are adjusting our cost base. So we are not actually dependent in our performance too much on the capital cycle. And that has been the whole idea that service PCV is 80% high profit recurring, growing and then the extra bonus is that when copper cycle will come back and we get new installed base that we can service. So it's the whole business model is like that. Operator: Our next question comes from Casper Blom with Danske Bank. Casper Blom: Thank you very much. Most of all, actually a couple of follow-ups. You just touched upon legal that it take some time a bit longer to execute orders given your inherent, is that also the comment that you give in the introduction to the quarterly report where you, well, you say that you recognize that you need to do more to strengthen more execution. Is that specifically that? Or is there other areas also where you think that execution is not good enough yet. That's the first question. Mikko Keto: So in terms of order execution and revenue, we've been improving our supply chain a lot, meaning that concentrating a few critical suppliers, helping them to improve the performance, and also streamlining our internal operations and because historically, we've had not super efficient internally. So now quicker wins in order execution is actually in our hands, so it's FLS internal kind of how we process orders, how we do all that. So it's continuously improving and still not where it should be but it's all right. And then regarding capital business, order execution, we are in better control of the backlog than ever before in the history of this company. So the kind of risky stuff is out. We know exactly what's going on. So there's more predictability now in the product business for the revenue. So I think -- and also that maybe highlight is that we've done the new ERP system in PCV operations, and you haven't seen any negative impact from that one. So we are slowly but carefully improving the internal operations that ensure execution. So PCV with the biggest pump factory what we have in the world as a new ERP system that they'd be running and we haven't really seen significant issues during that transition to ERP. So I think I'm confident that this low-risk approach to the internal processes that we improvements in the way that it doesn't upset the company in terms of operation. I don't know if we answered your question, but... Casper Blom: Probably as far as we can take it. Then a second follow-up on the comment that Roland gave about what to expect on product orders, you mentioned DKK 400 million to DKK 700 million per quarter in product orders. I suppose that's only until you expect that we see some sort of turnaround at some point and if and when that turnaround hopefully comes in towards the end of '26, any kind of idea of how fast we could see it improve and to what kind of levels? I mean are we talking about are doubling? Or can you give any kind of indication? Mikko Keto: Yes. I think we addressed that in the Capital Market Day more in detail because I think we are in the low end of the cycle. And we are super, super disciplined what we are taking in because in the low end of the cycle, you have a -- we promise action to the market because I remember when we started transformation, said that somebody asked, "Hey, if there's going to be a low end of the cycle, do you have a kind of a stomach that take only good orders in and don't take anything that you regret later." And I think we'd be super disciplined in our portfolio and what orders we take in making sure that when the business will turn, we only have a high-quality backlog. But we will detail those estimates, what would that be in the high end of the cycle. Now we are looking at the low end of the cycle and then we will show you some estimates of what it could be, but it's -- we don't want to do that before the CMD. Casper Blom: Fair enough. But if I may just follow up, Mikko, when you say you've been disciplined and full respect for that, I think it's the right thing to do. but I think also maybe we came to a point where we were a little bit too disciplined. With the new heads in service and products, are you now sort of taking the orders that you should? Or are you still missing out on something where you may be a little bit too conservative? Mikko Keto: I don't think so. And I think now we turn the corner in service as well that if you remember that we exited basically labor so that services also is basically spare parts and wear parts to 80%. And then, of course, that's all high-profit, low-risk business and a part of those spare parts to go to the upgrades refurbishment. So -- and if you look at the world market, I think what has been moving is actually small mines and kind of maybe not -- and the reasons that are not in our sweet spot. As I said, our sweet spot is critical minerals, copper in particular. And when the South America, North America copper is quiet then you see that one because we are dominating the market in largest of the equipment, largest mills, large HPGRs, all that to things. That's where we -- when that market will come back, then that's where we are dominant. So it depends also on which part of the world, which segment is moving. And if you look at then the demand estimates for the copper in the future, you can see that current capacity in the world is not able to fulfill the demand. Short-term customers are focused on maximizing profitability, dividends, share buyback, but the CapEx will come back to copper and there are lots of plans in South America for expansions. But when they are released, we don't know exactly. Operator: The next question comes from Claus Almer with Nordea. Claus Almer: Also a few questions from my side. But first of all, congratulations with the strong margin you again achieved in the quarter. The first question goes to the PCV and the order intake. It is a bit difficult to compare momentum given how strong Q3 last year was. So how did Q3 actually develop compared to your own expectations? That would be the first one. Mikko Keto: It was in line with the expectation because the project activity was slow. And I think now with the low -- smaller reporting segments, I think look at quite a lot kind of rolling average is year-to-date over 2 or 3, 4 quarters. So that will tell a story. I think because of the size of reporting segments, there's more variability. But if you look at the -- year-to-date development, organic 9% is, I think it's fantastic. I don't think anybody is growing faster, the pumps market. And we expect that to continue at a good level. So we -- and also that we have plans to more boast even further the PCV sales. And as I said, it's quite independent business. And if you look at it, it's underlying profitability of the business, how steady it is really, really valuable part of FLS. But we are investing to that business as we speak. We are taking cost out from other parts of the business. We are investing, as Roland has highlighted quite a few times that we are investing in the front line to make sure that we are close enough to the customers. So yes, it's a fantastic business, and it's -- we expect to continue to grow that. But look at it a little bit over the quarters, 1 quarter is just kind of a snapshot of the business. Claus Almer: Sure. Okay. And then my second question goes to the backlog as we have heard about or learned about it during this year. So the project that has been delayed from this year, what drives the delay? And secondly, has a new delivery date being agreed with the customers? Mikko Keto: So I think in the projects, there has been some discuss with the customers, for example, they didn't want to receive the equipment so early and that type of thing. So it's more customer related in the projects. And in service is okay, the revenues, but it could be higher in the quarter. So in services is more internal, not supply chain related that we are in the process of fixing. And then in project business in the capital. Usually, it's more customer dependent that customer wants us to delay something or we have -- we are trying to resolve some of the issues related to that particular project. So it's -- but I don't really have a concern for the revenues and order execution. But you are right that we need to get back on track in service so that we can estimate better and generate more revenues. But there's no big underlying issue. As I said, supply chain works, we are getting orders and it's more the internal products and admin that has caused some small delay. But it's not massively big, but it's having some impact. Claus Almer: Sure. But maybe to -- I know the change of your revenue guidance has been both impacted by these delays, but also FX. So it's a little bit difficult from the outside to know what is what. But I guess, what I don't know, DKK 0.5 billion to DKK 1 billion of revenue that has been delayed for 2025 into the future. Should we expect that to come in '26 instead? Or is it even far out before the revenue recognition will happen? Roland Andersen: Yes. So Claus, we expect that to come in '26. Now what happens to FX is a different thing. But the delays that we talked about in the products business, and also us getting in place in the global business centers, order execution and so on and service business line, that will slowly improve and improve revenues in Q4 and also first half of next year. So it's not lost. Operator: The next question comes from Tore Fangmann with Bank of America. Tore Fangmann: Just one more from me. You flagged the near-term demand from the small gold projects. Could you maybe elaborate a little bit on the size of potential orders and basically, what does near term actually mean for you? Is it something that we will see in the next 1 or 2 quarters already or just something maybe into '26? Mikko Keto: The gold are so small, so that they are part of the baseline that we don't announce. So as we said a few times, we don't have so many day-to-day small products and orders there. So everything is related to expansion or then new CapEx or new project. And those baseline figures, if you look this year, they include the gold projects. So they are below our reporting threshold typically. So in that sense, it's part of the baseline business. So you will not see any massively big orders in that business because most of the new plants are smallest and the CapEx is small. But it's still a good business for us, and we have a good position there. Operator: The next question comes from Lars Topholm with DNB Carnegie. Lars Topholm: Yes. A couple of questions from me. First, a household question to the order backlog in products which is up from DKK 4.9 billion to DKK 5.1 billion, even though your revenue is DKK 300 million higher than your order intake. I just wonder how that can happen? Roland Andersen: That I have to come back on, Lars. That I have to come back on. Lars Topholm: That's okay. Then a second question, Mikko, you mentioned in PCV, there's a capital business and the service business. And now, of course, we guess the capital business is somewhat subdued for all the reasons you have mentioned. I just wonder if there's a difference in the margin between those 2 parts of the PCV business? And if there's say any implication for your ability to defend current margins into an upturn. Mikko Keto: So the margin in the service side, which is most -- or our aftermarket, it's most of the business, let's say, depending on the quarter, let's speak 70%, 75%. That is very steady and good in terms of margins. And only margin differences are in the product -- let's say, that the product part of the business is 25% or 30%. So within that mix, if we sell product as a part of the project, then it's much lower margin, than if we sell the conversion because conversion product is a technical decision by the site, price doesn't matter if the product performs. So in that sense, it's a small impact, but then you're talking about within that 25% that there's a difference that if it's project order for product and it's lower margin and then if it's a conversion, then it's higher. So it's -- we can defend the margins. So vulnerability is so small, but it's all in that kind of, let's say, 25% bucket and a mix between project-related orders and conversions. Lars Topholm: Okay. That's very good. Then a question on the cash flow. So you have a lower use of supply chain financing. I guess that hurts your cash flow. So I wonder if you sort of neutralize that, what would the cash flow impact be? Roland Andersen: Yes. So I think utilization of the supply chain financing out of the quarter was about DKK 300 million, right? And the DKK 100 million belongs to cement. So the continued business would have DKK 200 million left and we roughly say that half of that is improving net working capital. Lars Topholm: On cash flow is actually a notch better than what we can see in the raw numbers. Roland Andersen: Yes, you can say that excluding the supply chain, yes. 1/3 of that supply chain is disappearing with the Cement business. There's a lot of the cement customers on that, and we have been unwinding that over the last 6 months or so. Lars Topholm: Then one final question. How should I think about absolute SG&A costs going forward? I'm thinking Q4 and 2026 versus the current run rate? Roland Andersen: Yes. So SG&A costs will come down from where they are today. And then there are some FX back and forth in that, of course, but we are still not done taking costs out. Mikko Keto: And Lars, the whole idea is that we make a platform that is totally scalable, both in service products and PC so that we have a kind of corporates and lean SG&A and then we can scale with the volume. So we are still addressing the kind of support function costs pushing activities out from expensive countries to cheaper countries and getting efficiencies. So as I said, products business line have taken out 250 to 300 people, and it's not sitting in yet for the SG&A reduction. Of course, there's some inflation always in the labor cost as well. But you will see improvement in absolute terms. And also that the full benefit is visible when the market will come back and we keep it the same. So it's -- we are becoming a highly scalable platform for the future growth. Lars Topholm: That is very, very clear. Final question on my side. You have previously mentioned that to close the margin gap to Metso you needed to be 1/3 larger and you needed to do M&A. I just wonder, is that still your view? Are you actively looking at anything? Should we expect bolt-on acquisition, say on the end of 2026, what's the status there? Mikko Keto: So we have a number of bolt-ons in the pipeline. Of course, timing is a little bit difficult to say. But we have -- and now when we are -- we'll be focused on selling and shutting down the bad businesses, kind of exiting cement, selling the -- getting rid of the material handling businesses. So it's -- we will actually -- we don't know when those will kick in, but we do have an active pipeline, and we will detail in CMD to your disappointment based on some of the earlier comment that we are limber, but we have a good pipeline. And now we are focused instead of selling, we are focused on buying. Operator: The next question comes from William Mackie with Kepler Cheuvreux. William Mackie: A couple of questions, 3 actually areas. So firstly, sticking with products, Mikko. You've talked about lowering the structural cost base and reaching a breakeven by the end of 2026. Ccould you just share some of the core assumptions about reaching breakeven? And with regard to -- are you thinking volumes flat and you brought the cost base down to reach breakeven? Or are there some assumptions for growth embedded in your '26? And at what point should the products area start to reach a kind of normalized margin through cycle margin flight path. That's the first question. Mikko Keto: So we don't expect growth in '26 yet. And we are building the baseline based on the kind of steady volumes and then to be close to breakeven end of the year. So and then we are taking cost out where we can. And at the same time, we need to have enough engineering capacity because we are winning future orders now because engineering activity is ongoing. But we are kind of -- all the initiatives to bring the cost level down is completed over the next 6 to 9 months, and then the full benefits should kick in before end of the year. But then it's just kind of a headline estimate so that whether it's 0 or plus 1 or minus 1, it's just kind of thereabout. But we want to make it scalable so that when the market will come back, and we will estimate what is the upside in the kind of peak market that we can support the business for the same SG&A and then just scaling the engineering resources or what we have in India. But I think we'll gain detail that. We are actioning as we speak, but we will detail the impact then in CMD. William Mackie: Following on from that and the discussion about cleaning the product portfolio, to what extent should we look at the '25 numbers as having -- as you having fully exited the nonattractive conveyors, material handling and other areas that you've mentioned as lower margin and less attractive. Has that all left the portfolio or is there more of a transition effect that will take place this year and into next year? Mikko Keto: No more transition effect. And if you look at the business today, most of the business is coming from 9 to 10 core product areas. And those 9 to 10 core product areas generate most of the aftermarket. So it is complete. And the portfolio what we have is basically -- yes, that portfolio change is complete now. William Mackie: The second question area was related to service. Perhaps you would just run through the major changes you've made to the reorganization, which we've touched on a couple of times and the verticals, either regional or the verticals you're now focused on, but perhaps more specifically in relation to working capital, are you happy with the footprint? And I saw you've invested in inventories to raise service levels this quarter. Is that process now over? Or should we expect further growth in inventory days? Mikko Keto: So first about footprint, we still have some white spots in the market. If we look at the global market in where we are less present. So we will continue increasing coverage, either more targeted acquisitions, or then investing our own resources. So we still need to continue that work. And the business is basically what is called [indiscernible] model, the commercial is driven by the global business line and product lines. And then the sales front is, of course, in front of the customer. And we are investing a lot to sales excellence. We're upping the organization -- has been not commercial enough in the front end and that kind of organization update continues. But operation model more or less is what we want to have, it's working well. And now it's more about people getting right people in the right places, inventories continue to increase. And I think Roland the kind of network capital continue to go up. And if you look at the peer group it will be 4 percentage points possibly to that. Roland Andersen: Yes. So thank you for that. So as I said, we will continue to invest in inventories, right? And the 12% may be going up from here and also on the Capital Markets Day, we'll give you more longer-term numbers on that. But the intention is to sort both the PCV business and the SBL business, with inventories a bit closer to customers, not dramatically up from where we are today, but more proximity. William Mackie: The last question area related to PCV again. Great that you have an open Whatsapp line for product wins on your pumping business. What happens if you lose a competition? Do you also get a Red WhatsApp line? So seriously... Mikko Keto: Yes, we do actually follow the -- what is called competition balance, what we are losing what we are winning, but it's quite evident looking at the losses and wins that it's mainly winning. But of course, you lose something every now and then as well. So it's -- but it's very positive what we see. And it's building the confidence that we have a best product in the market. Traditional footprint hasn't been wide enough. Our local presence has not been wide enough. So it has been not about product in the past, but it has been more about operational model. And that's why running it independently, having dedicated PCV resources, close to customers at sites, assembly repair facilities, near the sites. So that has been product. We knew that we have a winning product, but we haven't had a winning kind of presence in front of the customers. And now when we are improving presence, then it seems that we are winning the business because technical, the product is really good. William Mackie: I mean there's one very large competitor in the market and one of your German competitors gave a CMD and called out a #2 position. How would you describe your market share in pumps? And where could it go? Mikko Keto: I think we are #2 in the market. And of course, if you start including water pumps and something that nobody should be interested in because there's no aftermarket, you can have a different market shares. But if you look at what is really going to hardcore mining, which is mill discharge pumps and slurry pumps at the mining side, we know that we are #2 in the market. And the pump market as a whole is huge. You have a world full of water pumps. But of course, you know that if you are at home that you don't need to replace them ever and they last forever. So it's -- that is not our business. But in the core mining, we know that we are #2. Operator: Our next question comes from Klaus Kehl with Nykredit. Klaus Kehl: There's been quite a few questions about this ongoing cost out program. But you didn't really answer the questions about the absolute cost reductions there going forward. And perhaps that's fair enough. But did you say that you have taken out 250 people, which is not reflected in your SG&A right now, and therefore, yes, I can see that the cost saving in the P&L. That would be my first question. Roland Andersen: So that exercise is ongoing in the product business line. And they are not all SG&A resources. There will be resources also on the cost of goods sold. So it sits in the gross margin. So you can't move it directly one to one. But you will see the head counts changing over the next couple of quarters. Mikko Keto: But we are really pushing hard for the absolute DKK cost targets internally, but we don't communicate the absolute target externally, but we have -- we continue. And I think once we are out of it, I think -- despite a decrease in the volume, which is because of portfolio changes, there was a concern that we will take bad business in just to kind of justify SG&A. So we haven't done that. When we kind of trim the portfolio to have the right products in the portfolio. We are rather taking cost out than taking bad business in to justify higher SG&A. So we have a really, really aggressive cost target internally and sometimes you get to 80% of your aggressive cost target. So that's why we don't communicate externally. But you can continue to follow the absolute number in the SG&A line, and you can see that trending down. Klaus Kehl: Okay. But did you say 250 people? Or did I... Mikko Keto: Yes, that's the part is COGS and SG&A people. So we are -- because sometimes you need to look at both. You have inefficiency both in COGS and SG&A. So it's -- we are looking at -- because it's just a different line item, but it's still a cost. Klaus Kehl: Got it. And then my second question is that, yes, we talked quite a lot about gold, but what about silver, the silver price has also been skyrocketing here in '25. So any comments to that? Or is it a -- is it a very small market for you guys? Mikko Keto: It's a smaller market. We have some activity. We are working with a couple of silver customers who are looking at new investments. So there's activity, but as a market is small, but we have a good position in silver. So it's -- just if you look at the size of the market, copper is biggest, gold is second biggest that's why we talk more about that. And then you have a whole host of other commodities. But yes, there's some activity in silver, and we are working with a couple of cases there as well. Operator: Our next question comes from David Farrell with Jefferies. David Richard Farrell: I've got 2 quick ones. Firstly, just can you talk about cash flow from operations, clearly performing very well in the quarter. You've previously given guidance that this wouldn't exceed DKK 1 billion for the year, but it's on trend to do so. So maybe you might like to clarify that guidance around CFFO for the year, please? Roland Andersen: Yes. Thank you for that one. And we still expect a positive CFFO in Q4. So I think we'll have to say that CFFO for the year will be slightly above DKK 1 billion. David Richard Farrell: And my second question just comes back to kind of the dynamics between PCMV and the products business in terms of thinking about some of these major tenders you've got going forward. How likely is it that kind of you would combine your teams to kind of tender together for a project and not allow the PCMV business to operate wholly independently in that tendering process? Mikko Keto: So basically, we have a capital sales team, which is project sales. and they are pulling together kind of portfolio from different parts of the organization, something from also from service, some are first-time spares, some wear parts and they do also include the pumps. And regarding that big India case that we had, iron ore in the first part of the year, we got all the pumps to that site. So all parts of the process. And so it is independent. And that's why I said, synergy areas for PCVs projects sales. They are included in the bundle. PCV gives a price and the kind of -- but it's part of the bundle, but it's a sales channel for PCV in major capital opportunities. But if you look at then the conversions at the site, it is totally independent. Of course, there's synergy that we have service present at the site and PCV, so we are more present as a company, but that is totally PCV independent and then services independent. So we know that we get more out of the business if we run it kind of stand-alone, fully focused. But of course, the team is using capital sales or project sales as one channel to get into the bundles. But the numbers are totally different. So if it's part of the bundle, there's incentive for the project sales team to sell those, but then the number still sits for the PCV. Operator: The last question comes from Xin Wang with Barclays. Xin Wang: I'll be quick. The first one is adjusted EBITDA margin in the quarter. Is there any one-off in any disposal impacts or provision release? Roland Andersen: Yes. So provision release, not so much. But what we have had, we've sold a few summer houses. So that's an income. And then we have our transformation and -- transformation and separation costs. So both are netted off and it's DKK 52 million in costs and its DKK 22 million in income. So net-net, DKK 30 million out. Xin Wang: That's very clear. My second question is on HPGR. has recently decided to reenter the mining market through its cement arm that will offer a suite of products, including HPGR. Do you think they will be able to capture more market share improvement or recruit some of the installed base in aftermarket? Mikko Keto: Absolutely not because we have all the service facilities close to the mining side. And we have a much better supply chain. We have a total different supply can to what it's much better in terms of the cost. We have service repair centers around the world. So they may make noise, but we have 0 concern about them. I think they are not capable of entering mining market. It's just kind of -- so it's -- we are not really concerned at all. And I think we've done so many improvements since we took over the business. Xin Wang: Great. My last question maybe is a follow-up on the service business. I think you've given the vast splits of the business being 80% spare parts. Can you maybe give us a rough idea of the relative profitability of different types of service orders as well? Mikko Keto: I think typically we don't give the details, but if you -- that 80%, if it's wear part and the spare parts. So the spare part is higher than wear parts, but we don't give for competitive reasons, we don't give the details. But basically, within that 80% spare wear mix, spare is higher, wear parts is lower, but for -- as I said, for competitive reasons, we cannot give more detail. Operator: The last question comes from with Hanneke. Unknown Analyst: Yes. Just one topic I want to take up Mikko, did I just hear you right that you're not planning for a higher product rate in 2026. Mikko Keto: So talk about the product versus service mix? Unknown Analyst: No. If I heard you right on the profitability improvement in products. I think you just said on a previous question that you're not really planning for higher volumes year-over-year. Did I get that right? Mikko Keto: Yes. So if I look at the market, there's a market estimate that we expect '26 to be still flattish market. And then we are expecting pickup towards end of the '26 and in '27. So that's how it looks. You are right. So the don't plan for growth in '26. We might see the pickup towards the end of '26. It's basically the same what we saw last year. And we have -- we are super appreciate with all engineering orders and engineering. And we expect that we see more and more kind of sanctioning of the expansions and projects then towards end of the year. So you are spot on. Unknown Analyst: Then the final one because that's relevant. I mean I know we're 1 quarter away from talking about 2026. But if I try and discuss the trajectory here a bit, your run rate gross margin is now sitting around 35%, maybe a bit higher with time, but then it's hard to see a big negative mix shift next year given what you said on products and the fact that PCMV orders have been growing faster than service year-to-date. With the SG&A pace that we are seeing now and what you have previously communicated on [indiscernible] mathematically, we could get to a pretty high margin number for next year. So I'm just curious if we're missing something in this reasoning if you can share some thoughts. Roland Andersen: I think you're missing a number of things, Gustav. First of all, we can't discuss the '26 guidance here. But the service business this year is not growing -- is not growing in nominal terms, and we have significant FX headwinds. And then when there's no reason to believe we will be a bigger company next year when we look at the order intake. And then it will take a little longer to get to the percentages that may have been indicated earlier on SG&A out of revenue. So I think we will talk a bit more about this in the Capital Market Day and how it's going to play out going forward. Mikko Keto: And I think, of course, you are looking at full potential of the business, which is really good. But then also that we will need to get a little bit more support from volumes as well. And we are highlighting growth ambition in service and PCV in CMD. And I think based on that one, then you can better estimate kind of what numbers we can hit and when. And as we indicated, service EBITDA is kind of steady, hovering around 20%. And then PCVs same at what is today and turning around the capital business. Unknown Analyst: Okay. I will just try to bridge it before I let you go because even without sort of estimating any big change here, I mean I don't see a mix shift next year. If you take the current gross margin and you assume that at some point, the one-off costs will end. That takes you to a significantly higher level than what we're seeing right now. So yes, I guess that's my question/statement. Roland Andersen: Gustav, I think you're fishing for guidance for '26, we're not going to engage. On a one-on-one basis, I'm happy to take you through whatever assumptions you have made and how it may or may not stack up. And I think we should do that. We cannot have a guiding statements here now, and we will have a lot more about this in the CMD. Operator: Ladies and gentlemen, this was our last question. I would now like to turn the conference back over to the management for any closing remarks. Mikko Keto: Yes. Thanks very much for the call. And I think we have a really good situation at the moment. We completed the portfolio changes what we needed to complete. We are today, 80% service and PCV, high margin, low risk recurring business for the growth potential and also that we are sitting in a good position long term being a leader in critical minerals copper in particular. So I think I'm quite upbeat about longer-term performance of FLS and we continue to build on this one. Thank you very much for your time.
Operator: Thank you for standing by. This is the conference operator. Welcome to Extendicare Inc. Third Quarter 2025 Analyst Conference Call. [Operator Instructions]. The conference is being recorded. I would now like to turn the conference over to Jillian Fountain, Vice President, Investor Relations. Please go ahead. Jillian Fountain: Thank you, operator, and good morning, everyone. Welcome to Extendicare's 2025 Third Quarter Results Conference Call. Joining me today are Extendicare's President and CEO, Michael Guerriere; and Executive Vice President and CFO, David Bacon. Our Q3 results were released yesterday and are available on our website as is a live audio webcast of today's call, along with an accompanying slide presentation. An archived recording will also be available on our website following the call today. As well, replay numbers and passcodes have been provided in our press release to access an archived recording by phone until midnight on November 28. Before we get started, please be reminded that today's call may include forward-looking statements and non-GAAP and other financial measures. Such forward-looking statements involve known and unknown risks and uncertainties that may cause actual results to differ materially from those expressed or implied today. We have identified such factors as well as details of non-GAAP and other financial measures in our public filings with the securities regulators and suggest that you refer to those filings. With that, I'll now turn the call over to Michael. Michael Guerriere: Thank you, Jillian, and good morning. Q3 was an excellent quarter for Extendicare. Strong organic growth augmented by a full quarter impact of our recent acquisitions established a new baseline for our results. We started the quarter by completing the acquisition of Closing the Gap on July 1, welcoming more than 1,200 caregivers and adding an estimated 1.1 million annual service hours to our Home health segment. Closing the Gap added $24 million in revenue and $3.1 million in NOI in Q3, ahead of our expectations when we first announced the deal earlier this year. As we integrate Closing the Gap into ParaMed operations, we expect to generate annualized operating efficiencies of approximately $1.1 million after the first year. The acquisition also enhances our capability to establish and deliver new integrated care models such as direct Home care contracts with hospitals that provide us with new ways to meet the needs of the aging demographic. Home health care volumes at ParaMed were up 13% over the prior year quarter, the largest year-over-year organic growth we've experienced. This reflects rising demand due to the aging demographic, Long-Term Care capacity growth that's falling short of needs, and a strong societal preference for living independently at home for as long as possible. We've been successful in meeting this rising demand through large-scale recruiting and training programs that ensure we have the staff necessary to meet the needs of our clients. On the heels of the Closing the Gap acquisition and the Nine Home LTC acquisition we completed in Q2, we increased our senior secured credit facility by $100 million in the quarter, drawing $55 million on our delayed draw term loan to partially fund the Closing the Gap acquisition. The upsize in our credit facility allowed us to complete the 2 acquisitions while maintaining very favorable liquidity, providing us with significant flexibility to optimize capital allocation and drive further growth. On Slide 4, you can see that this quarter marks our strongest performance in recent years, reflecting margin improvements across all segments. We strive to be Canada's leader in the delivery of high-quality Long-Term Care and Home care services, leveraging our deep expertise to drive growth in a capital-efficient manner. Our results released yesterday demonstrate several pillars of our strategy at work, including organic growth driven by strong operational execution, strategic M&A that builds scale and expand service capabilities, and disciplined capital allocation grounded in a strong balance sheet. Adjusted EBITDA increased to $50.8 million, up 40.6% over the prior year. Excluding the out-of-period items recorded in both years, adjusted EBITDA increased by 36.6% to $46.9 million, with Home health care leading the way. Home health volumes grew almost 25% from the prior year, reflecting the organic growth and Closing the Gap. Home health care NOI margin improved by 230 basis points to 13.6%, reflecting the operating leverage enabled by the scalability of our technology-driven back office. In our Long-Term Care segment, Q3 NOI margin improved by 40 basis points over the prior year after adjusting for out-of-period items. And in Managed Services, third-party and joint venture beds serviced by SGP grew 6% from last year, bringing the total to over 152,000 beds. Driven by the strength of these results, AFFO increased to $0.31 per share, up 19.3% on a year-over-year basis, driving our payout ratio down to 45% on a trailing 12-month basis. Our growing cash flow and strong balance sheet give us flexibility to pursue strategic growth through acquisitions. We see attractive opportunities in a fragmented senior's care market that is underpinned by strong demographic demand. Our scalable back office helps make acquisitions immediately accretive as we realize the synergies that come from running higher volumes through our cloud-based technology platform. Turning to Slide 5. We continue to advance our redevelopment agenda with 6 homes under construction that will bring 1,408 new state-of-the-art beds into service, replacing 1,097 Class C beds. The $565 million development cost of these 6 projects is being funded through our joint venture with Axium, where we retain a 15% managed interest. We are targeting opening 2 new homes, our Orleans and Peterborough projects in the first half of next year. In addition, we have a further 18 projects advancing through the planning and development stages under the new Ontario government Long-Term Care Home capital development program. We plan to start construction on a new 320-bed Home in Sudbury by the end of this year, which we intend to vend into the Axium JV in Q1 2026, subject to regulatory approval. We aim to start construction on up to 3 additional projects in 2026. We remain committed to replacing the older homes in our portfolio and expanding Long-Term Care capacity in Canada. As recent projects have demonstrated, pursuing redevelopment through the joint venture structure is capital efficient. Proceeds from the sale of new projects into the joint venture and sales of vacated Class C buildings to third parties provide capital that we can redeploy into the next wave of redevelopment projects. This preserves our balance sheet and delivers long-term value to shareholders. I'll now turn the call over to our CFO, David Bacon, to discuss our financial results in more detail. David Bacon: Thanks, Michael. I'll start with a brief review of our consolidated results, followed by our individual business segments and our liquidity position. Turning first to consolidated results for the quarter. Q3 was impacted by a $2.1 million net increase in out-of-period Long-Term Care funding. The impact of out-of-period items is summarized in the appendix of the presentation, which is referenced on each of the financial results slides. Our consolidated Q3 revenue increased by 22.6% to $440.3 million, driven by the full quarter contribution of $56.9 million in revenue from the 2 recent acquisitions, 13% organic growth in our Home care volumes, along with bill rate increases and Long-Term Care funding increases. This was partially offset by the closure of Class C LTC homes that were vacated following the opening of the newly redeveloped Long-Term Care homes in the Axium joint venture. Excluding out-of-period items, our Q3 NOI improved by $13.7 million or 28.3% to $62 million, reflecting the revenue growth and approximately $6.3 million contribution to NOI from the 2 acquisitions, partially offset by higher operating costs. Excluding the impact of out-of-period items, our Q3 adjusted EBITDA increased by $12.6 million or 36.6%, reflecting the improvement in NOI, partially offset by higher administrative costs. Growth in AFFO continues to be strong with Q3 AFFO of $0.349 per share, up 27.4% from the same period last year, supported by our stronger after-tax earnings, partially offset by higher maintenance CapEx, in part due to the LTC homes that were acquired. When out-of-period items are excluded, our AFFO per share improved by $0.05 or 19.3% to $0.309 per share. Turning first to Home health care, which delivered exceptional performance this quarter. Revenue increased by $48.4 million or 35% year-over-year, driven by the $24 million contribution from the Closing the Gap acquisition, 13% organic growth in volumes and the impact of the rate increases received in Q4 of last year. NOI improved by $9.9 million or 63.2%, reflecting the strong organic volume growth in our base business, augmented by approximately $3.1 million of NOI from closing the gap. Turning to our Long-Term Care segment. The Q3 results were impacted by out-of-period funding of $3.9 million this year and $1.8 million last year. Excluding out-of-period funding, our revenue increased by $34 million, driven by the full quarter contribution of $32.9 million from the Nine LTC homes acquired from Revera, funding increases and the timing of envelope care spending, partially offset by a loss of $8 million in revenue from the closure of the 2 redeveloped Class C homes that were replaced by new homes in the JV. NOI increased by $4.8 million or 21.2%, driven by the increases in revenue and approximately $3.2 million in NOI contribution from the Nine LTC homes that were acquired, partially offset by higher operating costs and the loss of approximately $600,000 in NOI related to the closed C bed homes. Corresponding NOI margins increased 40 basis points over the prior year period to $11.8 million in the quarter. Finally, turning to our Managed Services segment. The decline in revenue and NOI this quarter reflects the loss of the management contract resulting from the sale by Rivera of the 30 Long-Term Care homes that were under contract to Extendicare, 9 of which we acquired in Q2 and are now included in our LTC segment. Our Managed Services revenue decreased $3.3 million to $15.6 million, and our NOI declined $1 million to $8.9 million. Despite the reduction in the number of managed homes, earnings benefited from the 6% organic growth in our SGP clients and increased management fees from the newly opened home in the Axium JV. NOI margins were 57.2% for the quarter, while our year-to-date NOI margin of 54.9% remains in line with our expectations for this segment of between 50% and 55%. Turning to the balance sheet. Our liquidity position remains strong. Despite funding the 2 acquisitions earlier this year, we ended the quarter with cash on hand of $166 million and access to a further $154 million under our revolving credit facility. All of our credit metrics remain solid, and we have no debt maturities until Q1 2027. We are in a strong position, which allow us to pursue our growth agenda. We will remain disciplined in our approach to allocating capital as we evaluate opportunities that strategically fit and align with our growth and shareholder value creation objectives. With that, I'll pass it back to Mike for his closing remarks. Michael Guerriere: Thank you, David. The compelling merits of our strategy are evident in our third quarter results. As the demographic realities of an aging population continue to drive demand for our services, the scale and efficiency of our operations position us well to answer the call. Not a day goes by without a new story about the stress our health care system is experiencing. Access to care is a national challenge. The services we provide offer a way to relieve pressure on hospitals, by providing care in more comfortable and cost-effective settings. We will continue to build capacity to ensure that everyone in Canada receives the care they need to live their best lives. My sincere thanks to our growing team for their commitment to advancing this important mission. With that, we're happy to take any questions that you might have. Operator: [Operator Instructions] The first question comes from Linda Wright with TD Securities. Please go ahead. Linda Wright: This is Linda standing in for Jonathan today. Congrats on a great quarter. My first question is on the CTG acquisition. When we're comparing it to the Q1 sorry, the Q2 press release and also the initial announcement, we noticed that the earn-out initially was estimated to be $3.5 million to $5 million, but now it seems that it's dropped to $1.5 million to $2 million and the same with also the new business revenue estimates. So just wondering if you can provide some details on this change. David Bacon: Sure. The first part of the question first with respect to the earn-out. There's 3 discrete contracts that the earn-out relates to that were relatively new to the business at the time of the acquisition. So, and the earn-out mechanic has us paying a portion, a percentage of the revenues for the first 12 months post-closing. So what you're seeing there is more of a timing difference, and those 3 new contracts are ramping up a little bit slower than anticipated. And the fact that the earnout cuts off after the first 12 months just means the contribution will be a little bit lower for the period that the earn-out is applicable. So it's more of a timing thing on starting up that new business. And I think your second part of the question just more generally around the overall results. for Closing the Gap. They are tracking higher than our when we originally announced the deal, but that is in line and keeping with, I think, what you're seeing in our own business and the growth that we've been experiencing. So it is tracking higher, but it is in line with the underlying organic growth we're seeing in ParaMed. Linda Wright: Okay. That's helpful. And then just continuing on the Home health care segment, we noticed that margins were higher during the quarter. Just wondering, is this being driven with the CTG business having a higher margin? Or is this more like organic growth? David Bacon: Yes. I'd say that the single biggest contributor is just the volume growth this quarter, like a 13% organic growth year-over-year. The margins in Closing the Gap are largely similar to ours. I think it's just; it's a volume impact more than anything. And it does go to what we've said in the past about the back office and scalability. So, we're able to handle that growth and you see that then get reflected in higher margins. Linda Wright: And then on the Home health care segment, again, should we expect to see more acquisitions in like the near to medium term? Michael Guerriere: Well, we're constantly looking for opportunities that fit well with our, with our existing business. We don't want to buy volume just for the sake of buying volume. We're always looking for capabilities that expand our current either geographic reach or the scope of services that we're providing. So, we do see a number of attractive opportunities in the market. So that is something that we're looking to explore. And the fact that our balance sheet is quite healthy, I think, gives us flexibility to look for those opportunities. Linda Wright: And then one last one for me. On the LTC projects under construction, it looks like the Theodore Place location completion was delayed by a quarter. Just wondering if there's any particular reasons behind that. Michael Guerriere: No, I think it's just, it actually slipped by 6 weeks and it slips us into a quarter. But it is construction. There's nothing particularly concerning about that, but it is a bit delayed, had to do a bit with tying in the power with Hydro One, to be honest. But we're talking about the difference measured in weeks. It just crosses over a quarter. Operator: The next question comes from Tal Woolley with CIBC. Tal Woolley: Just for Home health care, obviously, the business is expanding rapidly. The profitability has really improved. And you talked about scalability. I'm just wondering, is there a certain breakpoint here where you need to start thinking about making more investments? Or are there other investments you should be thinking about making in the business now if it's going to be this much a bigger part of the profitability picture going forward? Michael Guerriere: Yes. I think it's a good question. I think what you're seeing to date for us, we've been able to handle the growth that we've experienced, which you're seeing in the margin improvement. I think at the moment, we're comfortable sort of being able to sort of sustain this level, although we'll be honest, the 13% year-over-year organic growth was, did exceed even our expectations for growth, but we were able to handle that. So, I do think where we're at and our ability to absorb some additional M&A through this, acquisitions like Closing the Gap, I think we could absorb quite readily. So, there's nothing imminent sort of like a step function at the current level we're at. But so I think it is, I think we're in a good spot here given sort of the, where we sit today. Tal Woolley: And then just looking at the Long-Term Care performance, I think if I'm doing my math right, like the sort of organic growth or same-property NOI growth is probably in the mid-single-digit range, which is maybe a little bit higher than what we would typically expect. Is there anything particular driving that? Michael Guerriere: I think, yes, it's marginally ahead of the kind of 2%, 3%. But I think a few things. I mean, there's a bit of an uptick in occupancy. I do think, particularly in Western Canada, where you don't have the flow-through funding like you do in Ontario, we've made improvements there in our operating costs, virtually eliminating use of agency, et cetera, which were a bit of an overhang for quite a while. But, so, and we did get some rate increases in the West in the quarter, some additional funding there with not only kind of underlying increases, but a little bit of catching up on costs that have been running over the last couple of years. So I think it's a little bit outsized, but I still think the longer-term outlook, as we've said before, is we should expect same-property NOI and LTC to be growing in that kind of inflationary kind of range, 2%, 3% with the various provincial governments keeping tabs on the underlying wage increases, which really drive all the decision-making. Tal Woolley: And then for the Class C buildings that you still have on your balance sheet, I think you said there's probably 15 to 18 projects still remaining. As you look to move those out, is that a sort of 1 to 2 per year kind of phenomenon or 2 to 3 per year? Or are you, is there some sort of deadline you've got to hit with the ministry to try and get these all underway? Michael Guerriere: Yes. The last part of the question first, there is no deadline to hit. I think one of the positive features of the new program in Ontario is it isn't time constrained like the former capital funding. We have a target, we have 18 to do. We are ramping up to start a seventh project in construction before the end of the year, and we expect to try and start another 3 next year. We'd like to do 3 to 5 a year over the next, however that maps out over the next 4 to 5 years. we are looking at ways to maybe accelerate that as well to take advantage of the program. But at the moment, that's the cadence of sort of 3 to 5 a year starting to work through the balance of the Ontario portfolio. Tal Woolley: And then just lastly, with Axium sort of playing a big role here in Ontario redevelopment, are you, any concern that the province has some thoughts about them having control of this many assets? Or is there any sort of concentration risk? And have any other capital providers come to the floor now that things have sort of started to progress with more ease? Michael Guerriere: No, we don't see any concern there. I mean if you look at it from the perspective of our entire portfolio owned and operated, we're running about 15% of the beds in Ontario and Axium is a smaller proportion of that. So there's not a significant concentration risk as a result. Tal Woolley: And no one else has really decided like, hey, this is a business we'd like to step forward and be like an alternative to them. Michael Guerriere: Well, not with the joint venture model that we're using, no. But there are quite a number of other financial partners that are partnered with various players in the sector, including with the joint venture, with our joint venture. So there are quite a number of organizations that are part of capitalizing this building program. Operator: The next question comes from Giuliano Thornhill with National Bank Capital Markets. Giuliano Thornhill: I guess just starting off with the Home health care and the volume growth there. I'm just wondering what it's like, if you could aggregate or place in buckets like the levels of strain on the system, whether that's the aging or the immigration or the lack of doctors, like how would you rank them, that's really resulting in that like 13% ADV growth? Michael Guerriere: Well, the Financial Accountability Office in Ontario has started publishing information about the availability of Long-Term Care beds in the province per 1,000 people over the age of 75. And what that shows is a steady downward trend in that ratio. We peaked at about 99 beds per 1,000 back in 2006, and we're at 58 now. And even with the new homes and the new beds that are coming on stream, they're still forecasting further declines. So you look at that in the face of a waiting list for Long-Term Care in the province that today stands at about 48,000 people. And you realize that we have a problem in terms of supporting the needs of all of those people that are eligible for Long-Term Care that are eligible for 4 hours a day of resident care in a Long-Term Care environment, but are not able to get it. So those people are occupying a lot of beds in acute care hospitals, which is causing the backup into emergency departments and the hallway medicine problem that we have. But there are also many of them at home. And so we're supporting them now with Home care. So a lot of the growth that we've been seeing has been in the hours of care that we're providing to each person in our care as opposed to just more people in kind of a Home care setting. So you may recall us talking about the demographic growth of the population that we serve is running at about 4% growth per year. You can kind of think of that as the underlying kind of demographic support for the sector. But with the constraints in the Long-Term Care beds, we're seeing more and more of those people being referred to us for Home care support, and they require very significant numbers of hours each day to keep them living independently and to keep them safe. So, we think that, that's what's driving the volume growth that we're seeing. And as David mentioned, 13% year-over-year, it's a surprise to us that it's growing at that pace, but that's what we think is the underlying driver. Giuliano Thornhill: So, it's mostly the LTC waitlist. And are you seeing that or noticing that Bill 7 is impacting that Home health care growth at all? Michael Guerriere: No, not very much. That bill attracted a lot of attention, but it's a small minority of the referrals that are subject to the terms of that process. So, it really is not a material impact on the volumes. Giuliano Thornhill: And how would you characterize the Atlantic Canada Home health care market compared to Ontario? And just similarly, what does the year-over-year growth in volumes also match Ontario? Michael Guerriere: It's very different province to province because each province uses a somewhat different model. And each province has quite significantly different availability of Long-Term Care beds. So, some provinces have quite a bit of availability and some are more constrained than Ontario. So, it's actually quite different province to province. And in the provinces that we operate, that 13% is the weighted average of what's happening in the different provinces. Giuliano Thornhill: And then, just obviously, the volume growth here is driving a lot of the margin upside, say, in Home health care. How much does an extra $1 million in Home health care revenue get you in NOI? And how does that compare to, like, last year or 2 years ago? I guess my question is just really on the incremental margin and where that is trending. Michael Guerriere: I don't think there's an easy rule of thumb on this, unfortunately. There are a lot of moving parts that are underpinning the margins changing from quarter-to-quarter, including things like how many staff holidays, how much vacation our staff are taking. There's a whole bunch of different variables that contribute to it. What I would suggest is that our year-to-date margins are probably a good guide. There may be some additional margin improvement over the next couple of years; it's possible. But I think our trailing 4 quarters is probably the best guide, so that you've factored in all of the seasonal variability that we see in that sector. Giuliano Thornhill: And just the last couple of questions I had was with the softer hard costs and lower interest expenses. Are you increasing your expectations on how much of a gain you can recognize on the projects that are actually being dropped down into the Axium JV? David Bacon: I'd say no. I think that if you go back in time at the couple of different waves of construction we started in the different programs and now this new next-generation program, the first 2 are sort of look at cash-on-cash yield out of those developments, even though they were done in 2 very different times, 2 very different interest rate cost environments, they modeled out the same. And I think the way they've designed this third program, it's a sliding scale based on costs. So, I still think that our expectation is the returns will be largely in line with what we've seen in the past, and therefore, be fairly consistent going forward, and I think that's by design the way they've set the program. Giuliano Thornhill: And just the last question was just on the tax. It was kind of high this quarter. I'm wondering if there's anything one-time included there. David Bacon: The biggest difference there is there's a bunch of, some of our, the transactions have transaction-related costs related to them that are not deductible. So, we have a little bit of a blip this quarter with the deal costs that aren't deductible, in particular, on Closing the Gap because it was a share deal. Operator: The next question comes from Tania Armstrong with Canaccord Genuity. Tania Gonsalves: Most of my questions have been asked, but just a couple on the margins then. You talked a little bit about Home health care margins. [Technical Difficulty] Michael Guerriere: Tania, you're breaking up. Tania Gonsalves: I'll try the organic growth on your Home health care segment, that 13%, you touched on the overall market gains. Could you also touch on whether you had any market share growth in the quarter that contributed to that 13%? Michael Guerriere: So market share information, precise market share information is a little bit hard to come by because we don't have statistics that cover all the different Home care programs really in any of the provinces. That said, our impression is that the majority of our growth is coming from growth in the underlying demand in the market. Remember that our contracts, particularly in Ontario, are driven by market share and entitle us to a certain market share by region across the province. So I think the majority of this is an expansion in the market as opposed to market share gains from other operators. Tania Gonsalves: And then touching on the [Technical Difficulty] operating margins, but just flipping to the Managed Services segment, we saw a very strong NOI margin expansion there, too. Is this a new? Or was there any onetime operating expense items that affected the quarter? David Bacon: Yes. I think you're breaking up a bit. I think you're asking about margins in managed services. Tania Gonsalves: Yes David Bacon: So it's a bit elevated. I think if you go back in the last three or four years, we've had a couple of quarters where we blipped above 55%, but we generally are comfortable in that 50% to 55% range. The things that affect it are periodically, we have some consulting with some of our Assist clients that can have a bit of a blip, timing of purchases and rebates with our SGP clients, if they have a, maybe they have a capital program going on that has a blip in some of their procurement that comes through in the rebates. So there's a bit of variability in there. But I don't, I still feel that sort of that 50%, 55% we're quite comfortable with, but we will see variability from time to time because of the examples that I just gave. Operator: The next question comes from Pammi Bir with RBC Capital Markets. Pammi Bir: In the commentary, you mentioned that you continue to review potential acquisition opportunities in the Home health care space. So I'm just curious what sort of deal sizes are you looking at? And maybe if you could also just comment on maybe what you're seeing from a multiple standpoint in terms of where they range? Michael Guerriere: Yes. There's a lot of variability in the size of organizations in the Home health sector across Canada. There's a handful of companies that are similar in size to ParaMed. There's 10 or 20 sort of midsized companies that look more like Closing the Gap. And then there's a couple of hundred companies that are smaller than that. And so there's quite a range. We, as I mentioned earlier are more interested in organizations that cover a geographic area or cover a service line that we don't currently provide and that, that then adds to the base for our organic growth because the organic growth is really the opportunity for creating value here. And so our acquisitions are very much about augmenting that and giving us more geographic reach. From a multiple perspective, there's not a lot of comps out there. And I would say that there's some, pretty big differences depending on the size of the organization. So I really couldn't say much about that. Pammi Bir: Okay. That's helpful. You mentioned also just coming back to Home health care, the stronger organic growth. And as we kind of think about 4% sort of being the baseline. Is 13% that you put up this quarter, is that sort of the high end of where you sort of see it playing out? Or maybe the other way to think about it is, what are you budgeting for internally as you map out the ParaMed business? Michael Guerriere: Yes. I think we're, the way that we're approaching this is we've set up our systems to be very, very responsive to the referrals that are coming in through our government contracts and our hospital contracts. And so, it's really difficult to predict. We found it very, very difficult to predict. I mean, a couple of years ago, we were thinking that there would be a rebound from the pandemic lows that we experienced and then things would level off and that they would get closer to just that underlying demographic trend line of the expansion in that senior's population. So, we've been surprised that we've been growing at double digits and have continued to do so as long as we have. We think we have an explanation, but it's a theory just based on looking at demand for the other services that we provide. But honestly, I would have a lot of difficulty even guessing what we would expect to see next year. We've created a very scalable platform, right, that as the referrals come in, we can throttle our hiring and our training up and down to be able to respond to that quite rapidly. So, we're following the market. I wish I could give you a better projection, but we're following what's coming in the front door. Pammi Bir: And I guess part of this is really going to be tied to the delivery of these Long-Term Care beds as they are completed and the wait list over time would start to diminish, but it feels like we're probably still some time away. Michael Guerriere: Well, and that's why, I am sorry to interrupt; that's why I pointed to these reports now that are coming out of the FAO, Financial Accountability Office because they're starting to put together some projections looking out the next couple of years to see if that wait list is going to go down. And unfortunately, at this point, they are not projecting a decline in that wait list for the next couple of years at least. And I mean, the 4% demographic growth equates to about 4,000 Long-Term Care beds a year. So, we need to be opening 4,000 beds a year to cause that availability curve to level off. And we haven't hit that because we're probably opening more than that over the next couple of years, but a lot of them are replacement beds because we're replacing the old C Homes. So anyway, for the foreseeable future, we're not seeing any meaningful drop in that wait list. Pammi Bir: Okay. That's helpful. Last one for me. Just on the $1.1 billion of funding the Ontario government announced last month. Just any incremental pickup for ParaMed there? Or anything you can comment on? David Bacon: Yes. I think, Pammi, that was, there's no rate increase in that $1.1 billion. I think the way to think of it is these elevated, like the volume growth we've experienced over the last couple of years. What you saw there is the government kind of reallocating, committing enough funding in their budgets to create the new floor in the funding underneath the kind of volumes that you're seeing now in the sector. So, I think it helps underpin kind of the new floor, which is encouraging, but there's no kind of rate increase buried in there. Operator: [Operator Instructions] The next question comes from Kyle McPhee with Cormark Securities. Kyle McPhee: I'm just thinking through potential bottlenecks here for ongoing pretty healthy Home health care growth. It doesn't sound like back office is a bottleneck at all. What about labor? If you keep growing like this, the sector keeps growing like this, does labor supply become an issue for the sector or for Extendicare? And maybe as part of your comments, you can just comment on your relative ability to find and keep labor versus some of the other platforms out there. Michael Guerriere: For the most part, labor is not a constraint because of the fact that we've got our in-house training programs and our partnerships with colleges. We have about 3,000 students spending part of the year in our organization, getting their clinical training and getting their credentials. We also fund with various in-house scholarship programs, PSWs who want to bridge to a nursing registration. So, we've got our own internal supply that is working quite well. So, I don't see any significant constraint. A few years ago, that was a big issue for us. But now from a volume perspective, it really isn't a big factor. We do have some challenges in certain regions, particularly more rural regions of the country where we have trouble finding nurses and physiotherapists and certain registered staff but that does not have a material impact on our growth numbers. Operator: This concludes the question-and-answer session. I would like to turn the conference back over to Jillian Fountain for any closing remarks. Please go ahead. Jillian Fountain: Thank you, operator. That concludes our call for today. This presentation is available on our website, along with a link to a replay of the call. Thank you all for joining us, and please don't hesitate to reach out if you have any questions. Goodbye. Operator: This brings to a close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Ladies and gentlemen, welcome to the Semperit Publication of Q1 Q3 2025 Results Conference Call. I am [ Sandra ], the course Call operator. [Operator Instructions] The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Mr. Stanek, CEO. Please go ahead, sir. Manfred Stanek: Thank you very much. Ladies and gentlemen, welcome to our results presentation for the first 3 quarters of 2025. Joining me today is our CFO, Helmut Sorger. We are well aware that today is a particularly busy day for publications with numerous Q3 reports being released. That's why we are all the more pleased that you are taking the time to learn more about our progress. Helmut and I will guide you through the presentation, which is available on our website and then open the floor for your questions. I would like to start with Slide 3, the overview. On this page of the slide deck, you will find a brief summary of the highlights. Let me start with the positive developments in the third quarter. We continued to build momentum with EBITDA improving to EUR 21.3 million. That's a 92% increase versus Q1 and 9% growth versus Q2. Year-on-year, EBITDA was up by almost 29% and the margin climbed by 2.8 percentage points to 13.1% despite revenue growing only slightly by around 1%. This clearly shows that the measures we implemented earlier in the year are paying off. Our order situation is now above 2024 levels following the subdued development we saw in the first quarter. This gives us confidence as we move into the final weeks of the year. At the same time, we have defined additional cost savings initiatives, which will reduce our annual cost base by another EUR 10 million. These actions are essential to strengthen our resilience and improve profitability going forward. However, we must acknowledge that challenging market conditions still weigh on overall performance for the first 9 months. EBITDA stands at EUR 52 million, down 18.6% year-on-year, and the margin is 10.8% compared to 12.6% last year. On a positive note, earnings after tax returned to positive territory in Q3, reaching EUR 2.8 million compared to a loss of EUR 2.5 million in the comparable quarter 2024 and losses in the first 2 quarters this year. The third quarter marks a clear turnaround and reflects the progress which we are making. Finally, based on the development so far, we have specified our outlook for the full year. We expect operational EBITDA to come in at approximately EUR 78 million. Just to remind you, that is EBITDA before costs for our ERB digitalization project. Turning the page, you see the shift in revenue and EBITDA year-on-year for our 2 divisions, Semperit Industrial Applications and Semperit Engineered Applications, showing graphically the impact of some of the latest economic trends. After Engineered Applications muted first quarter, we now see a much more balanced split between revenue and EBITDA across our 2 divisions, approaching the distribution which we saw last year. Revenue stands at 42% for SEA and 58% for SEA, while EBITDA is 59% for SEA and 41% for SEA. This demonstrates that the recovery in SEA engineered applications is well underway and that our portfolio is returning to a more balanced state. Let's turn to the Industrial Applications division at Slide 5. Here, we see a continuation in margin recovery since the final quarter of 2024 to nearly 20% in the third quarter on the back of cost reduction, better capacity utilization and sales excellence initiatives. Overall, challenging market conditions persist, but the order situation has improved compared to last year, mainly driven by the hoses business. Sales in the first 3 quarters remained broadly stable with a slight year-on-year decline of 1%, primarily due to lower volumes. EBITDA decreased by 8.3%, but the margin held firm at a resilient 18.7%. In hoses, demand remained subdued, especially in the OEM segment, while direct customer business improved as inventory destocking ended. Order intake and backlog are above last year's levels. For profiles, construction activity is still weak. That said, early economic indicators suggest signs of stabilization, although we do not expect a short-term recovery. We are countering this with targeted cost savings and sales excellence initiatives. Turning to Slide 6 to the Engineered Applications division. Following a slow start to the year, the division gained noticeable traction from the second quarter onward as clearly illustrated in the chart on the top showing the development of quarterly sales and margins. We can see a continuous improvement since Q1, although the weak start of the year could not be fully offset over the course of the first 3 quarters. Sales for the first 3 quarters totaled EUR 282.2 million, representing a 7% decline year-on-year, mainly driven by project delays in belting and liquid silicon rubber tooling during Q1. EBITDA amounted to EUR 26.3 million with a margin of 9.3% compared to 12.1% in the previous year. Encouragingly, the order situation has improved compared to last year. Looking at the business units, our Form business, which encompasses various product market combinations recorded a slight increase in sales. Demand was mixed. Mountain applications, industrial and European handrails performed strongly. Transport was stable, but we see delays in larger infrastructure projects like high-speed rail and budget shifts towards defense. The Chinese handrail market remains challenging due to weak infrastructure investment and high local government debt in China. Importantly, both order intake and backlog in the Form business exceeded last year's levels. As you know, Belting, our conveyor belt business started the year under pressure from project postponements and uncertainty around the U.S. tariff policy. As a consequence, we did adjust capacity. In Q2, orders clearly picked up, but lost some momentum in September, leading to a slight slowdown towards the end of Q3. Still, intake and backlog for the first 9 months are above last year. Currently, we are operating at full speed and full capacity to process all orders on time and ensure reliable delivery until the end of the year. Finally, our liquid silicon rubber business, respectively, Rico, posted stable revenues compared to last year, but managed to increase EBITDA. Order intake in parts production developed satisfactorily overall, although demand varied by product group. Call-offs from the health care sector increased mobility continued at a high level. Declines were seen in segments like the construction industry. The order situation in the tool shop has improved, and this has also laid a good foundation for future capacity utilization in the production of liquid silicon rubber parts. And with this, I would like now to hand over to Helmut, who will take us through the financials. Helmut Sorger: Thank you, Manfred, and also a very warm welcome from me. Let me start with the financial highlights in the first 9 months on Slide #7. As already announced, we defined and began implementing yet another cost-saving measure beginning of the year. These initiatives reduced our annual cost base by another EUR 10 million on a run rate basis -- annual run rate basis. By the end of September, we had already achieved savings of EUR 4.1 million. In this context, allow me to just remind you of the extensive actions we've already taken since 2023. We responded very early. And together, the new measures, we will have removed around EUR 30 million in overheads in the last 2.5 years. This has certainly helped us counter inflation, support margins and significantly improve our operating leverage. You'll clearly see the impact once market demand picks up a little bit. We maintained our free cash flow at a stable level at EUR 22.3 million, and we clearly see Q3, the cash flow generation gaining clear momentum. We have a stable balance sheet. Our net financial debt-to-EBITDA ratio is at 1.5. Clearly below our internal threshold of 2.5. Turning to our key transformation project, one ERP, which is in a really, really hot stage right now. We had the technical go-live on November 1. We have a system, and we are officially in cutover. Big thanks to the team, the efforts that went into it. It clearly shows there's still some pioneering spirit left in Semperit that will certainly leverage with the continued rollouts. This will give us one system for the entire group. help us be efficient in back-office processes, and we are looking forward to the rollouts of the next plans in the next 3 years. Not to say the least, we also managed to pay a dividend of EUR 0.50 per share. That's EUR 10.3 million total to our shareholders on April 30. While this may feel like a while ago, it remains an important element in