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Operator: Good day, and thank you for standing by. Welcome to the Enlight Renewable Energy's Third Quarter 2025 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Yonah Weisz, Director of Investor Relations at Enlight Renewable Energy. Please go ahead. Yonah Weisz: Thank you, operator. Good morning, everyone, and thank you for joining the Third Quarter 2025 Earnings Conference Call for Enlight Renewable Energy. Before beginning this call, I would like to draw participants' attention to the following. Certain statements made on the call today, including, but not limited to, statements regarding business strategy and plans, our project portfolio, market opportunity, utility demand and potential growth, discussions with commercial counterparties and financing sources, pricing trends for materials, progress of company projects, including anticipated timing of related approvals and project completion and anticipated production delays, expected impact from various regulatory developments, completion of development, the potential impact of the current conflict in Israel on our operations and financial conditions and company actions designed to mitigate such impact and the company's future financial and operational results and guidance, including revenues and adjusted EBITDA are forward-looking statements within the meaning of U.S. federal securities laws, which reflect management's best judgment based on currently available information. We reference certain project metrics in this earnings call and additional information about such metrics can be found in our earnings release. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our 2024 annual report filed with the SEC on March 28, 2025, and other filings for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Additionally, non-IFRS financial measures may be discussed on the call. These non-IFRS measures should be considered in addition to and not as a substitute for or in isolation from our results prepared in accordance with IFRS. Reconciliations to the most directly comparable IFRS financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations web page. With me this morning are Gilad Yavetz, Executive Chairman and Co-Founder of Enlight; Adi Leviatan, CEO of Enlight; Nir Yehuda, CFO of Enlight; and Jared McKee, CEO of Clenera. Adi will provide some opening remarks and will then turn the call over to Jared for a review of our U.S. activity and then to Nir for a review of our third quarter results. Our executive team will then be available to answer your questions. Adi, would you like to begin? Adi Leviatan: Good morning or good afternoon, everyone. It's a privilege to join you today for my first conference call as CEO. I want to begin by sharing my genuine excitement about leading Enlight during a period of remarkable growth and strong momentum. Following a global career in consulting and a 3M company, I'm excited to be part of an organization that not only drives innovation and business discipline, but is also fast growing and generates positive energy, both figuratively and literally. Enlight stands at the forefront of the renewable energy sector, and I am deeply committed to steering our company successfully through its dramatic expansion and transformation into a leading global energy developer and IPP. Renewable energy is the fastest-growing segment within the energy industry and recent advancements have also made it the most cost-effective solution for the growing demand for energy worldwide. Enlight is uniquely positioned to continue its growth as a global leader in this space. Thanks to our broad geographic reach, diverse technological capabilities, deep expertise across the entire value chain and robust pipeline of projects, we anticipate continued rapid growth in both revenue and profitability. These strengths will enable Enlight to remain at the forefront of the global renewable energy sector and continue being one of the largest developers in the United States. In my first communication as Enlight's CEO, I am pleased to report another quarter of strong growth, primarily driven by new projects reaching commercial operations across the United States, Israel and Europe. Revenue and income grew by 46% from Q2 2025 to $165 million. Adjusted EBITDA grew by 23% to $112 million, and net income grew by 33% to $32 million. At 23%, adjusted EBITDA growth was partially impacted by compensation revenue from Bjornberget project in Sweden in the corresponding quarter last year that reflected a catch-up for 3 quarters. Given the outstanding results we have delivered this quarter, I am pleased to announce that we are once again raising our full year 2025 guidance. As we approach year-end, the increased visibility and confidence in our performance have enabled us to both narrow and refine our forecast ranges. We now expect 2025 revenue and income to be between $555 million and $565 million, and we anticipate adjusted EBITDA in the range of $405 million to $415 million. These updated projections represent increases of 6% and 4.5%, respectively, underscoring the strong momentum and robust growth trajectory Enlight is experiencing this year. We continue to progress faster than expected in the execution of our work plan. Energy storage is a major growth engine for Enlight across all our geographies. In Europe, the growth of renewable energy generation capacity has not been matched by a corresponding rise in storage capacity, resulting in a notable shortage of storage and presenting opportunities for the sector to achieve fast growth with substantial returns. This quarter, we strengthened our energy storage segment in Europe by signing 2 transactions that mark a significant entry into 2 of the fastest-growing and most attractive energy markets in Europe. We entered Germany with the acquisition of 50% of the 860-megawatt hour Bertikow project, a mature stand-alone energy storage project that will begin construction in 2026. In addition, we significantly strengthened our presence in Poland by acquiring the Edison project, also a mature stand-alone energy storage project with a capacity of 208 megawatt hours. Both projects entered our mature portfolio's preconstruction phase and are projected to deliver an average project level return of 22%, highlighting Enlight's ability to achieve high returns also by partnering with leading developers and M&A transactions. We also expanded the storage segment in Israel, adding over 800 megawatt hour. This brings our global mature storage portfolio to 11.8 gigawatt hour at the end of the third quarter, almost 6x its size 3 years ago, reflecting an annual revenue and income of $650 million to $700 million once operating, making the storage segment an important pillar for Enlight, representing over 40% of our mature portfolio revenues. Enlight's competitive advantage and global and diverse access to capital is reflected in the scale of our capital raising achievements in the past 12 months, totaling about $4.8 billion. Sources included project finance of about $3.3 billion, U.S. tax equity partnerships of $0.5 billion, $300 million of an equity offering, sell-downs, bond issuances and mezzanine loan. These resources are expected to cover all the corporate capital needs for our mature portfolio and support capital needs for additional projects in advanced development phase. Earlier this week, we reported the $1.44 billion financial close for one of our flagship projects, Snowflake A in Arizona, a mega project with an expected capacity of 600 megawatts and storage capacity of 1,900 megawatt hour expected to generate approximately $130 million in revenue and over $100 million in EBITDA in its first full year of operation. This is the largest project in Enlight's history to reach financial close with commercial operation expected during the second half of 2027. The revenue model is based on a 20-year busbar PPA with Arizona Public Service Company, the largest utility in Arizona and on a low-risk availability model for the batteries. This allows us to benefit from attractive financing costs with an interest rate in the range of 5.4% to 5.8% as well as a low equity contribution, thereby maximizing the return on equity and achieving pre-leverage return of approximately 12%. The project highlights the strength of our platform in the U.S. and the ability to execute large-scale projects from the planning stage through financing to operation. Snowflake A marks the initial phase of the broader Snowflake complex in Arizona. The upcoming second and larger phase currently in Enlight's advanced development portfolio will leverage the strategic 1 gigawatt grid interconnection, enabling us to maximize operational and development efficiencies and reach total complex capacity of approximately 2.4 factored gigawatts. This project exemplifies Enlight's connect and expand strategy, the potential of robust grid connections to facilitate greater scale and enhance project returns at a lower risk. This quarter, we also continued the expansion of our portfolio, which will serve as the source of our rapid growth in the coming years with a 6% growth in Q3 in the total portfolio, reaching 37 factored gigawatts and a 5% growth in the mature component of the portfolio, reaching 9.6 factored gigawatts. We continue to progress projects to advanced stages. Projects totaling 250 factored megawatts in Europe and the U.S. moved from development to advanced development and projects totaling about 240 megawatts in Israel moved from advanced development to the preconstruction phase. Enlight's excellent execution capabilities are also reflected in our U.S. portfolio. 100% of the preconstruction projects, 91% of our advanced development projects and 52% of our development projects have completed the system impact study, the most critical stage for securing grid connection. We were also proactive this year and have made rapid progress in recent months to secure eligibility for tax equity. Since May 2025, we safe harbored approximately 6 factored gigawatts of projects, and we estimate that by July 2026, we will secure a safe harbor for approximately 5 to 8 additional factored gigawatts. Thanks to these advancements, we project that annual revenue and income from our mature portfolio will reach $1.6 billion upon commencement of operations in the 2027 to 2028 time frame, a realization of our strategy of tripling the size of our business every 3 years. Enlight benefits from strong tailwinds and favorable business environment in our operating markets. The race for AI investments is expected to lead to unprecedented growth in demand for processing capacity and electricity. Approximately $400 billion is expected to be invested in 2025 by the large tech companies in AI infrastructure and data centers. This accelerated growth is expected to result in data centers share of U.S. energy consumption rising from about 4% in 2025 to approximately 12% in 2030. Renewable energy is the best answer to the emerging electricity demand and is, therefore, the fastest-growing segment in the energy world due to both the relatively fast construction pace compared to other technologies and the attractive cost of energy, or LCOE, produced from solar combined with energy storage. The regulatory environment is also improving. Following the favorable resolution of OBBA in July, the U.S. and China recently agreed to reduce tariffs on various imported products from China from an average of 57% to an average of 47%. We monitor the tariff litigation in the U.S. Supreme Court and continue to find ways to mitigate the effects of tariffs on our U.S. business. Altogether, thanks to positive market fundamentals, visionary strategy and excellent execution, Enlight's generation capacity is expected to reach 11 to 13 factored gigawatts and the annual revenue run rate by the end of 2028 is expected to reach about $2 billion. As we continue to expand our operations and grow our portfolio, our commitment to profitability remains. We maintain a disciplined focus on ensuring that all our projects deliver strong returns on investments. We expect 11% to 12% return on investments for our mature projects that are not already operating, which positions our return on equity above 15%. This approach guarantees that our growth is not only rapid but also disciplined, sustainable and value generating for our stakeholders. With our expertise in the development, construction, financing and operation of renewable energy projects, Enlight is positioned very well for the future, and I am personally committed to ensuring we continue to capitalize on our strengths and the positive trends in the market to become one of the leading global renewable energy developers and IPP. I would now like to turn the call over to Jared, the CEO of Clenera, Enlight's U.S. subsidiary. Jared McKee: Thank you, Adi. I'd like to begin by sharing the progress we've made over the last quarter in advancing the construction of our projects, safe harboring our project pipeline and securing significant financial resources, all of which position us as a leading solar and storage company in the U.S. Starting with project execution, our construction teams have made substantial progress across multiple sites. Two projects are expected to reach commercial operation in the near future. Quail Ranch, our 128-megawatt solar and 400 megawatt-hour energy storage project in New Mexico and Roadrunner, a 298 megawatt solar and 940 megawatt-hour energy storage facility in Arizona. Both projects are working through the final steps of construction and commissioning to achieve commercial operation. Together, these projects will provide enough power to supply over 90,000 homes and are expected to generate combined annual revenues and income of $142 million and EBITDA of $127 million in their first full year of operation. Moving on to Country Acres, our 403 megawatt solar and 688 megawatt-hour energy storage project in Central California. Much of the groundwork is complete with crews installing tiles, digging cable trenches and installing solar panels. We are on track to achieve commercial operation in the fourth quarter of 2026. Another project in construction in Arizona is Snowflake A, a mega project with 600 megawatts of solar and 1,900 megawatt-hours of energy storage capacity. The concrete pads for the substation and battery are complete and solar site work is well underway. To date, we've installed over 5,000 piles and have completed procurement contracts for the project's major equipment. The project anticipates commercial operation in the second half of 2027. 80 miles northwest of Snowflake is our CO-Bar complex. Early construction activity is ongoing, including grading, ground clearing and road building. We continue to manage interconnection risks influenced by a federally required approval and any potential delay from the federal government shutdown. Despite this challenge, we have finalized the negotiated LGIA and are making progress on the necessary approvals of the LGIA. We made significant progress in ensuring that numerous projects obtain eligibility for federal tax credits. To date, we have safe harbored over 9 factored gigawatts of projects, including all of Enlight's 5.6 factor gigawatt mature portfolio. An additional 2 to 4 factored gigawatts are expected to be safe harbored by the end of the year with an additional 3 to 4 factor gigawatts of projects slated to be safe harbored before mid-2026. This continues to be an important focus for our team as we prepare to safe harbor a total of between 14 to 17 factored gigawatts of projects by the mid-2026 deadline for project eligibility. Looking at our supply chain, we've worked to accelerate the procurement of equipment for most of our mature projects. Nearly 2 gigawatts of panels have been contracted for the mature portfolio with a significant amount of this equipment already passed through U.S. customs. Additionally, we have onshored over 2.8 gigawatt-hours of battery storage. Our close partnership with suppliers and off-takers has proven resilient during the initial introduction of tariffs earlier this year. These partnerships continue to help us navigate changing trade regulations, mitigating the effects of price and supply volatility. I am proud to share that we have successfully achieved financial close with 6 leading banks for the Snowflake A project, totaling approximately $1.5 billion, supporting the construction of our project. This closing is a significant step forward for the Snowflake A project and a key component of Clenera's growth strategy into 2027. In addition, since our last earnings report, we achieved a $340 million tax equity partnership for the Roadrunner project and a $131 million tax equity partnership for the Quail Ranch project, both significant milestones. Altogether, we have raised just under $2 billion in financing and tax equity since our last earnings report. I am very proud of this achievement as it demonstrates our ability to execute on our deep portfolio of projects, guiding them from advanced development into construction and operations. Our financing partners are clearly confirming that our projects are a strong long-term investment. We are well positioned to continue this growth trajectory with a healthy project pipeline in our mature and advanced development portfolio. This past quarter reflects the disciplined execution required to continue our construction progress through risk mitigation and financial strength. Our focus remains on building profitable, sustainable renewable energy projects and delivering long-term value for our investors, partners and the communities that we serve. I will now turn the call over to Nir. Nir Yehuda: Thank you, Jared. In the third quarter of '25, the company's total revenues and income increased to $165 million, up from $113 million last year, a growth rate of [ 46.07% ] year-over-year. This was composed of revenues from the sale of electricity, which rose 27% to $139 million compared to $109 million in the same period of '24 as well as recognition of $27 million in income from tax benefit compared to $4 million in the second quarter of '24. Revenues from the sale of electricity grew due to the contribution of newly operational projects. Since the third quarter of '24, Atrisco in the U.S., various projects in Israel, Pupin in Serbia and Tapolca in Hungary all begun selling electricity. The most important increase is originated at Atrisco, which added $11 million, followed by the Israeli project, which added $7 million and Pupin, which added $4 million. In total, new projects contributed $22 million to the revenue from the sale of electricity. Revenues and income were distributed between MENA, Europe and the U.S. with 47% from Israel, 27% from Europe and 26% from the U.S. Third quarter net income amounted to $32 million compared to $24 million last year, an increase of 33% year-over-year. The change was driven mainly by new projects, which contributed $12 million to net income, along with $10 million of financial income right from the refinancing of the Gecama wind farm in Spain. This was offset by a $5 million increase in operating expenses, along with a decrease of $7 million in other income compared to last year, all after tax. The company's adjusted EBITDA grew by 23% to $112 million compared to $91 million for the same period in '24. The increase in adjusted EBITDA was boosted by $52 million stemming from the same factors that drove the revenues and income increase mentioned above. It was offset by an additional $17 million in cost of sales linked to new projects, while other operating expenses rose by $7 million. We recognized $3 million in compensation linked to blade failure at the Bjornberget project in Sweden during the quarter compared to $10 million in compensation, which was recognized in the same period last year. Enlight secured a significant amount of new capital since our last quarterly report. At the project level, we secured $1.5 billion financial close for Snowflake A, our mega project in Arizona and completed the funding requirement for Project Roadrunner and Quail Ranch by concluding tax equity partnership totaling $470 million. We also announced a $350 million mezzanine debt facility with Israeli largest bank. At the corporate level, we raised $300 million of equity through a private share placement to Israeli institutional investor. Altogether, Enlight has raised $4.8 billion in project finance, corporate debt and from asset sales in the past 12 months, providing the financial underpinning for our ambitious expansion plan with particular focus on the U.S. In addition to this fund, we have $525 million of credit facility at several Israeli and international banks, of which $415 million was available for use at the balance sheet date. In addition, we have approximately $1.4 billion of LC and surety bond facility supporting our global expansion, of which $800 million was available for use at the end of the quarter. This further increases our financial flexibility as we continue to deliver on our growth strategy. Given the strong financial performance during the first 9 months of '25, we are raising our '25 guidance range with revenues and income now expected between $555 million and $565 million and adjusted EBITDA expected between $405 million and $415 million, representing a 6% and 4.5% increase for both metrics, respectively, compared to our previous guidance range. Our revenues and income guidance for '25 includes recognition of an estimated $80 million to $90 million in income from U.S. tax benefit and 90% of '25 generation output is expected to be sold at fixed price either through hedges or PPAs. I will now turn the call over to the operator for questions. Operator: [Operator Instructions] And the first question today comes from the line of Justin Clare, ROTH Capital Partners. Justin Clare: So I wanted to first start out with the quarter. So revenue in Q3 was meaningfully ahead of our expectation. And so I just wanted to see how did solar and wind resource availability compare to typical seasonal assumptions? Were there any onetime items that may have benefited the quarter? Adi Leviatan: Thank you for the question. Indeed, we did see additional wind in some of our Israeli assets. Solar was very much in line with our expectations. We also have had the ability to extract additional from our battery storage projects. And in addition to that, there are prices dollar to shekel exchange rate considerations that have brought additional revenues in dollar terms beyond what we had initially forecasted. Justin Clare: Okay. Got it. That's helpful. And then just on the safe harbor, you've already safe harbored meaningfully larger amount than what had initially been planned. Wondering what enabled that acceleration? And if you could walk us through the strategy for additional safe harboring and your confidence in achieving the updated target of the 14 to 17 factory gigawatts. Adi Leviatan: Thank you for the question. Jared, can you take this one? Jared McKee: Absolutely. So every project has its own challenges in regards to safe harbor. Every project has to have a unique real plan for it to move forward. Generally, our safe harbor strategy has included physical work of a significant nature. So the physical work can be either done off-site with manufacturing of project-specific equipment or on-site building out of roads or other physical work at the site. So we took both of these plans, and that is how we completed the non-factored gigawatts already this year with the rest that we're looking at going to be completed for safe harboring by the middle of June of 2026. And so it's really both off-site and on-site work and whether or not we use one of those is very much project specific. Justin Clare: Got it. Okay. And then just one more. So if we assume that you do achieve the updated safe harbor targets, it's a meaningful amount of capacity. So wondering if you could just talk about how you're thinking about the growth rate of your operating capacity as you move from '28 into '29 and to 2030, what kind of growth rate might be achieved? And then if you could speak to any potential constraints given the large volume of capacity, where you're positioned in terms of the interconnection or permitting or financing? Jared McKee: Absolutely. So we expect to see a continued growth rate similar to what we've seen in the past. We continue to grow and we will continue to grow over '27, '28, '29 and 2030 with a build-out of projects that have been safe harbor of between 14 to 17 factored gigawatts, we will be able to pick from the projects that we really want to prioritize and move forward. As with development, there will always be constraints, there will always be hurdles. And so we will be really ready to counterbalance and to mitigate any sort of risk that come from the interconnection and other risk aspects of the project. With this -- with the large pool of projects, we will be able to not only continue our growth, but we will be able to really pull if there are certain projects that drop out. I mean, you'll see that the mix of the safe harbor project is really throughout our entire portfolio, whether it's advanced development or development or mature under construction or mature preconstruction, as projects advance into the advanced and mature portfolio, their throughput ratio increases dramatically. Safe harbor projects in the development side, there is a lower throughput than the mature portfolio, but that's why we really focused on having a very large broad spectrum of projects that we can safe harbor to be able to pull from by 2030. Yonah Weisz: Justin, I think Adi -- one moment. Justin, I think Adi wanted to add to Jared's question. Adi Leviatan: Yes. Thanks for the question, Justin. I also wanted to add that this is exactly our advantage as a big developer. And I think -- I mean, recently, we have been named as a Top 5 developer in renewable energy in the United States. This ability of us to both execute on the safe harbor across the board, many projects at the same time and then the ability to prioritize and take them to completion within the 4- to 5-year time frame. In addition to that, you probably know that we have been able to raise $1 billion in the capital markets just in the last few months. This, again, is testimony to our ability to execute on many large projects at the same time. And of course, Enlight is a global company outside of the United States, also in Europe and in Israel and outside of Israel in the Middle East, which we can bring some of that capacity to bear also on projects in the United States. Operator: And the next question comes from the line of Mike Mcnulty from Deutsche Bank. Michael Mcnulty: I'm on for Corinne Blanchard. My first question pertains to your EBITDA guidance. So first of all, congratulations on the EBITDA guidance raise. It implies a 73% EBITDA margin. Can you talk about puts and takes to your long-term target of 70% to 80% and how you expect to achieve the high end? Adi Leviatan: Yes. I'm going to refer this question to our CFO, Nir Yehuda, who is here with me. But before I do so, I will just say that our expectation for project level EBITDA is always north of 70% for every individual project. And from there, there's adjustments on the corporate side. And from here, I will give it to Nir to add a few remarks. Nir Yehuda: You pretty much covered it. So as Adi described so our project EBITDA, the ratio EBITDA to revenue is much higher than what you see in the earnings in the financial. It's around 75% to 80%, depending in the region and in the project itself. But the corporate naturally involves also headquarter expenses that some of them, for example, in this quarter, a one-off item that relates to our building our strength and capabilities towards the -- utilizing the development pipeline. Michael Mcnulty: Great. And then for my follow-up, can you talk about your current India tariff exposure and the mitigation strategies that you're currently exploring there? Adi Leviatan: Jared? Would you be able to take the India question? Jared McKee: Absolutely. So Clenera is utilizing PV cells for our next projects. All of these next projects, we are focused and we will have cells coming in from countries that are not subject to any of the ongoing investigations. So really with our India focus, we are able to pull in cells from all over the world, and we are also able to assemble in the U.S. And so when we have any specific country risk, we are able to have flexibility with our modules, where we assemble modules, where we source our cells from. And so that way, we are really mitigating any specific country risk. And I apologize, my phone had a technical difficulty. So I didn't quite hear the first question on that, but I believe I captured what you were looking for. Operator: [Operator Instructions] and your next question comes from the line of Maheep Mandloi from Mizuho. Maheep Mandloi: We saw 2 projects being acquired in Europe, mature late-stage projects there. So just curious, is there any strategy here, I think it helps offset any slowdown in the [indiscernible]? And separately, Adi it's been almost, I think, a quarter since you've joined. So any thoughts on the changes you're trying to bring here or any differences compared to what we have used at Enlight. Adi Leviatan: Thank you so much for the question, Maheep. So the projects in Europe are actually -- I mean, they're unrelated directly to the U.S. The relationship is that, I mean, Enlight is a very diversified company that has projects in the United States, in the Middle East, North Africa and in Europe and also diversified across technologies, which enables us to grow consistently and when there's lulls in one place to indeed make up with growth in another space. But in this case, the United States is, of course, growing tremendously with the new projects that we have both brought online and the ones that we have announced financial closing and tax equity. And in Europe, in parallel, we're making great strides with entry into the stand-alone storage space. As you know, Europe is ahead in many ways globally in renewable energy as a source of energy in the electricity mix. They've -- some countries, I mean, Europe specifically, we're talking about Germany and Poland with the acquisitions of these new projects. They have -- they will have by 2030, renewable energy as a source in their mix of electricity might -- will be up to 50% to 70%. They have advanced very much on generation from renewable sources, and they need to catch up on storage. Catching up on storage will enable -- will reduce the price volatility, and it will also enable the interconnection between countries in Europe that need to maintain the same frequency rate. So this is a huge opportunity in Europe. And for a player like Enlight that has already been working in battery storage for 3 years now, and we've gathered expertise in the procurement, in the operation, in the efficiencies we can get out of batteries and the ability to do the revenue management, the energy management system, it's a natural step for us now to capitalize on this great demand for energy storage in Europe. And so we have come in -- these -- we're also hybridizing our wind farms in Spain and in Sweden, and we have other projects. But these 2 projects that we chose to highlight are because of the significant entry into Germany, which is the biggest renewable energy market in Europe and a significant step additionally in Poland, and there are other projects that are forthcoming. Can you, Maheep, also repeat the second part of your question, please? Maheep Mandloi: Sure. Just curious on -- you've been more than on all the quarters since you joined. So any thoughts on changes you want to bring in or any updates here or anything different you should expect from Enlight... Adi Leviatan: I'm very much committed to the strategy that is in place for Enlight, which I think is a very strong strategy of the diversification on geographies, technologies and at the same time, very diligent execution by a committed team that shares our values in the U.S., here in Israel and in Europe. You should expect to see us continuing to grow at the pace of 40%, tripling our revenues every 3 years as we have done so far, we project the same into 2028 and continuing to advance projects to get favorable financing terms and very good access to capital in the various capital markets and to continue to expect the same level of performance from Enlight also going forward. Operator: This concludes the Q&A for today. I will now hand the call back to Yonah. Yonah Weisz: Thank you very much for joining, and we'll speak to you next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good morning, good afternoon and good evening, ladies and gentlemen. Welcome to the Samsonite Group 2025 Third Quarter Results Conference Call. [Operator Instructions]. Please note that this event is being recorded. I would now like to turn the conference over to Mr. William Yue, Vice President of Investor Relations. Thank you. Please go ahead, sir. William Yue: Thank you very much, operator, and thank you very much, everyone, for joining the call. We have the pleasure today of our CEO, Kyle Gendreau; and our CFO, Reza Taleghani with us, and our CEO, Kyle Gendreau, will start off with a few remarks. Thank you very much. Kyle Gendreau: Okay. Thanks, William. Thanks, everybody, for joining from Hong Kong. I realize we have a time change. So sorry, this is at 10:00 New York Time, if I'm getting the times right. But thanks for being with us. So I'm on Page 5. And I think the way I would start with title sums up really well, strong momentum in the business supported by innovative products, which you'd expect from us. But importantly, all regions in our core brands -- actually, all of our brands are delivering sequential improvement in Q3 versus Q2. We've seen clear sales momentum in Q3, our net sales decline for the quarter. Constant currency is 1.3%, coming off of the Q2 that was down 5.8%. Encouragingly, net sales growth was positive in the month of August, September and October in all regions and brands, as I said, are seeing sequential improvement in constant currency growth Q3 versus Q2. If I take one lens, the one market that's continuing to have some challenges on the wholesale side with wholesale buy-in, consumer sentiment and lower inbound tourism in North America. We'll cover North America in a little bit of detail as we're going through. Our net sales would have increased in the quarter by 0.3%, just adjusting for North America. Our Q3 benefited from growth in our overall direct-to-consumer business and both our -- and also our non-travel sales had positive growth -- noticeable positive growth. Clearly, sequential improvement on those, and we continue to see sequential improvement on our travel net sales. Our direct-to-consumer sales consolidated up 3.5% period-over-period. Our DTC e-commerce was up a little over 10% -- our owned company stores were up 1.1% off the back of store openings and building momentum. Our DTC mix today is -- in Q3 is 42% versus 38.9% last year. We'll cover that in a little more detail later, but we continue to move in that direction, similar to what we saw in Q2. Our overall wholesale channel net sales declined 4.5% period-over-period, with sales for our traditional, I call it, brick-and-mortar wholesales down around 7% due to more cautious purchasing by a few of our key wholesale customers, particularly in the U.S. that are driving a lot of this. But this was partially offset by meaningful growth in our e-retailer sales, up 12.3% in the quarter. And then lastly, I talked about non-travel. I've got a slide in my deck, and Reza, I think, has one in his as well, but our non-travel sales were up almost 7% in the quarter as we continue to focus on this opportunity, which is white space opportunity for us, becoming a more meaningful percentage of our overall business, as you know, but really a very strong trend there. I think one of the real highlights of the numbers as well beyond improving sales trend is the gross margin story. Our gross margins expanded in the quarter with impacts from tariffs really well managed. Our Q3 gross margin was 59.6%. That's up 30 basis points to last year. And importantly, up 60 basis points to the prior quarter. And when you think about the full effect of tariffs going in at the beginning of Q3, it speaks to kind of our tremendous ability to navigate and mitigate tariffs. Our U.S. business is around 1/3 of our business, but well managed. You can see it in the overall gross margin of the business. I can't thank our sourcing teams enough. What they've done to navigate is tremendous. What our teams on the front end have done and the relationships and the partnership we have with our suppliers really speaks to our scale advantage and the ability to manage the gross margin of this business well. And it trends into Q4 looking just as strong. We do expect sequential improvement in our sales in Q4 relative to Q3. We believe we're capitalizing on the growth in travel, which continues. We have really amazing products. We'll talk about a few that we've launched in the midst of the quarter, like Paralux that you can see to the right of this page. And we have a positive sales trend leading into Q4. Last 3 months have been strong. The first month of Q4 is a positive growth story. And there's good momentum leading into holiday. A lot of Q4, as you know, depends on holiday. But I would say the early reads from -- across our markets are feeling good on the holiday story. But a lot happens in the next 4 or 5 weeks, but we're well positioned on that front. And as you know, we're really very positioned really well for profitable long-term growth. I'll cover it in my outlook as well, but the medium and long-term growth prospects for our business and our competitive advantage on product innovation, real strength on advertising and really being able to capitalize on the underlying growth in travel that continues and seizing the white space on the non-travel opportunities, which we've shown over the last couple of quarters and for sure in this quarter, really underpins kind of the strength and our ability to continue to deliver medium- and long-term growth for the business. Next slide, from a brand perspective, you can see each -- every one of our brands delivering improvement over last quarter. Importantly, Samsonite improved from roughly down 5% to down 4% in Q3. But when you peel into that, Europe is positive 1.3%; Latin America, positive 8%. Tremendous performance shift in Asia with building momentum in the quarter, down 4% versus down 9% in Q3. And our North America business, again, largely driven by wholesale customers and some of the buying behaviors and cautionary approach was down 10%, just a bit better than what it was in the previous quarter. A real tremendous shift to TUMI's trajectory. We were performing down 2% to 3% for the first half of the year. Q3 shifted to positive 5%. Importantly, it came from across all of our regions, particularly in Asia, which was up 7.1% and Europe, up 6.3% off the back of initiatives pushing the business, new store openings and a consumer group in this higher income class that has shown more resilience in Q3 than the rest of our consumers. And North America, importantly, was up 3.3% in the quarter. And if I call out China specifically, where we have a laser focus within our Europe business, that was up 10% in Q3 for the TUMI business. So really solid performance, good trends as we move into the back half of the year. And American Tourister had a really quite dramatic shift. That was at the start of the year, and we talked about this in the last two earnings calls, a consumer group that's under strain more than others, particularly in the U.S. market, but around the globe, that consumer was moving more cautiously. We saw a really meaningful shift in improvement, largely off of what we've done to shift the product offering within the brand, particularly in Asia, particularly in India, which shifted to positive 3% growth for American Tourister. And as you know, that's our biggest market for American Tourister in the globe and really sequential improvement, noticeable improvement from where we were in the first half of the year. And I think we're set up well as we finish the year and go into the start of next year. Page 7 is a slide we've looked at before. And I just want to drive the point. And for me, this company is hitting an inflection point that we've been talking about coming. As we exit Q3 and step into Q4, you can clearly see the shift. But importantly, if I go back to this revenge travel period '21 to '23, where our business was up 23% against an industry that was up 3.8%, tremendous growth. We were 6x growth in industry off the surge of travel that came back. Global air traffic is still projected to grow. This business correlates really well with air travel. I have a slide that you've seen before a little later in the deck. 4% growth in global air traffic really underpins the resilient of consumer spending on travel. Maybe they're not spending the same way. I think that's had some impact on our business, but the sheer travel numbers continue to grow and the outlook continues to be very positive. We've continued to invest in this business on product innovation, new product innovation, capitalizing on the white space within non-travel and pushing the advertising and elevating the advertising stories of the business. So we're continuing to invest in marketing spend, changing the lens on the way we spend these dollars to really go after not just existing customers from a loyalty perspective, but to deepen our relationships and broaden our relationships with new customers. And we're seeing clear traction on that front and investing there. I believe we're about to get the benefit of replacement cycle in this industry for the same reason that revenge travel slowed down at the end of '24 in the first few quarters of 2025. I'm certain that we're going to see the inverse of that as consumers continue to travel at a very good pace. As you know, and I presented this, I think, in the past, over 52% of travelers replace their luggage every 2 years. Non-traveler bags, 73% of travelers replace that every 2 years. And so we're now at a moment in the cycle where we're 3 to 5 years past that surge in travel. And I think we're starting to see the benefit of that in our numbers as well, which I was anticipating. We also believe consumers in this environment in many markets around have shifted towards value and have shifted to e-com. We can clearly see it in our own e-com numbers, both our direct-to-consumer e-com and wholesale. And I think importantly, because of our scale advantage, we're well positioned to capitalize on that. Our brands can hit price points -- competitive price points across all of our markets across particularly Samsonite and American Tourister, and we've been doing that. That's fueling some of our story. And we -- and as you know, we're investing in this in a strong digital platform, both digitally and importantly, on the wholesale side as well. And it's delivering. And you can see it in our numbers in Q3. And I think we're really set up for medium-term growth on both of these avenues as we move forward. We're focused on profitable long-term growth. When you think about what I'm focused on as a leader, it's really around getting this business back to its normal growth profile. We have a long history of delivering outsized growth against industry, and I think we're heading there. And importantly, we've continued to strategically invest in our business. Even as we face headwinds, we're pushing the business to really strengthen our competitive advantage in the marketplace from a leadership platform capabilities and scale advantages to continue to move us forward. We're continuing to win through product innovation. We've got some really exciting stuff that we've launched across all brands, a lot in the pipeline as we move into the start of next year. We're really laser-focused on amplifying and elevating brand awareness. As you know, we're leaders, our three core brands are leaders in the market in their own rights individually. But collectively, we're looking to amplify and really push more efficient, more effective marketing and have a vision to increasing this as we move forward. And we're really set up to do that to, again, cultivate customer loyalty, but importantly, continue to attract new customers to our business. And so you should be seeing and feeling that in our marketing messages today and as we move forward. We will capitalize on the growth in travel. The forward view for global travel continues to be strong and as a leader with really the most trusted brands in the space, we will capitalize on that growth. I say it again, this white space around non-travel, there's tremendous opportunity. I've got a slide that talks about market size and what our shares are. We have tremendous opportunity to grow the non-travel business, of which we've been doing consistently for a long period of time. I think we can accelerate what we're doing here on the non-travel side, and you'll hear and see some of that in the numbers that we're showing today. And we're strategically growing DTC really through enhanced e-commerce platforms across the globe and across land -- brand and really disciplined store openings and expanding our retail footprint in the markets that it makes us -- sense for us to do. It provides this really unique competitive advantage to us that we're executing wholesale, but we're executing perfectly digitally and pushing ourselves on the digital side. And we have a foundation of retail stores, almost 1,300 stores globally that consumers can interact with us. And these are direct owned stores that we can have this deep relationship with our consumers. And we'll continue to do that. And I think over time, our DTC mix continues to slow but steadily increase in the business at the right pace. And we remained strictly disciplined on overall cost structure. You can see that in our overall numbers. Obviously, gross margin is an art and a scale that we have, and we manage gross margin for a long time really well. But how we manage the rest of our cost structure, Reza will talk through that as well. Even as we face some headwinds over the earlier quarters of this year, -- the cost structure has been really well managed, and it's well entrenched in who we are as a business. I think this is a new slide. It's a slide that we use internally quite a bit, but we operate in a really highly attractive fragmented global bags and luggage business. I'm on Slide 9. If you look to the right, global luggage. This is what you typically think of us as when you think about us today. It's roughly 64% of our business is travel luggage. We have a 19% share in what in '24 was a $22 billion business that grew at a CAGR growth of 2010 to '24 by 3%. And that's with the COVID years. The reality is take the COVID years out, it looks more like what the forward indicators are for this industry, 2024 to 2029, 6% CAGR. And as you know, we have the ability to outpace this growth. And that's the way to think about this space. So we have a growing industry. We have meaningful scale and we have the ability to continue to grow and attract consumers into that -- into our family of customers. To the right of the page is bags, global bags. This is excluding luggage and excluding handbags, which is not us, right? This is the rest of the bag business, what people are carrying around and moving backpacks, duffles, crossbodies, things that we see every consumer in the world traveling with. That has very similar underlying growth dynamics. You can see the 10% to 24% impacted a bit by the COVID years and the forward indicator is not so different than luggage, 5% growth. And importantly, our market share here is 3%. We've been growing high single, low double-digit growth for a period of time in this space, and we have clear ability to continue to expand with collections that we've launched and been launching. I think my next page I will show you a few of those that shows that we have tremendous ability to grow share in this bucket. And it's a larger bucket with plenty of opportunity for both ongoing growth and just gaining share. And just as a reminder, in this 2010 to '24 period, if you blend the two, we -- our CAGR growth in that time period was 8.2%. That's including COVID years. That is almost 3x the industry growth that we saw in that same time period. So it speaks to kind of our ability to leverage our scale to move across these two big categories of the market we operate in. Our growth, we've covered this before, has historically been really strongly correlated to travel. And the outlook for travel remains tremendously strong. If you take a 5-year forward view, travel growth expected to be around 4%. If you shorten that up a little, I think it will actually be a little more. If you look to the left of the page here from where we are to 2019 levels, call this pre-COVID, we're up 22% in sales against the global passenger growth in that time period, including COVID, that's up 8%. So you can see this tremendous outpace that we have in growing against an industry that continues to grow. The chart on the right, we've shown before, okay? The red line is travel industry. You can see the impacts of COVID. But the real impacts are really where we are now, which is this revenge travel that I covered that we really overperform. And the forward indicators. The most important page here is the forward indicators for global passenger travel, 4% growth. And we're importantly at this inflection point that we're getting back on course. The history clearly shows we outperformed this industry, and we're pivoting into positive growth again is the way I would describe it in -- at the end of Q3, in Q4 and for sure, in the years to come. And we should do better than what the industry underlying growth is like we have for the last decade. On Page 11, non-travel category, 14% CAGR for us, 2020 to '25, right? So I just showed you a number where the industry growth was something like 2%, and we had 14% growth here. We've gone from $480 million to $912 million. We've talked about this for several years. There's real opportunity to continue to grow in this space. We delivered close to 7% growth in Q3. And we're focused, and it's across all of our brands, brands like Gregory that are largely non-travel, High Sierra which has a meaningful piece of travel. But TUMI, Samsonite and American Tourister are all delivering meaningful growth in this space and plenty of opportunity to gain share and continue to grow. As a team, we're laser-focused on really further penetrating what I would label is a big business of us, a $1.4 billion to $5 billion business, but under-penetrated from a category perspective, that I know we can do more. And in this Q3 period, we're up 270 basis points as a percentage of our sales, approaching 36% of our sales non-travel. I think when I started a long time ago, it was something like 12% of our business, right? So this is really meaningfully moving. And again, in a huge market that's got tons of potential for us. On Page 12, what does it look like? I think you know this. A good example of Samsonite Better Than Basic designed and developed in our U.S. team performing really well. This has a whole collection of backpacks, duffles, cross bodies that is performing tremendously. It's what you see consumers moving with today. Ecodiver in the middle of the page. This has been a home run, started in Europe. It's a home run all across the globe. The whole collection of duffles, backpacks, more unstructured travel goods that consumers are traveling with today. It's a top three collection in Europe overall, and it's penetrating the rest of the world over the last couple of years in a meaningful way. American Tourister take the cab and underseater. There's this huge wave of underseater bags within Europe as discount airlines put pressure. This underseater category, we're hitting with all of our brands, and there's so much more to go. And this American Tourister bag has been a tremendous success. And when you think about American Tourist, you think about bright colorful luggage, but this non-travel capacity we have in backpacks and duffles is tremendous, and the teams around the world are doing great stuff. Gregory, you get it. This is Gregory, which is super technical mountain bags. As we come off the mountain and we really penetrate into everyday bags, that make you feel like you're on the mountain, but you're in an urban setting and more lifestyle approach products with Gregory. Gregory is delivering significant double-digit growth this year for us, and it's got tremendous room to grow. Samsonite Paralux, this is a collection that we launched. I have a slide on it. This is the backpack component of this. This has been a huge success. This is a 2-in-1 backpack, where you can separate that backpack and you have a bag that you can take with you for the day and the travel component of that backpack that you can use is effectively your underseater has been a huge success, a Red Dot award-winning collection. And then TUMI's, Celina part of the-- TUMI Voyageur collection, really an amazing bag, big part of TUMI's journey and so much more to go on TUMI from a collection perspective. Think about owning totes and business bags and what TUMI is known for, there's real opportunities to drive further that space, particularly in the women's category. Just a little call out. We were -- and we've been here before, this is -- Business Travelers Award, where Samsonite was rated #1; TUMI was #3 on the list. No surprise, Samsonite is #1. This is a survey with 95,000 global travelers voting in a panel of 20 experts. And importantly, when you think about scale and the ability for us to innovate and bring products to be recognized as #1 business traveler luggage is meaningful. And you'd expect that from us. And I'm just sharing that this is with [Technical Difficulty] push in the business to really demonstrate this amazing product development, this focus on functionality, focus on sustainability and creating inspiring bags that people want to travel, and this award speaks to that. On Page 14, we've had a very successful, I would say, ahead of our expectations launch of Paralux Collection. I think I indicated we're working on this. This launched in September of 2024. It's a collection that really brings the best of our innovation from a sustainability perspective, the bag is largely sustainable. Almost every inch of this product incorporates sustainable materials. It's built for self-repairability, another real sustainable attribute. This is a bag that you can replace the wheels at home. We can help you do that very easy. And it's built to last, and it's built with superior design functionality. It's become one of my favorite bags to travel with from a carry-on perspective. It's got front access, a mid- access. It's really designed perfectly for the way consumers think about traveling and ease of travel when you're moving through airports and in hotels, what the bags deliver is tremendous. And it was recognized. We won two Red Dot awards for this, both on sustainability design and overall design. And again, it's exceeding our expectation. And I would argue it's just getting going. I think it's been a really successful collection. And it speaks to the power of a globally launched product with cohesive high-impact media campaigns across all of the regions of the world. This talks about scale advantage when we put ourselves together to deliver on a really amazing product. You should expect more of that from us as we move forward. And TUMI is really on the run. You can see the shift in performance as we stepped into Q3. We continue to focus on elevating this brand on all fronts. It's a very product-centric and communication strategy-focused business, okay? This is around delivering performance luxury products and then really meaningfully elevating the messaging to consumers on what we offer here and what this means. We had a 50-year anniversary for TUMI. Even that surprised me, I hadn't fully appreciated TUMI was 50 years in the making. It's hard to find brands in our space that are 50 years -- and it was driven. It was well presented the signature TUMI Red that you can see on the left, incorporated in some of the product materials as we are launching our 50-year messaging to consumers. We launched 19-degree light as part of this 50-year, really a testament to the innovation that continues to be deep in the brand TUMI, both on travel bags and non-travel bags, very successful line. Clear focus on lightweight that TUMI has been needing and waiting for it, very well received by consumers and more to come, is what I would say as we go into next year. And then just lastly, TUMI's Icons Tested” campaign as we talked about the icon of TUMI and what it means to travel with the TUMI that fits the true definition of performance and luxury, how it comes together. This we launched in September. We've already had 56 million impressions off of a campaign that I think has been well received, both focused on men's, non-travel, women's non-travel and talks about the true DNA of what TUMI is all about when you think about performance luxury. So we're quite excited and more to come on the TUMI's journey as well. We've opened some amazing stores for TUMI around the world. I just wanted to give you a few of these. South Coast Plaza in California, just a tremendous store. I think we talked about the TUMI store in Shanghai, this flagship location in the bottom left. That's been a tremendous success, really distinctive TUMI. When you get into that store, you feel the brand in a meaningful way. Chengdu, China. So when you see China moving and the types of stores that we're opening within this region, really amazing in Beijing, China as well. This speaks about the power of this direct-to-consumer model and the strength of the brand as we show up not just -- on digitally, not just with amazing product, but on a footprint that consumers really embrace kind of what the brand is all about. So with that, I will hand over to Reza and I'll come back with outlook right at the end. Reza Taleghani: Thank you very much, Kyle. We're on Slide 18, just looking at the overall results, and some of this Kyle has covered, but just to go through it. Overall, Q3, we're reporting sales that are down 1.3%, a meaningful improvement from the first half. The first half, as you'll recall, was down 5.2%. So we are seeing that sequential improvement that we had indicated on our last call. Very importantly, this gross margin improvement, not only are we maintaining gross margins despite the tariff headwinds, but we're actually 30 basis points better year-over-year. And as you'll recall, gross margin last year was running at record levels for most of the year. So we're very, very pleased with what we've been able to do on the gross margin front. Adjusted EBITDA, obviously, the sales have been down, and therefore, that's working its way into the adjusted EBITDA numbers. So we're reporting $143 million of adjusted EBITDA in the quarter. If you're looking at the margin levels, we have had 43 net new stores that have come in year-over-year. So that obviously has a cost implication that works its way into that margin. So the margin has been impacted between the sales being lower. We have some incremental stores that have some SG&A associated with it. And so we're looking at 16.3% from an adjusted EBITDA margin for the quarter. And adjusted net income at $64 million as well, just looking at the total flow-through of that. Again, I think the important point on the sales is the last 3 months have been positive, and we're feeling pretty good about where the business stands right now. On Slide 19, just to give you a sense in terms of how everything is performing by region. Net sales did improve sequentially in every region since the last quarter. So as we mentioned, we had a North America business that has been under strain, but even that is looking better quarter-over-quarter. Just to go through the numbers. Asia has had a meaningful improvement, so roughly flat in Q3. And as you can see, the first half of the year, Q1 Asia was down 7%, Q2 was down 7.6%, and we're looking at about 30 basis points down for Q3. So a meaningful improvement, largely on the back of TUMI as well, although all brands are performing. North America down 4.5%. Obviously, as Kyle mentioned, the wholesale customers from the Samsonite brand impacting that number and that consumer sentiment point that we have been talking about earlier in the year continuing a little bit. Europe returning to positive. We're feeling pretty good about the Europe business, although the travel statistics and the inbound tourists are a little bit lower than what we've expected in the past few years. Reporting Europe up about 1% in Q3 and Latin America up 1.2% in the quarter. Largely, if we didn't have -- you'll see it on a subsequent slide, if Mexico weren't caught up in some of these tariff issues and some consumer confidence and wholesale buying issues in Mexico, that would have been the normal double-digit growth that you would expect from Latin America in the quarter as well. On the next slide, we can get into it a little bit at a country level just to give you a sense in terms of the individual drivers. If I'm looking at net sales in North America, you should be aware that TUMI really had a good improvement quarter after quarter. So TUMI was positive 3.3% in Q3 in North America as compared to down 3.3% in Q2. So that's a meaningful shift that we saw quarter after quarter. The Samsonite brand still under pressure in North America, but it is getting a little bit better, and it's largely drawn off of the cautious buying that we're seeing from our wholesale customers. Net sales in Asia, roughly flat, and we're seeing sequential improvement in net sales of TUMI. TUMI was up 7.1% in Q3 versus up 5.2% -- versus a 5.2% decrease in Q2. So very meaningful shift in terms of what we're seeing in the TUMI business in Asia off the back of the initiatives that Kyle outlined. Strong growth of the brand in China, 10% growth in China in Q3 alone. So we feel very good about TUMI globally. Sequential improvement in net sales of Samsonite brand in Asia. So if you're looking at it quarter after quarter, Q2 Samsonite brand was down about 9%, Q3 down 4.3%. So getting a little bit better as we get enter the back half of the year. And then meaningfully, you saw the shift that we saw in American Tourister overall. That was -- a lot of it was due to Asia, but specifically India. And so if you're looking at Q3, India improved 8.5% growth in Q3 from down 2.7% in Q2. So really meaningful improvement in terms of the sequential improvement that we saw in that market as well. Going on to the next slide, we can touch on Europe a little bit. Europe sales up about 1% in Q3 as compared to down about 1% in the previous quarter. Both Samsonite and TUMI are delivering positive net sales growth in that region. The specific markets where we've seen improvement, we've seen France and the U.K. help drive a lot of that sequential improvement. But overall, most of the countries in Europe are performing relatively well. I would tell you that Germany has started to come back a little bit as well, but we were pleased, especially with these two specific markets in Europe. The net sales growth in Latin America improved 1.2% in the quarter. Again, I think this Mexico point is very important as you look at Latin America, excluding Mexico, it would have been up 13.2% in the quarter as compared to Q3 of 2024. So Mexico is under pressure as we look at that Latin America market overall. On Slide 22, gross margin stability is really a key. It has been all year, but I think we're very proud of where we ended the quarter as well. So Q3 gross margin, 59.6%, 30 basis points higher than the 2024 number of 59.3%. Some of that is driven by mix effects. As we have said over the course of the year, the teams have been very disciplined in terms of maintaining the promotional activity and the cadence. Obviously, we're still trying to make sure that we don't miss on sales and pursuing that, but we have been very disciplined in terms of what we're looking at on the promotional side. And really, the actions taken to mitigate tariffs have been tremendous. We've talked about this the last -- since the April tariffs on the last couple of calls, we've been talking about this, but you can actually see that with tariffs in full effect right now, if anything, we've actually improved our gross margin. So the mitigation efforts have been very successful. Those included partnering with our suppliers to manage the cost, reengineering product in the medium term to make sure that we hit those price points while making sure that we hit the business specific gross margin targets that we have for all the brands. And we do anticipate being able to continue that going forward as well. On the next slide, just some of the other financial highlights that bear mentioning coming out of the quarter. We're on Slide 23. Overall, Q3 distribution and G&A expenses were $339 million. That's up 5.1% compared to last year. But bear in mind that we do have 43 net new company-owned stores over the past 12 months. So that's working way into the cost structure. Advertising spend, 6.1% of net sales in the quarter. So that was $53 million in total. That's about $3 million lower than what we had last year. It's roughly about the same number. We do anticipate increasing advertising as we enter really next year, but you may see a little bit of an increase going into Q4 as well. We want to make sure that we're investing behind the brand, especially now that we have all of these really great product introductions coming in. We want to make sure that the marketing is supporting that as well. Operating profit of $139 million in the quarter, that compared to $133 million in the previous period in 2024. Strong adjusted free cash flow, $64.7 million. So continuing to generate free cash flow. This business has always had a great track record of doing that. And then a net debt position of $1.2 billion. When we get to the balance sheet, I'll touch on the fact that we had this refinancing that we just announced last week as well, so we can get through that a little bit in terms of extending all of the maturities. That net debt position is after returning almost $300 million of capital to our shareholders as well, so $279 million in aggregate between our share buyback program last year as well as the dividend. Our net leverage ratio was right around two turns, which is our long-term target for the company. And then liquidity at the end of the period, we were at $1.3 billion of liquidity. Post the refinancing that we did, that did improve a little bit as well. On Slide 24, the DTC sales mix, Kyle touched on this a little bit. Overall, if you're looking at it year-over-year, the wholesale is down about 2% as we increased our DTC mix. So our DTC mix is now 42% in aggregate. If you're looking at it in terms of the component parts of it, our own e-commerce channels have grown to 11.8% of the total number of sales that compared to 10.5% last year. Our retail, our own store fleet is delivering -- is now about 30% of the mix of that as compared to 29.3%. I know we oftentimes get the question as to what is our store strategy. But what we usually say is that we're trying to keep that portion of the pie that comes from the retail fleet the same. So it should be around 30% going forward. And most of the DTC growth going forward should come from e-commerce. The other point that I'll just raise is if you're looking at the breakdown of that wholesale pie, wholesale includes e-tailers for us. So it includes Amazon as well as Mercado Libre and the other etailers that you see around the globe. The portion of that 58% that comes from the e-tailers is now 9.2%, that's a full point better than where we were last year as well. So even that wholesale portion, you're seeing us push the e-commerce channels as well. On Slide 25, looking at travel versus non-travel, Kyle just showed you where the huge opportunity is in terms of trying to expand our presence and stretching our brands into non-travel. Non-travel growth, if you're looking at it sequentially from last year versus this year, non-travel growth up 6.7%. So we have a meaningful investment in this category. So now non-travel represents 35.6% of our total sales. Just compared to last year, we were just shy of 33%. So that 6.7% growth is meaningful and an area that we're going to continue to invest in. So just looking at it on a year-to-date basis on Slide 26. Obviously, as I mentioned, the first half was down 5.2%. Q1 was down 1.3%. That blends to we are just around down 3.9% year-to-date. Obviously, going to the back half of the year I am going into Q4, we're hoping that, that continues to improve as we get to the back end. Kyle will touch on that in his outlook. Gross margin year-to-date remains very strong. Again, 59.3% year-to-date. And we do expect as Asia starts to grow back to its normal clip and TUMI, which is performing, that will also further help the gross margin story for us. Adjusted EBITDA is down $77 million year-over-year. That's largely due to the fact that the sales are obviously lower. And there's a little bit of gross margin that's declined year-to-date between last year versus this year. And that's partially offset by a little bit of lower advertising as well. And year-to-date net income, $187 million as well. Looking at the balance sheet. Again, we have a very strong balance sheet. We feel very good about where we stand. Again, I have a specific slide dedicated to the refinancing, which is on the next one. But just on this slide, we are very well positioned to capitalize on long-term growth prospects. We have significantly delevered coming out of COVID, but we have a lot of financial discipline, and we expect that deleveraging story to continue. Ample liquidity at $1.3 billion and net leverage stands just right around two turns of net leverage. On Slide 28, I want to just spend a minute in terms of talking about this refinancing that we did. Basically, we refinanced all of the corporate debt that we had on the balance sheet at Samsonite. This is important because it was massively oversubscribed, showing the strength of our balance sheet overall and the interest in Samsonite. The importance is all of the debt maturities have now been extended. So our core pro rata facilities, our Term Loan A and revolving credit facility now have a maturity of 2030. The Term Loan B has been set to a maturity of 2032, so going out 7 years. And our senior notes, the Eurobonds that we had talked on the last few calls that were coming due beginning of next year have now refinanced to 2033 as well. If you look at the component parts, we were able to actually reduce pricing on the pro rata facilities, the Term Loan A, the revolving credit facility by removing the CSA that was there. So that's a 10 basis point improvement in pricing there. The Term Loan B, we were able to also reduce the margin on that by 25 basis points as well. So we're now at SOFR plus 175 basis points. Obviously, the bond markets are very different than where they were when Kyle initially executed the Eurobonds, but we still were very pleased with the outcome of 4.38% on that piece of debt as well. And you should be aware that we're also entering a number of swap transactions that should also help us in the near term in terms of managing the overall financing. The net-net of all this is basically we've extended the maturities and the interest expense is about the same with where it was previously. And we did improve liquidity by another $40 million as well as a result of this. On Slide 29, just looking at CapEx. Again, I mentioned that we had 43 net new stores year-over-year. Again, we're very disciplined on how much CapEx we spent. Year-to-date, we're at $54 million of CapEx, which is a slight improvement over where we were last year. Most of the CapEx goes into the retail fleet, as you can see, so $33.8 million of that is going into the stores. The breakdown of that is about $17 million is going into remodels, about $3 million into fixtures. And then new stores is about $13 million of CapEx. Again, very disciplined about how we're choosing to spend the additional CapEx that we have, but we are investing in stores because we believe in the opportunity there as well. I went through that very quickly to leave time for questions, but let me turn it over to Kyle for outlook, and then we'll open it up for questions. Kyle Gendreau: Okay. Thanks, Reza. So -- and importantly, and I think you can sense it from my tone and what we've been delivering, we remain really confident on the long-term tailwinds that support our business. Although the current macroeconomic environment still is uncertain and there's plenty of inflationary pressures around the world that could weigh on consumer demand, particularly in the U.S., as you've heard from us, we expect to drive medium- and long-term sales growth really against very strong product launches, strong and elevating advertising campaigns, capitalizing growth in consumer demand for travel. It continues. Travel is one of the areas that consumers continue to prioritize and seize again on the opportunities around non-travel underpenetrated geographies, and channels across our business. All of these things we're very focused on and continuing to invest behind. With positive constant currency sales growth in the recent months, we expect some level of improvement in our constant currency net sales growth in Q4 relative to Q3. Q4 is expected to continue to benefit from global travel demand, strong product launches like Paralux, which really launched at the end of Q3 that's carrying into Q4 and this elevated advertising campaigns that you're seeing and feeling from us, not just on a product like Paralux but across our business. I think that said, consumer demand remains challenging to predict. I think that hasn't really changed tremendously. And it's -- and we have a sequentially tougher period to comp in Q4 off a stronger demand that we felt at the end of last year. But early reads into Q4, particularly with a positive start with a strong October and strong momentum into holidays make me feel convinced you'll see sequential improvement in the quarter for us and as a business. You can feel it in the messaging, the tone and just the recent trends that we've seen. We believe our scale advantages, supplier relationships, tariff mitigation efforts will continue to enable us to maintain a strong gross margin profile like we just delivered in Q3. And if you listen to how we talk about kind of the shifts of mix effect as we grow TUMI at a faster pace, as Asia gets back to delivering in normal course of growth that Asia is capable of delivering, this margin has strength behind it. We've managed through the bumps of tariffs perfectly, and there's opportunities for this to continue to expand in the medium and long term from a mix perspective. We continue to leverage this asset-light business model, as Reza just talked about when we look at the balance sheet and our ability to return cash to shareholders, deleverage our balance sheet on a go-forward basis. And as Reza just went through, and we successfully just reset and optimized our corporate debt structure, something that was significantly oversubscribed when we went to market, which delivered a great result that provides kind of stable balance sheet and stable liquidity for this business as we look forward to the next 5 years. And lastly, we continue to prep -- I would say, we're well prepared for dual listing in the U.S. We've been closely monitoring global economic backdrop and our own trading conditions, and we are encouraged with recent results, improvements in our trends in our own business. The Board and I firmly believe and the management team believe that dual listings in the right -- is the right thing for this company and to enhance shareholder value over time. And we're sitting in a ready position to do that. And we intend to complete this dual listing in 2026, considering the constructive environment that we're seeing. So with that, William, we'll open up to questions. William Yue: Thank you, Kyle. Thank you, Reza. Operator, we can go into Q&A now. Thank you very much. Operator: [Operator Instructions]. We are now going to proceed with our first question. And the questions come from the line of Erwan Rambourg from HSBC. Erwan Rambourg: I wanted to thank Reza. I don't know if I will speak to you again, I mean, hopefully, in the future, but just wanted to say thanks for everything and best of luck. Three questions, if I can. I think you make a good case in terms of correlation between travel trends and sales having broken down post COVID and more recently, with a bit of a digesting period. When do you think you can reconnect to growth that would be similar or maybe even slightly above the growth of travel? Is that as early as next year, you think? So that's the first question. The second question is around, I think Reza mentioned the ad spend ratio should maybe pick up a bit in Q4 and into '26 to support the comeback of the business. Where do you see that ad spend ratio more sustainably? And then last question. I think, Kyle, you said that you were confident that Q4 could show sequential improvement despite the world not being that easy. Where do you see that improvement coming from, whether it's region or brand sequentially? Kyle Gendreau: Okay. Thanks, Erwan, and thanks for the call out on Reza. I might just make a statement because others might have a thought on Reza as well. Reza and I have been together for 7 years doing some amazing stuff with this company, so I can't thank Reza enough as well. We're in a good position as a business. We've transformed a lot, particularly through COVID and positioned it well. But we're well placed on the finance side. Reza has got an amazing team around him. That we won't miss a beat. We'll obviously start a search on that, and we'll be thoughtful, just like I was thoughtful when I brought Reza into the fold with me 7 years ago. But we're well placed. The team's well trenched the finance team super solid. As you can tell, I'm laser-focused on delivering growth in the business and driving strategy and nothing changes in that arena. This business is well rooted with deep teams around us, but I agree and thanking Reza. I haven't quite congratulated him on that because I'm slightly annoyed with him -- I'm just ready. But that's -- but that's normal, but we've done some great stuff together -- we spent a lot of time together. So thank you. On the returning to travel trends, I think we're -- as I said, I feel like we're in this inflection point right now off of the back of what we've seen from kind of surge in travel and the dip that we felt off the back of that and consumer sentiment. But we're seeing some good trends right now as we're looking at the months fall. I think we're not too levels that are normal for us. But I have an indication and inkling that next year will look more normalized for us from a growth perspective, and I think start to really show that correlation. If you go back 15 years and see how perfectly correlated we are and our ability to actually outgrow the industry. And I think we start to trend into that as we get into next year, particularly as we get into Q2 as we're comping kind of a different period. And momentum feels good as we're going into holiday. I think the Q4 kind of trend that you asked as your third question, I think we generally see it kind of across the mix. The only market that I would say, continues to be challenged and largely because -- it's a meaningful wholesale business in North America, where we see very good sell-through. We're looking at sell-throughs of our October numbers of our month of October and month to date September sell-throughs that are quite high, quite surprising, actually. It speaks to consumers moving consumers moving ahead of holiday. We can see that in our November, Decembers. So I think you'll see sequential improvement across all of our business, just like you saw in Q3, you'll continue to see that across each of our brands. I expect Samsonite maybe to improve at a faster clip. That was kind of at a different point in Q3 than maybe what you saw in TUMI and American Tourister, but I expect that to kind of catch up. And we're seeing generally growth across all of our regions and some consistent improving trend way, which speaks to me, and it helps support kind of my comment on the front. We're really at this inflection point where everything is kind of reshifting and correlating back to the trends that we typically see in our industry. From an ad spend perspective, I just want to make sure we interpret right. I think we're -- we've been leaning into advertising. But Q4 from a percentage basis, will probably look like what we've been doing roughly year-to-date, maybe even as a percentage, just a bit lower. But overall, we're in and pushing. And so for the full year, we'll probably be just shy of 6%. I think the natural place for this business, and we've talked about this before, is somewhere around 6.5%. And I think as we really continue to build momentum, don't put it past us to push it forward. But if you're thinking next year, I think we bring it up to kind of what the normal trends are for us that I think is the right levels if we're really driving new consumers to the business. And excitement to the business, really effective efficient spend, but probably in that mid-6% range is the natural place to be. Operator: We are now going to proceed with our next question. And our next question comes from the line of Chris Gao from CLSA. Chris Gao: So I have three questions. So firstly, is regarding the China trend. So we have been seeing very exciting sequential recovery of TUMI brand Samsonite brand, which is also similar with some of the luxury brand data points that have been reflecting a recovery in China. So the first question is how do you see the sustainability of China's -- China markets recovery in the next few quarters? And also for the TUMI brands recovering, which reached 10% in the third quarter, how much is coming from retail space expansion and how much is coming from the same-store sales. And also -- the second question is also related with China, it is about the latest update. So how do you see the Double 11 trends in China right now? And also regarding recent China recoveries consumer profile, do you see the recovery is more boosted by the existing customers coming back? Or it is mainly coming from your new customers' recruitment? So this is the second question. And the third question is regarding the cash deployment. Since we have been seeing Samsonite adding on liquidity after the refinancing of senior notes and credit facilities, and recall that last year, Samsonite has launched a tranche of buyback. Is this something that we'll continue to consider going forward? And also dividend side have been continuously improving the dividend payment in the past 2 years. So do you also consider any dividend payout ratio increase? So these are the three of my questions. Reza Taleghani: Why don't I start with the China stuff and then Kyle, -- China -- you can take it from there. Kyle Gendreau: Yes. Reza Taleghani: So overall, as you can tell, we definitely are seeing a shift in China. Again, this year, China compared to last year, we felt pretty good about it, but the first half of the year was a little bit slow. So when you were looking at China, so Q2, China was down about 6%. And China now, we're still a little bit down, but we're approaching flat in Q2 or it's down about 2% right now. But we are anticipating Q4 and we can already see the early reads of it. Obviously, we've seen a little bit of Double 11 already. We've already seen October as well. We're firmly in positive territory right now with China. It is all brands, but I will be honest, TUMI has really outperformed. So you saw the 10% number that we just shared. To answer your question about where it's coming from, actually, you'll be surprised -- maybe you'll be surprised to hear this. If you're looking at TUMI overall, the total number of net new stores year-to-date in all of Asia is actually 0. So all of it is -- now there are obviously certain locations where you exit and you add another one, and we're getting -- we're trying to get some larger square footage stores in the region. But this is really just -- so it's not through additional store expansion. It's actually coming from the existing store footprint as well as those new locations really delivering. In terms of who the customers are, it's a mix. So we do -- especially for brand TUMI, we do have some greater data in terms of being able to get some loyalty information from those customers. So you are seeing existing customers come back, but we are also seeing new customers being introduced to the brand as well, especially in China, making some really meaningful investments in advertising and brand behind some local influencers has helped us in that regard. Obviously, the new product introductions have been great. You've been with us for a while, so you'll recall that last year, we were talking about one of the initiatives we had was around 19-degree light. So trying to make sure that we have a lightweight product that really resonates with that international consumer. Those are the kinds of things that we've been doing to make sure that we can address the product needs, but also investing behind it with real brand advertising as well. So overall, again, I think we feel very good about our China business at a macro level across all the brands, but TUMI has been disproportionately doing well, as well. Early reads on Double 11, we don't have the final numbers in yet, early reads have been very positive. We've been pleasantly surprised in certain cases, candidly, in terms of how well it's gone. So I think that should work its way into the Q4 numbers as well. Let me see what the other question you had -- the new customer -- cash distribution. So what we've said is the dividend policy, we generally look at about a 40% payout ratio, you should expect us to do that. That's about $150 million in terms of cash use. So expect that going forward. Nothing has changed in terms of our approach with share repurchase. We're opportunistic around it. As you migrate to a U.S. listing, we are mindful that we have certain shareholders where from a tax perspective, it's much more efficient to return capital to them via share repurchase as opposed to dividends. So we will revisit that with the Board. But actively right now, we've completed the $200 million that we were out to do that we're holding those shares in treasury. We'll decide what to do with that at the time of the listing. And then going into next year, we'll decide whether we will look at that opportunistically as well. It will probably end up being some sort of mix between the dividend and share repurchase, but that hasn't been determined yet for next year. Kyle Gendreau: Cash flow for the business remains tremendously strong. This kind of asset-light model that we talked about continues to deliver and to our ability to have some share buyback opportunistically pay dividend and continue to deleverage the balance sheet is something that we're very capable of doing. Even in a year where we're maybe trending down low single digit for the full year. The business generates a tremendous amount of cash flow. So all of that will stay in place. Chris Gao: Okay. Can I follow up with one question. That is about the pricing. So the background of tourists -- can we ask about the magnitude of price increase in U.S. for the third quarter and also help it to trend in the next few quarters? And also, if there could be any price increase in other regions, could you please also update us as well? Reza Taleghani: Yes. We haven't disclosed the level of price increases in the U.S. market. What we've said is it's been a combination between price increases, working with our suppliers. The other thing you should bear in mind as it relates to tariffs, a large portion of the landed cost of the product in the U.S. is freight, which has actually been working in our favor. So through a combination of those three, actually, it's more than that, but largely those we've mitigated it. The other point that I'll just raise is usually buy luggage every probably 3 years or so, it's not a regular good that you're regularly seeing what the price is. So the end consumer -- the actual price increases are really going to have a negligible impact. So it's not going to be like there's a sticker shock that my $200 carry on all of a sudden is $500. Kyle Gendreau: And we're constantly redesigning product and reengineering products. So it becomes kind of a neutral story when you think about a period of 2 or 3 years because we're able to reengineer a lot of what we've been doing and a lot of what you've seen in markets like Asia and China where the consumer is doing a little bit of trade down, but within brand, we're able to reposition products to hit price points that deliver margin. And that's really what drives our business. So this is a business that you just kind of tack on price increase and off you go. This is around reengineering constantly to hit the right margins, to hit the value that consumers are looking for in the products. And there are no pending pricing. Most of everything we did on tariffs was done as we exited Q2 because we had full visibility to it. So there's nothing from a price increase perspective kind of baked in our business for Q4. And next year will be just a function of normal course if there are some on a normal course basis. Operator: We are now going to proceed with our next question. And the questions come from the line of Anne Ling from Jefferies. Kin Shun Ling: Just a couple of questions. First, regarding the margin, like I understand that in terms of having a stronger growth from TUMI, which is the higher-margin business and also more retail. So we have a pretty good GP margin. But I think we also have some store expense. So therefore, like our -- we have some pressure in terms of our OpEx on top of like -- top line growth was slightly negative. So my question will be like moving forward, when will we start to see like same-store sales growth start to have positive operating leverage. Maybe you can share with us some guidance in terms of like what we should be looking at in terms of the adjusted EBITDA margin. When will we be going back to the high teens level that you think that you previously mentioned. That's my first question. And my second question is on year 2026. Any like initial feel about like -- should we be going back to the mid-single-digit top line growth trajectory from that on? Reza Taleghani: Why don't I start with the margin point. If you look at it on a percentage level, if you're just looking at our cost structure and always -- keep in mind, every time we talk about EBITDA margins, we should always look at advertising and then the rest of the cost structure as well because advertising is a lever that we move up and down, and we just finished saying that as you're entering next year, you should expect us to be increasing the advertising point as well. So if there's an increase that's coming as a result of sales rebounding, we will reinvest some of that behind advertising in the brand. But generally speaking, if you're looking at the -- so we had about a little over 40 stores, so 43 net new stores on an LTM basis that are adding a little bit to the cost structure. During that period of time, revenues have been down. So naturally, there's a deleveraging that's happening. You have some increased costs from new stores coming in. There's also just the normal wage increases, rent inflation and things like that, that you're looking at. If you're looking at it just in terms of the percentage increase, even including those stores, you're up about 4% or 5%. I think it's like 4.8%, if I remember correctly or thereabouts year-over-year. So it's not like something that's really out of whack. Usually, what happens is as soon as you return to sales growth and even just a couple of points of sales growth, you start to see the operating leverage come back. But again, you have to look at that in terms of at what point do we start to reinvest in advertising and increase that by whether it's 0.5% or thereabouts. So we haven't given guidance next year as yet for -- in terms of where we're going to be on sales or margins. We typically do that off of the year-end numbers in our normal course. So you should expect from March. What I will say is just the general trends, that Kyle said in his remarks, the trends are very favorable going into next year. We do feel good about two really big things. There's the overall macro level points in terms of what you expect travel to do, and Erwan asked the same question as well. And we're seeing that we are -- now that we've come out of that revenge travel kind of pull forward of demand that, that correlation is coming back again. So you have just the normal trends of the industry that are happening. But don't underestimate the fact that we are entering into a replacement cycle for next year as well. So you're coming up on that 3-year, 4-year period that where a lot of bag replacement happened post-COVID, and it's that natural replacement cycle should benefit us as well. So I think the combination of those two make us feel pretty good about going into 2026. But I think you should just expect formal guidance when we finish out the year. Kyle Gendreau: And I think for '25 our Q4, you guys know our Q4 is often our strongest EBITDA margin quarter for us, and that still looks the same for us as well. So if you look at our year-to-date EBITDA margin, that will step up for the full year off the back of what typically very good EBITDA margin in Q4 that we can see will be delivering. So it gives you a good sense for it. And I think just to close the loop by, as we talk about advertising, I think Erwan asked the question. we are planning on leaning in to push advertising, which will do the same as driving sales. It will really allow kind of a lot of our brand and growth strategies to really accelerate for us. But that comes with kind of the short-term meaning on the overall margin as we lead into advertising. And so we should expect that a bit from us as well. But I think it's exactly the right thing to do as the business starts to move. And as I think I said during Erwan's question we start to get into some normal correlation to travel for next year is how we're feeling, but as we look with a slightly easier comp, which will also help next year as well. Thanks, everybody. We really appreciate the call. Any questions, you know how to get a hold of William and Alvin. And we'll be out and about meeting people as well over the next few weeks. William Yue: Great. Thank you very much, Kyle. Thank you very much, Reza. Thank you very much, everyone, for joining the call. Operator: Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect your lines. Thank you, and have a good rest of your day.
Operator: Hello, everyone, and welcome to Yatra's Fiscal Second Quarter 2026 Financial Results Call for the period ended September 30, 2025. I'm pleased to be joined on the call today by Yatra's CEO and Co-Founder, Dhruv Shringi; and CFO, Anuj Sethi. The following discussion, including responses to your questions, reflects management's views as of today, November 12, 2025. We don't take any obligation to update or revise the information. Before we begin our formal remarks, let me remind you that certain statements made on today's call may constitute forward-looking statements, which are based on management's current expectations and beliefs and are subject to several risks and uncertainties that could cause actual results to differ materially. For a description of these risks, please refer to our filings with the SEC and our press release filed earlier this morning on the IR section of our website. With that, let me turn the call over to Dhruv. Dhruv, please go ahead. Dhruv Shringi: Thank you, and good morning, everyone. Thank you for joining us on this conference call to discuss our second quarter and first half of fiscal year 2026 earnings. Let me start by briefing you first on the operational performance for the period under review, after which our CFO, Mr. Anuj Sethi, will brief you on the financial performance in detail. As you would have seen from our results and presentations that have been uploaded, it has been a remarkable quarter for Yatra as we have not only delivered strong financial and operational performance well ahead of guidance, but also celebrated 19 incredible years as one of India's most trusted travel brands. For second quarter of fiscal year '26, our revenue grew 48.5% year-over-year to INR 3,508 million, which is approximately $39.5 million. Adjusted revenue grew significantly year-over-year as well. Our growth in the quarter was fueled by resilient demand and consistent execution across both our corporate and consumer platforms. This also reflects the momentum we have gained in our corporate business and the higher-margin Hotels and Packages business as well as continued momentum in the MICE segment. Notably, our profitability metrics underscore our disciplined execution. Adjusted EBITDA surged 218% year-over-year to INR 212 million or USD 2.4 million, and profit for the period increased significantly to INR 98.8 million or USD 1.1 million versus a loss of INR 0.3 million or USD 0.1 million in the prior year, well ahead of our earlier guidance. The corporate travel market is expected to reach around USD 20 billion by FY '27. However, online penetration in this segment remains low at just about 20% in FY '24 compared to almost 45% for the overall travel market in India. This indicates substantial headroom for digital adoption across the corporate travel industry. Online penetration is accelerating, driven by rapid adoption of digital booking platforms and the uptake of self-booking tools and integrated expense management solutions. In the lodging space, branded hotels and curated packages are witnessing increasing demand from both leisure and MICE travelers, supported by improving supply, better service standards and a growing preference for experiential stays. Overall, this large and expanding market, coupled with increasing digital penetration presents a significant opportunity for Yatra, particularly in the underpenetrated corporate segment. Our Corporate Travel segment represents a meaningful part of our overall business and delivers strong momentum for Yatra. In Q2, we onboarded 34 new corporate clients, collectively adding an annual billing potential of INR 2.6 billion or USD 29.5 million. On the B2C front, we continue to make good progress in rationalizing our cost of acquisition and finding avenues to scale profitably. Bookings, which were impacted in the previous quarter due to macro events have now started to show signs of recovery. Additionally, the recent reduction in income tax and GST rates in India is expected to further boost travel consumption and discretionary spending, supporting a stronger growth outlook in the quarters ahead. On the technology front, we continue to enhance our digital platforms to deliver a more seamless and intelligent travel experience. Our Diya AI, our generative AI-powered travel assistant now enables seamless flight and hotel search bookings, streamlining the entire travel journey from planning to payment. We have also introduced a new user interface designed for hotels with a transparent per room per night pricing model, along with upfront display of taxes and fees to eliminate surprises for users. The optimized interface is designed to improve usability and drive higher conversion rates. Additionally, our best price guarantees customers can be assured to access the lowest available hotel rates on Yatra. If they find a lower price elsewhere, we match it or offer a better rate for the same booking. In sales and marketing, we celebrated our 19th year with a big outing fest, a high-impact sales campaign that was amplified across digital, social, outdoor and print platforms. As part of our broader brand-building efforts, we also strengthened our corporate travel presence on LinkedIn, driving greater visibility and engagement among enterprise customers. As part of our ongoing efforts around restructuring, the company believes it has a viable structure to pursue. While some hurdles remain, we are actively navigating processes across jurisdictions. The time line is uncertain due to complexity, but we are fully committed. This transition is key for Yatra and its shareholders, aligning us with the market and unlocking value. We'll share more updates as we move forward. As we look ahead, we see strong sustained growth opportunities driven by rising digital adoption across both leisure and corporate travel segments. Yatra is well positioned to capture this growth through our expanded corporate client base, enhanced technology offerings and a growing share of high-margin hotels and MICE business. We remain committed to disciplined cost management, profitable scaling and delivering long-term value to our shareholders while strengthening our competitive edge in the globally -- in the global travel ecosystem. Thank you, everyone. And I'll now request our CFO, Anuj Sethi, to brief you on the financial performance for the quarter under review. Anuj Sethi: Thank you, Dhruv. Good morning, everyone. For the second quarter of financial year 2026, on a consolidated basis, our revenue from operations grew 48.5% year-on-year to INR 3,508.7 million or equivalent to USD 39.5 million, driven by continued momentum across key segments, including robust growth in our Hotels and Packages business and a meaningful contribution from MICE segment. Our adjusted margins performed strongly across segments. Air ticketing adjusted margin increased 14.7% year-on-year to INR 1,016 million, equivalent to USD 11.4 million. Hotels and Packages adjusted margin rose 28.6% year-on-year to INR 514.5 million or USD 5.5 million -- USD 5.8 million and Other Services adjusted margin grew 25.1% year-on-year to INR 95 million or USD 1.1 million, underscoring the strength of our diversified business model. Adjusted EBITDA surged 217.7% year-on-year to INR 212 million or USD 2.4 million. As a result, profit after tax increased significantly to INR 98.8 million or USD 1.1 million versus a loss of INR 0.3 million or USD 0.1 million in the prior year. In terms of segment performance, our ticketing passenger volumes declined 3.5% year-on-year to 1,329,000. However, our gross air bookings grew 11.7% year-on-year to INR 14,811.4 million or USD 166.8 million, and our adjusted margins rose 14.7% year-on-year to INR 1,016 million or USD 11.4 million, with adjusted margin percentage improving from 6.7% to 6.9%. In the Hotels and Packages segment, the hotel room nights grew by 9.4% year-on-year to 504,000. Gross bookings increased 40.4% year-on-year to INR 5,141.6 million or USD 57.9 million, while the adjusted margins expanded to 28.6% year-on-year to INR 514.5 million or USD 5.8 million with the adjusted margin percentage at 10% compared to 10.9% in the previous year. Total gross bookings across all segments increased 16.2% year-on-year to INR 20,504.8 million or USD 231.0 million. On the liquidity front, cash and cash equivalents and term deposits stood at INR 2,207.8 million or USD 24.9 million as of September 30, 2025. With this, I would like to hand it back to moderator and open the floor for the question-and-answer session. Thank you. Operator: [Operator Instructions] We have the first question on the phone lines from Scott Buck with H.C. Wainwright & Co. Scott Buck: I was hoping you might be able to provide a little bit more color around corporate travel trends that you're seeing in the India market. And maybe how much of your momentum there is driven by just kind of industry tailwinds versus your market share gains? Dhruv Shringi: Good morning, Scott. Scott, to answer your question, I think today, the corporate travel market in India is growing approximately at about 8% to 9%. We are growing almost at like 2x of that rate. The reason we are growing that much faster than the industry is because what we've seen over the last few years now, last couple of years, at least, is that there is an increasing drive on the part of corporates in India to adopt digital technology to automate their business processes. And as part of that being the market leader in this segment, our teams, along with their own execution capabilities are growing at a rate which is faster than the market. So market itself is growing, you're right, but within the market as well, given the technology solution that we offer, we are able to gain market share as well. Scott Buck: Great. I appreciate the added color there. And Dhruv, I'm curious, how are you guys thinking about M&A and the potential to accelerate the MICE business even more through acquisitions. Is that on the table? Dhruv Shringi: So we continue to evaluate opportunities, Scott. At this point of time, I think it's hard for me to give any more direct color on that. But just as an organization, if you look at the track record that we've had over the last few years, we've successfully made some acquisitions that we've been able to integrate within the Yatra platform. So we continue to evaluate these kinds of opportunities. Scott Buck: Perfect. And then last one, I know you touched on it in the prepared remarks. But the restructuring efforts, can you give us a little more color on maybe where you are? Are you waiting for regulators at this point? Or are there more steps that you need to complete on your end. Dhruv Shringi: I think there are a few more steps that we need to complete at our end, but along with [ MDs ], given the nature of this work in tandem with the regulators as well, we are hoping that in the near term, we can give some more concrete information, right? But given that there are multiple jurisdictions, multiple regulators involved in the process, the time line is slightly uncertain, but we are quite confident that we are moving in the right direction with this. Scott Buck: Okay. Perfect. I appreciate the added color guys. And congrats on all the progress. Operator: [Operator Instructions] I can confirm that does conclude the question-and-answer session here. And I'd like to hand it back to Dhruv for some final closing -- I apologize. We do have a question on the line from Aman Jain with PMB Securities. Unknown Analyst: I just wanted to check specifically on the consumer business, how profitable is it vis-a-vis our corporate travel business. And how do you see it trending? I understand in the last quarter or probably in Q4, you guided that we should be bottoming out around Q1, Q2 in the consumer business and then we should start picking it up. How is it trending now, the consumer business? And what percentage of your overall business does consumer contribute now? Dhruv Shringi: So the consumer, let me just work backwards. The consumer business now is accounting for about 1/3 of our overall gross bookings. And in terms of the trending of the consumer business, the consumer business has definitely bottomed out, and we've seen profitability improve over there. We would expect a gradual kind of increase in the consumer business as well. While we would expect the corporate business to grow between 13% to 20%, we would expect the consumer business to grow in the mid- to high single digits. And this growth that we're looking at in the consumer business is all profitable growth only. We are not looking at doing any negative cost of acquisition. So whatever growth rate we are projecting out here on the consumer business, that is all going to be incremental and accretive from a bottom line point of view. Unknown Analyst: Very good. Next is just on the call on the previous question, you mentioned towards your effort towards streamlining the corporate structure. You said you are doing some approvals. Can you just throw some more light exactly where we are and how do you see it progressing. By when do you see it to be completed? Dhruv Shringi: It's hard to give an exact time line on that, but it remains a key priority for us as an organization. As you might be aware, we have -- our corporate structure entails entities in Cayman Island, Cyprus and Singapore. So it is a multi-jurisdiction transaction that has to go through. So to that extent, there are multiple regulators that will get involved in this process. That's the reason why it's difficult to give an exact time line on this. But I think from a commitment point of view, the organization is fully committed to this. Unknown Analyst: Should we expect it to be completed in an year's time or it could be longer? Dhruv Shringi: As I said, it's hard for me to give a time line to this. But if I was to give it my best estimate, I don't think it should take as long as a year. I mean that's my best estimate of it, but it's all obviously subject to regulatory approvals across the different jurisdictions. Unknown Analyst: And how do you -- how are you planning it. Will it involve a delisting of the U.S. company, merger with the Indian company? I mean, merger with the Yatra Online. How exactly are you envisaging it currently? Dhruv Shringi: I think it will be a bit premature to talk about that at this stage. When we have the exact plan, which is signed off by all regulatory elements, we will publish that out for shareholders. I think it will be difficult for me to really articulate that at this point. Unknown Analyst: Okay. But so my key takeaway is it should take less than a year, but that is the best estimate. There is no commitment from your side. Operator: [Operator Instructions] We have a follow-up question from Aman. Unknown Analyst: I will take my liberty here. As you are aware, the other listed Indian OTA in the U.S. is MMT. And the valuation gap is quite considerable to MMT versus what we trade at. Any plans on how can we fix it? Dhruv Shringi: See, I think in terms of the U.S. entity, the holding company today, as you rightly pointed out, trades at a meaningful discount to peers. Part of it is also driven by the much smaller market cap and the lack of liquidity. One of the ways that we are trying to solve for or rather the key way that we are trying to solve for is to introduce some kind of a fungibility because in India, the entity is trading at a much better multiple than where it's trading in the U.S. So that's the entire reason for taking on this exercise of trying to streamline the corporate structure and put in place some kind of a fungibility to the shares. That's definitely one way that we are looking at doing it. And in India, we've been -- based on the strong performance that we have, interacting with analysts, large amount of investor community, and that's what's driving the momentum behind the stock in India. Unknown Analyst: Okay. Just for my clarity, what exactly do you mean the fungibility. Dhruv Shringi: By fungibility, I mean the ability of a U.S. shareholder at some point to get the same price or similar price to what exists in India. Unknown Analyst: Okay. So does that mean getting the Indian shares? Dhruv Shringi: Yes. As I said to you earlier as well, Aman, that's something that once the plan is concrete, approved and adopted by the Board, we will share that out transparently with all shareholders. Operator: I can confirm that does conclude the question-and-answer session here. I'd like to hand it back to you for some final closing comments. Dhruv Shringi: Thank you, moderator. I'd like to thank all of you for joining the call today. If you have any further questions, please reach out to our IR partners, ICR. Thank you for your time. Operator: Thank you. This does conclude today's conference call with Yatra. Thank you all for your participation. You may now disconnect, and please enjoy the rest of your day.