how we allocate capital and reflect our commitment to delivering value. On the next slide, we summarize the main items of the P&L and other key financial indicators in comparison to the last period. As you'll recall from our last call, we suggested using the first quarter as proof of our operating leverage. Just to remind you, sales in the first quarter were down 14%. EBITDA was down 52%. To give you the Q3 in a side-by-side comparison, in Q3, sales were up just slightly 1%, but EBITDA plus 29% operating EBITDA even 34%. This is kind of a situation where we say an small incremental change in volumes and utilization goes directly into the bottom line. As Manfred has already told, revenues recovered in Q2, Q3, improving overall trajectory despite the soft start. EBITDA also benefited from our cost measures, partly offsetting the volume decline. Over the course of the first 3 quarters, we recorded a moderate decline in revenue of 4.6%, while EBITDA came in at EUR 52 million, which is still down 18.6% compared to last year. Operating EBITDA reached EUR 55.6 million. This includes the EUR 3.5 million in project cost for our digitalization initiative ERP. Earnings after tax came in negative at EUR 8.4 million. This reflected the overall development, but also had the EUR 3.3 million impairment of our customer base at Rico and EUR 4.2 million in negative currency effects. Our free cash flow, as I mentioned before, remained stable. This primarily due to our disciplined CapEx management. We tried to shift CapEx projects into future years when they were not entirely essential. Not to mention, at last, we also use the effective method of factoring in order to cash in on our accounts receivables. Turning the page and plotting the last 12 months industrial revenues against the industrial EBITDA margin. After a margin decline from 14.8% in Q4 2024 to 12.5% in Q2 '25, largely due to the stronger margin base in early '24, we now see a clear upward trend in Q3. This improvement reflects mainly the impact of our cost reduction efforts, but also good procurement and control of the sales prices. As I've emphasized before, these measures play a key role in stabilizing margins, especially in a challenging market environment. When looking at the year-on-year EBITDA bridge on Slide 10, the decline in volumes could not be fully offset by price/mix effects and other measures. However, you can already clearly see the impact of our latest cost-saving initiatives, which contributed EUR 4.1 million in savings by the end of September. Cost of materials, services and energy increased slightly year-on-year, while the change in inventory continues to play a role in the overall pictures. It reflects the normalization of our stock levels. Project costs related to our 1 EP digitalization initiatives amounted to EUR 3.5 million, and that brings our operating EBITDA to EUR 55.6 million. Over the page, we present the constituent parts of our working capital management with an improvement compared to the situation a year ago. In total trade working capital as a percentage of last 12-month revenues was down at 16.7% after 18% at the end of the September last year. Compared to the end of the year, we see a slight increase, which is mainly due to the normalization of inventory levels and certainly an uptick in production activity. The bridge chart for year-on-year net financial debt development on Page 12 shows that free cash flow of EUR 22.3 million comfortably covered both our growth-related CapEx of EUR 7.1 million and the dividend payment of EUR 10.3 million. At the end of September, our net financial debt-to-EBITDA ratio stands at 1.5x, slightly up compared with 1.2x at the end of the year last year, but a very solid and conservative level and well within our financial framework. Let's take a look at our financial position at the end of the third quarter on Slide 13. Cash and cash equivalents stood at EUR 86.6 million, a decrease of 31% compared to year-end '24, but this was primarily due to the repayment of the Schuldschein loan with a nominal value of EUR 31 million that happened in July. As a result, our financial liabilities were reduced to EUR 199.1 million. Most importantly, our EUR 100 million revolving credit facility remains undrawn, giving us additional financial flexibility. As already mentioned, our leverage remains at a very solid level with net financial debt-to-EBITDA ratio of 1.5, and our equity ratio is stable at 47%, underscoring the continued strength of our balance sheet. Let me conclude with our capital allocation priorities on the next page, cash usage, which you're already familiar with. Rather than going into detail for each component, the key message is that we managed to keep normal investments under tight control. Maintenance CapEx amounted to EUR 18.6 million in the first 3 quarters, while growth investments totaled EUR 7.1 million. Given the current market environment, we believe it's prudent to pull this lever, which is fully within our control. We paid a dividend of EUR 0.50 per share on April 30, totaling EUR 10.3 million. With this, I've come to the end of my part of the presentation, and I would like to hand back to Manfred for his concluding remarks. Manfred Stanek: Thank you very much, Helmut. Let me wrap up with the outlook and a few key takeaways for the months ahead. Order intake continues to trend positively year-on-year. This was also true for October. Nevertheless, market conditions remain challenging. In the Industrial Applications segment, the host business is benefiting from the completed inventory reduction, while profiles are showing early signs of stabilization. In the Engineered Applications segment, the picture is mixed. Strong performance in mount applications and handwheels in Europe, plus a clear rebound in belting and liquid silicon rubber after a soft first quarter. At the same time, some areas remain under pressure and the Chinese market is still tough. Based on our earnings performance so far, we fine-tuned our full year outlook. For 2025, we now expect operating EBITDA of around EUR 78 million. Project costs for ERP will be about EUR 5 million. As for CapEx, we are looking at roughly EUR 40 million. As we've already said, we can flex our investments to match market conditions. Looking ahead, seasonality will continue to play a role in 2026 with a slower start and a stronger second half. We are planning for that. Thanks to our lean structures, strict cost discipline and ongoing innovation, we are confident we can capture above-average gains even from a modest market recovery. Looking ahead to the midterm, we see strong structural growth drivers in place, including the German infrastructure program, rising EU defense budgets and reconstruction efforts in Ukraine. These are tailwinds alongside other factors that will further support demand. And to wrap up, our investment case remains strong, market leadership, innovation and a resilient business model with high operating leverage. When demand rebounds, we are positioned to benefit disproportionately, and our platform sets us up for sustainable growth. And now Helmut and I are available for any questions you might have. Operator, if you would please start with the Q&A procedures. Operator: [Operator Instructions] Our first question comes from Markus Remis from ODDO BHF. Markus Remis: Congrats on the strong profit improvement in the third quarter. I would have one question related to the earnings walk-down that you displayed in the third quarter. If I compare the first 3 quarters, and the first 2 quarters in the third quarter, it appears that there was quite an impact from the change in inventories. If you could break that down, why does it seem more pronounced than in the prior quarters? If you can shed some color on it. Helmut Sorger: Markus, yes, absolutely. I mean, we had, if I remember correctly, about EUR 7 million in the first half. Change in inventories now is, of course, a buildup that we have. We had to play catch-up with production since, as you're aware, in July and August, we have our planned standstills. So there are 2 moments in time when we basically need to optimize working capital, but also make sure that we generate enough product to furnish the market. And the better utilization rates, the higher rate of work in progress that we had in Q3 contributed to this positive turning of the change in inventories due to the better absorption of the fixed cost part. Markus Remis: Is it fair to assume that there is a bit of a countering effect in the final quarter? Helmut Sorger: Yes. Markus Remis: Okay. And then on the guidance, thanks for keeping this refined target. I'm surprised, I have to admit that you're pinpointing a specific number, still adding this approximately. What gives you the high confidence that you will be that close to that number? And if I may add, for the fourth quarter, given that we saw a further increase in the order intake and the order book, is it fair to assume that revenue momentum, top-line growth will pick up compared to the third quarter? Helmut Sorger: Let me start with the guidance, why the pinpointed guidance, because it's the best we know. And since the market at the moment is not the bottleneck, Manfred has told you we have pretty good order activity in Q3 and also throughout Q2. So we are playing a game of catch-up now, where basically we are utilizing all the capacities that we have available according to current staffing levels. So the exercise is a forecasting exercise where basically the bottleneck is our production capacity. And we certainly have confidence in our plants and confidence in our people that we will not have breakdowns and be able to furnish all the goods out of our doors to our customers. Of course, it has some caveats in there. December is always a month coined by weather effects, but also delays in shipping that might occur. So basically, invoicing, we try to do until the last day of the year, literally, we did that last year, and we want to continue that. But of course, this is what we have as an internal forecast that we share with you again. So there are no adjustments that we make or any room for safety that we want to do. If everything works to plan, we can deliver the 78 or maybe a little bit more. If we have standstills or there are breakdowns in the supply chains, or we have bad weather so that the trucks can't come to our plants in December, it could be a little bit less. But we are from the moment, from our forecasting, determined to get there. Markus Remis: Do you want to add something to the activity? Manfred Stanek: No, we have the orders in-house, so it's up to us to produce. We don't see any additional bottlenecks. So we are very confident to ship that in the next 7 weeks. Helmut Sorger: Your question about ordering activity in Q4, it's above last year. But it's not the wall that's coming and approaching us. So we don't see the big uptick and OEM business on the whole side, I mean, I'm sure you're following the figures that Volvo heavy equipment is publishing, Caterpillar as well. I mean, they see a flattish development. But what plays for us now is that the overstocking effects are out of the system, and this is a great help. Markus, I hope that answers your question. Markus Remis: Very clear. Then I would have one regarding the remarks regarding the 2026 seasonality. So typically, the industrial business is stronger in the first half, at least that's what it was for many years, looking at the old, if I may say, so, reporting structure. Now, if I look at the comparison base, Q1 will be the weakest quarter. So my sense would be also now, with better-filled order books that the Q1, Q2 shouldn't be that bad. Is your statement basically a reference to further buildup of momentum of order momentum in the first half, and that will then cater an even stronger second half? Is that a fair angle? Helmut Sorger: I would not go that far. I mean, for this year, our guidance was clear: first half difficult, second half better. I think that's what we're experiencing right now. For next year, I think we just need to see in our Performance Commodity business, you're absolutely right that the first half of the year is stronger than the second half because in the second half, we have 2 plant standstills for maintenance. So this is a very natural explanation. We need to repair machinery, equip machinery. For the project business, which is impacting the building business and Rico, it's more the uncertainties and also the peak cycle of investments and investment proposals that the big mining companies do. So here, we experienced that the first quarter was weaker due to the uncertainties in the economy, and also waiting and seeing in the project business. And I don't rule that out for next year at all. Manfred Stanek: Yes. Additionally, in the Belting business, we had a maintenance shutdown planned for December. We have now pushed this maintenance shutdown into January because production is so strong this year. So there will be, at least in the Belting business, a weak month in the month of January. So this also plays into our forecast. Markus Remis: And then the last question before I get back into the line. You've again lowered the investment budget to EUR 40 million now. If I look at the beginning of the year, it still stood at EUR 60 million, you have maintenance by which I find remarkable, given that maintenance should be more of a, I would say, nondiscretionary in nature. Can you elaborate a bit on the pushback or on the reduction? And also in the last call, you said that the decline from EUR 50 million to EUR 60 million would then be compensated by a higher budget in 2026. Could you give us some sort of brackets for CapEx next year? Helmut Sorger: Let me explain. Our maintenance CapEx comprises maintenance, smaller growth projects, and automation. So there's clearly some discretionary room that Manfred, [ Gerfried ], and I have in approving this when it comes to a situation. Remember the first quarter and even the second quarter when Semperit was basically barely cash positive. So then you can be assured we will not spend on CapEx that can be shifted into future periods when we are not earning money. Now the situation has turned. The free cash flow has improved. But of course, for CapEx projects, you run out of time because the year ends. It's basically we try to push whatever is not safety critical, whatever doesn't have a payback of less than 2.5 years, I think our cutoff was. And we are definitely, you see with the strategic growth CapEx, we are committed to our strategic growth CapEx. So we have not cut back any on this. But there's certainly a line that you can walk when you replace machinery, whether you want to push that equipment another year by doing a sound maintenance, which then goes into OpEx and then replace it at the future point in time with, of course, risks of machine breakage, but some of our machinery have been with us for decades. In that time, machinery was still good and overbuilt. So I think we can joke aside, take that risk to a certain degree. But we are certainly committed to maintaining our industrial base. This is our obligation, and this is our responsibility here. But you won't see higher CapEx next year because, I mean, there's just a certain amount of projects that we can do a year with our engineering program. Markus Remis: Right. So higher than what's like EUR 60 million or again EUR 40 million? Helmut Sorger: I'm just saying the backlog, the shortage of this year won't be on top of the normalized maintenance CapEx. I think we've told you before is about EUR 35 million, EUR 30 million to EUR 35 million. The rest would be automation projects and the rest would be strategic investments. Markus Remis: Okay. So if I say EUR 50 million is like the run rate of depreciation, that's kind of... Helmut Sorger: And we are a bit less than that and compensate with strategic investments that was committed. Operator: The next question comes from Volker Bosse from Baader Bank. Volker Bosse: I would have two questions. First question is on the specified guidance, EUR 78 million before project costs. You mentioned also the EUR 5 million for the one ERP. Is that all or are these all project costs this EUR 5 million which you want to exclude of the EUR 78 million or are there further project costs which has to be taken into account? So basically, you guide for EUR 73 million reported EBITDA and EUR 78 million operating EBITDA or adjusted EBITDA. Did I get the message right? Helmut Sorger: Yes. It's just the project expenses. That's a very quick answer. And the reason for it is we are implementing as for public cloud from our friends at SAP. And since this is Software as a Service, it's only very limited potential to capitalize that. So basically, the implementation expenses have to go through the P&L. So we exclude specifically these expenses for comparability, nothing else. Volker Bosse: Okay. That's all what you have in mind. Perfect. Got the message. And the second question is also on the order intake. You speak about positive order intake despite challenging market environment. Could you give a bit more granularity if you speak about order intake from a regional perspective or in general, what are the underlying trends by region? Can you break it out to get your picture of the world, so to say? Manfred Stanek: Yes, I can take this and maybe you can complement, Helmut. So when I go in my mind through the different businesses, I cannot really say that I see a trend per region. We see a strong order -- not a strong -- better than last year order intake definitely in all regions, I would say, with the exception of China, where we have a very big handrail business and the local towns and communities in China are not investing currently because they have a very high debt -- but other than that, we see a good order intake throughout all our businesses all around the globe. What would you say, Helmut? Helmut Sorger: Yes. I mean the exception of China, as I mentioned before, which is basically domestic sales of handrails in China have tanked, as we explained in the management report. But our form business is able to compensate that with new PMCs, strong performance in mountain applications, very solid order intake in industrial mining, filtration membranes, mixmerals. So the niche business of our SEA comes into play here that we can say, okay, they are moving at the moment, all in the right direction apart from and this is a big handrails in China. Manfred Stanek: Yes, exactly. And in the Belting business, for example, we strategically made a shift when it comes to our customers away from coal mining towards copper mining and towards the minerals, which are supported by the electrification. And for example, in the last month, two months, we have seen that almost the entire order intake is also coming from those new minerals and not from the old minerals. So we're also very pleased how this order book is developing. Operator: [Operator Instructions] The next question comes from Marc-René Tonn from Warburg Research. Marc-Rene Tonn: Just coming back to the EBITDA outlook at first. I think when my math is correct, I think with the EUR 78 million for the full year, you're basically targeting a Q4 result in the magnitude of Q3. I think seasonally, probably sales will be lower than compared to the third year. So if I'm not mistaken, or are you expecting anything different than that, which would mean another margin improvement for that quarter on a stand-alone basis, potentially supported by cost savings. Is this the right way to look at it? Or is there, let's say, anything else you would expect like higher sales, which will contribute to that? Helmut Sorger: No, I think you're spot on with your analysis. I mean the cost savings, basically the EUR 4.1 million with the main momentum buildup in Q2, Q3, they should contribute it fully or they will contribute fully in Q4. Inflation is basically digested. So most of the wage increases have already happened. So this is basically just the run rate. What we are going to see is good productivity in Q4, knocking on wood that equipment holds up. And on the dark side, of course, to manage working capital becomes more challenging. You mentioned EBITDA. But of course, if you're fully booked and you need raw materials and you have work in progress, of course, our eyes are fully on working capital and making sure we're not overshooting on this one. This is the challenging part in managing the upturn, if I may add here. But it's still -- it's Q3 that we need to replicate, but we have, as Manfred has mentioned before, basically capacity available until shortly before Christmas when we have our plan standstills. Marc-Rene Tonn: And just, let's say, what I understand correctly, I mean, if we would see -- let's keep our fingers crossed, this will materialize, let's say, a more pronounced increase in revenues in the second half of next year, you are confident that you will, let's say, be able to build capacity with new hires just in lot of... Helmut Sorger: The machines are not the problem at the moment, labor because we are staffed, of course, to market demand or to needs, but we are already improving in our hoses business by hiring here. And of course, other businesses like our liquid silicone business is highly automated. So I mean, labor is not really the restriction here. Marc-Rene Tonn: Perfect. And perhaps lastly, I think you mentioned in earlier calls, some price pressure, I think was in belting at the time when, let's say, with weaker demand and you already mentioned the mix in the customer structure you are targeting there with the focus shifting from coal to metals. Is there also, let's say, a different, let's say, kind of price pressure? Or is, let's say, the competition basically following you so with no major, let's say, relief on the pricing side there? Manfred Stanek: Well, I think the only thing that we see is Chinese competition has become stronger outside of the U.S. Exports from China to the U.S. have declined strongly. But at the same time, the entire decline was compensated to exports in other regions. I now mean macroeconomically. And we also see that in our regions outside of the U.S., a stronger Chinese competition, which puts a pressure on prices, but that's just something we have to deal with. Operator: The next question comes from [ Sara Hellman ] from Neways. Unknown Analyst: So my question would be, since the Chinese demand for handrails has been so weak, if there are any visible changes for the next quarters coming? Manfred Stanek: For the demand for Chinese handrails, well, we see a shift. We sell less to the OEMs, and we sell more to the aftermarket sales to the service market because there are less newer handrails, but the handrails which are installed are being changed at a higher rate. This has a little bit of a negative margin impact for us. But still, part of this business is compensated through the aftermarket service, compensating less OEM sales. That's how I would see that. Helmut Sorger: And if I may add, of course, if budgetary restrictions with the provincial governments are very tight, of course, they're inclined to use cheaper handrails because, I mean, they still need the handrails. And of course, we have products in our portfolio that satisfy those needs... which is basically also for aftermarket business and a cheaper alternative. Of course, we'll see some margin impact. I mean, of course, if the price point is a different one, you see different revenues and you see percentage margin is comparable, but in absolute terms, margins are lower. But we are very confident that in SEA, we can compensate the temporary decline with new PMCs, with new business. In fact, Manfred more than compensate that. Operator: We have a follow-up question from Markus Remis from ODDO BHF. Markus Remis: Yes. It's actually 2 follow-ups. Firstly, can you give us an idea of the current capacity utilization that you're running? I appreciate it's worse over the business unit, but a better understanding here would be helpful. And related to that, how much growth can you digest before your cost base will have to be inflated again. So the next not Okay. So no what we call in Germany don't fix the cost in the next quarters. Helmut Sorger: It's interesting that you asked because we just had a management call at 1:00. And the Executive Board was very adamant to congratulate everybody on the call. That's top management about 170, 180 people. Congratulate them on the efforts with regard to cost reduction because it's really not the fact we're carving out now. I mean it's the tough ones where we had to cut out performance too. But we made them aware that when business picks up, they need to be very vigilant that higher overheads are not introduced because it comes through the back door. You don't have everybody on staff anymore. The work needs to be done. So you're playing with the thought to use third party for some time, and then you have the great idea you replace third party with employees, with full-time employees. And then all of a sudden, you get back to where you started. So everybody is cautioned. We try to be minus 1. If it takes 2 to do the task, we have one, and what's going to help us? I mean, this is clearly not a sustainable situation under normal circumstances, but what's going to help us is the ongoing digitalization initiatives. So we basically moved ahead, reduced overheads for back-office functions for other key functions and we'll replace that with digital workflows. And one ERP will be a great help because we'll have one system, unified processes and of course, need less people for doing the tasks. But you're absolutely right. It needs to be managed, but we are confident that we can manage the uptick without adding overheads. Manfred Stanek: And to your first question, it's a little bit difficult to answer because we don't calculate an overall capacity utilization. It's different between the businesses. But I would say that we are roughly at around 70% of installed capacity. Helmut Sorger: So belting fully booked at the moment, which is good, hoses, we are operating basically to the shift system. So we are basically at capacity with a 15-shift model, but we can go back up to a 21-shift model. So there's plenty of machinery in our park once we start it. And of course, don't forget, we have our project DH5, which is basically almost fully automated hose factory that we plan on bringing online as well, which is online already, but utilizing fully. And in the form business, we are pretty well booked in mountain applications, fully booked in compression molding and have some spare capacities when it comes to the project business for railway systems because, of course, railway projects were stopped for temporarily. Markus Remis: Okay. That's very helpful. And last question relates to, say, the sphere of U.S. tariffs, U.S. dollar impact. Firstly, is it correct to assume that the entire effect is suggested in the financial result, do I remember correctly? Helmut Sorger: We have some impact, of course, also in revenues. That was not the major impact. But of course, we have a dollar cash pool. I mean, we have EUR 100 million business in the U.S. just for the legacy businesses or including Rico. So we have some effects. And I think the cash effect of that was about EUR 2 million and EUR 4.2 million was the overall FX effects, majority of it being the U.S. dollar. Markus Remis: Okay. And on the impact of tariffs on your overall trading conditions on volumes not being shipped into the U.S. from your peers. So volumes diverted or back into European markets. Anything you can tell us about these conditions? Helmut Sorger: Not so much really because, I mean, you clearly saw the effect of the U.S. foreign trade regime change in our Q1 results when basically all the projects in Belting came to a halt where we should have produced. So this was a major impact. I think our estimate was about EUR 8 million on this, but it's probably right now in hindsight. The impact in the other businesses is basically a little impact on margin. But on volumes, so far, not really. It's more a margin impact that you somehow have to split or take over the customs duties, particularly with long-length hoses where we have the plan to build up the local production in the U.S. Operator: Ladies and gentlemen, that was the last question. I would now like to turn the conference back over to Mr. Stanek for any closing remarks. Manfred Stanek: Okay. Thank you very much. Thank you for your time and participation. We still have several weeks to go. But we all know no time tends to fly. So we already wish you now a wonderful holiday season. And of course, we remain available for any questions at any time, and we will speak again in this circuit at the latest when we present our full year 2025 results on March 18. Well, it sounds a little early to wish you a happy holiday, but I don't think we will hear each other again. So please allow me to do so. Helmut Sorger: Okay. All the best. Thank you. Operator: Ladies and gentlemen, the conference is now over. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.
Operator: Thank you for standing by. Welcome to LiveOne Q2 Fiscal 2026 Financial Results and Business Update Conference Call. [Operator Instructions] I would now like to turn the conference over to Ryan Carhart, Chief Financial Officer. You may begin. Ryan Carhart: Thank you. Good morning, and welcome to LiveOne's Business Update and Financial Results Conference Call for the company's fiscal second quarter ended September 30, 2025. Presenting on today's call with me is Rob Ellin, CEO and Chairman of LiveOne. I would like to remind you that some of the statements made on today's call are forward-looking and are based on current expectations, forecasts and assumptions that involve various risks and uncertainties. These statements include, but are not limited to, statements regarding the future performance of the company, including expected future financial results and expected future growth in the business. Actual results may differ materially from those discussed on this call for a variety of reasons. Please refer to the company's filings with the SEC for information about factors which could cause the company's actual results to differ materially from these forward-looking statements including those described in its annual report on Form 10-K for the year ended March 31, 2025, and subsequent SEC filings. You'll find reconciliations of non-GAAP financial measures to the most comparable GAAP financial measures discussed today in the company's earnings release, which is posted on its Investor Relations website. The company encourages you to periodically visit its Investor Relations website for important content. The following discussion, including responses to your questions, contains time-sensitive information and reflects management's view as of the date of this call, November 12, 2025. And except as required by law, the company does not undertake any obligation to update or revise this information after the date of this call. I'd like to highlight to investors that this call is being recorded. The company is making it available to investors and the media via webcast. and a replay will be available on its website in the Investor Relations section shortly following the conclusion of the call. Additionally, it is the property of the company and any redistribution, transmission or rebroadcast of this call or the webcast in any form without the company's expressed written consent is strictly prohibited. Now I would like to turn the call over to LiveOne's CEO, Rob Ellin. Robert Ellin: Thank you, Ryan, and welcome, everybody, and thank you for joining us. This has been a transformative 12 months for the company. As we came out of the loss of over $50 million of revenues with Tesla, we not only survived, but we thrived. As you look at the numbers today, the highlights are going to be is how this team and how this company has utilized technology and being a talent-first platform. to again prove that we can get back to EBITDA positive numbers, right? With that loss of $50 million in revenues, we're excited to tell you that we finished the quarter with $36 million -- a little over $36 million, $36.6 million in our Audio division with $1.1 million of adjusted EBITDA. How did we do that? The first thing we did is we leveraged technology. We embraced AI. We embraced the ability to use AI to be able to cut our staff and cut it from 350 people to 95. We have cut our costs down from $22 million down to $6 million. And with that, we now have aggressively moved on our B2B plan to move to partnerships that the history of this company has been built on like [ Tesla. ] And with that, I'm excited to say we closed our [indiscernible] deal, we have now expanded our partnership with Amazon from $16.5 million in a 3-year deal to over $20 million. That's all based on traffic and audience continue to grow massively. Our Fortune 250 partner increased from 2 million originally to 12 million to now $26 million plus a year run rate. Going back to Tesla, we converted over 60% of the total cars out there, which was 2 million. We now have almost 1.3 million cars of both paid and free. 1 million of those free cars are now being -- those cars have now re-signed back up, of where we finally now have data and information on those consumers and now the ability to try to convert those. And now using an AI marketing strategy, we are aggressively converting those and generating real cash every day and continue to grow that number of subscribers and see a really exciting opportunity now to convert to those million. If we can convert 10% of them, we'll add another 100,000 paid subscribers. If we can convert 20%, the numbers start to skyrocket. We have 72 additional B2B partnerships and fully expect to announce multiple additional ones before year-end. Utilizing AI, we have increased our ARPUs by 60%. We're starting to see a $5-plus ARPU versus the $3 that we had previously. Our podcast business. Our podcast business has grown. We bought the company doing $20 million in revenues, losing $5 million. We've just announced record-breaking revenues over $15 million for the quarter and announced that we expect to do $56 million to $60 million this year and $4.5 million to $6 million of EBITDA. That's a $6 million to $8 million swing from last year. We have aggressively taking our podcasts and now taking our [ True Crime ] podcast, which we have a slate of over 12, and we've now brought that to market to the streaming networks, and we've sold 3 podcasts to television now. What does that mean for the company? It means hundreds of thousands of dollars in option money day 1 and could be millions tens of millions of dollars in the very near future as those get greenlit. We've now sold the show to CVS Peacock to Paramount, and we fully expect to sell additional shows. We have our first giant upcoming live event. Our last major live event goes back to the days of COVID, which was called Social Gloves. That event did over $20 million and over $4 million of EBITDA. On December 11, we are going to launch Reality Olympics. The reality Olympics will be at LFC Stadium the BMO Stadium and we launched with YouTube committing over 1 billion impressions to the event. We just announced our launch of our subsidiary, LiveOne Africa, with a commitment from [ Virtuosity ] Music to raise over $20 million to a market that will be bigger than the U.S. market in the next couple of years. Our buyback continues. We continue to buy back both stocks. We've now bought back over $6 million of stock in LiveOne. We will continue to buy back stock. For everyone that remembers, we sold $10 million of stock at $7.5 only 3 months ago -- 2.5 months ago. We'll continue to buy that as well as you will see management and Board members doing the same. As we look at the future, we see the highlight films of these B2B deals providing a massive opportunity for the company. Current Amazon deal, we see it just continue to grow. It's a highlight film as the more podcasters, the more traffic we drive, the bigger those revenues are going to be. As we launch our next major project to over 30 million monthly paying subscribers, we will talk about this in great detail over the next couple of weeks and expect to launch this year. If you think about the Tesla numbers, we had 2 million subscribers, 2 million cars, right, and we've now converted 60% of them. If you have 30 million, if you just convert a couple of percentage, we're going to start to really generate very serious subscriber growth, ARPU growth as well as revenue growth. With that, I'm proud of my team. They have survived Tesla's loss of the revenues and come out of it stronger than ever. For those of you there, if you remember when COVID hit, we went from $38 million in revenues, we lost all of our live business and somehow the following year, we did well over $100 million in revenues. I see telltale signs that with the current B2B pipeline, the current B2B deals have already been announced, which are over $50 million in contractual deals, actually $52 million contractual deals as they continue to grow. I see telltale signs that this company is well on its way to again be well over $100 million. And with that, we will continue to buy back stock, and I want to thank everybody and appreciate everybody's support and open up the floor to Ryan to talk about the numbers. Ryan Carhart: September 30, 2025. Consolidated revenue for the 3-month period ended September 30, 2025, was $18.8 million. Our Audio division posted revenue for Q2 fiscal 2026 of $18.2 million and adjusted EBITDA of $0.7 million. Consolidated adjusted EBITDA for the second quarter of fiscal year 2026 was negative $1 million. On a U.S. GAAP basis, LiveOne posted a consolidated net loss of $5.7 million or $0.52 per diluted share in Q2 fiscal 2026. At the operating level, our PodcastOne subsidiary posted record revenue of $15.2 million and adjusted EBITDA of $1.1 million. Our Slacker subsidiary reported Q2 fiscal 2026 revenue of $3.1 million and an adjusted EBITDA loss of $0.4 million. We are pleased to report continued record growth from our PodcastOne subsidiary, which we anticipate will extend throughout the year. In parallel, we are advancing several transformative partnerships from our business development pipeline, creating significant opportunities for long-term growth and value creation in the near future. Rob, I turn it back to you. Robert Ellin: Yes. Just to wrap it up, I think we've covered just about everything. But just to wrap it up, I can't be more excited about the B2B partnerships. The history of LiveOne as well as the 2 subsidiaries that generate the revenues from Slack to PodcastOne have had a history of B2B deals. And these B2B deals, there's a cycle that comes. And as you're watching the cycle, you're seeing in the industry that is exploding, right? The audio industry, iHeart stock is up 4x. Spotify stock is up 3x, almost $175 billion in value. Warren Buffett has been buying up Sirius Radio. There's so much math right now that shows that the partnerships that are being created that are being announced in podcasting and audio, right, across Netflix announcing they're going to the audio business, right? And Spotify going to the video business. You're going to see more and more of this happening in the industry. And my humble opinion is that you're going to see amazing strategic deals -- you're going to see investments in the space and you're going to see acquisitions in the space. And the acquisitions are happening at multiples of revenues, right? We're trading at 60% of revenues. The industry is trading at 3.5x revenues. And I think you're going to see just about every streaming partner. Anyone who is missing an audio platform is going to need an audio platform. When you think about the cost of content and how expensive it is for all these streaming networks, they can increase their ARPUs dramatically overnight by acquiring a music platform or investing in a music platform or white labeling a music platform. So with that, I'm going to open it up to questions. And again, thank you, everyone, for joining us and thank our team for just doing an amazing job of not only surviving, but coming out of this and thriving. And again, seeing those telltale signs where the revenues are going to start to ramp up dramatically in the very near future. Thank you. Operator: [Operator Instructions] And your first question comes from Brian Kinstlinger with Alliance Global Partners. Brian Kinstlinger: Great. Last quarter, you discussed the soft launch at the beginning of August for a B2B partner with 30 million subscribers and said you'd share more information soon. Is there any details you can share about this? Robert Ellin: I mean the success of the beginning launch was spectacular. I would say it was in line with the launch -- the relaunch with Tesla, right, and succeeding. And again, without giving you exact numbers, in Tesla, as you know, we've succeeded in bringing back 60% of those 2 million cars, right, which is kind of amazing that we didn't necessarily have all those cars and not all of those people are even using the service even if they paid through the connectivity package, right? I think you're seeing telltale signs of that as well with our next partner. And I think you're going to be able to highlight that as we enter year-end. Brian Kinstlinger: So is this deal part of the $50 million plus B2B revenue? And if so, when does it begin to ramp? Robert Ellin: No. No. What we said is that's not part of the $52 million. This will be an additional, right? We have not put out guidance yet, but fully expect that somewhere around year-end, we're going to start to put out guidance. As we said, these deals are ramping up. They've ramped up faster than we expected, right, both at Amazon as well as the streaming partner. And we see a telltale sign that, that new partner will be very similar. So we'll be talking about our guidance somewhere probably before year-end, but certainly by year-end, we'll start to talk about it. Brian Kinstlinger: And I think the biggest question I think investors might have is when you provide this $52 million B2B revenue over the next 12 months, I think you said last quarter, and so I'm sure it's still the next 12 months. How much of that is incremental to the revenue you've just reported in the September quarter, which I assume includes Amazon and some of your other B2B partners? Robert Ellin: Yes. I mean we can't give that, obviously, until we start to give guidance, right, which will happen again, as I said, before year-end. Our year-end is March 31, and we're getting close to it fast, right? It's moved fast to do that. And we'll start talking about that guidance. You've already seen us raise the guidance at PodcastOne, and I fully expect we'll start to talk about LiveOnes as well. That ramp-up will start to happen, as I said, towards the end of the fourth quarter, right, third a little bit, fourth quarter. So it's starting to ramp up. We're starting to feel the momentum coming, but we'll have a lot more clarity on that as we enter the fourth quarter of this year. Brian Kinstlinger: Two more questions. First, can you share the freemium versus paid subscribers for Slacker? And maybe if you can or can, can you talk about the conversion that you're seeing for Tesla, if at all? Robert Ellin: Ryan, do you want to give a little bit of that? If we can... Ryan Carhart: Yes. I mean, Brian, just real quick, I mean premium versus paid, I mean, you're talking about premium versus plus. Is that kind of what you're thinking? Yes, premium versus plus. I mean I think. Brian Kinstlinger: You have subscribers that are freemium, especially in Tesla. And then you have paid subscribers. And so I'm curious what the total is maybe the split. And then I'm curious how conversions are going for those freemium. Ryan Carhart: Yes. So if you think of the combination of all of our paying subscribers, you're looking at a total of somewhere between 250,000, 275,000 in terms of the paid and then the free would be the rest that Rob talked about earlier on this call. So that's basically the breakup between the 2. And then Rob talked a bit about ARPU earlier as well. Brian, does that answer the question? Brian Kinstlinger: I'm curious how conversions are going. It's been a few months -- we've been hearing about the focus on that. So is it 1%? Is it 2%? Is it more or less? Ryan Carhart: Yes. We put out, I think it was a week or 2 ago, an earnings release on our new partnership with our AI-driven data partner that's going to help us really ramp up the conversions. So that was launched. It took a little longer than we thought to get that fully to market. So right now, we're out there testing and optimizing the algorithm. So I think you'll start seeing that come through second half of this quarter. And then we don't have full results yet as we're still kind of optimizing right now, but it will ramp up. We're expecting 5%, 10% increase is definitely within the ballpark. It could be higher. We're still in that optimizing phase where the algorithm is doing its work. Robert Ellin: And we're going to lose some free subscribers in that process as well, right? We'll lose some free and we'll gain some paid. And one of the exciting things that you can be looking at just like last year. Last year, you saw a large increase in cash right around the end of the year, right, as you start to see 1-year subscriptions, a, we, but also the new ones converting. We're very aggressively out there trying to convert those now to continue to strengthen our balance sheet, buy back stock and put cash on our balance sheet. Brian Kinstlinger: Great. Last question, Ryan, I didn't hear anything. The gross margin for the first half is about 13% last year, almost twice that. Is that a pure function of scale with the falloff of the revenue? Or is there something more to that? And when might we think about beginning to see a recovery? Ryan Carhart: Yes. I think the difference this year versus last year has been the change in the customer relationship with Tesla, right, where the volume there lifted the margin because we were able to pull that off at slightly higher than what we do normally now. So I think that difference that you're seeing is really just the volume from Slacker changing, driving the overall down. And that's offset by increased margin at PodcastOne. So slightly offset that. But yes, that's the cost. Operator: And the next question comes from the line of Sean McGowan with ROTH Capital. Sean McGowan: Following up on Brian's question on cost of sales. So what portion of that increase as a percentage of revenue is stock-based comp? Is that a factor? Ryan Carhart: Yes. Stock comp is definitely higher in cost of sales than versus year-over-year, if you just do the comparison. So you'll see it's not out yet in the Q, but we'll fully disclose that so you can see it. But it kind of shifted categories. You're going to see more stock comp in the cost of sales line this quarter versus last quarter. a little bit lower just on the lower G&A that you're seeing year-over-year. And then last year, we had a little bit more in G&A. So you're going to see a decrease in stock comp and G&A this quarter year-over-year. I definitely notice a difference there. So less year-over-year, but still a chunk there. Sean McGowan: Okay. And when will the Q be out, Ryan? Ryan Carhart: Filing date is Friday, hoping to get it out sooner. So we're hoping to file tomorrow. Sean McGowan: Okay. So on G&A, I imagine stock-based comp plays a role in that, too. But is this level of G&A likely to be what we should expect to see? Or were there extraordinary factors driving that up? Ryan Carhart: Yes. Good question. So year-over-year, obviously, we're seeing definitely a lot of strong increases or decreases in the G&A. If you look at this quarter over last quarter, there was a couple of onetime things that flowed through. So we expect it to be lower next quarter than it was this quarter. So what you're seeing this quarter, you'll see an improvement next quarter and in Q4 and going forward. So even less than Q1. Sean McGowan: Perfect. Ryan, if I can ask you to repeat something, right at the end of your prepared remarks, I think you made some comment about PodcastOne over the next 6 months or something like that. Would you mind repeating that? I just -- I couldn't quite track what you said. Ryan Carhart: Yes. All I'm saying is we expect continued growth of the PodcastOne subsidiary. That's it. We upped our guidance like Rob talked about. So yes, we just -- we expect it to continue to grow as it has been. Sean McGowan: Right. Got it. It was the word growth, but I couldn't quite get. Robert Ellin: I think, Sean, just to add to that, you've seen our 17th additional podcast announced just announced. And we're basically signing almost -- we signed 24 a year. As we said before, you're picking up 2 things. Number one is you're picking up revenues. Most of these are existing podcast so the space has really moved to. You watched Spotify and Amazon basically fire their entire teams. They keep their super big podcast, but they're all waking up to realize they're really distributors. They're not curators of content. And because we're a full 360 play, these podcasters need handholding. So we continue to add those as we add them, it's a self-fulfilling prophecy. One is you're going to add immediate revenues, but two is you're going to add that immediate traffic. And the more traffic we drive, the bigger the Amazon partnership is going to grow, I couldn't be more excited about where that's going and directionally, right, to think that it's only been a couple of months already from $16.5 million going to $20 million, but it looks like it can go way higher than that. And I've talked about landing an anchor tenant on the podcast network. if we land an anchor tenant, right, which has been one of the only things missing from that business. If you land an anchor tenant and you could add some very serious traffic, right? Those metrics just keep going up. And if they keep going up, you're going to pick up a lot of revenues. A lot, a lot of revenues are going to move up the charts in terms of what number you are on contracts and the overall industry and the respect from the industry is showing in a unique way. Sean McGowan: Okay. If [indiscernible] is here, he's probably like what the **** man? I'm right here. So just kidding. Robert Ellin: Adam is the best I spoke to them yesterday. It was a great partner, and we just continue to grow with them. Sean McGowan: Okay. Last question for me. Kick did a great job yesterday of outlining the ways in which PodcastOne has used AI kind of across the platform across the whole enterprise, drive revenue, drive costs, drive efficiency, et cetera. In addition to what Kick talked about yesterday, could you describe some of the AI tools that are being deployed in the rest of the company, just so we have a fuller idea of that? Robert Ellin: Yes. As you know, Sean, you know me a long time, all of my companies are media companies from a revenue standpoint but are always focused on next-generation technology. And we're right in the heart and the center of it. You're going to see more and more partnerships coming out of us in the AI space. But the team -- Brad and the team are at Slacker, under sees, right? You lose $50 million of revenues, you got to take costs down. They've just done an amazing job of embracing technology, both from a marketing standpoint, right, to convert subscribers to lock down -- to think that we lock down 60% of every Tesla car and got them even though a lot of them are free is just -- it's just an amazing thing, and that was utilizing AI. They've also utilized AI in that we used to need way more hosts, right? You can now create a music channel way quicker and you can combine the use of AI with the human -- with a human, right, as a DJ, DJ host. So we're able to cut those costs down. I think you're going to see a lot more of those initiatives happening as the revenues ramp back up, right, on the other side of the business. As those ramp back up, we'll continue to grow those. And we're looking at consistently looking at more and more ways to do it. And we've been able to cut our staff from 350 people to 95. Ryan has just done a great job of restructuring, fighting through this and really surviving a loss of $50 million of revenues. Most companies can't survive that. We've come out and now we're thriving. Sean McGowan: Circling back for one second, I just got something else I want to ask. On the number of subscribers that you've converted, it is amazing. I never would have thought you get to that 60%. You kind of feel like you're at that limit now. I mean it was never going to be 100%. It's probably never going to be even 60 and you manage that. But I noticed that the number is about the same as it was at the end of August. So have we converted pretty much everybody we're going to convert? Robert Ellin: From a free standpoint, yes, right? From a post standpoint, now we just started to put advertising in, right? So we partnered with DAC, the biggest ad agency to do that, doing programmatic advertising. And it does 3 things, Sean. Number one is it noise the hell out of people, right? All of a sudden, all of a sudden, you go from no ads to a ton of ads. right? My son was giving me a hard time because I had in my car because I want to hear actually what's happening in it. I want to make sure those ads are relevant, right, A, so the people that are going to stay for free are actually going to use it, right? That's a. And then b is I want to convert them, right? So we're now using Intuizi, right, which is an amazing AI marketing technology platform, right, that really is able to find in multiple different spaces, but first in the automotive space. Another goal is to convert those people. And just think about if we converted $100,000 of the 1 million, right, at an average ARPU of $60 a year, most of that's going to be paid upfront. We can generate a lot of cash right now, right? And that initiative has just started. We went from 0 advertising it was 3 months ago, Ryan, to today, we're like 90% advertising, 90% fulfillment, which it generates some revenues as well, right? It's a new revenue stream that will start to kick in, in the advertising side of it. But our real goal is -- and Spotify says they convert 60% of every -- the reason they have a free tier is 60% convert. I don't know what the time frame they convert. But if we can convert 10% of this, 20% of it, if somehow we convert 60%, obviously, the numbers are off the charts. But if we can convert 10% to 20%, we're going to generate a ton of cash upfront, and we're going to generate long-term revenues with those subscribers that are going to be beyond the advertising side. Operator: I am showing no further questions at this time. I would like to turn it back to Robert Ellin for closing remarks. Robert Ellin: I think we covered everything. I'm looking forward to our next call. I'm looking forward to the next major announcements of this company. As I said, there are 72 B2B deals in the works. This is what I've done in my career, has always been sort of the smaller company that's been able to partner with these massive distributors. There's so many of them now that are out there that as the cycle has changed, right? And you look at the cycle, everyone from Facebook to Microsoft to every streaming partner to auto companies, everybody is fighting for data again. And I think we're right in the sweet spot that LiveOne has the opportunity to be that strategic partner that we're nimble with the lowest price and we're willing to white label. I think you're going to see more and more of those B2B deals. And you see a couple more Amazons, you see a couple more streaming partners. You see a couple more retail partners. You can easily see this company in the next 5 years doing $1 billion of revenues and with 0 cost to marketing, right? We're not chasing an individual subscriber. We're chasing a pool of subscribers. So we're looking at leveraging this great content we have, this original programming we have and really leveraging it and positioning ourselves that we partner with anyone who has 10 million to 3 billion eyeballs like Facebook. And we partner with a lot of them, right? Both before I own this company and since we've owned it, we partner with the likes of everyone from TikTok to Facebook, right, to Amazon, to Paramount, right? We continue to do that, and we continue to grow with it. I see telltale signs that we're starting to build real momentum on those B2B deals. We land a couple more of these, and we're going to have another exciting run in like I said, I'm proud of our team. I'm proud we fought through this battle, and I see the future is extraordinarily bright right now for where the company is going. With that, thank you, everyone. I appreciate your time. Operator: Thank you. And this now concludes today's conference call. Thank you all for attending. You may now disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to Central Puerto's Third Quarter of 2025 Earnings Conference Call. A slide presentation is accompanying today's webcast and will be also available on the Investors section of the company's website, centralpuerto.com/en/investors. [Operator Instructions] Please note, this event is being recorded. If you do not have a copy of the press release, please refer to the Investor Relations support section on the company's corporate website at centralpuerto.com. In addition, a replay of today's call will be available in upcoming days by accessing the webcast link at the same section of the Central Puerto's website. Our host today will be Mr. Fernando Bonnet, Central Puerto CEO; Mr. Enrique Terraneo, the company's CFO; Mrs. Maria Laura Feller, Head of Investor Relations; and Mr. Alejandro Diaz Lopez, Head of Corporate Finance. Maria Laura, please go ahead. Maria Laura Feller: Thank you very much. Good morning, and welcome. We are turning you today with our management team from Buenos Aires to report on the results of the third quarter of year 2025 and then answer any questions you may have. During the third quarter, adjusted EBITDA reached $101.1 million, up 64% quarter-on-quarter and 8% increase year-on-year. Revenues totaled $233.9 million, up 30% quarter-on-quarter, mainly reflecting higher contract sales from renewables and thermal. Fuel cost pass-through, up 26% year-on-year mostly reflected additional revenues in this quarter from fuel cost pass-through and also Central Costanera successfully resuming activities after the maintenance works. Total generation was 4,539 gigawatt hours, 4% up from second quarter 2025, but 20% down year-on-year mostly due to the lower hydrology at Piedra del Aguila. From a financial standpoint, our net leverage ratio remains very healthy at 0.5x, adjusted EBITDA underscoring our strong balance sheet and financial flexibility. Also good news for our credit rating. Moody's has initiated the grade assessment with a AA+ Fix SCR upgrading our rating to AA from AA-. Third quarter 2025 capital expenditures amounted to $76.1 million which includes the acquisition of Cafayate solar farm at $48.5 million. Final works for the closing of the Brigadier Lopez combined cycle and San Carlos Solar farm, which are very near COD as well as maintenance CapEx. Moving to a key development for the quarter. In August, our company successfully participated in [ AlmaGBA ] Battery Energy Storage System biding process, BESS. We were awarded, both projects we submitted which collectively represent 205-megawatt hours of new best capacity. The projects are scheduled to be fully operational by mid-2027. A significant fourth quarter outlook. The Energy Secretariat released Resolution 400/25 in October. This resolution marks a pivotal step in liberalization of the power market and creates a strong business outlook for our company. Going now to Page 4 for the earnings summary. Our adjusted EBITDA came in strong at $101.1 million reflecting the effective fuel cost pass-through to revenues and solid operational performance in both our renewable portfolio and at Central Costanera. In this quarter, our revenue mix was 53% spot and 47% contracted with 63% of total revenues denominated in dollars. Renewable generation revenues increased by 24% this quarter, supported by a 21% rise in generation volumes quarter-on-quarter. This strong performance was driven by our wind farms and the contribution from the newly acquired Cafayate solar plant. On the thermal side, contracted revenues benefited from additional fuel cost pass-through at Terminal 6. Thermal revenues also rose in both the spot and contract markets, reflecting the positive impact of Central Costanera, which successfully completed maintenance works in the second quarter as well as fuel cost pass-through effects. Now turning to Page 5. Let's look at our generation and availability performance. Total generation for the quarter was 4,539 gigawatt hours, composed of thermal, hydro and renewable sources. Volumes were up 4% quarter-on-quarter. Thermal generation represented the largest share followed by [ hydro and renewables ]. Thermal and renewal volumes grew, while hydro volumes decreased due to lower [indiscernible]. Availability rates for all our thermal units remained strong at 88%, with combined cycles rate at a very competitive level of 96%. We continue executing our growth strategy. [indiscernible] combined cycle at the [indiscernible] solar farm are very near COD. In OS, we acquired 80-megawatt [ Cafayate ] solar farm and also, we secured 2 best projects totaling 205 megawatts and [ 15-year contracts ]. Central Puerto complex we had 150 megawatts of lithium [ iron phosphate ] and the offtaker would be the institutional company Edenor. Central Costanera complex will have 55 megawatts and the offtaker will be Edesur. Estimated capital expenditure is between $130 million and $140 million for both projects combined. On October 21 and already effective since November 1, the Energy Secretariat issued the new framework to reform the Argentine's wholesale electricity market. The core objective of Resolution 400 is to liberalize such market through a progressive transition. The new spot revenues incorporate a margin on top of variable production costs supporting long-term value creation for generators. Also, there is a significant shift for revenues in the spot, now denominated in dollars, mitigating currency and inflation risk. Thermal generators gained significant flexibility, allowing them to trade capacity and energy in the new Thermal Term Market. We can sell up to 20% of our production to large users and the remaining up to 100% to distribution companies or the spot market. Spot market energy remuneration will capture marginal rent on top of the variable cost of producing the energy, and capacity payment in the spot market is now $12 per megawatt of capacity per [ MAT ] and is weighted by a factor based on fuel requirement and fuel management approach. Also, we decided the reliability reserve. During a fuel management transition period until Plan Gas contracts naturally expire, CAMMESA continues as a supplier of the contracted capacity of Plan Gas which ends December 2028. From 2029, generators will be fully responsible further on fuel management. For renewables, existing renewable contracts will be enforceable until natural expiration, then generators will trade in the matter. Our total financial debt at quarter end stood at $452 million. Cash and cash equivalents totaled $292 million, resulting in net debt of $159.9 million. Net leverage ratio stood very healthy at 0.5x adjusted EBITDA. In October, we issued a new corporate bond facing $89 million in capital and also repaid $90 million of maturing debt, including the repayment of our Class B corporate bond and the legacy debt associated with the [ Guanizuil ] solar farm. Total installed capacity in Argentina as of September 2025 was approximately 43,887 megawatts. Energy generation during the third quarter was 34,342 gigawatt hours, while domestic demand reached 35,255 gigawatt hours. Going now to Page 10 for key takeaways. 3Q '25 adjusted EBITDA of $101.1 million and 3Q '25 last 12-month adjusted EBITDA of $317.5 million reflect solid operations and a starting point in this new market environment. Central Puerto was awarded both projects submitted under the AlmaGBA Battery Energy Storage Systems tender. This means we added 205 megawatts of new capacity. These strategic projects notably boost our growth path and provide additional operational capabilities needed in the future of power generation. Our growth pipeline is delivering results with the acquisition of Cafayate Solar Farm, which added 80 megawatts of installed capacity to our portfolio since August 2025. Additional growth will be provided by ongoing projects. Brigadier Lopez combined cycle closing and the San Carlos Solar Farm very near COD. Central Puerto's business outlook has gained significant growth momentum, driven by the Energy Secretariat Resolution 400. This resolution formalizes the market liberalization roadmap, representing a pivotal step towards strengthening long-term value creation for us. This context reinforces our positive outlook for 2026 in our long-term company vision. Thank you for your time and your confidence in Central Puerto. Operator, please open the line for questions. Operator: [Operator Instructions] The first question comes from Mr. Martin Arancet with Balanz Capital. Martin Arancet: I have 2 topics that I would like to discuss. I will run them one by one, if that's okay. First, regarding the market liberalization. I was wondering if you could provide any guidance on how much do you expect this to improve your results over the next 2 years? Also, if you are considering any improvement to your loyalty fleet, given this inhales in revenues? And how likely do you think it will be to contract that 20% with large users? Fernando Bonnet: Martin, thank you for your interest and your questions. We are going to the first one. The impact of the new deregulation of the sector. In terms of -- in terms of cash, we are seeing -- that's depending on the dispatch of the used consumer fuels, but we can expect around between 20% and 25% of increase in our EBITDA could be, as I mentioned, would be 20%, 25% depending on the dispatch of the units and the fuel consumption. Talking about the other improvements that the regulation brings that are important also as important as the pricing as Maria has mentioned -- it's very important for us to have the denominations of these new prices in dollars, setting dollars. So we cannot need to wait until the government resolution month by month for price increase, which was the case in the past. So for us, it's very important to keep the remuneration at least attached to dollars updated. And the other big improvement and is related to your question is that we can sell our part of our production to -- in private terms, private offtakers, as you mentioned, it's 20% for big users, the consumers, but we have no limitation to sell it -- in the percentage to sell it to distribution companies. So in terms of this 20%, we are start selling, the situation right now is the big consumers are very, very contract. The biggest ones are very contract with renewables. So we are trying to find the ones that are not contracted and the small -- going down to small ones, the [indiscernible] GUDIs. But for that, it is -- we have been selling since the regulation was issued, but to be completely honest with you, the market right now is trying to understand how the price is going to move with these new regulations. How CAMMESA is going to set the prices and the Secretariat of Energy is going to set the prices for spot basis of market, and for the GUDIs that are still in the distribution companies that right now, the price is still setting by resolutions and the scheme of every quarter setting by Secretariat of Energy and CAMMESA. But we are very confident that we -- whenever these are more or less clear by the demand, the demand is going to start to contract because the prices of the spot during winter times will be much more higher than now. And because of that, they're going to prefer to cap that increase on winter times and set contract we generate. So we are very confident that during this year, we're going to reach that 20%, and we expect more with the distribution company. Distribution companies needs also to set with each regulator -- each province regulator and national regulator in the case of [indiscernible] how they're going to make the pass-through of these contracts or new contract that the distribution companies will establish with the generator. So everything is under -- and is moving, but we are confident that this new market [ MAT ] as the regulation mentioned going to start, and we have a good pace to contract our production during this year. Martin Arancet: Just a couple of follow-up questions. First, you mentioned $20 million to $25 million of additional EBITDA per year. I was wondering if that's not considering the 20% that you could sell to big users? And if so... Fernando Bonnet: Sorry, Martin, it's not $20 million it's 20% increase. Martin Arancet: 20% to 25% okay, right... Fernando Bonnet: This is -- it is more than around $70 million, $80 million. Martin Arancet: Great. And that's without the 20%. So if you are successful in selling that 20% to industrials, we could see any where further improvement, right? Fernando Bonnet: Yes. Martin Arancet: Okay. Great. And then follow-up question regarding you mentioned distribution companies. Probably it's too soon, but do you foresee new auction for distribution companies next year or in the near future? Fernando Bonnet: You are talking about the capacity auction or batteries? Martin Arancet: An option to sell the other 80%, I mean, if I understood correctly... Fernando Bonnet: No, no, but -- yes, this will be by each distribution company process. It's not a centralized like batteries or like a capacity contract. It's any distribution company can do -- go for -- this regulation established that CAMMESA is going to provide around 75% or between 70% and 75% of the distribution company's demand and the rest could be contract by distribution companies itself direct with generators. So we are seeing some distribution companies asking for quotations and start the conversation for provide these 20% or 25% of these -- of their demand. But it's not centralized -- will be each by distribution company and there will be a negotiation directly between generators and distribution companies... Martin Arancet: Yes. So we can expect also beyond the 20%, some distribution companies probably in 2026, 2027 contracting additional energy? Fernando Bonnet: Yes. Martin Arancet: Well, great. Then my -- the second topic that I would like to discuss was regarding the recent hydro auction. I don't know if you could provide any color on that, probably the targeted assets and expected time line for awarding these assets? Fernando Bonnet: Yes. So as you know, we participate with Central Puerto and Costanera. We expect that have more news in the next coming weeks. The first, the CAMMESA is -- are evaluating CAMMESA and Secretariat of Energy are evaluating the capacity and the documentation that the bidders provide. And then I think between, as I mentioned, next week, on the other one, we will have a clear view of the competition or the ones are available to compete. And then for sure, in previous to middle of December, we will have the results -- the final results. Operator: Our next question comes from Mr. [indiscernible] with Citi. Unknown Analyst: My question is on -- first on capital allocation. I mean we have been seeing a lot of rerating of Argentinian assets over the last couple of weeks. So in that context, are you evaluating maybe some portfolio recycling with some of your assets in forestry perhaps in mining already? Or would you rather wait for longer cycle to engage on that front, especially considering now there may be some more projects looking interesting as investment opportunities. And yes, my second question would be, conceptually speaking, where do you see the stabilizing for the term market price, right, which today is about $60 per megawatt hour, but you will get an ever growing supply of power there. On the other hand, you may also have increasing demand from distributors for those PPAs. So where do you see that stabilizing over the short term? Those would be my 2 questions. Fernando Bonnet: Okay. Thank you. Going to the first one. We are not evaluating right now a reallocation of our assets or selling. We are not -- we think that they have a lot of room to increase price. And so because of that, we are waiting for a longer period of growth, and we are also evaluating the possibility of -- if we improve the value by some developments around those assets. So it's not -- right now, we are not looking for reallocate that assets or sell. In terms of the second one, talking about prices, we are seeing some -- in the short term, for sure, we are seeing some reduction around $60, perhaps moving between $57, $55, $56 in the short term when this new offer come to the market. But in the long run, we are not seeing a huge reduction on those values because you will have to increase the capacity of Argentina and the prices for new capacity are going up. All the data centers, boom and the demand of Middle East are rocketing the prices of the GTs and the delivery time. So perhaps we see some reduction at the beginning in order to stabilize that market, that new market -- but in the long run, we are seeing prices around $60. Unknown Analyst: If I may add a quick one. Now that thermal projects should have, I mean, with the new rules should have better rates of return, very likely. What would you say are the key projects in the thermal side of the business that Central Puerto is looking into? Fernando Bonnet: Well, this new regulation is not -- I think it's not enough yet to bring new projects from zero from scratch. It's not easy to set a big combined cycle, I don't know 800 megawatts and sell it to the market. We are not there yet. As I mentioned, the price will be much more than $50 something. So I think the new projects coming will be perhaps at the beginning of the next year, some auctions that the government are planning to set in terms of capacity, small open cycles and machines working as [ pickers ] I think this is what we are seeing coming with centralized auctions but not huge combined cycle selling to private. We think we are new -- I mentioned new ones, we are not there yet. Operator: Our next question comes from text. This is [indiscernible]. In the release, we saw that the installed capacity of San Carlos, Cafayate and Brigadier Lopez is already available. Could you provide some color on how much of the capacity will actually be operating or contributing to generation during 4Q? And what we could expect in terms of revenues or margin uplift, both from the additional capacity and from the recent steps toward electricity market deregulation? Fernando Bonnet: Thank you for your question. In terms of new capacity entrants, San Carlos and Brigadier Lopez, as you mentioned, are right now entering -- San Carlos is entering, I think this week or the next -- the beginning of the next month. So the impact in our revenues for the fourth quarter will be like half of November and full December. In respect of Brigadier Lopez, which is closing of combined cycle, we are expecting the COD. We are right now in the commissioning -- at the end of the commissioning phase, but we need to make a lot of test to be online and to be producing energy and we receiving the payment. So in the case of Brigadier Lopez, we expect the mid of December, perhaps 20 -- 20 something of December. So the impact on our revenues in the fourth quarter will be significant. But talking about full year basis, we expect around -- in terms of Brigadier Lopez around an additional EBITDA of $60 million, $65 million, and San Carlos around $3 million -- between $3 million and $5 million more, fully based -- full year basis. I don't know if I forget a question or one part. Operator: Our next question comes from Ludovic Casrouge with Autonomy Capital. Ludovic Casrouge: My question was about the CapEx. Which level of CapEx do you expect for next year? Fernando Bonnet: Okay. Thank you for your question. In terms of CapEx, we are finishing, as I mentioned, Brigadier Lopez and San Carlos. So we are not expecting big CapEx for that part. The CapEx that we are entering on right now and will be continued in the next year is the best projects that we get awarded last quarter. And this will be around $130 million, $140 million for both projects, the Central Puerto and Costanera projects. Sorry? Ludovic Casrouge: Just for 2026? Fernando Bonnet: Yes, yes. We expect the completion of those projects in 2026, yes. Ludovic Casrouge: Okay. And just thinking could we expect an extra dividend distribution for the end of this year? Fernando Bonnet: Well, that depends on the results of the hydro auction. That will depend on that. Operator: Thank you. This concludes our Q&A session. I would like to turn the conference back over to Mr. Fernando Bonnet for any closing remarks. Fernando Bonnet: Hello, everyone, for your interest in Central Puerto. We encourage you to call us for any information that you may need. Have a great day. Bye-bye.
Operator: Good day, and thank you for standing by. Welcome to the Experian's Half Year Results for the 6 months ended 30th September 2025 Webcast and Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Mr. Brian Cassin, Chief Executive Officer. Please go ahead, sir. Brian Cassin: Well, thank you very much, and hello, everybody, and welcome to our first half results presentation. I'm joined today by Lloyd, who will run through the financials after my initial overview, and then we'll open it up for Q&A. So we delivered very good first half results at the top end of our FY '26 guidance range, and we are on course to meet our medium-term framework objectives. Revenue, margin and cash performance were all strong, supported by significant strategic progress. Just turning to some of the financial highlights. Organic revenue growth accelerated from 8% in Q1 to 9% in Q2, averaging 8% for the first half. Including acquisitions, total constant currency revenue growth reached 12% with all acquisitions performing well. North America performance was strong and broad-based, accelerating to 12% organically in Q2, driven by client wins, client expansions, consistently improving lender activity in B2B and good results in Consumer Services. Fiscal conditions in Latin America, particularly Brazil, remain constrained by high interest rates and consumer indebtedness. The growth in H1 reflects continued excellent Consumer Services progress. And while the UK&I delivered low single-digit growth overall, Ascend Sandbox adoption among B2B clients has been excellent with U.K. Consumer Services driving growth through new products and market expansion. And EMEA and Asia Pacific delivered a solid mid-single-digit growth, supported by innovation initiatives and our stronger positioning in key markets. Revenue growth translated into EBIT margin delivery at the upper end of our expectations, up 50 basis points at constant currency and 30 basis points at actual rates. Margin expansion in North America, UK&I and EMEA and Asia Pacific offset lower LatAm margins, which was primarily driven by acquisition mix. EBIT strength flowed through to double-digit benchmark EPS growth, and we've raised the interim dividend by 10%. Cash flow growth was very strong with our leverage ratio now standing at 1.8x. I'll just touch on some of the strategic highlights in the half. The Ascend platform adoption continues to accelerate. In addition, earlier this year, we introduced new cash flow attributes and analytics in North America, and we're seeing very good client demand and B2B achieved organic revenue growth in the half of 8%. Consumer Services delivered 9% growth, reaching over 208 million free members. We continue to add more breadth and depth to our products and all of our key metrics, organic traffic, engagement continue to trend positively, reflecting the successful positioning of this business as a financial partner for our members. Our recent acquisitions are on track, delivering cost synergies and new product opportunities. We also recently completed a small fraud acquisition in the U.K., which further enhances our product portfolio and strengthens our position in nonfinancial services verticals. And finally, cloud migrations in North America and Brazil, excluding North America Health, are on track, and we expect dual run costs to peak this financial year. Our strategic progress reflects our consistent commitment to our dual-sided strategy across B2B and consumer, which is unique and which has expanded our growth potential and created new value opportunities across our priority ecosystems. We're now entering a new and exciting era driven by AI, and we're strongly positioned to take advantage of the opportunity this brings to our business. The starting point for this is our data. These data sets are vast, complex. They're constantly being refreshed. They are subject to expansive and stringent regulation, and they need to be accurate all the time. The job of creating these data assets is a huge and complex operational exercise, which relies not just on process, but also on proprietary intellectual property and significant industry expertise. They simply cannot be replicated and they cannot be accessed unless permissioned by us. Our strategy has always been not only to sell data, but to build solutions on top of our data that provide action and insight to improve client outcomes and reduce cost. Almost all these solutions require our data as a foundational input, and this is a source of huge competitive advantage to us that will grow over time. And we have a long and successful track record of doing this. The evidence is everywhere in our current solutions and our history of innovation and business expansion, PowerCurve, Ascend, the expansion of our verticals and the huge growth in our consumer businesses are all examples. Broadly, this expansion of our opportunity set have been driven by the increasing use of data to automate critical business processes to make better decisions, create better client outcomes and to lower operational costs. AI will accelerate this trend, and it is and will continue to expand our opportunities. Despite decades of investment, many client processes remain siloed, inefficient and costly. And this is particularly true when it comes to leveraging data, which, of course, has to be solved to leverage AI at scale, and this is where Experian excels. The opportunity for us remains huge, and the excitement for us is that the AI will accelerate the speed with which we can bring disruptive new products to market. Our data, our products, our platforms, our product development capability and our industry footprint gives us a strategic position that most companies will kill for, and we intend to leverage that to accelerate our growth. Now we've built strong foundations over many years to put ourselves into this position as this slide demonstrates. And just over the past few years alone, we've been proactive across the entirety of our B2B and consumer businesses in leveraging AI use cases to enhance our product sets and also to penetrate new growth areas. And we haven't just been talking about it. We already have AI products in the market. A good example of this is the Patient Access Curator product, which is driving our growth in health and redefining the process of insurance discovery. Platforms like Ascend and Activate have been specifically developed to be modular and to bring all of our data and capabilities together in one place. This, of course, is a perfect setup to allow our clients to take the maximum advantage of data at scale, both our data and their data and for us to easily introduce new functionality, both AI and conventional for our clients to test and learn and quickly implement and then put into production. Very good example of this is Model Governance, an AI-first solution, which virtually eliminates vast amounts of work related to comply with regulatory and internal improvement requirements for credit model evaluation and approval. Clients building models in Ascend can now access this module, which saves huge amounts of time and expense in what are time-consuming operationally complex but mission-critical functions. And there are many more products in development. For Ascend alone, we expect to have agentic solutions covering 5 major categories of activity this year, each category representing an agglomeration of many different capabilities or activities bundled together. And we have more than doubled that number of categories in production for '26 and beyond. I want to bring this to life for you with a Tier 1 client example. The client here is a long-term data partner of Experian, a very large global financial services provider. And we've taken them on a journey, which started with really our data and the value of our data. It then migrated into the integration of our data and our software. They used to be just a client that consume bureau data and other data sources. They also use legacy Experian software as well as competitor software and in-house systems. And these are all now moving on to the platform. Initially, they acquired our data quality tools, which helped them to actually enhance the decisioning systems by ensuring consistency and usability of their own data as well as ours. They then took the Sandbox to help them actually accelerate the insights and analytics that they can derive from that data across the entire product life cycle. And now they're looking at how to deploy models like AI Model Risk Manager. And this strategy really gives us the ability to enable more modules for clients in a managed way. It's a convergence strategy, which creates incredible performance and value for clients. And of course, it opens up new value pools for us. We showed them the value of bringing all of these capabilities into one place. They saw the benefits of this in not only just reducing the number of vendors or in-house systems, but the power of data in one place can bring to them. And this led naturally into a much longer partnership type arrangement with increased tenure, in this case, from 3 to 5 years and a substantial revenue uplift over the term of the contract period. And we can continue to grow from here by bringing new value to the table using the platform in situations like this. So AI is already helping our revenue growth and margin today. It's driving productivity improvements. It's speeding up and reducing the cost of new product development, and it is the fuel for our future investment. As we look at our addressable markets, the constraint we historically face was the time it took to develop new products to market and the time for these products to gain acceptance and adoption. And it often needs a catalyst to create conditions for change. And we believe that AI is that catalyst and that we have a huge amount of white space that is now more accessible to us than ever before. So we see continued opportunities both internally through improving productivity and many new product opportunities. In short, we're very excited about the opportunities this brings, and we're positioning our business to capitalize and we intend to take full advantage of the opportunity this presents to us. Now many of the new products that I've referenced contributed towards our successful H1. As just illustrated, Ascend platform momentum continues. The range of capabilities in the platform will continue to expand, and it now encompasses AI, data, analytics, marketing and credit services together with complex decisioning. And our progress with clients has been strong. And as the chart here shows, we've seen rapid adoption. We recently introduced new Cashflow Scores and Analytics. These combine credit data with AI-powered real-time cash flow data and categorization. This innovation strengthens predictive power scores and results in higher approvals with enhanced model accuracy. Client demand is strong here, too, and our pipeline is expanding rapidly. And we've also integrated ClearSale in Brazil, and we're commencing the launch of new products with the ClearSale acquisition, but also new propositions like Serasa+. This introduces reusable identities and has applications across both B2B and B2C. In Consumer Services, we're focused on delivering deeply personalized experiences by leveraging experience data assets. At the center of this strategy is EVA, which is already is an agentic assistant providing not only guidance, but also taking actions on behalf of consumers. Confirm Your Home uses Experian North America property data to provide home value and mortgage insights. It forms the hub for our new home vertical and leverages data from our B2B housing business. Over 2 million interactions have been initiated with EVA on our consumer services platform. And just 2 other quick examples to highlight are the Serasa+ in Brazil I just mentioned, which has consumer applications and will provide secure log-ins to third-party digital properties using Serasa credentials and the enhanced UK&I refi feature, which supports debt consolidation for consumers. And these are all small examples of the extensive product innovation road map, which is designed to drive higher consumer engagement, greater efficiency for our clients and extend us into new monetizable value pools. So let's now turn to our H1 regional performance. North America delivered strong momentum with Q2 strength driving 10% H1 organic revenue growth. Financial Services, excluding mortgage, was fueled by new client wins and client expansions amid a steady and consistently improving lending environment. In Financial Services, clients can now access credit, clarity and cash flow data through a single integration, which unlocks new potential with significant wins in a growing list of prospects. The Ascend analytical platform saw continued progress with new clients for Ascend Marketing, further Sandbox adoption and rising interest in the fraud sandbox. The Experian AI assistant has also driven cross-sell opportunities with deepened client relationships. Verticals delivered strong growth. In Health, Patient Access Curator is transforming how the industry understands a patient's insurance picture to reduce claims denials and accelerate payments. It's positioned Experian as the market leader with a first-to-market AI solution performing substantially ahead of existing products. The milestone partnership we previously discussed in Auto has expanded availability of our vehicle history reports across dealer networks, strengthening earnings quality through a long-term agreement and reinforcing our track record for innovation-led wins. And in targeting, Audigent is off to an excellent start, driving momentum in audience targeting and activation. So now I'd like to provide some comments on the recent changes to the U.S. mortgage market. The FHFA's recent decision to introduce Score Choice into the conforming mortgage market has introduced new competition and a market opportunity for VantageScore. Like many -- like in any of our markets, we believe the primary value lies here with the data as the score cannot be generated without the data. And there has been much debate on this issue of where value resides score or data, but I'll summarize it with an important data point. Roughly 50% of all mortgages in the U.S. are acquired by the GSEs. In determining whether to buy a loan, the GSEs are reliant on the data that we and the other bureaus provide. By contrast, the GAs do not rely on the FICO Score in their buying decision. They don't need it. In fact, just last week, Fannie Mae removed the minimum 620 FICO Score requirement from its desktop underwriting system and official selling guide. And just to quote Fannie Mae's selling guide, credit scores are not an integral part of that risk assessment because they perform their own analysis of the credit report data. While scores are used to help the borrower communication, pricing adjustments on the secondary markets, it's clear that VantageScore can also easily enable these use cases. Now up to now, VantageScore has not been approved for use in mortgage, largely due to inertia more than anything else as VantageScore outperforms the FICO Score currently used in the mortgage market. Where VantageScore has been used in unsecured lending and in card, auto and other nonmortgage categories, it's actually already captured substantial share, and we estimate this to be around 30% for lending originations based on our internal data. Now that it is approved for mortgage, we expect that VantageScore will gain share in the same way that it's done in unsecured lending. And we will be facilitating lender and consumer choice through the Experian Score Choice bundle and by making VantageScore available in the Ascend Sandbox. We expect this to be a long-term opportunity for Experian with a shift to VantageScore driving millions more scorable consumers and ultimately greater mortgage origination activity. As this happens, we expect our profitability to be further enhanced. But to be clear, we do not need a shift to VantageScore to protect our position in the value chain. That resides in our data and the GSEs and every industry participant knows that it is the data that matters. Now turning now to Consumer Services. Organic revenue growth for the half was 8% or 12% excluding data breach. Membership, Marketplace and Partner Solutions all contributed favorably in the half. In Membership, we're delivering new value to deepen engagement and drive upsell from across our ecosystem. We saw particular strength in marketplace as lenders compete for prospects with clients leveraging Activate to deliver credit and personal loan offers, improving their efficiency. Activate was robust across both cards and personal loans, supported by our popular No Ding Decline card feature and expanded panel. And insurance too has continued to make good progress. Turning now to Latin America. Over the past few years, we've built a superior product portfolio in Brazil, and we continue to make good strategic progress. While high interest rates and consumer indebtedness have tampered B2B growth, progress in Consumer Services has been strong. We're particularly excited by the prospects arising from the integration of ClearSale with our credit risk B2B platform. We've built a healthy pipeline for new blended fraud and credit risk products. Prospects for Ascend Analytics are also strong, alongside an encouraging outlook for our SME segment driven by client growth and upsell into advanced solutions. Despite high interest rates and election uncertainty, we're well positioned to strengthen market leadership in H2 and beyond. 18% growth in Latin American Consumer Services is a strong result, driven by our expanded opportunity and diversification around financial empowerment and leveraging our strong brand presence in Brazil. Limpa Nome performed well as consumers manage rising indebtedness. Our Q3 credit fair will further support Brazilian consumers to manage their finances. And our credit marketplace is scaling rapidly and contributed meaningfully in this half. New payroll loan offers will deepen our marketplace further to serve the 40 million-plus Brazilian eligible -- Brazilian consumers. Progress also continues in Insurance as we continue to add new large insurance -- insurers to our panel. UK&I delivered 1% organic revenue growth, which was led by Consumer Services. While not yet fully reflected in revenue performance, B2B new business achievement was good. Ascend Sandbox proof-of-value is converted into major wins and uplift renewals with leading financial institutions, including a Tier 1 enterprise partnership. More proof-of-concepts are pending and new module introductions are planned. COVID aside, U.K. Consumer Services grew at its fastest rate in a decade. We've transformed this business with an enhanced consumer experience, new features like refi for debt consolidation and by leveraging EVA. The enhanced analytics we deliver through the Activate platform has led to exclusive credit offers on our platform, and this drove strong marketplace performance. Turning now to EMEA and Asia Pacific. Organic revenue growth delivered 6% and another -- which was another solid year of progress with total revenue up 35%, including the acquisition of illion. The illion acquisition integration is on track. It drove the 480 basis points regional margin uplift. And our combined bureaus in Australia now offer a strong and differentiated consumer data asset. We've introduced the Ascend Data Hub and Ascend Ops to Australia to leverage our pre-acquisition leadership in decisioning. And with the combined bureau data now available, we have really good interest in the Ascend Sandbox. We've also advanced our technology and back-office integration while streamlining legacy and noncore portfolio elements. Regionally, organic H1 progress spanned our geographies, supported by new product introductions and leveraging our global solutions. So with that overview, I'm going to hand over to Lloyd for the financials. Lloyd Pitchford: Thanks, Brian, and good morning, everyone. As you've seen, we delivered another very strong performance in the first half with total revenue growth of 12% at constant rates and 13% at actual rates. This was driven by organic revenue growth of 8% at the top end of our guidance and a further 4 percentage points from acquisitions. Benchmark EBIT margin from ongoing activities progressed well, up 50 basis points at constant rates and 30 basis points at actual rates. EBIT growth was 14% at both constant and actual rates. And this converted well into EPS growth with 13% at constant rates and 12% at actual rates. Operating cash flow grew 25%, reflecting a 77% conversion in the half. And our growing capital base continues to generate very high post-tax returns on capital employed of around 16.5% for the half year. As Brian mentioned, we announced an interim dividend of $0.2125, which is up 10% on the prior year. And finally, we continue to be very strongly financed with our net debt-to-EBITDA ratio at 1.8x. Turning to our medium-term framework. We're in the second year of delivery against this medium-term framework and continue to execute confidently and well on our strategic plans. And financially, we continued last year's momentum with high single-digit organic growth, strong organic margin progression and the benefits of capital discipline and deployment all being delivered in this half year. And if you look back over a longer time horizon and our performance here over the last 6 years, you can see we've delivered consistently strong financial results across all of our key financial metrics. Since FY '20, we've grown half 1 revenue at an 8% compound annual growth rate. Benchmark EBIT has grown 9% compound; benchmark EPS, 10% compound; and operating cash flow at 17% compound. And this highlights the quality and consistency of the strategic execution over this period as our business scales. Looking at more current trends, organic revenue growth was at the upper end of the expected performance range for the first half. All our regions contributed to half 1 growth with North America at 10%, 4% in LatAm, 1% in the U.K. and Ireland and 6% in EMEA and Asia Pacific. By quarter, organic revenue growth strengthened from 8% in Q1 to 9% in Q2, supported by a onetime volume true-up in the North America Consumer Services business, which added 1% to group growth in the second quarter. Looking at organic revenue growth across our segments. Here on the left-hand chart, you can see B2B organic revenue growth was 7% in Q2 with good growth across both financial services and verticals and was underpinned by client wins, cross-sell and new product innovations. North America was the key driver, growing at 11% for Q2 with 12% growth in Financial Services, 15% in Automotive and 10% in Health. Financial Services growth, excluding mortgage, was 12% with mortgage growth of 41% on modestly lower volumes. On the left-hand side is the Consumer Services trend in total and excluding -- sorry, on the right-hand side, Consumer Services trend in total and excluding our Data Breach business. As the elevated Data Breach comparable fell away in Q2, consumer growth rebounded to 12% globally in Q2 and 13% in North America. And in the yellow diamonds, you can see the strength and consistency of the underlying consumer growth, excluding Data Breach. Turning now to EBIT margin. And last year, in the first half, we added 70 basis points to margin. And this year, we delivered 100 basis points of organic constant currency margin expansion, primarily due to broad strength across the North America business. Organic margin progression has been driven by broad-scale productivity improvements as our businesses scale. We're also seeing tangible benefits from AI deployment across our business. Organic headcount is broadly flat this year, thanks to these productivity programs, whilst organic revenue grew by 8%. And we see many exciting applications of AI in our business, which can continue to drive productivity. Including acquisitions, total EBIT margin from ongoing activities increased 50 basis points at constant rates and 30 basis points at actual rates to 28.3%. On a regional level, North America's EBIT margin added 90 basis points from broad expansion across the portfolio. U.K. and Ireland added 60 basis points and EMEA and Asia Pacific expanded 480 basis points due to the addition of illion. Latin America margin contracted by 240 basis points, largely due to the temporary effect of the integration of acquisitions. And when considering our segmental margins over a longer-term time frame, here you can see that the B2B margins have been relatively consistent at around 30% since FY '20 despite the temporary dilution from recent acquisitions and cloud transformation dual run costs. As previously indicated, the dual run costs peak this year and will trend down from FY '27. And the margin from our recent acquisitions will trend to group average margin over around 3 years. Consumer segment margins have expanded from 21% in half 1 2020, reaching 30% in the first half this year, which has resulted from scaling our audience to over 208 million members and the growing breadth of our consumer propositions. Turning now to EPS, where last year, we delivered 8% growth in half 1. And this year, we've delivered double-digit growth of 12% at actual rates. Benchmark continuing EBIT grew 15% at constant currency due to strong revenue growth and 50 basis points of margin expansion at constant rates. The combination of interest expense reflecting acquisition funding and a slightly higher tax rate resulted in 13% EPS growth at constant currency and 12% at actual rates. So over a 2-year period since we began our medium-term framework, the increase in first half EPS is over 20%. Taking a look now at our usual reconciliation to statutory results. Our benchmark profit before tax grew 13% at actual rates, driven by revenue performance and good margin progression. Acquisition-related expenses increased to $32 million due to the acquisitions of ClearSale, illion and Audigent, and there was little change in the fair value of consideration on prior acquisitions and restructuring-related costs were $3 million for the half. The above items resulted in a statutory profit before tax and noncash items of just over $1 billion, representing a 12% growth at the half, which is broadly in line with the growth in benchmark PBT. Noncash items included an increase in amortization of acquisition intangibles and financing remeasurements were $92 million favorable versus a $93 million adverse in the prior year. And this swing was principally driven by remeasurements on Brazil intragroup funding, resulting in a statutory profit before tax of $975 million or 36% growth on last year. So now turning to cash flow and return on capital. On the left-hand chart shows our long-term operating cash flow and conversion metrics. As you can see from the slide, we delivered strong growth on half 1 operating cash flow, growing at 17% compound rate since FY '20. This half year, we generated around $900 million of operating cash flow at a 77% conversion rate. A key part of our framework is to continue to use our cash generation to invest in high return on capital growth opportunities. And on the right, you can see our disciplined use of capital, where we've significantly grown our capital base to around $10 billion whilst delivering consistently high post-tax returns, this year at 16.5%. Turning to capital investment. We are significantly progressed with our cloud transformation program and well on the way to our expected position of over 85% of processing in the cloud in our U.S. and Brazil businesses outside of health by this year-end. As we approach the latter stages of the program, we expect to benefit from the reduced dual run costs and lower change-related capital investment. And this will allow us to expand our innovation and AI investment activities to drive future growth, all within the financial envelope of our medium-term framework. And as we materially complete our cloud technology program, we're very strongly financed. Our key leverage measure of net debt to EBITDA was 1.8x at the half year. Our fixed debt level stands at around 60% at the half year, and we have an average tenure of 5 years remaining. And our average interest rate is 3.5% in the half. Our benchmark net interest expense guidance for the full year remains at around USD 190 million. So turning now to our full year modeling considerations, which relate to ongoing activities. Based on the strength of our half 1 performance, we now expect organic revenue growth for the full year to be around 8% at the top end of our previous guidance range. And we continue to expect a 3% inorganic contribution from completed acquisitions. Based on recent FX rates, we now expect FX to be a 1% tailwind to both revenue and EBIT growth. And beyond these points, we don't expect any other changes to our guidance. So with that, I'll hand you back to Brian. Brian Cassin: Great. Thanks, Lloyd. So in closing, we've started the year with good momentum with strong H1 financial progress across revenue, margins and cash flow generation, and we now expect to deliver at the top end of our FY '26 guidance range. We've advanced strongly across B2B and B2C, scaling key initiatives and future growth investments. Our recent acquisitions have performed well and have integrated well, and they've strengthened our market position and give us the opportunity to unlock new avenues of growth. We're driving AI initiatives across the business with a clear ambition to lead the next wave of data-driven intelligence solutions, and our cloud transformation is on track to peak this financial year. All of this puts us on track to deliver on our medium-term financial framework. We're very well positioned to sustain our growth and to continue to generate high returns. So with that, I'm going to hand it over to the operator for your questions. [Operator Instructions] Operator, over to you. Operator: [Operator Instructions] And now we're going to take our first question, and it comes from the line of Scott Wurtzel from Wolfe Research. Scott Wurtzel: I guess maybe first one, just on the guidance and great to see you guys raise to the top end of the revenue guide. But with margins staying flat, can you just maybe talk a little bit about where you're maybe investing a little bit more in the business with that incremental revenue growth? And then I guess as a follow-up to that, maybe your view on sort of the structural margins within the B2B business as we kind of get through these dual running costs and lap the impact of the recent acquisitions? Brian Cassin: Lloyd? Lloyd Pitchford: Yes. So I think you said with flat margins. Margins are up 30 basis points. Scott Wurtzel: I meant reiterating the guide, yes. Lloyd Pitchford: Okay. Sorry, I understand. So look, I think we're really confident in the margin outlook for the business. You've seen -- when we put our medium-term framework together, obviously, we didn't have acquisitions to forecast at that time. Organic margin last year was up 90 basis points. First half this year is up 100 basis points. So that tells you that we have a lot of capacity to be able to reinvest and to be able to deliver on the margin commitments that we've got. You look out for the full year, we've reiterated the 30 to 50 basis points, again, very confident in that. As you look out beyond this year, the dual run costs move from a headwind to a tailwind. So that 100 basis points will come back over about 4 or 5 years. We also get back the dilution that we've had from the recent acquisitions. So last year, that was 20 basis points, this year, 30 basis points. So what you can see is that the margin outlook embedded in our medium-term framework is very well underpinned. And that gives us a lot of flexibility, and we said this at the time we outlined our medium-term framework to ensure that we're continuing to invest and innovate. And as Brian said, we see an exciting future as AI really fuels the opportunity of the value embedded in the proprietary data that we have, and we're going to be investing strongly behind that. And we can do that whilst confidently delivering our framework. Operator: And the question comes from the line of Andy Grobler from BNP Paribas. Andrew Grobler: Just a couple, if I may. The first one on productivity. Lloyd, you mentioned that you could see tangible benefits from AI from a productivity perspective. Could you kind of quantify what you're seeing now and how you expect that to move over the next 2 to 3 years as that develops? And then secondly, on mortgage, there's clearly a lot going on in that market at this time. What do you think is the time frame for the market, i.e., the resellers to move to the new system? And also, what are your expectations in terms of how long it takes VantageScore to be kind of fully utilized within that market? Lloyd Pitchford: Yes. Andy, so on productivity, I mean, like everybody, we're just seeing an acceleration of the availability of tooling that can really drive productivity across the group. We have a lot of people in producing product and the ability to be able to increase capacity without adding people in that because of the use of coding deployment, auto coding generation. But looking more broadly across administrative functions, support functions, customer support functions, all of them are showing the benefit of the deployment of new tooling. And that's -- as I mentioned in my remarks, we grew 8% organically in the first half and headcount -- organic headcount was broadly stable. So that kind of shows you the potential in the group. We clearly have a lot of capability in the company is what we do to be able to deploy AI tooling, and that benefits our clients, but also benefits inside the company. So I expect that to continue, and that's going to give us a lot of flexibility, as I said, to be able to deliver on our financial framework, but also to increasingly invest in product innovation and in AI deployment for our customers. Brian Cassin: And Andy, just coming back on to the mortgage market. Yes, there is a lot going on. On the reseller point, I think there's no kind of one answer because I think the reseller market consists of quite a lot of different players, some big ones, some small ones. Probably the big ones are able to cope with the operational changes quicker than the smaller ones. But even that's going to take a bit of time. It's difficult to be precise. I think it will differ based on reseller to reseller. But they will have to change operational processes. Obviously, in a new structure, they'd be calculating the score. They've never done that before. There's lots of requirements around that, which is ensuring that you actually have completely synced up between the actual data and the score. You have audit requirements around that for the GSEs and for their clients. You have billing that you have to set up. You have to set up processes around ensuring that you can answer any consumer disputes that come because today, those consumer disputes around the score data will come to the bureaus. If you split between the actual data and the score between bureau and resellers, you probably have a lot of customer confusion about where that liability relies. So there's quite a lot to do. And I suspect that there will be different time scales for different resellers, but we don't expect this to be very quick. I think sometime in '26 and I say, some will be quicker than others. So hopefully, that answers that question. The second part was VantageScore adoption. I think just reiterate points, I think, that have been made ad nauseam. FICO Score has been the only score available for use for 30 years. So it is embedded in the system in the way that I described when I referenced the GSEs. So it's used across the system. But I think people can move. We've seen that -- we've seen some people move from FICO to VantageScore pretty quickly in other areas. Some will take longer. So I think over the next few years, you are going to see people move. Obviously, those will be individual decisions made by lenders and so on and so forth. But I think over the next few years, you're going to start to see some of that shift. Operator: Now we're going to take our next question, and it comes from the line of Annelies Vermeulen from Morgan Stanley. Annelies Vermeulen: So 2 questions as well. Just coming back to AI. I just wanted to understand a bit better on how that develops into pricing of your products to customers? As you make -- as you embed more AI in these products, is that something you can price for? You mentioned that it's also reducing the cost of developing new products. So equally, is any of that being passed on to customers? I'm just wondering if there's any risk of pricing pressure as a result of AI and how you think about that? And then secondly, just on marketplace in North America, it sounded like growth was pretty broad-based across credit and insurance marketplaces. Is there anything particular to call out in terms of the driver of that in H1, audience expansion, adding more lenders? And perhaps as part of that, could you update on your expansion into home insurance and how that's progressing? Brian Cassin: Just on the first question, I think we see AI as -- the new products that we've introduced have actually all been new functionality. So if you look at Patient Access Curator and Health, that's a new process, which really improves the insurance discovery solution for our clients. And because of the performance of that product, we're able to actually to get premium prices for that. I referenced Model Governance, which would be embedded in the Ascend platform. Again, when you look at the value equation, Model Governance is a hugely complex exercise, a lot of people involved in that, very important from a risk and compliance perspective, very costly. The extent that we automate that and take out significant costs for our clients, that also represents revenue upside opportunities. So we're in the sort of early stages of that, but actually, the evidence that we've seen so far is that this is revenue additive. In terms of the productivity benefits, we have seen those. I think what that means is that 2 really important things. One, we can build more stuff. And secondly, we can actually build more stuff, which gets to market quicker. And I think -- but there's 2 aspects to that. One is actually building the product to a point which people can pilot and test and two, making it operational. And overall, we just see that cadence of new product introduction and the ability to get them to market quicker, leveraging these capabilities is what we're focused on. Clearly, all clients will do an economic assessment of the value that's provided by any solution. That's not going to go away. People don't just accept solutions because they've got AI labeled on them. They will evaluate whether it's better, faster, cheaper or enables them to take -- bring -- take cost out of their own system or give them a better outcome. So that evaluation continues, and we expect that to be no different in the new world. But we're excited about what that does for us given the big footprint of developers we have across the business. We introduced a huge number of products every year. I think that cadence is going to improve, and I think that's really a positive. Lloyd Pitchford: And I'll touch on marketplace. So just lending more generally in the U.S., I think we're in our third quarter of sequentially improving lending position. And you can see that in the performance of the Core Financial Services business outside of mortgage. The place that first showed up was very strong growth in Financial Marketplace inside the Consumer business, and that continues to grow very strongly. And Insurance continues to grow well even outside of the one-off catch-up that we had, which I think was helpful in the quarter, but it also reflects that the Insurance business was actually a bit better than we thought it was with the volumes that we reported last year. Brian referenced in his remarks the launch of HomeHub. So just like we launched the AutoHub where people can claim their car and then we use all of our data assets to help consumers around their car owning journey, the principle is the same around the HomeHub, including home insurance. So we'll be bringing all of the assets that Experian has around home, to bear in the direct-to-consumer market. And we'll tell you a bit more about that as that product launches analytics. Operator: Now we'll take our next question, and it comes from the line of Simon Clinch from Rothschild & Co Redburn. Simon Alistair Clinch: I just got 2 questions here. The first one, I just wonder if you could just clarify your assessment of the 30% market share that VantageScore has in certain parts of the market. I just want to make sure I understand exactly what you're referencing to there? And then my second question to follow up would just be on -- it's very interesting that the launch of the Cashflow Score recently. And I'm just kind of curious as to where we are in terms of the -- I guess, the bundling or even integration of consumer permission data sets with Core Credit and how that's going to really feed the innovation pipeline going forward? Because to me, that seems to be one of the more unique opportunities for Experian. Brian Cassin: Great. Okay. Well, look, on the 30% market share actually comes from our assessment of our internal data. Obviously, we don't cover whole market, but we have a very big market share, and we expect actually that, that will be replicated across the other bureaus. So that's across all unsecured lending, across auto, across card, personal loans and so on and so forth. The biggest penetration is actually in card, which obviously is the biggest category and also in fintech. So for example, in fintech, VantageScore has over 50% market share across all fintech categories. So I think you can see that where there has been competition available, people have adopted alternative scores. And so I think you turn back then to the mortgage market where VantageScore has not been available for 30 years and now is. So I think it'd be a pretty reasonable assumption to say that VantageScore will gain market share. I think on the cash flow score point, we're very excited about this product. And I think this is kind of following what we've seen really across other territories when open banking was introduced, which is, one, consumer permission data has a role to play. The role is really an enhancement in addition to core bureau data is not a replacement. So the really powerful solutions combine the 2. And therefore, we are in a fantastic position to develop this market and to be the leading player. And frankly, we've got the best solution in the marketplace. And I think we're going to win in this category, and we're going to win very big. And the reason is because only we can really do that combination and the attributes and scores we've developed have been really leveraging consumer data that we've had access to at scale. That has a lot of resonance in the marketplace, and we're seeing a lot of client interest in this. Operator: And we take our next question, and it comes from the line of James Rose from Barclays. James Rosenthal: Two, please. The first one is how you think AI could affect your medium-term model. I think on one side, you've got productivity evident now, which could push you above the 30 to 50 bps or if you kept the margin profile the same, presumably revenue growth could go up if you've got faster product development or more products coming to market. So I just wonder how you think it could sort of move the needle in sort of longer term? And then secondly, I notice your -- the point you just made that you're now enhancing credit data with your Cashflow Analytics. Equifax have made some comments around offering TWN in credit reports. Just wondering whether you think there's a need to counter that and to start building your own sort of employment and verification data a bit more rapidly? Brian Cassin: Okay. Lloyd, do you want to answer the first one in terms of... Lloyd Pitchford: The medium-term model. Yes. I think, James, clearly, AI is a rapidly developing area. I think on the one hand, it's almost impossible to forecast all the different avenues. What you can see in the way that we've been performing is we have a lot of flexibility. And I think that's going to be important. We can't forecast out exactly how it will develop over the next 3 or 4 years, but we have financially a lot of flexibility to be able to continue to deliver good margin progression as our business scales and continue investment to make sure that we win in this new field. We have just huge embedded value in our proprietary data sets that AI will accelerate the monetization of, and we plan to invest to make sure that we can do that, and we can do that while still adding margin. Brian Cassin: Yes. And on the -- just on the sort of employment data, I mean, as you know, we have been building our employment verification business over the last few years. And we've gotten to some significant scale in that. But I think that the main point really is just that people continue to innovate. All bureaus continue to innovate and offer solutions to their clients that they think might add additional value. The Work Number flag is one example of that. There are many others. So I think -- but I think when we look at the cash flow and the uptake on the cash flow, the interest that we've seen on that, I think that's very significant. It's obviously really significant for people at the lower end of the borrowing spectrum, more thin file and less prime customers. But nonetheless, we think it's a very significant new innovation, and we're excited about it. Operator: [Operator Instructions] And now we're going to take our next question. And the question comes from the line of Ben Wild from Deutsche Bank. Ben Wild: Two for me as well, please. There's obviously a huge range of discussion on AI and its potential impact on your business. But specifically on the Consumer Services platform, you talked consistently over many years about building a platform that's focused on supporting consumers and enhancing their financial lives. I know that you talked about your own internal AI assistant, EVA. But how do you think about protecting your consumer audience as consumers increasingly adopt competing AI tools? And how do you think about integrating your offer with some of these tools such as ChatGPT? And as an adjunct to the question, are you seeing any impact on active user intensity as ChatGPT penetration grows, for example? Second question is on -- again, on the consumer platform, sorry. If you look at consumer reviews for the Experian app, many consumers flag that access to FICO Scores is an important differentiator versus some of your other very large platform competitors. How important is it to retain the FICO Score offering consumer services? And is your thinking on that point evolving in light of recent events? Brian Cassin: Okay. Well, thanks for the question. So I'll deal with them one by one. So first of all, I think on the -- first point to make, I think, on the metrics that we're seeing across our consumer business continue to trend very positively. That includes organic search traffic, which has actually increased this year, and that's really in contrast to a lot of other properties. And the reason is because of the strength of the brand. We generate a lot of traffic from our brand. That continues. That's been enhanced by the investment that we put in our brand over many years. And we think that, that is a very important point as we think about how channel distribution is going to change over time. What we've seen is a really significant increase in traffic from the AI platforms in excess of 1,000% growth over the last year. But the traffic coming from there is still very small, but it is obviously going to be a very important channel going forward. And we'll be focusing a lot of our efforts on making sure that we have the same level of visibility and profile there, which we do actually. And that's really down again to the strength of brand plus also the content and so on and so forth. So I think that's a future opportunity for us as we think ahead. On the EVA capability, I think this where this really sort of makes a big difference because that capability is able to do things which other AI agents will not be able to do. And specifically because it will be built around capabilities that will have deep access to our data and also enable them to take actions, for example, like freezing your credit report or retrieving your score or so on and so forth. So we've seen really significant engagement on that, over 2 million interactions so far. So I think we're pleased with that, and I think we'll continue to build out those propositions. So all in all, I think as we look forward, we're excited about where that goes because we think the strength of our brands, the capability on the platform continues to position us as a winner in the longer term. On the FICO Score thing, yes, that is a part of our offer. We've had that for a long time. It was introduced over 10 years ago. I think since we introduced that, there's many, many more -- much more value that we provide on that platform. So the reliance on that as a value proposition, it's still important, but it's not as important as it was, and we'll continue to evaluate all those propositions as we go forward. Operator: Ben, any further questions? Ben Wild: No. Not for me. Operator: [Operator Instructions] And now we have another question, and it comes from the line of Simon Clinch from Rothschild & Co Redburn. Simon Alistair Clinch: Sorry for sneaking just one final one in. Just a very quick one, Lloyd. Just on share repurchase, you basically -- as far as I can see, you pretty much completed your guide for the year. Just how do we think about capital allocation in the back half of the year? Lloyd Pitchford: Yes. So we obviously update on capital allocation really once a year in May. You've seen the strength of cash generation. We finished the half at 1.8x. If we don't do any further acquisitions for the rest of the year, we'd finish the year at about 1.5x. We expect to do some other acquisitions. We've got a good pipeline. But you can see with this level of cash generation, we have a lot of financial flexibility for capital allocation. So we look forward to updating you in May. Operator: Dear speakers, there are no further questions for today. And I'd like to hand the conference over to your speaker, Brian Cassin, for any closing remarks. Brian Cassin: Great. Well, thank you. So that concludes today's session. Thanks, everybody, for joining us. Hope you all have a good day, and we look forward to speaking to you again in January for our Q3 update. Lloyd Pitchford: Thank you. Operator: This concludes today's conference call. Thank you for participating. You may now all disconnect. Have a nice day.