Operator: Good morning, ladies and gentlemen, and welcome to the Similarweb Q3 Fiscal 2025 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I will now hand you over to Rami Myerson. Please go ahead. Rami Myerson: Thank you, operator. Welcome, everyone, to our third quarter 2025 earnings conference call. Joining me today are our CEO and Co-Founder, Or Offer; and our Chief Business Officer, Maoz Lakovski. Yesterday, after market close, we released our results for the third quarter and published a discussion of our results in a letter to shareholders as well as an investor presentation with a strategic overview of the business on our Investor Relations website at ir.similarweb.com. Certain statements made on the call today constitute forward-looking statements, which reflect management's best judgment based on the currently available information. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our earnings release and our most recent annual report filed on Form 20-F for more information on the risk factors that could cause actual results to differ from our forward-looking statements. Additionally, certain non-GAAP financial measures will be discussed on the call today. Reconciliations to the most directly comparable GAAP financial measures are available in the earnings release and the earnings presentation. We will begin with Or's highlights of the quarter, and then I will provide an overview of the financials. Then we will open up the call to questions from sell-side analysts. With that, I'll turn the call over to Or. Or, please go ahead. Or Offer: Thank you, Rami, and welcome, everyone, joining the call today. I'm super proud of the third quarter financial results that we reported yesterday. Revenue increased by 11% year-over-year to $72 million, in line with our expectation. Our customer base grew 15% year-over-year to more than 6,000 ARR customers at quarter end. We reported an eighth quarter of positive free cash flow, and we are reiterating guidance for 2025 revenues and raising our profit guidance for the year. Customer interest in our Gen AI data and solution is amazing, and revenues from our Gen AI data and new solution continue to expand and are one of our fastest-growing revenue streams. We remain focused on 3 high-impact opportunities where Similarweb is highly positioned to lead. The first one is the Gen AI Intelligence. Our Gen AI Intelligence suite has been well received by our customers. In October, we launched a Web Intelligence 4.0 that integrates our Gen AI capabilities into our web intelligence solution, providing an even more comprehensive view of the digital world. ARR from Gen AI Intelligence product is growing rapidly and to more than $1 million since the launch in April, a great milestone for this product. The second one is our data selling for LLMs. We are supplying our unique and fresh digital data to companies that are building their own LLM and generative AI applications. And the third one is our AI agent. We continue to roll out AI agents to help our customers maximize the value and automate their workflow, enabling them to extract insight from our data in the shortest time possible. Utilization of our AI agent continue to grow. For example, 27% of our Sales Intelligence customers use our AI meeting prep and our new AI outreach agent with adoption and utilization is growing quarter-over-quarter. In September, we launched our new Similarweb MCP server that can deliver trusted digital market intelligence data directly into AI agent and workflows. These new products empower our customers with a tool to integrate our digital data insight at scale via LLMs and automation tools, including Claude, Copilot, OpenAI Agent Builder and more. The MCP is an exciting milestone in our deployment of data-driven AI products and services. I'm super proud of the strong adoption of the Similarweb App Intelligence that we launched in March. At the end of Q3, more than 580 of our customers were using our App Intelligence, and ARR has increased rapidly to above $10 million. Similarweb digital app data today cover over 4 million iOS and Android apps across 58 countries, providing our clients with comprehensive coverage of data that includes ranking, download, usage, engagement, retention and audience demographics. The investment in go-to-market that we started in the fourth quarter of 2024 is ramping as planned, and we are starting to see good results. At the end of Q3, we had 30% more sellers than in the third quarter last year, and we are seeing encouraging improvement in yield. I'm super proud that we continue to operate efficiently and reported our eighth quarter of positive free cash flow in Q3, generating $43 million of free cash flow in the past 8 quarters. We remain focused on delivering profitable growth over time as well as achieving our long-term profit and free cash flow targets. I'm super excited that Ran Vered, our new CFO, will join in December. Ran has over 20 years of finance experience and a proven track record of driving growth, efficiency and strategic transformation. He has worked as a CFO at 3 companies, 2 U.S. traded public companies and recently in a SaaS enterprise data company. I would like to thank Jason Schwartz for 10 years of service at Similarweb and wish him good luck and success. And as I like to say, we are just getting started. Thank you, everyone, for the call and for your continued support. And with that, I will turn the call back to Rami. Rami Myerson: Thanks, Or. I'll provide highlights of our financial performance, and then we'll open the call up to questions. We generated $71.8 million of revenue in Q3, an 11% increase relative to Q3 2024. Revenue growth was driven by the 15% growth in overall customers as well as increased revenues from some of the new products we launched in 2025, including App Intelligence and Gen AI Intelligence. The quarterly growth rate reflects a strong Q3 '24 comparison and the early recognition of LLM evaluation revenues in Q2, which we had originally expected in Q3, as we discussed with you last quarter. We are proud that 58% of our ARR is contracted under multiyear contracts, up from 45% last year. We believe this demonstrates the durability of our revenues and the importance of our data to our customers. We generated $3 million of normalized free cash flow in the quarter, a 4% free cash flow margin and an eighth consecutive quarter of positive free cash flow. We plan to continue to generate positive free cash flow on a quarterly basis going forward. Our remaining performance obligations, or RPO, totaled $268 million at the end of Q3, up 26% year-over-year. We expect to recognize 68% of total RPO as revenue over the next 12 months. In Q3, overall NRR was 98% across all customers and 105% for customers with over $100,000 of ARR. The decline in NRR reflects a strong expansion activity in 2024, particularly from large contracts booked during the second and third quarter of last year. We are very encouraged by the improving trends in GRR that increased sequentially in Q3 and was our highest in 2 years. Moving to guidance for the year. We are reiterating our revenue guidance for full year 2025 and expect total revenue in the range of $285 million to $288 million, representing 15% year-over-year growth at the midpoint of the range. We are raising our non-GAAP operating profit guidance to between $8.5 million and $9.5 million, an increase from our previous expectation and significantly higher than the guidance we provided at the beginning of the year. This is due to our focus on disciplined execution. With that, Or, Maoz and myself are ready to answer your questions. Operator: [Operator Instructions] Our first question comes from Surinder Thind of Jefferies. Surinder Thind: Or, could you maybe just talk about your gross revenue retention? It looks like things are trending in the right direction, but NRR would suggest even given the tough comps that maybe the upsell process has been a little bit more challenging. Any color there would be appreciated. Or Offer: Yes, of course, and thank you for the question. I'm talking about the NRR trend. And so the NRR we report is the average of the 4 last quarter of the past 12 months. And in this past 12 months, a lot of the expansion we're doing is mostly like big part of the big expansion were those engagement on the data for LLMs. And the way this work is usually start as a onetime test that is significant. And then down the road, it's converting into ARR deals. So because a lot of the expansion come from those in the past 12 months, and you don't see it in the NRR because the NRR only reflect in ARR deals. So I hope that as a lot of those pipelines of big deals we have for selling data for LLMs will convert into ARR deals going forward, this trend will change and go up down the road. Surinder Thind: That's helpful. And then maybe, I guess, since you mentioned kind of the LLMs and the training data partnerships in the pipeline, can you maybe talk about how that's evolving at this point? In the past, you've announced a number of kind of these upfront data purchases that aren't in your ARR. So should we be expecting conversion? Is this something where the clients maybe take 6 months to evaluate whether they want to enter into a longer-term relationship? Or how should we think about what's coming down the pipeline here? Or Offer: It's excellent question. Thank you. So indeed, the answer is yes. It's a long process of sell. And when you usually provide a big chunk of historical data that those companies are trying to use and analyze and prove that it will improve their accuracy of the models. So those processes usually take a long time and there's many different data sets. Similarweb is a leading digital company of the world. We have so many different data sets that there are so many assumptions and so many things we see how it's improving. So there's many tests going and there's different companies. So yes, I feel very confident that a majority of those engagements will convert to ARR deals going forward because we already have a few of them that are already in ARR with long-term commitments. So we see the impact, it's driving on other players. So we're very confident that we can drive this impact on all the other players. Operator: Our next question comes from Raimo Lenschow of Barclays. Raimo Lenschow: Perfect. I had 2 questions as well. So first of all, great to see the App Intelligence customer count grow and ARR reaching almost $10 million there. Can you help us understand where these customers are coming from? Are they cross-sell or net new? Like can you speak to that, please? And then I have one follow-up. Or Offer: Yes, of course, we're very excited about the new product that we launched into the market. So not only the App Intelligence that is like super successful, also our Gen AI offering that just passed $1 million like in super fast time. So regarding the customer, I think the majority of the customer is cross-sell. We think that we have more than 6,000 customers that we engage buying our digital data to increase their market share all across the digital world. So the App Intelligence is like spot on for them, like they all usually have website and app. So it's an easy sell. They love us. They trust us fast. So we see a very big success. The more we're increasing the coverage of countries we provide and the metrics, it's going to be very successful. So we're very happy. We're seeing good success that the product that we innovate and build and launch are adopting by our customers. Raimo Lenschow: Yes. Okay. Perfect. And then if you look at the -- to the last question, you talked a little bit about the days in the quarter as well. But the -- if I look at the sequential add this quarter was kind of more on the lower side of what we've seen historically. Can you speak a little bit to -- were there other factors? Or was it just what you mentioned to the first question? Or Offer: Yes. I think that -- we think that the execution was good. So I know it's very hard to land exactly where you plan, but we felt that the execution was good. We feel good for the year. So some of the deals are big, so it's very hard to forecast them. But overall, I think that like we're really able to land spot on what we -- maybe, Rami, if you have anything to think about that? Rami Myerson: Raimo, just to add to that, as you remember, we had some contracts that came in earlier than expected, some of those evaluation contracts in Q2. And so the phasing isn't linear. And so we booked revenues in Q2 earlier than Q3. If we would have booked those revenues in Q3, then the sequential improvement would have been more gradual. Operator: The next question comes from Ken Wong of Oppenheimer & Co. Hoi-Fung Wong: This one might build on the response you just gave, Rami. But just wanted to get thoughts on kind of why the ARPU declined slightly even with the focus on upmarket customers. How are we thinking about the trend on ARPU going forward? Rami Myerson: I think that ARPU is impacted by the number of customers that we added. And particularly for the larger customers on the ARR, we added some -- mainly the large end, some onetime customers. We didn't add, we saw an increase in revenues, whereas a lot of the customers that are crossing the trend are coming through below average, but we expect this to fluctuate over time. What most matters to us is the increase in customer count because that ultimately means that we have a big range of customers that we can then sell and upsell to and move them from single product into multiyear products, which move them from single geographies to multi geographies. As we mentioned in the shareholder letter, we have customers that have increased 6x over time or 10x over time. And so once they're in the pipeline, then we can work on them and land and expand and implement the playbook. So quarterly fluctuation or decline or increase. It's very, very small and doesn't really have a big impact on the way we think about the business. Hoi-Fung Wong: Okay. Perfect. And then a broader theme, we just wanted to kind of pick your brain on with SEO traffic coming down, I know you guys have some AI tools that are helping customers kind of focus on other channels. But any impact you're seeing in terms of demand for web intelligence and some of your core products with some customers maybe deemphasizing web traffic? Or Offer: So I think we see a little bit the opposite. I think that a lot of those digital companies that have a website and now getting less traffic from SEO, now they need to close those gaps from other channels. And then they come to us, we are the leading digital company to give visibility to the market. So they want to understand how they position if the decrease they see is worse or better than the competition and what action they need to do to drive more traffic. So for us, those market changes and dynamic only increasing the need and the demand for the solution we provide. Maoz, maybe... Maoz Lakovski: Yes. I think I would just add that, first, we are following and seeing where the users are, and we are making sure that we are able to track and have compelling offer, and we are investing a lot in the GEO or AEO offer. And it's also important to mention that we launched Web Intelligence 4.0, a new pricing schema about a month, 1.5 months ago, and we're seeing initial good signs of monetization of our core products. We are optimistic about it and think that our monetization strategy will make sure that we keep growing our core offering. Operator: Ken, does that conclude your questions? Hoi-Fung Wong: Yes, it does. Operator: Our next question comes from Arjun Bhatia of William Blair & Company. Willow Miller: I'm Willow Miller on for Arjun Bhatia. So curious to hear more about the sales rep ramp that were added a few quarters ago now that we're through the third quarter and into the fourth quarter. In the past, you mentioned you were looking forward to the newer sales resources closing more deals in the back half of the year. Is that playing out? Or Offer: Yes. So we're seeing an improvement in the go-to-market quarter-over-quarter. And I think last quarter, we said that we have a record high of salespeople closing deals. And I think even this quarter, we saw even higher numbers of salespeople that are participating in generating revenues. And of course, as a CEO, you always want better and bigger. So you're always optimizing that the go-to-market will be much more stronger and better. Operator: Our next question comes from Tyler Radke of Citi. Tyler Radke: So just going back to the results and the guidance. I mean, I think we're used to Similarweb, probably vast majority of your quarters as a public company, beating the midpoint, if not the entire guidance range and raising at least on revenue. So I just wanted to make sure I understood the dynamics. Certainly, can appreciate the quarterly dynamics in terms of the revenue that sort of got accelerated last quarter. But just relative to your guide, was it simply deal timing, linearity of the quarter when these deals closed? Are you building in more conservatism just given the CFO transition? Just help us understand sort of the lack of a beat and raise on revenue. Or Offer: I think that overall, I think, of course, everything you said is part of that. But I think that also when we started the year, we were -- and even now, we're very focused on optimizing the margin, the EBITDA margin, and this is where we felt that we can drive good impact. And this is, as you can see, we're doing very nice beat and raise on that, running a very efficient and disciplined execution. So I think this is where we put our focus. Tyler Radke: Okay. And then on the margin side, you talked about a pretty healthy growth in the number of sales reps that you had this quarter. But sort of what's driving that incremental raise? Like where are you taking costs out? Is it more sort of not hiring as many sales and marketing people? Is it more R&D and GA? Maybe you're seeing some AI efficiencies in the business? Would love to just hear specifically what's driving the lower costs here for the full year? Or Offer: I think it's a combination of -- we decided to become better at that metrics and become more disciplined around it. And of course, you have the AI tailwind that is helping increase productivity so you can run a very tight engineering without growing the R&D resource. And of course, around the go-to-market as you go when you optimize, you start in the beginning of the year, hiring many people to execute and the one that were not performing, you let go. So basically, you keep with the best ones, and they are becoming more productive. And I think this was the majority of the cost savings we look into. Operator: Our next question comes from Patrick Walravens of Citizens Bank. Kincaid LaCorte: Great. This is Kincaid on for Pat. Congratulations on the quarter, guys. So I was just curious if you could highlight any customer conversations that you've had around the Gen AI products? And what's really driving uptake with these seeing a lot of love for? Or Offer: Yes. I think it's very interesting. It's kind of the Gen AI optimization product that we sell. It's a new channel for all of our customers. It's a channel that happened rising this year. And there's many questions about getting visibilities and understand how to be successful. It's a very interesting dynamic because maybe it's not driving a lot of traffic, but I think a lot of the answers coming on the chatbots are kind of defining the customer perceptions on brands and the purchase decision-making. So it's very important to them to understand how many consumers asking about their brand, what are the, what is the sentiment. So as you work with the customers and basically building and developing the product they need in order to be more successful in this new channel that arise. Rami Myerson: Kincaid, this is Rami here. If I can just jump on. And we've had some meetings with the leadership that are coming back from meetings with a range of customers around the U.S. and around the world. I think there's general excitement in the business about the opportunities. C-suite are very, very keen to understand how Gen AI is impacting the business on the one hand. On the other hand, all the leading LLMs are very, very keen to understand how the data we provide them can help them improve their modeling. So I think that when we combine those 2 parts of the market, on the one hand, the interest that we're getting from all the model generators and creators and from the corporates that the business is being impacted and disrupted by AI really gives us a lot of makes us very excited about the opportunities we have from that part of the market. Operator: The next question comes from Luke Horton of Northland Securities. Lucas John Horton: Just wanted to talk a little bit about the customer side. And kind of are you seeing any mix shift between enterprise versus mid-market customers, especially with kind of the new use cases and product launches that you guys have made over the past year? Or Offer: Not really. I think the mix between SMB and enterprise stayed the same. We didn't observe any change in that. Lucas John Horton: Fair enough. And then just kind of piggybacking off of that into the competitive landscape here. Just have you seen an uptick in competition here, especially with, I mean, a couple of other companies out there kind of doing similar cadence of new product launches and trying to capture this Gen AI demand. Just curious your thoughts on the overall competitive landscape. Maoz Lakovski: Yes, Maoz here, thank you for the question. We -- there is a lot of interest and a lot of demand for our Gen AI products, but we are confident that we can be a dominant player in this space. We have a unique data sets that enable us to be the best solution in this field. We have great client relationships, and we get a lot of demand, both from new prospects and from existing clients. It's a very horizontal play. Many of our clients across brands, agencies, publishers, they all care about Gen AI visibility. So we are not too concerned. We are focusing. We are building a great product. We have great data sets on this landscape. We are really allowing brands to understand visibility within the engines. So for us, it's more about market growth and market education. It's not really about this competitor or that competitor at this point. Lucas John Horton: Okay. Fair enough. And then just last one here. Apologies if this one has already kind of been asked and answered, but just looking at the implied revenue guidance for 4Q, it's sort of a wider band here. Just wondering if that's kind of more so due to uncertainty around the timing of some of these larger deals flowing through or just kind of the puts and takes on the implied 4Q revenue guide? Or Offer: Yes. It's basically because we have a very strong pipeline and very big deals. So we want to keep it in that range to understand we're very confident we'll end on the range, and we want to see how it materialize. Operator: [Operator Instructions] Our next question comes from Adam Hotchkiss of Goldman Sachs. Adam Hotchkiss: I just wanted to ask on your RPO metric that was strong for a second consecutive quarter here. Maybe just comment a little bit on contract duration and how we should think about the interplay of revenue growth versus that higher RPO growth rate. Or Offer: Yes. Thank you, Adam, for the questions. Indeed, we're seeing a good success with a multiyear commitment. We see more and more of our customers loving our product, monetize it, getting great ROI from that and willing to engage with us for a multiyear. And as they report that we now have 58% of the revenue is closed for multiyears that we're very, very proud with that metric. And it's a very strong indication of the value of the data we give to our customers. So with that success and every quarter, we're getting better and more customers engage with us, it's also helping to get a better RPO. Adam Hotchkiss: Great. That's really helpful. And then just on sales and marketing, I appreciate the comments on the ramping of sales employees. I did notice that sales and marketing expense did come in a little light of expectations this quarter and sequentially, which I think was potentially part of the profit outperformance. I know or we had talked about you taking a real-time approach to sales rep productivity and trying to understand that relative to margin performance, particularly when you gave the guide earlier this year. So maybe comment on if there are any changes in what you're seeing there and if anything flowed through the sales and marketing number in Q3 that we should be aware of? Or Offer: Yes. So the ramp-up of the salespeople is on track as you try to scale go-to-market organization, what we did in Q1, we overhire in a lot of those areas to make sure that we can ramp the people and then we can have the options to double down on the ones that are successful and can show indication that they can be successful selling our solutions. So the process, you little bit over hire, you see who is successful, who can be part of our culture. And then as you go through, you start optimizing and let go the one that are less successful. And as you're doing that, your S&M is getting better and you're able to start getting more yield from the salespeople. So I think this is what you're seeing in the numbers. Operator: Our next question comes from Patrick Walravens of Citizens. Patrick Walravens: Can I ask 2 follow-ups? First of all, what kind of big deals do you have in that pipeline? What the very big deals are, obviously, not the companies, but just like if you could characterize them? And then secondly, how should we think about next year? Or Offer: So I will try to answer what I heard because I think the line was not super clear. I think the first question was around the big deals that we have that, as we said over the past few quarters, we're seeing big success on selling data for LLM companies or companies that are trying to create the best LLMs for this new AI world. And we're seeing that our digital data is a critical element in building, training those LLMs. And once we're able to engage and show the value of our data after those long process of evaluation, we get a very good engagement that is very sticky and very long term, and we're becoming a critical part of building and developing those LLMs. So this is around the big deal. And the second question that I heard, I think, is about next year. We're going to give guidance to next year in the next quarter. So... Operator: Ladies and gentlemen, with no further questions in the question queue, we have reached the end of the question-and-answer session. I will hand back over to Or Offer for closing comments. Or Offer: So I would like to thank you all for joining the call and especially our shareholders for the support. We look forward to speaking to you again over the coming weeks. Thank you all. Operator: Lovely. Thank you very much, sir. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your lines.
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: 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 Enlight Renewable Energy's Third Quarter 2025 Earnings Call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to Yonah Weisz, Director of Investor Relations at Enlight Renewable Energy. Please go ahead. Yonah Weisz: Thank you, operator. Good morning, everyone, and thank you for joining the Third Quarter 2025 Earnings Conference Call for Enlight Renewable Energy. Before beginning this call, I would like to draw participants' attention to the following. Certain statements made on the call today, including, but not limited to, statements regarding business strategy and plans, our project portfolio, market opportunity, utility demand and potential growth, discussions with commercial counterparties and financing sources, pricing trends for materials, progress of company projects, including anticipated timing of related approvals and project completion and anticipated production delays, expected impact from various regulatory developments, completion of development, the potential impact of the current conflict in Israel on our operations and financial conditions and company actions designed to mitigate such impact and the company's future financial and operational results and guidance, including revenues and adjusted EBITDA are forward-looking statements within the meaning of U.S. federal securities laws, which reflect management's best judgment based on currently available information. We reference certain project metrics in this earnings call and additional information about such metrics can be found in our earnings release. These statements involve risks and uncertainties that may cause actual results to differ from our expectations. Please refer to our 2024 annual report filed with the SEC on March 28, 2025, and other filings for more information on the specific factors that could cause actual results to differ materially from our forward-looking statements. Although we believe these expectations are reasonable, we undertake no obligation to revise any statements to reflect changes that occur after this call. Additionally, non-IFRS financial measures may be discussed on the call. These non-IFRS measures should be considered in addition to and not as a substitute for or in isolation from our results prepared in accordance with IFRS. Reconciliations to the most directly comparable IFRS financial measures are available in the earnings release and the earnings presentation for today's call, which are posted on our Investor Relations web page. With me this morning are Gilad Yavetz, Executive Chairman and Co-Founder of Enlight; Adi Leviatan, CEO of Enlight; Nir Yehuda, CFO of Enlight; and Jared McKee, CEO of Clenera. Adi will provide some opening remarks and will then turn the call over to Jared for a review of our U.S. activity and then to Nir for a review of our third quarter results. Our executive team will then be available to answer your questions. Adi, would you like to begin? Adi Leviatan: Good morning or good afternoon, everyone. It's a privilege to join you today for my first conference call as CEO. I want to begin by sharing my genuine excitement about leading Enlight during a period of remarkable growth and strong momentum. Following a global career in consulting and a 3M company, I'm excited to be part of an organization that not only drives innovation and business discipline, but is also fast growing and generates positive energy, both figuratively and literally. Enlight stands at the forefront of the renewable energy sector, and I am deeply committed to steering our company successfully through its dramatic expansion and transformation into a leading global energy developer and IPP. Renewable energy is the fastest-growing segment within the energy industry and recent advancements have also made it the most cost-effective solution for the growing demand for energy worldwide. Enlight is uniquely positioned to continue its growth as a global leader in this space. Thanks to our broad geographic reach, diverse technological capabilities, deep expertise across the entire value chain and robust pipeline of projects, we anticipate continued rapid growth in both revenue and profitability. These strengths will enable Enlight to remain at the forefront of the global renewable energy sector and continue being one of the largest developers in the United States. In my first communication as Enlight's CEO, I am pleased to report another quarter of strong growth, primarily driven by new projects reaching commercial operations across the United States, Israel and Europe. Revenue and income grew by 46% from Q2 2025 to $165 million. Adjusted EBITDA grew by 23% to $112 million, and net income grew by 33% to $32 million. At 23%, adjusted EBITDA growth was partially impacted by compensation revenue from Bjornberget project in Sweden in the corresponding quarter last year that reflected a catch-up for 3 quarters. Given the outstanding results we have delivered this quarter, I am pleased to announce that we are once again raising our full year 2025 guidance. As we approach year-end, the increased visibility and confidence in our performance have enabled us to both narrow and refine our forecast ranges. We now expect 2025 revenue and income to be between $555 million and $565 million, and we anticipate adjusted EBITDA in the range of $405 million to $415 million. These updated projections represent increases of 6% and 4.5%, respectively, underscoring the strong momentum and robust growth trajectory Enlight is experiencing this year. We continue to progress faster than expected in the execution of our work plan. Energy storage is a major growth engine for Enlight across all our geographies. In Europe, the growth of renewable energy generation capacity has not been matched by a corresponding rise in storage capacity, resulting in a notable shortage of storage and presenting opportunities for the sector to achieve fast growth with substantial returns. This quarter, we strengthened our energy storage segment in Europe by signing 2 transactions that mark a significant entry into 2 of the fastest-growing and most attractive energy markets in Europe. We entered Germany with the acquisition of 50% of the 860-megawatt hour Bertikow project, a mature stand-alone energy storage project that will begin construction in 2026. In addition, we significantly strengthened our presence in Poland by acquiring the Edison project, also a mature stand-alone energy storage project with a capacity of 208 megawatt hours. Both projects entered our mature portfolio's preconstruction phase and are projected to deliver an average project level return of 22%, highlighting Enlight's ability to achieve high returns also by partnering with leading developers and M&A transactions. We also expanded the storage segment in Israel, adding over 800 megawatt hour. This brings our global mature storage portfolio to 11.8 gigawatt hour at the end of the third quarter, almost 6x its size 3 years ago, reflecting an annual revenue and income of $650 million to $700 million once operating, making the storage segment an important pillar for Enlight, representing over 40% of our mature portfolio revenues. Enlight's competitive advantage and global and diverse access to capital is reflected in the scale of our capital raising achievements in the past 12 months, totaling about $4.8 billion. Sources included project finance of about $3.3 billion, U.S. tax equity partnerships of $0.5 billion, $300 million of an equity offering, sell-downs, bond issuances and mezzanine loan. These resources are expected to cover all the corporate capital needs for our mature portfolio and support capital needs for additional projects in advanced development phase. Earlier this week, we reported the $1.44 billion financial close for one of our flagship projects, Snowflake A in Arizona, a mega project with an expected capacity of 600 megawatts and storage capacity of 1,900 megawatt hour expected to generate approximately $130 million in revenue and over $100 million in EBITDA in its first full year of operation. This is the largest project in Enlight's history to reach financial close with commercial operation expected during the second half of 2027. The revenue model is based on a 20-year busbar PPA with Arizona Public Service Company, the largest utility in Arizona and on a low-risk availability model for the batteries. This allows us to benefit from attractive financing costs with an interest rate in the range of 5.4% to 5.8% as well as a low equity contribution, thereby maximizing the return on equity and achieving pre-leverage return of approximately 12%. The project highlights the strength of our platform in the U.S. and the ability to execute large-scale projects from the planning stage through financing to operation. Snowflake A marks the initial phase of the broader Snowflake complex in Arizona. The upcoming second and larger phase currently in Enlight's advanced development portfolio will leverage the strategic 1 gigawatt grid interconnection, enabling us to maximize operational and development efficiencies and reach total complex capacity of approximately 2.4 factored gigawatts. This project exemplifies Enlight's connect and expand strategy, the potential of robust grid connections to facilitate greater scale and enhance project returns at a lower risk. This quarter, we also continued the expansion of our portfolio, which will serve as the source of our rapid growth in the coming years with a 6% growth in Q3 in the total portfolio, reaching 37 factored gigawatts and a 5% growth in the mature component of the portfolio, reaching 9.6 factored gigawatts. We continue to progress projects to advanced stages. Projects totaling 250 factored megawatts in Europe and the U.S. moved from development to advanced development and projects totaling about 240 megawatts in Israel moved from advanced development to the preconstruction phase. Enlight's excellent execution capabilities are also reflected in our U.S. portfolio. 100% of the preconstruction projects, 91% of our advanced development projects and 52% of our development projects have completed the system impact study, the most critical stage for securing grid connection. We were also proactive this year and have made rapid progress in recent months to secure eligibility for tax equity. Since May 2025, we safe harbored approximately 6 factored gigawatts of projects, and we estimate that by July 2026, we will secure a safe harbor for approximately 5 to 8 additional factored gigawatts. Thanks to these advancements, we project that annual revenue and income from our mature portfolio will reach $1.6 billion upon commencement of operations in the 2027 to 2028 time frame, a realization of our strategy of tripling the size of our business every 3 years. Enlight benefits from strong tailwinds and favorable business environment in our operating markets. The race for AI investments is expected to lead to unprecedented growth in demand for processing capacity and electricity. Approximately $400 billion is expected to be invested in 2025 by the large tech companies in AI infrastructure and data centers. This accelerated growth is expected to result in data centers share of U.S. energy consumption rising from about 4% in 2025 to approximately 12% in 2030. Renewable energy is the best answer to the emerging electricity demand and is, therefore, the fastest-growing segment in the energy world due to both the relatively fast construction pace compared to other technologies and the attractive cost of energy, or LCOE, produced from solar combined with energy storage. The regulatory environment is also improving. Following the favorable resolution of OBBA in July, the U.S. and China recently agreed to reduce tariffs on various imported products from China from an average of 57% to an average of 47%. We monitor the tariff litigation in the U.S. Supreme Court and continue to find ways to mitigate the effects of tariffs on our U.S. business. Altogether, thanks to positive market fundamentals, visionary strategy and excellent execution, Enlight's generation capacity is expected to reach 11 to 13 factored gigawatts and the annual revenue run rate by the end of 2028 is expected to reach about $2 billion. As we continue to expand our operations and grow our portfolio, our commitment to profitability remains. We maintain a disciplined focus on ensuring that all our projects deliver strong returns on investments. We expect 11% to 12% return on investments for our mature projects that are not already operating, which positions our return on equity above 15%. This approach guarantees that our growth is not only rapid but also disciplined, sustainable and value generating for our stakeholders. With our expertise in the development, construction, financing and operation of renewable energy projects, Enlight is positioned very well for the future, and I am personally committed to ensuring we continue to capitalize on our strengths and the positive trends in the market to become one of the leading global renewable energy developers and IPP. I would now like to turn the call over to Jared, the CEO of Clenera, Enlight's U.S. subsidiary. Jared McKee: Thank you, Adi. I'd like to begin by sharing the progress we've made over the last quarter in advancing the construction of our projects, safe harboring our project pipeline and securing significant financial resources, all of which position us as a leading solar and storage company in the U.S. Starting with project execution, our construction teams have made substantial progress across multiple sites. Two projects are expected to reach commercial operation in the near future. Quail Ranch, our 128-megawatt solar and 400 megawatt-hour energy storage project in New Mexico and Roadrunner, a 298 megawatt solar and 940 megawatt-hour energy storage facility in Arizona. Both projects are working through the final steps of construction and commissioning to achieve commercial operation. Together, these projects will provide enough power to supply over 90,000 homes and are expected to generate combined annual revenues and income of $142 million and EBITDA of $127 million in their first full year of operation. Moving on to Country Acres, our 403 megawatt solar and 688 megawatt-hour energy storage project in Central California. Much of the groundwork is complete with crews installing tiles, digging cable trenches and installing solar panels. We are on track to achieve commercial operation in the fourth quarter of 2026. Another project in construction in Arizona is Snowflake A, a mega project with 600 megawatts of solar and 1,900 megawatt-hours of energy storage capacity. The concrete pads for the substation and battery are complete and solar site work is well underway. To date, we've installed over 5,000 piles and have completed procurement contracts for the project's major equipment. The project anticipates commercial operation in the second half of 2027. 80 miles northwest of Snowflake is our CO-Bar complex. Early construction activity is ongoing, including grading, ground clearing and road building. We continue to manage interconnection risks influenced by a federally required approval and any potential delay from the federal government shutdown. Despite this challenge, we have finalized the negotiated LGIA and are making progress on the necessary approvals of the LGIA. We made significant progress in ensuring that numerous projects obtain eligibility for federal tax credits. To date, we have safe harbored over 9 factored gigawatts of projects, including all of Enlight's 5.6 factor gigawatt mature portfolio. An additional 2 to 4 factored gigawatts are expected to be safe harbored by the end of the year with an additional 3 to 4 factor gigawatts of projects slated to be safe harbored before mid-2026. This continues to be an important focus for our team as we prepare to safe harbor a total of between 14 to 17 factored gigawatts of projects by the mid-2026 deadline for project eligibility. Looking at our supply chain, we've worked to accelerate the procurement of equipment for most of our mature projects. Nearly 2 gigawatts of panels have been contracted for the mature portfolio with a significant amount of this equipment already passed through U.S. customs. Additionally, we have onshored over 2.8 gigawatt-hours of battery storage. Our close partnership with suppliers and off-takers has proven resilient during the initial introduction of tariffs earlier this year. These partnerships continue to help us navigate changing trade regulations, mitigating the effects of price and supply volatility. I am proud to share that we have successfully achieved financial close with 6 leading banks for the Snowflake A project, totaling approximately $1.5 billion, supporting the construction of our project. This closing is a significant step forward for the Snowflake A project and a key component of Clenera's growth strategy into 2027. In addition, since our last earnings report, we achieved a $340 million tax equity partnership for the Roadrunner project and a $131 million tax equity partnership for the Quail Ranch project, both significant milestones. Altogether, we have raised just under $2 billion in financing and tax equity since our last earnings report. I am very proud of this achievement as it demonstrates our ability to execute on our deep portfolio of projects, guiding them from advanced development into construction and operations. Our financing partners are clearly confirming that our projects are a strong long-term investment. We are well positioned to continue this growth trajectory with a healthy project pipeline in our mature and advanced development portfolio. This past quarter reflects the disciplined execution required to continue our construction progress through risk mitigation and financial strength. Our focus remains on building profitable, sustainable renewable energy projects and delivering long-term value for our investors, partners and the communities that we serve. I will now turn the call over to Nir. Nir Yehuda: Thank you, Jared. In the third quarter of '25, the company's total revenues and income increased to $165 million, up from $113 million last year, a growth rate of [ 46.07% ] year-over-year. This was composed of revenues from the sale of electricity, which rose 27% to $139 million compared to $109 million in the same period of '24 as well as recognition of $27 million in income from tax benefit compared to $4 million in the second quarter of '24. Revenues from the sale of electricity grew due to the contribution of newly operational projects. Since the third quarter of '24, Atrisco in the U.S., various projects in Israel, Pupin in Serbia and Tapolca in Hungary all begun selling electricity. The most important increase is originated at Atrisco, which added $11 million, followed by the Israeli project, which added $7 million and Pupin, which added $4 million. In total, new projects contributed $22 million to the revenue from the sale of electricity. Revenues and income were distributed between MENA, Europe and the U.S. with 47% from Israel, 27% from Europe and 26% from the U.S. Third quarter net income amounted to $32 million compared to $24 million last year, an increase of 33% year-over-year. The change was driven mainly by new projects, which contributed $12 million to net income, along with $10 million of financial income right from the refinancing of the Gecama wind farm in Spain. This was offset by a $5 million increase in operating expenses, along with a decrease of $7 million in other income compared to last year, all after tax. The company's adjusted EBITDA grew by 23% to $112 million compared to $91 million for the same period in '24. The increase in adjusted EBITDA was boosted by $52 million stemming from the same factors that drove the revenues and income increase mentioned above. It was offset by an additional $17 million in cost of sales linked to new projects, while other operating expenses rose by $7 million. We recognized $3 million in compensation linked to blade failure at the Bjornberget project in Sweden during the quarter compared to $10 million in compensation, which was recognized in the same period last year. Enlight secured a significant amount of new capital since our last quarterly report. At the project level, we secured $1.5 billion financial close for Snowflake A, our mega project in Arizona and completed the funding requirement for Project Roadrunner and Quail Ranch by concluding tax equity partnership totaling $470 million. We also announced a $350 million mezzanine debt facility with Israeli largest bank. At the corporate level, we raised $300 million of equity through a private share placement to Israeli institutional investor. Altogether, Enlight has raised $4.8 billion in project finance, corporate debt and from asset sales in the past 12 months, providing the financial underpinning for our ambitious expansion plan with particular focus on the U.S. In addition to this fund, we have $525 million of credit facility at several Israeli and international banks, of which $415 million was available for use at the balance sheet date. In addition, we have approximately $1.4 billion of LC and surety bond facility supporting our global expansion, of which $800 million was available for use at the end of the quarter. This further increases our financial flexibility as we continue to deliver on our growth strategy. Given the strong financial performance during the first 9 months of '25, we are raising our '25 guidance range with revenues and income now expected between $555 million and $565 million and adjusted EBITDA expected between $405 million and $415 million, representing a 6% and 4.5% increase for both metrics, respectively, compared to our previous guidance range. Our revenues and income guidance for '25 includes recognition of an estimated $80 million to $90 million in income from U.S. tax benefit and 90% of '25 generation output is expected to be sold at fixed price either through hedges or PPAs. I will now turn the call over to the operator for questions. Operator: [Operator Instructions] And the first question today comes from the line of Justin Clare, ROTH Capital Partners. Justin Clare: So I wanted to first start out with the quarter. So revenue in Q3 was meaningfully ahead of our expectation. And so I just wanted to see how did solar and wind resource availability compare to typical seasonal assumptions? Were there any onetime items that may have benefited the quarter? Adi Leviatan: Thank you for the question. Indeed, we did see additional wind in some of our Israeli assets. Solar was very much in line with our expectations. We also have had the ability to extract additional from our battery storage projects. And in addition to that, there are prices dollar to shekel exchange rate considerations that have brought additional revenues in dollar terms beyond what we had initially forecasted. Justin Clare: Okay. Got it. That's helpful. And then just on the safe harbor, you've already safe harbored meaningfully larger amount than what had initially been planned. Wondering what enabled that acceleration? And if you could walk us through the strategy for additional safe harboring and your confidence in achieving the updated target of the 14 to 17 factory gigawatts. Adi Leviatan: Thank you for the question. Jared, can you take this one? Jared McKee: Absolutely. So every project has its own challenges in regards to safe harbor. Every project has to have a unique real plan for it to move forward. Generally, our safe harbor