Operator: Good morning, ladies and gentlemen, and welcome to the Loblaws Inc. Third Quarter 202 Results Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 12, 2025. I would now like to turn the conference over to Roy MacDonald, Vice President, Investor Relations. Please go ahead. Roy MacDonald: Great. Thanks very much, Danny, and good morning, everybody. Welcome to the Loblaw Companies Limited Third Quarter 2025 Results Conference Call. As usual, I'm joined in the room this morning by Per Bank, our President and Chief Executive Officer; and Richard Dufresne, our Chief Financial Officer. So before we begin the call, I'll remind you that today's discussion will feature forward-looking statements, which may include, but are not limited to, statements with respect to Loblaw's anticipated future results. These statements are based on assumptions and reflect management's current expectations. As such, are subject to a number of risks and uncertainties that could cause actual results or events to differ materially from our expectations. These risks and uncertainties are discussed in the company's materials filed with the Canadian securities regulators. Any forward-looking statements speak only of the date they were made. The company disclaims any intent or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, other than what's required by law. Also, certain non-GAAP financial measures may be discussed or referred to today. So please refer to our annual report and other materials filed with the Canadian securities regulators for a reconciliation of each of these measures to the most directly comparable GAAP financial measure. And with that, I'll turn the call over to Richard. Richard Dufresne: Thank you, Roy, and good morning, everyone. I'm pleased to report that we delivered another quarter of consistent financial and operational performance reflecting our ongoing focus on retail excellence and our commitment to deliver value, quality, service and convenience to Canadians. Top line growth continues to be very strong, supported by the opening of 76 stores over the past 12 months, an increase in our retail square footage of 2%. On a consolidated basis, revenue grew by 4.6%, reaching $19.4 billion. Our drug retail business grew at 3.8%, and our food retail business grew at 4.8% in the quarter. Adjusted EBITDA increased by 7.2% to $2.2 billion and margin improved by 20 basis points to 11.4%. Adjusted diluted net earnings per share grew by 11.3% to $0.69. And on a GAAP basis, our net earnings per share increased by 4.8%. In food retail, we delivered higher sales, traffic and basket growth, once again driving significant tonnage market share gains. Absolute sales outpaced same-store sales by 280 basis points at 4.8%, reflecting our new store growth, while our food same-store sales grew 2%. The impact from the stores we opened so far has been in line with expectations. We continue to see positive momentum across key categories in the right-hand side of our stores, notably in apparel, cosmetics and H&E. That said, headwinds from liquor, specifically in tobacco and our exit from the optical business led to a net 30 basis point negative impact to same-store sales this quarter. Our Q3 internal CPI-like food inflation was lower than Canada's grocery CPI of 3.6%. Our average article price data, or AEP, which reflects our customers' actual basket mix and includes nonfood items not included in the CPI basket was also lower than CPI. Our lower internal inflation metrics demonstrate that Canadians who shop our stores are finding more value. Cost increase requests from large global vendors continue to trend well above historical levels. In response, we're pushing back harder than ever to ensure that any increases we accept are justified. Our Hard Discount banners continue to deliver strong sales growth based on consumers' ongoing focus on value. Momentum continues to build across the Hard Discount stores we added to our network through conversions and new builds, proving that our strategy is resonating very well with Canadians. We're also pleased with the momentum and strong performance in our conventional stores, which improved tonnage market share within the conventional sector. This quarter, we announced that Specsavers would be opening 111 locations within Loblaw stores to replace our Theodore and Pringle optical business. Exiting this business resulted in a $30 million adjusted charge this quarter. Going forward, we expect it to negatively impact food same-store sales by an approximate 20 basis points until we lap this transaction, while the exit from the Theodore and Pringle business, coupled with our new agreement with Specsavers is expected to generate approximately $10 million in annual run rate earnings accretion. In drug retail, absolute sales increased 4.3%, excluding the impact of the sale of Wellwise, while same-store sales grew 4%. Pharmacy and health care services grew same-store sales by 5.9%, driven by broad strength in prescription and new health care services. Our specialty drug prescription growth continued to lead our pharmacy performance. Patients continue to respond positively to the convenience and expanded level of primary care we offer through our more than 1,800 pharmacies across the country, including our 209 in-store clinics. We're on track to reach our target of 250 in-store clinics opened across Canada by the end of this year. Our front store same-store sales continued to improve, growing 1.9%, reflecting the ongoing strength of our beauty category. This more than offset the impact from the exit of certain electronics category in the prior year, which will no longer be a headwind to same-store sales after the fourth quarter. We continue to be pleased with the underlying strength, profitability and sales momentum of Shoppers Drug Mart front store business. Online sales in the quarter increased by 18% across our retail businesses. Delivery continues to lead growth in the online grocery channel, and we continue to be pleased with our online sales penetration in both food and pharmacy. Our retail gross margin improved 20 basis points, led by drug retail, reflecting improvements in shrink in both drug and food. Food trading margins remained stable. Our SG&A rate as a percentage of sales was stable with operating leverage from higher sales, offsetting incremental costs related to the opening of new stores and the successful ramp-up of our new automated distribution facility in East Gwillimbury. This new DC continues to ramp up ahead of plan. Costs remain lower than budgeted, and we are on track to ship significantly more cases than planned this year. We have begun fulfilling orders in our ambient section, which is ramping up a full quarter ahead of plan. We're making considerable progress on the construction of our second automated DC in South Caledon, Ontario. The project is on schedule. In the quarter, retail adjusted EBITDA grew 6.8% and EBITDA margin increased by 20 basis points to 11.1%. PC Financial's revenue increased 5.5%, driven by higher sales in our mobile shop and higher insurance commission income. Our PC money spending and savings accounts are performing very well. Customer account deposits increased by $174 million in the quarter. This increase in deposits is evidence of strong customer engagement and helps us lower our bank's funding costs. The bank's adjusted earnings before tax increased by $13 million or 36.1%, primarily driven by higher revenue, lower operating costs and favorable impact from our ECL provisions. We remain very comfortable with the risk profile of the bank's portfolio. We continue to take a conservative position in our loss provisioning with a strong and very well-capitalized balance sheet. Free cash flow from the Retail segment was $325 million in the quarter. And in the quarter, we repurchased $450 million worth of common shares. Our balance sheet remains strong, and we continue to improve our key return metrics. Our return on equity is 24.8% and our return on capital is 11.9%. Looking ahead to Q4, while it's still early in the quarter, we are confident our results will be in line with our financial framework. Reflecting our strong performance year-to-date, we now expect full year adjusted EPS growth to increase slightly from high single digits into the low double digits, excluding the impact of the 53rd week. Our assets are well positioned. We are executing well, and we are investing for the future, all while delivering consistent operational and financial performance. I'll now turn the call over to Per. Per Bank: Thanks, Richard, and good morning, everyone. I'm really pleased with our third quarter performance. We continue to generate strong revenue growth through a combination of same-store sales strength and the positive impact of our strategic investment in new stores. This top line growth of 4.6% allowed us to deliver 11.3% adjusted EPS growth this quarter and will help us support our long-term earnings expansion. As Richard discussed, we accomplished this while increasing our spending to support the opening and ramp-up of our new stores, the accelerated transition to our new 1 million square foot DC and the lapping of some real estate gains from last year. This is a clear demonstration of the strength of our business and our ability to deliver consistent financial results. With our broad footprint, we know many Canadians are looking for opportunities to get the most out of their budgets in this challenging economic environment. And we believe it's our responsibility to deliver the quality, value, service and convenience across every corner of our business. Every day, we fight to earn our customers' business, whether that's through competitive pricing, meaningful promotions, through omnichannel service or personalized rewards through our PC Optimum program. As a result, more Canadians shopped our stores, and we generated $857 million in additional revenue. In drug retail, we delivered another quarter of positive momentum in our front store sales. Our prestige cosmetics continued to be very strong, supported by fragrance and derm categories. Beauty categories remain strong. In Pharmacy and Healthcare Services, we saw ongoing strength in acute and chronic strips and in our specialty drug and new prescribing services categories continue to deliver strong double-digit growth. In drug retail, we're enhancing our omnichannel presence, offering our customers more choice and speed. We're growing delivery through Skip and now Uber Eats and scaling our buy online, pickup from store network to cover 750 stores by early next year. This delivered even greater convenience supporting several customers promise to help make lives easier. Across the country, we have now opened 12 new pharmacies and 55 new pharmacy clinics this year, providing expanded scope of care service to Canadians. In food retail, same-store traffic was up and basket growth was positive. This contributed to tonnage market share gains. Our Hard Discount banners also continued to outperform same-store sales growth and drove the majority of our absolute growth. In the quarter, we opened 19 Maxi and NoFrills stores. With 16 of these being small format stores, we are bringing Hard Discount to underserved urban markets as well as suburban communities. We see this as an investment to strengthen our position in what is a long-term consumer trend towards value. Similar, we saw higher same-store sales growth rates in our Superstore banner. Within the right-hand side, we saw strong growth from our general merchandise refresh, and we're also showing very positive results from the right-hand side inspired refresh in our medium-sized stores. Turning to tariffs. Following the removal of Canadian counter tariffs in September, the related cost increases and corresponding tea labels were removed from our shelves as we sold through the inventory. During this time, we received a lot of positive feedback that our efforts were helping our customers make informed decisions. As always, from every challenge comes opportunity. More customers are discovering quality Made in Canada products. So we continue to support these customers and have now sourced and onboarded more than 200 new Canadian vendors since the start of this year. We actually believe that this is good for both our customers and good for Canadian producers and manufacturers and good for the economy. Our digital sales growth remained very strong, and our weekly engaged users hit an all-time high as we continue to differentiate ourselves by enhancing customer experience with more personalization and choice. We're excited to have begun launching Uber Eats across our network. This provides customers with optionality across third-party delivery providers, which already includes Skip, Instacart and DoorDash. And some of you may have noticed something new on your last shop, 3 of our GTA NoFrills stores have implemented PCO Go. This is a new feature and is designed to provide a faster shopping experience, enabling customers to scan grocery as they shop with a real-time estimated total of the bill and streamlining the checkout process. Of course, this has only been less than a week, but we are seeing a 90% OSAT for the customers who have tried this new feature. So -- so feel free to take it out. It's great. We are pleased with the strategic foundation that we have built and are excited about the opportunities that lie ahead. The strength and diversity of our business provides differentiation, unique growth opportunities and allows us to deliver consistent operational and financial results. This provides the foundation to make substantial investments today and to accelerate our longer-term growth ambitions. Freight as a Service is a great example. Today, we are leveraging our existing supply chain delivery infrastructure, enabling us to rent out our empty trucks as a return from the store delivery routes. Next year, this business is expected to generate more than $200 million in EBIT, delivering another year of more than 20% growth. Similarly, our Advanced Media business is expected to generate over $100 million in EBIT next year. So we're scaling this business with the rollout of more in-store digital screens in partnership with STRATACACHE. Customers like the immediacy and relevance of in-store screens, where it's a beauty tip, seasonal promotions or a great product worth trying, the content feels personally and useful in the exact moment it matters. So advertisers value the ability to reach 4 million plus in-store shoppers every single day at the point of decision with measurable impact. A visible example of this growth opportunity is that you will start to see more screens with new content in our stores over the coming months. And we're very pleased with the strategic advantage our rich first-party data provides. It seems every week we are implementing a data-driven solution that allows us to better understand and serve our customers, improve our operations, make smarter decisions and deliver even more relevant offers. For example, we are now aggregating customer data to guide and optimize space planning for our store network. This initiative is driving a material sales lift and it ensures each store better reflects the needs and preferences of its local customers. Our data assets will be a key differentiator for Loblaw's continued success and growth. These examples plus our PC Optimum loyalty program and our expanding e-commerce business supports higher growth, higher-margin business opportunities that should have a flywheel effect across everything that we do. This year and next will mark an important milestone in our future growth. We're well on our way in the construction of the second 1 million square foot DC in South Caledon, an identical trend to the East Gwillimbury DC that we are currently ramping up. We remain encouraged by the success of our new small format discount stores and the new clinic [indiscernible] pharmacies. And tomorrow, November 13, we will be excitedly watching the new opening of our second T&T in the Seattle area. And by end of next year, we expect to have another 5 T&T stores open in Washington and California. So our strategy remains anchored by unmatched core assets, excellence in retail operations and consistent operational and financial performance. So looking ahead, we are well positioned to serve the everyday needs of Canadians today and in the future. I'm excited about the launch of our Holiday Insiders last week. This has been a holiday tradition for more than 40 years in Canada. Our team and I do take great pride in showcasing innovative products crafted so Canadians can celebrate and share the spirit of the season with family and friends. I'll just invite you to try my personal favorite this year. I know it's probably always ice cream. So it's the Santa's Milk and Cookie ice cream that has been received very well by our customers. I'd also like to call out the amazing generosity that happens every day in all of our grocery stores across the country. I'm very proud to share that each of our stores is partnered with at least one local school to help support the students with their access to nutritious food, removing a significant barrier to learning. This year, the PC Children's Charity met its long-term goal of feeding 1 million Canadian children. Thanks to the support of our customers and colleagues, PC Children's Charity is the nation's largest share of direct-to-school food program, where 100% of all customer donation goes to feed the students in their own community. I like to thank all members of the Loblaw team for, once again, their tremendous efforts. Your passion and hard work are what allows us to consistently deliver the quality, value and service that people in your community relies on every single day. Finally, I will close by letting you know that we have successfully completed the global search for the key role of President for Shoppers Drug Mart. So I'm very pleased to announce the appointment of Gregers Wedell-Wedellsborg as President. Gregers will be joining us January 26 next year, following his transition from Matas Group, where he's currently Group CEO. He will officially take off his responsibilities on March 16 after a thorough onboarding process. Matas is a publicly traded health and beauty retailer with over 500 locations across Denmark, Sweden, Norway and Finland. And Gregers is an exceptional leader and retailer with a proven track record in driving growth and performance, digital innovation and operational excellence. Shoppers has a well-established strategy and leadership team, and I'm highly confident with Gregers will help take the organization to the next level. In making this announcement, I would also like to acknowledge the significant contribution of David Markwell, Interim President of Shoppers and Head of our Technology and Analytics Group. David himself into this interim role with great energy and enthusiasm and has made a tremendous difference. He will, of course, support Gregers transition until he starts his official accountabilities on March 16 and also continue his role as Executive Vice President, Technology and Analytics as well as supporting several key enterprise initiatives. Yes, that was the end of my script. I know it was long, but I just had so much I wanted to share with you. With that, I'll now open the floor for questions. Operator: [Operator Instructions] Your first question comes from Irene Nattel of RBC Capital Markets. Irene Nattel: A lot of great color there. I was wondering if we could please just start with what you're seeing in terms of consumer behavior. Same-store sales growth of 2% in food was consistent with Q1, but admittedly a deceleration from the Q2 level. So just wondering below the surface, how should we be thinking about that? And how should we be thinking about the growth rate on a go-forward basis? Per Bank: Thank you. Good question. On consumer behavior, I would say that we are seeing more of the same. So our promo penetration stays high. It's higher than last year, but it's actually not higher than quarter 2. Customers are still shopping more and more in Hard Discount, but we are not seeing it accelerating. So basically, we are seeing more of the same with regards to customer sentiment. At least that's what we see right now as we speak. Our food or our grocery same-store sales number, just trust me, it's continued to be an important number for us, even though that more sales will be coming from our new stores and will help fuel our long-term performance. And also, I think it's important also to look at our same-store sales in 1/3 of our business in Shoppers because there, we saw the drop same-store sales at 3.8% and our front store sales at 1.9%, which was the best quarter in 9 quarters. And adjusting for the electronics, then we are at a 3% kind of growth in front store. So I think that's how I see it. So I'm pleased with our Q3 performance as we are heading into Q4. But maybe you have some more you will share, Richard, on this. Richard Dufresne: Yes, Irene. So specifically, if you look at same-store sales in Q3, we need to go back to 2024, okay? As you know, we had -- we hit some bumps in Q4 in the first half towards the end of the first half. And so internally, we had to play some catch-up to be able to recover over that bump. And so that led us to be somewhat more aggressive in the second half last year to be able to deliver on our market share objectives. So now we're comping through that. So that's simply us comping over what we did last year. Having said all that, I think what's key for us is if you look at our total food sales growth of 4.8% and our internal inflation, which is less than 3%, the delta is essentially tonnage growth. So we've been gaining significant tonnage growth. We're on our way to deliver the best market share we've ever had on top of the best market share we had last year. So we feel very, very good about the business. But you're going to see this wonkiness in same-store sales for food for Q3 and Q4 this year. Per Bank: And I think maybe I'll just add to that, Irene, that how we see customers are not changing, and we saw it a bit in Q2, but also in Q3. If you look at meat, red meat market prices are increasing because of commodity prices increasing. And then customers, they do understand how to navigate that because they're not just buying the same as they did last year. So they're buying more chicken as an example. And you'll see the same in other categories. If berries goes up, then they'll buy the cheaper berries or not buying berries and buying something else. So that's how customers they continue to navigate through inflation and keeping their costs low and of course, as well shifting to discount for some of our customers. Irene Nattel: That's great. And just switching to Shoppers. Can you talk through how we should think about the sustainability of that Rx print as we lap sort of year-over-year of continuous sort of, let's call it, mid -- higher mid-single-digit same-store sales? Richard Dufresne: Yes, Irene, the specialty drug category continues to grow quite significantly. We're going to see the introduction of less generic drugs in that sector next year, which will affect the top line. But if we look historically on the introduction of generic drugs in general for our business, it's actually been a positive because we get more volume. And so that ends up generating more dollar profits for the organization. Per Bank: Yes. And maybe when the prices come down, we will see sales could increase as well. So what we know right now, it looks like we will continue the trend that we have seen in the past. Irene Nattel: That's great. And I'll be sure to try the Santa's Milk and Cookie ice cream. Per Bank: That's really good, Irene. Operator: Your next question comes from Michael Van Aelst of TD Cowen. Michael Van Aelst: I just want to follow on some of Irene's questions. But -- so you talked about market share gains in both discount and full service. And I think it's clear to a lot of people what you're doing in discount and how you're trying to gain share. But on the full service side, where you're not really adding stores, how are you gaining tonnage share? What do you -- what would you say are the -- is behind those gains? Richard Dufresne: Yes. So just to be exact, and we say this every call, like the conventional channel share is going down, but we're doing better than our peers. And so we see that very clearly. So we're doing better than our peers in conventional. And obviously, we're doing better than peers on discount. Per Bank: Yes. And we have a number of initiatives in our conventional business. So in our Superstores, as you know, we are working on the right-hand side adding more brands into clothing, in food, we are increasing our multicultural assortment. We're making a better shopping trip. We are working more with our digital offers. So we're doing a lot when it comes to our market division, whether it's our Fortinos or Zehrs or Loblaw stores. There, we are giving customers more value in the form of better service, better products, but also better pricing. So we're finding that sweet spot of combining value with the quality that we serve in our conventional banners. Richard Dufresne: Yes. And net-net, just to be very clear, net-net, we're gaining. When you add both of them together, we're gaining share. Per Bank: Yes. And we shouldn't forget that T&T. It's not in -- we don't know about the share, but we know that if we're adding that, it's not in the Nielsen data, then it's even more because T&T is still a growth engine for us, both in Canada and of course, what we're seeing in the U.S. Michael Van Aelst: Okay. So conventional, I think we've heard in past quarter is that conventional was growing a little bit. But it sounds like this quarter, you're saying it hasn't -- it isn't growing, but you're just... Richard Dufresne: No, no, it's the same. We've been saying the same thing, Michael. We've been saying the same thing. Conventional channel. Per Bank: It's not growing at the same pace as the others. Richard Dufresne: And -- but we're doing better than our peers. Michael Van Aelst: Okay. But is it -- it's not growing at the same pace, but is it growing? Richard Dufresne: Yes, it's growing. Sales growth in market are up, same-store sales in market are growing, yes. Operator: The next question comes from Mark Carden of UBS. Mark Carden: So to start, you guys called out strength in your Superstore business. Was the contribution from these formats any bigger or smaller relative to last quarters? And then are you seeing many shifts in how consumers are shopping the stores? And then just your thoughts in general on merchandising for the holiday? Per Bank: So no, I think it's more of the same. And our Superstores have a very, very strong position, especially in the West, where it's driving some significant sales and the DM, so especially in the home. So toys, we're doing very well, home and also clothing. And that's, of course, helping on our overall margin. So in general, Superstores is a good fit to us. And now we also -- so our supermarket division, they combined our Atlantic Superstores and our Superstores in the West into one Superstores from coast to coast. So now we have 180 of those Superstores, which, of course, we'll try to get more of having those combined. Mark Carden: Okay. Great. And then just on the drug retail side, what have your learnings been thus far from the Shoppers locations that have offered some of the expanded health services capabilities? Have you found that it leads to higher spend in the front store as well? And just any quantification on the lift? Per Bank: Yes. Overall, they're doing better. And by end of this year, we will have met our target of having 250 Shoppers Drug Mart with clinics. So of course, right now, it's mostly Alberta and it's Nova Scotia. And then we are seeing how much more we can do in other provinces as they open up for more scope. So we're really pleased with the performance we're seeing there. And of course, it has a higher the rest of the business. Operator: Your next question comes from Mark Petrie of CIBC. Mark Petrie: I just wanted to follow up maybe on the competitive landscape. Just to clarify. Do you think the comment of gaining tonnage market share holds on a same-store basis? Or would you say it's more stable there? And then second, I know CPI is noisy. So when you do your price benchmarking, would that suggest that Loblaw is an outlier with an internal inflation below CPI? Or do you think that's essentially consistent across the industry? Richard Dufresne: I think -- I don't know what the others have, so I can't comment. But I can tell you like from a market share perspective, year-to-date, we're gaining share, and we're ahead of our plans for last year and on our way to finish very strong. So yes, we are gaining share. Per Bank: I think on the market, for me, it stays very rational. It's a good competitive market to the benefit of customers here in Canada, but it also stays rational. Mark Petrie: Yes. Okay. And then on Shoppers, also 2 questions. Just based on the behavior that you're seeing, how would you characterize consumer confidence? I know you called out strength in beauty, maybe just behavior within that category, if there's any color? And then second, what has the impact been of your shift in [indiscernible] approach on price and promo? Is there any adjustments to how you're positioning on that today? Per Bank: I think the consumer sentiment, again, as I said before, it's more of the same. And we are seeing some good growth in fragrance and in the derm category. So customers might not buy as many big electronic items, but they buy -- they definitely continue to buy fragrance and derm. So we're seeing a good strong uplift, and that's helping our overall sales in Shoppers Drug Mart. We have not changed the way that we promote in shoppers. We have lower prices. We started that in November last year, and we continue to do so, but we have not really changed the way that we trade in Shoppers. Richard Dufresne: Yes. Our business in Shoppers is pretty steady like steady as she goes. Mark Petrie: Yes. Okay. Fair enough. And then just last one, maybe just on by Canadian. I think last quarter, you had commented that it accelerated from Q1. How would you characterize it as a factor in Q3? And what do you think the momentum is on that? Per Bank: Yes. No. So after the tariffs have gone, so we in Canada have moved the territory tariffs, then prices on direct imported products from the U.S. has gone down to normal. And of course, we are seeing some customers who are going back to those products that they love now that they are much cheaper than they were, and that will have some impact on Canadian sales. Overall, Canadians just love to buy Canadian products, and that's also why we have added another 200 suppliers this year so far. So it's still up, but it's not up as much as it was before because of lowering prices of those products from the U.S. Operator: Your next question comes from John Zamparo of Scotiabank. John Zamparo: I wanted to ask about private label penetration. And I wonder if you could share the delta of growth rates in private label versus national brands in Q3 compared to recent quarters? And is there any change in terms of response you're seeing from national brands to try to support tonnage growth? Per Bank: For us, we like growth both in national brands and in control brands. So we like growing with both. Right now, we are seeing that our no name, especially in our discount division is growing ahead of everything else. So customers are seeking the good choices that we have no name. Overall, we don't see any big significant shift to control brand or to the big national brands. But no doubt that the big players, the big national brands, they need more volume. So -- but that might change over time. But for now and also what we see right now is that it's more of the same with a little bit of favorability to our no name plus right now that we're in the middle of our insiders launch, that's doing incredibly well for us. John Zamparo: Okay. And I wanted to ask also about e-commerce growth. It remains elevated. I wonder how you think about this? And if you could talk about the evolution of profitability from these sales because it's good to see the sales growth and market share, but margins are lower on these sales. So I wonder how margins are evolving as this business grows. Per Bank: Yes. So if I can just talk about the market share and Richard maybe a little bit on the profit. But overall, we're gaining market shares. And we have a market share in online food that are way above our overall market shares. And with having added Uber, I think, 2 weeks ago, we're seeing a really, really good uplift there. And what we are really pleased about is that the penetration of customers shopping online food is increasing a lot in our Hard Discount stores. So in NoFrills, it's up a lot. So we are giving access to online food to many more Canadians and they can access Hard Discount where they get more value for their money. And just one overall for the profit before I give it to you, Richard, is that we don't have our own trucks. So a man and a van is very, very expensive. And since we use the delivery services, actually margin is okay for us. It's not as good as if it was online, but it's still very, very good. And also customers who shop online, they also tend to shop more in our stores. So overall, it's good for us. So we are pleased, and it was an 18% uplift in online sales. It's a big part of our business. And we do expect that, that's going to -- that kind of growth levels would continue into next year. Richard Dufresne: Yes. So the drag -- additional drag on earnings is minimal because essentially, the fastest-growing segment for us is PC Express, which means we pick in store and we have a third-party deliver to home. So we're not paying for the delivery. So the impact on earnings is not that significant anymore. So we feel really good about growing this as fast as we can. Per Bank: So when we are into loyalty and online and digital, I just want to state that last quarter, I talked about AI for the tool we had for district managers and many, many companies, they do a good talking about AI. But due to the excellent team that we have, we're actually delivering because that tool now is out in 43 districts. And in quarter 1, it will probably be out in our entire store network. So we have a lot of great use cases within this. Operator: The next question comes from Vishal Shreedhar of National Bank. Vishal Shreedhar: With respect to your real estate program, I know off the top, you indicated that it was in line with expectations. But as you look at your various projects, is there anything that's within the projects, whether shoppers or the small format NoFrills that's coming in better than expected and maybe you'd like to tweak going forward and accelerate one and deemphasize another? Richard Dufresne: I think everything is going pretty well, Vishal. I think what is clearly very successful is small format urban. Shoppers continue to click along. Each one we opened is doing really, really well. And as we've said in the past, like outside urban areas, we're going to go with a much slightly larger box. And the few we've opened this year, we're very happy with. So, so far, so good. The top metric we're focused on is sales. And so far, when we look at the sales of these stores, we're happy. Vishal Shreedhar: Okay. With respect to industry square footage growth, your materials indicated that it was up. Do you have a sense of how quickly Loblaw is growing versus the industry? Are you all in line? Or are you going a little bit quicker in terms of... Richard Dufresne: Just a little bit, like we said 2% over the last 12 months. In food, it's less than 2%. So -- but we've been playing catch-up. And I was actually looking at this figure this week, like our square footage share in Canada is not yet back to the level that we were in 2019. So we've been playing a bit of catch-up. We're going to catch up to that next year. So for us, it's pretty sensible. And so far, we feel good about all the stores we've opened. And as long as that continues, we'll keep going. Per Bank: And many of the new stores we're opening, they are about 10,000, 15,000, 17,000 square foot where previously we might have opened them at 40,000, 50,000. So yes, we are opening more, but less square foot and of course, also less sales. So that's also a big difference. So don't only look at the -- and I know that you don't at the numbers. Vishal Shreedhar: With respect to e-commerce growth, still very strong. And obviously, we're putting CapEx dollars in new stores. Do you anticipate the e-commerce growth to taper at some point? Or do you anticipate this accelerated growth in e-com to continue for several years? Per Bank: I think your guess is as good as mine. But if I can just look at other countries, I think that probably that's the best measurement of guessing where it's going to land. I think overall in Canada, penetration of e-com in food, it's about 4%, above that number. We are higher than that. Would it end up being 8% or 10%, I don't know. In the U.K. right now, after many years where everyone they really went for online food, it's about 11%. In Germany and France, it stays about 4%, 5%. So U.S., I'm not aware of the number. So we predict that growth level of whatever, 15% as an industry over the next few years. And at some point, yes, it is going to take off because so many customers, they want to do both. They also want to go down. They want to touch their produce. They want to look at what they buy. They want to get the experience going to stores. So I think 7, 8 years ago, I think we all in our industry thought that there was no need to build new stores, but there definitely is because customers, they want to shop and many customers, they are not good at planning, and you also need to be good at planning to shop online. Richard Dufresne: And one thing I would add, Vishal, is a phenomenon that's definitely affecting the top line growth of everybody is the advent of the new gig players, like all the gig players are filling up their channels, whether it's Uber, Instacart, SkipTheDishes. So as everybody sort of fills up their channel, it's going to lead to higher growth. Once that's all filled, like I think you're going to get to a more normal growth. We don't know what that number is yet. We'll figure it out probably 2 years from now. Operator: Your next question comes from Chris Li of Desjardins. Christopher Li: It sounds like there's a lot of interesting and exciting developments within your Advanced Media business. If I heard you correctly, I think you're targeting like $100 million of EBIT next year. I'm just wondering, are you able to share what is the level right now in this year in the Advanced Media business? Richard Dufresne: Yes, it's lower than $100 million. Christopher Li: How much lower... Richard Dufresne: We said we would mention it when it reaches that number. Per Bank: Yes. I think... Richard Dufresne: So it starts with a 9, okay? And that's all I'll say. Per Bank: I think over time, also the STRATACACHE deal will help us generate more and more income there. But that's going to be rolled out over the next year. So all the screens in all our stores. Christopher Li: Okay. Okay. That's helpful. And then just you mentioned about Ozempic and Wegovy becoming generic. I guess it's no secret like we're hearing in the media reports that there has been some delays from Health Canada in terms of approving the applications by the generic drug manufacturers. Are you guys seeing that as well? And do you have a sense of like when generic will be available on the shelves? Richard Dufresne: Yes. We've heard the same thing as you. We know they're coming. Maybe not early '26, but maybe mid-2026. So that's all we know. We know as much as you do probably. Per Bank: We agree either way. And what we think about is our customers. So when it goes generic, it's going to be so much cheaper for many, many customers. And so many customers now they will have access to that drug, which is good for us, good for customers and good for health care in Canada. So we hope it comes sooner than later. Christopher Li: And then when you mentioned earlier that, obviously, you get the lift in volumes, which makes a lot of sense. Is that good in terms of more dollars from volume, is that good for the top line as well as the bottom line? Per Bank: Yes. So that's still to be seen. So our prediction would be that we're going to see -- so even though that it's going to be significant cheaper, then we will sell more. So that's the best guess. So right now, the best guess would be that we will still have a good top line growth. And then on the dollar, we'll be fine. Christopher Li: Got it. Okay. And then my other question, just maybe on the supply chain. On the East Gwillimbury DC, is it still on track to be fully ramped up by middle of next year? And I know it's a bit of -- it's an earnings drag right now for you. But as the ramp is complete, is it fair to assume that, that headwind will turn into a tailwind for you in the back half of the year? Richard Dufresne: Yes, mid-'26, like the ambient section, which is the last section that we've opened, we started fulfilling orders a few weeks ago. So as I said in my remarks, we're a full quarter ahead of ramp-up. So by mid-2026, we should be well on our way, and we should start to get benefits from East Gwillimbury for sure. And I'm surprised at how much progress we've done at Caledon. Like let's not forget, we started construction on that one in January. Steel is up. We're going to be finishing erecting steel by the end of winter, and it's going to be fully included, I think, by the summer. So that's also progressing well and on plan. And that one will open in '28. Christopher Li: Got it. Okay. And my last question is just maybe on T&T. Obviously, you guys are planning to convert that Loblaw at Empress Walk in North York to a T&T, which I think makes a lot of sense given the demographics there. And I guess my question is, as you look to potentially double the footprint of T&T in Canada over the longer term, do you expect store conversion to play a bigger role than in the past in terms of how you're opening up new T&T's? Richard Dufresne: No, I think there's the [indiscernible] store that could become T&T and Empress Walk is one. I think most of the growth will come from greenfield sites. Per Bank: Yes. So overall, I think that's the same for all across our network. We have not planned for a lot of conversions. There might be a few here and there that makes sense. But overall, that's not a big part of our strategy. Operator: [Operator Instructions] Your next question is from Etienne Ricard, please from BMO Capital Markets. Etienne Ricard: So revenue growth from new stores continues to accelerate. Given that openings appear to be weighted to the second half of this year, should we expect this growth to accelerate further over the next few quarters? Richard Dufresne: Good question. So what I'll say is if you look at the 2-year stacked growth of absolute revenue for Q3, which is 6.1%, which is like 4.6% plus 1.5%. We expect that the 2-year stack growth of revenue for Q4 will be in line with the 2-year stack growth of Q3, which will answer your questions because it reflects the timing of new stores. Per Bank: Yes. And we opened a lot of new stores last quarter last year. Richard Dufresne: It's mostly in [indiscernible]. We opened a lot of new stores in Q4 last year. We're opening a lot of new stores in Q4 this year. So that's going to be the best guide because you can see -- you'll see if you go back that in Q3 of last year, our absolute sales were up 1.5%. And in Q4, they were up 2.9%. So because of new stores. So you're going to see a similar phenomenon in Q4. Hope that's helpful. Etienne Ricard: Yes. That's helpful. And as you continue to open the new small format NoFrills, I'm curious, are these stores giving you new read-throughs or maybe customer data that would be additive to the Retail Media business? Richard Dufresne: That mean more of the same, like one more box with one more stream of data with one more opportunity to put screens. So the answer is yes, but it's -- it would be probably similar type data that we get in any of our Hard Discount stores across the country. Per Bank: Yes. So we have so much data already now that we're working and utilizing even better, and our team is doing an incredibly good job of doing exactly that. Operator: There are no further questions at this time. I will now turn the call back over to Roy MacDonald. Please continue. Roy MacDonald: Thanks, Danny, and thank you, everybody, for your time this morning. If you've got any follow-up questions, drop me a line. And mark your calendar for Wednesday, the 25th of February, when we will be reporting our Q4 and full year '25 results. Have a great day. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. Welcome to Jumia's Results Conference Call for the Third Quarter of 2025. [Operator Instructions] I would now like to turn the call over to Ignatius Njoku, Head of Investor Relations for Jumia. Sir, please go ahead. Ignatius Njoku: Thank you. Good morning, everyone. Thank you for joining us today for our third quarter 2025 earnings call. With us today are Francis Dufay, CEO of Jumia; and Antoine Maillet-Mezeray, Executive Vice President, Finance and Operations. We would like to remind you that our discussions today will include forward-looking statements. Actual results may differ materially from those indicated in the forward-looking statements. Moreover, these forward-looking statements may speak only to our expectations as of today. We undertake no obligation to publicly update or revise these statements. For a discussion of some of the risk factors that could cause actual results to differ from the forward-looking statements expressed today, please see the Risk Factors section of our annual report on Form 20-F as published on March 7, 2025, as well as our other submissions with the SEC. In addition, on this call, we will refer to certain financial measures not reported in accordance with IFRS. You can find reconciliations of these non-IFRS financial measures to the corresponding IFRS financial measures in our earnings press release, which is available on our Investor Relations website. With that, I'll hand it over to Francis. Francis Dufay: Good morning, everyone, and thank you for joining Jumia's third quarter 2025 earnings call. This quarter marks a significant acceleration in customer demand and order growth, reflecting a strong execution across our markets and growing consumer trust in the Jumia brand. What's particularly encouraging is the continued acceleration in usage across our platform. Physical goods GMV grew by 26%, adjusting for perimeter effects and by 37% when excluding corporate sales, in line with similar acceleration in physical goods orders and active customers across markets. This momentum is translating into higher order frequency, deeper customer engagement and continued market share gains in our core categories. We believe Jumia has reached an inflection point. The combination of rising consumer adoption of e-commerce, a compelling value proposition and improving operational discipline is driving durable momentum. We are building a solid foundation for sustainable, profitable growth and the results are becoming increasingly visible. Looking ahead, our focus remains on driving profitable growth through efficiency, disciplined execution and strategic investments in customer acquisition, technology and logistics. These efforts are strengthening our competitive position and creating long-term value for shareholders. And let me reiterate, we remain fully committed to our strategic goal of achieving full year profitability in 2027. Let me now walk you through some of our key highlights for the quarter. We continue to build momentum in usage trends, driven by solid execution across our markets. Adjusted for perimeter effects, physical goods orders grew 34% year-over-year, driven by strong customer demand, improved product offering, increased marketing efficiency and our expansion into secondary cities. Our core focus remains physical goods, which represented 100% of total orders and nearly all GMV this quarter. The remaining share came from digital products sold through the JumiaPay app, such as airtime and vouchers. As we scale our core marketplace, we are phasing out these noncore digital transactions to streamline operations and enhance organizational efficiency. Adjusted for perimeter effects, quarterly active customers increased 22% year-over-year, reflecting healthy customer acquisition and retention and marked the highest increase in the past three years. Customer loyalty also strengthened with our NPS score increasing to 64 from 63 in the prior year period. In addition, 43% of new customers from Q2 '25 made a repeat purchase within 90 days, up from 40% in Q2 '24. Demand remained strong across key categories, including electronics, phones, home and living, fashion and beauty. Adjusted for perimeter effects, physical goods GMV grew by 26% year-over-year in reported currency. And excluding corporate sales, GMV increased 37%, reflecting accelerating momentum in our core consumer business. The average order value for physical goods in Q3 '25 stood at $35, down from $38 in Q3 '24, mainly reflecting reduced corporate sales in Egypt. We expect GMV growth to accelerate over the remainder of the year as underlying demand remains robust, business fundamentals continue to strengthen, and we begin to lap the impact of lower corporate sales. Revenue reached $45.6 million, up 25% year-over-year, with first-party sales representing 52% of total revenue. In addition to top line growth, we continue to make progress on monetization initiatives that enhance revenue quality and support margin expansion. Importantly, we believe that acceleration in usage is not coming at the expense of monetization. We're driving both growth and improved unit economics simultaneously. Our new retail advertising platform launched in the second quarter of '25 continues to scale across our seller base and represents a strategic high-margin revenue opportunity, supporting our path to profitability. With advertising revenue at 1% of GMV, Jumia sees substantial upside potential. In addition to our third quarter performance, we are sharing early fourth quarter trends to provide further visibility into the current momentum. In October and adjusting for perimeter effects, physical goods orders and GMV each grew over 30% year-over-year. These results highlight sustained customer demand and strong start of the final quarter of the year, reinforcing our confidence in achieving our full year outlook. Now let's discuss our progress towards profitability. We remain on track towards our profitability objectives, driven by disciplined execution and continued efficiency gains across the business. Our initiatives in G&A, technology and fulfillment are delivering meaningful and sustainable cost improvements. We continue to streamline the organization. The total headcount declined by 7% since December '24 to just over 2,010 employees on payroll at the end of the third quarter, reflecting a leaner, more agile organization and ongoing efforts to strengthen operating leverage. Fulfillment cost per order decreased 22% year-over-year to $1.86, driven by structural efficiencies across our logistics network. Technology and content expenses decreased by 10% year-over-year, benefiting from automation, platform optimization and improved vendor terms. As a result, adjusted EBITDA loss improved to $14 million compared to $17 million in the same quarter last year, reflecting both operating leverage and continued cost discipline. Loss before income tax was $17.7 million, a 1% decrease year-over-year or 8% decline on a constant currency basis. Cash used in operating activities declined year-over-year to $12.4 million, underscoring our focus on prudent capital management. We continue to make strong operational progress during the quarter, particularly in 2 strategic areas that are driving growth. First, our upcountry expansion is unlocking meaningful opportunities beyond major urban centers. We're leveraging our logistics and commercial infrastructure to efficiently serve secondary cities and rural regions, which are now driving some of our fastest growth. Orders from upcountry regions represented 60% of total volumes this quarter, up from 54% in the same quarter last year. Second, we significantly expanded our international seller partnerships, particularly with suppliers from China. In the third quarter, we sourced 3.4 million growth items from international sellers, representing a 52% year-over-year increase, adjusted for perimeter effects. This allows us to offer a broader selection at more competitive prices while maintaining healthy unit economics and strengthening our overall value proposition. Turning to country-level execution. Nigeria delivered strong performance with physical goods orders up 30% year-over-year and physical goods GMV up 43%, reflecting sustained momentum following the macroeconomic and currency challenges of 2024. Our upcountry expansion strategy is driving tangible results, fueling steady growth in our active customer base nationwide. Performance in the Southwest and Southeast regions remains robust, and we are seeing encouraging traction as we expand into the North, building on a more balanced geographic footprint. Kenya also performed strongly, with physical goods orders up 56% year-over-year and physical goods GMV increasing 38% in reported currency. Growth was driven by our upcountry expansion as secondary cities and smaller towns continue to outpace Nairobi and other major urban centers. Operationally, we reduced logistics costs through better shipment consolidation, volume leverage and route optimization, underscoring our ability to scale efficiently. We also launched a new initiative, Jumia Instant, offering 4-hour delivery in Nairobi, focusing on more convenience-driven customers. Ivory Coast delivered a solid performance with physical goods orders up 23% year-over-year and physical goods GMV increasing 22% in reported currency, both accelerating from the second quarter. The growth acceleration demonstrates Jumia's ability to win market share even in a major market. We remain focused on deepening engagement, improving monetization and expanding penetration from our clear leadership position. Egypt showed very clear signs of recovery. Physical goods orders increased 27% year-over-year, while physical goods GMV fell 23% in reported currency due to strong corporate sales in Q3 '24. However, excluding corporate sales, physical goods GMV grew 44% year-over-year, marking an important inflection point after several quarters of restructuring. This improvement was driven by 3 factors: a rebuild supply base with broader assortment in both high-value and high-frequency categories, growing adoption of buy now pay later for phones and TV and early momentum from our upcountry expansion, which is driving higher volumes outside major cities. Ghana delivered outstanding performance with physical goods orders up 94% year-over-year and physical goods GMV increasing 157% in reported currency. This exceptional growth came despite significant currency volatility and was driven by our upcountry expansion and a broader product assortment that includes both local and international. Our other markets portfolio also performed well. Collectively, our remaining markets delivered 18% physical goods GMV growth and a 15% increase in physical goods orders. The competitive environment remained stable during the quarter. We continue to see a pullback from certain global entrants in some markets like Nigeria, while we continue to steadily gain local market share. Our localized operating model built on strong vendor partnerships, cost-efficient logistics and deep market knowledge remains a clear competitive advantage that is proving to be difficult to replicate. Looking ahead, we are very encouraged by the progress we are making across the business. Our focus remains on consistent execution, strengthening our unit economics and capturing the significant growth opportunities ahead of us. We are building a stronger, more efficient and more trusted Jumia, one that can deliver sustainable, profitable growth and create long-term value for our shareholders, customers and partners across Africa. With that, I will hand it over to Antoine to walk you through the financial performance in more detail. Antoine Maillet-Mezeray: Thank you, Francis, and thank you, everyone, for joining us today. Let me now walk you through our financial results for the third quarter. Starting with our top line performance. Third quarter revenue was USD 45.6 million, up 25% year-over-year or up 22% on a constant currency basis. The increase reflects strong consumer demand and ongoing execution. Marketplace revenue for the third quarter was USD 21.5 million, up 4% year-over-year and up 1% year-over-year on a constant currency basis. Third-party sales came in at USD 19 million, up 5% year-over-year or 2% on a constant currency basis. Growth was driven by strong momentum in our core marketplace business, where we continue to see healthy usage trends and higher take rates. This strength was partially offset by a USD 3.5 million decline in third-party corporate sales, mainly in Egypt. Excluding corporate sales, third-party sales were up 30% year-over-year or 26% on a constant currency basis, reflecting the solid performance of our marketplace platform. Marketing and advertising revenue totaled USD 1.3 million, down 24% year-over-year or 26% on a constant currency basis. The decline reflected lower spending from large sellers as brands reassess their budgets from '25 and '26. This was partially offset by strong momentum in sponsored products, which continue to ramp up following the launch of our new retail advertising platform in the second half of 2025. With advertising revenue currently representing just 1% of GMV, we see significant upside potential as this revenue stream continues to scale. Value-added services revenue was USD 1.1 million, up 59% year-over-year or up 56% year-over-year on a constant currency basis. Growth was driven by higher usage and improved take rates, partially offset by lower commissions from third-party corporate sales in Egypt. Revenue from first-party sales was USD 23.8 million, up 54% year-over-year or up 50% year-over-year on a constant currency basis, driven by strong momentum with key international brands. Turning now to gross profit. Third quarter gross profit was USD 23.8 million, up 4% year-over-year or up 1% year-over-year on a constant currency basis. Gross profit margin as a percentage of GMV for the third quarter was 12% compared to 14% in the third quarter of 2024 and 13% in the second quarter of 2025. The year-over-year margin decline is primarily due to reduced corporate sales in Egypt. The sequential decline is mainly driven by currency depreciation in Ghana, which reduced reported revenue and gross profit quarter-over-quarter. Turning to expenses. While we continue to see benefits from our cost initiatives, we expect further improvement to materialize over the next few quarters. Let me walk you through the key expense lines. Fulfillment expense for the third quarter was USD 10.4 million, up 1% year-over-year and down 2% in constant currency. Fulfillment expense per order, excluding JumiaPay app orders, was $1.86, down 22% year-over-year or down 25% year-over-year on a constant currency basis. Sales and advertising expense was USD 5.2 million for the third quarter, up 18% year-over-year and up 19% in constant currency. The increase reflects targeted investment in sales and marketing, particularly across high ROI social media channels, allowing us to efficiently scale top line growth. Technology and content expense was USD 8.7 million for the third quarter, representing a decrease of 10% year-over-year and down 11% in constant currency. The decrease was primarily driven by ongoing headcount optimization and savings from recently renegotiated contracts. Third quarter G&A expense, excluding share-based payment expense was USD 16.2 million, down 8% year-over-year and down 10% on a constant currency basis. The year-over-year decrease was primarily driven by lower tax expenses, partially offset by higher staff costs and professional fees. Staff costs within general and administrative expense, excluding share-based compensation expense, increased by 1% to USD 8 million, mainly reflecting currency translation effects. Turning to profitability. Adjusted EBITDA for the quarter was negative USD 14 million or negative $14.1 million on a constant currency basis. Loss before income tax was USD 17.7 million, a 1% decrease year-over-year or 8% decline on a constant currency basis. The loss in the quarter reflects a USD 0.1 million improvement in gross profit alongside $1.8 million lower operating expenses and a $2.6 million reduction in net finance results, driven by lower net foreign exchange gains. Turning to the balance sheet and cash flow. We ended the third quarter with a liquidity position of USD 82.5 million, including $81.5 million in cash and cash equivalents and $1 million in term deposits and other financial assets. Overall, Jumia's liquidity position decreased by USD 15.8 million in Q3 2025 compared to an increase of USD 71.8 million in Q3 2024, which included net proceeds from the August 2024 at-the-market offering. Net cash flow used in operating activities was USD 12.4 million in the quarter, including a positive working capital impact of $0.4 million. CapEx in Q3 2025 was USD 1.4 million compared to $0.9 million in the first quarter of 2024, primarily reflecting investment in supply chain equipment ahead of the end of year season. In summary, we delivered another quarter of solid execution and strong top line growth while continuing to reduce underlying costs. Our progress on structural cost reductions, automation and cash efficiency reinforces our confidence in achieving our near-term targets and advancing toward profitability. Looking ahead, our focus remains on operational discipline, improving margins and maintaining prudent capital allocation. These priorities will position Jumia for sustainable growth and long-term value creation. I'll now turn the call back over to Francis for a discussion of our updated guidance. Francis Dufay: Thanks, Antoine. Based on current business trends, we are refining our 2025 financial guidance as follows: we expect physical goods order growth to be in the 25% to 27% range. GMV is projected to grow between 15% and 17% year-over-year. We anticipate loss before income tax to be approximately negative $55 million to $50 million. For 2026, we are maintaining our target for loss before income tax to be in the range of negative $25 million to $30 million, reflecting continued improvement. We confirm our strategic goal to achieve breakeven on a loss before income tax basis in the fourth quarter of '26 and deliver full year profitability in 2027. Thank you all for your attention. We are now ready to take questions. Operator: [Operator Instructions] Our first question is coming from Tracy Kivunyu with SBG Securities. Tracy Kivunyu: My first question is on the guidance for PBT. At $55 million at the top end, it is suggesting a very significant drop in costs in the fourth quarter, considering what you've seen in the third quarter already. And I just wanted to get some feedback regarding how you're thinking of the attribution for that. Is it that we're going to see very strong revenue acceleration considering you're going into a high seasonality period? Or do you also see some additional benefits from cost management. I think from my view; I feel like the tech expenses and the G&A expenses did not fall off as much as initially expected. So, will we see a bit more deceleration in costs from that end? Or will we actually see both? My second question would be on fulfillment. How should we think about fulfillment? There was a material deceleration in fulfillment per order in 3Q is quite positive. Is that our new baseline? Or should we expect an uptick considering the sale that we're factoring into 4Q? Francis Dufay: Tracy, thanks for your questions. I will comment on those 2 questions, and I will let Antoine add to that on some financial topics. So, your first question about Q4. So, we're definitely expecting a significant acceleration in usage in Q4. There's obviously very strong seasonality in this quarter with the Black Friday that we've already started at the beginning of the month. It actually lasts 4 weeks for Jumia. It's a franchise that we really own in Africa that's driving a lot of traffic and a lot of expectations from customers. And then the Christmas season is usually pretty strong in most of our countries, even in some Muslim countries. So definitely some acceleration in usage that will translate in revenue and monetization. And on the cost side, we are usually confident if you look at the past, that further growth in usage will bring economies of scale on the fulfillment side in particular. So, you can already see some clear progress on the fulfillment side this quarter at $1.86 per order, 20% down versus last year same quarter. This is definitely the new baseline. So, answering your second question, there's no specific one-off element that comes -- that impacted this figure this quarter. This is really the result of a bit more scale and efficiency across our fulfillment centers and better work with our logistics partners. So, this will play in Q4. I mean we expect this to play in Q4 as well. We expect also continued improvement on the fixed cost base. So, you see that the tech costs are decreasing by about 10% this quarter versus the same quarter last year. We expect to be -- to keep on gaining on some items in the fixed cost basis. Antoine, do you want to add to that? Antoine Maillet-Mezeray: Not much to add to what you just said. Q4 is indeed a very strong quarter, and we expect better efficiency from scale. And as you mentioned, and we'll see also the continuation of the work we've been doing on cost and efficiency, which led us to this guidance. Tracy Kivunyu: And if I could ask one more question on working capital movements for the fourth quarter. How are you thinking about that? And how is that feeding into your liquidity expectations and impact on shareholder equity? Antoine Maillet-Mezeray: So maybe I can take this one, Francis. On working capital, you see that we showed a small improvement in Q3, which shows that we now are able to ramp up our inventories much faster than in the past. A few years ago, we would have been in a position where we would have started 1 month ahead of a Tier-1 events such as Black Friday to beef up the offer. Today, it's no longer the case. We are able to go much faster. And that's why we were able to prepare a very good supply for this event without impacting drastically the working capital. Going forward, what we always say is that supply is key in the countries where we are operating, and we always capture the opportunity when they present. So, it might happen that we have ups and downs in the working capital, but we do not expect significant modification in the working cap cycle. Tracy Kivunyu: Sorry, if I may, just a clarification. Are you saying that most of the working capital requirements for Black Friday have already been factored in, and we do not expect a significant shift in terms of working capital management in the fourth quarter? Antoine Maillet-Mezeray: Sorry, I'm not sure I heard properly. What I said is that we do not expect any significant changes because we are now able to ramp up our inventory much faster. And what we're going to buy, let's say, for retail in October will be sold before the end of the quarter. So, the movement we'll be seeing probably will be intra-quarter movement. And to your last point, we do not expect any significant changes in the working cap dynamics of this quarter. Operator: Our next question is coming from Brad Erickson with RBC. Bradley Erickson: I have a few. First off, when you look at the 30% order and GMV growth in October you called out, I