strategy has included physical work of a significant nature. So the physical work can be either done off-site with manufacturing of project-specific equipment or on-site building out of roads or other physical work at the site. So we took both of these plans, and that is how we completed the non-factored gigawatts already this year with the rest that we're looking at going to be completed for safe harboring by the middle of June of 2026. And so it's really both off-site and on-site work and whether or not we use one of those is very much project specific. Justin Clare: Got it. Okay. And then just one more. So if we assume that you do achieve the updated safe harbor targets, it's a meaningful amount of capacity. So wondering if you could just talk about how you're thinking about the growth rate of your operating capacity as you move from '28 into '29 and to 2030, what kind of growth rate might be achieved? And then if you could speak to any potential constraints given the large volume of capacity, where you're positioned in terms of the interconnection or permitting or financing? Jared McKee: Absolutely. So we expect to see a continued growth rate similar to what we've seen in the past. We continue to grow and we will continue to grow over '27, '28, '29 and 2030 with a build-out of projects that have been safe harbor of between 14 to 17 factored gigawatts, we will be able to pick from the projects that we really want to prioritize and move forward. As with development, there will always be constraints, there will always be hurdles. And so we will be really ready to counterbalance and to mitigate any sort of risk that come from the interconnection and other risk aspects of the project. With this -- with the large pool of projects, we will be able to not only continue our growth, but we will be able to really pull if there are certain projects that drop out. I mean, you'll see that the mix of the safe harbor project is really throughout our entire portfolio, whether it's advanced development or development or mature under construction or mature preconstruction, as projects advance into the advanced and mature portfolio, their throughput ratio increases dramatically. Safe harbor projects in the development side, there is a lower throughput than the mature portfolio, but that's why we really focused on having a very large broad spectrum of projects that we can safe harbor to be able to pull from by 2030. Yonah Weisz: Justin, I think Adi -- one moment. Justin, I think Adi wanted to add to Jared's question. Adi Leviatan: Yes. Thanks for the question, Justin. I also wanted to add that this is exactly our advantage as a big developer. And I think -- I mean, recently, we have been named as a Top 5 developer in renewable energy in the United States. This ability of us to both execute on the safe harbor across the board, many projects at the same time and then the ability to prioritize and take them to completion within the 4- to 5-year time frame. In addition to that, you probably know that we have been able to raise $1 billion in the capital markets just in the last few months. This, again, is testimony to our ability to execute on many large projects at the same time. And of course, Enlight is a global company outside of the United States, also in Europe and in Israel and outside of Israel in the Middle East, which we can bring some of that capacity to bear also on projects in the United States. Operator: And the next question comes from the line of Mike Mcnulty from Deutsche Bank. Michael Mcnulty: I'm on for Corinne Blanchard. My first question pertains to your EBITDA guidance. So first of all, congratulations on the EBITDA guidance raise. It implies a 73% EBITDA margin. Can you talk about puts and takes to your long-term target of 70% to 80% and how you expect to achieve the high end? Adi Leviatan: Yes. I'm going to refer this question to our CFO, Nir Yehuda, who is here with me. But before I do so, I will just say that our expectation for project level EBITDA is always north of 70% for every individual project. And from there, there's adjustments on the corporate side. And from here, I will give it to Nir to add a few remarks. Nir Yehuda: You pretty much covered it. So as Adi described so our project EBITDA, the ratio EBITDA to revenue is much higher than what you see in the earnings in the financial. It's around 75% to 80%, depending in the region and in the project itself. But the corporate naturally involves also headquarter expenses that some of them, for example, in this quarter, a one-off item that relates to our building our strength and capabilities towards the -- utilizing the development pipeline. Michael Mcnulty: Great. And then for my follow-up, can you talk about your current India tariff exposure and the mitigation strategies that you're currently exploring there? Adi Leviatan: Jared? Would you be able to take the India question? Jared McKee: Absolutely. So Clenera is utilizing PV cells for our next projects. All of these next projects, we are focused and we will have cells coming in from countries that are not subject to any of the ongoing investigations. So really with our India focus, we are able to pull in cells from all over the world, and we are also able to assemble in the U.S. And so when we have any specific country risk, we are able to have flexibility with our modules, where we assemble modules, where we source our cells from. And so that way, we are really mitigating any specific country risk. And I apologize, my phone had a technical difficulty. So I didn't quite hear the first question on that, but I believe I captured what you were looking for. Operator: [Operator Instructions] and your next question comes from the line of Maheep Mandloi from Mizuho. Maheep Mandloi: We saw 2 projects being acquired in Europe, mature late-stage projects there. So just curious, is there any strategy here, I think it helps offset any slowdown in the [indiscernible]? And separately, Adi it's been almost, I think, a quarter since you've joined. So any thoughts on the changes you're trying to bring here or any differences compared to what we have used at Enlight. Adi Leviatan: Thank you so much for the question, Maheep. So the projects in Europe are actually -- I mean, they're unrelated directly to the U.S. The relationship is that, I mean, Enlight is a very diversified company that has projects in the United States, in the Middle East, North Africa and in Europe and also diversified across technologies, which enables us to grow consistently and when there's lulls in one place to indeed make up with growth in another space. But in this case, the United States is, of course, growing tremendously with the new projects that we have both brought online and the ones that we have announced financial closing and tax equity. And in Europe, in parallel, we're making great strides with entry into the stand-alone storage space. As you know, Europe is ahead in many ways globally in renewable energy as a source of energy in the electricity mix. They've -- some countries, I mean, Europe specifically, we're talking about Germany and Poland with the acquisitions of these new projects. They have -- they will have by 2030, renewable energy as a source in their mix of electricity might -- will be up to 50% to 70%. They have advanced very much on generation from renewable sources, and they need to catch up on storage. Catching up on storage will enable -- will reduce the price volatility, and it will also enable the interconnection between countries in Europe that need to maintain the same frequency rate. So this is a huge opportunity in Europe. And for a player like Enlight that has already been working in battery storage for 3 years now, and we've gathered expertise in the procurement, in the operation, in the efficiencies we can get out of batteries and the ability to do the revenue management, the energy management system, it's a natural step for us now to capitalize on this great demand for energy storage in Europe. And so we have come in -- these -- we're also hybridizing our wind farms in Spain and in Sweden, and we have other projects. But these 2 projects that we chose to highlight are because of the significant entry into Germany, which is the biggest renewable energy market in Europe and a significant step additionally in Poland, and there are other projects that are forthcoming. Can you, Maheep, also repeat the second part of your question, please? Maheep Mandloi: Sure. Just curious on -- you've been more than on all the quarters since you joined. So any thoughts on changes you want to bring in or any updates here or anything different you should expect from Enlight... Adi Leviatan: I'm very much committed to the strategy that is in place for Enlight, which I think is a very strong strategy of the diversification on geographies, technologies and at the same time, very diligent execution by a committed team that shares our values in the U.S., here in Israel and in Europe. You should expect to see us continuing to grow at the pace of 40%, tripling our revenues every 3 years as we have done so far, we project the same into 2028 and continuing to advance projects to get favorable financing terms and very good access to capital in the various capital markets and to continue to expect the same level of performance from Enlight also going forward. Operator: This concludes the Q&A for today. I will now hand the call back to Yonah. Yonah Weisz: Thank you very much for joining, and we'll speak to you next quarter. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: [Interpreted] Thank you for joining today's. We will be starting our financial announcement. So I'd like to first ask CFO, Hagimoto-san to talk. Then next, I'd like to hand it over to CEO to talk about the direction and the core businesses for TIS. So followed by that, we will move to the question and answer. And we will take 60 minutes for the combined presentation and the Q&A. We have simultaneous translation in Japanese and English. You can see both of them. [Operator Instructions] We'd like to ask you some asks before we start. We will be talking about the projection of the future businesses, all of which comes with uncertainties or risks. Please the actual results may be different from our projections that we'll be presenting today. With that, I'd like to ask Hagimoto to be talking about our financial results. Hagimoto, would you please go first? Jin Hagimoto: Yes. I'm Hagimoto, the CFO. Let me walk you through the highlights of our financial results for the second quarter of the fiscal year ending March 2026. I'd like to talk about our second quarter. This is our highlights. We continue to benefit from favorable business environment. Our revenue for the first half reached a record high of JPY 534.9 billion. In particular, demand in North America remains strong, resulting in an 8% decrease in revenue on a local currency basis. Operating profit, adjusted operating profit and profit for the period, all reached record highs for the first half. In addition to increased revenue, profits are growing at a pace that exceeds revenue growth; driven by global pricing measure and appropriate cost control. In light of the current business, we have revised our full year guidance announcement in May. We have upwardly revised revenue and adjusted operating profit, reflecting the strong fundamentals and changes in foreign exchange assumptions due to yen depreciation. On the other hand, we have incorporated temporary costs related to the strategic initiatives such as acquisition-related expense and continuous portfolio reviews into our operating profit. I will explain the details later. Next slide. Moving on to our P&L performance. Revenue was driven by C&V and TBCT companies. Despite negative currencies impact, revenue for the first half reached a record JPY 534.9 billion. Operating profit and adjusted operating profit both grew faster than revenue, reaching record highs of JPY 1.0 billion and JPY 114.4 billion, respectively. From the second quarter, tariff impacts began to materialize, but profit growth was achieved mainly through pricing measures and appropriate cost management. Next slide, please. Since the year-on-year OP variance analysis for the second quarter reflect the same trend as the first half, we will provide further details on the next slide. OP variance analysis for the first half is this. Overall increased sales driven by a continued demand expansion contributed to profit growth. G/P improvement -- increment by sales increase led by overseas TIS, especially in North America and by plasma business and Global Blood Solutions gross margin price. Pricing measures in the C&V contributed significantly to profit growth, though positive effects were partially offset by tariff inflation and mix effects. SG&A increased by business expansion, remaining within expected levels. Research and development decreased slightly year-on-year, partially due to last year's impairment losses on capitalized R&D. Foreign exchange impact negative both on flow and stock basis compared to the previous year. Next slide, please. Let me now explain results by companies. Please note that revenue by region slide, which was previously shown earlier is now placed and comes after the revenue by company slides. First, the Cardiac and Vascular Company. Revenue grew by 8% on local currency basis with strong global performance centered in North America. TIS and Neuro grows, while Cardiovascular also achieved high single-digit growth in local currency, driving overall company performance. Although Aortic experienced supply issues with surgical vascular products during the first quarter, revenue rose due to recovery trends from the second quarter and strong progress in expanding sales of hybrid products. Operating profit improved by 2 percentage points to 27%. Pricing measures, profitability improvement measure and a review on how profitable regions have contributed. FX stock impact was negative, resulting in a slight decrease in margin compared to the first quarter, but fundamentals remain solid. Next slide, please. Next is our TMCS Medical Care Solutions Company. Revenue for the first half increased, driven by growth in Pharmaceuticals. This growth reflects the impact of delivery timing shift in certain areas of the domestic CDMO business being recovered in the second quarter, along with continued strong performance of projects overseas. Hospital Care saw a temporary revenue decline due to last year's business transfer and ongoing supply issues for some products. Pricing measures started in April are progressing very well. Profit growth was supported by recovery in Pharmaceuticals. Next slide, please. Continuing to TBCT, the Blood and Cell Technologies Company. Revenue grew significantly in Plasma Innovation and Global Blood Solutions. Rika deployment to existing customers were completed in the first quarter and operational optimization will continue. Core business is progressing as expected. In Global Therapy Innovations, revenue increased due to growing demand for cell collection in cell and gene therapy, especially in the U.S. along with replacement demand for certain devices. Profit increased, led by improved profitability from higher sales of Rika. Next slide, please. And this is our revenue by region. In the Americas, demand expansion continued with double-digit growth in local currency. All companies showed strong growth with TIS and Pharmaceuticals and Global Blood Solutions serving as key drivers of global revenue. In Europe, stable growth in TIS and Neuro, and strong performance of PLAJEX drove Pharmaceuticals segment growth. In Japan, Pharmaceuticals contributed to higher revenue, supported by the recognition of delivery timing adjustments in CDMO during the second quarter. Neuro sustained its double-digit growth trend in C&V. In China, Neuro maintained strong growth, supported by the successful expansion of sales channels under VBP, resulting in higher revenue. In Asia, C&V achieved revenue growth, while Hospital Care, Pharmaceuticals and Global Blood Solutions posted declines in the first half due to delay in tender timing. Next slide, please. Now regarding our guidance revision. To begin, we will explain the assumptions underlying the revision of our guidance focusing on two major points. First, regarding the fundamentals of our existing businesses. As we shared in the first half results earlier, the second quarter remained strong. Thanks to continued robust demand and the successful implementation of proactive pricing measures. We expect profit increase of JPY 10 billion compared to the figures announced in May. This effectively offset the anticipated JPY 10 billion negative impact from tariffs for the current fiscal year. In addition, we have reflected changes in foreign exchange assumptions due to the continued depreciation of the yen, resulting in an increase of -- expected increase of JPY 10 billion in AOP for existing businesses. Separately, we have factored in temporary costs related to the [indiscernible] further growth, including acquisition and continued portfolio optimization into this year's guidance. Next slide, please. Further details on division. Based on the assumptions earlier, we have revised our full year guidance announced in May by upwardly adjusting revenue and adjusted operating profit and downwardly adjusted operating profit. The guidance excluding the impact of the acquisitions announced this year is also presented at the slide. On this basis, both revenue and profit for the full year are revised upwards. And both revenue and the profit were adjusted. Here is the details why company, C&V and TBCT reflects strong performance with upwards revision of both revenue and profit. Of course, C&V continued robust demand in North America and pricing measure will remain key drivers in the second half. TBCT continues to be driven primarily by plasma innovation. However, due to higher-than-expected collection efficiency with Rika, turnover of disposable products in the second half is expected to fall slightly below plan. Accordingly, production adjustments are scheduled for the second half, while the efficiency improvement supports our solid foundation for long-term growth. Conversely, TMCS has been revised downward in profit mainly due to acquisition-related expenses. We have also included OrganOx performance from November onward with cumulative 5 month revenue projected at JPY 9 billion and adjusted operating profit at JPY 1.3 billion. Next slide, please. Let us now explain the revision of adjusted operating profit. Overall, we have revised the initial guidance from JPY 240.0 billion to JPY 221.5 billion. Strong fundamentals and effective cost control have offset the JPY 10 billion negative impact from tariffs. In addition, we have reflected the positive impact of favorable exchange rate compared to the initial guidance. We have also incorporated as well the investments, including the capital expenditure for the Leverkusen Plant as well as the contribution from OrganOx acquisition. Details of the adjustment items that account for the difference from the operating profit will be presented on the next slide. Adjustment items have increased by JPY 20 billion from the initial guidance of JPY 20 billion to JPY 40 billion, with two main components accounting for the increase. The first is acquisition-related expenses, including costs associated with the OrganOx acquisition and amortization of acquired intangible assets totaling approximately JPY 9 billion. The second is costs related to portfolio review, clearly all of the expenses arising from the revision of exclusive distribution agreement relative to TIS business also totaling about JPY 9 billion. We continue to conduct strategy business reviews to support further growth. The other costs were not included last year due to the ongoing discussions and initial requirements, but the efforts to portfolio optimization will remain our priority going forward. Next slide. Lastly, as we have consistently continued, we are on track to deliver the three financial goals outlined in GS26 revenue growth, operating profit percent and capital efficiency. Although acquisition-related and onetime expenses will be incurred this fiscal year, the operating profit percent for FY 25, excluding these costs based on our existing business is 18.6%. Our business fundamentals is solid, and this momentum will remain unchanged next year. We will continue to make proactive investments to drive future growth, ensuring the achievement of GS26 and further enhancement of core value. This concludes my remarks. Thank you very much for your attention. Unknown Executive: [Interpreted] I'd now like to hand over to CEO, Mr. Samejima. Hikaru Samejima: [Interpreted] Hello. I'm CEO, Samejima. And today, I would like to talk about the strength and future outlook of Terumo's core business, the TIS division, which continues to drive robust growth and lead the company this fiscal year. And in particular, I would like to focus on our imaging strategy. And finally, I'll provide an update on the acquisition of OrganOx. Despite the impact of PCI market maturity, the TIS division continues to deliver high single-digit growth. This growth is underpinned by the stable performance of Access products, which account for half of our revenue. And in the Therapeutics segment, products such as Therapeutic Lesion Access, namely PTCA guidewires and microcatheters are contributing to this momentum. And as you can see, Access and TLA, these fundamental device groups, make up more than 80% of our sales. And this is a key differentiator from our competitors, enables us to maintain a unique position and achieve sustainable growth. Here are the highlights of the TIS growth strategy on this slide. In the Access market, we will continue to strengthen the #1 position that we have built and maintain mid-single-digit growth. And as the second pillar, TLA products will achieve high single-digit growth by expanding market share in addition to overall market growth. And beyond these existing drivers, I would like to highlight Imaging as the third growth area. Imaging usage has been increasing in recent years in Europe and the U.S., and Terumo will deliver double-digit growth by introducing a unique new product, the Dual Sensor System. So first, let me reiterate the strengths of the TIS division that are common to both Access and TLA products. The first is our core technology, advanced manufacturing capabilities. Our hydrophilic coating, which enables smooth maneuverability inside blood vessels is one of the technologies that physicians have trusted for many years. In addition, the precise engineering of each component ensures ease of use and reliable device control, supporting seamless procedural flow. Interventional procedures are largely invisible to the naked eye, and the subtle tactile differences that only the physician can sense are the true source of TIS' unique strength. The second is consistent large-scale multiproduct manufacturing. Our scale advantage creates a barrier to entry that competitors cannot easily overcome, delivering price competitiveness. Furthermore, by producing high-quality products with uniformity and minimal variation, we provide physicians with the confidence that using Terumo products will deliver a familiar feel in daily clinical practice. Beyond simply supplying products, we have pioneered the radial approach and promoted its value. Through a comprehensive product lineup that enables same-day discharge and appropriate use training, we support safer and more efficient hospital operations. By delivering our unique technologies and operational expertise as part of our solution platform to clinical settings, we transform what are generally considered commodity products into high-value offerings. This is exactly the fundamental strength of the TIS business and the foundation of Terumo's leadership. The Access and TLA demands present significant potential for future growth. For Access products, the main intervention market is expected to continue growing at mid-single digit, and Terumo aims to solidify its presence through the further adoption of the radial approach. Moreover, Access devices are widely used beyond the main segment. The trust earned through high-quality devices developed for the intervention market has made Terumo a preferred brand. And as the number of cases in these domains increases, there are opportunities to use Access products, which will expand even further. In the TLA product group, which is essential for delivering stents and coils to the lesion site for treatment, Terumo has now established itself as category leader. By steadily increasing the market share of wires and microcatheters across various treatment areas, we have achieved a growth rate that exceeds overall market growth. These products, which are used routinely in large volumes, clearly showcase the strengths of the TIS business that I have been emphasizing. The growth potential of TLA products is my next point. The key lies in expanding the product lineup and broadening both business domains as well as geographic reach. Through continuous innovation, we respond to evolving treatment trends and develop products that meet clinical needs, supporting daily procedures and therapies. We also accelerate growth by quickly capturing market opportunities beyond existing areas. In recent years, catheters have been increasingly used in MSK embolization, which is a treatment for chronic pain such as joint pain. And this market is expanding very rapidly. The future market size is estimated to exceed $500 million, and Terumo has already secured a significant share with microcatheters, positioning us for continued growth. From a regional perspective, introducing products into Asia and Latin America offers even further opportunities to achieve growth. Now let's move on to the third growth driver, the Imaging segment. The global imaging market is expanding, driven mainly by the U.S. and China, and it is expected to reach USD 1.3 billion by 2031. This growth is supported by accumulated evidence that using imaging improves outcomes in interventional procedures. In the U.S., imaging guiding PCI has recently achieved the highest recommendation level, which is Class I, evidence Level A, and major medical societies this year. And furthermore, the increasing adoption of atherectomy and IVL devices has reinforced the need for imaging assessment of calcified lesions. The penetration rate of imaging in PCI in the U.S. is projected to rise to 56% by 2031, making imaging a high potential area that is now the tipping point for significant growth. Terumo has been competing to lead the Imaging segment for the long term. In Japan, imaging is used in more than 95% of PCI cases and Terumo holds an overwhelming market leadership with a share exceeding 50% in this home Japan market. Terumo's strength in Imaging lie in three key areas. The first is superior catheter deliverability. Secondly, clear high-resolution images. And thirdly, simple, speedy operability. As the global market expands, the fact that Terumo imaging is the top choice in Japan, the country which is most experienced with imaging, represents an immense value. Currently, two modalities are available for imaging: IVUS, which uses ultrasound; and OCT/OFDI, which uses near infrared light. IVUS excels at assessing the overall condition of the vessel and is suitable for cases with large vessel diameters, but it is less effective for examining microstructures. But on the other hand, OCT or OFDI offers high-resolution imaging, making it ideal for evaluating stents and microstructures, and is particularly effective for calcified and bifurcation lesions. However, it has limitations in visualizing the entire vessel and requires a blood flush using contrast agents. In clinical practice due to cost constraints, in most cases, only one modality can be used, leaving physicians unable to view both images even when they want to. To address this challenge, Terumo has developed the Dual Sensor Systems or DSS. This innovative system features a catheter equipped with both IVUS and OFDI sensors, enabling simultaneous acquisition and output of two images. By leveraging the strengths of both IVUS and OFDI, DSS allows for a more accurate depiction of intravascular conditions. Its value lies in supporting the realization of the optimal treatment strategy for any case. This is DSS' highest value. And with DSS, the step of deciding which modality to use disappears. Physicians can compare both images side by side to make the best treatment decisions possible. And at a time when Imaging market is poised for significant expansion, Terumo takes on the challenge with DSS. With the launch of DSS in Japan and the U.S., Imaging sales are expected to grow to more than 3x their current size by 2031. In Japan, we will leverage our established market position and begin introducing DSS at facilities with high appetite for this technology. By pricing DSS above the current standard of IVUS to reflect its added value, we can drive growth. At the same time, we aim to quickly accumulate clinical data in the U.S. to establish meaningful evidence of DSS' clinical significance. In the U.S., meanwhile, as a new market entrant, we will take a phased approach to market introduction. By combining Terumo's proven imaging strength track record with the unique value of dual technology, we will steadily build a loyal customer base. Additionally, we are preparing to integrate AI technology to enhance software capabilities and tailor solutions to meet the precise needs of users in the U.S. Beyond Japan and the U.S., demand for imaging is expected to rise globally and Terumo Imaging holds significant potential for rapid growth through further geographic expansion. The TIS business has long been a core driver of Terumo's growth, and that role will remain unchanged. We see further growth opportunities in Access and TLA, where we already have established strong positions. On top of this solid foundation, the launch of DSS will bring a new level of evolution to the business. Of course, we are also looking ahead to expanding into therapeutic product areas, including strengthening our pipeline through M&A. And by adding DSS to our portfolio, we will create synergies with therapeutic products and further enhance Terumo's presence in endovascular treatment. Finally, an update on the acquisition of OrganOx, which was announced in August this year. And as stated in our recent press release, we successfully completed the acquisition of OrganOx on October 29. First of all, regarding our recent performance for calendar year 2025, revenue is expected to reach up to $120 million, which represents approximately 70% growth over last year. This reflects continued strong demand driving high growth. So the market expansion, specifically the increase in liver transplant procedures enabled by the adoption of NMP technology, combined with metra's rising market share quarter-after-quarter, underscores the strong momentum. And these results validate the high expectations for organ perfusion technology in metra's proprietary innovations. Since NMP was approved in 2021, the use of cardiac death donors has rapidly increased, driving a rise in liver transplant procedures, a trend that will continue this year. NMP also enables planned transplant surgery, significantly improving quality of life for medical terms. Looking ahead, transplant numbers will keep growing. And as NMP becomes the standard method for liver preservation, it means more precious organs can reach patients on waiting lists. The growth potential for metra is enormous, as discussed previously, and OrganOx is to reach a scale of around JPY 100 billion in revenue over the next 10 years. Moreover, as transplant volumes increase, more potential patients will be added to waiting lists. This represents a major step toward turning hope into reality for all of those suffering from liver disease. In the NMP market, metra also holds a strong competitive advantage. As mentioned in our previous briefing, real-time monitoring enables quantitative assessment of organ function, improving utilization rates of donated livers. Additionally, the ability to preserve organs with a simple operation is a major differentiator, and its automated control function reduces the burden on clinical staff. This automation also allows flexible transport options, enabling customized services tailored to each case. By selecting the optimal service for each case, preservation and transport can be achieved with minimal resources, delivering significant cost benefits. Even when offering a full package service that includes transport, OrganOx maintains its price competitiveness, which has steadily driven market share growth. So finally, let's look at -- let's talk about synergies. metra supports the preservation of liver function by perfusing the organ with an oxygenated, temperature-controlled perfusate containing blood delivered through a centrifugal pump with precise flow control. Terumo has long supplied all these key components, the centrifugal pump, oxygenator, heat exchanger and reservoir under the CAPIOX brand. And in addition, anticoagulants and other drugs are administered via syringe pumps, which are also one of Terumo's strengths within its TMCS infusion management business. When you break down metra's structure, it becomes clear that it is built on perfusion technology that Terumo has cultivated for many years. By combining the technologies of both companies, we can unlock the potential for next-generation perfusion solutions that are even more innovative and competitive while also improving profitability through cost synergies from component integration. OrganOx is highly innovative and poised for growth. But by leveraging Terumo's platform, its growth and next-generation device development opportunities will expand dramatically. Terumo is adding a new frontier in perfusion to its portfolio and is thoroughly committed to becoming a global top-tier company. Thank you for your attention. Operator: [Interpreted] [Operator Instructions] Together with Hagimoto-san, I must tell you Otaka-san from Corporate strategy to be answering question. I'd like to first direct Kohtani-san from Mizuho to ask first question. Motoya Kohtani: [Interpreted] Yes. This is Kohtani speaking from Mizuho Securities. So let me just ask few questions since this opportunity in a vision. First question about DSS. I think it's about JPY 10 billion, mostly in Japan, but it's going to go up to JPY 30 billion. And I was quite surprised because this was much bigger than what I was expected. As you said, there was a good reason for that ASC, LTM guideline has been revised in 2025, Class A in 2025. In Europe, the class adjustment change was held back in 2024. The IVUS and the OCT is slightly higher, but both of them are going to be guided to be used in both. But my question is for IVUS and OCT, you can just do it because it's already been approved. It's already been -- reimbursement is already taken care of in the U.S. But this is one single catheter. So new code or maybe new code or national coverage determination, maybe not to that extent. But you, I guess, take new Medicare code. How am I assuming how this is going to progress? Or IVUS/OTC, I don't think none of the competitors have that product. I just want to clarify if that's -- so that's my first question. Hikaru Samejima: [Interpreted] That's right. That as you pointed out, existing IVUS or ODI, OTC, the price point is higher than that. That will be our pricing strategy, premium price. But with that, you'll be launching both in Japan and the U.S. in the near future. And one sensor with the two devices, there's nothing like that. I mean who has the manufacturing capability to produce that, it's very rare to find a company who has that capability. It goes back to a high quality, the manufacturing process. This is going to be big barrier entry to that. So I think going back to Slide 10, I want to clarify. You will do the OTC by making sure that you are going to clarify all of it which is written here. Motoya Kohtani: [Interpreted] My second question about the OrganOx. So 120, I was quite surprised by number. NMP today is becoming widely adopted. I guess that number is quite high driving big contribution to this target. But my question, for the next several years, NMP will keep becoming bigger. But after that several years, the growth will become saturated. What are the things that you are doing to prepare for that time in liver cancers, for example? Implant standards have changed in Japan, doesn't change much in the U.S. How are you going to address that? Downstage of a cancer is another one. Microcatheter of your product has a perfect match. Are you going to be running trial to that? So let me just ask a question about the growth after plateauing in several years potentially. And in September, OPP licensed in Florida state where OPP investigation will start there. There is an article written about that. Is there any impact from that or expected impact coming from that? Hikaru Samejima: [Interpreted] Well, that's right for liver implant. NMP will be driving, especially for the donor whose heart stopped working. That will be the growth driver for the next several years like you have implied, and that's exactly right. So after that, I talked about it last time, then we are going to plan to get into the other organs and also somebody who cannot be registered for the implant, but somebody who is having damaged liver. Because by doing so, somebody with the patients that can be addressed with the pipeline to help somebody with the proper fragmented livers. And the supply was a bottleneck in the past. So the registration as a recipient requires very high demand. So even as your liver is damaged quite heavily, you couldn't go -- become registered as a recipient. Those number of population will go up. So that will also drive the market growth. By combining these three, we are quite confident OrganOx is expected to grow in the long run to come. Motoya Kohtani: [Interpreted] And HIS investigation, Florida state any impact? Should we expect an impact coming next year? Hikaru Samejima: [Interpreted] Well, there was some impact more in the short term, but liver implant will be saving patient life. That value is absolutely strong. That hasn't changed. So this impact only range to be short term. Mid to long term, organ implant is actually a very strong growth driver in a long run. Operator: [Interpreted] Mr. Yamaguchi from Citigroup Securities. Hidemaru Yamaguchi: [Interpreted] Hello, this is Yamaguchi. Can you hear me? Hikaru Samejima: [Interpreted] Yes, we can hear you. Hidemaru Yamaguchi: [Interpreted] Well, in your explanation, you were looking at Imaging, the MSK. I think that was one thing you mentioned, MSK. And I'd just like to ask you for your current initiatives around that. And you put some mention about what are your expectations in this for going to market. Hikaru Samejima: [Interpreted] I will respond to your question. Yes. Well, when -- currently, we are -- whether we are proactively approaching this at the moment, we're not so aggressive. But on the other hand, the Access or TLAs, the high quality that we have, we are -- and today, I mean, MSK was given today as one example today, but there are guidewire and microcatheters are used in many other domains, and the perception of that is getting wider and wider. So I think rather than us aggressively going to market here as with our catheter intervention, it's different to that. It's a departure from that, but it's starting to take off. And our fundamental Access and our TLA, which will continue to grow in the mid- to double-digit growth, I think, will be one factor in that. Hidemaru Yamaguchi: [Interpreted] Well, one thing within the financial results, you mentioned that the revision of TIS. I think from last year, that's been in motion since last year. So overall, I mean, it came up several times throughout the presentation. But -- so have you gone over the mountain already for TIS or what is in terms of the financial results? Could you just give -- I felt that it featured quite prominently in the results. Kojiro Otaka: [Interpreted] Thank you. I will just -- these were a one-off expense that I -- so I will respond to your question. Whether -- I think Hagimoto will address the future prospects of that from now on. So let me just explain, first of all, the slide that I'm showing you here. As you can see on this slide, for TIS, the portfolio change in the middle was Orchestra Bio. We have also put a press release about this, but we have this exclusive distribution agreement with them. And we decided to review the exclusive distribution agreement with them. And so there had been some, and it is the same for the -- while maintaining the relationship with them and maintaining the preferential position. It's a JPY 30 million fund in terms of -- and in terms of the market cap, that's been taken into account as well. But we have put that in for our guidance for the end of the full period. Jin Hagimoto: So let me give you a bigger picture view of this. On this occasion, regarding operating income, we gave some guidance regarding operating income, and we made some adjustments to that based on the information we currently have. And there may be some structural reforms going ahead and several other -- some lawsuits that are in process. So it's hard to give an absolutely setting stone guidance in terms of amounts. But the portfolio review that we are aggressively promoting at the moment, that will continue. But for the current fiscal year, these are accurate guidance as provided in these results. So I would hope that you would take those as face value. Operator: [Interpreted] I'd like to ask Nomura Securities, please. Takahiro Mori: [Interpreted] This is Mori speaking from Nomura Securities. I hope you can hear me. Operator: [Interpreted] Yes. We hear you. Takahiro Mori: [Interpreted] About JPY 5 billion for Leverkusen. Is this a onetime? Or should we expect that to come again? What's happening in Leverkusen? What kind of cost we should be expecting from that? Kojiro Otaka: [Interpreted] I will take this question. So Leverkusen, JPY 5 billion in the second half, that we are expecting that to be posted in the second half. And our projection for now, this is a JPY 3 billion growth. So that transaction was JPY 10 billion assets. The JPY 70 billion -- the depreciation of those assets is JPY 1 billion. And we have a lot of great talent in the company. We have retainment talent costs, JPY 800 million. And maintenance of equipment, some of the costs are PMI-related in all EUR 3 billion, JPY 5 billion to be posted on second half. The impact of the cost after that PMI cost is up partially, so it's not going to be doubling as not simply as that. But we are going to be expecting some depreciation talent costs in the next financial year as well. Takahiro Mori: [Interpreted] My second question is about OrganOx driving -- expected to drive the high growth, but the supply do not make sense in terms of the presentation. But centers, how many capacity, how many headcounts in terms of doctors? How those centers can we recruit more people? So how is the demand side? How long it will take to keep that full capacity that you're expecting? Hikaru Samejima: [Interpreted] Well, to that question, so the medical practitioners capacity is your question, how much do we do. We don't have a quantified assessments, we haven't done that yet. But what we can do is after adoption of NMP, everything before that, was very emerging practices like the -- registered, you have to do the implement -- within several years, the daytime, they are busy with the other, and the hospital needs to call up the doctors in the middle of the night. But now they can do it for 24 hours. They can do the plans. So it will be given more leeway for medical practitioners. So right now, we believe that lack of resource is not going to be a problem. But we will check the data, and we will get back to you after checking some of the clarifications and get back to your question. Takahiro Mori: [Interpreted] Well, it's been already several years since NMP started. So I thought maybe the initial impact is going to be go down. That was my concern that this is going to be reduced quickly. Operator: [Interpreted] UBS Securities, Yoshihara-san, please for the next question. Tomoko Yoshihara: [Interpreted] This is Yoshihara here from UBS Securities. Thank you very much for today. So for OrganOx, I would like to ask about the amortization. I think it was on Page 16 of the presentation, and it says provisional at the moment. But if I -- the amount of this is core intangible asset amortization, I would understand. So this is provisional in brackets for the amortization of intangible assets. So I just wanted confirmation on where possible of what is meant by provisional there. And hypothetically, it seems that there's such a large difference in between the revenues for the OrganOx, there was a minus including this disposal of intangible assets. So I just want to know if my presumption is correct regarding the organOx. Kojiro Otaka: [Interpreted] Thank you very much. I will respond to your question. So for the OrganOx costs here, there are two types here. One is the PMI-related costs which are JPY 4 billion -- sorry, JPY 1 billion in the first half, which is a temporary. And for the depreciation and the amortization of intangible assets, this will come in the -- it says provisional a tentative in brackets. In the first half, we think it would be JPY 4 million -- in the second half, sorry. And this is -- for next year, these will fully come online. And well, the goodwill and the intangible assets and so on. The impact of these, I think, will be limited. And so the outlook for the second half. Once these are fully established and set in stone, I will then make another announcement once these are no longer provisional, but set in stone. Tomoko Yoshihara: [Interpreted] So for OrganOx margins from now into next year, will they not differ so much for the core business? What will those look like? Kojiro Otaka: [Interpreted] Well, regarding the business for OrganOx, we intend to expand it in future going forward. So in line with our business expansion, I think incomes, revenues will definitely expand in line with that. Tomoko Yoshihara: [Interpreted] Understood. My second question is regarding Rika. I think in Hagimoto-san's presentation at the beginning, I might not have understood this correctly, but it's disposables where the demand was lower than expected. Is that correct? And so I wondered if the production amount was slightly down. Is that correct? So as a result of that, from the second half onwards, the Rika business, as you start to monetize that more, I believe that there may be some time lag due to that lack in demand for disposables. And from the next period, in coming period, will that have any impact on your profit in the next -- in the upcoming quarters. Could you let me know regarding that? Kojiro Otaka: [Interpreted] Thank you very much for your question. Well, for the TBCT domain profit, I think the operating profit ratio is improving. So the monetization of Rika is definitely on the up as per the figures provided. And looking ahead now, I think -- well, it's slightly ironic, but the Rika is -- the plasma demand is definitely increasing. But our disposable sets compared to expectations, the demand is going slightly down, ironically, when the demand for plasma is going up. So I think in the second half, the production adjustments would be made under our current plan. So in the second half, yes, to an extent, the income, the revenue from disposables may be slightly lower than 50%. There is certainly that possibility. Tomoko Yoshihara: [Interpreted] So just to confirm that, is that for the production? Kojiro Otaka: [Interpreted] So plasma demand itself will grow from now on, definitely. So we will implement production adjustments. And from next year, we expect it to improve to its current levels after the production adjustments. Operator: [Interpreted] I'd like to ask Tony Ren from Macquarie to ask a question. Tony? Tony Ren: [Interpreted] Tony Ren from Macquarie. Just a couple of quick ones from me. So first of all, actually, both of them are related to TMCS business. So the first one is about the German Leverkusen losses. How long do you think it will take for you to stop the losses at that factory to turn it around? Jin Hagimoto: [Interpreted] So thank you for the question. So in terms of the running costs, as Otaka has mentioned, we are looking at somewhat of a $30 million on a semiannual basis. This cost, we do not project will be going down anytime soon. So the overall profitability when that will be coming will depend on how soon, how fast we can get the contract from the pharmaceutical companies. So currently, many of the major pharmaceutical companies, we are in discussions. And based on the input from all the teams of pharmaceutical and our organization, they are mentioning that there is a strong interest from the major pharmaceutical companies to be able to utilize the location within the European region. So at this point in time, our outlook for the profitability contribution is not within the GS26 period. We do foresee that within the next midterm projections, it is going to become improvement of the contract situation. We will be able to utilize the manufacturing plants. Therefore, contribution profit basis should be in the midterm of the next midterm strategy period. Tony Ren: [Interpreted] Receiving our regulatory clearance typically takes about 2 years or so, right? You probably also need to do some fixing up at the factory. So we are probably looking at, at least, 3 years from now? Jin Hagimoto: [Interpreted] Yes. So the overall facility itself is, of course, we have done our due diligence and have determined that it is a high-quality manufacturing facility already. So there are some investments that we will need to make to bring it up to sort of a thermo standard level of the quality, but we do not see any kind of issues in getting the regulatory approval. So as you mentioned, there are going to be some lead time required to get the regulatory approvals. But whether we can get the approvals, we feel very strongly that there is no obstacle in getting the approvals for that location. Tony Ren: [Interpreted] Very good. My second question is about the -- also in your CDMO business, your LEQEMBI autoinjector. The CDMO revenue related to the LEQEMBI autoinjector. Do you book it in Japan? Or do you book it in other geographic regions? Kojiro Otaka: [Interpreted] So based on our contract with Eisai, we do have the shipment in the Japan area. So we will consider the revenue within the Japan region. Operator: [Interpreted] So I think JPMorgan Securities, Saito-san please. Naoko Saito: [Interpreted] Hello. This is JPMorgan Securities, Saito. Well, in the second quarter, looking at the effect of the tariffs. And I think could you just delve a bit more into the 3 months in the second quarter? Kojiro Otaka: [Interpreted] So I will respond to your question regarding that. So the effects of the tariffs in the 3 months in the second quarter, I think it would have been JPY 2.5 billion in impact, but the prices were -- we had strong price effects as with the first quarter. And we made JPY 4 billion in profit, which was way beyond the impact of the customs. And in terms of inflation, there were some effects from inflation and tariffs impact, but we rebounded from that and have surpassed the negative effects of the tariffs and the inflation. Naoko Saito: [Interpreted] Thank you. Well, from the next period, next year onwards, some price rising effects will come into play. Is that correct? Kojiro Otaka: [Interpreted] Well, I think it tends to our pricing strategy in terms of the customs and so on. When we do recontracting, we will aim to have some price rising. And from next year onwards, we hope that those -- at the time of contracting, price rises will continue to come into effect. Naoko Saito: [Interpreted] I understood well. So just a very precise point. But for SG&A, I'd just like to ask for sales, general and administrative expenses, I believe that you shifted offices to a new office this year, your headquarter is changed. And next year onwards, will that play out this year, or will that continue to have an impact into next year? Kojiro Otaka: [Interpreted] Well, for SG&A, I think it has been managed within the trend of net sales or net revenues. And so there is very, very small diminutive impact. But it will, however, be well controlled within the scope of revenues. Naoko Saito: [Interpreted] So my second question is regarding the Plasma Innovation business. I think the second quarter, Rika devices were at full pace. And the net sales from facilities, the volume of disposables reached a peak in the second quarter, I understand. Could you just -- I think in the lower half, I believe the production is going to go down, but have we already reached the peak of full production in the second quarter for Plasma Innovation devices? Kojiro Otaka: [Interpreted] Yes. Well, yes, we are already in the full peak of that. So we have a full tilt in the second quarter. You are correct in your assumption. Operator: [Interpreted] Thank you very much. We are getting close to time to finish. I'd like to make sure if there are anybody else physically here in this room or somebody will see any other questions. Well, it seems like there was no more questions today. We'd like to finish Q&A session here. So with that, we'd like to close our Terumo Inc., March 2026 in the third quarter financial presentation. We'll be closing the session. Thank you very much for your time today. [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 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 Aimia Third Quarter 2025 Results Conference Call. [Operator Instructions] I would now like to turn the conference over to Joe Racanelli, VP, Investor Relations. Please go ahead. Joseph Racanelli: Thank you, operator, and good morning, everyone. Joining me on today's call are Aimia's Executive Chairman, Rhys Summerton; and our President and CFO, Steven Leonard. Before we begin, I'd like to point out that we issued our financial results for the third quarter earlier this morning. All other materials, including the news release, MD&A, financial statements are available on our website and SEDAR+. We will be using a presentation today. And for those listening to our discussion by phone, a copy is available from the IR section of our website. Some of the statements made today on today's call may constitute forward-looking information and our future results may differ materially from what we discuss. Please refer to the risks and uncertainties that may affect our future performance referenced in our presentation and MD&A. In addition, we will be making note of GAAP and non-GAAP financial measures. A reconciliation of these is provided in the appendix of our presentation and in the news release as well. Now following today's presentation and if we don't get a chance to answer any of your questions, please reach out, and I'll be happy to have a follow-on discussion with you. Please go ahead, Rhys. Rhys Summerton: Thanks, Joe. Good morning, good afternoon, everyone. It's great that we can report results to you, which shows that we generated our first profit for equity holders in 3 years and we saw measurable growth in adjusted EBITDA and cash flow from operations. This was despite Q3 being marked by some pretty difficult macroeconomic headwinds, which the underlying companies we own, navigated really well. And we'll discuss that in a bit more detail. But when you look at what drove this improved results performance, what you'll notice is that reducing holdco costs was a big feature. We still have work to do there. We'll continue to be doing that. Where does that leave us now? Well, combined with our increased liquidity and efforts to close the discounted of our share price, we ended Q3 ready to focus on the third step of our strategy and that is to start to deploy or allocate the capital that we have to new investments. And I'll talk a little bit more about that towards the end of the presentation. But first, I'm going to hand over to Steve, who will review our financial results in a bit more detail. Steven Leonard: Thank you, Rhys. Good morning and afternoon, everyone. I'd like to begin my remarks with a review of our consolidated results. As you will note from Slide 7, we experienced improvements in several key financial metrics against the backdrop of macroeconomic and geopolitical challenges. Of note, SG&A expenses declined 11% to $26.3 million. Operating income grew 37% to $7.8 million. Adjusted EBITDA increased by 35% to $20.3 million. Cash flow from operations grew by $13.8 million and we generated net earnings of $1.4 million, which represents a turnaround of $3.6 million. Our improvements on a year-over-year basis were largely due to reduced holdco costs, including the absence of shareholder activism costs incurred last year and to the positive impact of foreign currency fluctuations relative to the Canadian dollar. Turning to the performance of our core holdings, starting with Bozzetto on Slide 8. The results of our Specialty Chemical business in Q3 underscore the strength of its business model and its diversified product and market mix, which led it to outperform its specialty chemical peers. In Q3 '25, Bozzetto saw a 3.3% revenue increase on a year-over-year basis. On a constant currency basis, Bozzetto's revenue was down 3.8%. The decline was attributable to softness experienced by its Textile Solutions sector due to the impact of U.S. tariffs on several Asian markets that Bozzetto sells into. Bozzetto's textile solutions are used in these markets to manufacture textiles that are then exported into the U.S. and other markets. This revenue decline was offset by improved pricing and product mix at Bozzetto's Water Solutions and Dispersion Solutions sectors, whose products are mainly sold outside of the U.S. In Q3 '25, Bozzetto generated adjusted EBITDA of $16.8 million, which represents a margin of 18.9%. In the same period last year, Bozzetto generated adjusted EBITDA of $14.5 million on a margin of 16.9%. The year-over-year improvements were driven by reduced SG&A costs and favorable product mix. Cortland results from the third quarter are presented on Slide 9. In Q3 '25, Cortland generated revenue of $37.6 million, down from -- down 12.8% from last year. On a constant currency basis, Cortland revenue declined by $5.9 million or 13.7%. Similar to other rope and netting manufacturing companies, Cortland experienced softer sales in the quarter, albeit did better than peers we track. Cortland's rope sales to marine and shipping customers fell due to market uncertainty associated with the introduction of tariffs and we have seen some competitive pricing on netting solutions. I should point out that Cortland's revenue in the comparative period last year was buoyed by strong project sales in North America within the oil and gas sector, which did not reoccur in 2025. Despite a top line revenue decline, Cortland generated a 2% increase in its adjusted EBITDA and improved its margin to 14.6% from 12.5% compared to last year. The improvements were largely driven by lower SG&A costs. In Q3 2024, Cortland incurred $1 million of professional and advisory fees related to a business transformation initiative. We ended the third quarter with $106.5 million of cash, up from $70.5 million at the end of Q2. Slide 10 shows a waterfall of the cash movements in the quarter. Key drivers for the increase in liquidity included a $29.3 million refund from the CRA, the Canadian tax authority, $15.1 million of net cash flow from operations and $1.8 million from the sale of an idle facility at Bozzetto. Cash outflows in the quarter included $3.3 million of common share buybacks, including tax, $4.2 million of CapEx investments and $2 million of principal repayments on the Bozzetto credit facilities. Looking at our liquidity more closely, Slide 11 shows a breakdown of our cash position by segment at the end of September. Over the next 12 months, our cash requirements will include less than $9 million of holdco costs, $13.9 million of interest payments on our 2030 notes, $10.8 million on the Bozzetto senior debt financing and $9.6 million of Bozzetto interest payments. I should point out that our September 30 liquidity outlook excludes the anticipated $8.5 million refund from Revenue Quebec associated with the tax settlement and operating cash flows from Bozzetto and Cortland over the next 12 months. Through the 9-month period, Bozzetto and Cortland generated $66.5 million of adjusted EBITDA on a combined basis, putting us on track to reach our guidance for 2025. As illustrated on Slide 12, our forecast for adjusted EBITDA in 2025 for the 2 businesses is between $88 million and $95 million. We continue to monitor macroeconomic developments on their -- and the impact on these core holdings and we'll adjust our outlook if necessary. Similarly, we are on track to lower our holdco costs to $9 million for the year. Some of the cost savings we have made on holdco costs include reduced audit and professional fees, lower rent, lower insurance and reduced director fees stemming from the optimization of our Board earlier this year. This concludes my summary of the financial results. I would now like to return the call back to Rhys for his closing remarks. Rhys Summerton: Thank you, Steve, and particularly well done on reducing the holdco costs. So on Slide 14, we instituted a 3-step strategy about 6 months ago when I took on the role as Executive Chairman. And just to remind you what those 3 steps were, the first was reduce holdco costs; the second, reduce the discount that the shares trade at; and the third, allocate capital effectively. So how are we doing with those 3? Well, we made progress, we believe, on the cost-cutting initiatives as far as the holdco is concerned. As I said earlier, there's still more work to do there and we will continue that into 2026. I think we're very confident that we'll achieve a good result there. Then on step 2, we bought back about $3 million worth of shares. And we are feeling pretty confident about the value, the market value of our core holdings as a result of the actions that we have taken so far and also getting to know the businesses better. Why is that important? Because knowing the market value of your -- what you own gives you options on what you do next. And that's obviously the really exciting part. As I've discussed in the past, these options include creating additional value from existing assets, whether that's new investments or making adjustments to how they operate. Another option is, of course, to realize value for them based on the market value of those underlying assets. We're excited about the opportunities ahead, but I want to make it very clear that we will proceed with proper due diligence and oversight of the next steps. As we weigh our options, I would also point out that we are well positioned to allocate any new capital that comes our way. We're already receiving capital from the CRA settlement and we have a list of potential investments which we would look forward to talking about more in the coming periods. We're undergoing this transformation from where we were at the start of the year or even 6 months ago and we expect this transformation will accelerate over the next several months. Moving on to Slide 15, progress on the share buyback, that just indicates that we bought back about 8.9% of the shares since June 2024 and we're down now to just over 90 million shares. I'd like to make a point about the share buyback. If you look at it, we, on a monthly basis, announced the number of shares that we've acquired in the market. And that led them to ask why have you tempered your buybacks recently. Just to be clear about this, the buyback is available. But during blackout period, it's difficult for us or more challenging to execute buybacks as freely as we can during non-blackout periods. So just bear that in mind when you see the monthly share buybacks. But the important point is we will buy back shares as long as we see value and we see that buybacks will be a real opportunity to continue to trade that discount that the shares trade at. And then Slide 16, an interesting slide, updated valuation metrics. And I just wanted to draw out a couple of points from this slide. The first is that that very first number, net book value attributable to common shareholders at $295 million. Now that number is impacted mostly on the way down when assets get valued lower. It's hardly ever assets that are valued higher. So we put that number in there to show what -- that we expect that number to grow over time and we would expect strong growth out of that number into the future. And then the other 2 numbers that I would draw out are kind of allied to that. It's the bottom 2 and that's the capital tax losses and NOLs. That's over $1 billion, those 2 numbers combined. Now that value isn't reflected anywhere in the net book value. And we have every intention of utilizing that value into the future. And so on the following slide, the tax loss carryforwards, what we've included, is just an extract from annual accounts, which just gives you an idea about when those losses start to expire and also the fact that they are mostly focused on Canada and the U.S. Now that's on the NOL. The capital losses, they are available on taxable gains at the holdco level and they have no expiration. So we have a little bit of time on our side before we need to start being able to utilize these tax losses in those jurisdictions. I think that's important because it should give investors in Aimia some clarity and confidence that we -- the process that we're going to is going to get us to a point where we can start allocating capital to benefit from these operating tax losses that we have. On to the next slide, Slide 18, measuring the value creation. This is our net book value per common share and you can see it's stabilized, down [ $3.26 ] per share, but we want this number to start growing and we think that as the group changes, you'll see this number start to increase materially. So to summarize, the third quarter was marked with improvements to several financial metrics and of course, a lot of progress on our 3-step strategy. Our focus in the coming months will be to continue with this momentum and execute against that strategy. In particular, we will begin to make investments in companies that meet our specific criteria. These criteria, as discussed previously, will include investing in companies that provide an opportunity to [indiscernible] controlling interest. But more importantly, they generate strong cash flows, that have very strong balance sheets, mostly carrying cash on the balance sheet. And of course, they have to be significantly undervalued and that's how we're going to create value. Our other priorities include achieving our guidance for the year, which Steve spoke about earlier and continuing to reduce our holdco costs, which are really in our control and we're confident of doing that and executing on the share buyback program in line with the various constraints we have and different reasons for being in blackout period. So we look forward to providing updates on this progress. Thank you for your time and we'll now hand over for questions to Joe. Joseph Racanelli: Operator, if you would ask -- or poll the participants for Q&A, please. And then Rhys, I'll also ask some questions that have come in after we've gone through a set of questions from people on the call. Operator: [Operator Instructions] And your first question is from Brian Morrison from TD Cowen. Brian Morrison: Rhys, you say you've gained confidence in the market value of your core holdings. I'm just wondering if you can maybe, at a high level, state to us what steps have been taken to gain such confidence and if you think you have visibility into potential timing of monetization of these assets? Rhys Summerton: Yes. Good questions. So I think we were discussing this internally the last couple of days. A lot of what we can disclose at this time doesn't tell you the work that's kind of gone on underneath the surface here. And so maybe I can elaborate a little bit. We've spent a lot of time meeting with different players in the industry, different owners of similar assets to what we have and I think what's clear is that the trade buyers, financial buyers, competitors, there's no shortage of interest in the assets that we own. And that is what I can say about our underlying confidence in what the value of these assets are. If you take -- if you go back 6 months, I think we could see what the numbers showed, but that doesn't tell you what potential market value might be of these assets. And so that goes up and down, as you would expect with market conditions, the demand for these assets. But it's clear to me that these assets are in demand from various interested parties. Now what I would say on that to elaborate a little bit more is that I have also grown in confidence in the businesses and understood them a bit better. And particularly, I think Roberto and Stefan have done an amazing job running Bozzetto so well in a difficult environment. They're really outstanding managers. And when it comes to Cortland, Cortland is a very, very interesting business. And it's not a business that initially, I might have thought, well, I'm not sure how solid or how strong that business is. I think I'm pretty confident that we can make some changes to that business, which will enhance it, improve it and I think it will be a very attractive business in the future. So hope I've answered your questions. In terms of timing, I don't think we want to go into the timing of things. But I would imagine if you think about what we want to do with the business and create this permanent capital vehicle, which it is, but to utilize it better, we don't want to procrastinate at all. So we are moving as quickly as we possibly can, but we are cautious. We are doing all the appropriate due diligence and are managing the processes as confidently as we can. Brian Morrison: Okay. And then I want to maybe circle back on to this permanent capital vehicle you alluded to and identified your short list of target investments. I wanted to ask about the criteria, but you stated that I think you said controlling interest has positive free cash flow and it's undervalued. I mean, the global markets had a very good run here. Maybe just talk about where you see the sweet spot in terms of potential size and geographies where you might find these attributes. Rhys Summerton: Yes, that's another good question. I mean, if you think about where we are, everything we look at in the U.S., every time we kind of get excited about finding something there, it turns out it has some large SBC charge, which doesn't go through the EBITDA line or maybe the business is not as strong as we initially thought. Where we are finding good businesses, and this is what I've alluded to before, is in the U.K. where they are facing issues from not having very high passive investing or investment ownership. They've got ongoing redemptions in the U.K. And so you find relatively cheap valuations. For a variety of reasons, they're also sitting with almost no gearing or net cash on the balance sheet, which is great for us. And you find one of the things that people don't really appreciate as much is you find that the management teams are significantly cheaper and probably as good as what you find in other countries. So I would say as a first stop in the fast-forward for Aimia, obviously, we want to run this for the next 30, 40 years. But as a first stop, I think you'll find our focus will be on U.K.-exposed companies where they are cheap, but equally, things change quickly. If valuation starts to present itself in other places, we have the flexibility of going there. But I want to stress that we can't allow that to happen for too long because we want to start utilizing the tax losses. And so that's why I think we put the slide in there showing that the tax losses start to expire in 2028 onwards. We want to be in a position where well before that, we are starting to benefit from that asset. Brian Morrison: And would you consider potentially going down the risk scale a little bit and looking at paying down some of your high-cost debt or accelerating the buyback on Aimia with the discount to NAV that it's currently at? Rhys Summerton: Yes, absolutely. When you think about the right structure for this business, what you want is you want debt at the subsidiary level and you don't necessarily want debt at the holdco level. So you want to match cash flow with debt. And I think that's one of the shortcomings that we've identified and we will rectify that in the time ahead. I think what you would expect going forward is a matching of the 2. Ideally, we don't want to carry a lot of debt anyway. If we're buying companies that have cash on the balance sheet and we're upstreaming some of that cash, it will enable us to continue with share buybacks. It will also enable us to use that for further investment. But I think if you have to look at this business in the years ahead, I wouldn't want there to be holdco debt hanging around. I don't want the subsidiary level of the holdco. And obviously, on buybacks, we love buybacks. And as much as we can, while it offers good value, we will continue with the buyback. Operator: And your next question is from Surinder Thind from Jefferies. Unknown Analyst: This is [ Logan ] on for Surinder. I was just wondering if you could give us more color on the sale of the idle manufacturing facility that you mentioned in your earnings release? Just wondering like how long, I guess, it's had excess capacity? Anything else you can point out there? Steven Leonard: Yes, it's Steve. Rhys Summerton: I think that's generally part of our capital -- sorry, Steve, I'll hand to you now. I think it's a little bit part of our focus on making sure we can allocate capital even at the subsidiary level. Now I don't think we've done enough there yet and there's more opportunities to do that. But as a general point, I think we'll try to be as efficient as possible. For the details, I'll hand over to Steve. Steven Leonard: Yes. It was an idle facility when we acquired the Bozzetto business that was identified. There were certain -- as you can appreciate in any manufacturing, there were certain parameters that had to be cleared prior to disposing of the facility and those were achieved. And it wasn't a large facility, but it wasn't something that was being in production for some time. And they realized around $2 million in proceeds. Unknown Analyst: Got it. And then lastly, I was wondering if you could give us an update on Clear Media. I know last quarter, it seemed to sound like you were seeing some early green shoots. So I was just wondering if you could give us an update there. Rhys Summerton: Yes, it's Rhys here. I think we've seen signs of strength coming through in that business. Steve can give us some more details there. Steven Leonard: Yes. As we've commented in the past on Clear Media, a lot of the revenue generation is tied to consumer spending, which is still -- although there's been some GDP growth in China, there's -- the consumer spending is still lagging. However, in the quarter, we saw some strong performance in the business tied to some high level of advertising in a particular industry, particularly in the online industry, which pulled through in terms of advertising on their panels. So things are turning around there. We're starting to see some positive signs. While the business was going through some tough times on the revenue side, they took out a significant amount of costs, both overhead and other operating costs and that's positioning them well as the revenue is coming back. So we're looking for some future growth in that business, but the key indicator is going to be consumer spending. When that comes back, we'll see some good returns at Clear Media. Joseph Racanelli: We've received a couple of questions inbound for Rhys and Steve. First off, with respect to potential investments, would you consider any debt financing in the short term to support those efforts? Rhys Summerton: Yes. I think we look at a mix if needed. If you look at the opportunities that we are exploring, we might not need to raise any debt. And like I said earlier, we have debt at the holdco, which we want to extinguish over time rather than take on more. But we look at all ways of allocating capital. And if debt enhances our returns, we'll definitely look at it. Joseph Racanelli: I know you discussed this, but if you can clarify how will the company benefit from its tax losses if you start making investments in the U.K. Rhys Summerton: Well, that's a good question because it won't necessarily if we buy out companies entirely. But it's means to an end. So over time, it will give us the cash flows and the size to be able to make further acquisitions in the U.S. and Canada. So the reason that we need to move relatively quickly is that we have 2028 is [indiscernible] when tax losses start to roll off. And so we must be in a position where we can be executing on buying high-quality cash-generative businesses in the U.S. and Canada by that time. So buying things in the U.K. or wherever else, that is part of the -- that's the first phase of further acquisitions to get us to having critical mass. Steven Leonard: And I want to point out that on the capital loss side, as long as we structure the acquisition through the holdco, when we ultimately divest of any of those investments, any gain, taxable gain will be shielded no matter where that business is operating as long as we structure it through the holdco. Joseph Racanelli: So holdco costs were initially forecast for $11 million. They've gone down now to $9 million. How much further can they actually go? Steven Leonard: Well, I think you saw in Q3, I think our costs were around $2 million for the quarter. So we're still evaluating. There's a few things we're spending on that are not necessarily going to be recurring, but we're being prudent in terms of the guidance where we said $9 million. I think year-to-date, we were at $6.4 million. So we're definitely getting closer to the lower end of below $9 million. And I think we -- as we said, I think there's a few other action items that we're looking at to lower the base. Joseph Racanelli: Okay. And then final question, can you provide some color -- sorry. Rhys Summerton: Sorry, Joe. Just to remind everybody that the target is to go below 1.5% of book value on an annual basis. So that for me has been the target from day 1. And I think we will get well below that in the future. Joseph Racanelli: And then final question. Can you provide some color on the $4 million CapEx spend in the quarter? Steven Leonard: I mean, that's split between the 2 businesses. I mean, obviously, they have -- they're spending for maintenance for -- also for safety or compliance. And also on the growth side, I would say that would be the smaller portion of the 3 categories. And yes, so whether that $4 million is a recurring number, I think in the past, we've guided around 3% to 5% in revenue in terms of CapEx. And obviously, we look at that very closely. Joseph Racanelli: So that concludes our call today. We appreciate all the questions that we received. If you do have any further, please do reach out to us. We'll certainly make ourselves available. Thank you, everyone. Have a good day.
Operator: Good morning, ladies and gentlemen, and thank you for standing by. At this time, I would like to welcome everyone to Stellus Capital Investment Corporation's conference call to report financial results for its third fiscal quarter ended September 30, 2025. [Operator Instructions] As a note, this conference is being recorded today, November 12, 2025. It is now my pleasure to turn the call over to Mr. Robert Ladd, Chief Executive Officer of Stellus Capital Investment Corporation. Mr. Ladd, you may begin your conference. Robert Ladd: Okay. Thank you, Ali, and good morning, everyone, and thank you for joining the call. Welcome to our conference call covering the quarter ended September 30, 2025. Joining me as usual this morning is Todd Huskinson, our Chief Financial Officer, who will cover important information about forward-looking statements and will start us off with a review of our financial information. W. Huskinson: Thank you, Rob. I'd like to remind everyone that today's call is being recorded. Please note that this call is the property of Stellus Capital Investment Corporation and that any unauthorized broadcast of this call in any form is strictly prohibited. Audio replay of the call will be available by using the telephone number and PIN provided in our press release announcing this call. I'd also like to call your attention to the customary safe harbor disclosure in our press release regarding forward-looking information. Today's conference call may also include forward-looking statements and projections, and we ask that you refer to our most recent filing with the SEC for important factors that could cause actual results to differ materially from these projections. We will not update any forward-looking statements unless required by law. To obtain copies of our latest SEC filings, please visit our website at www.stelluscapital.com under the Public Investors link or call us at (713) 292-5400. Now I'll cover our operating results for the quarter. I would like to start with our life-to-date activity. Since our IPO in November 2012, we've invested approximately $2.8 billion in over 215 companies and received approximately $1.8 billion of repayments, while maintaining stable asset quality. We've paid $318 million of dividends to our investors, which represents $17.75 per share to an investor in our IPO in November 2012, which was offered at $15 per share. In the third quarter, we generated $0.32 per share of GAAP net investment income, realized income of $0.42 per share and core net investment income was $0.34 per share, which excludes estimated excise taxes. Net asset value per share decreased $0.16 during the quarter, which had 2 components. The first was $0.08 per share of dividend payments that exceeded earnings, which is necessary for us to continue to pay out the spillover balance from 2024. The second component was net unrealized losses of $0.08 per share related primarily to 2 debt investments. During the quarter, we had a realized gain of $2.8 million on an equity position. The realization had no impact on net asset value because it had already been recorded as an unrealized gain, which was reversed in the third quarter. Finally, during the quarter, we issued approximately 531,000 shares for $7.4 million of proceeds under our ATM program. Year-to-date, we've issued approximately 1.5 million shares for $20.6 million. All issuances were above net asset value. So turning now to portfolio and asset quality. We ended the quarter with an investment portfolio at fair value of $1.01 billion across 115 portfolio companies, up from $985.9 million across 112 companies as of June 30, 2025. During the third quarter, we invested $51.3 million in 5 new portfolio companies and had $12.5 million in other investment activity at par. We also received 3 repayments totaling $29.8 million; 1 equity realization totaling $2.8 million, which resulted in a realized gain of $2.8 million and received $6.4 million of other repayments, both at par. At September 30, 98% of our loans were secured and 90% were priced at floating rates. The average loan per company is $9.2 million and the largest overall investment is $22 million, both at fair value. 99% of our portfolio companies are backed by a private equity firm. Overall, our asset quality is slightly better than planned. At fair value, 82% of our portfolio is rated a 1 or 2 or on or ahead of plan, and 18% of the portfolio is marked at an investment category of 3 or below, meaning not meeting plan or expectations. We did not add any new loans to our nonaccrual list during the quarter. And currently, we have loans to 5 portfolio companies on nonaccrual, which comprise 6.7% of the total cost and 3.7% of the fair value of the total loan portfolio, respectively, which represents a slight decrease from the prior quarter. Turning to capital. During the quarter, we amended and extended our revolving credit facility, which reduced the spread over the 30-day SOFR rate from 2.6% to 2.25% and extended the maturity date by 2 years to September 2030. We also upsized the total committed amount from... [Technical Difficulty] Operator: Apologies, ladies and gentlemen, we have momentarily lost our speaker line. [Operator Instructions] Robert Ladd: Okay, everyone still there, Ali. Operator: Yes, sir. Glad to have you back. Robert Ladd: Okay. Sorry for the technical difficulties. I think I would suggest why don't we start from the beginning and let you know where we stop. Operator: Sir, the last I heard, I believe it was during your financial report for the year. W. Huskinson: Which was kind of lengthy probably. Robert Ladd: So I'm going to suggest, I apologize for this. Why don't we plan to go back, we'll start -- restart with operating results. Okay. Todd, please, if you will. W. Huskinson: Okay, sure. In the third quarter, we generated $0.32 per share of GAAP net investment income, realized income of $0.42 per share and core net investment income was $0.34 per share, which excludes estimated excise taxes. Net asset value per share decreased $0.16 during the quarter, which had 2 components. The first was $0.08 per share of dividend payments that exceeded earnings, which was necessary for us to continue to pay out the spillover balance from 2024. The second component was net unrealized losses of $0.08 per share related primarily to 2 debt investments. During the quarter, we had a realized gain of $2.8 million on an equity position. The realization had no impact on net asset value because it had already been recorded as an unrealized gain, which was reversed in the third quarter. During the quarter, we issued approximately 500,000 shares for $7.4 million of proceeds under our ATM program. Year-to-date, we've issued approximately 1.5 million shares for $20.6 million, all of which were issued above net asset value. We ended the quarter with an investment portfolio at fair value of slightly over $1 billion across 115 portfolio companies, up from $985.9 million across 112 companies as of June 30, 2025. During the third quarter, we invested $51.3 million in 5 new portfolio companies and had $12.5 million in other investment activity at par. We also received 3 full repayments totaling $29.8 million, the equity realization I mentioned previously for $2.8 million, which, as I mentioned earlier, was a $2.8 million realized gain and also received $6.4 million of other repayments, both at par. At September 30, 98% of our loans were secured around and 90% were priced at floating rates. The average loan per company is $9.2 million and the largest overall investment is $22 million, both at fair value. 99% of our portfolio companies are backed by a private equity firm. Overall, our asset quality is slightly better than planned. At fair value, 82% of our portfolio is rated a 1 or 2 or on or ahead of plan and 18% of the portfolio is marked in an investment category of 3 or below, meaning not meeting plan or expectations. We did not add any new loans to our nonaccrual list during the quarter. Currently, we have loans to 5 portfolio companies on nonaccrual, which comprise 6.7% of the total cost and 3.7% of the fair value of the total loan portfolio, respectively, which represents a slight decrease from the prior quarter. Turning now to capital activity. During the quarter, we amended and extended our revolving credit facility, which reduced the spread over the 30-day SOFR rate from 2.6% to 2.25% and extended the maturity date by 2 years to September 2030. We also upsized the total committed amount from $315 million to $335 million. On September 25, we issued an additional $50 million of the 7.25% 2030 notes at a premium yielding 6.94%, bringing the total 2030 notes issued to $125 million. We'll use the proceeds to repay the 2026 notes prior to their maturity. And with that, I'll turn it back over to Rob to discuss the overall outlook. Robert Ladd: Okay. Thank you, Todd. As we look ahead to the fourth quarter of 2025, I'll cover portfolio growth, equity realizations and dividends. As Todd noted earlier, we now have an investment portfolio in excess of $1 billion across 115 companies. We continue to be very active. And although we expect meaningful payoffs in Q4, we'll likely have a portfolio in excess of $1 billion at year-end. For equity realizations, we expect $5 million for Q4 and possibly another $5 million in Q1 of '26. Estimated gains associated with these realizations are $3.8 million in Q4 and $3.3 million for Q1. And with respect to dividends, we declared, as you know, a $0.40 dividend for Q4. And so with that, you've probably heard some of this twice. So thank you for bearing with us. But at this point, Ali, let's open it up for questions. Operator: [Operator Instructions] Our first question is coming from Erik Zwick with Lucid Capital. Erik Zwick: I didn't have the benefit of hearing the full presentation 2 times. Could you just repeat the expectation for equity realizations in fourth quarter and first quarter? I missed that, couldn't type fast enough. Robert Ladd: Yes. No worries, Erik. Yes. So projecting $5 million of realizations in Q4, of which we've already received $1.1 million and a similar number of $5 million for Q1 of '26. And if those come to pass, the expected gains would be $3.8 million for Q4 and $3.3 million for Q1 of next year. Erik Zwick: Perfect. And just you had a very active quarter in terms of new originations and a nice healthy mix between new and add-on. And I know last quarter, you mentioned that you really started to see a pickup in kind of the pipelines and new activity. So just curious today, as you look at the pipeline, how it looks in terms of mix between new and add-on opportunities? And if you could maybe add some comments, too, just in terms of what you're seeing in terms of rate and structure as well. Robert Ladd: Yes, I'd be glad to. So with respect to -- and we have had quite a few follow-ons, glad you've noted that. I'd say that probably continue to see the same mix, as you may know or have identified that we have quite a few delayed draw term loans in the portfolio that are undrawn. So those are the -- typically the things that are funding that are follow-ons. So we would expect the pace of both to continue very active this quarter and really, it's picked up meaningfully since 4th of July overall for the year. So I think that we expect both to occur. But certainly, the majority of the fundings will be on new investments. Relative to rating structure, so we've not seen any change, and this would really be for the entirety of our investing in terms of meaningful capital structures. So typical equity check is at least 50% of the acquisition. Therefore, our debt is typically 50% or less, more likely in today's case, 40% debt, 60% equity. Leverage quotients are running at 4x EBITDA or less. So those structures all are really strong. We continue to have important covenants across all of our loans. But we are seeing some tightness in spreads. It's a competitive market. Again, we have competition, but we're very active. So seeing some reduction in spreads. As you know, from a year ago, 6 over SOFR or so and now 5 over SOFR and starting to creep down just a little bit under 5. But that's -- we're seeing that throughout the industry. I think you guys are observing that in other companies. But a meaningful amount of capital to invest, very active. We -- fortunately, we continue to obtain equity co-invest in many of the loans we make. And as you could tell from my earlier remarks, those continue to pay off for us. Erik Zwick: That's very helpful. And just last one for me. We continue to see some mixed signs and maybe some mixed expectations for the economic trajectory as well. As you look through your portfolio, and you noted, I think it's 82% of the portfolio is 1 or 2, so on or ahead of schedule. Just are you seeing any increasing weakness or even signs of concern in any segments or industries of your portfolio at this point? Robert Ladd: We're really not. So the -- any credit issues we have had are really based on company-specific issues. So don't see a trend in that way. And -- so more company specific. And fortunately, most of the companies are doing well. Operator: [Operator Instructions] Our next question is coming from Christopher Nolan with Ladenburg Thalmann. Christopher Nolan: Todd, on the new facility, was there any change in the advance rate? What I'm really interested in is whether or not the banks are getting increasingly concerned in terms of the private credit environment? W. Huskinson: No, no, not at all. No, they were -- there's no change in the structure of the credit facility in terms of advance rates. And in fact, we have other relationships with these -- with the banks and other things and had some additional banks come into this facility as it is. And so no -- we really were pleased with the bank group and their response to the changes. So no change at all. We didn't sense any issues. Christopher Nolan: Great. And what is the current status on the third SBA license, please? W. Huskinson: So as we reported last quarter, we received a greenlight letter and are kind of in the spot where we're waiting for the third license to be issued, which we don't know exactly when it happens, but we would expect it relatively soon. So we can -- we don't have any new news on it, though. Christopher Nolan: And how much capacity would that add, levered? W. Huskinson: Well, so today, we have $295 million of debentures outstanding and the total funds family is -- the maximum is $350 million of debentures. So think of it as another $50 million or so, a little over $50 million, which, of course, is dependent upon those loans qualifying for SBIC capital. But it would add additional capital to us. We also have to fund that license with some equity from the parent, which we would do through payoffs of the existing debentures and other sources. Robert Ladd: But I think in summary, $50 million more of capacity. W. Huskinson: Yes, that's right. Christopher Nolan: Okay. And then final question. As I recall, about half of your deal origination is SBIC compliant. Is that correct? W. Huskinson: That's correct. Operator: Thank you. As we have no further questions on the lines at this time, I would like to turn it back over to management for any closing remarks they may have. I apologize, sir, we've had a late question come in, I do apologize, from Robert Dodd with Raymond James. Robert Dodd: In your prepared remarks, I mean, you mentioned potential for significant repayments in Q4. I mean is that going to generate like any onetime income, accelerated prepayment fees, et cetera, et cetera, that's one. But could you also tell us, I mean, like what's the driver? Obviously, some of the equity realizations. Is it repricings? Can you give us an idea of like what's the underpinning for significant repayments in Q4. Robert Ladd: Sure. It's -- I'd say, mostly sales of businesses. And then it could be a case where someone is refinancing, but getting down to like bank pricing where it fits for a bank. But I think it's mostly sales of companies. Robert Dodd: Got it. And then on the spread environment, I mean, yes, I mean, it's kind of across the market. What do you think within your segment, which obviously are smaller, relatively smaller companies [ than the ] upper market. What's the primary driver here? I mean I've heard that it's not necessarily the large players coming down market, but there's new capital formation as well. I mean what do you think is the overall driver pushing down the spreads you said now, in some cases, below 500. And do you think -- do you think they ever go back? Robert Ladd: Yes. So great question. So certainly a competitive market and some credit providers are willing to lend at lower rates. So I think that drives it. Will it go back up? It likely will. We've seen -- as you know, we've been in business for over 20 years. We've seen a number of cycles, and you can see it go the other way. But the good news is that a lot of good capital in the system, both at the private equity firms who we're supporting and in private credit. So a healthy financial system around private credit, but they can certainly go the other way. Operator: I am going to be very cautious here and see if we have any further questions come into queue. Okay. Gentlemen, it appears we have no further questions at this time. So I'll hand it back to management for closing remarks. Robert Ladd: Okay. Very good. Well, thanks, everyone, for joining us. Thank you for the support of our company, and we look forward to give you an update in the spring, I believe it will be in early March, we're reporting the results of the fourth quarter and the 10-K as well. Many thanks. Operator: Thank you. Thank you, ladies and gentlemen. This does conclude today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Operator: Good morning, ladies and gentlemen, and welcome to the Orla Mining Conference Call for the Third Quarter 2025 Results. My name is Audra, and I will be your conference operator today. [Operator Instructions] Please be advised that this call is being recorded. I would like to turn the meeting over to Andrew Bradbury, Vice President, Investor Relations and Corporate Development. Please go ahead, Mr. Bradbury. Andrew Bradbury: Thank you, Audra, and welcome to Orla's Third Quarter 2025 Conference Call. We will be making forward-looking statements during today's call, and I would direct you to the second and third slides of the presentation, which contain important cautionary notes regarding these forward-looking statements. All dollar amounts discussed today will refer to U.S. dollars unless otherwise indicated. The Orla executive team is on the call this morning, and I'll now pass the call to Jason Simpson, President and CEO. Jason Simpson: Thanks, Andrew. Good morning, everyone. I would like to walk you through the key developments of the last quarter, a period that tested our resilience but ultimately highlighted our operational strength and diversification. Most notably, we had another strong quarter with record margins delivering cash to the balance sheet. In particular, we generated record free cash flow supported by record gold production and price. At Musselwhite, the team had an outstanding quarter of strong gold production. At Camino Rojo, a pit wall event occurred in July but a stabilization plan was enacted quickly, so the operations have rebounded nicely. The update to 2025 guidance reflects a deferral of mining higher-grade material due to the mine resequencing. We are also making impressive strides in advancing our growth projects. At Musselwhite, our growth for longer vision is focused on both near-term and longer-term opportunities for resource growth, expanded production and mine life extension. Recent drilling has confirmed an extension of the main gold trend, indicating potential to extend the mine life and increase production from our cornerstone Canadian asset. At our Camino Rojo underground project, work is underway on delivering the preliminary economic assessment in 2026, a key development steps and key development steps thereafter to advance this to a construction-ready project. Which takes us to South Railroad, our heap leach project in Nevada that is now moving toward final permits and construction start with project updates to be delivered in the weeks ahead. This next building block will establish an operating presence in Nevada and take our annual production to closer to 0.5 million ounces at competitive costs. We look forward to increasing the frequency of updates as we actualize this project. Andrew Cormier, our Chief Operating Officer, will now discuss our operating performance. J. Cormier: Thank you, Jason. Musselwhite mine, 326,000 tonnes of ore and milled 329,000 tonnes at a mill head grade of 5.87 gram per tonne gold. Gold recovery rates of 95.3% resulted in production of nearly 58,000 ounces of gold. Our investment in new underground mobile equipment and preventative maintenance program on the existing equipment are contributing positively to the working conditions and productivity. Ventilation upgrades and underground infrastructure projects remain on track for completion in early 2026. The company continues to expect steady production and cost performance from the fourth quarter. At our Camino Rojo oxide mine, mining operations were temporarily suspended in late July following an uncontrolled movement material along the north wall of the open pit. Once again, I'm pleased to highlight 0 injuries, 0 equipment damage, 0 environmental impact as a result of the pit wall event. Our pit wall moderning systems worked