guess if we kind of run rate that through the quarter, I think that may bring you up maybe a bit below the low end of the guidance, at least for GMV. And so, I guess just is there an implied acceleration in the latter part of the quarter in there? I certainly could be doing the math wrong, but just any color there would be great. Francis Dufay: Yes. Brad, thanks for the question. So, we said above 30% -- so we -- it's kind of a range, if you want to take it this way. We wanted to give some color about the early acceleration of Q4, but we're still in the middle of Q4, so we don't want to create the wrong expectations either. So, it's more an indication of the continued momentum, and we stick to the refined guidance that we've given, so between 15 and 17 points of GMV growth for the whole year. Bradley Erickson: And then I guess just with the slight adjustment to the guidance, I guess just generally, what changed in your visibility to the end of the year on order growth and GMV? So yes, start there. Francis Dufay: Yes. As you mentioned, it's slight adjustments, right, on growth numbers. It means we're going to be on the lower end of the range that we had provided earlier this year. There's no massive change in the dynamics. We're still factoring in quite an acceleration in the last quarter, as you mentioned. We just refined it based on mid-quarter trends just to make sure that we don't go too bullish. I mean we just want to be conservative enough. So, it's not a surprise to anyone. And no massive shift in market dynamics. I mean you can see the trends at country level. I mean all countries are accelerating. We have no cause for concern, if that's the way you -- if that's what you're asking. Bradley Erickson: And then just curious on supply. You mentioned -- and I think you gave some nice metrics on the acceleration in order growth from China in particular. I just wonder on Q4, are there any puts and takes on access to supply? I know directionally, it's clearly positive, but just curious if there's anything like transitory in the quarter that was occurring where maybe you could have gotten more product and you're not now or something like that? Francis Dufay: No, I think that the medium- to long-term trend remains the same that we -- I mean, the same as the one we started to describe last time. So, there are 2 very positive trends at play. On the one hand, currency stability is really helping us. Of course, it's helping on the demand side of the marketplace, but it's most importantly helping us on the supply side because even both local importers and international sellers are more and more willing to commit more inventory to Africa, to commit their hard currency to Africa. And we see that it's really helping to fill the supply pipeline. And it's going -- I mean, it's helping to drive the performance. So, when we say that we see acceleration in October, it's partly driven by better supply. And then we're also still helped by the gradual shift of Chinese manufacturers towards new markets, including Africa. So, it's really bringing Africa back on the map. We see some very positive momentum in China, onboarding a lot more new sellers. We see our current sellers willing to ship more assortment to Africa in consignment in our warehouses, so kind of taking the risk to commit inventory. So, we only see positive trends, and it will continue in the quarters to come, and it will keep on impacting our numbers in the quarters to come. I mean I would even say that Q3 was a bit early to see the full impact of this trend. Bradley Erickson: And then when you look at some of the countries where you said your competitors seem to be maybe retreating a little bit. From your perspective, I guess it would just be curious to hear what you think is kind of happening in terms of the competitive environment related to those comments. Francis Dufay: Yeah. So that comment is mostly aimed at -- I mean, it's mostly focusing on international nonresident platforms, right, the likes of Shein or Temu. What we see in those markets, I mean, it's easy to track from some public data actually. We see some reduced marketing investment. We see price points increasing in several markets like Nigeria. The way we read it is the following, and that's our opinion. That's -- I don't know exactly how to decide it, but the way we read it is that these markets are pretty hard to operate at scale for these players. The context in Africa is very different from the U.S. or from Europe or some other more mature markets where it's relatively straightforward for nonresident platforms to come in. For example, there are a number of prerequisites that do not exist in our markets. These platforms need reliable customs, which we mostly don't have in our markets. I mean it can take between 1 week and 2 months to get products through customs in those markets at costs that can be unpredictable. They cannot find a major logistics ecosystem. They cannot find the right partners to distribute their product at scale. The biggest distribution network in most of those markets like Nigeria is actually managed by us, by Jumia, and we will not really help them in the process. So, they're stuck working with smaller 3PLs at much higher costs with a much more limited country coverage. And then then we've adapted much better also, I believe, we adapted our playbook to what customers actually need so we can do payments and delivery, which foreign platforms cannot do. We have customer support on the ground, which in a country like Nigeria is extremely important because there's a lot of suspicion around e-commerce and anything digital. So, you need to be able to talk to someone. And even on the price side, I mean, we're managing to deliver quite a competitive assortment through our international, mostly Chinese vendors, and we can actually compete against those platforms. So, in many ways, we have the right to compete, and we believe that our leadership position is actually consolidating in a country like Nigeria. And yes, Africa is a challenging market. If you build the right business model, you can serve it in a profitable way. But if your business model is not fully adapted to the unique challenges of the continent, it's difficult to operate. And I think a number of players are realizing this. Bradley Erickson: That's great color. And then I guess just lastly, from a top line perspective, if we -- I guess if we try and remove maybe the impact from Egypt on the corporate sales that you mentioned several times, would that -- would we kind of arrive at the right mix as you think about that part of the business versus marketplace here going forward? Or any other drivers of mix you'd want to call out? Francis Dufay: No, I don't see any -- I mean, excluding the corporate sales of Egypt, as you mentioned, I don't see any major shift in the mix to expect. You mean retail versus marketplace, right? So 1P versus 3P. As explained, right by DNA, we're a marketplace. We always prefer to do 3P, but we're tactical about 1P when we have the right opportunities or when we have to do 1P to be able to play in some categories in some countries. But no reason to foresee any major change in the mix. Bradley Erickson: And then you mentioned the Jumia Instant product. Talk about how kind of important that can be and particularly talk about the net profit impact from that when we balance kind of the incremental demand, maybe offset by any margin differences versus the core? Francis Dufay: Sure. So, Jumia Instant is a pilot that we have started in Nairobi in Kenya a few months back to be able to deliver all of the items that we have in the warehouse, so fulfilled by Jumia within 4 hours to anyone in Nairobi. So that's the project. The goal here is to be able to compete against the quick delivery platforms, quick commerce and to provide more convenience to those customers who are willing to pay for it. So, we clearly know that this is only a fraction of our customer base and that most of our customers are highly value driven, need amazing value for money and will be okay for slower delivery at lower cost. But still, we want to cover that segment as well without completely pivoting our strategy, obviously. So, that's why we've launched this pilot in Kenya with limited resources so that we don't get too distracted during Black Friday. We're seeing early traction. That's quite interesting. And it's something that could be scaled in other countries if it's successful enough. What we see -- I mean, back to your question in terms of margins, it's quite -- at this stage, it's neutral because we charge more basically. We're not entering the war for quick commerce with free deliveries. We make sure that we charge the additional cost of quick deliveries, which are, of course, less efficient and more costly for us than usual deliveries, scheduled deliveries or pickup station deliveries. So, we make sure that we pass those costs to customers who wish to benefit from greater convenience. Bradley Erickson: And then on the fulfillment costs, you mentioned the cost per order, I think, down 25% constant currency. Can you talk about the drivers there? You mentioned scale, I think, earlier in the call is the driver. But maybe just give a sense of any of the other important inputs to that kind of output metric and what's there to continue driving the number down. Francis Dufay: Yes. So, versus last year, I mean, Q3 last year, we were still in several countries operating across multiple smaller scattered fulfillment centers, which have all been consolidated since then at the end of Q3 last year, actually for the last countries. So, we clearly see the change now in terms of productivity. We have been able to run very -- I mean, very strict cost improvement and productivity improvement programs across countries. So, tracking the productivity of pickers and packers, bringing some level of basic automation, not much at the stage and working pretty hard on the cost centers, in particular, where we've been able to automate a lot of the interactions that we used to manage with human agents. So, consolidation of the main fulfillment centers, automation and productivity across all operations, so being fulfillment centers and call centers and then scale effect that's helping to leverage the fixed cost base much more efficiently. Bradley Erickson: And then one last one, if I can. When you kind of look at adjusting the range for the pretax loss a bit too versus your prior outlook, is that just a function of the kind of slightly lowered order outlook? Or just any other callouts you'd want to mention that are embedded in that new pretax outlook? Antoine Maillet-Mezeray: Antoine speaking. It's just a refinement. We have changed the phasing of some costs, notably in G&A, and we want to make sure that we are in the right sense. But there is nothing significant. And this is not linked to the new guidance on the top line. Bradley Erickson: Maybe one more, if I could. Just as we look longer-term, you kind of reiterated your targets. And as you think about exiting '26 breakeven and profitability in '27, can you remind us just what is the kind of top line algorithm as you think about that, whether it be order volumes or anything like that from where we stand today? Francis Dufay: So at this stage, we've not provided top line growth guidance for '26 or '27. What I can say, though, is that what you see in Q3 is a strong starting point, right? I mean, to put it differently, there's no reason for the growth rate of '26 to be very different from the exit rate of '25. I believe we're in a healthy B2C business that's driven by strong fundamentals, much better supply, efficient and reliable delivery, efficient and relevant marketing. And what we see is pure clean, healthy B2C growth with the right unit economics. It doesn't just vanish overnight. We believe that's a long-term trend that we're starting here. Operator: Our next question is coming from Fawne Jiang with the Benchmark Company. Yanfang Jiang: First, I want to dig a little bit deeper on your active customer growth was very solid this quarter. Just wonder what drove the acceleration. And also, any demographic profile you could share on this new user group? And any color on how sustainable this pace of the customer growth might be, that would be very helpful. Francis Dufay: Sure, thanks for your question. So yes, we're quite happy with the growth in active customers this quarter. It's the highest point that we've had in several years. We really see that as the output of very fundamental changes that we've brought to the business over the past 3 years. So, I mean that's a combination of much better assortment, much better choice, better price points, being able to reach new markets. So, over the past 1.5 years, we've been opening up hundreds of new cities across our footprint. The biggest push was in Nigeria, which in practice, just increased the addressable market, gave us a bigger pool of potential customers. We've been refining the marketing playbook, so it becomes a lot more relevant to a more diverse group of customers, some people being fully digital natives, who can be targeted with Google Ads, TikTok and other on the app. But on the other hand, a lot of people are fully offline. For them, we're doing great in local language. We're printing catalogs or we are incentivizing sales force on the ground. So, all that is -- I mean, all that is adding up, and it's just delivering a much better value proposition and is driving customer growth. So, to us, it's very healthy trends. And that's why we always disclose all 3 KPIs at the same time. So GMV growth, active customers growth and orders growth. And you can see that these numbers are starting to align, right? The one factor that's creating some gap is corporate sales in Egypt. But as we're lapping those quarters of strong corporate sales last year, we really expect to get some alignment in the growth of those 3 factors, showing that it's -- well, very healthy trends. It's not like one specific category that's killing it. It's not just one specific market. You can see that it's broad-based across all of our key markets. So, we believe it's fundamental. And for that reason, we believe that there's no reason -- I mean, we don't foresee any reason why it should slow down. Yanfang Jiang: My next one is actually on your upcountry expansion. It seems like you emphasized you're going to continue for second-tier cities expansion in Africa and view that as a key growth driver. I guess, can you provide a bit more details in terms of your expansion plan? I don't know whether there's any key milestones you're looking for potentially tied to the 2026 strategy. Francis Dufay: Yes. Good question and tough one. So, as you see, the share of orders we're shipping to outside of the capital cities has increased now to 60%. This is a result of the push we've made to secondary cities over the past 2 to 3 years. It's something that started back in the days, 8 years ago, actually in the Ivory Coast and that we're now replicating across markets. What I can tell you to give you some indication, and I hope we can provide a bit more tomorrow during our Investor Day, we see that in most countries where we operate, we're still covering a fairly low fraction of the population in terms of distribution network. So, there are still a lot of cities that are not reached, not yet covered by our distribution network. And we have a lot of upsides, a lot of potential customers to come and serve that we cannot reach today. The country where we have the densest network, obviously, the Ivory Coast because they started way earlier back in 2016. And in a country like Nigeria, which is a good example for us because of the potential customer base we can have there. We're actually starting the expansion only 1.5 years ago, more or less. And so, there's still a lot more to be done. We've made a big push into Eastern Nigeria and Western Nigeria, or mostly Eastern Nigeria actually over the past year. We're just pushing now into Northern Nigeria. We've expanded to give you like some tangible examples, a few months back, we opened the route to Sokoto on Northwest and to Maiduguri on Northeast, which are very big cities that were not reached by Jumia in the past. So, this is adding to our addressable market. We have big plans to further expand in countries like, well, Nigeria, obviously, into the North with our local partners. Kenya, Ghana, but also Egypt in the coming year. So sorry, it's hard for me to provide you hard facts and concrete numbers here. But I think the message is just we're just halfway through, right? There's still a lot we can do to cover million more -- many, many millions of additional customers. Yanfang Jiang: Great color. My last question is actually on your advertising opportunities. It seems like your penetration is still very low. Also, I think for the quarter, specifically, if I'm not mistaken, it seems to be on the softer side. So, I know there's probably a quarterly factor, if you can define it. And more importantly, can you help us to think about your advertising monetization opportunity? I don't know like for mid-, long-term without box down to the specific guidance. How should we think about and how you're going to shape your advertising monetization on the strategic side? Francis Dufay: Yes, of course. So, on the advertising revenue, so yes, as you mentioned, we're still around 1% of GMV, which is low. I mean, by any standard, it's low for an e-commerce platform. Year-over-year, I mean, the numbers in Q3 are not very strong because Q3 is not a very strong quarter in terms of commercial activity and marketing activity. Typically, brands will focus their investment on Black Friday and the Jumia anniversary that happened in June this year. So, it's not the best quarter usually for advertising. We also see that year-over-year, some brands have been a lot tougher on their budgets. We see that with the bad economic situation in '24, a lot of big spenders have rationalized their budgets in Africa in '25. But I mean, that's to explain the current situation in the past. But looking ahead, we believe we have quite an important runway for growth here. If we look at other platforms in emerging markets, I think the right benchmark should be around 2% of GMV rather than 1%. So that gives us a target. And we're looking to reach that target with a few priorities. So, the main priority is on retail advertising, so selling basically performance advertising to medium-sized and smaller sellers, the local marketplace as well as our Chinese seller base. We see great upside from our international sellers. So, they -- I mean they're already well-accustomed, well-used to these tools from other platforms that they're using like Amazon, eBay and so on. So, they're usually pretty strong tenders on those sponsored ads. So, we're quite confident that we'll be able to deliver much bigger volumes -- much bigger returns, sorry, on retail advertising. And we're, of course, working with key African brands and international brands to negotiate better budgets for the year of '26. And in this regard, of course, I mean, for both segments of the advertising spend, the big driver is scale, right? The bigger -- the more scale you get, the bigger you get, the more you're able to get from your vendors on performance advertising because there's more competition in the marketplace, and it's more important for them to show at the top of the page. And it's also making us a lot more relevant for big brands and big importers and enabling us to negotiate a better rate, a better take rate on advertising contributions. So, in short, we're confident that we can scale this revenue line, driven by better tools that we've rolled out recently, strong execution and scale from our core business. Operator: Ladies and gentlemen, we have reached the end of our question-and-answer session. This will also conclude today's call. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to Gol Linhas Aéreas Conference Call to discuss the Third Quarter 2025 Results. This event is being broadcast via Zoom and can be accessed on the company's website in www.voegol.com.br/ri. We inform you that all participants will only be watching the event during the presentation. Before proceeding, I would like to emphasize that the forward-looking statements are based on the beliefs and assumptions of the company's management and the current information available to GOL. These statements may involve risks and uncertainties as they relate to future events and therefore, depends on circumstances that may or may not occur in the future. All listeners should consider that events related to the macroeconomic scenario, the environment, the segment and other factors could cause results to differ materially from those expressed in the respective forward-looking statements. I will now give the floor to Mr. Adrian Neuhauser, CEO of ABRA Group. Please, Mr. Adrian, the floor is yours. Adrian Neuhauser: Good morning, everyone, and thank you for joining us for GOL's third quarter 2025 results. I'm Adrian Neuhauser, CEO of ABRA Group, and I'm tremendously pleased to be here as GOL delivers its first full quarter results after emerging from Chapter 11. Since completing the Chapter 11 bankruptcy process in June, GOL has been relentlessly focused on executing on its plan. The airline is flying a more robust, more efficient network with an optimized fleet plan and a streamlined cost base. This quarter's performance underscores that path, healthy top line, expanding margins and faster deleveraging than originally projected, the result of disciplined commercial execution, rigorous cost management and above all, a relentless focus on running a safe, reliable operation for our customers every day. At ABRA, we have doubled down on GOL's future. We renewed our commitment, increased our investment and became GOL's controlling shareholder, a vote of confidence in Brazil, in the company and its management team in all of its employees and in GOL's multiyear plan. With ABRA as a strategic enabler, unlocking scale, best practices and smarter capital allocation, we believe that GOL is well positioned to continue growing profitably and creating long-term value. Manuel Irarrazaval, ABRA's CFO, who is also on this call, and the broader ABRA team are fully engaged in supporting GOL in this next phase. I will now pass the floor to Celso Ferrer, CEO of GOL; and Julien Imbert, GOL's CFO, to walk you through the third quarter results in detail. Thank you again for being with us today. Please, Celso, go ahead. Celso Ferrer: Thank you, Adrian, and good morning, everyone. Thank you for joining us today for the GOL third quarter '25 results presentation. I'm pleased to present our performance and achievements for this quarter. Let's move to the highlights on next page. On capacity and fleet, we closed the quarter with 143 aircraft, and our operational fleet reached 120 passenger aircraft, lifting efficiency and productivity. On customer, consistency remains a clear differentiator. We are the on-time performance leader in Brazil, which supports loyalty and our commercial strategy. On business units, both Smiles and GOLLOG delivered contribution margin expansion across the whole bench of products they have, reflecting disciplined pricing, capacity allocation and cost control. That generates sustainable results. The earnings quality is translating to the balance sheet, accelerated deleveraging alongside a sustainable increase on EBITDA. We have a more efficient fleet, best-class punctuality, broader margin expansion across the portfolio and a stronger balance sheet. Let's move to next page, where we can see the key figures representing our path to sustainable performance. Starting with capacity. Total ASKs grew 8.9% with a strong 34.5% in the international markets. We added supply where the demand is and where the yields justify it. Revenue more than followed. Net revenue was up 11.6%. Quality shows in the unit revenue metrics. Our RASK grew 2.5% and our PRASK grew 3.2%. Earnings reflected that discipline. Adjusted EBITDA reached BRL 1.6 billion in the third quarter '25, an incredible increase of 46% versus last year. Margin also expanded to 29.7%, 7 points year-over-year, and it strengthened our balance sheet. Net leverage fell to 3.2x, down 2.1 turns year-over-year. Less debt per unit earns more resilience through the cycle. We have capacity on track with quality, sustainable price, expanded margin and deleverage. That's the trajectory we intend to maintain. Now I invite Julien Imbert, GOL's CFO, to take the floor. Julien Pascal Imbert: Hello, everyone. Thank you, Celso, and all the team. I'd like to start the presentation by moving to the next slide on operational performance, focusing on capacity and fleet. We brought 13 aircraft back year-over-year, closing the quarter with an operational fleet of 120 aircraft. So with more airplanes flying, we offered increasing capacity of 8.9% versus the third quarter of 2024. And the mix matters, if you look at international ASK, we grew about 34.5%, which is in line with our strategy to scale profitable international routes. Crucially, we placed that capacity intelligently. Our load factor increased by 0.8 percentage points, reaching 84.1%. So even with the larger seat supply. So it evidence healthy demand and better scheduling. On year-to-date, we're also increasing our aircraft capacity, our ASK capacity 13% and our load factor is in line with what we're seeing in the third quarter. Moving on to the next slide on operational performance and the quality of our operation. Three messages. one, broader network; second, best-in-class punctuality; and three, a stronger brand. Network reach. We operated 82 airports with our own fleet in the third quarter of 2025. This is our largest third quarter footprint in the whole history of GOL. We added 4 new routes and also 150 domestic and 43 international routes, excluding codeshares. On reliability, we've been Brazil's on-time performance leader for 8 months in 2025 and the top 3 on-time airline in Latin America. Our 15 days on-time performance has hovered around 90% from 85.6% in April to 89.8% in September and with 90.5% in May, showing consistency even as we expanded the network. On brand strength, GOL was recognized as the Top of Mind Airline in Brazil for the ninth consecutive year, reinforcing loyalty and pricing power. We are flying to more places, arriving on time and strengthening a brand that customers choose first. Now moving on to the next slide on operating results, focusing on revenue. The story is disciplined with stronger unit metrics. Even with an 8.9% capacity increase versus the third quarter of 2024, our PRASK rose 3.2% and our RASK was up 2.6%, reaching BRL 0.441. The drivers behind that growth were solid passenger trends and higher ancillary revenues. Year-to-date, the momentum holds. RASK is up 4% and PRASK reached BRL 0.401 from BRL 0.385 the same period last year. So this translates into top line. Total revenue grew by 11.6% in the quarter at BRL 5.5 billion versus BRL 5 billion in 2024. And if you look at the number year-to-date, top line growth revenue at 17.6%, reaching BRL 16 billion versus BRL 13.6 billion in 2024. Importantly, yield has increased 2.5% (sic) [ 2.1% ] year-over-year, underscoring the sustainable revenue strategy we've been executing. So we can see more capacity, better pricing, rising ancillaries, delivering double-digit revenue growth. On the next slide, we'll focus on one of our business units, GOLLOG. Our cargo business posted double-digit growth year-over-year with revenue rising 15.7% to BRL 376 million. The drivers behind the growth, we added 3 dedicated freighters versus last year, bringing the fleet to 9 dedicated freighters. We deepened the Mercado Livre partnership, and we executed a targeted logistics strategy in key lanes. That combination lifted throughput and monetization across the network. So we can say that we have a more dedicated capacity, a stronger e-commerce partnership and smart routing translated into more volume and a 16% step-up in cargo revenue versus last year. On the next slide, we continue talking about our business units, focusing on our loyalty program, Smiles. We have more than 29 million Smiles members, out of which 1.2 million are Clube Smiles members. The number of Clube Smiles rose almost 1% year-over-year with 1.2 million members, focusing on a higher quality and stickier card . You can also see the engagement with redemption activity that has accelerated. Transactions rose 10.4% from 2.6 million to 2.8 million, reflecting healthy earn and burn dynamic and better inventory availability. I'd like also to talk about our co-branded credit card portfolio. We have 3 issuers working with Smiles who offer exclusive benefits, including VIP lounge access at our hubs in Guarulhos and Galeao, which are driving both acquisition and spend. Smiles customers can earn miles with more than 100 partners, so expanding earning velocity and deepening engagement beyond the flight. And those numbers show a steady subscriber base with faster redemption, a richer co-brand offering and a broad partner network that feeds loyalty and revenue quality. Moving on to the next slide on operating results, focusing on cost. Our CASK for the third quarter 2025 was at BRL 0.372, a decrease of 0.5% versus our CASK in the third quarter of 2024. CASK fuel was down 11.6%, thanks to lower jet fuel prices and better FX in Brazil, while our CASK ex-fuel was increasing 4.7% in the period. This was mainly explained by higher lending and navigation fees as we expanded over the network and also higher depreciation tied to the fleet recovery investment. Now moving on to the next slide on our EBITDA and margin results. Our EBITDA for the third quarter of 2025 reached BRL 1.6 billion, up BRL 516 million versus the third quarter of 2024, but also an increase of BRL 510 million compared to the second quarter of 2025, an increase of more than 45% quarter-over-quarter. The margin for the third quarter of 2025 reached 29.7%, an increase of 7 percentage points versus the same period last year. Year-to-date, our revenue reached BRL 4.3 billion, up BRL 1.2 billion versus the same period last year, and our margin is reaching 27% year-to-date, an increase of 4.1 percentage points versus the same period last year. So this shows the result of our strong strategy in terms of growing revenue and growing capacity domestically and in particular internationally, while we have tight cost management and discipline. Notably, this is our highest EBITDA margin for a third quarter since pre-pandemic, and it shows the consistency and the strength of our plan. Now moving on to the next slide on liquidity and net leverage. As you can see, we continue to reduce our net leverage from 3.7x in the last quarter, we reached 3.2x in the third quarter of 2025, which is much better than our plan and continue to show the improvement and the strength to reduce net leverage. Notably, if you would exclude the debt that we have with the ABRA Group of around $850 million, our net leverage would be around 2.5x. On liquidity, we continue to have a very strong liquidity position, reaching BRL 5.4 billion, which is around 25% of our last 12-month revenues. So this is a very strong third quarter 2025 for GOL, delivering on our plan on all key dimensions from capacity to PRASK to cost to EBITDA to net leverage and cash position. We are delivering consistently with discipline and executing our plan. With that, I'll turn the floor back to you, Celso. Celso Ferrer: Thank you, Julien. Now that we've gone through everything that happened this quarter, all these results prove that GOL is completely positioned to win. We are growing with quality, ASK growth, but also revenue unit growth. We are adding capacity where we are strong and where the demand is solid. The balance sheet keeps improving. Net leverage at 3.2x and liquidity of BRL 5.4 billion give us flexibility to fund growth and manage seasonality. We are the on-time performance leader in Brazil and the Top of Mind Airline, reinforcing loyalty and our strong brand. Before we move to the Q&A, I want to close this earnings call by thanking our team of Eagles who deliver what really matters in this business, safe and reliable flying while keeping the operational running with discipline and consistency. To our flight ops, pilots, cabin crew, maintenance, support teams, thank you for protecting safety while executing our day-by-day operation. My thanks also to our customers, lessors, suppliers and financial partners and especially to ABRA, who stood shoulder to shoulder with us and was essential to this outcome. Our core business is clear, operate every flight safely on time and efficiently. That's how we got here, and that's how we will keep moving forward. Thank you. Operator: [Operator Instructions] Our first question comes from Guilherme Mendes from JPMorgan. Guilherme Mendes: I have 2 questions. The first one is taking into account the third quarter was better than expected, and congrats, by the way, is it fair to assume that we could expect an upside to the plan that you guys provided upon the emergence of the Chapter 11? And the second point is on the maintenance cost, which seems the one with the best performance on a year-over-year basis during the third quarter. Just wanted to understand if this is the recurring level going forward, so a similar level that we can expect for the fourth quarter and onwards or there is some kind of one-off into it? Celso Ferrer: Thanks, Guilherme. It's Celso here, and thank you for -- I mean, start this call with us. We have -- as you said, the third quarter results came ahead of our expectations, our plan. I think it's a result of a very solid demand and a great execution by our team here. And we also published a new projections for the year now. So we gave the range of BRL 5.8 billion to BRL 6.1 billion EBITDA, also net leverage in low numbers, also with a range of 3.4x and 3.6x, reflecting the continuation of this performance to the end of the year. Of course, more we are following and we are planning next year still with the numbers we have very close to our plan that we -- you know when we made -- when we exit from Chapter 11. So everything fine. No big changes so far. The execution is better, but nothing that would change completely our strategy. We are doing a little bit more domestic than international and always using the flexibility we have in our model, in our fleet. So for the maintenance, I will have Julien also asking your second question here. Julien Pascal Imbert: Guilherme, this is Julien. Thanks for joining the call today. Very nice having you here. And so on maintenance, yes, you can see on the quarter, we have a slightly lower maintenance versus the third quarter of 2024. If you look at the full year picture, 9-month picture, we have a bit higher maintenance cost versus last year. Some of it will be because we're putting back a lot of aircraft this year. So this is a particular year of investing in the fleet to get it back online. But to answer your question, when we look forward, we're trying to normalize the maintenance cost and to have -- and see a lower maintenance cost in the future. The point we're working on is engine maintenance cost as always, where there is some work to be done still. But I think the overall story is, yes, we see that more normal maintenance costs moving forward as we have put the fleet back on track. Operator: Our next question comes from [ Manuela Echavarria ] from Vinci Compass. Unknown Analyst: Yes. Can you hear me? Operator: Yes, we can. Unknown Analyst: So my question is related to the CapEx. So I don't know if you maybe could provide some color on the CapEx levels you are seeing and what we can expect going forward? Celso Ferrer: Thank you, Manuela. We -- this is the level of CapEx that we intend to keep. We are already like the way we built the overall CapEx for this year is, let's say, normalized spread through every quarter. So we are trying to concentrate more CapEx in one quarter than the other. So that's the level that we intend to show, that's reflecting the, let's say, all the backlog engines that we were addressing during the last 18 months basically and also to run the whole operation. So I don't foresee changes on the level of CapEx. Julien Pascal Imbert: And just to complement also -- and just to complement also on CapEx, there is the FX effect also is quite important on CapEx. So on the variation, you may see a lower CapEx in Brazilian reais due to the lower USD. Unknown Analyst: Okay. But maybe thinking about 2026 and going forward, do you still see like kind of this level of CapEx since -- like I don't know if I think when you start growing the fleet again, should I still expect this level of CapEx? Julien Pascal Imbert: Yes, we should keep a similar level of CapEx moving forward and more of a -- although we're growing, it's more of a recurring operation that we'll have versus what we had last year and this year where we had to put back the fleet operational. Unknown Analyst: Okay. That's clear. And maybe just a second question on my side is on leverage. So it seems you are deleveraging faster than you expected versus the initial plan out of the Chapter 11. So I was wondering if you have any like kind of new target plans going forward? Julien Pascal Imbert: I would say, I mean, new target plan, the plan remains the same. If we can accelerate the plan is what we want to do. So we want to be delivering on the operation as planned and leverage any favorable macro environment that we may have to accelerate the plan. So this is what the team is focusing on. So we are seeing a better net leverage because the team is delivering because the environment is favorable. So it's accelerating the plan, I would say, but the target -- I mean, the long-term target remains the same. Operator: Our next question comes from [ Chris Reidy ] from BNP. Unknown Analyst: Great results. You really executed on every metric, which is pretty impressive considering you just got through a restructuring. Your last comment about accelerating the plan, it looks as though the capacity adds and the operating leverage is coming through a heck of a lot faster than at least I expected. Is -- are you getting capacity adds or deliveries or engines out of service faster? Or is it just an operational execution that's delivering this capacity and obviously, revenue and everything throughout? Celso Ferrer: Chris, Celso here. Thank you for your kind words. And yes, as you said, like the execution has been well done. But I would highlight the unit revenue versus, let's say, the cost that we have, like the spread that we are creating and have been able to maintain a healthy unit revenue environment while we deploy the ASKs, while we deploy the network strategy. On the strategy itself, it's the same. What we have been doing is we have been adjusting the mix between domestic and international. We have 2 markets in the international flights that are still like underperforming versus what we had expected this year. One is Argentina due to all the volatility we have there and also the increase on the recently rumors about the potential shocks in the FX right there. So Argentina, I mean, we saw a great first beginning of the year and then a lot of airlines had a lot of capacity. We are flying with overcapacity at this point. So we are adjusting this in the third quarter and fourth quarter. And we are putting those planes back into the domestic, which is performing well. Like we are keeping the same ASK plan for 2025. No big changes from, let's say, the long-term projections so far. We are keeping, let's say, just small adjustments, like I said, on the mix. Domestic market is performing well. Like the -- I think the good news is that demand is resilient. I mean, both leisure and corporate has been responding very well to this new capacity. And the overall market is more disciplined on where to allocate capacity. In our case, we said this, and I want to reinforce, we are focused on places where GOL used to be very strong. So places like Rio is a real focus. Salvador has been a real focus, and most of our growth is concentrated in few bases where we have a network effect. As we grow, we create more connectivity, we create more connections and then we are able to increase load factors. We are flying with very healthy load factor. The whole industry is flying with healthy load factor, which gave us the opportunity to optimize unit revenue. So no big changes in the overall capacity. The fleet, it's still -- it's in the pace that we wanted in terms of the overall haul in the engines and also the deliveries that we had from Boeing was we took delivery of 1 aircraft more than the plan. Boeing is performing well now on the delivery side, but that's not a huge change, okay? Unknown Analyst: Right. And so you increased the guidance for the year very rapidly after you exited. And we know that the supply-demand is exceptionally in your favor. Is most of the fourth quarter already booked from a ticket sales perspective? Celso Ferrer: Yes. I mean we are now in the middle of the fourth quarter. So the [Audio Gap] range we had in our guidance. The fourth quarter usually is really big in the overall -- has a big weight on the overall annual results. And it's -- we have like November and December as the really strong months. As you know, we are having the COP30 in Brazil. We had Formula 1 in Brazil. All these events help a lot to -- and we are deploying capacity where we think the demand is. Like so for [indiscernible], for example, we increased -- we almost double the capacity short term to be able to offer flights and still the flights are full. So the demand is responding very well to these big events that we are having in Brazil right now. So December, if we perform as we performed last year, we are going to be achieving the high end of the guidance we gave you. So that's where we are putting ourselves right now. Unknown Analyst: Great. One last question, if I may. You're having tremendous growth in Smiles, 25% growth in subscribers is kind of unheard of. What is attributable [ to it ]? Celso Ferrer: Just a minute, Chris. Just a minute. Just let me take. Julien Pascal Imbert: When you said 25% increase in subscribers... Unknown Analyst: Yes, you opted like 29.6 million subscribers or members, I guess, you call. Julien Pascal Imbert: Yes, yes. Okay. But versus last year. Celso Ferrer: Yes. On redemptions on the Smiles... Unknown Analyst: Yes, everything in the Smiles seems to be working far better than expected. I'm just wondering how -- what's that... Celso Ferrer: I mean, since we incorporate Smiles, we have been focused on how can we have real synergies between, let's say, the GOL revenue management and Smiles. And that's -- that has been our target. What you can see here, especially on the redemptions is that we have been able to -- I mean, have the right price, the right seat allocation for the program and being able to grow as we grow the ASKs of the company. That's the main target. Clube Smiles is growing. I mean we have a big -- more than 1 million members, as you can see. And the concern we had with Smiles at this moment is only the Argentina market, which is the same concern I mentioned on the passenger side. It is also because of, I mean, all the uncertainty that I hope now it's going to be a little bit more stable environment. We are a little bit lagging behind on the international markets in the Smiles as well. But rather than that, domestic has been performing as good as it is. Operator: Our next question comes from [indiscernible] from [ System OTIS ]. So I received the question in written form and it's, what about the Dow Jones IPO? My name is [ Clever ], and I'm an investor, and I believe in the [ food corporation journey ]. Manuel Irarrazaval: So maybe I can take that, Celso and Julien. This is Manuel Irarrazaval from ABRA. As we've announced or as we said in the recent days, we are working towards an IPO of ABRA, which should happen during the next year. And the basis for that is kind of given the strong performance that GOL has shown and the very good performance that Avianca is performing, we believe that the market is right to be able to do an IPO next year. So we're working towards that. That will be at the ABRA level and not at the GOL level. Operator: [Operator Instructions] Our next question comes from Miranda Wei from ExodusPoint. Miranda Wei: I just want to know what's the expectation for free cash flow in Q4? And then I have a follow-up. Julien Pascal Imbert: Miranda, nice having you. So we'll not share a prospective view on free cash flow for Q4. I would say it's in line with what we've published in the past. Miranda Wei: Understood. And I want to have a better understanding on the CapEx part. If I recall correctly, the plan laid out a CapEx that's roughly BRL 2.7 billion for the year. I think we're just at around BRL 1 billion year-to-date. And I understand there's FX movement. So if you could discuss in dollar terms on a normalized level, what is fleet CapEx and what is non-fleet CapEx? Julien Pascal Imbert: Miranda, very good question. I think we'll get back to you on this one to have all the details, but I don't mix any numbers. But you're correct in saying that for the first 9 months, we're at BRL 1 billion, and there's a lot of FX. But let me get back to you on the specifics, okay? Celso Ferrer: So if no more questions, I would like to thank you for joining the GOL earnings call today. And I want to thank you again to the whole team of Eagles, and have a great day. Thank you. Operator: This does concludes GOL earnings conference call for the third quarter of 2025. We appreciate your participation and wish you a very good day.
Operator: Good morning, ladies and gentlemen, and welcome to the Mountain Province Diamonds Inc. Q3 2025 Webcast and Conference Call. [Operator Instructions] This call is being recorded on Wednesday, November 12, 2025. And I would now like to turn the conference over to Mark Wall, President and CEO. Mark Wall: Thanks, Ina. Good day to everyone joining our Q3 2025 results call. I'm Mark Wall, President and CEO of Mountain Province Diamonds. Also present on this call is Steve Thomas, our CFO; and Reid Mackie, our Head of Diamond Sales and Marketing. At the conclusion of this presentation, we will be available for any questions that you may have. Firstly, I would draw your attention to our cautionary statement regarding forward-looking information. This presentation will be posted on our website for anyone who needs additional time to review this statement. Starting with safety. This quarter, our top priority has remained safety. I'm pleased to report that the total recordable injury frequency rate that we call TRIFR for the first 9 months of 2025 was 1.43, the lowest in the history of the mine, and this has dropped even further to 1.29 after the quarter has ended. Safety remains at the core of our operations, and this strong record is a testament to the team's commitment to a safe workplace. During Q3, our operational focus was on successfully stripping down to the much higher grade 5034 NEX ore body. NEX stands for Northeast Extension. As of now, we are consistently mining and processing this material, positioning us for improved production in Q4 and into 2026. Mining has gone well in 2025 with efforts to improve mining fleet equipment availability, underpinning improved mining performance. The 5034 NEX ore body is quite thin at the top and widens as we sink down. The lack of space was a constraint in equipment utilization during Q3. On processing, the maintenance team executed a 5-day plant shutdown in September to complete a long list of maintenance areas of the crushing and grinding circuit as well as the power generation system. This resulted in slightly fewer tonnes treated for the period. The average recovered grade was 1.18 carats per tonne, 5% lower than last year, impacted by a continued reliance on stockpiled lower grade ore in early quarter 3, but partially offset as we access the higher-grade 5034 NEX transitional zone. We expect to benefit from higher grades as more NEX material is processed in quarter 4. Cost control remains a focus with the expenditure for 2025 intended to be generally in line with the budget. The cash cost per tonne and per carat are higher than 2025 original guidance due to the lower grade material that was treated earlier in the year, resulting in lower carat production and the release of previously capitalized costs from stockpile processing. Year-to-date, the company remains reliant on the liquidity support provided by our major shareholder, Mr. Dermot Desmond, who remains a stalwart supporter of the company. During this period, we have experienced historically weak diamond prices. On that, the U.S. retail market continued to show strength, but diamond prices remain significantly constrained by the ongoing tariff situation between the U.S. and India. It is reported that the U.S. and India are nearing an agreement on tariffs, which may offer a tailwind to the current low diamond prices, but Reid will provide far more detail on that in a few moments. In summary, quarter 3 was a period of operational transition as the team completed important work exposing the higher-grade 5034 NEX ore body. We are now mining and processing that material, which is expected to drive a step change in results for Q4 and into 2026. The mine is well positioned with the shift to the NEX ore and operational improvements to continue to deliver. As always, our primary focus is on safety, operational discipline and cost management as we await stabilization and eventual improvement in market conditions. Thank you for listening, and I'll pass you over to Steve, who will take us through the financial results. Steve? Steven Thomas: Thank you, Mark, and good morning, everyone. Noting that all numbers discussed will be in Canadian dollars unless otherwise stated. As for the first half of the year, the company has seen low diamond prices during Q3, resulting in a very low revenue quarter impacting throughout the financial results. Also, sales in Q3 were fed by production drawn from the stockpile consisting primarily of Tuzo material treated in Q2. This explains the significantly lower diamonds recovered by the mid-year of 2025 compared to 2024, which limited the amount of goods available for sale. This outcome plays into industry-wide lower demand in the rough diamond market, itself driven largely by the uncertainty caused by the U.S. tariff regime, which is under review. As a result, quarterly revenue is the lowest since the mine opened with Q2 2025 being the second lowest. Expected amendments to the current tariff regime and our recommencement of mining ore in Q3 will significantly improve revenue earn going forward and result in financial performance. Continued lower market price has impacted Q3's reported cost of sales also as in Q3 2025, like the first 2 quarters, that required a write-down in the carrying value of diamond inventory, thereby increasing production costs. During Q3, treated ore continued to be sourced from the ore stockpile, but for the first time in 2025, the volume of tonnes of ore mined was similar to tonnes treated, resulting in only a small net depletion of the stockpile tonnes in Q3. However, over the first 9 months of the year, tonnes held in the ore stockpile reduced by 1.7 million tonnes, resulting in the release of previously capitalized costs. And that compares to the first 9 months of 2024 when tonnes in the stockpile grew by 1.1 million tonnes, resulting in capitalization of costs. The resultant loss from mine operations for Q3 2025 is CAD 29 million and CAD 103 million for the 9 months year-to-date, which compares to a loss in Q3 2024 of CAD 11 million and a profit of CAD 31.4 million for the first 9 months of 2024. In respect to foreign exchange, the U.S. dollar strengthened over the course of Q3, resulting in a material unrealized foreign exchange loss in the quarter. However, since the start of the year, the U.S. dollar has weakened, reflected in a material foreign exchange gain over the 9-month period, which is almost equal and opposite in value to the loss arising in the first 9 months of 2024. Adjusting for this and other impacts, adjusted EBITDA for the 3 and 9 months ending September 2025 is notably below the comparative 3 and 9-month periods in 2024, being negative CAD 4 million in Q3 2025 and marginally negative for the first 9 months of 2025, which compares to positive CAD 91 million for the first 9 months of 2024. Cash flow from operating activities was a CAD 3 million outflow for Q3 2025 and a CAD 31 million outflow for the first 9 months of 2025, which compares to a CAD 61 million inflow for the first 9 months of 2024. Q3 2025 also saw a further injection of USD 10 million from the bridge loan facility used to pay operating costs. And as a result, sees the Q3 closing working capital position at negative CAD 25 million compared to positive CAD 182 million at the end of Q3 2024. Turning briefly to the balance sheet. The CAD 3.2 million increase in the closing cash balance reflects a further injection of USD 10 million under the bridge credit facility and for the first 9 months, a total of USD 40 million, which is fully drawn on that loan. And in addition, CAD 33 million drawn through a working capital facility, both of which were made available by our related party, Dunebridge. These funds, along with temporarily utilizing CAD 20 million held in the restricted cash account enabled us to fund all operating and corporate costs through to the Q3 period end. The value of the derivative asset at CAD 1 million represents the fair value of the early repayment feature within the second lien notes and has changed minimally over the quarter, but decreased by CAD 4.9 million over the 9-month period, reflecting the increase in the discount factor used to derive its fair value. Inventories at CAD 154 million have decreased by CAD 13 million over the quarter as the supplies delivered on the winter road are drawn down. For the first 9 months of the year, the reduction in value by CAD 42 million is due primarily to a CAD 55 million reduction in the value of the ore stockpile for which the tonnes have reduced by 1.7 million. As mentioned earlier, during Q3, all mining commenced with 807,000 tonnes mined being very close to the 847,000 tonnes treated, resulting in the ore stockpile tonnes at Q3 end at 2.34 million tonnes being very close to the opening tonnes. Lastly, for inventory, although Q3 -- during Q3, there has been an 82,000 carat increase in the volume of rough diamonds held in inventory, the value has only increased by CAD 1.1 million to CAD 17.5 million as the value per carat has reduced to CAD 48 per carat from CAD 58 per carat at the end of Q2. This reduced value reflects the noncash write-down of CAD 15 million in the quarter to reflect the net realizable value compared to costs. Since the start of the year, when the value per carat was CAD 72, we have booked CAD 43 million in write-down charges, reflecting the deteriorating selling price experience. For property, plant and equipment, the Q3 2025 balance at CAD 630 million is up CAD 5 million over the quarter and CAD 42.5 million above the 2024 year-end balance, reflecting a CAD 14 million balance invested in sustaining capital and an additional CAD 61 million of capitalized waste activity in respect of NEX waste material, less the depreciation incurred since the start of the year. For current liabilities, the accounts payable balance at CAD 89 million includes CAD 19 million of accrued interest on the senior secured notes, which the lenders agreed to forego until settlement in June 2026. This was previously paid every 6 months, so would not figure in the comparable AP balance at June 2024 or 2024 year-end. The USD 40 million bridge credit facility was fully drawn in July and the balance reflects the principal unamortized deferred transaction costs and accrued interest translated at the closing FX rate. Similarly, the working capital facility of CAD 33 million was fully drawn during Q2 and is accounted for as per the bridge credit facility as a short-term liability accruing interest under it until it is settled. The fair value of the USD 20 million U.S. currency hedges in place is reported as a derivative liability due to the strengthening of the U.S. dollar over the quarter and the resulting forecast forward FX curve, which exceeds the average settlement rate of CAD 1.38 to the U.S. The fair value of the current and long-term components of the decommissioning and restoration liability has seen little movement over the 3 and 9-month period with the risk-free interest rate used in the fair value calculation at 3.2% being very close to the year-end figure. The resulting change in the value of net current assets and current liabilities during the 3 and 9 months ending Q3 '25 results in the working capital position decreasing by CAD 30 million during the quarter. And although it is CAD 95 million greater than at 2024 year-end, if that '24 balance was normalized for the reclassification of the second lien notes from short to long-term debt, it would equate to a reduction in working capital of CAD 165 million, half of which reflects the injection of CAD 88 million of short-term debt for which the cash has been used to meet operational needs. In respect of the long-term liabilities of the U.S. dollar-denominated senior secured notes and junior credit facility, the strengthening of the U.S. dollar compared to CAD over the quarter increased the comparative Canadian dollar reported values, and that is reflected in the unrealized foreign exchange gain of CAD 10.2 million in Q3. Conversely, the relative weakening -- sorry, that was a CAD 10.2 million loss in Q3. Conversely, the relative weakening of the U.S. dollar over the 9-month period has tended to lower the Canadian denominated value and resulted in a foreign exchange gain of CAD 11.4 million since the start of the year. To note also that whereas the junior credit facility balance is stated inclusive of accruing interest for the senior secured notes, that accrued interest is reported as part of the current accounts payable liabilities, as I mentioned earlier. Turning now to earnings plus. As per my opening remarks, revenue earned in the 3 and 9 months up to Q3 2025 was far lower than the comparative 2024 period. For the first 9 months of 2025, volume of goods sold are 43% down compared to 2024, reflecting the source of ore treated coming from the ore stockpile and average price sold is 14% down. For Q3 2025, at an average selling price of USD 52 per carat compared to USD 75 per carat in Q3 2024, this is the lowest price in a quarter since Q2 2025 and prior to that since Q3 2021 when the market was closed due to COVID. And as Mark mentioned, Reid will provide a more in-depth view of current market conditions shortly. Cost of sales at CAD 58.1 million in Q3 2025 compared to CAD 80.4 million in Q3 2024. However, if that balance is normalized for the amount of carats sold, the Q3 2025 figure would be comparatively CAD 16 million higher, of which CAD 5 million is attributable to the comparatively higher non-cash charge to write down inventory to its net realizable value. Cost of sales for the 9 months ending Q3 at CAD 214 million compared to CAD 184 million for the 9 months ending Q3 2024, which again, if normalized for carats sold, would be approximately 2x higher. This significant comparative increase reflects the CAD 27 million higher write-down charges against rough diamond inventory in 2025 compared to 2024 and because in the first 9 months of 2024 the ore stockpile grew by 1.1 million tonnes, whereas in 2025, it shrank by 1.7 million tonnes, resulting in the release of a significant proportion of costs previously capitalized. The cash cost of production, excluding capitalized stripping for the 9 months ending Q3 '25 at CAD 99 per carat and CAD 93 per tonne of ore are markedly above the comparative figures of CAD 56 per carat and CAD 77 per tonne of ore treated for Q3 2024. As for cost of sales, this is largely due to the aforementioned significant depletion in the ore stockpile tonnes in the first 9 months of 2025 compared to the growth in 2024. Also, as I noted in the Q2 earnings presentation, this is due also to the respective average value per carat of opening and closing inventory, which feeds into production costs having gone up in 2025 compared to 2024. The differences in comparative costs on a per tonne and per carat basis widen when including capitalized stripping as capitalized stripping costs incurred in the first 9 months of 2025 were CAD 35 million higher than in 2024. As a result of the lower carat recovery and the cost effects outlined above, we have reguided the full year production cost per tonne and per carat as disclosed in our production press release on November 6 and in the Q3 MD&A. Finance expenses for the 3 and 9 months ending Q3 2025 are CAD 15 million and CAD 40 million, respectively, and as expected, above the 2024 comparable periods at CAD 11 million and CAD 32 million. This reflects the increase in the interest charge in respect of the junior credit facility as that accrued interest adds to the principal outstanding and also the inclusion of interest and deferred charges associated with the new working capital facility and the bridge loan facility, which increased in size during Q3 2025. In respect to foreign exchange movements in Q3 2025 and the 9 months year-to-date, I've discussed the unrealized foreign exchange impacts arising on translation of the U.S. dollar-denominated debt. But in addition, there was a realized foreign exchange loss of CAD 4 million incurred on the settlement of U.S. dollar hedges at rates below the prevailing spot rate. Deferred income tax recovery of CAD 2.9 million in Q3 2025 and CAD 14 million for the first 9 months of 2025 compared to a deferred income tax charge of CAD 1.3 million for the first 9 months of 2024 reflects the reduction in the deferred tax liability due to the scale of the operating losses arising in 2025. The above results in loss from operations for Q3 2025 of CAD 29 million compared to a loss of CAD 11 million in Q3 2024. And for the first 9 months of 2025, a loss of CAD 104 million compared to a gain of CAD 32 million for the comparative 9-month period in 2024. Selling, general and admin expenses for the 3 and 9 months ending Q3 2025 continue to reduce in the year and are significantly below the comparative periods in 2024, driven by continued cost control efforts. Cash flows provided by operating activities, including changes in non-cash working capital for the first 9 months of 2025 saw an outflow of CAD 31 million compared to an inflow of CAD 61 million in the first 9 months of 2024. The injection of CAD 89 million via related party debt supports the closing cash balance of CAD 4.9 million for Q3 2025 compared to the opening balance of CAD 1.7 million. Per the analysis in the MD&A, adjusted EBITDA for the 3 and 9 months ending Q3 2025 was minus CAD 4.3 million and minus CAD 0.4 million, respectively, with a year-to-date margin of 0% versus CAD 91.3 million and a margin of 42% for the first 9 months of 2024. Overall, a net loss after tax for Q3 2025 of CAD 56 million and CAD 128 million for the first 9 months of the year compares to a loss of CAD 19 million for Q3 2024 and a loss of CAD 19 million for the first 9 months of 2024 with the difference largely due to the significantly lower sales volume and price and also the release of previously capitalized production costs as tonnes in the ore stockpile reduced. For Q3 2025, the loss per share was CAD 0.26 and for the first 9 months of the year, a loss of CAD 0.60 compared to a loss of CAD 0.09 for Q3 2024 and equally CAD 0.09 for the first 9 months of 2024. In conclusion, Q3 2025 has seen a continued challenging market with constrained price compounding the reduced production volumes available for sale whilst we mine through NEX waste material. During 2025, the ability of the company to meet ongoing operational costs has been made possible by the significant financial support provided by our major shareholder, Mr. Desmond. These financial results are despite the mine performing beyond historical records. And now that we are mining the richer NEX ore body, this will drive a significant improvement in revenue, our overall financial results and our ability to pay down debt. Thank you for listening. And with that, I will turn the presentation over to Reid. Reid? Reid Mackie: Thanks, Steve. Indeed, it's been a difficult quarter. Overall, the diamond market sentiment remains cautious, driven by the evolving U.S. tariff landscape as well as the uncertainty around the pending sale of De Beers. All eyes are now on the upcoming holiday season to improve upstream demand and boost pricing. Throughout Q3, producers continue to gradually draw down inventories and manage supply to support pricing. Purchasing flexibility at producer rough sales remains common with some continuing to strategically withhold goods to protect pricing and balance tariff-related pressures. Both rough and polished prices declined in Q3, although larger sizes have stabilized in some categories. In recent months, the U.S.-India diamond tariff dispute intensified, triggering strategic shifts across the industry. The U.S. doubled its tariff on Indian diamond imports to 50%, prompting a sharp drop in exports and forcing Indian traders to pivot where possible towards high-margin jewelry and alternative markets like the UAE. And manufacturers explored offshoring production in other jurisdictions. While the EU secured zero tariff access for locally polished goods, countries like Botswana and India continue to seek similar arrangements. In early September, the U.S. added diamonds to a list of potential exemptions for countries with trade agreements. U.S. consumer demand remained steady ahead of the holiday season despite macroeconomic headwinds. The National Retail Foundation forecasts 2025 U.S. holiday sales to be the second highest in its history. Hong Kong's luxury retail showed signs of further recovery in Q3, while the Chinese luxury market is beginning to show signs of a rebound. India's domestic market continues to be strong with holiday demand driving down growth in diamond -- driving growth in diamond jewelry sales there and natural diamonds still dominate the Indian market with lab-grown making up just 2%. Retailers are leaning into consumer assurances around natural versus lab-grown products with some training staff to highlight natural diamond attributes, the widening gap and GIA's updated grading terminology are further differentiating between natural and lab-grown stones at the consumer level. Heading into Q4, the industry is looking ahead to the upcoming holiday season, cautiously optimistic that strong retail performance will support upstream demand and price growth. Tariff developments, especially those affecting India, remain a key focus as the industry seeks to continue to see more market predictability and signs of recovery. Long term, we feel the outlook for natural diamonds, especially those with verifiable origin stories, remains positive. And with that, I pass you back to Mark for closing remarks. Mark Wall: Thanks, Reid. So at the end of Q3 2025, we've continued to focus on safety performance and achieved the lowest TRIFR so far at the operations. We've continued to waste strip to the high-grade 5034 NEX ore body, which we have now fully accessed. We've executed a 5-day shutdown on the processing and power facilities to set the plant up for the winter months. We look forward to some stabilization in the market to be able to leverage our higher production from Q4 through 2026. Thanks for your time, and the team is now available for any questions that you may have. Operator: [Operator Instructions] Mark Wall: Steve, is there anything on the chat? Steven Thomas: No, not at this time, Mark. Mark Wall: Okay. You have nothing, Ina? Operator: [Operator Instructions] No questions at this time. I will now hand the call back to Mr. Mark Wall for any closing remarks. Mark Wall: Thanks, Ina. Thanks, everyone, for dialing in. Thanks, Steve. Thanks, Reid. Steven Thomas: Thank you. Operator: And this concludes today's call. Thank you for participating. You may all disconnect.
Operator: Good morning, ladies and gentlemen. Welcome to the Dream Unlimited Corp.'s Third Quarter 2025 Conference Call for Wednesday, November 12, 2025. During this call, management of Dream Unlimited Corp. may make statements containing forward-looking information within the meaning of applicable securities legislation. Forward-looking information is based on a number of assumptions and is subject to a number of risks and uncertainties, many of which are beyond Dream Unlimited Corp.'s control that could cause actual results to differ materially from those that are disclosed in or implied by such forward-looking information. Additional information about these assumptions and risks and uncertainties is contained in Dream Unlimited Corp.'s filings with securities regulators, including its latest annual information form and MD&A. These filings are also available on Dream Unlimited Corp.'s website at www.dream.ca. Later in the presentation, we will have a question-and-answer session. [Operator Instructions] Your host for today will be Mr. Michael Cooper, CRO of Dream Unlimited Corp. Mr. Cooper, please go ahead. Michael Cooper: Thank you very much, operator, and good morning, everybody. Today, I'm here with Meaghan Peloso, who will provide the CFO update in a few minutes. I wanted to start with a couple of macro comments and then after Meaghan, I'll go into some detail about the company. The first comment is without sort of being partisan, I think it's factual for the last 10 years, Canada has been going in the wrong direction relatively quickly, and it's really created a lot of damage to the size of the economy and it really has created a lot of issues with just sort of uncontrolled immigration, like being 18% below the trend line for where the GDP should be, where the GDP per capita should be and it's really been hitting hard as time goes by. But I would say that the new government is going in the right direction as far as we can see, and we can discuss whether it's going in the right direction fast enough or not, but it is an amazing positive to change from going in the wrong direction quickly to going in the right direction, and we're very encouraged by that. I also think that the major projects are major, and I want to give one example that's close to home for us at Dream, just as an example of what the potential of some of the things that are happening are. Now in Saskatchewan, the Jansen mine is being built, and it is not being built. I don't know if it has any government support, but I'm just using this as an example of how much a major project can influence economy. So Saskatchewan has the second highest per capita income, which is based on $90 billion GDP and 1.25 million population. What's interesting in Saskatchewan is half of the GDP is exported, but it has the least percentage of exports to the U.S., what actually exports a lot of things all around the world. So this Jansen mine is going to open next year. it's a $14 billion development, which is massive for the size of the province, and it's going to produce about $4 billion of revenue, which by our calculation, would literally be a onetime increase in the GDP of the province of over 4%, and almost a 10% increase in the amount of exports in Saskatchewan. And we think this is tremendously bullish for the province. There's lots of other things. But as Canada gets more major projects going, there will be an increasing number of bumps to the GDP. These onetime bumps that will then continue to grow on a regular basis. So we're very excited about it, and we believe in it. And we just think turning the ship around makes take some time and the next 24 months may not be as positive as we would like just because the actions of the old time are still reverberating before the new actions take place. The second area that I've been thinking about a little bit is, I mentioned that the choices that we have made have reduced the size of our economy, 18% from what it could have been. And I think Canadians have been really focused on the U.S. and from everything I've seen from all of the bank's numbers, it's like if there's tariffs or there's other issues, it could be like a 3%, 4%, 5% onetime hit to our GDP, which is terrible, but it's manageable and all the other countries around the world are managing their way through it. Canada is in the worst position, of course, because we've got a 5,000-mile border with the U.S. and we're very far away from any other country. But I think we can manage our way through it. But I don't want to focus on that. I want to focus for a second on the Supreme Court decision on tariffs, which I know a lot of Canadians are rooting for, that the Supreme Court overturns the tariffs. And I think that probably sounds like a good idea. But one of the biggest threats I think to Canada is that the U.S. starts to see an increasing cost of debt. And if the Supreme Court says, that the $400 billion a year that the U.S. is getting, which is like 20% or more of their annual deficit has to be paid back and the U.S. has to fund that money. I'm just worried about what that might do to interest rates. So look, the relationship we have with the U.S. is really complicated, really significant. I think we're doing pretty good so far. We can take care of ourselves that we focus on it, and I really hope that Canadians as a whole will really focus on how we grow our economy and how we act more courageous, not just the government, but entrepreneurs and employees as well. And I think it's well within our control to see huge improvements over the next 4 or 5 years. So I'm really quite excited about that. Just think that what I would say is when we're running Dream Unlimited, you got to divide into things that are within our control and things that aren't. And I'm really pleased with the work our team has done since the beginning of this decade in a very difficult times. And I will go through it a little bit later in terms of all the accomplishments that we're currently achieving. And then at the same time, there's obviously great uncertainty over things that are out of our control, and I'll try to explain how it is that we're positioned ourselves for that as well. So with that kind of foreshadowing, Meaghan? Meaghan Peloso: Thanks, Michael. Good morning, everyone. The company's third quarter results for our core operating business was solid with $24.1 million in net margin generated in the period, up from $9.8 million in the prior year. Net earnings for the third quarter on a stand-alone basis was $27.4 million, which does include fair value adjustments on our Dream Group unit holdings. Now just as a reminder, last quarter, we revised our operating segments to better articulate how we view and manage the business. I'll briefly walk you through our segmented results under our updated headings, which represents our stand-alone activity only. In the third quarter, our Asset Management division generated revenue and net margin of $14.5 million and $11 million, respectively. Within revenue, we continue to see steady base seat growth, while transactional and development fees continue to fluctuate period to period. In the third quarter, net margin increased by $4.4 million relative to the comparative period, due to higher costs attributable to our private asset management platform, which have now normalized in the current period, in addition to the impact of the transactional activity. In the third quarter, Western Canada Development generated revenue and net margin of $61.6 million and $11.4 million, respectively. We achieved 137 lot sales, 13-acre sales and 34 housing occupancies, which were largely concentrated in Alpine Park in Calgary. Relative to Q3 2024, the average selling price fluctuated significantly period-to-period due to the specific product mix in phase being released. Over the past quarter, we've made significant progress in our land presales commitments, which helped us manage our capital and adapt to market changes in real time. As of November 7, we have a total of $275 million in sales commitments that will be recognized between 2025 and 2027, which is up by $71 million from the last quarter. Now this $275 million does include the $65.9 million of land revenue recognized in our year-to-date earnings. In the third quarter, our income properties generated revenue and NOI of $13.1 million and $6.5 million, respectively, compared to $11.1 million and $4.9 million in the comparative period. The increase in NOI was driven by strong leasing activity within our newly completed purpose-built rentals in Saskatoon, partially offset by the impact of normalizing operating expenses as we establish the portfolio. As of September 30, we had $928.7 million of income properties on Dream's balance sheet, reflecting only our direct ownership. Our other investment segment generated $14.2 million of revenue and $3.2 million of negative net margin in the quarter. Overall losses in this segment are within our expectations and periods of low occupancy as fixed costs will exceed earnings. Over the course of 2025, we spent just over $8 million in share repurchases equivalent to 1% of our shares outstanding. At this point, we're likely done using our NCIB for the remainder of the fiscal year, and we'll reevaluate our buyback activity in the new year. Lastly, we ended the quarter with $328 million of liquidity and very modest near-term debt maturities positioning us very well for the remainder of the year and going into 2026. So with that said, I'll now turn the call back over to Michael. Michael Cooper: Thanks, Meaghan. As we've been speaking about the company, for sure, since the annual meeting but even before that, we're looking at the company in terms of its 3 major drivers being income properties, asset management in Western Canada. So I'd like to give an update on each one of those, and then I'll also deal with what we call other. On Asset Management, when we sold Dream Global at the end 2019, we decided we wanted to continue growing in the public markets, but we also wanted to pursue private asset management. And since then, we've had some success. I think we have in excess of $10 billion of assets under management from institutions. And it is -- I think, at this point, it's larger than our public company asset management, which is pretty encouraging. Looking forward, there's lots of opportunities. It's a difficult process to get a new client. It's very time-consuming and uncertain. But we've been having plenty of conversations that we have confidence about that we're going to continue to see growth with new clients as well as seeing growth with existing clients. We feel that, we'll talk more about in February on all these points as we to reflect after our year-end and our approved business plan. But we see lots of opportunities to increase our margin within the existing assets that we have and that they could be meaningful next year. So between growing some assets and increasing our margin, we expect next year to be a very strong year for profits for the asset management business. And it's hard for me to believe, but I think we're likely going to exceed $30 billion of assets under management by the end of 2026, which I think is a number that's relatively significant. I mean, if you look at the big guys like Brookfield and Blackstone, there at $1 billion to $1.3 trillion and $30 billion is not much. But $30 billion is a relatively significant amount of assets that we have expertise and responsibility for. And I think we're proving ourselves to our clients. And I think we've got great growth prospects. In Western Canada, we've been referring to it. We've started the Coopertown community in Regina, that's well underway. We have 210 lot sales, 60 -- 150 to third parties as Meaghan mentioned. But just to get that approved means we now have that land available year after year with no more zoning requirements. So I think we've got a long horizon of developing Regina, where we believe there's pent-up demand. at Alpine Park, it's been going very well. It's a couple of years ahead of Coopertown. And we've got a lot of approvals. We still need some more to keep it going. But in the North segment of the first portion, which is 615 acres, we're in good shape, and we've got a lot sold. We'll probably be selling through to 2030, by which time we'll start, I think it's south of 164th Street. So we have pretty good visibility there. We're getting -- we're selling lots at highest prices ever. And I think we're selling our parcels at the highest price ever, which is very encouraging. In Edmonton, I think things are going well. In Saskatoon, we're going to finish the Brighton community. The sales of the Brighton community in 2026. We mentioned before, we've got this massive school complex as well as a large retail complex starting. We're still dealing on some zoning there, but if we can get that zoning done in time. We're going to be on our way in Homewood for the next 10 or 15 years. So we've got a lot of land keyed up, ready to go, a lot of demand. In most of our markets, there's very low completed and finished houses, developers, builders have very few lots. So we've got the ability to manage slower sales for a while. But we think now that the budgets come out and there's clarity on HST on housing, we'll see a bit of a bump. People won't be waiting to buy. So I mentioned last time I went through some numbers. I think those numbers pretty much are good now. We're expecting, starting in 2026, our baseline of earnings from Western Canada. Land and housing will be higher than it's been over the last 5 years. So that's very exciting for us. And the third major area is income properties, and it's pleasing to see every time we come up with our numbers. Our income property margins are increasing. I think it's going to speed up. We've seen a tremendous amount of leasing on our finished apartments just in the last 90 to 120 days, with virtually all of our newly completed buildings now over 90%. And hopefully, we'll get them a little bit higher and they'll be stabilized in the next few months. So it's very exciting because it was slow at times with some of the changes. So we're adding a lot to our income profit. I think we're adding $200 million to $250 million a year. I think by year-end, we'll have about $1 billion of just owned properties on Dream's books, not investments in other entities that own income properties. And we think that's going to continue to grow at a rapid pace, and the NOI will continue to rapid pace. And generally, we're getting development profits plus appreciation as the rents grow, which in most of our markets, the rents are continuing to grow. So it's looking very good on all 3 of those areas and I suspect they're going to continue to increase in the significance of those 3 areas to our whole business. So as we've been talking about these areas over the last number of years, we are seeing tangible evidence that we're achieving the goals that we set out for ourselves. We started all 500 apartment units in Western Canada this year that we had planned on. And we've got the 77,000 square feet of retail that we've undertaken. And I think all the 10,000 square feet of that is leased and the construction is going on. In Calgary, the 60,000 square foot center should be finished in 2026. So a lot of the things are going according to plan. And in Ottawa, we're getting good leasing. And in Toronto, we own the distillery district, but we actually -- we own value-add apartments, which are doing quite well. But we don't have exposure to that much else directly. So we're expecting that the future years are going to look very good from each of those 3 areas. In the other category includes like the office REIT, which we're very pleased with the leasing. I think we mentioned on our conference call that 74 Victoria, the federal government left most of the building last year. If we exclude that, our Toronto portfolio is over 90% committed. And that's a big sign. That's really -- a lot of that has happened in the last 4 or 5 months. And we got tenants taking possession fairly regularly. And of the other 10% in those buildings, we can see very leasable spaces. We're building out space and we expect to move a good portion of that in 2026. And we also think that we're going to make some progress in 74 Victoria. So it's still capital consuming. But we do believe that the leasing market has improved, and we don't know where it's going to stabilize, but it's looking encouraging. On our urban development, we have some ownership directly within Dream. But most of it is through the Impact Trust. And the Impact Trust has not been trading well at all, and it's got leverage and a lot of development, and it has not been of interest to the public shareholders at this time. Having said that, it has some of the most exciting projects we've ever been involved in, and those projects are proceeding, and they're proceeding in an exciting way. So as an example, the tenant who is in 49 Ontario, left the building literally, like Elvis literally this week and is now in occupancy in 30 Adelaide, and we've commenced the demolition of that building as well as we're doing other work on the site. So we are underway to build a 1,200-unit apartment complex. It's 20% or 21% affordable. We have CMHC funding approved. We're just finalizing it and hope to draw within the next 30 to 90 days. We're very advanced on tendering the work and it's looking very good. That property benefited from the City of Toronto waiving development charges because we have affordable housing. So that means that we're saving quite a bit of money on the total development cost because of the waiver of the development charges. In addition, we're doing quite well on the construction cost and the construction should be significantly less than it would have been 18 months ago. So our cost base will be quite attractive. As we all know, rental rates have also come off during that time. But I think our savings are relatively similar to the amount rents have come off. So we have a low cost base, and we can use lower rents and achieve the type of returns that we would have hoped to achieve a couple of years ago. So I think we've got a pretty good starting point and we could make it work with existing rents. And our expectation -- I mean that's too strong. Our thoughts are that with the rents coming off so much for a whole bunch of reasons. Even though we don't budget it, it's quite likely that the rents will pick up again and return to new highs within the next couple of years, which would make the building a home run. So that's really exciting. Dream has about a 37% indirect interest in that asset. We're also making a lot of progress at Key side, which is just a little bit bigger and that's a venture between Impact Fund and Impact Trust. Our net indirect interest there is about 35%. And there again, we're making great progress with the city, the federal government, Waterfront Toronto, and we expect to start that project very soon with relatively similar outcomes, lower costs, lower rents, but overall, having a compelling investment opportunity subject to a little bit more. We still need to do to hit our numbers. So even in the areas that aren't fashionable. I think our team is doing a great job, and I think there's really great opportunities with assets that are being managed really well. So I guess that's my overall about the company. And then you say, well, the stuff that we can control, we think it's going pretty well. What about the stuff we can't control? That's why I've been saying you got to focus on liquidity, which we have been. And we're always looking at where we can get more liquidity if we need it. And I do think that the next 12 to 24 months may be more challenging than we'd like just because of the change in government direction, the change in the U.S. But as I was saying, like in Western Canada, we got a tremendous amount of presales already. We expect that to be in 2026, it should be a good year for asset management. And on income properties, it's pretty steady. So it should be -- like we should be able to generate cash over the next couple of years, even if it's a tougher environment. But all in all, I think that the company is really quite well positioned. And whether it's easy sailing from here or build both ways. I think our financial capacity our assets and our people are ready to deal with it. So with that, I turn it over to any questions. Operator: [Operator Instructions] Our first question is from Sam Damiani with TD Cowen. Sam Damiani: Thank you, and thank you also for comprehensive business overview. That was very helpful. Michael, one of your comments was on liquidity. And I'm just curious as to the reason to stop the NCIB activity at this juncture for the rest of the year and any update on Dream's support for Dream Impact Trust? Michael Cooper: Yes, I thought it would make it said it was a little strong. I mean we almost are at the end of the year. I think we're looking at buying up 1%. We've done that. We could buy a few shares, but I suspect that, as I mentioned, we do our business plan now. So we're still tweaking it. We go to the Board. So we probably aren't going to be too ambitious on the NCIB until we have a plan going forward that's approved. But the NCIB is definitely one of the tools in the tool chest that we'll be using. And there's been years where we bought back more than 1%. But I think if you compare the amount that we're using it to many other companies, 1% is a reasonable amount. The second question is about support for Impact Trust. And there I think that impact trust put out a press release that we've given them a $15 million line. I don't think we quite said it, but that was specifically due to the predevelopment costs prior to getting the first draw -- excuse me, first draw in Ontario. I had mentioned previously on a conference call that -- or I think it was in the press release in August that we've been dealing with some potential lenders for Impact Trust. There is definitely money available, but it's treacherous terms. And when we looked at that, we thought, you know what, it is better for Impact Trust and better for Dream if we have loans among people who have the shared values and shared interest. So I think we're looking at increasing that $15 million. We haven't fixed the amount. We're still working with the 2 Boards, but we're pretty far advanced, but it will definitely be within what Dream has the capability of lending. And the other thing I would say is hard to communicate, which is the -- when we are doing our projections, we're talking about, well, when this loan comes up, will there need to be a pay down. What's the timing on another thing? What's the worst case of this. And we're finding that the numbers are moving around quite a bit right now. And we think over the next 60 days, a lot of those numbers will be settled, and we'll have much more clarity as to how much money is needed over what period of time. But as I said earlier, Dream is -- Dream would, Dream is keenly interested in many of the assets within Impact Trust. And we think that for Dream lending some money is the best way to support those assets and to support Dream's interest in the assets from Impact Trust perspective. I think that borrowing from somebody else is too difficult at this time. So I'm not telling you the number. We didn't say it at the Impact Trust. When we spoke to our Board, we gave them a rough range and we'll know more soon, and we will disclose it as soon as we have established it. Sam Damiani: That's really helpful. I appreciate that. And just on the Western Canada side, nice to see the commitments take a nice step up for the next year or 2. Just curious what you're sensing on sort of the end user market, the buyers of these completed homes how that demand is trending or holding up, just given the macro that the country is facing as you alluded to. Michael Cooper: Yes. Well, I don't think we have an economy that's national. I think we have a specific economy. I've mentioned this many times, I think Ontario is positioned maybe the poorest and Saskatchewan, Alberta are positioned the best. In Saskatchewan, housing prices are near a high, if not at a high. There's been quite a bit of interest. We had a pretty good spring. But throughout the summer and early fall, it was slower. October looked a little bit better, but I think a lot of that has to do with uncertainty. The builder is committed to everything we hope for them to commit to for 2026. And as I was saying, that's really because they don't have much inventory. So we'll be looking much more closely in 2026. How we progress through -- how the builders progressed through their inventory because that will give us more insights as to their demand for 2027. One of the things is we've got a lot of new developments. So the builders obviously have no lots there. And I think they'll stretch to get positions in those neighborhoods. So I think we're buffered even for 2027. But the sales have been a little bit slower than we would have liked, but still, there's still sales and there hasn't been an issue on pricing or anything like that. I just think there's been a bit of uncertainty in this thing with HST is a significant factor. And why would anybody buy a house if they're going to save $30,000, $40,000, $50,000 if they wait. So just to go into even more detail, you didn't ask for it, but there was a hope that the liberal government would say that the HST waiver was not just for first-time homebuyers, it was for all buyers under a certain price. And there's good reason why HST should not apply to new housing. Trudeau said he's going to take it off. There were times where really right at the beginning, they weren't sure whether housing should have it or not. And this government decided in their budget last Tuesday that they're going to pass into law that first-time buyers will not have to pay HST under $1 million. So at least that's done now, and people know what it is. And I think the date that as of last budget, so people can make decisions now. So hopefully, that will be better. Sam Damiani: That's helpful. And I guess last one for me, just on the supplemental. It did show about, I guess huge increase in acre sale commitments up about 200 acres from what was disclosed in Q2, including a big chunk, I guess, expected to close in Q4. Could you just shed some light on what you're expecting there? Michael Cooper: Yes. I think that there's a couple of things where we're really building up our presales. The one that would close in Q4 is 200 acres in Edmonton that we're bringing partners into like we did last year. So we've been very pleased with the ability to get a decent price for land and partnering with it, that's not core lands to us. So that's about a $20 million sale. And I think we paid $3.75 million for the land some time ago. Operator: Our next question is from David Spier with Nitor Capital Management. Michael Cooper: Welcome back, David. David Spier: Thanks, I appreciate it. I just had a bigger picture question here. I understand the strategic value in the different segments and keeping them in one house. But you talked about the growing value of the asset management business. I mean, if you're looking at it the last 3 quarters and in the last few years. I mean you mentioned the AUM growth, but on an FFO basis, it's exceeding probably $40 million on an annual basis. There's also future monetization opportunities where with industrial, where according to the most recent filing, there's a -- I think it's $330 million potential carry? Michael Cooper: I think it's $37 million, but I'm not arguing. David Spier: All right. So give or take. So and now especially with the development projects coming online over the next few years, and adding some additional recurring income. Has the company thought about the possibility and would even be possible to create a cleaner story here where you would have a separate publicly traded asset management business, maybe even combined with some of the dividend-paying investments put into a separately traded vehicle and then the development in physical properties and other? Just to really create a cleaner story, more or less. Michael Cooper: Okay. There was a twist at the end there. I was thinking of -- we've really been growing the asset management business, and we know that they're highly desirable businesses. We have looked at funding it -- okay, I'm sorry, I'm stuttering. We've been looking at financing that building business on its own. What would it take for us to be able to finance the asset management with its own debt. We also have looked around at how other people have dealt with our asset management business and how it's turned out. And some people have done quite well by bringing in a 20% partner who has a strategic partnership reason. So we're probably open. I think what we've seen is the business is too small to get the top valuation, and we think it's going to get bigger. So I would say on that part, not yet. And that was sort of like do we bring a partner in, I don't think we'd look at selling it. We could spin it out. David Spier: That's -- by the way, I didn't mean selling it. I meant spinning it out and having it in a just a separate vehicle that will be valued better by the market more or less. Michael Cooper: Yes, we could look at that. We haven't yet, and I think a lot of that is due to scale. But I don't -- I mean if you're asking me, is there a religious reason why we wouldn't, there isn't. DRR is getting privatized. So we'll have -- we'll be down to 4 public companies, maybe there's room for another one. Because generally, we're like, no, we're not going to have a 6 public company. But you know what, we've been -- like it has been a very difficult time to manage through, and we've been really focused on not losing ground. So hopefully, things will be settling down over the next 12 months. and it will be much easier to plan strategic things. But David, it's a great thing to think through. We are always open to ideas from shareholders. If that makes sense for the company. And I don't really have a answer because... David Spier: Yes. I would just add that it's -- the company has a lot of levers. And I mean I think arguably, even with the difficulties in the environment. I think clearly make the argument that selling at a pretty significant discount to the NAV of the company and the different parts. So if one, we're not going to take advantage of that via a buyback, an aggressive buyback for just liquidity purposes, what's the alternative way to unlock and create shareholder value? And I think that just might be one of them to consider just because I think we see with other vehicles, whether it be Brookfield creating these -- keeping everything in-house, but creating separate public entities that could be valued appropriately in the markets. Michael Cooper: Yes. I mean I haven't paid too much attention about Brookfield spending off 25%. But we've actually been quite active in structuring and restructuring businesses and it's done well for us over time. So I don't want you to think I'm being dismissive in any way. We're just not at that point yet. But we have thought about it a little bit when we get better, bigger. David Spier: All right. I appreciate a $30 billion may be small relative to the other guys, but it's not small in general. So I really appreciate it. Michael Cooper: Thank you. I really appreciate your comment. It's good to hear from you again. Operator: [Operator Instructions] This concludes the question-and-answer session. I would now like to turn the conference back over to Mr. Cooper for any closing remarks. Michael Cooper: I just want to thank everybody for listening and paying attention, and we look forward to the year-end conference call where we can provide a lot more information on the business plan for the next 4 years. Thank you. And as always, Meaghan and I are always available to speak with anybody who wants to speak with us. Bye-bye. Operator: This brings to close today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.
Sam Ghezelbash: Good morning. Welcome, everyone, to Ypsomed Half Year Results 2025-2026 Earnings Conference call. Today, with CEO, Simon Michel; and CFO, Samuel Kunzli, we would like to go over our first half year results. We'll go over the key achievements and the financial drivers for this first half year. After a short presentation, we will open the floor to questions. Thank you for joining us again, and a warm welcome to all. Without further ado, I'll pass on then to Simon. Please. Simon Michel: Thank you very much, Sam, for introduction. Good morning, everybody. Great to take the time for us here this morning. We have great results. You have seen it this morning. Let us deepen it. I will do a channel overview and then hand over to Samuel for the financials. And as you know me, I always start with our purpose. This is why we get up every morning. Ypsomed is making self-care simpler and easier. And those 4 are our structural growth drivers, therapy go home, drugs have to be injected, more and more biosimilars are available, and the large new class of GLP-1 incretins that is giving Ypsomed a strong push. So we profit a lot. We have a lot of tailwind that supports Ypsomed in its growth. And we are really well set up. Ypsomed is a pure-play injection specialist. We are a leader in innovation. We have our operations under control, and we have very robust financials. I will deepen now with you the first 3 pillars, and then Samuel will go with you through the financials. Let me start with the injection specialist focus. As you all know, we have done our homework. We have finished the transformation after 3 years, a very clear path, selling DiaExpert to Mediq in '23, selling Pen Needles to MTD in '24, selling Diabetes Care to TecMed this year, and selling Ypsotec last week to Callista. With that, Ypsomed is now really clear setup, really focused self-injection specialist, focusing on the high-profit, high-margin self-injection B2B business. So the new Ypsomed is a delivery systems only company. I will not further deepen the figures. I will leave that on to Samuel in a couple of minutes. Innovation leadership. Ypsomed is strong with by far the broadest portfolio of devices, the auto-injectors to the left with the YpsoDose for larger volumes, the pens to the right and the digital assets. And as you may have read, we have received FDA approval as the first company at all with a digital device in America to support clinical studies, clinical trials with smart devices. We're also very proud that we were able to launch and present 3 new platforms to the community in our industry, YpsoDot, YpsoFlow, and YpsoLoop. YpsoFlow is a FlexTouch-like device, it's a spring-driven disposable device for insulins for GLP-1s. YpsoDot is a GLP-1 optimized device, a click, very simple device. And YpsoLoop is the next-gen auto-injector. And what is in common for those 3 platforms is that they are all recyclable. They consist of 1 or maximum 2 different plastic parts. They used to have 7 different plastic types. Now we are down to 2 different plastic types, and that makes them recyclable. And that's our new technological S-curve. And it gives us at least 4, not even 5 years of advantage towards competition. We are really, really much further now here in the new cycle. And big pharma biotech, they want to order devices that can eventually be recycled. So it's YpsoMate NetZero, YpsoMate Zero, the first version to reduce by 22% and YpsoLoop now is reducing 64%, remaining us at 85 grams of carbon equivalent. And this, of course, then in the end we can offset and will further work on in the recyclable scheme. So the main focus of Ypsomed on the innovation is sustainable devices for our pharma partners. We have launched 12, 13 new products. We just mentioned 3 here. We are very proud to be the partner of Innovent with mazdutide. That's a GLP-1 incretin, the first of its kind in Mainland China. We had a very good start. We are producing both out of Switzerland and out of China now, and we will move, of course, the volumes there to deliver out of China 100%. We have a client for Alzheimer out of Japan, you may know, and we have a Japanese client here as well on a new innovative autoimmune therapy in the space of psoriasis. So very high-value drugs that we present here, especially in the 2.25 mL format. I mean a very important topic probably is how we are set up. And you always hear Ypsomed's dependency on GLP-1s. We have indeed over 30 deals in the space of incretins and GLP-1s, absolutely. But they make only, at the moment, a small part, much less than 10%. Overall, we have not one client that is delivering more than 15% of revenue. And that's important. It will stay. Even in the foreseeable future, next 5 years, not one client will make more than 15%, and that's very important. So we don't have this clump risk, this risk of being too dependent on one client or one molecule, really broadly set up with 130 clients, 230 projects, 70 in the market, 160 in the pipeline. This is how Ypsomed is set up. And this shows also -- this graph here how broad we are active. So we work in a large range of indications, in a large range of therapy areas, as you see here on this slide. Ypsomed is not a diabetes company. Ypsomed is not an obesity company. We are very broad. We are injection systems, injection therapy company. That's what we are doing for all kinds of therapies, and many more will follow in the coming years. And Ypsomed is winning not only because of its unique platform portfolio, we are also winning because we do excellent service, because we pick up the phone after 3 times ringing, because we answer e-mails in 24 hours. It's the way we work with our clients, the way we listen, the ability to customize devices, but still have to manufacture on the same lines. So we have now a setup that really lets us to accelerate, really lets us to profit from what we have been installing over the past years. Let me give you a couple of insights on the operations side. So what has happened? I mean the main topic, obviously, is our big plan to move to 1 billion device capacity to the end of this, beginning of next decade. 1 billion installed capacity. Today, we are at 350-ish million. So we'll almost triple the capacity in the coming 3 years. It doesn't mean that we will deliver 1 billion devices end of the decade, but we are ready to deliver, in a 5, 6, 7 days model, such volumes. And you see on this graph here where this is going to happen. So Switzerland is remaining an important place. Switzerland here in Solothurn, we are moving old contract manufacturing out and we move new auto-injector YpsoMate in will still be a very important site with roughly 1/4 of the total volume. But the main site, obviously, is Schwerin with tripling our current installation, our so-called Schwerin 2 program. And then also China, Changzhou, which had an excellent start in the team there, and Holly Springs near Raleigh, which we are going to sign this week and then really start installing the factory. So Ypsomed is becoming a much more global company. We have a footprint closer to our clients. This makes sense from a client perspective. It makes also sense from an ecological perspective. We have much less freight, much less cost on that end. So this is how Ypsomed is going to be positioned in the future, China for Mainland China, U.S. for North America, Switzerland and Germany for EU and rest of the world. As I just mentioned, Solothurn remains a very important place. Diabetes Care business now moved out. So we have some office space left. We are going to fill that over the time. This is not the first priority. The main priority is manufacturing. We're installing a new high beam warehouse. We are installing a new tool shop, as you know, and we are installing tool lines for auto-injectors. In China, we had opening in June, a great team, really ready, really proud. The team wants to succeed. They want to show us how it works. We want to learn from our friends in China. I have a very good feeling here that they will succeed. In Germany, we had the topping-out ceremony with the Minister President Schwesig, a couple of weeks ago. You see here just a small glimpse on the new warehouse for 15,000 pallet places. This is now being built. It will be 40 meters high. It gives you an idea on how large this site will be, tripling basically in 2 phases, our current Schwerin 1 site, which is going to be full by end of '26. And North America, in the research triangle, so we decided for North Carolina, a bit more south on the East Coast, a great area, fastest-growing state in America, Raleigh, third fastest-growing city in Northern America. Raleigh, the research triangle with most big pharma being very close to our site. Holly Springs, a small town. We are able to buy here, acquire a finished building, 15,000 square meters. It will take us now 18 months to install our equipment in to install first lines in and then to be live end of '27, deliver first devices '28 for our customers in America. It's very important that we have now this message out there since SHL also delivered the site in America. We are now also present, and that's important now that we are really close to our clients, and this is no longer an argument for our customers that we are not in America. So very proud we found that spot. I was there last week. I have a very good impression. I met the Governor, I met many chancellors of universities. Also on the people side, with the community colleges, the apprenticeship programs they have, they acquire 150,000 people per year that move to North Carolina. So I believe we will have not an issue here finding good staff, well-educated people to ramp up our site in the course of '27. My last slide before I hand over to Samuel, this gives you a glimpse on the people side. As you see here, we are still growing a bit in Switzerland, but the main growth is now happening, obviously, in our manufacturing sites in Germany and in China. And that will also be the case in the coming years. Switzerland will only grow slightly some specialty functions in R&D here and there, but the main growth of colleagues here is going to happen in Germany, China and then in 2 years in America. In Germany, we are going to move from 500 people to 1,000 people over the course of the next 3 years. So this is where the music is going to play. This is where we're going to manufacture, but we don't need more people in overhead, in admin, in R&D. So the main growth now is happening on variable side, on volumes, on factory side. 780 people, as you see here, moved out now last week. They are now part of the TecMed Group, roughly 250 in Switzerland and 500 in the countries. It's no longer part of the Ypsomed family, but many of them are nearby in Burgdorf. So with that, I would like to hand over to Samuel, who will give you an insight on where we are on the financials and how we are set up financially. Samuel, please? Samuel Kunzli: Thank you, Simon, and a warm welcome also from my side. I will give you the highlights of the semiannual result in the next 10 to 15 minutes. Let's start with the top line. We reported sales of CHF 363 million in the first half year. On the left side, you see the breakdown. I do start with the green part, the Diabetes Care business. CHF 75 million of sales the infusion pump business realized in the months April to July. You remember, end of July, we had the closing of that business. Then CHF 21 million, that is in the red part, this is all discontinued operations, and this includes Ypsotec. You heard, we sold that business end of October. So in the first 6 months, that was fully included. This includes also still the phaseout of the Pen Needle and BGM business. And this includes now also what we started for Diabetes Care, the contract manufacturing for infusion sets and reservoirs. Now let's focus on the core business, the remaining business, the delivery system business. Here, we had sales of CHF 267 million in the first half year. Let's deepen that. You see we grew from CHF 220 million last year to CHF 267 million, so a 21% top line growth in the core business. So we are on track with what we guided. You remember, we said we will grow in the core business around 20% in the business year '25-'26. What is especially a good sign and what I want to highlight is how the project revenues developed. We grew from CHF 43 million to CHF 52 million, so around 20% growth in the project business, pen and auto-injectors together. And that is a very strong signal that we have a good pipeline, because those project sales, so the clinical devices we sell, the customizing we do for our customers, they translate into midterm commercial sales, and this is the future then for the commercial sales. Now the commercial sales, there we also had a very strong development. The main growth drivers were the auto-injectors. They grew by 46%. Now what did we earn? What did -- how does the profitability look? We reported EBIT in the first half year of CHF 152 million. And that EBIT is high. It needs some explanation because we had certain one-off effects. And I want to highlight that. Let's also have a look on the left side of this graph. The Diabetes Care business in those 4 months in which it was consolidated in our P&L made a loss of CHF 5 million. So that business was not yet breakeven. Now in other, we report a profit on EBIT line of CHF 70 million. The main driver was the book profit we realized from selling the Diabetes Care business. This profit was CHF 75 million. Some of you expected a higher profit from this sale. We were reading numbers in your reports from CHF 90 million to CHF 100 million. Therefore, I want to explain why we have now the CHF 75 million profit. One important factor, and we mentioned that when we sold the Diabetes Care business is the earn-out components. So the earnout depends on the sales of the business we sold for the next 3 years. When you value earn-outs in the balance sheet, you always have to assume an uncertainty, because the competition in that business, Insulet, Tandem, they are not sleeping. So from this total possible earn-out of CHF 90 million, you see that in our books, we took CHF 45 million in our books. The second point I want to mention why this profit is maybe not so high as some of you expected, have in mind, we sold a business which still was also at the closing not breakeven. So we had still minus CHF 5 million negative EBIT. And this, of course, does also not help for this book profit. Now let's focus on the core business. In Delivery Systems, we earned CHF 87 million. This is an EBIT margin of 32.4%. Let's have a look now at how we make sure that we also grow and that we are profitable in the future. For that, we did the investments, and these are mainly growth CapEx. You remember, we have our growth plan to reach this 1 billion device capacity by the beginning of the next decade. For this, we want to invest around CHF 1.5 billion until end of the decade. This program, we started already last business year. Partially, this is financed also by customers. Have that in mind. What you see here very well, we are on track with those investments, with the fixed assets. Simon showed you the investments we did in Schwerin. So from this CHF 126 million, the biggest part, roughly CHF 120 million went to the core business, to the Delivery System business. And yes, Schwerin is a very important side now we invest. We invest in Solothurn, but we invest also in China, in Changzhou. That were the main drivers on the fixed asset side. The intangibles as well, we develop the future platforms, the pen, auto-injector platform, Simon showed you the YpsoLoop, the YpsoDot, and the YpsoFlow. And we have invested around CHF 20 million overall, roughly half of it is for the Delivery System business. When you compare that number with the previous year for the intangibles, you see that in the previous year, we capitalized CHF 39 million of intangible assets. And the main driver was that the Diabetes Care business in the previous year was 6 months included and was heavily investing at that time. So it's not that we invested less in R&D in the core business. Now could we finance the growth CapEx with the operating cash flow? For this, we look now at the cash flow statement. Let's start with the operating cash flow. Again, have in mind, this is the operating cash flow for all the businesses, including the Diabetes Care and the discontinued operations. The CHF 130 million is for everything. If we just look at the core business, that number is even slightly higher. We would be above CHF 140 million cash flow we generate from the operations, and that is a very strong number. Then the cash flow from investment activity needs an explanation, because you just saw we roughly invested CHF 150 million. So why net, we are here positive? The reason is we sold the Diabetes Care business and received a little bit more than CHF 300 million already now in cash. So that makes this cash flow from investment activity positive, roughly CHF 160 million. So the free cash flow, around CHF 290 million. So even if you take that extraordinary cash we got from TecMed for the sale of the Diabetes Care out, you see we are only slightly negative. So we nearly managed to finance with the operating cash flow, our growth CapEx. So having in mind that the operating cash flow from the core business is even a little bit higher. So we would nearly finance that with the operating cash flow. What did we do now with this money? We paid back our short-term financial liabilities. So we deleveraged, and I'll come to that. So the net cash amount on our bank accounts end of September was roughly the same as it was end of March. Now since we are in a capital-intensive industry, we have to look also at our balance sheet. And for us, not only EBIT margin counts, for us counts the capital efficiency. And we measure that with the return on capital employed. And for us, a very important number is this ROCE in the core business. So we realized, again, the created value. We realized a ROCE of around 21% in the core business, and that shows that we create value for our shareholders. Then the second point I want to mention, our balance sheet is very solid. We have an equity ratio of around 67% and the ratio, net debt-to-EBITDA from the last 12 months is 0.3x. So the last 12 months EBITDA was CHF 245 million, and that is a very high and important number. The last 12 months EBITDA, CHF 245 million. So as you see, we are well set. We are on track to finance that organic growth, growing up to 1 billion device capacity, investing in total this CHF 1.5 billion with some co-investment from customers, with our own cash flow and our own resources. Now let's finally look forward. We confirm our guidance for this business year. I mentioned already the top line. We expect to grow around 20% with the sales with the Delivery System business. And the EBIT, remember, in the first half year, we had now CHF 87 million. So mathematically, we are not on half, but you need to have in mind that for us, typically, the second half year is stronger than the first half year. So we are also comfortable to reach that EBIT range between CHF 190 million and CHF 210 million. In the last slide, I want to even look further in the future our midterm ambition. Many of you followed our Capital Market Day, and you saw our midterm announcement. We want to grow with our sales between CHF 900 million and CHF 1.2 billion. So that is basically when you look at the Delivery System sales of '24-'25, which was around CHF 500 million, that is basically doubling the top line. We want to reach between CHF 280 million and CHF 340 million of EBIT. We also want to clarify, so this time we wrote it also that the EBIT margin stays above the 30%. I last time only mentioned it in the oral way. So we want to really clarify this. This is our ambition. And the capital efficiency should stay on the level we have now, around 20% ROCE. With that, I want to finish the presentation, and we want to open the floor for questions, and I give back to Sam. Sam Ghezelbash: Thank you, Samuel. Indeed, strong financials, great performance for the first half year. Simon as well, thank you for going over our key achievements. Sam Ghezelbash: We will now open the floor for questions. [Operator Instructions] So now we have on the screen, number one, Sandra, I believe that will be you. Please feel free to unmute and ask your questions. Sandra Dietschy: I have 2 on the gross margin and one on the pen segment. I think maybe we go one by one. So first on the pen segment. Can you comment on the current growth rate of your pen business? You mentioned that commercial sales of the auto-injectors grew 46%. So the overall segment grew 21%. So that implies that commercial sales from the pens might have declined. Does that interpretation make sense? And then what do you expect from this segment going forward, especially with the new platforms such as the YpsoFlow and YpsoDot that should support the pens midterm outlook? So that would be my first question on the pen segment. Simon Michel: So indeed, we have been flat on the pens. Maybe Samuel you can explain why this has happened, and then I can give a couple of comments on the new platforms. Samuel Kunzli: So it's the right observation, yes. So the pens were more or less flat. And have in mind with pens, there is quite a wide portfolio. So the pen sales are heavily driven by product and customer mix. But your observation is right. For now, it was flat. And the second part, when we look forward, yes, we assume a growth rate for the pens as well. But for you, it's fair to assume that the growth rate for the auto-injectors, also when you look midterm, will be higher than what we expect from the pens, but we expect also the pens to grow, especially having also our new platforms in mind. And Simon, please add from your side. Simon Michel: Sure. I mean the main growth on UnoPen is still happening, on the disposal pens is still happening on UnoPen. So we have new clients in China, and we have new clients in the Western world on GLP-1s. But those GLP-1s will only launch in '28, '29, '30. So these 3 years in between now, we are basically bridging with Chinese volumes. So this is going to start as of now-ish. Therefore, we are going to fill the capacity and then swap steadily with higher-margin Western products. That's for UnoPen. So this platform is still very much alive. YpsoDot and YpsoFlow are new platforms. We have presented them now at PDA and CPHI the first time. We are now discussing and starting the dialogue. So this is something we will see the first revenues in 3 to 4 years from now. It's a new platform. Sandra Dietschy: Okay. Very helpful. Just to clarify, so the commercial sales were flat. You're not talking units, but rather sales? Simon Michel: There's a mix. We have also a couple of older products in pen, as you know, which declined a bit, but in total volumes on UnoPen, we had a slight increase. In Swiss francs, we were flat. Sandra Dietschy: Okay. Super. And then my second question is on the gross margin. So the H1 gross margin has still been diluted by noncore segments, the 41%, I think it was. What would be a reasonable assumption for the gross margin of the core YDS stand-alone business? And how should we expect that to evolve given the factors such as price pressure and lower ASP from high-volume contracts, but then also potential efficiency improvement and positive mix effect from higher auto-injector shares. That would be very helpful to have some guidance there. Simon Michel: Gladly. I want to give you, let's say, calculating backwards view on how you can imagine that gross margin developing midterm. If we say midterm, the EBIT margin is still above the 30%. So then it's for you fair to assume that a little bit more than 10% will be needed for SG&A and R&D. So what you need to realize still is a gross margin of at least 45% that you still end up above the 30% EBIT margin, just ballpark numbers. And again, I tried to speak for a mix, auto-injectors, pens, project business, as you know, many factors influence that, but just to give you a rough idea on how we think of that number. Samuel Kunzli: Maybe a comment to the profitability since Sandra is asking on that. Yesterday, we have launched YpsoFit. It's a fitness program that we have rolled out over the whole company. We believe it's the right moment, not that we really are under pressure, but it's the right moment since Diabetes Care is leaving us now. So we see some potential for stranded cost improvements that we take out elements. We have 4 programs in the space of organization, space of procurement, IT data and systems. So this is a program that we rolled out in order to really also work on the cost, on the bottom line to achieve those margins. Sam Ghezelbash: Thank you, Sandra, for your questions as well. Now we'll move to the second person, Odysseas. Odysseas Manesiotis: So my first question is on the Solothurn plant organization. Could you give us a feeling on the full year '26, '27 impact on the Delivery System sales growth and EBIT? I mean, is high single-digit growth for Delivery Systems likely in that year? Or am I being too conservative here? Simon Michel: I mean, I'm not sure just like the question, I got right. So for '25, '26, the Delivery Systems segment and which growth rate you were speaking? Odysseas Manesiotis: '26, '27. Simon Michel: So '26, '27, we don't really guide there, but it will be a bit below. In the end of the day, we have those waves. We have also months sometimes. We cannot really predict. It depends a lot on a couple of large launches. We will talk more about it in May. But yes, in the end of the day, you have to see this 1 billion that we look at end of the decade. This is where we are heading to. And so it might be a bit -- a smaller one since we have now had a bit of stronger one on the 20% area. Overall, we will be in this 13% to 17% growth, right? And so it can be a bit softer one. We have certain indications, but for us, the important element is the 2028, '29 time frame where we are heading to. Samuel Kunzli: And if I may add to that one, Simon correctly said, look, we have this 1 billion you see midterm, which is the midpoint of that guidance, which implies this 15% CAGR year-on-year top line. And when we look now at next year, of course, the launches, the individual contracts, but one important factor you need to have in mind, we have also the phaseout of the contract manufacturing, which is going to end next business year. So just roughly from that, not having this contract manufacturing business within the Delivery Systems. So if you just have CHF 20 million, CHF 30 million of sales less from that, this automatically gives you a lower top line growth rate. But as Simon said, we will do the guidance for '26, '27 when we present the annual results in May '26. Odysseas Manesiotis: Understood. Very clear. And my second question, have there been any changes to your Novo agreement announced in September '23 in light of the CagriSema readout in Q4 and given some pipeline reorganization with the company? Simon Michel: No. Zero change. We are fully on track installing the capacity here in Switzerland and in Germany, everything is on track. Sam Ghezelbash: And now we'll move to Daniel Jelovcan. Daniel Jelovcan: Hello, do you hear me? Simon Michel: Yes. Daniel Jelovcan: Excellent. So 3 questions, if I may. And I just ask one by the other. So the first one is, would you be willing to share the dilution to the still very good 32.4% EBIT margin for YDS. I mean, how big was the dilution of the ramp-up with Novo and Innovent? Because I have no idea, is it 100 bps, 200 bps, 300 bps or more? Simon Michel: I think it's a good one. Let's talk a bit about the comparison, 35%, 36% to 33% now. That was 2%, 3% points in EBIT. Maybe you want to start with it, Samuel? Samuel Kunzli: Good question, yes. So it's right, in the first half year '24, '25, the EBIT margin in the core business was rather around 36% on EBIT margin level. So yes, now we report the 32.4%. And I want to highlight a few points. First, have in mind, we sold a business area, the Diabetes Care business. And of course, we used certain functions for both areas. So it's normal to have a certain dyssynergy, a certain stranded costs Simon mentioned, that has for us a high focus. We have an internal cost optimization program, the YpsoFit going on. So we want to really be on top of that. Then, yes, we talked about the pen business. So I mentioned product, customer mix. So that, for sure, does also not then help to keep that level. And your assumption is right. Yes, we have new contracts ramping up, Innovent and also Novo. So that, of course, is also a factor to be considered when you want to explain why, in the core business, the EBIT margin goes down from 36% to around 33%. But I also want to highlight what we announced in May this year when we did the full year guidance, if you take the midpoint from this full year guidance, you are on 33% EBIT margin. So we expected that already. We at that time already guided it in that way for the first half year, because for those who observe us closely, they know that in the first half year, we rather have a little bit less sales, and that means in the first half year, the EBIT margin is rather a little bit lower, because the distribution of the indirect cost is a little bit worse. So I hope that explains those main deviations. Simon, feel free to add from your side. Simon Michel: I think it's also good to assume that in general, now speaking, that when you install new capacity, you will always have some cost until it's full. You can also assume that Solothurn is now really optimized. It's full. So you don't have cost lying around. It's really used, fixed costs are all covered. The same for Schwerin 1. It's almost full. It's really used. But now we put Changzhou online, and this is now just one part, maybe 1/3 a bit more is now running, and we have space left that is generating cost. And we will now put in -- end of '26, you will see something like 3 months of Schwerin 2 going live. It's huge. So we will have 1 or 2 lines in when we start in '27 step by step. So we will have a bit cost there, fixed cost there that need to be covered. And then the same thing will happen 1 year later in the U.S. So that's why it's probably right to assume that this idle capacity costs us something like 2% constantly, and therefore, you will not see a 36% EBIT anymore. So that's why we actually guide in this direction above 30%. Samuel just made the mathematics on it, but that's a very good question. And we take a very close look at that, but we have to do big steps, and we cannot do whole, whole, whole. You have to build a building and then you install. So it's a very important topic where we put a lot of attention on. Daniel Jelovcan: Yes. That's very clear. And yes, the dyssynergy point is actually a good point as well. That's at least -- yes, that's good that you highlighted. The second question is, I mean, the 20% growth in project revenues. I mean, at the CMD, you said it will rather be stable or decline a bit. And of course, I'm happy to see 20%, because it's very good for the future. But why is there such a big deviation basically? Samuel Kunzli: I'll start, and feel free to add then, Simon. So the project business by nature has a higher volatility, because that is the business. What we invoice there is we do customizing for our customers of those devices, and we sell clinical devices. And by nature, you have there -- if a clinical trial starts, you might have a higher delivery of clinical devices, you might reach certain milestones. So by nature, you have more volatility. I mentioned we are also positively -- let's say, we are pleased that we have that 20% growth. But I stay with the opinion what we said at the Capital Market Day. It's not something we can just assume to grow in parallel with the commercial sales. We have new platforms coming in, adding to the project business, but we have also platforms which are getting more mature. So the main statement stays, it stays more or less stable and only grows a little. Simon, feel free to add from your side. Daniel Jelovcan: That's great. And the last question, I mean, the Alzheimer's -- do you hear me? Simon Michel: Sure. Daniel Jelovcan: The Alzheimer's device caught my attention, of course, a hot topic. But Alzheimer's probably isn't that important for you because the volumes are probably not that big. I mean, this one device now, is that in a commercial drug for Alzheimer's? And if so, how often do you need the auto-injector for Alzheimer's? I have no clue. Is it also weekly like obesity or -- yes, thanks. Simon Michel: So it's LEQEMBI drug, Eisai and Biogen, and it has launched in the U.S., but I'm not sure about if it's once weekly or -- I think it's once weekly. But it's just starting now. So it's slow. But we are launching it now. We are delivering now. We are just delivering. Daniel Jelovcan: But we don't talk about huge volumes. Samuel Kunzli: Yes, it's a maintenance therapy. I think probably if we look at their communication, it's probably best to see how they see the future of this particular therapy. Sam Ghezelbash: Now we'll turn to Pallav from Barclays. So Pallav, if you hear us, you have to click on the mic. Unfortunately, Pallav, we cannot hear you. So that's okay. We'll move to Sibylle and come back to you in a moment. Sibylle Bischofberger Frick: Good morning, everybody. Does it work now? Simon Michel: Yes. Sibylle Bischofberger Frick: So I was quite happy with your development in YDS. But in there, you have also the contract manufacturing for the French customer. Is it still correct that this part of the business is not growing and you will end production in November '26? Or has anything changed because they ask you to produce longer for you? And what does it mean afterwards, then you will have a couple of months no production there because you have to move the production facilities out and the next in. So will this mean that end 2026, '27, you will have less sales due to that? Simon Michel: Thank you very much, Sibylle. So as Samuel said before, and then I'll let you answer the question on the amount. So yes, absolutely. So that's what we said before. That will have a slight impact on the growth rate for '26, '27. We will have roughly actually almost half a year less. And then we do it in 2 phases. The first line, SoloStar, we took out already. So there is no manufacturing at all anymore. We manufactured last SoloStar in the summer. So we are now installing the first auto-injector line. And then the same exercise will start half a year later in spring when we move out -- or summer-ish, we move out to [indiscernible] and then we install that one. So we have, twice in a row, something like 4 to 6 months no manufacturing on one floor. So therefore, you, of course, will see -- then in the same time, we are ramping up. I mean, for the auto-injectors, we don't manufacture from day 1, 5 shifts, 7 days. So you also ramp up. So that will have an impact on the auto-injector growth rate '26, '27. But maybe you can add some -- give some more flavor on the contract business. Samuel Kunzli: Yes. Gladly. I can give you, Sibylle, a little bit more that you understand the numbers. So in the first half year now, this business made a little bit more than CHF 20 million of sales, so in line with what we saw in the previous years. In the previous years, it was roughly CHF 40 million for the full year. So now we have a half year around CHF 20 million. For the second half year, it's for you now fair to assume that it goes slightly down, but not yet significantly. So we still might see around CHF 15 million of sales in the second half year now of this business year. And your assumption is right, in November '26, it's going to stop. That means we have in the next business year, still a little bit more than 6 months. So if you take the October and November as well, so you might have 8 months. So you might still end up also again having around CHF 15 million of sales of this not continued contract manufacturing business. And I think, Simon, you explained very well what the challenge is. And, of course, that is a reason why we have next business year a challenge with the top line growth. Sibylle Bischofberger Frick: And then the second question is about the broadening of your portfolio. You mentioned it in Schwerin with the Capital Market Day. Any news there on possible acquisition targets or in what direction you could go? Simon Michel: So we are really doing our analysis. We have a lot of launches, a lot of dinners, and we continue to understand our space better. We are in such an excellent position. We have such a great opportunity ahead of us in our core business. And this is our main focus. We are focusing on delivering the capacity, on delivering the device to our clients. And at the same time, we do our homework. We listen, we talk a lot. We also look at the market specifically with some consultants. They help us to understand better margin profiles, et cetera, but we are not there yet to explain you our next steps. Sam Ghezelbash: Thank you, Sibylle, for your questions. Perhaps we'll have another trial. Pallav, if you can maybe try again to unmute or type in your question into the chat and I can read it for you. Pallav Mittal: Good morning. Can you hear me now? Sam Ghezelbash: Perfect. Yes. Pallav Mittal: Sorry about that initially. So 3 questions. I'll take it one by one. Firstly, on your 20% revenue growth for the full year, given the second half is traditionally stronger versus the first half, are you being conservative here? Because your H1 growth is already touching 21%. Or are there some moving parts which I'm missing? Samuel Kunzli: I start, and Simon, feel free to add. Yes, the 20 year around -- sorry, the 20% growth for the full year is our guidance. When you now look