well, detecting the movement early and allowing us to pause mining and respond in a controlled manner. This incident validated our commitment to monitoring and safety protocols. We maintain production continuity by crushing and stacking existing stockpiles. I would like to thank our team who successfully mitigated the short-term impact, ensuring consistent processing. The current plan includes mining from surface downwards to pushback and stabilize the entire north wall and reestablish safe working conditions along the north side of the pit. The north wall will be reestablished at a lower overall stope angle at single 10-meter benches based on a design that reduces the risk. During the quarter, Camino Rojo mined nearly 0.7 million tonnes of ore and 2.4 million tonnes of waste for an implied strip ratio of 3.34. A total of 1.7 million tonnes of ore was stacked at an average grade of 0.44 grams per tonne of gold, equating to an average stacking rate of approximately 18,900 tonnes per day. In addition, 1.1 million tonnes of low-grade ore were rehandled and placed on the leach pad at an average grade of 0.32 grams per tonne gold. In total, 2.8 million tonnes of ore at an average grade of 0.4 gram per tonne gold were placed on the heap leach pad during the quarter. Total quarterly production for Camino Rojo was 22,059 ounces of gold. South Railroad hit an important milestone this quarter with the Bureau of Land Management publishing the notice of intent in the Federal Register on August 13, which initiates the formal environmental impact statement process under NEPA. More recently, in November, South Railroad transitioned from participation under the FAS-41 transparency process to a FAST-41 coverage project. The importance of this shift is that FAS-41 coverage provides tools to support efficient review, reduce uncertainty and help ensure the project meets the highest standards of environmental stewardship and regulatory compliance. In parallel, the U.S. Army Corps of Engineers Section 404 permit application, addressing wet land and surface-disturbance impacts was submitted in August 2025 and deemed administratively complete. The BLM NEPA public-comment period closed on September 18, with the largest category of submissions being letters of support, reflecting strong community and stakeholder backing for the project and the U.S. Army Corp Engineering Section 404 public-comment period ended on September 15 with no significant comments received. At the state level, the company has secured a Class I and II Air Operating Permits while water-related applications continue to progress with the Nevada Division of Water Resources. The Water Pollution Control Permit and the National Pollutant Discharge Elimination system, discharge permit applications have been submitted for review in the third quarter 2025. The BLM's Record of Decision, the final permitting decision is targeted for the second quarter of 2026. Following this approval, on-site construction on the South Railroad project would commence and its first gold targeted for early 2028. We continue to engage with local, state, federal stakeholders to sustain momentum in the permitting process in the United States. Our project team continues to work with M3, our EPCM on the engineering for the projects to be prepared for on-site construction starting next year. We are planning on providing a project update in the weeks ahead, which will include a feasibility study update on the South Railroad project. The feasibility study we will release and construct honors the plan of operations submitted initially in 2020, but is significantly more advanced to a construction-ready project supported by detailed engineering, vendor pricing and refined execution planning to enhance the overall confidence in the project. Our team is gearing up for the successful development of the South Railroad project. Etienne Morin, our Chief Financial Officer, will now discuss the financial results for the quarter. Etienne Morin: Thanks, Andrew. Firstly, I'd like to mention that the transition and integration activities at Musselwhite are nearly complete. Until now, Orla continue to rely on some of Newmont's infrastructure, but this transition, data migration and integration efforts should all be completed at the end of November. It was a very collaborative approach and thank you to everyone involved as we reestablish a more decentralized model at Musselwhite following the closing of the acquisition. During the quarter, we sold 79,000 ounces of gold at a realized price of $3,417 per ounce, including the impact of the gold prepay, which resulted in approximately $270 million in revenue for the quarter. As a reminder, we delivered just over 12,000 ounces towards the gold prepay at an average price of $2,912 per ounce, which is captured in the total average realized price mentioned. Excluding the impact of the gold prepay our average realized price for the quarter was $3,508 per ounce, beating the average for the quarter. Consolidated cash costs and all-in sustaining costs for the third quarter totaled $1,200 and $1,641 per ounce of gold sold, respectively. We recorded net income for the quarter of $49.3 million or $0.15 per share, and on an adjusted basis, adjusted earnings were $73 million or $0.22 per share. Cash flow from operating activities before changes in noncash working capital was $113 million or $0.13 per share for the quarter. Exploration and project development costs during the third quarter were $39 million, of which approximately $13 million was expensed and $26 million was capitalized. Our cash balance at September 30 was $327 million, with total liquidity, including the undrawn portion of our revolving credit facility of $357 million, positioning us well for future growth and capital allocation. Subsequent to quarter end, we repaid $30 million towards our revolving facility, bringing the balance outstanding at $90 million, down from $120 million. With South Railroad construction about to begin, we intend to use our strong cash position to self-fund that construction phase and continue to delever. But that being said, we frequently review our capital allocation strategy to ensure the right balance between investments for future growth, such as the South Railroad project, continued investments in exploration for new discoveries and also considering return to shareholders. I'd like to turn it back to Jason now to give us a quick update on our recent site tour at Musselwhite that we hosted in October. Jason Simpson: Thank you, Etienne. In October, we hosted our first site tour at Musselwhite mine. It was a tremendous success that highlighted the mine's operation and the Musselwhite team's expertise and teamwork. And while we were only able to host a small number of participants, I'd like to provide a quick snapshot of what we discussed. Our tour showcased our growth for longer vision at Musselwhite. This is our commitment to continued investment in exploration and operational growth to expand production and extend the mine life for many years. We didn't just buy a mine, we invested in the future. And since closing the acquisition, we launched an aggressive 2-year program designed to begin unlocking that potential. Our first priority has been to fully embrace the growth potential of this remarkable asset. We are committed to multiyear exploration to test the mine trend extensions, significantly expand our underground resources and ultimately identify new satellite deposits that will feed the operation for years to come. Also reinforcing team and culture. One of the most compelling things that drew us to Musselwhite was its people. Our job is to trust our team, support their needs and empower them to succeed. We are actively reinforcing the team and the culture at Musselwhite. Since March, we have recruited an additional 200 new team members to Musselwhite to strengthen the operation and who are now embedded in making real contributions. It isn't just about incremental changes, it is about defining the next era of Musselwhite. What do some of those changes look like? First, evaluating materials handling and improving mine productivity. Also purchasing newer, lower emission fleet, reducing ventilation demands, constraints and improving the environment. Optimizing ventilation systems, minimizing dilution and more broadly, establishing a decentralized structure that enables faster decision-making right at the site level. The power to act is moving closer to the ore body. The growth objective is to fill the mill. The mill has always been underutilized at Musselwhite, so it is our objective to increase mining rates and leverage this untapped mill capacity for production and cost improvements. Expanding the resource is part of this objective, which is supported by our aggressive exploration. It isn't just a list of tasks. It's a commitment to Musselwhite's long-term prosperity through strategic investment and most importantly, through believing in the team. We are extremely proud of the work that has been done over these early months and stay tuned for exciting updates and developments. Our Senior Vice President, Sylvain Guerard, will provide you an update on our exploration programs. Notably, the phenomenal first results from Musselwhite exploration that will feed this future vision. Sylvain Guerard: Thank you, Jason. We are very confident in the value and future of the Musselwhite operation and the outstanding exploration upside of the property. Our exploration strategy is clear, aggressively grow our resource base to unlock opportunities that will significantly increase our annual production and extend our life of mine. In just 8 months since the acquisition, our deep directional drilling program along the mine trend has delivered exceptional first results, validating our investment thesis. This figure highlights some of these initial results. Drilling has intersected high-grade mineralization 1.6 kilometers along strike from current operation, including 4.1 meters at 15.1 grams per tonne gold with visible gold observed. Favorable geology continues another 400 meters pointing to strong potential to extend the mineralized corridor. The program began in late May with 3 rigs active. We have completed 8,000 meters of the planned 11,000 meters in 2025, with results reported from the first 4 holes of the roughly 30-hole program in '25, '26. Each mother hole supports 2 drill sections spaced 200 and 400 meters apart moving to consistent 200 meters spacing in 2026. The other holes will be testing mineralization 1.2 to 2 kilometers beyond current resources. Additional hole will be completed by year-end with assay results expected to be reported in early 2026. Overall, these early results confirm strong potential for resource growth supporting stronger production and a longer mine life at Musselwhite. Our underground exploration program has also delivered exciting high-grade results in access mining areas like PQ Deep, Lynx and Redwings, supporting our resources replacement and expansion effort. To illustrate the beauty and technical challenge of our efforts, the figure shows 1 of the 3 drill rigs across Lake Opap successfully drilling ore to the mine trend extension 2 kilometers from the mine, an impressive technical achievement. Our near-mine surface exploration is focused on testing multiple targets within 10 kilometers of the mill as potential sources of medium-term feed. Encouraging early-stage shallow intercepts have been received from Camp Bay and Karl Zeemal building on significant historical drill results and evaluation to potentially advance both targets into resource categories are underway. In the third quarter alone, our combined surface and underground drilling programs completed over 21,000 meters. Our near-mine surface program was completed in October and will resume in winter once ground conditions allow while our deep directional and underground programs will continue aggressively throughout the year. We are not just maintaining, we are building for the future. In summary, we are executing a high-impact exploration program that is already delivering impressive high-grade results. Musselwhite is a cornerstone of our long-term growth, and we look forward to providing future updates as we continue to define this exciting potential. Our Camino Rojo underground exploration project continues to deliver. With the success of our initial infill program at Zone 22, we expanded drilling by 5,000 meters to a total of 20,000 meters to continue upgrading and growing the resource. We expect this expanded program to be completed by end of this year. Our original program also continues to test multiple targets and is on track for completion in the fourth quarter. In summary, we are advancing the underground project, expanding the high confidence drilling at Zone 22 and systematically exploring our large land package for maximum value delivery. At South Carlin complex in Nevada, our team has nearly completed the full 18,000 meter drill program with final assays and interpretation expected in the near future. We are focused on growing and expanding known resources and identifying new oxide gold mineralization both near our projected open pit and across our extensive, highly prospective land position along the prolific Carlin trend, where we see excellent upside potential. An exploration update for South Carlin complex is expected to be released before year-end. Now I would like to introduce Silvana Costa, Chief Sustainability Officer to continue the presentation. Silvana Costa: Thank you, Sylvain. Our commitment to environmental, social and governance performance is a cornerstone of our strategy, and I'm proud to share key milestones from the third quarter across our sites. At South Railroad, the focus was on a comprehensive engagement program to ensure that key stakeholders have access to transparent and complete information about the project in advance of the public scoping period. Public comment events were hosted by the BLM during September. And as we expected, the great majority of submissions demonstrated strong support for the project from a broad range of stakeholder groups. At Musselwhite, we continue to foster strong relationships with communities and indigenous partners and to develop our talent pipeline. We successfully launched LEAD our signature leadership training program. During the quarter, we trained 32 leaders across 3 workshops investing over 500 hours into developing the Musselwhite's team's capabilities. On September 30, Orla observed Orange Shirt Day or National Day for truth and reconciliation. At Musselwhite, we held a ceremony at site to honor residential school survivors, their families and communities. Most recently, we announced the launch of a $6.6 million fund with our First Nations partners dedicated to advanced education, skills development and cultural revitalization for indigenous use and communities across Northwestern Ontario. At Camino Rojo, we continue to advance social and environmental programs and concluded negotiations of a collective bargaining agreement. The third quarter marked the start of activities of the water, biodiversity and climate project, which we call Pro-ABC. This multiyear multi-stakeholder project in collaboration with the Mexican NGO in our host communities is designed to go beyond the mine footprint to promote fauna and flora conservation, water stewardship and sustainable land-based livelihoods in the region. As we implement Pro-ABC, activity so far have focused on improving practices in animal husbandry, new investments in horticulture, environmental education initiatives and ecological assessment work. Other milestones at Camino Rojo are the renewal of land occupation agreements with local communities and the successful negotiation of the collective bargaining agreement with the union which was voted and approved on November 4. These achievements demonstrate our commitment to responsible gold production and to work in partnership with our host communities, indigenous partners and union to build a sustainable and inclusive future for all of our stakeholders. The third quarter was also a critical time in our permitting time line for Camino Rojo. We remain optimistic about the pending approval of a permit to expand the open pit and build an exploration drift in 2026. During the quarter, our team had the opportunity to meet with Mexican environmental authorities and respond to questions about our permit application. We have maintained positive engagement with state and federal level agencies in Mexico, often with the support of the Canadian embassy. In September, Prime Minister Carney visited Mexico and met with President Sheinbaum and discussed the role of Canadian mining companies operating in the country. The visit led to the development of a new Canada Mexico action plan which includes a commitment from both governments to work together in advancing responsible mining practices in Mexico. As part of this effort, Orla has joined other Canadian mining companies and committing to apply the Mining Association of Canada towards sustainable mining protocols at our operations in Mexico. Then at the end of October, Orla participated in a meeting in Toronto with Mexico's Minister of Environment and Natural Resources, Alicia Bárcena, alongside other Canadian miners. Minister Bárcena expressed her strong support for responsible mining, welcomed the new Canada mining collaboration and reaffirmed her commitment to advance mining permit processes that have been delayed under the previous administration. These developments mark an important step forward in strengthening our partnership with Mexico and reinforcing Orla's leadership in responsible mining. I'd like now to pass it back to Jason for his closing remarks. Jason Simpson: Thank you, Silvana. Looking towards the remainder of 2025, we have several upcoming catalysts for Orla. Notably, a project update, including our feasibility on South Railroad as we move through the permitting process toward construction, an exploration update from our prospective South Carlin complex in Nevada and continued exploration for the underground deep directional drill program at Musselwhite to extend mineralization. This quarter was marked by operational resilience and significant advancements in our growth pipeline. Thank you to our teams in the countries where we operate whose commitment and delivery are driving this business forward. At this point, I'd like to open the call to questions and hand the call back to the operator. Operator: [Operator Instructions] We'll go first to Cosmos Chiu at CIBC. Cosmos Chiu: Maybe my first question is on Musselwhite. Thanks a lot for all the details on Musselwhite, and I was on site as well. But as you mentioned today, you started a new stope in the Redwings area commissioned in September, which is great. My question is to confirm, this is in the higher portions of the ore body. Am I correct? If that's the case, that will help you in terms of increasing your throughput at the mill in terms of filling your mill strategy just because I believe this is beyond some of the constraints you might have in the sort of the material handling system. So maybe if you can touch on that, that would be great. Jason Simpson: Thank you Cosmos for remembering our detail from the site visit and Andrew Cormier can build on any answer that I provide. You're absolutely right. there's really 2 opportunities at Musselwhite, both of which we're working on. The first is these additional stopes in the upper part of the mine, Redwings as an example, as you described, to get a more efficient feed to the mill, but still at reasonable grades as you can see on the section that Sylvain provided. And then separately, there's opportunities for the higher grade stopes, particularly at the end of this year, in the deeper part of the mine but recognizing that it takes a longer material handling process to get to surface. So with the combination of more material from the upper part of the mine and higher grade material from the bottom part of the mine, we feel confident in the near term increasing our production throughput from Musselwhite, which, of course, build for that long-term future that I spoke about. Cosmos Chiu: And Jason on that... Jason Simpson: Looking further -- go ahead Cosmos. Cosmos Chiu: In terms of difference in grade, could you maybe share with us in terms of what that might be in terms of the difference in grade? Jason Simpson: Yes, the grade in the upper part of the mine -- yes the grade in the upper part of the mine is closer to 5, whereas the grade in the bottom part of the mine is 6 to 7 or even higher as we get deeper. The grade gets better in this deposit as we get deeper. Andrew can provide some additional clarity, if he has it on hand. J. Cormier: Yes. Cosmos, consistent with our strategy, the combination of having more tonnes available to feed the mill from the upper part of the mine closer to surface and maximizing increased tonnage and grade vis-a-vis the PQ Deep's, the other component that contributed to that is the equipment fleet. So the higher-tier engines, the more efficient air consumption that they require, less emissions allows us to run more equipment down there. So that's allowing us to access those higher-grade stopes and contribute to the higher performance that we're seeing and we expect to continue. Cosmos Chiu: Great. Maybe switching gears a little bit. At South Railroad, great to see that in early November, I believe, November 4, you're now a FAST-41 Covered Project. I think as Andrew has mentioned, it does provide some tools around the process. But I guess my question is, I'm just trying to get more granularity on it in terms of what it means because I see that the time line hasn't really changed. 2028 sort of start -- early 2028 start of production that hasn't really changed. So is it really just in terms of certainty, in terms of the process, could you maybe talk a little bit more about the significance of now being a FAST-41 Covered Project? Jason Simpson: Yes, certainly, even under being part of the transparency process under this administration, we have seen an acceleration in the permitting with the NOI submission in August -- mid-August, we would have planned for and predicted about a 12-month process. That acceleration began with BLM moving that time line up into the second quarter of next year. So before we became a covered project, I would offer that this administration was responsibly accelerating things. The benefits of being a covered project offers different access to different departments. And in particular, the Department of Interior, now has responsibility to inquire on the projects under this list to make sure that they're advancing and there's no impediments. We have a very aggressive schedule, which we're appreciative of from the BLM, but we have to recognize that we have to bring along all the other satellite agencies and the cooperating agencies, and they've done a great job of doing that. The oversight by the Department of Interior enabled by being a covered project will affect that. And so we now access -- can access and will engage with the Department of Interior and all of the cooperating agencies to make sure that we're doing our part to make sure that we can meet our permitting time lines. In terms of the production date, what I'd like to comment about that is I will protect Andrew and his team and their build construction schedule. We are a company like to deliver on our cost and time line objectives. And it really all comes down to how quickly we can get started in the spring. The current time line as published on the federal website shows towards the end of the second quarter, final permitting record of decision. If that can be accelerated earlier into the spring, there is prospects for us to pull that first gold into the tail end of '27. But officially, we are on the record saying that we will pour first gold early in 2028 and have effectively an almost full year of production in 2028. If things change with the permitting and things continue to get accelerated as we've seen over the last 6 months, then we'll update the market. Cosmos Chiu: That's great. And maybe one last question at Camino Rojo. In Mexico, I guess we've seen recently the granting of permits not for Orla per se, but for some of your peers. Any kind of read-through in terms of the permitting needed at Camino Rojo for the permanent pushback of the pit. Silvana kind of talked about there is continual engagement with the Mexican authorities, and I believe there were some questions being asked and answered by the Mexican authorities. To the extent that you can, Jason, could you share with us some of the questions they might have? Jason Simpson: Sure. Before we get to the questions that they had, maybe what I'll offer to build on what Silvana said, there's -- engagement is important, but also delivery on the part of the Mexican government is equally important. And so now what we are having is in addition to the engagement directly with Silvana and other Canadian mining companies, we're also seeing the delivery of permits and the one that you referred to we're certainly aware of and would be a great example of them following through on their commitments that they made in Toronto. So I'm extremely confident in our permit being granted in the near future because of those engagements. And because of that demonstrated effort on their behalf, I will acknowledge that they have a lot of permits in their backlog but they are very aware of our permits and the importance of it. We do have production certainty into 2027, but we would like to have that permit not only for the expansion of the open pit, but the continuation of Camino Rojo underground, which needs to begin with an exploration drift, which could start as early as next year, subject to Board approval. And finally, I think I heard a question there, Cosmos about the kind of questions that they had around our permit application. There was really 2 categories of question. One was around the expansion in our environmental mitigation practices that we would undertake flora, fauna, water and otherwise for that expansion. And the second category was around the context for the underground exploration drift and in particular, that it is an exploration drift, which will certainly serve as a future production drift, but that we would subsequently be submitting a permit for a CIL plant and underground mine to the Mexican federal authorities once we have sufficient data to do so. Part of that data is obtained from the work we do underground, not only exploration drilling, but geotechnical information, hydrogeologic information and so on that you'll appreciate are necessary for a comprehensive permit submission, which we would make for the continuation of Camino Rojo from open pit to underground. Cosmos Chiu: Great. Thanks, Jason and team for answering all my questions. And congrats again on a very solid Q3 and positive free cash flow. Operator: [Operator Instructions] We'll go next to Lauren McConnell at Paradigm Capital. Lauren McConnell: I just had a question a little bit on guidance. And going into Q4, you obviously reaffirmed 2025 guidance and mentioned costs should ease in Q4. Can you elaborate a little bit more on how quickly all-in sustaining costs at Camino Rojo should normalize and whether Q4 should still be viewed as sort of a transitional quarter? Or is it going to be back to sort of steady state levels with that remediation? Jason Simpson: Yes, I would offer that clearly, Q3, there was an impact to the remediation work we're doing at Camino Rojo reflected in our all-in sustaining cost. There will still be some work in that regard through Q4 as we do a higher level of strip than we had budgeted because we're back at the top, continue to reestablish that ramp and mine from the top down. So I think that some of that cost pressure could continue through Q4. The difference, of course, will be on the denominator in Mexico. In Canada, what I can offer is there will be some cost relief beginning towards the end of the year. By the end of this month, we should be fully extricated from the Newmont systems and the TSA payments that we make, so we should also see some cost relief. But on an average, over the quarter, Lauren, I would offer that those costs are tailing off, but we'll still have a certain impact on Q4. Lauren McConnell: Okay. Perfect. That's helpful. And then just another question sort of around capital and your balance sheet. I mean, obviously, there was a really strong free cash flow generated this quarter. And I know you're probably within your budgeting processes right now for 2026. And obviously, with the gold price, hovering around $4,100, how are you guys sort of thinking about capital allocation between debt reduction, growth and shareholder returns? Has that really changed with this gold price environment in the last couple of months. Yes, any color you could provide there would be really helpful. Jason Simpson: Thanks, Lauren. The answer is it has changed. The gold price requires a different considerations. To get through those 3 categories that you described, the market can expect us to continue to explore across our 3 properties in 2026 and frankly, an approximately equivalent investment rate on exploration. The big project next year, of course, will be the development of South Railroad. We are planning for and have sufficient balance sheet to deliver that through '26 and '27. And in addition to that, because of the strong gold price and Etienne's and Andrew's management of the costs, we'll also be able to continue repaying debt probably on a more accelerated basis. Etienne described 2 out-of-plan debt repayments that we made this year totaling $60 million. I can't telegraph what the payments will be next year. That will be decided upon gold price costs and growth requirements, but predictably, we'll likely continue an accelerated delivery. And then finally, it's important and is an active conversation currently with the current gold price and the health of our balance sheet to begin graduating to return additional returns to investors likely through a dividend. So that conversation is active. And once the Board approves any changes to our capital allocation strategy, we'll announce it to the market. Operator: We'll move next to Andrew Mikitchook at BMO Capital Markets. Andrew Mikitchook: Lots of great questions already asked. Just a quick one about Railroad. Can you give us a little bit of a idea of what's going to be included in this project update for Railroad and the feasibility that will be folded into that. It's been years since we saw the update. And even on today's call, there was a highlight of a fairly material drill program. Is there a resource update going into this? Is it just simply updating of the development plan? What should we expect? Jason Simpson: Yes. Andrew, your question is a very important one. So let me unpack that for you. The first thing I'll say is that the feasibility update needs to reflect the multiple years that have passed since the original update. So you can expect us to make sure that things were updated for 2025 dollars. But it needs to honor the original plan of operations that was outlined to the American government in 2020. And so it will honor that outline from 2020. And so on the question of resources, although we have identified tremendous opportunity for additional oxide gold ounces in Nevada, this update will not include material changes to the gold production plan based upon the 2020 plan of operations, which we're updating for costs, but there will be some considerable changes to the plan that we will construct and operate, namely, as we talked about for many years, we intend to build crushing system that will do 2 things: one, increase the recovery and produce more gold, particularly important at these gold prices, but also derisk any concerns about the heap leach not performing as planned. So that's an important change. I'll also point out that, that crushing system will be owner operated and will not be contract operated, which builds on to the next point I'll make, which is we have elected to move to an owner-operated mining model as well. And so we'll provide that update. So in summary, in the coming weeks, we are going to provide a complete update on the South Railroad project that is up to 2025 dollars, is a buildable project that we will execute over '26 and '27. Will -- for the time being, only include the original oxide ounces planned for Dark Star and Pinion with increased recovery that I talked about. With an absolute certainty of ability to add ounces to that, that we've already discovered and communicated to the market over several years and then we'll outline the cost schedule of all that in our feasibility update. Keeping us true to the plan of operations and making sure that the permitting process is not disrupted, and we look forward to being in Nevada for many, many decades. Operator: And that concludes our Q&A session. I will now turn the conference back over to Jason Simpson for closing remarks. Jason Simpson: Thank you, operator. Since there are no further questions, I would like to thank you for your time, never hesitate to reach out to Orla for questions. This quarter was marked by operational resilience and significant advancements in our growth pipeline. So thank you once again to the teams in the countries where we operate. Operator: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good morning, everyone. Welcome to the Boyd Group Services, Inc. Third Quarter 2025 Results Conference Call. Listeners are reminded that certain matters discussed in today's conference call or answers that may be given to questions asked could constitute forward-looking statements that are subject to risks and uncertainties related to Boyd's future financial or business performance. Actual results could differ materially from those anticipated in these forward-looking statements. The risk factors that may affect results are detailed in Boyd's annual information form and other periodic filings and registration statements, and you can access these documents at SEDAR's database found at sedarplus.ca and on EDGAR at sec.gov. I'd like to remind everyone that this conference call is being recorded today, Wednesday, November 12, 2025. I would now like to introduce Mr. Brian Kaner, President and Chief Executive Officer of Boyd Group Services, Inc. Please go ahead, Mr. Kaner. Brian Kaner: Thank you, operator. Good morning, everyone, and I apologize for my voice. I'm fighting off a bit of a cold, but thank you for joining us for today's call. On the call with me today is Jeff Murray, our Executive Vice President and Chief Financial Officer. We released our third quarter results before market opened today. You can access our news release as well as our complete financial statements and management discussion and analysis on our website at boydgroup.com. Our news release, financial statements and MD&A have also been filed on SEDAR+ and EDGAR this morning. On today's call, we'll discuss the financial results for the quarter ended September 30, 2025, and provide a general business update. We will then open the call for questions. It's great to be here today to discuss our third quarter results and what has truly been one of the most exciting and transformative periods in Boyd's history. Since the beginning of the third quarter, we've made significant strides across our business. We announced a return to positive same-store sales on the back of improved industry conditions, executed well on our margin initiatives and reached several exciting milestones, including surpassing our 1,000th location, announcing a definitive agreement to acquire Joe Hudson's Collision Center and listing our stock on the New York Stock Exchange. It's been an exciting quarter, and I'm proud of what the team has accomplished. Turning to our third quarter results. I'm excited to report that the momentum we experienced in our business in July was sustained throughout the quarter and early into the fourth quarter. For the third quarter, we generated positive same-store sales growth of 2.4%, with growth coming from continued market share gains as well as an improvement in industry conditions. While it remains early in the fourth quarter, same-store sales for October continued to show positive growth, delivering further improvement compared to the third quarter, falling within the range outlined in our 5-year plan. Over the past year, we've seen an improvement in several headwinds that have been negatively impacting repairable claims. These include a moderation in insurance premium increases, which are now back in line with historical levels as well as a return to growth in used vehicle prices. Most recently, we've begun to see some insurance carriers in the United States seek regulatory approval to decrease insurance premiums. These trends combined with our return to same-store -- positive same-store sales and support our view that the industry conditions are normalizing and that Boyd is well positioned to continue to outperform. In addition to the top line growth, we generated strong adjusted EBITDA margin improvement during the third quarter, with margins increasing 170 basis points over a year -- on a year-over-year basis to 12.4%. As a result, adjusted EBITDA grew by 22.8% in the third quarter. The margin improvement came from both gross margins and positive operating leverage as we continue to make headway on our Project 360 initiatives, our cost transformation plan and achieved positive operating leverage from the return to same stores -- from the return to positive same-store sales. With Project 360, we've achieved over $30 million in annualized run rate savings and are on track to reach a $70 million run rate by the end of 2026 with the full $100 million of savings expected by 2029. With the indirect staffing model now fully implemented, we continue to focus on direct and indirect procurement savings through centralization of our procurement spending to fully leverage the benefit of Boyd's scale. We also had a busy quarter with new location growth, adding 24 locations with 17 coming from acquisitions, including the acquisition of L&M Autobody in August as well as 7 new start-up locations. In addition, earlier this week, we completed a 5-location multi-store operator acquisition in Nova Scotia, Canada, which marks our initial entry into this province. We continue to target the opening of an average of approximately 8 to 10 new start-up locations per quarter and currently expect to open 13 start-up locations in the fourth quarter with an additional 18 currently in development through the end of September 2026. I'd like to take some time on today's call to discuss our definitive agreement to acquire Joe Hudson's Collision Center and the related financing as they mark a significant milestone in our company. Joe Hudson's is a company we've long respected for its strong operational performance, disciplined growth strategy, culture and concentrated regional footprint in the Southeastern portion of the U.S. With 258 locations, Joe Hudson's brings scale, operational excellence and strong local presence to complement our existing footprint. As we've mentioned in previous calls, we've been patient in waiting for the right complementary MSO to come along, one that made sense strategically and financially, and Joe Hudson's checks both boxes. This acquisition accelerates our growth, solidifies our position as one of the leading players in the highly fragmented North American collision industry and generates meaningful synergies. The anticipated synergies will benefit both Boyd and Joe Hudson's as we look to achieve direct and indirect procurement savings from the combined business as well as achieve operational benefits from our enhanced density. We estimate that these synergies will be between $35 million and $45 million with approximately 50% in the near term and the remainder by 2028. To support the deal, we successfully implemented an $897 million bought deal initial public offering in the U.S. and a CAD 525 million senior unsecured notes offering, which together secured the financing we needed to complete the acquisition. We also completed a CAD 275 million bond offering to refinance existing debt and strengthen our balance sheet earlier in the third quarter. Through these initiatives and based on the exercise in full by the underwriters of their option to purchase additional common shares as part of the public offering, we have maintained a disciplined financial approach and expect our pre-IFRS debt-to-EBITDA ratio to be at 3.1x at the closing of the acquisition, returning to levels -- returning to current levels as early as the end of 2026. Lastly, the listing of our shares on the New York Stock Exchange marks a major milestone in Boyd's journey, increasing our visibility and giving us access to a broader pool of investors as we continue to execute our long-standing growth strategy. I'll now turn it over to Jeff to go through our third quarter financial results in more detail. Jeff? Jeff Murray: Thanks, Brian. As Brian highlighted, we had a strong third quarter with positive same-store sales growth and solid margin improvement as we continue to execute on Project 360. During the third quarter, our sales increased by 5% to $790.2 million with same-store sales, excluding foreign exchange, increasing by 2.4%. In addition, $22.2 million in incremental sales were generated from 64 new locations that were not in operation for the full comparative period. As these stores mature over the next 2 to 3 years, we expect that they will contribute meaningfully to sales. Over the past 2 quarters, we have begun to see an improvement in industry conditions. Based on claims processing platform data for the third quarter, we estimate that repairable claims were down in the range of 3% to 5%. This represents a meaningful improvement from both the second quarter of 2025, which experienced an estimated decline of 6% to 8% and the first quarter of 2025 during which claims were down an estimated 9% to 10%. As Brian highlighted, we have seen this strength continue in the early part of the fourth quarter and our same-store sales delivering further improvement when compared to the third quarter, falling within the range outlined in our 5-year plan. Gross margin was 46.3% in the third quarter of 2025, up 60 basis points from the 45.7% achieved in the same period of 2024. Gross margin percentage increased due to several factors, including the benefits of internalization of scanning and calibration and an increase in parts margins. Improvement in parts margin was a result of Project 360 initiatives to enhance parts procurement to drive cost efficiencies. Now turning to operating expenses. For the third quarter of 2025, they were $267.6 million compared to $263.4 million in the same period of 2024. As a percentage of sales, operating expenses declined 110 basis points to 33.9% from 35% last year. Operating expenses as a percentage of sales were positively impacted by the indirect staffing model, which was introduced in the second quarter of 2025 as part of our Project 360 initiative. The full cost savings from the indirect staffing model were successfully realized during the third quarter. Future savings are expected to include additional direct and indirect procurement savings as we focus on a more centralized approach to purchasing in order to fully leverage Boyd's scale. In addition to Project 360, the decrease in operating expenses as a percentage of sales was positively impacted by our return to positive same-store sales growth, which provided improved operating leverage on certain operating costs. Offsetting some of the benefits to operating expenses were incremental costs associated with the internalization of scanning and calibration and new location growth. While the internalization of scanning and calibration contributes positively to gross profit and adjusted EBITDA, it does not contribute incremental sales and therefore, increases operating expenses as a percentage of sales. Adjusted EBITDA or EBITDA adjusted for fair value adjustments to financial instruments and costs related to acquisitions and transformational cost initiatives was $98.4 million, an increase of 22.8% over the same period of 2024. Adjusted EBITDA margins improved 170 basis points to 12.4% in the third quarter, up from 10.7% in the third quarter of 2024. The year-over-year increase in adjusted EBITDA was the result of improvements in gross margin, realization of the cost savings from the indirect staffing model and direct and indirect procurement cost savings. Net earnings for the third quarter of 2025 was $10.8 million compared to $2.9 million in the same period of 2024. Excluding fair value adjustments and acquisition and transformational cost initiatives, adjusted net earnings for the third quarter of 2025 was $13.3 million or $0.62 per share compared to $3.2 million or $0.15 per share in the same period of the prior year. Net earnings and adjusted net earnings for the period benefited from higher adjusted EBITDA, which was partially offset by increased depreciation expense and increased finance costs. The increase in depreciation expense was primarily due to the growth in new locations, investments in network technology upgrades as well as growth related to the calibration business. At the end of the period, we had total debt net of cash of $1.3 billion. Debt net of cash before lease liabilities increased from $487 million at December 31, 2024, to $521 million at September 30, 2025. Debt net of cash before lease liabilities increased as a result of new location growth. During the third quarter of 2025, the company successfully closed a private placement offering of CAD 275 million senior unsecured notes. The net proceeds of the offering were used to repay existing indebtedness. During 2025, the company plans to make cash capital expenditures, excluding those related to network technology upgrades and acquisition and development of new locations within the range of 1.6% and 1.8% of sales. In addition to these capital expenditures, the company plans to invest in network technology upgrades to further strengthen our technology and security infrastructure and prepare for advanced technology needs in the future. Excluding expenditures related to network technology upgrades and acquisition and development, the company spent approximately $16.2 million or 2% of sales on capital expenditures during the third quarter of 2025. The company spent $20.5 million or 2.7% of sales on capital expenditures, excluding expenditures related to acquisition development during the same period of 2024. I will now pass it back to Brian for closing remarks. Brian Kaner: Thanks, Jeff. Looking forward, our outlook remains strong. With a return to positive same-store sales growth on the back of improved industry conditions, a positive start to the fourth quarter, continued progress on Project 360 and a transformative acquisition, Boyd is well positioned for sustainable growth and continued value creation in the coming years. Before I conclude, I want to thank our entire team from technicians and frontline staff to regional leaders and support teams for their hard work and dedication. It's their commitment and collaboration that makes achievements like this possible. With that, I'd now like to turn the call over to the operator for questions. Operator: [Operator Instructions] Your first question comes from Chris Murray with ATB Capital Markets. Chris Murray: Maybe turning back to the outlook a little bit. Can you maybe give us some more color on what you're starting to see in the industry in terms of the turn? And you talked about same-store sales growth in line with your historical average, but that's kind of -- that 3% to 5% range is a bit wide. I was wondering if you could maybe help us understand kind of the magnitude of the uplift you're seeing and anything that we should be aware of in terms of thinking about how this might extend into 2026. Jeff Murray: Sure. Yes. Thanks, Chris. Yes, in terms of what we're seeing, we're really commenting on the fact that the conditions that are improving in terms of seeing the diminishment in the inflation around insurance premiums, stabilization of used car pricing, and those are the dynamics that are helping to -- that we're seeing affect our business. We did see an improvement in the first month of Q4 compared to the Q3, pushing us into that range. And so Q3 was 2.4%. The range -- our long-term outlook range is kind of in that 3% to 5%. So it was only 1 month. It's hard to necessarily provide much clearer guidance than that for just 1 month results. But essentially, we're moving into that 3% to 5% long-term range, which is obviously incredibly positive. Chris Murray: Okay. And any thoughts around anything you're hearing around industry trends as we extend into 2026? Brian Kaner: Yes, I'll take that. I mean, look, I think as we've said, the industry drivers around what's happening with used car prices that are up to kind of flat to slightly up, certainly helping the total loss situation. And then I think as insurance premiums come down, our expectation is that people will better insure themselves and put themselves in a better coverage position, which will ultimately result in them being able to file a claim should they get into an accident. Chris Murray: Okay. That's helpful. One question I just wanted to maybe get some explanation on is with the Joe Hudson's acquisition. You talked about it was about a $1.3 billion purchase price, but then you also mentioned briefly that it was kind of net of tax, it's more like $1.15 billion. Can you just walk us through how that delta works and how we should be thinking about your tax rates and kind of like for what duration or how structural is this going to be on a go-forward basis? And I guess the cash tax impact of all that would be helpful, too. Jeff Murray: Sure. Yes. Thanks, Chris. So really, what we're talking about is the fact that through the structuring of this transaction, we're able to get full tax shield or tax shelter on approximately $1 billion worth of the purchase price. And so we're going to be able to have tax amortization that's going to shelter not only what we expect to be Joe Hudson's net income, for a period of time to use up that shelter, but also some of Boyd's taxable income as well. So there's going to be this opportunity where from an accounting perspective, we'll still be recognizing tax -- income tax expense at the same level, but it won't be on current tax. We will actually have cash tax savings. And so we'll pay very