at the second half year, which we now basically compete or compare against for what is ahead of us, you need to keep in mind that we had, in the last business year, a very good second half year. You remember, we had even some pharma customers anticipating tariffs. So we even had very strong deliveries in February and March. So for you, it's fair to assume that it will be challenging to also overtake this already strong second half year, which we showed last year, by 20% or more percent. It's fair to assume that this will be more difficult to reach. And that, of course, you can make then the conclusion also for the full year. I think that is important here to notice and gives you a little bit of flavor. Feel free to add if. Feel free to add if... Simon Michel: No, sure. I mean we compare half year with half year, so fully on track. Pallav Mittal: Sure. Second question. So there's a lot of discussion around GLP-1s now over the last few months. And now the expectation is that pricing is going to be lower. So how are you thinking about the impact of that on your volumes? And also, how are you seeing the risk of oral GLP-1s in your medium-term ambitions that you laid out at the CMD? Simon Michel: So I mean, we are just a device deliver. We deliver devices according to contracts, and those contracts are set in stone. They are rock solid for the next 5 to 10 years. So there is no impact on Ypsomed side. We just deliver the devices. We have 47 contracts in GLP-1. We closed all the large deals out there. We cannot give you the names, but we are well set up. Now this is not a topic at all. We have no risk with Novo or any other company. We are just delivering our volumes and we will profit from GLP-1. As I said very clearly, we will not do more than 15% with any client in the future. So we have a clear broad spectrum. Out of our 130 clients, we have roughly 30 in the space of GLP-1. Mainly China will be interesting, actually more interesting in the next 2 years than Western world. Orals for us, it can -- orals will play a role, of course. But as I said again, we deliver such a small volume of the overall GLP-1 opportunity out there. If you look at what Lilly is manufacturing themselves with their 5 or 6 contract manufacturers, and when you see what Novo is doing as SHL next to us, we are just all growing. And of course, oral will play a role, but oral will play a role eventually together with the injection. For some patients at the BMI of 30, 35, they will take a shot, one pill therapy. There are new formats coming. And then we wait for the new molecules coming, the new molecules that are less problematic on the muscle. So we have so much things going on. So for us, this is not a risk at all. It's a huge opportunity for Ypsomed, and we will profit from GLP-1, and we are not dependent on Novo. So... Pallav Mittal: Sure. And lastly, just to fact check, any impact from FX in the numbers in the first half, if you could quantify? And what should we expect for the full year? Simon Michel: FX, yes. Samuel Kunzli: Yes. I gladly take that, Pallav. So really we have -- the huge majority of our contracts are in Swiss francs. So the currency we are reporting and the currency in which our stock is listed. So we do really have very minor FX impacts on the top line and also on profitability. So for modeling, you can really ignore that effect, and we'll also stay for the second half year that way. Sam Ghezelbash: We'll now move to Peter. Unknown Analyst: Okay. Can you hear me fine? Sam Ghezelbash: Yes. Unknown Analyst: Okay. Great. A couple of questions, please. The first topic is just on some of the ramp-up of facilities. And as you've highlighted, you closed the first part of the contract manufacturing over the summer. You take 6 months or so to put back new machines in. Does that mean, say, around Easter time, you'll start to ramp up again on the first phase of the Solothurn part? Simon Michel: Yes, absolutely. Unknown Analyst: Okay. So you'll start to ramp up from around Easter. Okay, good. And you're meeting the rest of the sales out of inventory, I presume? Simon Michel: And from existing clients. So we have obviously also installed capacity in Schwerin. You talk about auto-injector now, right? Unknown Analyst: Yes. Simon Michel: Yes. Of course, we have installed capacity in Schwerin. As you know, we are a platform company. Also, Novo is on a platform, so they run on the same line. So we are quite flexible here to deliver volumes for the ramp-up phase. Especially, now we have this machine learning phase where all those final assembly lines have to be installed. And therefore, we can deliver these also from different lines. Unknown Analyst: So the first part of Solothurn will start to ramp up and the beginning of Schwerin 2. You said a couple of lines will be starting in H2. So they will also start to ramp up in the fiscal first half -- from early fiscal first half, yes? Simon Michel: So exactly in '26, in the first half, one large line will ramp up a bit before Easter here in Solothurn. And the second line will only ramp up in the beginning of '27, because we finish to [indiscernible] until October, November on the second floor, and then we need again those 4 months of redoing, putting paint on the wall and put 40 plastic molding machines in and the big micron line and then it will take another 4 months. So we will start in March-ish. Maybe we'll see 1 month more from ramping up '27 for the second line, a large line here in Solothurn. Is that answering your question? Unknown Analyst: Yes, it is. And then the other part was just on the U.S. facility since you're able to buy a completed building and you can start putting machines in. Can you give a sense as to when the first sales you would expect would come out of that as you start to pick that in phases? Simon Michel: Peter, this is really brownfield. I've been there last week. It's a building, but it's just a shell. There is soil on the ground. We are actually now deciding -- I mean, we are ramping it up now. We are probably -- I think we are signing today the contractor. We have to do the flooring in. We have to do the engineering in, the cooling, the pressure. We will put there the granulate system, et cetera. So the building will be handed over, including everything which is technically relevant to operations, to manufacturing, in fall '27. So in roughly 20 months from now. And then the team will take roughly 6 months until they have installed the molding machines and the first lines. So the first goods will leave Holly Springs in Q1 '28. That's realistic to assume that is where we have to plan together with our clients in the U.S. Unknown Analyst: That's great. And then I had 2 questions just on the cash flow statement. One is you have a significant prepayment from customers for the first time that I can recall. I was wondering if you could give some background to that and to what it relates. I guess it's maybe ramp-up of the new facilities. But if you could talk a bit about how that's coming through and how that impacts cash flow. Samuel Kunzli: Gladly, I take that question, Peter. So it's true that we have co-investment, co-financing structures with our customers. And there is 2 elements I want to describe, which we also mentioned at our Capital Market Day, of how customers participate. Yes, the one thing is they make the finance equipment. So they really pay advance payments for those equipment dedicated for them. And the other element we have are capacity contribution. So they somehow reserve and co-finance platform capacities, which we build up. And you will see that now more often in our cash flow statement, because of this CHF 1.5 billion we're going to invest, roughly CHF 400 million we expect with co-financing from customers. So you will see that now more often such co-financing advances are coming into our balance sheet, and this will help, yes, the operating cash flow. These are the 2 elements there. Unknown Analyst: Okay. And then last question was just on the intangible CapEx. I think you said of the CHF 20 million, about half related to the Delivery Systems business. And is that more or less the run rate going forward now? Simon Michel: I think it was all of it. It's actually half of the CHF 39 million -- half of it Delivery Systems, yes. Samuel Kunzli: But Peter was talking of the CHF 20 million in the actual year. Unknown Analyst: Yes. Samuel Kunzli: That is right. Roughly half of it is the Delivery Systems business and the other half was still -- because we had still 4 months of Diabetes Care business in our business here. So we capitalized that. And you might not like that answer, but the decision when you capitalize, that depends always at which stage you develop something. And there is, like I told about the projects, a certain volatility, there is because whatever -- it's not always that you're constantly just developing and capitalizing new projects. There is a certain volatility in those capitalizations. But you will see that going forward very clearly because we are now a pure-play B2B company for the Delivery Systems business. And you very clearly see what is capitalized and what is expensed. Simon Michel: But it's probably right to assume that this first half year is not a typical year because we had a much larger amount in the P&L. We were putting more money in the innovation phase for YpsoFlow, YpsoDot, YpsoLoop. So if you are in the innovation phase, we put it directly into the P&L. And now we are moving those platforms over to the product areas. And now it's going to be capitalized to finalize the development before they are then industrialized. So now in H2, you will see a higher amount of capitalized R&D, maybe it's CHF 15 million. And then overall, we don't give a guidance here, but it will probably be a bit above CHF 20 million in the long run for R&D capitalized. Sam Ghezelbash: In the interest of time, maybe we'll ask to ask a few shorter questions. Julien, please feel free to unmute yourself and ask your question. Julien Ouaddour: Hi, can you hear me? Sam Ghezelbash: Yes. Julien Ouaddour: Thank you and congratulations on the strong performance in the first half. I just have a question on the sale of the Diabetes Care to TecMed. Since this is the company controlled by the founder, Willy Michel, I just want to ask about the risk of contagion between Ypsomed and TecMed. So this would be helpful for us also to analyze the consolidation scope. Simon Michel: So there is no consolidation happening. It's absolutely separated organization. TecMed is a company 100% under control of my father and Ypsomed is a stock listed company where the Michel family has roughly 70% of the shares. Or did I misunderstand your question? Julien Ouaddour: No, no, this was the question about the risk of contagion because this is a special construct. Simon Michel: I mean, I think it's not really a special contract. It's just different investments. We have investments in other industries as a family. We have a very clear contract manufacturing relationship between Ypsomed and TecMed for the Orbit reservoir and the Orbit infusion sets. We manufacture those 2 devices in Schwerin in our clean room. This contract lasts minimum 3 years, maximum 5 years. Both parties have an interest to move it out as early as possible because we charge too much for them and we earn not enough. We would like to charge this dilute to our overall margin. Obviously, that's why we put it into Others. And we will need a clean room as well in roughly 4 years for our YpsoDose ramp up, our large volume injector. So it is a very clear, very transparent logic contract manufacturing relationship, very alike of the Sanofi relationship we had. So it's not even covered by product management, it's all done in operations directly in a very lean manner. Sam Ghezelbash: We'll move to Ed, please. Edward Hall: My question is just on Holly Springs. I think you said this is set to open in Q4 '27. And you mentioned that labor is available. But could we talk about the gross profit margin here compared to European facilities? What's the pull and pushes on this? Is this anything from automation to sort of premium prices for onshoring in the U.S.? That would be really helpful to understand. Simon Michel: Thanks, Ed, for the question. So Ypsomed is installing the same equipment in Germany, as we do in Switzerland, as we do in China, as we will do in the U.S. So the manufacturing setup with ENGEL on molding, and with our partners, Micron and ATS on assembly, and eventually ASIC is remaining identical. We have a lower energy cost in America than in Germany, massively lower energy cost, but we have higher building cost than in Germany. We have lower people cost in America slightly than in Germany, although a bit the same, but of course, in China, they are lower. So if you compare all the 4 sites, America, Germany, Switzerland, and China, then America will, of course, be more expensive than Mainland China, but I mean, we talk a range of all sites of less than 10% difference on the cost of goods. But the logic is identical how we work. Would you like to add something? Samuel Kunzli: Absolutely fine, summarized. Sam Ghezelbash: We'll move to Daniel. Daniel Jelovcan: Yes, just a quick one. Holly Springs, I mean, do you all have fixed contracts with some customers? Or you just build it at the moment? Simon Michel: No, we have contracts. Good question. So that's actually why we waited another year. We wanted to have the ink. We have a couple of customers where we have contracts that we will deliver, we will move, and other customers are really new. So we want to ramp up the U.S. step by step, of course, but we have to fill this large site. And so yes, no, we have contracts, not just the building. Daniel Jelovcan: So the risk is relatively limited as we can probably say? Simon Michel: Yes. I mean our team really proved that we can industrialize in a different place. I mean when I look at Schwerin, we're now just installing ASIC 10, the 10s line of its kind. And this is a very smooth program. The same teams come together with the builder, the contractors, we move it in and we ramp up. It's really smooth. And we are going to do the same thing now in China and in the U.S. In China also, the first 2 lines, they went just online. We didn't have it once in the Executive Board. I assume the same thing will happen in America. Obviously, we have to train the people. We will get them also to Switzerland. We train them for 3 months. They will get to know to their lines. They will go back to America and ramp up their lines. And I had an extremely good impression when I was there last week. I was in several community colleges. We work very closely with those colleges to get staff that have a basic education. So America, what I have seen in North Carolina is much further than what we think here in Europe in terms of education. We have certain areas where the government really knows that biopharma, pharma, med-tech and specialty industries need people with an education. So those community colleges go to the high schools, they grab the students, they take them into the colleges, and together with the companies, they make 4 day in the company, 2 days at school, they make those joint programs. And these programs run in North Carolina for 5, 6 years. So I'm really confident we will find the people. Also, if you look at the wage level, it's way below Massachusetts up in the north. So we are in the area of below $60,000 per operator. So we are actually even below the German level. So from that perspective, I believe we have made a very good selection. Daniel Jelovcan: Then I wish you further good progress. Sam Ghezelbash: Thank you, Daniel. We'll move maybe last but not least, Anna, please feel free to unmute your mic and ask your question. Unknown Analyst: Perfect. Can you hear me? Simon Michel: Yes. Unknown Analyst: Okay. Maybe just a quick follow-up on that. I guess, outside the U.S., you're obviously expanding in Germany, but how much of your overall capacity that you're coming online between now and 2030 is already contracted? And then just another follow-up. The auto-injector growth of 46%. Maybe just how much of that would be just driven by GLP-1 versus capacity coming online or just broader growth trends. Maybe if you could just talk about the 46%, if that would be a sustainable growth rate. Simon Michel: Sure. So I will have you specify, Samuel. But GLP-1, again, it is just about to start. So it's a smaller part of the 46%. We grow on various platforms. We can give a bit more flavor to GLP-1 just in a minute. On your other questions, we basically try to fill 5 out of 7 days. So when you ask us how much we have contracted, obviously, we have not contracted yet the full 5 days today of the capacity we are going to have by 2030, '31. But what we see in the pipeline and from our past, we closed roughly 35 deals per year, roughly 25, 27 survived. If you look back and we assume and we look at our pipelines, we have quite a good overview on global pharma pipelines, not only of new molecules in Phase II and Phase III, where we are in with devices, but also in emerging markets with biosimilars. So this gives us a high level of confidence that we are going to close certain contracts that will lead us to a 5 out of 7 days. Now this is very important. Now obviously, in an optimized setting, you want to manufacture 7 days, but we need to have the spare capacity. And this sometimes hurts a bit. But we had situations in the past where customers just needed more devices, and we were always able to deliver, and this is still our promise. This makes us special compared to others that we are always able to deliver. And this is also why customers pay a premium at Ypsomed, because we can always deliver, and that's why we will always have some spare capacities. But when you look at the weekend shifts in Germany, the 6th day, I mean, you pay 25% more. Switzerland, the same thing; Sunday, 50% more. So from a cost of goods -- and of course, we want to run them as much as possible, but it also makes a bit more expensive. So overall, you can assume that we don't build capacity without contracting behind. Samuel Kunzli: Yes. If I may add to that one, we are lucky to be in an industry in which you have a very good visibility of the volumes. Our devices serve people with chronic conditions. So we get those customer forecasts for drugs where we are already selected. With switching being very difficult in our industry, we really have a very good visibility. And based on that visibility, we industrialize. And yes, Simon mentioned, a certain idle capacity we assume to have the flexibility for those customers. So we industrialize with visibility. Then to your second question about the auto-injector growth, the more than 40% top line growth. The main drivers, these are now these platforms, the 1 milliliter and the 2.25 milliliter, which are now in a growth phase. So have in mind, we start now still on a low basis. So in percentage, that's always a lot of growth. And now, yes, incretins are kicking in, not yet being significant, but you start from a very low basis, the incretin sales come on the top. But relate that now to the overall top line growth we said midterm when the overall top line growth is a CAGR of 15%. And yes, I said that auto-injectors grow stronger than pens. Nevertheless, it's also fair to assume that this growth rate a little bit comes down. We grow in auto-injectors, but not year-on-year always by 40% and more. That gives you a little bit color on that one. Simon Michel: And when you look at overall GLP-1, that makes for the full year clearly below 10%. But this is customers in China, customers in Russia. We have Victoza, liraglutide out there. So we have a whole bunch of GLP-1 products out there. And then slowly, of course, certain volumes for our Danish customer. So I mean, it's a smaller part that is gradually increasing. Sam Ghezelbash: Perfect. Thank you very much, Anna, and thank you all of you for joining us today. Thank you, Simon and Samuel, for presenting our great achievements, the great financials, and we will be very much looking forward to continued discussion with you. Thank you all. Simon Michel: Excellent. Have a great week. Samuel Kunzli: Thank you.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Anaergia Q3 2025 Conference Call and Webcast. [Operator Instructions] I will now hand the conference over to Darlene Webb, Investor Relations. Please go ahead. Darlene Webb: Thank you very much, operator, and good morning, everyone. On today's call, we'll be discussing Anaergia's earnings for the third quarter of 2025, which ended September 30, 2025. If you're following along with our slide deck, which is available here on our live streaming webcast or you can also access it directly from our Investors section of the website, my comments relate specifically to Slides 1 through 3. On Slide 2, you'll see that on today's call, I am joined by Mr. Assaf Onn, Anaergia's Chief Executive Officer; Mr. Greg Wolf, Anaergia's Chief Financial Officer; and Dr. Yaniv Scherson, Anaergia's Chief Operating Officer. Before beginning our formal remarks, we would like to refer you to Slide 3 of the presentation, which contains a caution on forward-looking information and a note on the use of non-GAAP or IFRS measures. Listeners are reminded, as always, that today's discussions may contain forward-looking statements that reflect current views with respect to future events. Any such statements are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated in these forward-looking statements. Anaergia does not undertake to update any forward-looking statements, except as may be required by applicable laws. Listeners are urged to review the full discussion of risk factors in the company's prospectus that is filed with the Canadian securities regulators. And with that, I'll turn the call over to Assaf. Assaf Onn: Thank you, Darlene. Good morning, everyone. We are now on Slide 4. It is real privilege to be here today sharing our results. Q3 was not just a defining quarter for Anaergia, it was a glimpse of our future. After many consecutive quarters of negative adjusted EBITDA, we are once again in positive territory. This is a remarkable milestone and more than that, it is proof that our transformation is real. When we launched the Anaergia 2.0, we were rebuilding from the inside out, not simply fixing what was broken, but reimagining what was possible. We set out to design a company capable of doing what only a handful of others in the world can and do it better, to reimagine every stage of the waste to renewable cycle and to show that turning waste into green energy is not a dream, it is where science meets engineering, where curiosity meets precision and where technology begins to serve both people and planet. And now you can see that vision taking shape. Revenue is growing sharply, margins are expanding and adjusted EBITDA is positive once again. But what matter most is not only that numbers are improving, it is why they are improving. They're improving because this team believes, because our strategy is precise and because our purpose is powerful. We will now move to Slide 5. We said Anaergia would become the benchmark for this industry and quarter-by-quarter, we are proving it. Our revenue backlog reached $287 million by quarter end, nearly triple where we began the year. That is not only growth, it is momentum. It shows that our customers trust us, our partners want to build with us and our brand means reliability, performance and innovation. Anaergia is no longer a company in transition. It is a company in motion, a company that is earning its place among the most trusted names in clean energy, not because of marketing, but because of results. When we introduced Anaergia 2.0, we committed to 5 priorities: operational efficiency, capital sales, geographic expansion, strategic partnerships and a stronger balance sheet. In Q3, we delivered progress on all 5. We are executing with precision, scaling intelligently and bringing technology and purpose together in a way a few companies can. Anaergia 2.0 is working. And more importantly, it is working the right way with discipline, with heart and with vision. The company we are building is not only financially stronger, it is becoming a symbol of what clean energy future can look like: profitable, circular and sustainable. That's what drives me every day, the belief that innovation and responsibility can coexist and that doing good for the planet can also mean doing well for shareholders. This is how great companies are born through clarity, through the courage to challenge convention and through belief in what is possible. It is that belief that drives us forward, the conviction that innovation and discipline can coexist, that engineering can be art and that progress when pursued with purpose can truly shape the world. That is what Anaergia stands for. With that, I will turn the call over to Greg, who will walk you through the financials and details behind the quarter's performance. Greg? Gregory Wolf: Thank you, Assaf, and good morning, everyone. I'm now speaking to Slide 6 and 7. Q3 was a defining quarter for Anaergia and one that truly reflects the financial strength now emerging under Anaergia 2.0. Revenue for the quarter was $51.4 million, an increase of 77% or $22.3 million compared to $29 million in the same period in 2024. That growth was led by our capital sales business with a particularly strong performance in Italy and North America regions where we're seeing consistent demand and repeat business. Gross profit for the quarter was $14.8 million, up 146% from $6 million in Q3 last year. That's a dramatic improvement, mainly driven by higher gross profit in our Capital Sales segment and the efficiency gains we have all been working towards. Gross margins climbed to 28.8%, up from 20.7% in Q3 2024. That's an 8.1% gross margin increase, the result of a business that's sharper, leaner and more focused on profitability at every stage. SG&A expenses were $14 million, down 16% or $2.7 million from $16.7 million last year. We continue to run the business with discipline while ensuring we have the right structure to support growth. These reductions are robust and reflect lasting changes on how we operate. Turning to the bottom line. Net loss was $0.5 million in Q3 2025 compared to a net loss of $15.6 million in Q3 2024, that's an improvement of more than $15 million year-over-year, a clear step towards sustainable profitability and evidence that our transformation is taking hold. It's an achievement that really underscores how far we have come, and it's incredibly rewarding to see the progress show up clearly in our results. Now moving to adjusted EBITDA. Adjusted EBITDA was positive $2.6 million compared to a loss of $6.4 million last year, an improvement of $9 million or nearly 140% improvement. This is the first time in over 2 years that the company achieved positive results. These results are different from the past. This is not a one-off quarter. This is what we set out to be in July of 2024, a sustainable, long-term, profitable RNG technology company that delivers full turnkey solutions around the world. This is just the beginning of our journey with a positive direction in revenue growth, solid gross margins and a growing pipeline of opportunities. On a year-to-date basis, revenue increased nearly 40% to $108.5 million, and our adjusted EBITDA loss narrowed to just $3.6 million compared to a $20.6 million loss last year, an 82.5% improvement on a year-over-year basis. That's a substantial turnaround, and it's been driven by management's focus on our core technology platform, turnkey delivery offerings and project execution. Now moving to Slide 8, revenue backlog. As a reminder, our backlog rule is only signed contract work in our Capital Sales segment as of the reporting date and conservatively only counts 3 years of long-term O&M contracts even though O&M contracts are typically 5 to 15 years in duration. Our revenue backlog continues to grow, reaching $287 million at quarter end, up from $244 million in Q2 and $103 million in the start of the year. That's a 179% increase year-to-date. This shows the strength of our customers' confidence and market demand for Anaergia's technology and delivery model. Backlog growth was led by new signed contracts in Italy and North America. In addition, we announced a $184 million multi-site framework in Spain, of which the first project of the 16 projects was signed into revenue backlog during Q3 2025, the remaining 15 committed projects will be added to revenue backlog as they are executed. We continue to strengthen our position in Europe's renewable gas market as well as advance our work in North America with a focus on project sales under our capital-light model. The substantial backlog and internal pipeline provides visibility, stability and confidence in the quarters and years ahead. In summary, this was a breakthrough financial quarter for Anaergia. Revenue substantially grew, margins improved, overhead costs continue to come down and adjusted EBITDA turned positive for the first time in over 2 years. And that's just the start. With that, I'll turn it over to Yaniv, who will take you through the operational highlights and the execution driving these results. Yaniv? Yaniv Scherson: Thank you, Greg. We're now on Slide 10. Q3 was an exceptional quarter for Anaergia, not only in terms of results, but in what those results represent. The business continues to strengthen and align across segments. The strong revenue growth, that Greg just described, a result of the successful execution of revenue backlog and the successful launch of our recently booked projects. Across our global operations, execution has been our priority. This past quarter, Europe has seen a surge in bookings in large in part due to strong incentive tailwinds and disciplined focus in strategic regions where we have long-standing presence. In Italy, construction is progressing on the Livorno facility, the country's first plant to co-digest wastewater sludge and source-separated organics for biomethane production. Our partnerships with Bioenerys and QGM continue to advance with follow-on orders across projects Moglia, Elionia and Ostellato that together represent $44 million in expected revenues. These repeat collaborations demonstrate the confidence our customers have in Anaergia's technology and delivery record. In Spain, momentum is strong. Our agreement with PreZero near Bilbao marks our first source-separated organics to biomethane project in the country, representing about $7 million in expected revenue. Additionally, in Spain, as we heard from Greg, we secured a major multisite framework agreement to supply advanced technologies from over 15 biomethane plants, valued at roughly $184 million. Among these are contract with Nortegas Renovables, a subsidiary of Nortegas Group, will convert organic waste into renewable biomethane, an important component of our broader Spanish presence with about $18 million of expected revenue for Anaergia. Taken together, these projects represent meaningful customer commitments this quarter and momentum behind Anaergia 2.0, where the market opportunity is translating into measurable growth. Beyond Europe, we are continuing to deliver on projects worldwide. In Singapore, construction continues on the integrated waste management facility at Tuas View Basin, one of the largest and most advanced co-digestion complexes in the world. The project is roughly halfway complete and remains on track for phase commissioning beginning next year. In North America, our wastewater co-digestion to RNG development project in Riverside, California, secured conditional financing commitment for EPC and O&M services anticipated to generate $39 million of revenue. Moving to Slide 11. Our build-own-operate facilities remain important contributors. The SoCal Biomethane plant continues to perform, as it awaits approval of its long-term offtaker agreement under California Senate Bills 1440 program. In New England, our Rhode Island bioenergy facility continues to ramp up production, converting food waste from across the region into renewable natural gas supplied to Irving Oil under a long-term offtake agreement with CI score under CFR awaiting approval. These projects are strengthening Anaergia's global platform and presence with geographically diversified exposure, enabling the company to capitalize on global biogas tailwinds. Inside the company, our focus is on operational efficiency that discipline has allowed us to contribute to a record quarter with revenue up 77% year-over-year and the company returning to positive adjusted EBITDA. We're now on Slide 12. Our revenue backlog continued to grow this quarter, 18% over Q2, reaching $287 million at the end of September, nearly triple what it was at the start of the year. And on Slide 13, across continents and industries, Anaergia is as part of a global shift, turning waste into renewable energy, reducing emissions and building infrastructure for regional energy security. That's what Anaergia 2.0 is about; precision, partnership and performance, a platform that turns innovation into impact. With that, I'll turn it back to Assaf. Assaf Onn: Thank you, Yaniv. Q3 marks more than a financial turning point. It marks the moment Anaergia began to realize the full potential of the company. We achieved positive adjusted EBITDA, we expanded revenue backlog and we proved that a disciplined purpose-driving strategy delivers results. But very importantly, we start a new belief in this company, in the mission of the company and in what Anaergia stands for. We can move to the next slide. We are the engineers of change. We turn waste into something viable, and we do it at scale, reliably, efficiently and with purpose. That is what Anaergia 2.0 represents not only a turnaround, but the transformation, the company becoming desired because it stands for something greater than itself, a company that leads by example. Our momentum is real, our vision is bold and our future is bright, and this is only the beginning. Thank you for your continued support and belief in Anaergia. We look forward to sharing more progress with you next quarter. I will now turn the call back over to Darlene, who will open the Q&A portion of this call. Darlene? Darlene Webb: Thank you, Assaf. Operator, we may now open the call to questions. Operator: [Operator Instructions] Your first question comes from the line of Craig Irwin with ROTH Capital Partners. Craig Irwin: Congratulations on this really strong quarter here. Can you maybe just unpack for us a little bit the $16 million ahead of our model is really impressive. Where are things going really right for you guys? I know you have to actually build and install a lot of this equipment across the globe to be able to deliver revenue like this. Clearly, your supply chain is working, your manufacturing is clicking together with the good margins. What's going so very well with you on the execution side? Assaf Onn: Yaniv? Yaniv Scherson: Yes, Craig, I think it's a good question. I appreciate it. What's clicking for us is repeat business and multiple contracts where we have similar scopes. And so we're able to drive efficiencies because of preferred vendors, common design, some bulk purchasing power and also shifting into larger scope contracts, so we're stepping into turnkey deliveries. And with that all in play, it's allowing us to continue to execute the same projects and designs we've done in the past, but under a standardized approach with larger scope and value. Craig Irwin: Well, that's an impressive result. I mean, $15 million is a lot of revenue to generate as far as upside. Next question I have is around the backlog and the bookings. So $244 million to $287 million, that's $40 million-plus sequential increase in backlog, but you still had a better than $50 million quarter there. So chunky bookings again this quarter, but you only booked a small portion of some of these projects like your project in Spain. Can you maybe talk about the scope that's out there in your existing agreements that could contribute to backlog that burns off in '26? For example, you've done one project for Spain. Could you potentially finish another 1 or 2 in the fourth quarter? How many a year would you see as reasonable inside the total, I think, you said 14 plants that could be built? Gregory Wolf: Yaniv, do you want to take that one. Craig, I think what we're seeing is, obviously, those projects get signed and they go into our backlog. We have one signed in Q3. So it's just beginning, actually. So actual revenue on that project will be over the next 18 months. But every time we add another one, obviously, we continue to add to our revenue that will be produced over the duration of each and every project, right? So those projects will continue to get signed into our backlog. It's a committed pipeline, but they go into our backlog as we sign each and every one of them. So in 2026, we expect a sizable amount of the number of contracts we have out there to sign into production. Operator: Your next question comes from Ben Stonkus with Haywood. Ben Stonkus: Congrats on the strong quarter. Just looking at EBITDA growth, how do you guys plan to sustain long-term EBITDA growth going forward under this new capital-light model? Gregory Wolf: Sure. We look at the market as very young. So when we look at the opportunities we're seeing, not only what we have in backlog right now, but what we have in pipeline, we look at a decade-plus of just really sizable growth in our back -- in our pipeline backlog as well as every project that we complete, we look for a long-term O&M contract which then becomes a repeat business for 15- to 15-year type agreements. So we're in a very good spot in the industry. The fact that we are worldwide can do EP work, engineering procurement; and EPC work in North America and Europe right now, it's -- we're in a great spot. And so we look at repeat revenues and growth through backlog growth and execution year-over-year. Ben Stonkus: Perfect. That makes sense. And I guess for my follow-up, how should we be looking at SG&A moving forward as your revenues continue to ramp working through this large backlog? Gregory Wolf: Sure. So our SG&A is really the overhead side of it. As we take on more engineering, more in-house project management, that becomes all project cost of sales, cost to produce these projects, which is what we've been doing. Our SG&A, we expect it to be normal increases in inflationary type of increases for people. And so we expect it not to grow very much at all in the next few years other than normal increases in what we need to do as a company to retain the best. Operator: Your next question comes from Donangelo Volpe with Beacon Securities. Donangelo Volpe: Kind of just a follow-up to the previous questions. Can we talk about the size of the overall pipeline? How we should look at backlog expansion/execution, as we're heading into fiscal '26? And maybe if you guys could provide some color on some of the geographies you guys are most optimistic about. We had good growth out of Italy and North America, just curious on other hubs we should be focused on? Gregory Wolf: Sure. Assaf, you want to speak to that one? Assaf Onn: Sure. Donangelo, we are -- we see still Europe and North America, not just North, the Americas, are a major potential for the upcoming revenues, but Asia in central locations is growing quite rapid. And as you know, we are already there. So we see a potential for the 2026 and '27 onwards with a few Asian companies -- countries, sorry, that we are under negotiation at the moment. Donangelo Volpe: Okay. And then I guess, just a follow-up, just looking at the adjusted EBITDA figure. We consider it to be outperformance for the quarter for sure at $2.6 million. Just kind of curious on what levers you guys have available to kind of drive margins higher? Where we can kind of see this growing to in the future? And if we should continuously see margin expansion as the company continues to scale? Gregory Wolf: Yes. We always are looking for further margin expansion where we can get it. Some things that are helpful for us is the kind of the rinse and repeat projects that we have. We have some that are of size, and so we're able to leverage our subcontractors, our equipment side gets more efficient, right, with materials as we're building in-house. So our cost structure goes down as we have more of the same type of work, obviously, on the equipment side that we manufacture with all of our patents is clearly, we get economies of scale there as well as it's also on the construction side, as we build several with the same contractors, we're able to drive down overall cost and increase margins where we can, so we're always looking to increase the margins. We're very focused on operational results, and it's very important to us, obviously. So yes, we think there's opportunity to continue to grow that area as we leverage others. Donangelo Volpe: Okay. Great. Congratulations on the results, guys. Keep up the positive momentum. I'll hop back in the queue. Operator: Your next question comes from the line of Alexandra Ricci with Paradigm Capital. James Smith: This is James Smith for Alex Ricci. First, just congratulations, everyone, on the first positive quarter of EBITDA. My question revolves around gross margin. Maybe to speak to what you expect for a normalized gross margin moving forward? And then do you see any seasonality as well with the business kind of coming into these winter months? Gregory Wolf: Sure. Gross margins, we peg our project, our cap sales in the 20% to 30% range in our O&M in the 40 mark. Our build-own-operate even this year has been a little bit of a drag on our gross margins in the business. But in general, though, we still are in the upper 20s in a gross margin perspective. So we think that's the range for ours is right in this area. So we think we're in a very good spot. But these projects are large, so to have large projects producing these margins is obviously attributable to our technology platform and our know-how to achieve such good margins at these size contracts. James Smith: Okay. Awesome. And then the seasonality around the business... Gregory Wolf: Yes, seasonality. There really isn't seasonality. It's really -- it's going to go on construction schedules, 18 months is probably the average duration of project builds, but it can go 2 years. But in the beginning of a project, it's a little bit slower as you're ramping up on the engineering and getting everyone lined up. And then when you get in the middle of the project, that's when you're hitting it heavy. And so it's not seasonal to the time of the year. It's really just -- it's a project cycle, right? So the beginning is a little bit slower. The tail end of it as you wrap up certain things and get commissioning done and you roll into like a longer-term O&M, that can be like a little bit of a ramp down on a project cycle one project. And in the middle of the project, you're very heavy in construction and manufacturing of our equipment. James Smith: And then just a follow-up, just what type of competition have you guys been seeing in the bidding [Technical Difficulty]. Gregory Wolf: I'm sorry. It's hard to hear. James Smith: Sorry. Just what type of competition are you seeing in the bidding pipeline here recently? Gregory Wolf: We don't have a lot of competition across the system. It's -- usually we go in with some engineering upfront and pretty much it's about a 99% chance we get the work after we finish the engineering, the preliminary engineering. There are others that manufacture certain other pieces of equipment, that sort of stuff, but not the technology that we have that produces a much higher yield for our investors. So we don't really see a direct competitor per se that can do this. If someone takes the lead on a EPC type of project, we're always in the EP side of it in the technology platform, which is excellent workforce. So from a competition standpoint, we really don't have a lot of direct competition anywhere in our system. Operator: [Operator Instructions] We have no further questions in the queue. I will now turn the call back over to Darlene Webb for closing remarks. Darlene Webb: Thank you, operator, and thank you, everyone. As always, for additional information or should you have any questions, please contact the IR team at ir@anaergia.com or visit us online at anaergia.com. Thank you all again for your time today. Operator, you may now end the call. Operator: This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Hello, and welcome to the TIC Solutions Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference call is being recorded. I would now like to turn the call over to your host, Andrew Shen, Director of Investor Relations. Thank you. You may begin. Andrew Shen: Thank you, operator. Good morning, everyone, and thank you for joining the call today. Joining me this morning is Tal Pizzey, our Chief Executive Officer; Kristin Schultes, our Chief Financial Officer; and Robbie Franklin, Executive Chairman; Ben Heraud, our President and Chief Operating Officer, will join us for the Q&A session. Before we begin, I'd like to remind you that certain statements in the company's earnings press release and on this call are forward-looking statements, which are based on expectations, intentions and projections regarding the company's future performance, anticipated events or trends and other matters that are not historical facts. These statements are not a guarantee of future performance and are subject to known and unknown risks, uncertainties and other factors that could cause actual results to differ materially from those expressed or implied by such forward-looking statements. In our press release and filings with the SEC we detailed material risks that may cause our future results to differ from our expectations. Our statements are as of today, November 12, 2025, and we undertake no obligation to update any forward-looking statements we may make except as required by law. As a reminder, we have posted a presentation detailing our third quarter financial performance on the Investor Relations page of our new website, reflecting our recent name change, www.ticsolutions.com. Our comments today will also include non-GAAP financial measures and other key operating metrics. The required reconciliations of our non-GAAP financial metrics can be found in our press release and in our presentation. Before we begin, let me outline the flow of today's prepared remarks. Tal will cover business performance and key operational highlights. Kristin will review our financial results, provide an update on our outlook and share progress on our integration program. Robbie will share perspectives on the strategic alignment of the combined company and how TIC Solutions is positioned for long-term growth. It's now my pleasure to turn the call over to Tal. Talman Pizzey: Thank you, Andrew. Good morning, everyone, and thank you for your continued interest in TIC Solutions. Welcome to our third quarter 2025 earnings call. As you may have seen, our new name, TIC solutions reflects the unification of Acuren and NV5 under a single platform dedicated to reliability, innovation and service excellence. During the quarter, we brought together these 2 strong organizations under the TIC Solutions banner. This creates a unified tech-enabled TIC and engineering services leader with scale diversification and momentum across infrastructure, energy transition and data centers that deliver comprehensive asset integrity and infrastructure solutions. I am pleased with what I'm seeing in these early months. Our teams are collaborating well and we're laying the groundwork for meaningful synergy capture as integration actions move from year-end into 2026. The new name also reflects our intention to continue to expand the markets we serve and the services we provide within the TIC and engineering space. Let me start with our strategic vision, recent performance and market momentum. As a combined entity, we now support clients across the full life cycle of critical assets and infrastructure from design and construction through commissioning, operation, ongoing maintenance, compliance and decommissioning. Our technicians and technology collect critical data on asset condition whether the asset is as small as a pressure safety valve or as large as a data center, a bridge or a shoreline. Our engineers then analyze that data with capabilities to use artificial intelligence to assess integrity, extend life and where needed, mitigate risk through our industrial rope access and remediation capabilities. We are not simply larger, we're more capable, and that matters in serving the complex regulated needs of our end markets where reliability, safety and compliance are paramount. Equally important is the diversification we've achieved through the combination. We're now a $2 billion-plus business with balanced exposure across multiple attractive end markets. On a combined year-to-date basis, we delivered year-over-year revenue growth of approximately 5% across our 3 segments. Our growth was supported by double-digit expansion in our Consulting Engineering segment. The exciting data center work for our hyperscaler clients more than doubled over the trailing 12 months, reflecting the accelerating demand from AI and cloud infrastructure build-outs. As hyperscalers expand into new geographies, we're growing with them, both domestically and internationally. Activity and infrastructure conformity assessment building, planning and design and building digitization also continues to strengthen alongside infrastructure build-out across North America. Finally, infrastructure investments supporting grid modernization and the energy transition are creating new opportunities across all 3 of our segments. These are not short-term trends. They are multiyear growth drivers. Reinvestment in both new and aging infrastructure expands our addressable market and our combined capabilities position us well to compete and win. Moving to Geospatial. Our geospatial data collection and analytics services performed well with steady mid-single-digit growth against the prior year as well as a compelling margin during the quarter. Performance was supported by healthy utilization, increased momentum in aerial hydrospatial and stable demand across both public and private sector clients. The Inspection and Mitigation segment has delivered year-to-date growth despite the negative impact related to the timing of capital projects such as LNG construction, softness in the chemicals customer base and foreign exchange headwinds. In the third quarter, growing run and maintain activity along with stable Call-Out work helped offset these declines. Turning to integration and cross-sell execution. We are having meaningful conversations with our clients about delivering more solutions than either business could provide independently. In several cases, we're already collaborating on opportunities that leverage our combined capabilities and these joint efforts will translate into tangible revenue wins and new value for our clients as we further integrate. We've seen examples of tangible cross-selling momentum. I'll provide 2. Our consulting engineering team is partnering with our inspection and mitigation team on a nationwide laser scanning and digital blueprinting initiative covering more than 1,000 retail sites with expansion into Canada planned for next year. The program integrates legacy Acuren field workforce and legacy NV5's digital modeling capabilities to deliver high resolution data-rich building scans that support real-time asset tracking and space management for the client. The scans enable the technology to achieve roughly 99% accuracy for tracking both quantity and location of individual retail products, providing a scalable foundation for future digital inventory applications. We're also collaborating on a Digital Twin initiative for a major mining operator in Canada, combining our site access and inspection expertise with our modeling and analytics capabilities for one of our long-standing clients. The program covers more than a dozen facilities and is focused on creating asset level maintenance models that allow the client to track individual asset component condition, age and replacement needs to optimize long-term reliability. These examples demonstrate how the combined organization is actively unlocking opportunities that neither could have pursued independently as stand-alone companies, highlighting the practical value of our value creation for our clients. More broadly, the strength of the platform lies in the essential nature of our work. Our customers rely on us to keep critical assets, buildings and infrastructure operating safely and efficiently. Our work is fundamental to how these assets are managed. Our recurring run and maintain business provides stability while our specialized offerings command premium pricing when timing is critical and when deep technical expertise is required. Together, these factors drive a resilient business model with durable performance through varying business cycles. As we move forward, our focus is on disciplined execution, growing the business, advancing integration, capturing synergies, both revenue and cost synergies enhancing margins and driving long-term value creation for our stakeholders. We see clear opportunities to invest prudently in the growth, improve efficiency and continue strengthening our platform for scale. I will now hand the call over to Kristin to walk through our financial performance in greater detail. Kristin Schultes: Thank you, Tal, and good morning, everyone. Third quarter revenue of $473.9 million grew substantially year-over-year, reflecting 2 months of NV5's contribution following the August closing. This growth reflects continued performance across our core end markets. If we look at the growth of the business, as if the acquisition had happened on January 1, 2024, the third quarter growth of the combined business would have been approximately 2.4%. On a year-to-date basis, the combined business grew approximately 4.7%. Beginning with this 10-Q, we've introduced segment-level reporting that aligns with how we lead and manage the business and how we plan to communicate about the business going forward. We felt it was important to provide a clear view of the different parts and how each contributes to our performance. Our Inspection and Mitigation segment, which is primarily the legacy Acuren business, generated approximately $293 million in revenue, down approximately 3% from the prior year period and up approximately 1% year-to-date. Strong activity in our run and maintain business, along with steady demand in our Call-Out work was offset by the impact of less project work along with softness in our chemicals end market and FX headwinds. Our Consulting Engineering segment, which is primarily legacy NV5's infrastructure and buildings and technology businesses, contributed approximately $122 million during the 2-month stub period following the close with strong momentum across infrastructure, buildings and data center services. If NV5's results were included for the full quarter, consulting engineering revenue would have been approximately $189 million or roughly 11% higher than the prior year on both a quarterly and year-to-date basis reflecting data center growth as well as revenue from acquisitions. The Geospatial segment contributed about $62 million during the same 2-month period. Including NV5 results for the full quarter, Geospatial would have been about $90 million, approximately 4% higher than the last year and 5% year-to-date, driven by steady federal and utility program demand. On a consolidated basis, adjusted gross profit, which excludes depreciation, was approximately $171 million, with adjusted gross margin of 36.1%, up from the prior year period reflecting the favorable gross margin mix from added NV5 services. For our Inspection and Mitigation segment, adjusted gross margin was 28.5% for the quarter and 27.7% for the full year-to-date period. In the third quarter, Consulting Engineering and Geospatial both generated strong gross margins of 51.4% and 48.4%, respectively, supported by favorable project mix and strong operational execution. Adjusted SG&A for the quarter was approximately $93 million or 19.7% of revenue compared to 12.9% in the prior year period. The increase was primarily due to the inclusion of NV5 operations which have a higher proportion of SG&A as a percentage of sales. Adjusted EBITDA for the third quarter was $77.3 million, representing an adjusted EBITDA margin of 16.3% compared to $51.3 million with a margin of 16.9% in the prior year period. The year-over-year increase in dollars reflects the addition of -- '25 results without the impact of realized synergies. We expect to begin realizing cost synergies late in the fourth quarter of this year and into 2026. Operating cash flow for the 9 months ended September 30, 2025, was approximately $45 million reflecting efficient working capital management and the inherent cash-generative nature of our services-based revenue model. Capital expenditures for the first 9 months totaled approximately $21 million or 2.1% of revenue. This is slightly below our historical average due to the NV5 acquisition. Turning now to an overview of our balance sheet and capital resources. As of September 30, 2025, we had total liquidity of $282.9 million including cash and cash equivalents of $164.4 million as well as $118.5 million of available capacity under our revolving credit facility. Total term loan debt was approximately $1.6 billion. In October, we completed a $250 million private placement of approximately 20.8 million shares of common stock and prefunded warrants at $12 per share to an existing shareholder. This transaction strengthened our balance sheet and provides additional flexibility to fund selective growth opportunities as well as accelerate deleveraging. These proceeds enhance our capital position and provide ongoing opportunity to allocate capital to our accretive tuck-in acquisition strategy as well as considering more material opportunities as they arise. Our balance sheet is in a solid position, and we remain focused on using free cash flow to reduce leverage over time. We continue to target a long-term net leverage ratio below 3x through disciplined cash generation and integration execution. Now turning to our outlook. We are reaffirming our full year 2025 guidance, expecting revenue in the range of $1.530 billion to $1.565 billion and adjusted EBITDA in the range of $240 million to $250 million. This outlook reflects steady year-to-date performance and continued confidence in demand across our core markets. For illustrative purposes, if NV5 had been included for the full year, these guidance ranges would equate to approximately $2.11 billion to $2.15 billion of revenue in 2025 on a combined basis. Looking ahead to next year, we expect revenue to grow between 3% and 5% relative to the 2025 combined company baseline, and adjusted EBITDA margin should be in the range of 15.5% to 16.5%, including the impact from cost synergies as they are realized. We look forward to providing a more detailed update in connection with our fourth quarter and full year 2025 results in March. Next, I'd like to touch on the work the team is doing to integrate these businesses. At the end of this month, we will conclude the planning phase of the integration program and move into our execution phase. Our teams are working hard, and I am excited to announce that we have increased our cost synergy target from $20 million to $25 million, and we expect to be at that full run rate by mid-2027 within our original time line of 18 to 24 months post close. The largest area of savings are coming from overlapping corporate resources and service providers, system consolidation, real estate footprint optimization and procurement and vendor optimization. Integration is advancing with discipline, a dedicated integration management office with leadership from both legacy companies is driving execution against defined milestones, and we look forward to continuing to update you on our progress. With that, I'll turn the call over to Robbie to talk through the long-term strategy for TIC Solutions. Robert Franklin: Thank you, Kristin, and good morning, everyone. With the NV5 transaction complete, we're seeing the benefits of bringing these complementary businesses together, creating new opportunities and measurable value for clients. The early success comes from how naturally these businesses fit together. Acuren's inspection and mitigation expertise combined with NV5's engineering design and geospatial intelligence to cover the full asset integrity life cycle, enabling us to move quickly and deliver broader solutions for our clients. Culturally, this combination is working because both organizations share the same foundation, technical excellence, professional integrity and a client-focused mindset. This shared culture gives us confidence in the long-term success of the platform. Looking ahead, TIC Solutions now has the characteristics of a long-term compounder, meaningful scale in fragmented markets, diversification that drives resilience and exposure to secular tailwinds such as infrastructure renewal, energy transition and investment in digital infrastructure. The company also has both the scale to invest across geographies and the financial flexibility to invest selectively where we see attractive returns. The work we do is essential, critical infrastructure across the globe depends on our services, ensuring asset integrity, verifying compliance, designing resilient systems and delivering geospatial insight. Demand for these capabilities is nondiscretionary and the complexity of modern infrastructure creates sustained need for our expertise. We're building TIC Solutions for the long-term, disciplined execution, consistent cash generation and durable value creation for shareholders while offering meaningful careers for our people and reliable outcomes for our clients. Thank you. With that, let me turn the call back to Tal for closing remarks. Talman Pizzey: Thanks, Robbie, and thank you, Kristin. Our third quarter results demonstrate that we're executing effectively through a milestone year for our company. We completed a major acquisition, are integrating large teams while continuing to deliver for our clients without interruption. This is a testament to the dedication and professionalism of our people across both organizations. We've built a platform with meaningful scale, technical depth and diversification across attractive end markets. The inspection and access capabilities that define Acuren now connect seamlessly with NV5's engineering and geospatial expertise, creating opportunities neither business could have achieved -- could have achieved alone. The structural trends supporting our markets remain powerful, aging infrastructure, increasing regulatory and technical complexity and the acceleration of AI data center and clean energy investment. Our priorities remain clear: operate safely, deliver exceptional service and translate growth into strong cash flow and long-term value. We are executing on a unified operating model, accelerating cross-selling across end markets, aligning our people and processes under one culture and focusing on high-growth capabilities like data centers, renewables and grid modernization. Finally, I want to recognize our 11,000 team members across more than 250 locations across the globe. Combining 2 organizations, while delivering for our customers every day requires focus, flexibility and commitment. Our people are rising to that challenge and their professionalism reflects the culture we've built, one centered on safety, quality and a higher level of reliability for our clients. With that, I would now like to open the call for questions. Operator: [Operator Instructions] The first question is from Chris Moore from CJS Securities. Christopher Moore: So you did the $250 million equity raise in early October. That leaves leverage a little above 3x based on at least my '26 adjusted EBITDA. Just trying to get a sense of a reasonable range for annual free cash flow after the integration is a little bit further along. Kristin Schultes: This is Kristin. Thanks for the question. I think cash flow for us is a big opportunity for us with regard to kind of the scale and the profitability of the combined business. I think if you step back, the business is -- continues to be a high free cash flow business, low CapEx, high margin. If we just mentioned some of the building blocks for that. We haven't provided guidance on free cash flow yet. But from a building block perspective, we've got the cash interest of roughly $105 million. And that a reminder that, that assumes no repayments and no changes to the current interest rate environment. On the cash taxes piece, we're in the range of about $20 million to $30 million. And then again, we've talked about this in the past, but our CapEx is roughly 3% of revenue. And from there, it would just be any changes in working capital. Christopher Moore: Got it. I appreciate that. So NV5 had a, I think, a $400 million revenue target for data center in 4 to 5 years a little while ago. Just trying to get a sense if -- is that still the target? And does the combination with Acuren, does that potentially accelerate anything? Kristin Schultes: Yes. That's a great question. The data center business is something that we're really proud of and very excited about the way we've been able to grow that. I would tell you that the revenue on a quarter and year-to-date basis is up over 100%. It's still only about 3% of our revenue, but we're excited about where it's headed. We started outside of North America with our data center business. And it was fairly limited in scope, and it continues to grow, and we're looking for ways to expand services from there. So I'll let Ben comment if he wants to add anything. Robert Franklin: Yes. Chris, it's Robbie. I would say we're in the process of sort of building out our strategic -- like our 5-year strategic plan. And I think the targets that the company -- that NV5 had historically were great and very ambitious, and I think that there's a glide path to get there. The opportunity for us in this combination is really to marry the kind of the on-the-ground services that Acuren can provide within the data center environment with sort of the technical expertise and the commissioning side that NV5 had historically. So it's certainly a big area of focus for us given sort of the secular tailwinds you see in the space. Christopher Moore: Got it. I appreciate that. And maybe just a last 1 for me. Q2, Acuren was still exiting some lower-margin customers contracts? Just trying to get a sense is that -- did that still happen in Q3 and kind of where that process is? Kristin Schultes: Yes. Thanks, Chris. Margin is important for us. We're continuing to look at relationships. And if needed, exiting those relationships through pricing, I think the softness you see in the third quarter is primarily timing, project-related and LNG construction related. And so we'll continue to look at that, but we're also really excited about the growth opportunities that we see heading into 2026 in that segment. Operator: The next question is from Justin Hauke from Robert W. Baird. Justin Hauke: Great. And I appreciate the new segment disclosure. That helps kind of understand the moving pieces a little bit better. I guess I wanted to ask about the geospatial. I mean it was good in the quarter. I'm just curious because in the past, it's been levered to kind of activity with the federal government and funding and things like that. So I'm just curious if there's been any impact from the shutdown in the fourth quarter or how we should think about that business in the year-end? Kristin Schultes: Justin, thanks for the question. Yes. So on a consolidated basis, we have roughly 20% exposure with government work, less than 10% from a federal perspective. I would tell you that there has been a nonmaterial limited impact here in the fourth quarter. So far, we're optimistic that the reopening is happening and that it will be quick in terms of individuals getting back to work and getting through the stack of papers on their desk and there's limited impact from issuing POs and work orders for our business. But aside from that, that's really it. Justin Hauke: Okay. And I guess my second question would just be in the Inspection and Mitigation segment. You talked about the weaker turnaround activity as kind of timing related maybe separate from the oversupply in the chemical markets, but the specific to the turnarounds. I'm just curious because that's also seasonal, how that's trending in 4Q? Have those kind of snapped back? Or are you still kind of waiting for turnaround releases on that? Talman Pizzey: I can take that. Kristin Schultes: Go ahead, Tal. Talman Pizzey: The turnaround activity is not really material change this quarter for us. The decline we mentioned was related to the timing of the starting and ending of LNG projects. We see a pretty good multiyear horizon in construction of LNG facilities. It's an area of particular expertise for the Acuren business. And as these projects come to an end and the next one starts up, there can be gaps there, and that's what we saw in the quarter. And as we indicated, the end market pressure we saw was really the chemicals. But the outage business for us is not as spiky as some companies, and I don't really see that as a big issue in the quarter or the year. Operator: The next question is from Kathryn Thompson from Thompson Research Group. Kathryn Thompson: And I appreciate the color that you're also providing in the 10-Q that you filed today on the segments. Just circling