little cash taxes as long as we have those deductions over the next period of time. And we've essentially done a DCF on those savings to determine that the $1 billion of shelter, it's approximately $250 million, $260 million of actual tax deductions. And when you present value that, it results in $150 million current benefit. Operator: Your next question comes from Derek Lessard with TD Cowen. Derek Lessard: Congrats all around. Just a couple of questions for me. Outside of the Joe Hudson's acquisition, it does look like sort of your bread and butter type SSO, MSO acquisitions have picked up the pace in the last couple of quarters. Just wondering if you can maybe talk about the drivers behind that and sort of the outlook going forward. Brian Kaner: Yes. Well, I think, first of all, we've always suggested that we'd get back to a level where we had been historically, where we're planning for 80 to 100 units a year. We did have a slower start to the quarter or to the first half of the year. That was primarily driven by just what was happening in the market itself, tougher to put new locations in the ground when the market backdrop is soft. It's just tougher to get insurance carrier support when we're doing that. So as the market starts to come back, it comes back to the larger players first. And so what we're seeing is probably a bit of an influx in the pipeline of those kind of smaller MSOs and single shops that are more willing to sell that, coupled with then our confidence in the ability to get those locations ramped to a level that we would expect them to ramp to over our normal maturity curve. That gives us the confidence to be able to turn on the acquisition pipeline a little bit more aggressively. In addition to that, we're starting to see the -- what we've also talked about is half of our growth coming from greenfield locations -- greenfield, brownfield locations, you're starting to see that pipeline mature. And as that pipeline matures to that 8 to 10 locations a quarter, it gives us that insulation that we need to really have almost a guaranteed number of new units opening every single quarter and then really the toggle becomes how are we going to do on the M&A side. And so far, the pipeline remains very robust. As we've outlined in the commentary with Joe Hudson's, we still expect -- even with Joe Hudson's, we still expect to acquire 80 to 100 or acquire or open 80 to 100 new locations every single year as part of our 5-year plan. And the leverage positions that we referenced in the material include us continuing to open 80 to 100 new locations every single year. Derek Lessard: Great color, Brian. And then one final one for me. Just in terms of returning capital to shareholders, 2% dividend bump. Just how do you think about -- how do you think about that and the balance between growth and acquisitions and buybacks and dividend raises versus your leverage? Jeff Murray: Yes, Derek. So we've obviously had a very, very conservative dividend payout ratio for a long time, and we've had a history of a very nominal increase annually really to help support the inclusion in certain funds. And so the vast majority of our free cash flow gets reinvested in the business because there's just lots of really attractive investments to be made to grow the business and expand EBITDA. And we think that, that is still our best use of capital, but this notional dividend and the notional increase are just there as part of inclusion in some funds. Operator: Your next question comes from Mark Jordan with Goldman Sachs. Mark Jordan: As we think about the impact of tariffs, I'm wondering if you could give us some insight as to what you're seeing in terms of parts price inflation, maybe how much, if any, of it was a benefit to your same-store sales growth during 3Q? And I guess, how should we think about it going forward? Brian Kaner: Yes. So look, I think parts price inflation continues to kind of creep up. If you look at it over the past -- if you look at a run from July to August, it's 2.9% up in July, 3.4% in August, 3.1% in September. As it relates to how much that's actually helping our same-store sales growth, I would tell you that the average cost of repair continues to be much lower or the average -- the increase in the average cost of repair continues to be much lower than it's been historically. If you look at the first half of the year, it's only up 0.9% and we only talk about the first half because it's the mature data that's out there. And that's coming off of '24 that was 3.7%, a '23 that was 7.4%. So I would tell you right now, what we're benefiting from is taking some market share in a down environment. We're taking market share because we're really focused on the success of our clients. Our stores are really dialed into making sure that they understand how to win with the clients, and that's putting us in a much better position to be able to take share in a down environment. Mark Jordan: Perfect. And I guess kind of thinking about that in terms of the repair costs you mentioned, how should we view that going forward in terms of total loss rates? Do you expect used vehicle values to be an offset there to raise the pre-collision values? Or how do you expect the repair costs to increase going forward? Brian Kaner: Yes. I mean I think there's no reason to expect that it won't return back to kind of those normal levels where we always say that our growth algorithm contemplates an average repair cost -- our average repair cost growing at 3% to 5% with the market backdrop from a claims perspective that's down roughly 1%. I think we're headed towards a claims environment where we're now starting to see that 3% to 5%. That's coming off a down 6% to 8% and a down 9% to 10% in Q1 and -- Q2 and Q1, respectively. So we're seeing the claims environment start to come back closer to that down 1% to 2%. I would expect as total loss rates start to react accordingly because used car prices are going up. And I don't think we've seen yet the influx of used car price increases to the extent that I think they will. But as they do continue to go up, I would expect total losses to come down. I'd expect those tickets, those larger tickets to come back into our repair facilities. And as that happens, I'd expect the overall to continue to increase. When you look at what CCC reports the increase in labor rates, that's still up around 4%, 4.5%. So the rates themselves are increasing. The part prices, as I referenced earlier, are still continuing to increase. What's really offsetting that is the larger tickets coming out of the shop and the mix effect of that going backwards. Operator: Your next question comes from Steve Hansen with Raymond James. Steven Hansen: Brian and Jeff, your outlook commentary on same-store growth momentum carrying into Q4 is certainly encouraging. I'm just curious if there's any soft spots buried within that just insofar that the weather was a bit slow to emerge through October. It seems to be showing up finally now, but it's still encouraging nonetheless. But do you have any disparity in the regional performance on that recovery? Brian Kaner: Nothing that's different than what we've seen even historically. I mean the West still remains a little depressed versus the rest of the country, which -- but it has been depressed. But as the markets returned, we see it returning to the same pace as the rest of the country. And to your point, we got a pretty good snowstorm here across much of the Midwest over the last couple of days, which is quite early in the year for us. So we would hope that some of that actually even provides some incremental tailwind to the business in the fourth quarter. Steven Hansen: Very helpful. And just wanted to go back to an enterprise agreement you signed with Mitchell back in October, at least for the Gerber side of your platform. Can you maybe just elaborate on the motivation there and how you think that impacts sort of some of the volume pull into 2026 as you stand that agreement up? Brian Kaner: Yes. Yes. Well, a couple of things there. I mean you also saw earlier in the -- I think it was in the third quarter that the largest insurance carrier came out and said that they've agreed to allow for -- to allow service providers to use either platform, CCC or Mitchell. And as you well know, the second largest carrier in the U.S. actually exclusively uses Mitchell. So our agreement with Mitchell is really to make sure that we're continuing to position ourselves to meet our customers where they're at regardless of what platform they want to use, we're going to be amenable to that. And I think this just opens up the possibility for us to continue to grow with both of those carriers. Operator: Your next question comes from Daryl Young with Stifel. Daryl Young: I just wanted to follow on that Mitchell line of thinking and questioning. Is there any added complexity or cost that's going to be associated with running dual systems going forward? Brian Kaner: Complexity, yes. I mean it is -- it does create a little bit of complexity. But when we have -- when -- typically, when we have dual platforms in the shops like that, we're really only talking about the estimatics platform, not the shop management. So -- and we do have proficiency in the shop right now to write in Mitchell. We write in Mitchell for other customers as well. And so I don't see that it being an inhibitor to that. And look, at the end of the day, we need to build the proficiency in the shops to make sure that they can write in either platform. I tell our shops, I don't -- it doesn't matter to me if carriers want us to write estimates in Crayon, we have to be in a position where we can meet the customers where they're at and take care of the volume that comes to us. So complexity, a little bit. From a cost perspective, not substantial. We don't expect to see a lot of incremental costs associated with running both platforms. Daryl Young: Got it. And then one more on margins. The Joe Hudson's platform obviously has very strong margins, and you called out density as a key component. That's also -- density also seems to be a key part of your 5-year plan. Does Joe Hudson's basically lay out the road map for you in terms of what we should expect to see on margins for the Gerber platform in the U.S.? And does this give you optimism you could maybe deliver faster or higher than the 5-year plan on your consolidated margin? Brian Kaner: Yes. I would -- I mean, look, we have the road map inside of Boyd as well. We talked about on the -- during the Joe Hudson's calls, the one thing that we see in our own business is if you were to look at our North division, which is where we have the most density, particularly around Illinois, Michigan and in markets like that. We have a similar profit profile as Joe Hudson's. So we have the road map. That's why when we came out with our 5-year plan, we talked a lot about building density because we know that density matters both -- it matters to our relationships with carriers and their reliance on us in the marketplace. It matters to us with our dealer relationships where we buy our OE parts from. The denser we are, the bigger we are in the marketplace, the more profitable our parts relationships become. And then we're much more stable from a workforce perspective when we're one of the larger players. So those were the drivers of us acknowledging that in our 5-year plan. Joe Hudson's just happens to be a shining example of when you stay disciplined, what happens. And so I think we have the road map internally. We now have the road map with Joe Hudson's as well or we have another point of validation with Joe Hudson's. Certainly, you would expect that as we blend in 258 new sites at what was reported in the financials at 14.4%, you'd expect that to accelerate our path to -- the timing of our path to 14% because we're blending in a very healthy business and actually have profit to go on top -- have synergies to go on top of that. So yes, I would expect that to be the case. Operator: Your next question comes from Gary Ho with Desjardins Capital Markets. Brian Kaner: Hey, Gary. Gary Ho: Yes. So a couple of questions on my side. First, just maybe just go back to the -- put a finer point on the Mitchell question. So I know in your annual filings, you disclosed the top 2 in terms of contribution to revenue. I'm assuming that's neither of them is kind of related to kind of the Progressive that you kind of mentioned in the past. Can you maybe give us a sense its contribution today, it's the third largest player, where would that be? And how quickly can you ramp up to get to that natural penetration do you think? Is it relatively quick? Is it 12 or 24 months? I just want to pick your brain on that. Brian Kaner: Yes. Well, look, we're not going to disclose anything more than what we've already disclosed in terms of top carrier relationships. Again, I would just reiterate the point that as one of the larger players in the space, we need to be able to serve our customers the way they want to be served. Opening up Mitchell just gives us the opportunity to do that with -- on a much more broad scale with the second largest -- certainly with the second largest carrier in the U.S. And as it relates to then the first largest carrier in the U.S. their openness and willingness to be able to use both platforms gives us the ability and the confidence then to be able to leverage that platform in our stores and start to build the proficiency on Mitchell that allows us to then be able to -- regardless of platform, be able to take care of customers. So I think I'll leave it at that. I don't -- there's really nothing more to say than we're making sure that we're being responsive to our customers' needs, and we're going to continue to do that, and we're going to continue to train and educate the organization as fast as we possibly can to make sure that's happening. Operator: Okay. Got it. Okay. And then my next question, I know in your Joe Hudson's kind of presentation, you talked about a pro forma 9.3x multiple that kind of bakes in $19 million of EBITDA for mature store contribution. That does seem sizable to me just relative to the $63 million of EBITDA after rent on an LTM basis. So what has to happen for you to hit that $19 million of contribution? Brian Kaner: Yes. Well, look, it's really more reflective of the fact that Joe Hudson's has bought 140 locations in the last 3 years. So when you think about 140 of the 258 coming in the last 3 years, there's just a lot of locations that are maturing. So nothing, I think, special needs to happen other than that those locations need to reach their full scale. The one benefit I would think we have right now is it feels like the market is kind of at a bit of an inflection point. So it might be that we've actually been able to procure or to buy this business with a set of maturing stores that might be able to accelerate in a much more expedient fashion than we were anticipating. So I think that it's nothing more than just the size, the sheer number of locations that are maturing. Gary Ho: Okay. Great. Maybe I can sneak in a quick numbers question for Jeff. Just on your slide on pro forma leverage, 3.4x post close, expected to return to 2.7x as early as '27. Correct me if I'm wrong. I don't believe that takes into account kind of the overallotment of the equity raise. So now you have all the final pieces in place and the debt deal, does that change the 3.4x and the timing to get back to the 2.7x? Jeff Murray: Yes, that's a great pickup, Gary. Yes, we've rerun those numbers based on the overallotment that we executed recently. And so yes, now we believe that at closing, we'd be at 3.1x and believe that we would get to approximately 2.6x within the end of 2026. Operator: Your next question comes from Bret Jordan with Jefferies. Bret Jordan: I guess when you think about the comps being within the 3% to 5% range, is it realistic to think about them being above that range in the first half of '26, just given the low bar? Or is what you're seeing in a ramp still pretty modest? Jeff Murray: Yes. I think it's certainly conceivable given that we're basing it off a lower -- sort of a more challenged environment as a low comp period. A normal level of growth with a low comp could see us exceeding that 3% to 5% for a period of time. We haven't seen that yet. So we're only commenting on what we're seeing thus far this quarter. But we have seen some low comps. And if you look at our history, when you see periods of low comps, they typically are followed by periods of higher same-store sales naturally. But as I said, we can't tell that for sure, but it's a reasonable thing to be considering. Bret Jordan: Do you have any color on the Joe Hudson's comp, their relative performance versus yours in the period? Brian Kaner: Yes. We think they were slightly behind where we were at in the current period. Bret Jordan: And then... Jeff Murray: I think they had been stronger, though. I think they had been stronger throughout the first part of the year. Brian Kaner: Yes. They were actually up in the first part of the year and then slightly behind where we finished in the third quarter. But I think, look, I mean, there is obviously going through a lot of distractions and a lot of activity in the third quarter as well. So nothing to really read into that. Bret Jordan: And then a quick question on the insurance pricing that you were commented on. Do policies need to actually come down on an absolute basis or just moderating or going up less to get the consumer to be either putting deductibles lower or putting comprehensive back on? Brian Kaner: Well, I think there's a couple of things that will happen. One, there's a tremendous amount of switching that's happening. So as people switch, I think there's going to be a higher propensity to better position themselves from a coverage perspective. There have been 2 of the large carriers have -- State Farm actually filed to -- with the regulatory environment -- regulatory group to put a 10% premium decrease in the state of Florida. And then you also saw that Progressive announced that they were going to put $1 billion, which is roughly $300 a vehicle into the state of Florida as a decrease. So our thought is if you can't afford the insurance coverage that you're in, people need to start -- and we saw this. We saw this coming out of the recession as well. People better insure themselves when they start making switches or they start to see the carrier or the pricing decreases, and that's what we're expecting. Operator: Your next question comes from Nathan Po with National Bank Capital Markets. Nathan Po: I just want to pull on that thread a bit more regarding what you saw in the last recession and talk about or ask about kind of the time line that you might expect between insurance companies decreasing rates, people noticing this, better insuring themselves and how that finally translates into more volumes in your repair facilities? Brian Kaner: Yes. Well, look, I'd start off by saying the reasons for the softness in those 2 periods was very different. During the recession, people were out of work, unemployment was high. And what really brought it back in line was people actually getting back to work and then kind of getting themselves back into a better financial position in order to be able to better insure themselves. So that took a longer period of time. It took roughly 2 to 3 years for that to really work itself out of the system. And what we've talked about historically is what you see when that's working itself out as you see collision claims, which is the first-party claim, the one that's the at-fault party go down disproportionate to the liability claims, liability claims being the best indication of accident frequency. So as liability claims have been much more stable in that kind of down 3-ish percent even through this period, the same thing we saw was happening on collision claims, which leads us to believe that when collision claims are filed, it's because the at-fault party can't afford their deductible or they don't have collision coverage. So as the second part of the question, when does it return? The immediacy of nobody would take the premium decrease and then go back later on and add the coverage. So my suspicion is that what's happening is as people go to switch their insurance, the carriers are having conversations around I can save you a couple of hundred dollars. And at the same time, I can actually put you in a lower deductible plan, and I can add back collision coverage and the consumers are generally making decisions at that point in time. When they get a premium decrease, probably -- look, the point of having insurance is to be able to use it if you need it. So if you have insurance and you put yourself in a position where you can't afford the deductible should you get into an accident, it's kind of pointless to have it. So I think, generally speaking, I would assume that people are trying to educate the agents and the insurance carriers are educating consumers around get yourself in a position to where if something did happen, you can actually use it. And I think when they've got the ability to have that conversation with decreases coming in, obviously, their objective is going to be to preserve the amount of premium that they can. The way they can preserve some premium is to increase the coverage. Nathan Po: Got you. I'll swap over to M&A. So with Joe Hudson's padding out your Southeastern presence, where does your focus now shift geographically after that's been integrated or in the books? Brian Kaner: Yes. Look, I don't see any meaningful shift. There's still plenty of -- given how fragmented the market is, there's still plenty of growth opportunities for us across the Southeast as well as the rest of the United States. So I would expect us to continue to be active in the Southeast. We pick up 2 new states with Joe Hudson's, West Virginia, and Mississippi. So I'd expect to see continued growth. It just really opens up a lot more white space for us to be able to build out density. So it puts us in -- as we talked about on the call, it puts us in the #1 position in 14 new markets and the #2 position in 2 new markets continuing to build out those markets and fill in any white space really is part of our market planning initiative that we kicked off earlier this year. Nathan Po: Excellent. And with Joe Hudson's now out of the MSO pool, are you able to describe what the MSO pipeline looks like now in terms of size? Brian Kaner: Yes. Well, I mean, Joe Hudson was one of the assets that was longer in their hold period with private equity. So the pipeline of larger transactions, most of them are fairly immature in their hold period. So the pipeline of larger deals like that is probably pushed out to the, call it, the 2- to 5-year period of time. But there are still plenty of, call it, 3 to 10 store locations that are out there that you're seeing us be a lot more active in right now. Obviously, the L&M transaction gave us 8 new locations. The new -- the business in Nova Scotia gave us five locations. So we're starting to get a lot more active, and they're starting to see a lot more activity in that kind of, call it, smaller MSO, smaller regional MSO category that we're going to continue to be very active in while the other ones get longer in their hold period and come back to the market again. And if they make sense for us, then we'll continue to be participative at that point in time. Nathan Po: Got you. And one last one for me. With the new entry into Nova Scotia, if you take a step back, are you seeing any major valuation differentials between Canada and the U.S. between like single stores or multi-stores? Brian Kaner: Well, I mean, no. And we haven't been as active in Canada recently. But I think as our leader in Canada has really gotten that business back on track, we've seen the Canadian marketplace emerge the same way we've seen some of the benefits we've seen in the U.S., we're really refocusing in on continuing to build out the Canadian market. And I'm really happy that we open up a new province with a lot of white space for us to be able to go build out. Operator: Your next question comes from Tristan Thomas-Martin with BMO Capital Markets. Tristan Thomas-Martin: I think it's kind of been asked in a couple of ways. I was just curious, is there any -- outside of insurance pricing and used car values, is there any correlation between consumer confidence levels and claims volumes? Brian Kaner: Probably, but harder to -- certainly harder to quantify. I mean the one thing that we can correlate and we have seen move as the drivers have moved is those drivers being what's happening with premiums and what's happening with used car prices. We've said those were the 2 kind of cyclical things that were happening that were driving the claims softness. And as those things have started to show signs of improvement, so have the claims environment. So I think it gives us a fairly high degree of confidence in the correlation between those 2 drivers and what's happening in the industry. Does it -- is there some incremental positive or negative associated with consumer sentiment, as I said, probably, but much harder to quantify. Tristan Thomas-Martin: Okay. And then just one more. The $35 million to $45 million of potential synergies, my understanding is it's all operational. Is there any way to think about maybe potential top line synergies or market share from this densification? Brian Kaner: There certainly is probably synergy opportunity as it relates to revenue. We haven't baked any of that into our thinking at this point. But we certainly believe that there's a benefit to densification and would anticipate that being upside to the transaction. Operator: Your next question comes from Razi Hasan with Paradigm Capital. Razi Hasan: Could you maybe just highlight the added relationships with insurance carriers that Joe Hudson's brings and the net new opportunities for Boyd? Is there much overlap between the 2 companies? Brian Kaner: There's -- from an overlap of insurance carrier relationships, I mean, they're doing business with all the same carriers that we do business with. So there's no meaningful difference in the carrier makeup. So we don't see anything kind of anomalous there. Razi Hasan: Okay. Great. And then just moving on to operating expenses as a percentage of sales. You mentioned indirect and direct procurement savings going forward. Could you maybe quantify that a bit just in terms of the impact in the coming quarters? Jeff Murray: Yes. I guess we'll stick to our -- the guidance that we've been providing all along that we sort of expect to get to $70 million worth of run rate benefit by the end of 2026. The indirect staffing model that we put through in Q2 of 2025 resulted in approximately $30 million of that $70 million. So we are expecting to be factoring another $40 million between the end of Q2 of 2025 and the end of 2026 is kind of the way we're thinking kind of in a ratable way is how we're modeling out so that by the end of 2026, you've got a run rate of $70 million. Razi Hasan: Okay. And that would impact the operating expense line, right? Jeff Murray: Yes, primarily. There'll still be a little bit of wins on the gross margin side as well, but the majority of it would be coming from the OpEx line. Razi Hasan: Okay. Great. And maybe just lastly, I think on your presentation deck, you mentioned with Joe Hudson's acquisition, market share in the U.S. close to 7.6%. Do I have that number right? Brian Kaner: Yes, that is what we referenced in the materials. Operator: [Operator Instructions] Your next question comes from Sabahat Khan with RBC Capital Markets. Sabahat Khan: Just on the Project 360 kind of the execution and as you look ahead to the integration of Joe Hudson's, I think there were some comments that it could be similar teams that execute this. Can you maybe just talk about the team that's going to deliver the synergies? Will you just sort of beef up your existing team? Will it be a separate integration team as we sort of work through 2026 to deliver on these targets and the synergies? Brian Kaner: Yes. So there are 2 things I'd add to that. One is, as part of Project 360, we opened up what's called a results delivery office to execute on those initiatives. What we're doing with Joe Hudson's is we're combining the results delivery office with an integration management office, and we're going to have that team responsible for going after now not just the $100 million that we committed to from a Project 360 perspective, but now the incremental $35 million to $45 million of synergies that we're anticipating from the Joe Hudson's transaction. So that team and that process is very, very robust. The results delivery office, obviously, has proven that we can get the type of traction that we need. So many of the same resources that we're working on that are going to be what's now helping us with the actual synergy realization of the Joe Hudson's transaction. The leader of that, which is Kim Morin, who's done a phenomenal job of managing through the RDO process is also going to lead the IMO process now. That will be a much more fulsome approach to not just synergy realization, but making sure that we integrate the Joe Hudson's transaction properly. The most important thing that we need to do in the short term is preserve the base business that we just bought and make sure that we keep the team stable in that organization because really our desire is to put the best of the best people on the field when we're done with the transaction. So the team has really dialed into making sure that happens. And I couldn't have any -- I couldn't be more confident in the leader that we have running it. Sabahat Khan: Great. And then just continuing on that discussion, particularly as it relates to the procurement savings and maybe consolidating some of the purchasing, are the agreements with your vendors and the suppliers? Is there sort of a time line to these? Is it something you can following a major transaction, sort of call them all to the table? Understanding the Project 360 savings are quite front-end loaded. Just wondering if the procurement savings related to Joe Hudson's could also maybe come a bit sooner than the rest of the synergies. Brian Kaner: Yes. I mean we've talked about slightly more than 50% of the savings coming in the first year when we talked about the Joe Hudson's transaction and our confidence in that really comes from the fact that we know that some of those procurement relationships will have an immediate benefit. So yes, you're right. We do expect some of that to be front-end loaded, and we expect the kind of more of the back-end synergies to be really more realized at the -- towards the tail end of the integration process. Operator: There are no further questions at this time. I will now turn the call over to Brian for closing remarks. Brian Kaner: All right. Well, thank you, operator, and thank you all once again for joining our call today, and we look forward to reporting our fourth quarter results in March. Thanks again, and have a great day. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
H. Foss: Hi, everybody. Welcome to Flex LNG Third Quarter 2025 Result Presentation. My name is Marius Foss, I am the Interim CEO of Flex LNG, and I'm here joined with our CFO, Knut Traaholt, who will take us through the financials later in the presentation. Today, we will cover Q3 results given an update on the LNG market, and as always, conclude the earnings presentation with a Q&A session. Knut Traaholt: And before we begin, a quick attention to our disclaimer. Today, we will be using some non-GAAP measures such as TCE, adjusted EBITDA and adjusted net income. These are supplements to the earnings report reported in accordance with U.S. GAAP. Reconciliations of these are available in the report. As there are limitations to the completeness of today's presentation, we encourage you to read this together with the quarterly report. And with that, let's commence with today's presentation and over to you, Marius. H. Foss: Thank you. Let's begin the highlights of the quarter. During the quarter, we said in $86 million or $84 million, excluding the EUAs related to the EU emission trading system. The fleet average TCE during the quarter ended up at $70,900 per day. Net income for the quarter came in at $16.8 million, implying an EPS of $0.31 per share. Adjusting for unrealized losses on interest rates, derivates and write-off financing costs. We end up with an adjusted net income of $23.5 million or adjusted earnings per share at $0.43. During the third quarter, we finalized the refinancing of Flex Resolute and Flex Constellation, resulting in an all-time high cash balance of $479 million. We received a notice from one of our charters that they will not declare the 1-year option on the good vessel Flex Volunteer, leaving her open from mid-January 2026. Flex Constellation is now fully booked in the fourth quarter and first quarter next year when she commenced her 15-year time charter in direct continuation. We expect the full year revenues for 2025 to come in around $340 million, and we expected TCE for the year about $71,000 to $72,000 per day. Adjusted EBITDA is expected to come in around $250 million for the full year. We are all time high cash balance, no debt maturity prior 2029 and a solid contract backlog. The Board has declared another dividend of $0.75 per share. This is then our 17th consecutive dividend of $0.75. Our 12-month trailing dividend is then $3 per share, implying a dividend yield of 11%. We have distributed close to $730 million to our shareholders since the fourth quarter of 2021. Looking at our contract coverage. We have 53 years of minimum firm backlog, which may grow to 80 years if the charters declare all the options. As mentioned during the highlights, Flex Volunteer will be relevered from us from current charter in December, and she will go straight into dry dock in Singapore for her 5-year special survey. We are first marketing the vessel for next employment ex dry dock Singapore mid-January. The Flex Artemis has completed her 5-year special survey in September and has since traded in the spot markets. We have fixed our good vessel Flex constellation, and she is now fully employed until 2041. In sum, we have a solid contract backlog with 80% of available days covered next year. This protects us from a softener term market. As we will see later in the presentation, our contract profile is well positioned to benefit the increasing LNG volumes coming on stream. Looking at our guidance for the full financial year of 2025, we expect 2025 revenues to come in around $340 million. We expected TCE per day of around $71,000 to $72,000 per day. Looking at our adjusted EBITDA, we expect TCE to come in around $250 million. We are committed to maintaining a shareholder-friendly dividend policy and delivering attractive shareholder returns. We have a transparent framework for dividend payouts. These include earning visibility, contract backlog, balance sheet strength and debt maturity profile. We have made a small adjustment to our set of decision factors. The backlog and visibility is now going from dark green to light green. This reflects having 2 vessels opened in 2026, which we are actively marketing. That said, we have comfortable with 53 years of minimum firm backlog, but we find it prudent to make adjustment to this scorecard. The Board has declared an ordinary quarterly dividend of $0.75 per share. The dividend will be paid out about 11th of December for shareholders on record by 28th of November. Before handing over to Knut, I want to give a sincere thank you to our crew on board, our vessels and our technical team for completing the 4 scheduled dry dockings in 2025 in a safe and efficient manner. With no LTIs, this is very impressive work, and we have completed all of our special survey in less than 20 days each. The average cost of docking was $5.6 million, reflecting that we had one drydocking taking place in Europe, which is more expensive than Singapore. In 2026, we will complete 3 dry dockings. Flex Volunteer will be ex-dry dock mid-January, whereas Flex Freedom and Flex Vigilant will be dry docking in the first half of 2026. With that, I think I'll hand it over to you, Knut. Knut Traaholt: Thank you, Marius. So as mentioned, revenues for the third quarter came in at $85.7 million or $83.6 million adjusting for the EAs. This translates into a time charter equivalent of $70,900 per day. The softer spot market is impacting the earnings from Flex Constellation and Flex Artemis. We have also completed the drydocking of 2 vessels, namely Flex Artemis and Flex Amber in the third quarter reducing the number of available days. While this is offset by Flex Resolute and Flex Aurora returning to service after dry dock. The operating expenses came in at $18.8 million or around $15,700 per day. Vessel OpEx for the first 9 months of the year is $15,500. Hence, in line and spot on with our full year guidance of $15,500. On the interest expenses, we are now materializing the benefits from lower base rates, improved terms under our financings, interest rate hedge management and utilization of our RCF capacity. Even though we have added new debt, these are done at improved terms. Hence, interest expenses are reduced compared to the previous quarter. But notably, and as highlighted here, the interest expenses for the first 9 months of the year is down $10 million compared to last year. We expect to see further positive impact as our new financings in particular, the attractive leases for the Flex Courageous and Flex Resolute are materializing into the P&L. During the quarter, we refinanced Flex Resolute and Flex Constellation. Hence, we have some refinance costs, which are primarily write-off of debt issuance costs related to the old financings. Our interest rate portfolio delivers a realized cash gain of $4.1 million, which is offset by $4.3 million in unrealized losses as a result of falling mid- to long-term interest rates. Consequently, we have a net loss on derivatives of $200,000 for the quarter. As a reminder, our swap portfolio has a notional value of $775 million, with an average duration of 3 years fixed at an average interest rate of 2.5%. Since January 2021, this portfolio has generated unrealized and realized gains of $130 million. So in sum, this results in a net income of $16.8 million or earnings per share of $0.31. Adjusting for the unrealized losses from derivatives and the refinance cost, adjusted net income came in at $23.5 million or adjusted earnings per share of $0.43. In Q3, we generated $43 million from operations and released $2 million in net working capital adjustments. With the $8 million in drydock expenditures, we generated approximately $37 million in net operating cash flow. We paid $23 million in scheduled debt installments. And as you can see, we realized $93 million in net proceeds from the refinancing of Flex Resolute and Flex Constellation. We also paid out $41 million in dividends to our shareholders, which then leaves us with an all-time high cash balance of $479 million at the end of the third quarter. So let's have a look at our balance sheet. With the new attractive financings in place, freeing up additional liquidity, we have fortified our balance sheet even further. As you can see, the balance sheet is clean with cash and ships. Our fleet is young and ordered at the right point in the cycle. The financing is a mix of long-term leases and bank debt, which is split in term loans and nonamortizing revolving credit facilities, which provides us with a lot of financial flexibility. We are managing the interest rate risk with a derivative hedging, as mentioned. But we have also fixed rate leases, which together provides us with a hedge ratio of 70% net of utilization of the RCFs. So to summarize, we maintain our fortress balance sheet with revenue visibility from our contract backlog, ample cash position, limited CapEx liabilities and no debt majority prior to 2029. That gives us financial and commercial flexibility to manage more market exposure and the current LNG shipping market. And with that, I hand it back to you, Marius. H. Foss: Thank you, Knut. The spot market was in doldrums at the start of the winter market in Q3. However, in recent weeks, we have seen a positive shift in the spot market. Spot rates for modern 2 strokes are currently quoted at around $70,000 per day. I would like to highlight some of the factors causing these dayrates movements. We are seeing a record LNG volumes on the water with record number of liftings coming out of the U.S. with almost 10 million tonnes exported in October. It's not just in U.S. LNG exports from Africa continent have also surged to the recent weeks especially for Nigeria and Algeria pushing total original output of the strongest level since late 2022. This has happened in apparel with a strong demand of LNG from Egypt. So strong that this is causing some congestions with several carriers waiting to discharge. This creates efficiencies and absorbs a lot of shipping capacity. Lastly, we have seen some signs of pricing spread between the JKM and the TTF, laying the groundwork for some arbitration opportunities. In sum, we see a very attractive spot market, and there are pockets of shipping efficiencies, which can suddenly absorb a lot of tonnage on a short time, and this drives the spot market now. Global LNG trading volumes continue to grow, 350 million tonnes from January to end of October 2025, which is up 3% from last year. The U.S. is driving that growth, exporting 87 million tonnes at a 22% jump year-on-year. Qatar is steady at around 68 million tonnes, while Australia has slipped 5%. On the import side, Europe is the clear growth engine with imports of 26%, offsetting declines in Asia. The more mature Japan, Korea, Taiwan or JKTC block is down 1%, whereas China is down 18%. And India is down 6%, showing that Asian buyers are pulling back from these levels around $10 and $11 per MMBtu. On this slide, we illustrate the accelerating growth in U.S. export volumes. The U.S. export close to 10 million tonnes, LNG in October with Freeport, Corpus Christi and Plaquemines as achieved record volumes. Take Plaquemines as an example, that project has impresently ramped up the production volumes and are now pushing already nameplate capacity. From a trade flow perspective, most US LNG cargoes continue to head to Europe, contributing to elevated inventories levels. Shipments to Asia has increased modestly and more vessels take the longer Cape of Good Hope route, boosting the ton-mile demand through Asia, share remains below the peak in 2024. So far in 2025, there has only been 18 LNG carriers ordered. This is markedly down from previous years and the lowest number for the first 9 months since 2029. The new building price for a standard 174,000 cubic meter vessel has seemingly flattened out below the $250 million mark and is currently quoted at around $240 million by ship brokers. The shipyards are quite busy, and the slots offered for these levels are for deliveries in the second half of 2028 and onwards. The order book itself stands at around 287 vessels, which equals around 40% of the live fleet. The bulk of fleet growth is concentrated to this year 2026 and 2027. There is a considerable slippage of deliveries from 2025 to 2026. Less than 30 of these new buildings are open, and we would like to highlight that the most new vessels are already tied up to Qatar project or other long-term projects entering programs. This profile means that while there will be a lot of new tonnage entering the market in the midterm. However, our own backlog gives us strong illustration of the near-term fleet growth. We are seeing a wave of LNG vessels retirement this year, 14 so far in 2025 has already been scrapped. The following gradual climb been scrapping since 2003 as older steam turbine ships reach the end of their economic life. The average age of scrap vessel continue to fall, now around 26 years, down from nearly 40 a few years ago, meaning that ships are being retired earlier than before. On the right, you can see the age profile of the live fleet. About 1/3 of the LNG carriers on the water today are 15 years old and 10% are already past 20 years. We see some 30 steam vessels are set for the fourth 5-year special survey over the next 12 months. As there is a very limited appetite for steam vessels in the current spot market, we believe this will push shipowners in the direction of scrapping versus substantial investment of another dry docking. So while 2025 is already a record year for scrapping, the trend is set to continue as operators make room for new buildings wave and retire the dinosaurs of the fleets. On the left-hand side, we are looking at the signed long-term SPAs volumes. The first 9 months of 2025 have seen record high activity. 79 million tons of new loan contracts approaching at peak levels last seen in 2011. This reflects a renewed appetite for long-term offtake, particularly among Asian buyers who are looking at future supply to manage prime and security risk. The positive takeaway is that this trend derisk new liquefaction project, giving developers of commercial backing needed to move forward. You can see that the momentum on the right-hand side of the slide, the way of having new FIDs continue through into the third quarter. Early in the year, several major projects reached FID, including Louisiana, Corpus Christi Midscale and CP. In September and October next decade took FID on Rio Grande LNG trains 4 and 5, while Port Arthur Phase 2 and Coral North FLNG in Mozambique, added another 16 million tonnes combined. Altogether, FID activity year-to-date stands around 68 million tonnes with the U.S. accounting for nearly 60 million tonnes of that underlying its continued dominance of the next wave of LNG supply growth. Let's wrap it up, the market section with a slide showing the growth in new liquefaction capacity. The outlook for new LNG supply remains very strong, and the way we are still building. What we are seeing is that the next phase of global LNG growth starting to take shape. Over the next years, there will be a steady steam of new volumes entering the market, supported by financial investment decision already taken and the record level of long-term contracts we discussed earlier. The 2 key drivers for upcoming supply wave are Qatar and the U.S. states. Qatar is moving ahead with the North Field expansion. The U.S. continues to lead the charge of the new projects with several facilities already under construction and more expected to reach FID soon. With this new wave of project coming, the outlook for LNG shipping is bright, and we are well positioned to capture opportunities ahead. With that, let's move over to Q&A session. Knut Traaholt: Thank you, Marius. Let's open up for the Q&A, and thank you for everyone who has sent in their questions. There are a couple of questions regarding Flex Volunteer, but probably more related to the sister vessel, Flex Aurora and options that are due early next year. Question relates to the likelihood of that option being declared or if you can share any more information around it. H. Foss: Yes. No. As we have explained in the presentation, the volunteer is coming back to us and going to dry dock and the Flex Aurora option is due in Q1, and we are anxiously waiting for the same. Given the momentum in the current spot market, and maybe that will continue into next year, it will be even more interesting to see if how they will deal with the option or not. We are always optimistic until we have the options or not. But for sure, the momentum in the spot market right now is maybe people, in general, have other thoughts which have options due in the near course. Knut Traaholt: And with then Volunteer coming back, and we have Flex Artemis open. There was a number of questions on the opportunities there for -- more of the turn market and longer-term contracts. We did not cover at this time in the presentation. So what can you say about the activity in the market? H. Foss: Yes. First of all, Flex Artemis has now been basically covered throughout 2025, which we're happy for. After we came back from Gastech, there has been a good number of term requirements, both for prompt deliveries and deliveries in 2028 onwards. So -- and we expect even more new projects to enter the market. So with what we have explained in today's presentation with the volume growth coming as well as you see most likely highway of scrapping. I think Flex LNG with the potential positions coming forward the next couple of years, we are in a good position to renew and enter into the market. So from where I'm standing today, we are quite optimistic and bullish about the coming 3, 4 years. Knut Traaholt: And we also have a number of questions which are recurring from previous quarters and relates to how to spend it and our cash balance. I guess I can also cover there that we have a sort of a strict capital discipline if we are reinvesting. We have been prioritizing return of capital to shareholders. And as we also mentioned in the presentation that we now have more market exposure with ships coming back to us, it's important to have a solid balance sheet and available liquidity so we can maintain our commercial flexibility. H. Foss: Yes, I think it's worth add that we aim to trade the ships we have coming open or are open in the spot market until the term rates come back where they should be and deserve to have our fleet on time charter. So I think we should be, as we said, disciplined and patient. Knut Traaholt: Yes. We also have a couple of questions on the delisting. As we informed on the last quarter, we had our last day of trading on Oslo Stock Exchange on the 15th of September and delisted from Oslo Stock Exchange on the 16th of September. We are very pleased to see that a number of the shareholders on Oslo Stock Exchange continue to trade on the share and remain shareholders now on New York Stock Exchange. There are a small portion of shareholders remaining with Euronext Securities Oslo. So we encourage those to contact their bank and request the bank to transfer the shares to New York Stock Exchange, so you can continue trade in the Flex LNG share. H. Foss: Yes, we are very pleased to see all the Oslo shareholders coming to New York and will join us for the next wave coming forward. So with that, I would like to thank you all for joining us on this Q3 presentation today and looking forward to welcome you back in early February for our Q4 presentation. So in the meantime, [ stable ] and thank you very much.