back to the synergies that you outlined. I appreciate you bumped it up to $25 million. Could you give a little bit more color on the driver for the upside? And how much of this -- of the components of the synergies are more cost driven? And do they include any revenue synergies that can come from the combination? Kristin Schultes: Kathryn, thanks for the question. Yes, I would tell you, I'm very excited about the momentum that the integration team has internally so far given that this acquisition just recently closed in August, and we really didn't kick off the integration until after Labor Day. I'm pleased with the way that we've accelerated the progress in identifying cost synergies. I would tell you that the $25 million is purely cost synergies, nothing with revenue. It's kind of a different topic for us. And it's primarily back office support and the way that we're organizing the business and supporting the business to sell and execute work. So we're going to continue to push on that number, but excited about the progress we've made so far. Kathryn Thompson: Do you have any -- on a ballpark standpoint, any type of early assessment of what the revenue synergies could be? Kristin Schultes: Yes. So Robbie, you mentioned some of the long-term strategic planning we're doing and to put a number on that, but it's an area of immense focus within the team right now, and we're really excited about some of the early momentum and the opportunities. We have cross-selling opportunities, intercompany as well as intersegment as well as across segments. And so we are looking to provide some internal targets on that front, but nothing to share externally in. Kathryn Thompson: Okay. And then on Slide 7 of the deck that you published today in conjunction to earnings has a nice breakout of the diversified end market mix for the combined entities? And you can see that data centers is technically 2% of the mix. But from our visiting side of a construction site, we know that there's more involved in than just the center itself, there's the power of the utilities, there's kind of the energy side. When you step back and look at broad not just data centers, but the reindustrialization. What are your main buckets that you've outlined in your end market mix touches on both data center build-out and reindustrialization secular trend in the U.S. Kristin Schultes: Yes. So Kathryn, in terms of end market mix, I would -- I'll just highlight a few kind of areas of bright spots or areas that we're excited about as it relates to some of the megatrends that we're seeing aside from data centers. Our renewables business is up significantly. I think our wind business in the Inspection and Mitigation segment is up 30% year-over-year. And we also see a lot of opportunities within the manufacturing and fabrication space, to your point. And also, I would just add, the Rope Access solution business that we have is largely untapped, and there's a tremendous amount of opportunity to grow that across the globe. So Tal, is there anything you want to add to that? Talman Pizzey: Sure. I think there's a lot of excitement around data centers for sure, and we are working on the individual -- with the individual segments to think of the cross-selling opportunities, things like Acuren technicians performing commissioning tasks. The undergrounding team dealing with power, delivery and utilities coming to and from. And then, of course, the generation of power itself is quite exciting as we see more and more companies looking at gas-powered turbines as well as in the future, I'm sure we'll see small package nuclear facilities. So these are all areas we're going to pay attention to. And Ben, you may have some comments on this as well as you've been working on the data center. Benjamin Heraud: Yes. I mean when we started the data center business, it was with a very narrow range of services. It was really just MEP and commissioning. As we brought [ MEP ] that was in Asia Pacific, largely a couple of years ago, we really invested in bringing those services in the sector heavily to the states. And what that enabled us to do is start layering in other services. So this -- we talk cross-selling, but this has actually been happening actively over the last couple of years where we're bringing substation design, power delivery, fire protection, security, structural engineering and then more recently, bringing the NDT work in. So it enables us to generate more revenue per megawatt of data centers. And so it's sort of a double-edged sword, while those traditional services we were providing continue to grow rapidly, we layer on these additional services, both here in the U.S. and now international. So it's sort of a compounding effect in terms of our growth on the data center side. Kathryn Thompson: Okay. Helpful. Just 1 follow-up question on the -- somewhat related to the government shutdown. When we -- based on our conversations with state departments of transportation, it does not appear that, at least right now, their flow has been impacted, which would obviously impact your infrastructure roughly 1/4 of your business. I just wanted to confirm that, that has also been your experience, but that has been our feedback from our industry contacts. Kristin Schultes: Yes. I think -- so Kathryn, like I mentioned, our impact is not 0, but it's also not significant. I think there's some individual departments within the government that have had an impact, and some of it is just more timing, like we said. So I think getting through this and getting things up and running again quickly, will be really helpful. Talman Pizzey: I would echo your thoughts around the infrastructure side of the business, that's not where we've been seeing impact. Operator: The next question is from Josh Chan from UBS. Joshua Chan: I know that you said some of the Q3 choppiness was timing related. So kind of setting those aside, on the chemicals side, do you expect that softness to kind of persist into Q4 and into 2026? And does that kind of color the range that you kind of gave us for 2026? Kristin Schultes: Yes, I would say what we're seeing is that we hope that it stabilizes in the chemical space. But when we look at our guidance for Q4 and into the next year. I would tell you that we're modeling a little bit of the same and hope that there's some upside there. But in general, we're excited about our ability to deliver against the Q4 and next year results and hope that there's some bright spots within the chemical space soon. Talman Pizzey: What I could add to that is -- I just add to that. In the chemical space, I thought it would be helpful to play out what it looks like when they're under pressure because we know the work we do is really essential services to maintain the integrity of facilities. And if our customers are under stress financially it's not wise for them to push inspection very far. So what we might have seen is if you have 20 inspectors on site, maybe they reduce headcount to 15 or if they have an outage, they might be able to replace some aged equipment. We refer to that as sustaining capital investments. And those sustaining capital investments have been smaller and deferred. And so often, when we see that, there can be a bounce back at some point because these facilities are not closing, they're still operating and they need to operate safely. So we do expect at some point to be a bounce back because this is essential work that we do. Joshua Chan: That makes a lot of sense. I appreciate that color there, Tal. I guess on the margin front, I think the level that you gave for 2026 may be roughly in the same ballpark as what it might be in 2025. So is there any thoughts on why that wouldn't be maybe a little bit better given the realization of at least some of the cost synergies? Kristin Schultes: Yes. Thanks, Josh. So the range that we provided of $15.5 million to $16.5 million does include some slight margin improvement as well as the impact of realizing some of the synergies that we've identified. Operator: The next question is from Stephanie Moore from Jefferies. Harold Antor: This is Harold Antor on for Stephanie Moore. So I think in your prepared remarks, you discussed some premium pricing in some of your specialized services. So I guess, thinking about organic in 4Q '25 and '26. And just trying to get a sense for what was premium pricing in the quarter, how should you expect it to run next quarter? And then, I guess, in 2026? And then just any comments on I guess, in that I think the revenue guide you gave for '26 was 3% to 5%. Maybe you could give us a sense for what percent of that is organic and then what you need to see to hit the high end of your EBITDA margin range target? Kristin Schultes: Can you clarify the first part of your question again, please? Harold Antor: Yes. So you discussed on premium pricing in some of our specialized services. So I wanted to get a sense of what pricing was in the quarter? And then in 4Q and then I guess, your expectations for 4Q '25 and 2026. Kristin Schultes: Yes. I think we're excited to be providing guidance for 2026. It does include some margin improvement. And in terms of specialized or premium pricing during the quarter, I think we've provided the adjusted gross margin in the tables. But I think it's important to point back, just given the noise with the timing of the acquisition back to our adjusted EBITDA margin. And I think that's the best way to be looking at the business in the short-term given the noise of the transaction. Harold Antor: Got it. I guess just at a high level, I guess, from where the company is today, and we've discussed it, I guess, the data set opportunity a little bit. I guess where do you see the most opportunity for growth in the business? Is it still data center? Is it expanded infrastructure into Canada or doubling down on geospatial. I would love to hear your comments of, I guess, which area of the business gets you most excited? And then I guess on a separate point, I think you discussed having a balanced capital allocation view given the pipe transaction. So I know debt paydown is a focus, but also wanted to hear any comments on M&A and which side of the business you would like to gain exposure through M&A? Talman Pizzey: Okay. I can take the first part of that question. I think the biggest opportunity to really realize the potential of these 3 companies working together or these 3 segments working together. There are -- there's a lot of white space to fill in the total value chain or the life cycle of an asset and the engineering design leading to a plan for inspection, leading to an inspection and collecting data and then back to engineering design. And I know that we have also a lot of white space in Canada, as an example, where NV5 has almost no presence and Acuren has a very strong, stable base of customers. So as we fill in these holes to connect the engineering -- the Consulting Engineering, the Geospatial and the Inspection Mitigation is a great opportunity for us. Of course, there are stronger end markets. And as we think about mix of work, to the extent that Consulting, Engineering, Geospatial, the higher gross margin work has higher growth than that will realize a better mix for us. So I think there's a lot of work to be done on just filling white space between the companies and following the end markets, things like data centers. I think, Kristin, you could probably talk to the... Kristin Schultes: Yes. I'll take the question on capital allocation. So yes, we're excited about the opportunity that additional pipe provides from a flexibility perspective. I would tell you that we're going to continue to be opportunistic and disciplined from a capital allocation perspective. We have a very strong pipeline of bolt-on M&A. We closed 2 deals during the quarter and 9 on a year-to-date basis, and we've got a few more in the hopper for Q4. And those are businesses that we're buying in the 4x to 6x range, so immediately accretive for us. And we'll continue to be deploying capital there. The ones we've done so far this year have been across all 3 segments. Operator: This concludes the question-and-answer session. I would like to turn the floor back over to Tal Pizzey for closing comments. Talman Pizzey: Thank you, everyone, for joining us today and for your thoughtful questions. We appreciate your continued support and look forward to updating you on our progress as a combined organization next quarter. We're excited about the opportunities ahead, and we remain committed to executing our integration successfully while we remain focused on the business, operational excellence and customer service. Have a great day, everyone. Thanks. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, ladies and gentlemen. Welcome to the CAE Second Quarter Financial Results for Fiscal Year 2026 Conference Call. [Operator Instructions] The conference is being recorded. [Operator Instructions] I would now like to turn the conference over to Mr. Andrew Arnovitz. Please go ahead, Mr. Arnovitz. Andrew Arnovitz: Good morning, everyone, and thank you for joining us today. Remarks, including management's outlook and answers to questions contain forward-looking statements, which represent our expectations as of today, November 12, 2025, and accordingly, are subject to change. Such statements are based on assumptions that may not materialize and are subject to risks and uncertainties. Actual results may differ materially, and listeners are cautioned not to place undue reliance on these forward-looking statements. A description of the risks, factors and assumptions that may affect future results is contained in CAE's annual MD&A, and MD&A for the 3 months ended September 30, 2025, available on our corporate website and in our filings with the Canadian Securities Administrators on SEDAR+ and the U.S. Securities and Exchange Commission on EDGAR. On the call with me this morning from CAE are Calin Rovinescu, the company's Executive Chairman; Matthew Bromberg, President and Chief Executive Officer; and Constantino Malatesta, our Interim Chief Financial Officer. Nick Leontidis, Chief Operating Officer, is also on hand for the question period. After formal remarks, we'll open the call to questions from financial analysts. Let me now turn the call over to Calin. Calin Rovinescu: Thank you, Andrew, and good morning, everyone. Q2 was a solid quarter, all things considered, and Matt and Constantino will comment on it shortly. More importantly, since Matt's appointment, we have started to build out the transformation plan for the next chapter of CAE's evolution with a focus on: one, sharpening our portfolio; two, disciplined capital management and capital allocation; and three, improved performance through operational excellence and cost transformation. We expect this plan to lead to sustained value creation and long-term shareholder returns. The first order of business for Matt as he took the reins as CEO was to undertake a comprehensive review of CAE's business and operations, and my focus has been on ensuring continuity providing counsel and engaging with stakeholders as we chart the transformation plan that Matt will set out in a few minutes. Matt and I have also met with many investors and prospective investors and equity analysts both to take their feedback as well as to discuss the huge opportunities in front of us, especially as regards the Defense business, which will remain a key component of CAE going forward. In fact, I recently participated in a Bloomberg conference panel in New York, focused on Canada's generational defense investment push, a discussion that underscored the market's confidence in the opportunity ahead for CAE. Canada's creation of the new Defense Investment Agency is an important step toward renewed emphasis on capability, modernization and industrial sovereignty, priorities that align closely with CAE's global position and core strengths. Last week's federal budget reinforces that direction with a total of $81.8 billion in new defense spending projected over the next 5 years and substantial incremental amounts over the next 20 years. As you'll hear from Matt, we're making meaningful progress on the first stages of the transformation plan, which has already resulted in some important organizational changes. Having led several successful programs to unlock shareholder value in the past, I'm confident we're on the right track, challenging the status quo while protecting what is core to CAE. We selected Matt as our CEO because he has the operational depth and proven record of building and leading high-performance teams that drive value in some of the world's leading aerospace and defense companies, and he has the full support of the Board as we embark on this next phase of CAE's journey. CAE's culture has centered primarily on growth over the last 2 decades, and it is time now to harvest that growth and extract even greater bottom line profitability. And that is what our transformation plan will seek to do. With that, I'll turn the call over to Constantino to provide some financial highlights, and then to Matt to share his perspective from his first 90 days, outline the high-level approach to the transformation plan and discuss the organizational changes that we announced today. Constantino, over to you. Constantino Malatesta: Thank you, Calin, and good morning. Consolidated revenue of $1.24 billion was 9% higher compared to the second quarter last year, while adjusted segment operating income was $155.3 million, up 4% compared to $149 million in the second quarter last year. Our quarterly EPS -- adjusted EPS was $0.23 compared to $0.24 in the second quarter last year. Net finance expense this quarter amounted to $56.9 million, up from $52.9 million in the second quarter last year, mainly because of additional financing costs associated with the acquisition of the rest of SIMCOM in Business Aviation, which took place in Q3 last year, and additional lease expenses related to training center expansions in our global network. The increase was partially offset by lower finance expense on long-term debt on a lower level of borrowings during the period, in line with our ongoing deleveraging undertakings. Income tax expense this quarter was $22.3 million for an effective tax rate of 23% on a statutory and adjusted basis compared to an adjusted effective tax rate of 18% in the second quarter of fiscal 2025. We continue to expect a run rate effective income tax rate of approximately 25%, reflecting the expected geographic mix of earnings and ongoing tax legislation reforms from various jurisdictions. Net cash from operating activities increased this quarter to $214 million compared to $162.1 million in the second quarter of fiscal 2025. Similarly, we had strong free cash flow, which increased by 44% to $201 million compared to $140 million in the second quarter last year. The increase was mainly due to higher net income adjusted for noncash items and higher dividends received from equity accounted investees. With continued expected reversals in noncash working capital investments and our outlook for operations, we expect to generate strong free cash flow for the year with a conversion of adjusted net income of approximately 150%. Capital expenditures totaled $87.6 million this quarter, with approximately 85% invested in growth. About 40% of growth capital expenditures this quarter were for simulators deployed to the FS TSS program in support of U.S. Army helicopter training in Alabama. We continue to expect total capital expenditures in fiscal 2026 to come in lower than last year, and now even below what we previously guided. More precisely, we are expecting a roughly 10% year-over-year decrease in CapEx, reflecting about a 25% reduction in Civil spending with the remaining investments focused on market-driven growth supported by multiyear customer contracts and simulator deployments across CAE's global training network. Our net debt position at the end of the quarter was approximately $3.2 billion for a net debt to adjusted EBITDA of 2.66x at the end of the quarter. We continue to expect to reach 2.5x net debt to adjusted EBITDA by the end of the fiscal year. In Civil, second quarter revenue grew 5% year-over-year to $670 million, while adjusted segment operating income decreased 6% to $108.7 million resulting in a margin of 16.2%. Training center utilization came in at 64%, down from 70% in the prior year. We also delivered 12 full-flight simulators compared to 18 last year. This performance reflects the normal seasonal slowdown in training activity, along with lower commercial training utilization than in the same period last year. In Defense, revenue grew 14% year-over-year to $566.6 million while adjusted segment operating income increased 41% to $46.6 million, delivering an 8.2% margin, thanks to higher activity on new higher-margin program awards and the ramp-up of recently awarded contracts in the U.S. and Canada. With that, I will turn the call over to Matt. Matthew Bromberg: Thanks, Dino, and good morning, everyone. Before I get started, I want to acknowledge yesterday, November 11, Veterans Day and Remembrance Day. It's something that's very important to me and the over 10% of our employees that are veterans, and given that almost 45% of what we do is to serve the war fighter, it's an important time to take a moment and reflect. Since stepping into the CEO role in mid-August, I have spent time with our customers, our partners, our shareholders and our employees across the company. These first few months have confirmed what those of you who follow the company already know. CAE is a strong business with strategic advantages and compelling industry fundamentals that support growth. We have world-class technology and a leading share of the markets in which we participate. CAE has very strong customer relevancy with airlines, OEMs, governments and defense services, and the CAE brand commands respect, not only for our capabilities, but what we stand for: safety, quality and mission readiness across both civil aviation and defense. Looking forward, the task is now to leverage our team, our technology, our customer relationships and our strategic assets to not only grow the top line, but also improve cash flow and our return on assets. We will build on our strategic advantages to further unlock value in our markets. And that's what our transformation will seek to do. We are a world leader in flight simulation and training. I have discovered firsthand that we have an entrepreneurial culture and a highly passionate employee base, who all recognize the importance of what they do. It shows in our engagement surveys and in our customer satisfaction surveys. The key now is to harness that drive and align it behind a coherent strategy supported by disciplined capital management and tighter operational controls. That same drive is reflected in the technology that powers our business. We have industry-leading capabilities embedded in our products and in our services. What is unique about CAE is that innovation here is built into how we think, how we design and how we execute. Our ability to simulate complex environments and scenarios is unmatched, and our model-based system engineering capability is world-class. Our expertise in hardware, software integration is a key differentiator, and unique database or knowledge base of aircraft, airports, pilot performance, environmental effects and sensor responses is a strategic asset. That innovative edge runs through everything we do. For example, the new CAE Prodigy Image Generator is the world's first third-generation Level D certified image generator. Prodigy is redefining realism and efficiency by narrowing the gap between virtual and real worlds with ultra realistic visuals and high-fidelity motion and flight dynamics. And for the first time, we are applying the same image generator technology across both commercial and military training systems. It has been certified for commercial aircraft use and is already operational in multiple Eurofighter and CH-53 C-styling and simulators with dozens more in the pipeline. To me, it's a clear expression of CAE's technology differentiation. Through capital -- sorry, excuse me, through disciplined capital allocation and a deep engineering culture, we can deliver dual-use technologies with lasting strategic and financial impact. Another example is the NH90 C line program in Defense, which demonstrates our ability to deliver highly integrated mission level simulation environment at scale. It is a fully immersive multi-role training ecosystem that mirrors the operational complexity of naval helicopter missions and is powered by more than 3,000 CPUs, 50 GPUs and over 100 terabytes of data. The system rivals the computational scale of enterprise-grade defense networks. It is able to link multiple training devices together from full mission simulators to tactical and procedural trainers. This provides the flexibility for our users, the war fighter, to operate independently or together in coordinated scenarios. What also sets it apart is the depth of its domain modeling, from advanced sonar acoustics to ship deck wind and wave dynamics, capturing the full realism of naval aviation operations. These are just 2 of many examples of how CAE's technology leadership translates directly into customer value, competitive advantage and long-term growth. The technology advantage spans both Civil and Defense. The majority of what we do in each business is training and simulation, and I believe there is real potential to create greater synergy and shared innovation between them. So looking forward, the task at hand, the opportunity is to protect and leverage the great technology, people and customer relevancy that has propelled CAE over the past decade, while at the same time, to sharpen how we operate with a focused portfolio, a simplified organizational structure and a higher bar for performance and returns. We are, therefore, embarking on a transformation plan, a transformation plan that will include several key drivers. To start, we have begun to align our organization and leadership for greater clarity of responsibilities and sharper execution. Nick Leontidis will retire at the end of the calendar year and transition to the role of Special Adviser to the CEO. Nick's 37-year contribution to CAE has been extraordinary, building civil into a global leader, stabilizing our defense operations and helping set the foundation for our next phase. And Nick is sitting here with me today and having gone through many transitions, I want to tell you, Nick, thank you personally as a mentor and as a friend over the past 90 days. It has been a pleasure to spend time with you and get to know you, and I look forward to working with you until the end of your retirement. With his retirement, we are reducing a management layer by limiting the Chief Operating Officer role and moving to a more streamlined business-led production model organized around driving excellence and quality across product and service delivery. To that end, we have consolidated leadership of the Civil business with the appointment of Alexandre Prevost as its President. By doing so, we are combining commercial and business aviation to accelerate the transformation and to optimize utilization and efficiency on a global scale. This move also establishes a single integrated service excellence organization designed to best serve the needs of our civil aviation customers. As many of you know, Alex most recently led our business aviation training division after heading commercial aviation training in Asia Pacific. He has an excellent customer relationship portfolio and brings a strong operational track record and financial acumen, having started his CAE career in structured finance and M&A. In Defense, we've consolidated from 3 P&Ls into 2. Merrill Stoddard will continue to lead our U.S. defense business, while France Hebert will have the responsibility for Canada and International. In doing so, we will sharpen focus and improve coordination across our global defense organization. Together, these changes create 2 comparable segments with the technology, scale and reach to capitalize on growing defense market opportunities. I want to thank Marc-Olivier Sabourin, who will be leaving CAE in December for his decades of dedication to the company and for his instrumental role in developing our international defense presence. We are deeply grateful for his many contributions and wish him continued success in his future endeavors. We are also welcoming Juan Araujo. Juan will join CAE in January as our new Senior Vice President, Operations. Juan brings over 25 years of global aerospace and industrial experience, with companies including Raytheon, Pratt & Whitney and Hamilton Sunstrand, and has a proven record of driving operational excellence. Juan will focus on productivity, quality, cost and continuous improvement across our product organization. In a typical year, CAE designs, manufactures and services over 300 training devices for the civil and defense markets, making this a prime opportunity to unlock further efficiencies and value. Juan's mandate is to unite several previously dispersed functional areas into a single end-to-end products team. In doing so, we will strengthen execution and product quality while lowering product costs and driving greater supply chain efficiency for both Civil and Defense segments. Today's leadership announcements are only the first step in creating a leaner, more focused organization, one that has fewer layers, eliminate redundancies and is aligned to deliver sustainable value creation. In addition to the leadership changes, the transformation will focus on 3 priorities: our portfolio, our capital discipline and our performance. First, let me comment on our portfolio. We have a strong balanced portfolio across Civil and Defense, 2 businesses powered by long-term secular tailwinds. Our Defense segment provides a durable, predictable growth, largely insulated from the broader economy with sovereign-backed contracts that generate steady cash flow. That cash gives us flexibility to fund the highest return opportunities across the company. And as I discussed a few moments ago, there is real technology and capability overlap between Civil and Defense that strengthen both sides of the portfolio. In addition, our operations team are focused on unlocking value across both segments. However, we are taking a bottom-up look at every business, every investment in every partnership within our 2 segments to ensure that our capital and management attention are concentrated where CAE has the greatest advantage and the greatest potential return. Our portfolio assessment is in its early stage, but I fully expect decisions and actions to be made over the next few quarters. Second, our capital discipline. One of my first actions as CEO was to review our capital approval and operating policies. While our previous practices were successful at supporting growth, we need to also reflect return on capital and free cash flow. We have already tightened policies around capital and operational expenditures, introducing sharper filters for returns, strategic fit and execution certainty. All material capital projects, again, all material capital projects and commercial proposals are reviewed by me to ensure that they meet the heightened return thresholds. We're also standardized how we bid, how we track and how we evaluate projects, shifting from discrete investment reviews to a more holistic, rigorous portfolio approach that looks ahead and links directly to our strategy, to our risk appetite and to our expected returns and cash flows. Through these enhancements, we expect to identify certain businesses and contracts that no longer align with our long-term objectives, a healthy outcome of this review. We also invest significantly in research and development. Here too, we are taking a pragmatic data-driven approach, evaluating initiatives not only against their budgets, but also their original business case, where the assumptions or market dynamics have shifted, we have already identified projects for wind down, and as a result, we expect R&D spending to moderate later in the year. Ultimately, our goal is to be more selective, not less ambitious, just more selective. The opportunities set in our end markets is large and growing, and that allows us to drive profitable growth while raising our standards for return on capital. In short, we'll be more disciplined, more selective and more demanding in all our commercial bids, in all our capital projects and all our research and development programs. Likewise, any acquisition will be considered only within our core markets. And finally, our performance. We are already taking actions to simplify our structure, consolidating where it makes sense and aligning the organization around speed, around accountability and around execution. Today's leadership changes are the first steps towards driving that next level of operational performance. We are reviewing every aspect of the company from our real estate footprint, and our asset utilization to cost transformation and go-to-market strategies. We are taking a thorough and pragmatic approach to ensure that every part of CAE operates at its full potential. One of our most powerful assets is our global aviation training network comprised of over 85 locations and 360 full-flight simulators, built over the past 2 decades. We delivered 1.3 million hours of training annually, far more than anyone else. Our global training network spans more than 6 million square feet, and we occupy roughly another 5 million square feet company-wide, which intuitively feels large relative to the scale of our output. We are looking for opportunities to better optimize that footprint so that we have the right simulators in the right locations and the network is sized appropriately to serve customer needs and optimize returns. We will also ensure that we are being more selective on future expansions, matching supply with demand. The team is engaged, and we will look to unlock significant value through this effort. On the product side, we manufacture more full-flight simulators than anyone else by far, and our factory operations will also be an important area of focus. The simulator production environment is a high-mix, low-volume business and our facilities need to reflect that reality through more modern processes and a stronger integration with product management. But performance is not just about scale and structure, it is also about the whole system works together. My philosophy is that great organizations require collaboration between people, processes, tools and purpose. Every improvement we make, whether in governance, decision rights or measurement, we tie it with our focus on capital and performance and measured with respect to impact on growth, profitability, cash flow and return on capital. With that in mind, we're also putting in place stronger governance over how performance is measured and managed after every investment is launched, ensuring projects deliver what they promise, not just in inception, but through their entire life cycle. Furthermore, to align incentives with this philosophy, we are assessing our executive compensation plans with the intent bidding next fiscal year to make capital efficiency and free cash flow metrics more prominent. There are multiple work streams and initiatives underway. This transformation will take time. However, the time and investment will unlock greater value from CAE's powerful platform, enabling us to delight our customers, drive higher returns on invested capital and generate stronger free cash flow. So let me take a moment to walk you through how we see the transformation developing over the next few quarters. We are focused on implementing the organizational changes announced today as well as conducting a portfolio and project review, establishing baselines and setting the metrics that will guide us forward. By the end of the fiscal year, we expect to share a clear blueprint of the broader transformation plan with prioritized initiatives and financial and operational targets as well as our approach to monitoring and reporting on our progress. We are driving the work methodically deliberately, pragmatically and with a results-focused mindset. So now that we've talked about the transformational plan, let me switch gears and talk briefly about current operations. In Civil, financial performance in the quarter was in line with our expectations, reflecting, as Dino mentioned, typical seasonality and some short-term softness in commercial training. Adjusted order intake was $593 million, and we added 7 new full-flight simulator orders, bringing the total to 12 for the first half of the fiscal year. And that 12 still maintains our market share, although historically a soft number. Order activity was lighter than we anticipated at this stage, consistent with the slow recovery in pilot hiring, particularly in the U.S. As a result, the Civil book-to-sales ratio was 0.88x for the quarter, a temporary dip or remaining above 1 at 1.22x on a trailing 12-month basis. We believe pilot hiring activity has passed the trough and is currently improving as indications from airlines in the U.S. are that pilot hiring has commenced again and will ramp in the second half of the year and into 2027. Notwithstanding the lighter activity, CAE continues to maintain its leading market share and is well positioned to leverage the inevitable market recovery. We ended the quarter with a Civil adjusted backlog of $8.5 billion, up 27% from last year, providing a strong foundation as market conditions continue to normalize. Building on that base of solid fundamentals, we signed a 15-year training agreement with WestJet, announced but not yet reflected in the Q2 adjusted backlog for the establishment of the Alberta Training Center of Excellence for aviation and aerospace in Calgary, which is scheduled to open in 2028. It is a great example of an infrastructure-like investment that strengthens our recurring revenue and cash flow profile and builds long-term strategic partnerships with airlines as they plan future growth. Also encouraging is that OEM production and deliveries have accelerated, driving renewed pilot demand and simulator sales. As I said, we are seeing indications of recovery and growth across the Civil market. U.S. Airlines, most of whom have recently reported encouraging results, are ramping up pilot hires for the second month in a row. And even in business aviation, customers at last month's MBAA reported a higher pilot turnover as commercial carriers resume recruitment. Global business jet activity is at record levels, up 20% in the U.S. and 12% in Europe compared to 2019, led by fractional fleets that have expanded more than 60% over the same time frame. These dynamics reaffirm the long-term trajectory of CAE. However, given the slower near-term cadence, we now expect Civil performance for the year to be roughly in line with the prior year. Consistent with that, as you heard from Dino, we are further reducing capital expenditures to reflect both the moderate pace of demand recovery and our disciplined approach to cash management and efficiency. We expect the benefits of the underlying market recovery to be more pronounced in fiscal 2027 and beyond. In defense, financial performance was also in line with our expectations, with steady margin improvement and double-digit growth, and we are maintaining our full year outlook. Momentum continues to build as we renew and strengthen the adjusted backlog with higher-value, longer-duration programs Second quarter adjusted order intake totaled $556 million, reflecting the continued success across key franchise platforms. This contributed to a book-to-sales ratio of 0.98x and for the quarter and 1.19x over the last 12 months, and resulted in an adjusted Defense backlog of $11.2 billion. The Defense pipeline also continues to be robust with some $6.1 billion of orders pending customer decisions. In the U.S., we were awarded a contract for 2 new F-16 mission training centers to be deployed to the Air National Guard base at Sioux Falls, South Dakota and the Joint National Guard base at McEntire, South Carolina. The F-16 program is a great example of CAE's enduring role on long-life defense platforms. Over its nearly 5 decades of production, more than 4,600 aircraft have been built with roughly 3,100 still in active service across 29 nations, making it the most widely operated fighter jet in the world. The fleet has logged over 19 million flight hours and flown more than 13 million sorties. And CAE has delivered more than 280 high-fidelity F-16 pilot and mission training devices worldwide, including recent awards, the total will be over 300. We have delivered more than 90% of all high fidelity F-16 simulators in service today, supporting over 15 nations. This installed base represents a significant opportunity for modernization and upgrades as operators look to bring their training devices up to the latest configuration. Since inception, the F-16 franchise has generated roughly $2.5 billion in cumulative sales for CAE and remains one of our largest defense product lines. And the F-16 is just one of several key platforms on which CAE continues to play a critical role in training and mission readiness across some of the most enduring and widely deployed military platforms in the world. So you can see across both Civil and Defense, what defines our portfolio is the quality and sustainability of our revenue base. From long-term infrastructure like training partnerships that generate highly recurring cash flows to enduring platform franchises that anchor multi-decade defense programs. So to summarize my take on current operations, both Civil and Defense are performing broadly as expected, and our near-term focus remains on disciplined execution, operational efficiency and free cash flow generation, and we advanced the company-wide -- as we advance the company-wide transformation. Looking ahead, the outlook across CAE remains strong. We are uniquely positioned at the intersection of two enduring global growth markets, civil aviation and defense. In Defense, momentum continues to build across allied markets, supported by sustained modernization programs, including those underway in Canada, and we are well positioned to capitalize on that growth through our proven capabilities in mission readiness and training systems. And in civil aviation, while near-term cadence remains uneven, the fundamentals are powerful. Structural pilot demand and record OEM backlogs continue to support the compelling long-term growth story. And across CAE, our focus remains on execution, driving higher margins, stronger free cash flow and better returns on invested capital. These priorities are the foundation for sustained value creation and long-term shareholder returns. As I look forward, the same 3 priorities that are informing our transformation, sharpening our portfolio, strengthening capital discipline and elevating performance will serve as my philosophy as CEO and as CAE's North Star going forward. This defines how we will operate, how we will invest and how we will measure success. This is a deliberate and disciplined journey and the direction is clear. We are aligning CAE structure, resources and incentives around performance, capital efficiency and accountability. I'm excited to lead CAE forward with a world-class team, an unmatched training network and a clear strategic vision. With discipline, focus and the continued support of Calin and our Board, I am confident in our future and energized by the opportunity ahead. We are powered by leading-edge technology and strong secular growth tailwinds in both Civil and Defense. It gives us tremendous runway to deliver sustained performance and long-term shareholder value. Thank you, and I look forward for your questions. Andrew Arnovitz: Thank you for that, Matt. Operator, we'd now like to open the lines to questions from financial analysts. Operator: [Operator Instructions] Your first question comes from Fadi Chamoun with BMO Capital Markets. Fadi Chamoun: Nick, I just want to say, first, congratulations on your retirement, and I appreciate all the insight and help over the years. Just a couple of questions maybe around this capital efficiency focus, obviously. So you've talked a lot about kind of harvesting capital after a period of growth. Can you share a little bit how the threshold approved capital has changed? And I'm curious, when you look at the business and you look at the opportunity to streamline the portfolio that you talked about and to sweat the assets more, what is the order magnitude return on capital this business is able to generate over the medium, longer term? Not looking for kind of guidance here, but you were, at one point in the past, CAE generated double-digit ROIC, mid-teens ROIC in a few years as well. Is this order of magnitude possible still to kind of look at over a period of 3, 4, 5 years, potentially to see that kind of leap forward in the ROIC performance? Matthew Bromberg: Fadi, thank you for the question. It's good to hear your voice. First, let me just give Nick the mic, and then I'll approach your questions. Nick Leontidis: Yes. Fadi, thanks for the kind words, and it's been a pleasure to work with you all of these years. Matthew Bromberg: Thanks, again, Nick. So Fadi, you had several questions there, and I want to make sure I answer them in the right order. Why don't you slow down and ask the first one, and I'm going take sure I answer it correctly. Fadi Chamoun: Yes. First, I'm curious if you can share how the threshold to approve capital change. You talked about kind of changing the mechanism within CAE and the threshold, how you approve capital? How has that changed? What does the threshold look like now? Matthew Bromberg: So I appreciate the question, Fadi. Yes, we're evaluating all of our prior investments to make sure that the assumptions that went into them are still true. And that is a lens that we'll use to look at the current network and make sure it's located and optimized for today's performance. We're also reflecting today's market conditions. So when we make new investments, we're going to affect the reality of where airlines are and what their growth prospects are. And through those 2 lenses, we're going to make a more disciplined approach going forward. Again, we have a world-leading network, one that we're very proud of, one that's a strategic advantage. And we think there's tremendous opportunity for us to leverage that network going forward given that we have the largest training network in the world. Fadi Chamoun: And the other question was around return on invested capital. This business did double-digit ROIC not very long ago. And through all this work that you're looking at in terms of portfolio streamlining and threshold and more capital discipline, do you see a vision where we can get back to that type of double-digit ROIC in the next few years? Matthew Bromberg: Yes. Fadi, it would be premature for me to answer that question precisely today, but that is the top focus of me and the entire leadership team, looking at how we've invested capital over the past 5 years and how we will invest capital over the next 5 years and so how we can make better decisions for future investment and maximize return on the current investment. So that's exactly what we're going to spend the next few months unpacking. We'll be able to share that with you as we talk about next year's financial outlook. Operator: Next question comes from Krista Friesen with CIBC. Krista Friesen: I was just wondering if maybe you can speak to us about any surprises you've encountered so far? I appreciate you've only been in the seat for about 3 months now, but you've made some early changes. I'm just wondering if you've encountered anything unexpected? Matthew Bromberg: Yes. Thank you for the question. I think there have been only positive surprises. The level of energy across the organization, the entrepreneurial focus and the strong customer relevancy is something I've seen in every part of the franchise. And so that has been an incredible reassurance. I knew that coming in, but it's a pleasant surprise. I also think the depth of our technology and how we can better leverage Defense and Civil is an opportunity I hope to unlock and quantify over the next few quarters. So all that's been very reassuring. Krista Friesen: Okay. Great. And as you've mentioned in your opening remarks and in the press release, there have been some initial organizational changes. Are there any opportunities you see in the near term in the next quarter or 2 for additional changes you can implement before maybe we get your full blueprint for the company? Matthew Bromberg: Yes, I appreciate the question. So the focus now is on giving the new team time to assess the responsibilities and create the strategic path going forward. And as that team is in place, we'll be able to share the objectives and the measurements we're going to use to chart the progress forward. So give us a few quarters. I have led transformations like this many, many times over my 25 years, and it's about identifying the opportunity, putting a team in place, identifying the management objectives and then letting them run. And that's what we intend to do. Operator: Your next question comes from Konark Gupta with Scotiabank. Konark Gupta: And I echo congratulations, Nick, for the remarkable career you had at CAE. My first question is on the CapEx side. I think you guys announced a 10% reduction in CapEx versus last year. How much of that is market condition driven as opposed to your capital allocation decisions you have taken early on? And of that CapEx, how much is that one large Defense contract if you can share? Constantino Malatesta: Konark, thank you for the question. It's good hearing from you. So what I think is important to reiterate effectively is that we are reducing CapEx by 10% compared to last year. About 1/3 of that is maintenance and 2/3 of that is growth and driven really by a 25% reduction in Civil CapEx. So that is a reflection of really a disciplined approach to capital. So it is a reflection of the slowdown, the lull, the temporary lull in the activity. And so we have adjusted and used the agility that we've implemented here to adjust the CapEx on a go-forward basis. About 40% of the growth CapEx this quarter was for the FSTSS program, specifically on the defense and security side of the business. Konark Gupta: Okay. That's helpful, Dino. And on the leverage ratio side of things, I think it's more sort of a broader strategic question long term. But you guys are on very much track on 2.5x leverage ratio by the end of this fiscal year. And this is when the civil market is not running full steam at this point. And you have just started the transformation plan, Matt. So if you're disciplined on capital allocation, my guess is you might have an underlevered balance sheet over time. So how do you bring that to a reasonable level? Matthew Bromberg: Yes. Thanks for the question. So our first and primary focus on the balance sheet is going to continue to delever. And secondly, as we look at investing for some transformation because it does take investment, we'll ensure that it meets our return thresholds going forward. And that will be the objective for the foreseeable future. Any change in the capital allocation strategy will be something we take up with the Board, but that's not in the near-term horizon. Operator: Your next question comes from Benoit Poirier with Desjardins. Benoit Poirier: Just looking at the capital employed for Civil, Matt, it reached $6 billion at the end of Q2, which was up basically from $5.1 billion a year ago and has basically doubled over 7 years. And if I look at Civil revenue, it was up about only 50% over this time frame. So could you talk about the potential opportunity to maybe optimize capital employed? And when we look at the utilization rate of 64% in the quarter? If we put aside the pandemic, it looks like it's almost a trough level that was reached during the great financial crisis and also during the September 2001. So any optimal level that you would consider for the overall training network? Matthew Bromberg: Yes, it's a great question, and I appreciate you asking it. As we look over the past 5 years, we've made significant investments in acquisitions and building out our network and some of our research and technology. And so what we're doing now is charting the path going forward. I can tell you there's some strategic advantages to the investments of the past. One, we have this fantastic defense portfolio, which is timed perfectly with a worldwide increase in defense spending, a once-in-a-generational opportunity. And on the Civil side, we have the world's largest training, one that's poised for the recovery, which is inevitable. So we're going to leverage both of those. But we will come back at the end of the year and talk about how we'll allocate capital going forward between M&A, between capital allocation in the civil network and our research and development. In general, I think that the amount we spend on capital and the amount we spend on research and development is high for a company of CAE's size and I see opportunity to reduce it, but that will be something we talk about as we get into next year's guidance. Benoit Poirier: Okay. And Matt, maybe any thoughts about the potential training opportunity for the sizable Biz Jet order placed by Bond Aviation? And whether any new investment would be required or the current training network can support such a training opportunity? Matthew Bromberg: Yes. I'll turn that over to Nick. Nick Leontidis: Yes. So Bond is going to be a customer. This is a Bombardier win with a large order. So as they start to ramp up the deliveries, we're going to be training Bond as a customer. Benoit Poirier: That's great. And maybe last one for me. Matt, you attended the Canadian Aerospace Summit in Ottawa towards the end of October. I suspect you met several industry participants. So any key takeaways from your meeting? And what are the next steps for building Canada's defense industrial strategy? Matthew Bromberg: Yes. Thank you for the question. I enjoyed the conference, and I'm just getting to know all the defense industrial base participants here in Canada. And as Calin commented on the remarks, this is a once-in-a-generational opportunity for Canada to grow its defense industrial base. And my message to the participants in the conference and to the team internally is this is our moment as a Canadian company to participate in the growth of a Canadian-based industrial -- defense industrial base that will not only be important for Canada, but will be important for the world. So that was my message to the conference, that was the topic of my speech, and that's something that I'm very committed to drive from the CAE's standpoint. Calin Rovinescu: Benoit, it's Calin here. So I'm going to add one thought to that as well. One of the potential additional opportunities here is that when Canada purchases equipment aircraft capabilities from other international providers where Canada doesn't have current capabilities. If there's a training footprint that attaches to that, if there's a mission readiness footprint that attaches to that, there are opportunities for CAE and frankly, for other Canadian companies to participate in some of those opportunities globally as -- almost as a requirement of the Canadian government. So the Canadian government is more open to that than they've been in the past, given the focus on promoting from an industrial policy perspective Canadian company. So there's an opportunity inside of Canada for Canadian defense spending, and there's an additional opportunity outside Canada where Canada purchases international capabilities. So that's a secondary interesting opportunity that will play out in the fullness of time. Operator: Your next question comes from Kristine Liwag with Morgan Stanley. Kristine Liwag: Matt, I wanted to understand a little bit better where you are in the process of the new ROIC threshold. It sounds like it's going to be higher than where it is. But I want to understand better, are you in the process of identifying and firming up where this new level should be? Or have you already identified it and we'll share at a later date? Any more information on this and your process would be helpful. Matthew Bromberg: Sorry, Mike. Thanks for the question. The answer is yes. We've ended at higher thresholds. But our capital base is large and doesn't move quickly, and we need to take time to sort out how we can drive top line performance out of the existing investments and ensure we make the right decisions going forward for future investments. We're not going to miss opportunities to grow our business. We're committed to growing our core markets, but we need to figure out how to leverage this capital base, which is a strategic asset. So all that guidance will come out as we announce financial guidance for 2027 and beyond. So thanks for the question. Operator: Your next question comes from Cameron Doerksen with National Bank. Cameron Doerksen: Just I guess a question on the time line when we should expect to see margin improvement, free cash flow improvement? I mean certainly, we can appreciate that you've got a lot of initiatives here that you've talked about today that are going to take some time. But is it to be expected that we would see some benefit to the bottom line as we get into fiscal 2027 from these initiatives? Or is this something that you think might take longer than that to really realize some of the benefits? Matthew Bromberg: Yes. Thank you for the question. As I said earlier, we're not going to be giving 2027 guidance today. But having led transformations like this in the past, some initiatives will be shorter term and yield immediate results and some will take quarters or years to develop, but that's what we're going to spend the next couple of quarters refining and then articulate that at the end of the year. So I commit to providing you more guidance and more visibility as we present 2027 guidance. Cameron Doerksen: Okay. Fair enough. On the sort of the portfolio, you've talked a little bit about, I guess, some of the contracts you have long-term contracts and perhaps some of them don't fit the return profile anymore. I guess what's the ability to either reprice some of these contracts or get out of them earlier? Or is this something that we would have to see those contracts kind of run off before we'd see the bottom line benefit? Just any thoughts on how that might play out? Matthew Bromberg: Yes, it's a great question, and it is an approach we look pragmatically with all options on the table. Some contracts we can go renegotiate because we see long-term strategic value, others, we have to attrit out. And so there's not a single answer to that, but it's one that I've challenged the team to put everything on the table and we'll look at each one and find the right answer. And that will create that ladder of opportunity that we'll start to articulate at the end of the year. Operator: Your next question comes from Matthew Lee with Canaccord Genuity. Matthew Lee: Most of my questions have already been answered. But maybe just on the Civil side, can you expand on what type of concrete signs you're watching for that would help indicate a turn in simulator orders? And when should we expect that to show up first or where rather, utilization or new FFS orders? Matthew Bromberg: Yes. It's a great question. I thank you for asking it. I've been watching the synergy for 25 years and a quarter or 2 of movement is not something that concerns me. The long-term fundamentals are what really matter here. The demand for air traffic will continue to grow. 80% of the world's population hasn't flown. The major airframers have 8 to 10 years of backlog, and there's a year of aircraft on the ground. So as all those things start to recover, and they will, we're the world leader in both flight -- full-flight simulator sales and training. And so we will benefit. From a lead time perspective, when an airline hires, it could be about 6 months before they start training depending on their indoctrination and onboarding process. And when someone orders a full-flight simulator, it's a year to 18-month lead time. So that's one of the reasons why we adjusted the second half of the year. We're seeing softness that we won't see recover in this fiscal year, and we're looking into next year, and we'll provide that guidance here towards the end of the year. So thanks for the question. Matthew Lee: Yes, that's helpful. Just a clarification here. It sounds like your growth guidance reduction in Civil was mainly due to lower deliveries for the year. My understanding was that usually deliveries are a bit of a lower-margin business than training. So if so should margins be better year-over-year? And if not, maybe there's some facts I'm not considering? Constantino Malatesta: Matthew, so I'll take that question. The reality is that we see both lower deliveries, yes, anticipated also in the second half, but also the utilization rate. There is a ramp-up effectively as the softness comes back, as the overhang essentially comes back, and we'll see utilization increase. And so it's actually a mix of both, full-flight simulator deliveries annualization in CAT and as well a little bit in the back business as well. As things pick up, we'll see a ramp-up of margins going forward into '27 and beyond. Operator: Your next question comes from Anthony Valentini with Goldman Sachs. Anthony Valentini: Matt, I just want to put a little bit of a finer point on this. I think that the company historically had talked about pretax returns on capital of 20% to 30% within 2 years for each simulator that was deployed into the network. Given the focus on the operational excellence and removing costs, I'm curious if now that target is higher? Or is that the company just kind of got away from some discipline of achieving those returns and you feel like you can get the company back to those levels? Matthew Bromberg: Thank you for the question. What really matters to me is what we're going to do going forward. And we have this world-class network. It's a field of strawberries that are going to continue to grow, and we want to harvest it. And we will be more diligent about where we put simulators in the future, and that's based on higher return thresholds. And where current simulators, and they were made with the right intention, the right investment, the right business case in the past, but the world has changed. And we'll make decisions on whether we relocate them or whether we retire them, and that's the activity that's underway. And so as we come out at the end of the year, what matters is not where we've been, but what we do with this fantastic strategic asset and the decisions we make going forward. Anthony Valentini: Okay. Totally fair. Last one for me is, I would just love to get your view on the evolving defense environment. Obviously, the macro is really strong, but it seems like there's a push to get more autonomous systems and drones into the hands of the war fighter. How does that impact CAE's business? I mean, is there less training that is involved for those types of systems? Or is there still a lot of training that needs to happen? Matthew Bromberg: Yes. I appreciate the question. And the space of drones and collaborative combat air and remote piloted vehicles is a very important growing market opportunity. And we're actively participating. And the short answer is, yes. When you train pilots, whether they're remote or operating systems of aircraft, training is required. And we have a fantastic partnership, for example, with General Atomics, and we do their predator training platform that supports not only the U.S. operator, but the international operators as well. So drones, remotely-piloted vehicles is a big part of the future for the Defense services. It's something we're very well positioned in with our modeling capability and something we'll continue to grow as we look forward. Thanks for the question. Operator: Your next question comes from Conor Walters with Jefferies. Conor Walters: Congrats to Nick on a great career here. I wanted to follow up on DNS. In your prepared remarks, you guys attributed the 14% year-over-year growth to the ramp-up of new margin-accretive contracts. When we look sequentially, margins remained flat and the guide is kind of calling for them to remain in this ballpark. So with that favorable macro backdrop and demand environment, how sustainable do you think that level of growth could be? And how should we be thinking about the underlying mix dynamics for the year here? Constantino Malatesta: Conor, this is Dino. I'll take that question, and thanks for asking it. So I think effectively, what we're seeing now is those higher-margin contracts ramping up and being signed and executed. And we're seeing some of the lower-margin contracts kind of get completed and done. There is also this, I think, opportunity that we're looking at for cost optimization. One of the offsets to the profitability in this quarter is higher SG&A that kind of offsets some with our profitability even as those merchants are coming on. So as Matt, I think, talked about, we're looking at all angles to optimize our structure, look at better ways to be more efficient and will drive that margin higher as we go forward and as we continue to sign the higher-margin contracts and they come on board. Operator: Your next question comes from Jordan Lyonnais with Bank of America. Jordan Lyonnais: I just wanted to follow up on Defense. So the product revenue in the quarter was really strong year-over-year. How much of that should we expect will just continue throughout the rest of the year? And then also on the defense business for where you want to take it, push margin growth, how are you looking at post excess comments about reducing cost plus contracts companies taking on more of their own developmental risk. And what is your protection against taking on other fixed price contracts that could go or [indiscernible] again? Matthew Bromberg: Yes. Thanks for the question. Let me answer the last one, and then I'll turn it Dino to answer the first. What's unique about CAE is we have the size and capability to respond to what all the defense departments are looking for. We are commercially organized entity with the defense business, which means we can go after fixed-price contracts and have the ability to execute, or if it's necessary, to a cost-type development contract. I've been doing this for 15 years, and I've never seen a more nimble capable company than CAE. We're also very flexible in how we go to market around the world. I think all those are really what [ Hegseth ] is trying to encourage from the large defense companies, and we have the opportunity to participate in that arena. So I'm looking forward to leveraging our skills, our technology, our operational base to answer the needs of both the U.S., Canada and the rest of the world. Dino? Constantino Malatesta: Thanks, Matt. So I'll talk about that first part of the question. So effectively, there is a higher percentage or proportion of product revenue on the defense side this quarter, this year to date. And effectively on the Defense side, product businesses tend to have higher margins than the training business. What's driving that is effectively new contracts and recently signed contracts ramping up this year. The big ones, as we had talked about previously, is the Canadian FAcT contract, the one that have been subcontracted CAE, where the first 5 years were delivering mainly products. And then in the last 20 years, it's essentially sustainment. And there's a couple of other contracts in the U.S. that we have signed in the quarter that's allowed us to recognize good margins on as they ramp up. Operator: [Operator Instructions] Your next question comes from James McGarragle with RBC. James McGarragle: I just wanted to ask a follow-up question on the lower CapEx guide. You referenced a step down due to the slower pace of demand in civil, but that said, is this the appropriate level of CapEx that we should expect going forward? And should we interpret this reduction in CapEx as a signal of potentially lower growth in 2027? Or do you think you can drive growth just through improving utilization in that segment? Just trying to understand how that aligns with your longer-term outlook for the Civil segment? Matthew Bromberg: Yes, James. I guess we saved the best question for last, and I appreciate it. As I mentioned earlier, the amount we invest in capital, growth CapEx, maintenance CapEx, I view them together, and research and development is high for a company of our size, And what we're going to do is determine what that level should be. But we will make the right investments to continue growing. We'll make them at the right place and in the right segments. And as I said earlier, we have a world-class network. We produce more full-flight simulators than anyone else in the world, and we have fantastic customer relevancy. So as we moderate and come out with guidance in 2027, we'll provide full visibility to where we think the next few years will come. And I really appreciate the question from you and everyone else this morning. Andrew Arnovitz: Thank you, Matt. Thank you. And thank you, Matt and team. We seem to have run the hour here. Operator, we'll conclude the call here. I want to thank all the participants who joined us this morning and all the financial analysts for their questions. Remind you that a transcript will be available later today on CAE's website. Thank you, and have a good day. Operator: This brings to close today's conference call. You may disconnect your lines. Thank you for participating, and have a pleasant day.