Operator: Good morning, ladies and gentlemen, and thank you for waiting. At this time, we would like to welcome everyone to Adecoagro's Third Quarter 2025 Results Conference Call. Today with us, we have Mr. Mariano Bosch, CEO; Mr. Emilio Gnecco, CFO; Mr. Renato Junqueira Pereira, Sugar, Ethanol and Energy VP; and Ms. Victoria Cabello, Investor Relations Officer. We would like to inform you that this event is being recorded. [Operator Instructions] Before proceeding, let me mention that forward-looking statements are based on the beliefs and assumptions of Adecoagro's management and on information currently available to the company. They involve risks, uncertainties and assumptions because they relate to future events and therefore, depend on circumstances that may or may not occur in the future. Investors should understand that general economic conditions, industry conditions and other operating factors could also affect the future results of Adecoagro and could cause results to differ materially from those expressed in such forward-looking statements. Now, I will turn the conference over to Mr. Mariano Bosch, CEO. Mr. Bosch, you may begin your conference. Mariano Bosch: Good morning, and thank you for joining Adecoagro's 2025 Third Quarter Results Conference. Consolidated adjusted EBITDA during the quarter reached $115 million, while year-to-date, it amounted to $206 million. In Brazil, we achieved an all-time quarterly crushing record of 4.9 million tons and even produced 40% more ethanol than the previous year as we switched our production [ maximization ], given premium commanded over sugar. Now, cane productivity has improved as we completed the harvest of all the frost-impacted cane, thus with lower productivity. Going forward and assuming normal weather, crushing volume should improve as we have greater cane availability, leading to a greater cost dilution. In Argentina and Uruguay, the challenging price-cost scenario continues to pressure results across our businesses. In crops, we are undergoing planting activities for the new campaign, reducing approximately 30% our leased area and adjusting our crops mix to improve margins. In rice, export price of the long rice are still looking for a support level, given the greater supply. Therefore, our decision is to reduce the long grain rice and to increase the mix of varieties. In dairy, cow productivity and processing volumes have achieved a new record. We continue to prioritize the domestic market with the production of fluid milk and value-added products. In early September, we signed an agreement to acquire a 50% stake in Profertil, the largest producer of granular urea in South America. Profertil is one of the lowest-cost producers within this industry, and it is strategically located in a net importing region with access to competitively priced natural gas. It is run by a highly experienced management team and has consistently generated cash through the years. YPF, Argentina's largest oil and gas producer, owns 50% stake. And together with ACA, we will be jointly acquiring the balance. Closing is expected before year-end and subject to YPF's 90-day right of refusal. To conclude, I would like to thank all the people in Adecoagro. I know that this year has been one of the toughest, but we need to remain focused on efficiency and on being the lowest-cost producer to overcome this challenging context. Thanks to our shareholders for their support. And now, I will let Emilio walk you through the numbers of the quarter. Emilio Gnecco: Thank you, Mariano. Good morning, everyone. Please turn to Page 4 with a summary of our consolidated financial results. Gross sales totaled $323 million during the third quarter, making a 29% year-over-year decline due to lower volumes and prices across our different operations. Despite this, adjusted EBITDA improved versus the prior year to $115 million on greater results from our Sugar, Ethanol and Energy business. On a year-to-date basis, sales and adjusted EBITDA stood at $1 billion and $206 million, respectively. Lower consolidated results were mainly explained by a combination of lower global prices and higher costs in U.S. dollar terms. Now, please turn to Slide 5. Regarding our production figures, on the bottom-right chart, we can see that crushing volume in our Sugar, Ethanol and Energy business was 4% lower compared to the same period of last year. The year-over-year gap reported in the previous release has decreased by the crushing record achieved during the third quarter, which we will get into more detail shortly. In the case of the Farming business, total production saw a 13% year-over-year increase, explained by higher planted area, as well as record productivity in our rice operations. Let's move to Slide 7 with the operational performance of our Sugar, Ethanol and Energy business. During the period, we achieved a new quarterly crushing record of 4.9 million tons and a 20% year-over-year increase. This was explained by the acceleration of our harvesting pace, which in turn enabled us to crush all the sugarcane that was hit by the frost event experienced by the end of June. Our average yield and TRS content declined compared to the previous year, explained by the impact of the frost in the sugarcane harvested. On a year-to-date basis, we have already milled 9.8 million tons of sugarcane. Despite the strong quarterly performance, we concluded the period with an accumulated crushing slightly below the previous year due to the combination of dry weather, followed by rainy days experienced during the first half of the year, which consequently slowed our crushing pace. Despite this, we still foresee an annual crushing volume in line with the previous year, assuming normal weather conditions until the end of the year. In terms of mix, we switched our strategy to maximize ethanol production during the third quarter, given the better margins compared to sugar. We reached 58% ethanol mix compared to 45% the previous year when we were maximizing sugar. This clearly reflects the high level of flexibility of our mills as we maximized sugar production throughout the first semester and then switched to ethanol due to its attractive premium as lower sugar prices started to decline. Let's please turn to Slide 8, where we describe sales conducted throughout the period. Net sales amounted to $131 million during the quarter, while year-to-date, they reached $433 million. Despite the increase in ethanol production, lower sales during the quarter were explained by a decline in volumes sold. Throughout the period, we strategically conducted our sales to profit from better prices. For the last year, we had our tanks full and had to sell our daily production. Ethanol sales were 8% higher year-to-date, thanks to our commercial strategy to sell our 2024 inventories once prices recovered. Regarding sugar, the combination of lower prices and the decline in production, given the lower crushing and switch in mix, were the main drivers towards the decline in sales. In the case of energy, the increase in sales was driven by higher selling prices year-over-year as we comply with our long-term contracts, as well as profit from the peaks in spot prices. Regarding carbon credits, we sold over 560,000 CBios at an average price of $9 per CBio, reaching $5 million in revenues. Please go to Page 9, where we would like to present the financial performance of the Sugar, Ethanol and Energy business. Adjusted EBITDA amounted to $120 million during the third quarter, making a 20% year-over-year increase. This was mostly explained by year-over-year gains in the mark-to-market of our biological assets, given an improvement in yield, coupled with gains in the mark-to-market of our commodity hedge position. On an accumulated basis, adjusted EBITDA reached $218 million, 16% lower than the same period of last year. Now, we would like to move on to the Farming business. Please go to Slide 11. By the end of October, we concluded harvesting activities related to our 2024-'25 harvest season, reaching 1.2 million tons of agriculture produced. Now, we are in the middle of planting activities for our 2025-'26 campaign with 52% of the total area already seeded. As you may have seen, we reduced our planting plan by 22% compared to the prior season as we decided to diminish the amount of leased hectares, prioritizing the farms with higher productivity potential and therefore, maximizing the margin per hectare in each of our crops. In rice, the decline in planting area was driven by the challenging price scenario of the commodity as global prices continue to decline, given the worldwide oversupply. On the other hand, we are increasing our mix of premium varieties over long grain white rice to offset the lower prices from the commodity type. In the case of dairy, not only did cow productivity improved versus the first semester, but it even achieved a new record at 39.1 liters of milk per cow per day during the quarter. At the industry level, we continue to maximize production of UHT milk for the domestic market, a product that offers the highest marginal contribution. On the following Page 12, we present the financial performance of our Farming business. Adjusted EBITDA for the Farming business totaled $1 million during the quarter, whereas year-to-date, it amounted to $19 million. Starting with our crops segment, lower results were explained by lower international prices and higher costs in U.S. dollars, both of which continued to pressure margins during the period and mainly for our peanut production. In rice, the decline in adjusted EBITDA during both periods was driven by lower sales, given the outlier prices reported the previous year, coupled with higher costs in U.S. dollar terms. Lastly, adjusted EBITDA generation in our dairy business was impacted by higher costs and a mixed performance in prices despite the increase in volumes sold mainly from fluid milk for the domestic market. Please turn to Page 14 with a broader view of our CapEx program. Expansion CapEx, excluding inorganic growth, represented $32 million during the quarter and $85 million on an accumulated basis. In Brazil, expansion CapEx was mostly allocated to increasing our sugarcane plantation size and the expansion of our biomethane production. In our Farming business, our main CapEx program consisted of the acquisition of agricultural machinery for our rice operations, together with marginal investments in our Morteros milk processing facility to expand our product portfolio. Now, please turn to Slide 15, where we would like to make a reference to the acquisition of Profertil. On September 8, we announced the market that we signed an agreement to acquire Nutrien's 50% interest in Profertil, the largest producer of granular urea in South America, through an 80-20 partnership with Asociacion de Cooperativas Argentinas. The transaction was valued at approximately $600 million, out of which $96 million advanced payment was made against the sign-off. The remaining 50% stake of Profertil is owned by YPF, Argentina's largest producer of oil and gas, who, as of this date, continues to hold the right of first refusal to purchase Nutrien's equity on the same terms and conditions. This right expires at the beginning of December. Once and if the closing conditions are met, we will provide more details. As Mariano commented earlier, we firmly believe that by acquiring this state-of-the-art asset, we will be reducing the volatility of our results, while diversifying operations across other value chains within the agro-industrial space, where we have shown a well-proven track record. On the following slide, we describe our debt evolution. Net debt amounted to $872 million, making a 35% year-over-year increase due to the lower consolidated results, together with the $96 million advance payment made for Profertil acquisition. Consequently, our net leverage ratio increased to 2.8x compared to the 1.5x reported in the same period of last year. Going forward and once we conclude the acquisition, we intend to reduce our leverage ratio as we implement cost-saving initiatives across all our operations, together with a revision of our capital allocation strategy and expected operational results. Despite increase in leverage, our liquidity ratio stood at 3.2x, showing the company's full capacity to repay short-term debt with its cash balance. Let's now turn to Page 17, where we would like to present our shareholder distribution program. 2025 shareholder distribution amounted to $45 million. We repurchased $10 million in shares under our buyback program, equal to 1.1% of the company's equity. In addition, $35 million were distributed via cash dividends with the last installment being paid in a few days on November 19, representing approximately an annual dividend per share of $0.35 and a dividend yield of 4%. With the second final dividend payment, the company concludes its distribution policy for the year 2025. Thank you very much for your time. We will now open the call to questions. Operator: [Operator Instructions] Our first question came from Matheus Enfeldt from UBS. Matheus Enfeldt: I want to think a bit about the upcoming year and the upcoming crops. I mean, your crushing volumes, despite of the challenges in weather, were relatively okay. And I was just wondering how is the outlook for 2026, if we could still see some crushing growth in sugar and ethanol and sort of get closer to the 40 million tons capacity and how you see cost advancing for the upcoming crop as well? And then, my second question is, when you think about CapEx, particularly for next year, but I think for the next 1 to 2 years, which we might see some pressure in earnings, given the weak pricing environment that we are seeing right now. You were doing around BRL 250 million, BRL 300 million of CapEx per year. Outside of M&A, which I assume there's still some installments for Profertil, what's the level that we could see moving forward for next year given the compression in cash generation due to prices? Those are my 2 questions. Mariano Bosch: Okay. Thank you, Matheus, for your question. I'm going to answer the CapEx, and then Renato will answer regarding our crushing expectations and costs there going forward. On the year CapEx, as we are mentioning, we are having this more compressed EBITDA and EBITDA margins. And so, we are revising all the different CapEx in each one of the segments that we have today and also taking into account with the potential acquisition of Profertil, we are reducing this at the maximum level. So we are only doing the organic CapEx that really, really makes sense and has a lot of synergies. And so, you can clearly expect a relevant reduction in terms of the growth CapEx coming in each one of our 4 business segments. That's for 2026. And then, Renato, can you take the question regarding the crushing expectations and costs? Renato Pereira: Okay. So regarding the crushing, I think it was mentioned here that we had an excellent third quarter in terms of crushing. So we finished all the low-yield sugarcane, especially those canes that was -- were affected by the frost. So we pushed the cane that otherwise would be crushed in the third quarter for the last quarter with much better yields. So the yields for the final quarter should be much higher than the average of this year. And it puts us in an excellent condition for next year, especially in the first quarter that we're going to have an intensive first quarter in terms of crushing and of course, take advantage of price of ethanol that should be high at this moment. And we have a potential to crush during this year, I would say, 5% to 6% more than we are going to crush in this year here. So '26, 5% to 6% more than '25, thanks to the conditions of the sugarcane. So we don't think that we're going to have a problem of sugarcane availability. The crushing, of course, depends on weather conditions. And so, it's not only the availability of cane, but the availability of cane, we think we are fine. So regarding the costs, we expect a reduction of cost for next year, I would say, a reduction between 15% and 20% of the cost. This is mainly a consequence of the volume, both the crushing volume and the yields that should be higher next year, diluting our fixed costs and also the Consecana price that is lower, so the raw material is lower for next year. And also, we have been working in a lot of efficiencies, both in the agriculture and the industrial operation. So we think that we are going to decrease our costs because of those efficiencies that we are getting. Operator: Our next question comes from Isabella Simonato from Bank of America. Isabella Simonato: I have 2. First of all, you mentioned in the press release, right, that you guys are going to pursue a couple of actions to reduce leverage, right? I understand that, as you just said, reducing CapEx is one of them. But if you could give a little bit more color on what other actions are you thinking about or what your expectation or eventually a target, right, to be reached in 2026, I think that would be quite helpful. And the other question is regarding the decision, right, to significantly reduce your area of crops in the next season. I think it's the first time that you take such a drastic reduction, right? And just if you could give us a little bit more -- sorry, I think I got muted. So the rationale to go with this decision and eventually the economics, right, that are driving it, I think, would be interesting. Mariano Bosch: Isabella, thank you very much for your question. I'm going to take the second -- your second question and then ask Emilio to answer the first question regarding the debt level. So, on explaining the reduction in the crop area, I think it's important there that since we started this new campaign that starts in August, where we start planting, and the old campaign, the numbers that we are reporting today that are so negative in the crop business is what we've been harvesting since April until September. So now, we are starting this new campaign. In this new campaign is where we started reducing the cost of leasing. So cost of leasing is one of the main costs in crop production in general, and that's what we are reducing. And because of reducing the cost of leasing, many people didn't want to lease to us. So we've reduced the area. On top of that, we are only securing the farms where we have high productivity levels and the level of return that we are asking and the level of risk that we are running are more important that we are asking more returns for each one of the farms. So the consequence is that we are reducing this. On top of that, we are reducing the structure to manage these farms. And on top of that, we are reducing the cost of planting, the cost of all what we are doing at the farm level. That is in the crop business, including the peanuts that is where we have the highest decrease in prices. Then, on rice that is part of our crops, we are also reducing area. We are reducing like 25% or 30% the long grain production of rice, but we are increasing the special products of rice. As we've been telling you some years ago, we have been developing special varieties that some of our clients need, and that is how we've been able to maintain certain level of prices. Just for you to have an idea, the reduction in the price of long grain rice was around 50% comparing to the previous year. So the 50% reduction in the price of rice is very relevant, and that's why we are adjusting making all this adjustment, including reducing part of the total area. That's the reason why we are doing it. And because of this is that we are more optimistic in terms of the levels of EBITDA that we can expect for next year comparing to this particular level to this year, all this assuming today's prices of all the different commodities that we are having today. We are not assuming to go back to the other levels. That's what we are -- where we are working, and that's why the consequence is the reduction of the area. So thank you for this part of your question. Then, Emilio can get into more details on our debt levels and what are we thinking about it. Emilio Gnecco: Yes. Sure. Thank you, Isabella. Thank you, Mariano. Well, let me start. If we take a look back at our history, you can see that we have been very disciplined with our debt ratios. And this is not an exception. We always said that if we encounter an opportunity that today we have in hand, we would incur an additional debt, and rest assured that this opportunity would contribute to our results in the coming years and therefore, become accretive to our shareholders. And although we would finish the year with debt levels above 2x, 2.5x, this debt is very well structured in the long term with an average life of 4.5 years and also at very competitive prices. Now, at the same time that we do this, we are revising all our capital expenditures, and namely, our distribution policy, we're discussing that for the coming years within management and our Board. The CapEx programs, as we said in the previous question, we are revising all the CapEx programs for each of our different businesses that will definitely -- is expected to be significantly lower in the next years. And as part of a specific plan, we started on the implementation of additional cost savings and additional enhancements in each of our businesses. And last but not least, and this is something that has been very vocal in our previous calls, we are having conversations with our controlling shareholder exploring potential capitalization structures in the company. All of that, of course, will contribute to bring down, in the coming years, the net debt ratios of the company. Isabella Simonato: No, that's very clear. Just a quick follow-up, Mariano. As you mentioned, right, you are reducing mainly leased area to save costs. But how that shape you for 2027? I mean, how easy is for you to plant more again in 2027? How that changed planted area in the midterm? Mariano Bosch: I think there is no problem there. This is a market where you can decrease or increase from 1 year to the other. For us, the key is the efficiency and the return. So that's our focus. And the area is a consequence on the return or the return that we are asking, the return that we are willing to have. So we don't see any problem on growing again in terms of the leased area. Operator: [Operator Instructions] Our next question comes from Julia Rizzo from Morgan Stanley. Julia Rizzo: Can I explore a little bit more Profertil acquisition? You still have some debt to take. I would like to understand what are the rates and how you expect that to be in terms of financing, time to pay, average cost. Also, in your best guess or in the last years, how much Profertil was able to deliver or distribute in terms of dividends but that would be the base case for 2026 distribution for Adecoagro coming from Profertil if the M&A gets concluded? Mariano Bosch: Julia, thank you very much for your question. On Profertil, in general terms, as we explained in the specific call that we did talking about this, we are very enthusiastic. We think this is a very attractive deal, and this is very accretive to what we have today. So we are very enthusiastic and keen to be able to close it by mid-December, as we just said. For that closing, it's all financed. 100% of the financing is already in place and at the same levels that Emilio just explained that are long term and very good rates. So there's no issue there. But in order to get into more details, et cetera, I think it is important to wait until we can make this final closing. And in terms of how we report and how this company has been giving dividends, you can see in their own financials that they've done a lot of dividends during every year, and they have already sent more than $1 billion of dividends in the last 5 years. And regarding our accounting, as we have already mentioned, the accounting is going to be on the equity method. Julia Rizzo: Yes. Okay. So you think it's too early to ask for opportunities within the business, [ how we ] explore eventually Vaca Muerta supply, how you see that dividend -- or expectations for 2026 in terms of how that could help to finance the cost of debt? Is that too early or you can give us a guidance on that sense? Mariano Bosch: No, I think it's too early to get into all the details. Again, we are very optimistic. We think that Vaca Muerta gas production is growing a lot in Argentina that you've all heard about, all the possibilities that Argentina has in order to produce gas. We are going to take advantage of this natural condition that Argentina has, and we can be the local producer of urea. So there's a lot of expectation on that going forward. But in order to get into all the details, we prefer to talk once this is something real. Operator: This concludes the Q&A session. At this time, I would like to turn the floor over back to Mr. Bosch for any closing remarks. Mariano Bosch: Thank you. Thank you for coming today, and hope to see you in our next call. Operator: Thank you. This concludes today's presentation. You may disconnect at this time, and have a nice day.
Operator: Good day, and welcome to the Kolibri Global Energy's Third Quarter 2025 Financial Conference Call. [Operator Instructions] Please note this event is being recorded. It is advised that participants that this conference is being recorded today on November 12, 2025. This call will be available on the company's website at www.kolibrienergy.com. Here is a disclaimer. This call may include forward-looking information regarding Kolibri's strategic plans, anticipated production, capital expenditures, exit rates and cash flows, results and other estimates and forecasts. Forward-looking information is subject to risks and uncertainties, and actual results will vary from the forward-looking statements. This call may include future-oriented financial information and financial outlook information. which Kolibri discloses in order to provide readers with a more complete perspective on Kolibri's potential future operations and such information may not be appropriate for further purposes. For a description of the assumptions on which forward-looking information is based and the applicable risks and uncertainties and Kolibri's policy for updating such statements. We direct you Kolibri's most recent annual information form and management's discussion and analysis for the period under discussion as well as the Kolibri's most recent corporate presentation all of which are available on Kolibri's website. Listeners should not place undue reliance on forward-looking information. Kolibri undertakes no obligation to update any forward-looking future oriented financial or financial outlook information other than as required by the applicable law. I would now like to turn the call over to Mr. Wolf Regener, the President and CEO of Kolibri Global Corporation. Thank you, and over to you. Wolf E. Regener: Thank you, Myron, and thank you, everyone, for joining us today. With me on today's call is also Gary Johnson, our Chief Financial Officer. As I'm sure you're aware, we released our third quarter 2025 results this morning, and I'm happy to say that we're very pleased with what we've achieved this quarter, where we continue to build on our last few years of great results in multiple ways. Production from the field has been going well with our third quarter of over 4,250 barrels of oil equivalent per day. That's up from the second quarter of this year of 3,200 BOE per day and also an increase of over 40% from the third quarter of 2024. Other operating expenses remaining low, with just over $7.15 of BOE. It would have been even lower at $6.57 of BOE if we exclude the onetime production tax adjustments from the prior periods. Despite of the oil prices being lower, our line of credit was reaffirmed at $65 million from our banking syndicate led by Bank of Oklahoma. And we're in the middle of fracture stimulating the 4 new wells that we expect to come on production in early December, which are expected to further increase our production, where we're expecting to exit the year at an all-time high production rate. So things are going very well. With that, now I'll turn the call over to Gary to discuss our financial results. Gary? Gary W. Johnson: Thanks, Wolf, and thanks to everyone for joining the call. I'm going to go over a few highlights for the quarter and September year-to-date results, and then we'll take questions at the end. All amounts are in U.S. dollars unless otherwise stated. As you will see from the results, we continue to increase our revenue and cash flow year-over-year despite the price declines we have experienced in 2025. I'll start with the third quarter comparisons. Average production was up 40% and to 4,254 BOE per day compared to 3,032 BOE per day in the prior year quarter. The increase was due to production from the wells that were drilled in 2025. Revenue was up 15% to $15 million in the third quarter of 2025 due to the higher production, which was partially offset by lower prices, which were down 18%. Adjusted EBITDA reached -- sorry, $11.1 million compared to $10.1 million in the prior year quarter, which was an increase of 9% due to the higher revenue, which was partially offset by an increase in operating expenses due to the increase in production. Our net income was $3.6 million and basic EPS was $0.10 per share in the third quarter of 2025 compared to $5.1 million or $0.14 per share -- basic share in the prior year quarter. This decrease was due to a $1.8 million negative swing in the noncash unrealized mark-to-market adjustments on our hedges between the third quarter 2025 and the third quarter of last year. The increase we added revenues was offset by the increase in depreciation expense and operating expense due to the increase in production. Netbacks for the quarter decreased 23% to $30.84 per BOE compared to $40.01 per BOE in the prior year quarter, due primarily to the lower prices. Operating expense was $7.37 per BOE for the quarter compared to $6.63 per BOE in the prior year third quarter, which was an increase of 11%. Which was due to reassessed production tax adjustments, which added $0.80 per BOE to the third quarter 2025 number. Excluding those adjustments, operating costs would have been $6.57 per BOE, which was a 1% decrease from the prior year. Now moving on to the year-to-date September results. Average production was up 22% to 3,851 BOE per day for the 9 months ended September 30 compared to 3,154 BOE per day in the comparable prior year period. Revenue was up 2% to $42.1 million compared to $41.2 million in 2024, due to the higher production, which was partially offset by lower prices, which decreased by 16%. Adjusted EBITDA increased by 3% to $31.6 million compared to $30.5 million in 2024 due to the increase in revenues, which were partially offset by higher operating expense due to the increase in production. Net income was $12.2 million, with basic EPS of $0.34 per share, which compares to $12.5 million and basic EPS of 35% per share last year as the higher depreciation and operating expense from the increase in production offset the increase in revenue. Netbacks from operations decreased 17% to $32.86 per BOE compared to $39.78 per BOE last year due to lower average prices. Operating expense was $7.20 per BOE for the year-to-date September compared to $7.84 per BOE in the prior year period, which was a decrease of 8%. In October, our credit facility was redetermined at the same $65 million borrowing base. Our net debt at the end of September was $42.8 million, and we had $18.5 million of available borrowing capacity. Since we started our stock buyback program in September of last year, we have repurchased a total of about 568,000 shares. We will continue to repurchase additional shares to enhance shareholder value as our working capital allows. And looking back over the last several years, our average production has increased by almost 300% since the end of 2021 as we continue to demonstrate the value of our deal. As Wolf said, when the last 4 wells of our 2025 drilling program start production in December, we expect to exit the year with record high production, which should lead to a further increase in production in the first quarter of 2026. And with that, I'll hand it back to Wolf. Wolf E. Regener: Thanks, Gary. As Gary laid out, we had a very solid third quarter, while oil prices were lower, our revenue and cash flow is still increasing year-over-year, and we're looking to continue the success we've had over the last few years. The company has had quite the growth. And with the activity we have going on, we're looking to continue that. Along with the production revenue and cash flow growth, we're intending to continue returning capital to shareholders in the form of share buybacks, where we've started buying back the shares, as Gary mentioned, over about 570,000 shares. Our plan is to continue to grow all value for shareholders, and we'll continue to get the word out about the company to shareholders and potential shareholders. This actually concludes the formal part of our presentation, and we'll be happy to answer any questions you may now have. Operator: [Operator Instructions]We have the first question from the line of Steve Ferazani from Sidoti. Steve Ferazani: Wolf, if I want to ask about the timing of the 4 new wells, I know you've drilled 2 wells, you're also going to simultaneously complete 2 others you previously drilled, where is that timing-wise? When are you expecting production this year? Wolf E. Regener: Good to hear from you. Yes, so we're on schedule with where we thought we would be now. We're in the middle of fracture stimulating the wells. Everything is going well on that. And we look to see that production coming on in early December. So everything is moving along. Steve Ferazani: As far as you updated your guidance in early October. Any changes, any thoughts to the expectations sort of gets us to about a 1x leverage year-end. Any of those numbers change significantly? Or are you still comfortable with around 1x net leverage year-end? Wolf E. Regener: Yes. I know that we should be right in that number. And then I think as we put in our guidance, we're expecting to pay down $8 million to $10 million in the first quarter just because the timing of when we're spending all this money bringing these other wells online. Andrew Louis DeAngelis: Got it. That's helpful. Can you give us an update on the Forguson well? I know you mentioned it in the press release, just where you are with that and how that might impact your thoughts on drilling in the East side in the future? Wolf E. Regener: Yes. So we'll keep monitoring where it is. Production has been fairly flat on it. And so we'll see as more fracture stimulation fluid comes back to see how flat that actually stays. I don't see us drilling another well over there where we dropped to do today with oil. Great timing on putting our financials as oil drops 4%. So yes, we're in the high 50s, I can't see us drilling well over there for a while, we made higher prices of these numbers. So we'll just see where it turns out to be here in another month or 2, but it will definitely take higher prices in order to do other activites over there. So we definitely -- we won't be focusing on it, let's put it that way. We've got a new presentation up on the website too, which shows the other potential that we have, not only the Eastside but these other things as well. [indiscernible] more information that's out there and then also people kind of tend to forget about the T-zone. So I put that back on there. I think that's a proven table that is in the reserve report. Steve Ferazani: I'll check it out. It sort of leads into -- I know it's only November. I know things changed and the market has been volatile. Can you provide any color to what's going to guide your thinking on a 2026 drilling program? Wolf E. Regener: Sure. I mean I'll speak for just myself and Gary, what we're likely to be recommending to the Board will depend on where prices are in December or early January, right? I didn't quite expect the drop here today. I thought we were at the lows and coming up already. So it looks like it's going to take a little bit longer. So really, I think from our point of view, we'll probably be recommending something more along the lines of keeping production kind of flat to where we end up here near the end of the year. The lower the prices are, the less capital you kind of want to put in the ground, but you want to make sure you're still flat to slightly growth, I think. And that's at least my view of it. So we'll have a good Board discussion about it, and we'll see where we end up in the long term. Steve Ferazani: The October hedges, you sort of changed how you're approaching that? And I'm assuming that's a reflection on pricing. It looks like around -- it looks like October was primarily $50 puts. Can you talk about your -- the shift? Wolf E. Regener: Yes. Just -- I mean, the forward curve is so bad that it's hard to even put collars in place on that. I'd hate to see us cap up because I think oil is going to turn around. We want to protect for the downside still in our bank that makes us do a certain amount of hedges. And so I'm grateful that we can do some puts so that our upside isn't capped. Just where the costless collars were, it just made more sense to put puts in place rather than having a very low cap on prices going forward because I don't know if it's going to take 2 weeks, a month or 6 months, but I'm sure prices are going to turn around. They can't stay down there. I don't think anybody in the world wants that on the producer [indiscernible] that way. Steve Ferazani: That's fair. Gary, you mentioned that the higher OpEx, it sounded like there was a tax adjustment. Can you just give us a brief explanation on what that was? And is that onetime only? Gary W. Johnson: It is onetime only. This is a true-up of production taxes. Our purchaser reassesses costs sometimes going back, they're allowed to do that. So they did that adjustment. So with that, like I said, a onetime thing that we don't expect. I mean, it could happen again, but it's not going to be a recurring thing. It's just a onetime. Wolf E. Regener: One clarification is in Oklahoma, the purchaser pays the gas and NGL taxes not the producer. And so that's why the accounting had accrued for a chunk of it, but a piece of it that tend to be higher at the -- than what was accrued for. Steve Ferazani: That's helpful. So general trends on... Wolf E. Regener: [indiscernible] Taxes in that way, we'd know right away. Steve Ferazani: I don't like to talk about taxes in general. So if we back that out, general trend, you're comfortable with being able to continue if production is up that OpEx per barrel should typically trend down over the long term? Wolf E. Regener: Yes. Yes. I'd kind of keep it flat in this range where we're at. If you set dollars, you're probably conservative on what we're doing. So... Operator: This concludes our question-and-answer session. I would like to turn the conference back over to Mr. Wolf Regener for closing remarks. Wolf E. Regener: Thank you, again, everyone, for participating and always happy to answer questions at any time. Feel free to contact us and reach out. So thank you, everyone, for the time, and have a good rest of your day. Operator: Thank you. The conference call has now concluded. Thank you for attending today's presentation. You may now disconnect.
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: Good day, and welcome to the Third Quarter 2025 Pharma Earnings Conference Call. At this time, participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question, please press 11. If your question has been answered and you'd like to remove yourself from the queue, press 11 again. We ask that you limit yourself to one question and one follow-up. I would now like to turn the call over to Chad Fugier, Vice President of Investor Relations at Ascendis Pharma. Please go ahead. Chad Fugier: Thank you, operator, and thank you, everyone, for joining our third quarter 2025 financial results conference call. I'm Chad Fugier, Vice President of Investor Relations at Ascendis Pharma. Joining me on the call today are Jan Moller Mikkelsen, President and Chief Executive Officer; Scott T. Smith, Executive Vice President and Chief Financial Officer; Sherrie Glass, Chief Business Officer; Jay Donovan Wu, EVP and President, US Markets; and Aimee Shu, EVP and Chief Medical Officer. Before we begin, I'd like to remind you that this conference call will contain forward-looking statements that are intended to be covered under the Safe Harbor provided by the Private Securities Litigation Reform Act. Examples of such statements may include, but are not limited to, statements regarding our commercialization and continued development of Skytrofa and Eurvipath, as well as certain expectations regarding patient access and financial outcomes, our pipeline candidates, and expectations with respect to their continued progress and potential commercialization, our strategic plans, partnerships and investments, our goals regarding our clinical pipeline, including the timing of clinical results and trials, our ongoing and planned regulatory filings, and our expectations regarding the timing and the result of regulatory decisions. These statements are based on information that is available to us as of today. Actual results may differ materially from those in our forward-looking statements, and you should not place undue reliance on these statements. We assume no obligation to update these statements as circumstances change, except as required by law. Additional information concerning these factors that could cause actual results to differ materially, please see our forward-looking statements section in today's press release and the Risk Factors section of our most recent annual report on Form 20-F filed with the SEC on February 12, 2025. TransCon Growth Hormone, or TransCon HGH, is now approved in the US by the FDA for the replacement of endogenous growth hormone in adults with growth hormone deficiency. In addition, the treatment of pediatric growth hormone deficiency in the EU has received MAA authorization from the European Commission for the treatment of pediatric growth hormone deficiency. TransCon PTH is approved in the US by the FDA for the treatment of hypoparathyroidism in adults, and the European Commission and the United Kingdom's Healthcare Products Regulatory Agency have granted marketing authorization for TransCon PTH as a replacement therapy indicated for the treatment of adults with chronic hypoparathyroidism. Otherwise, please note that our product candidates are investigational and not approved for commercial use. As investigational products, the safety and effectiveness of product candidates have not been reviewed or approved by any regulatory agency. None of the statements during this conference call regarding our product candidates shall be viewed as promotional. On the call today, we'll discuss our third quarter 2025 financial results and provide further business updates. Following some prepared remarks, we'll then open up the call for questions. With that, let me turn it over to Jan. Jan Moller Mikkelsen: Thanks, Chad. Good afternoon, everyone. In 2025, we accelerated our momentum towards fulfilling our Vision 2030 with key achievements in three areas. First, the global launch of Eurvipath continues to be strong, with a steady increase in new unique patient prescriptions and prescribers as seen in Q1 and Q2, along with expansion in new geographic markets. Second, we made great advancements towards leadership in growth disorders during the quarter. We saw the US approval of Skytrofa in adult growth hormone deficiency, and following our late-cycle meeting with the FDA, we are progressing toward expected approval of TransCon CNP in the US. Our strong operating fundamentals led to positive operating profit, signaling the beginning of sustained revenue and earnings growth for Ascendis. Now I will provide some specific comments on our commercial and late-stage portfolio. Starting with Eurvipath, Eurvipath continues its strong global launch with revenue of €143 million in the third quarter. Nine months into the launch in the biggest market, the US, patient demand continues growing quarter by quarter. From launch to September, more than 4,250 patients have been prescribed Eurvipath in the US by over 2,000 unique healthcare providers, highlighting the strong steady demand for Eurvipath even during the summer months. In October, the positive trend continued with Eurvipath being prescribed for more than 400 new patients in the US alone. Positive physician and patient experiences are driving a high rate of compliance, and we expect most patients will be on lifelong PTH therapy. We are expanding our physician reach each quarter within the endocrinology community, and we are also expanding to other physician groups who manage hypoparathyroid patients. As an example, at last week's American Society of Nephrology meeting, we presented three years of kidney function data across our combined clinical trials, demonstrating sustained clinically meaningful improvement in kidney function in Eurvipath-treated patients. In addition, we continue working hard to expand patient access in the US. The overall insurance approval rate since the start of the launch is around 70% of total enrollment, and we believe this figure will continue to increase over time. We currently see approval across all payer types, with a majority of approvals within eight weeks. We are pleased by the robust uptake of Eurvipath in our first three quarters of commercialization in the US. Today, less than 5% of US patients are currently on Eurvipath treatment. We see significant room to grow with around 82,000 to 90,000 patients already diagnosed with chronic hypoparathyroidism in the US and 3,000 to 4,000 new patients being diagnosed every year. Outside the US, Eurvipath is now available commercially or through named patient programs in more than 30 countries. In Germany, Austria, and Spain, we have now full commercial reimbursement. In Japan, our partner, Taigen, launched Eurvipath commercially last week following approval in August. We are looking forward to the commercial launch of Eurvipath in additional countries in the coming years. With a broad label covering hypoparathyroidism for all causes, international treatment guidelines that recommend PTH replacement therapy, and Eurvipath positioned as a first-in-class therapy, we expect sustained patient growth and revenue growth for years to come. As we are building this global market, we are expanding our offerings to patients with hypoparathyroidism. We are conducting the Pathway 60 trial to support doses up to 60 micrograms of Eurvipath in the US. We plan to begin a clinical trial for people 18 this quarter, and we are advancing our new once-weekly TransCon PTH product candidate, which we believe would be an attractive option for patients on stable doses of Eurvipath. In the new year, we will share more on our plans to maximize Eurvipath's value and reach even more patients. Let's now turn to growth disorders. Our growth disorders portfolio comprises our once-weekly growth hormone Skytrofa, approved for growth hormone deficiency, and our once-weekly TransCon CNP, currently under review by the FDA in the US and by the EMA in the EU for children with achondroplasia. Skytrofa is approved in the US and EU for the treatment of pediatric growth hormone deficiency. With this single indication, Skytrofa is established as a high-value brand and treatment of choice for pediatric growth hormone deficiency. Q3 revenue for Skytrofa was €51 million. In July, we received our first label expansion with FDA approval for adult growth hormone deficiency, the first of multiple planned label expansions. In Q3, we initiated our Phase 3 basket trial of Skytrofa with a range of established growth disorders, including ISS, shock deficiency, Turner syndrome, and SDA. Turning to TransCon CNP, we recently completed a late-cycle meeting with the FDA and are in the final stages of the label discussion. TransCon CNP is under priority review in the US, with a PDUFA date of November 30, and is also under review in the EU, where our MAA filing was validated. TransCon CNP, once weekly, is well-positioned to become the leading treatment for children with achondroplasia, with a full degree of linear growth outcome that can be achieved with monotherapy addressing the overactive tyrosine kinase gene. In addition, TransCon CNP achieved statistical improvement in leg bowing compared to placebo, increasing spinal canal dimension, a safety and tolerability profile compared to placebo, with a very low rate of injection site reactions and no cases of symptomatic hypertension. We are confident in TransCon CNP's ability to be a leading therapy. While we believe TransCon CNP monotherapy is transformative by itself, we want to further enhance outcomes for people living with achondroplasia. Earlier this year, we presented 26-week results from the Phase 2 COAT trial of TransCon CNP in combination with TransCon Growth Hormone, which showed around three times improved linear growth compared to what had been observed with monotherapies over the same time period. This resulted in healthy linear growth in children with achondroplasia, higher than that observed with an average state of children, accompanied by improvement in body proportionality and without acceleration of bone age. This data has been recognized by key opinion leaders as groundbreaking. Based on this data, we believe over time, the standard of care in achondroplasia will include combination therapy as a treatment option, building on the protected role of TransCon CNP as the backbone therapy. Following our recent FDA end-of-phase 2 meeting related to our combination therapy, we plan to initiate a Phase 3 trial this quarter. We anticipate disclosing 52-week data from the COAT trial in early 2026. With once-weekly growth hormone and once-weekly CNP, two highly differentiated medicines both as monotherapy and in combination, we believe Ascendis is well-positioned to become the global leader in many different growth disorders. Our Vision 2030 also includes creating value through partnerships, and we see that being achieved through the rapid progress of Taigen in Japan, endocrinologists in metabolic and cardiovascular diseases, VISEN in China, and Iconis in ophthalmology. The once-monthly semaglutide program is making fast progress towards the clinic. And finally, the commercial success of Eurvipath and Skytrofa has already transformed the financial profile of Ascendis. In the third quarter, we achieved positive operating income along with positive cash flow. For the near term, the building out of our commercial organization is largely completed in advance of future global launches. For the medium term, label expansion LCM activities have been initiated to maximize the value of our current products. At the same time, for long-term sustainability, our R&D organization continues to advance the TransCon technology platform to ensure a constant flow of new programs and potential new products. In summary, with TransCon CNP nearing potential approval, Ascendis is well-positioned to get approval of its third TransCon phase product in a row. This highlights the uniqueness of Ascendis, the continuous development of highly differentiated products created by the TransCon technology platform and our unique low-risk drug development algorithm. Importantly, our current three rare disease endocrine products position us for durable future growth and give us confidence in our aspiration to achieve €5 billion or more in annual profit revenue in 2030. I will now turn it over to Scott. Thank you, Jan. Scott T. Smith: I would like to reiterate Jan's comments that the positive operating income development seen in Q3 signals the transformation of our financial profile, with sustained revenue and cash flow growth. With that, I will touch on some key points surrounding third-quarter financial results and outlook. But for further details, please refer to our Form 6-Ks filed today. In Q3, Eurvipath global revenue grew to €143.1 million, up from €103 million in Q2, with strong growth partially offset by a €3.6 million foreign currency headwind compared to the previous quarter. In Q3 2025, Skytrofa contributed €50.7 million, with 3% growth in demand offset by a €1.6 million foreign currency headwind compared to the previous quarter. Including €20 million in collaboration revenue, driven by a €13 million milestone related to Eurvipath and increased partner activity, total Q3 2025 revenue amounted to €214 million. Continuing on to expenses, R&D costs in Q3 were €66.9 million, down from €73.5 million in Q3 2024, primarily driven by the completion of certain clinical trials and development activities. SG&A expenses rose to €113.4 million in Q3 2025 compared to €69.8 million in the same period last year, reflecting the continued impact of global commercial expansion. Total operating expenses for Q3 2025 were €180 million, and operating profit for Q3 2025 was €11 million. Net finance expense for 2025 was €60.9 million, primarily driven by non-cash items, including a non-cash remeasurement loss of financial liabilities of €47.2 million. Net cash financial income over this period amounted to €400,000. Note that in our 6-Ks filed this evening, we provide more detail on the components of finance income and expenses. In future periods, we plan to introduce a non-IFRS EPS measure, adjusted for the impact of certain non-cash non-operating items, including those related to our convertible notes. This is intended to increase comparability of period-to-period results. Finally, we ended 2025 with €539 million in cash and cash equivalents, up from €494 million at the end of Q2. Turning to our commercial outlook, primarily driven by the ongoing global launch of Eurvipath, we expect continued revenue growth in the fourth quarter. For Eurvipath specifically, we expect continued growth driven by new patients, stable pricing, payer mix, and contracting in Q4. Longer term, we expect Eurvipath to be driven by continued growth in new patients on therapy, including expansion into additional markets. For Skytrofa, we believe that sequential revenue growth should continue to track growth in prescriptions with stable pricing, payer mix, and no changes in contracting, with offsets potentially driven by currency as we saw in Q3. Longer term, we expect growth for Skytrofa to be driven by geographic and label expansion. With that, operator, we are now ready to take questions. Operator: Our first question comes from Jessica Macomber Fye with JP Morgan. Your line is open. Jessica Macomber Fye: Hey guys, good afternoon. Thanks so much for taking my question. I was hoping you could speak to your expectations for the rate of new patient enrollments on Eurvipath in the US. From here, I think you talked about more than 4,250 as of the end of Q3, putting you at what is that? About 1,150 ads or maybe a little more relative to June 30. Can we think of that as kind of like a good number to work off of from here? Should it continue to kind of drift lower a little bit? Just hoping you can frame some expectations there. Thank you. Jan Moller Mikkelsen: Thanks. Yes. First of all, we see a steady stable number of prescriptions being written in the US. When we, in some way, take away the bolus that we have from the ERP program about the 200 plus patients we have in the ERP program. When we think about Q3, I'm actually pretty surprised positively about Q3 because I was fearing that prescriptions were not going to be written in the three weeks every physician typically takes out of their quarter in that time. And what I saw, we saw nearly the same number of prescriptions being written that we actually had seen in Q1 and Q2. And it's also following up with what we said in the October month. We saw more than 400 prescriptions being written in October. Unique prescriptions being written in October. So when I look at this launch, look at the US, I see a very, very stable launch. And what we're also doing, we're building a fundament like a strong, strong fundament. Because patients stay on lifelong treatment. And therefore, when you start a patient, it basically is continued quarter by quarter. So it's building out a house where you have a strong fundament taking one brick on around every quarter and the house getting taller and taller every quarter. Operator: Thank you. Our next question comes from Tazeen Ahmad with Bank of America. Your line is open. Tazeen Ahmad: Hi, good evening guys. Thanks for taking my questions. I just wanted to get a sense of how you're thinking about the rest of this quarter. Are you expecting to see impact from seasonality, I guess, you can call it just because of the upcoming holidays, Thanksgiving, Christmas, and New Year's? And do you think that the script trends for December would be directionally lower, let's say, than what you're seeing, what you saw for October? And then if I could ask about the TransCon CNP review, you said you're in final labeling discussions, which is good to hear. Can you just confirm whether or not you've had any requests for any type of data from the agency in the review cycle? Thanks. Jan Moller Mikkelsen: Let me take the last question. Thanks, Tazeen. First part, let me take the last question because it's an easy one because just no. Just no. No. No. No. It's really simple. So going to the next one, it's more what Scott Logan didn't read the FLS this time, which Chad FLS this time. But, you know, when I look forward in the future, yes, there are some holidays coming up. But when I look back, I was more worried about Q3 actually compared to Q4 because I actually believe that it's a longer summer vacation than in Q3 compared to basically what you will see in Q4. So I see pretty positive on Q4. I see the excellent increasing our prescription basis from physicians writing prescriptions with more than 500 new prescribers, meaning that having a broader, broader boat where there's more and more that can come in rowing on the ship, and this is where I feel pretty confident about it. So no worries from my side, Tazeen. Operator: Thank you. Our next question comes from Gavin Clark-Gartner with Evercore ISI. Your line is open. Gavin Clark-Gartner: Hey, guys. Thanks for taking the questions. I wanted to focus in on the conversion rate for Eurvipath. I'm wondering why it's only 70% and you noted that you expect it to be higher over time. How much higher do you expect it to be, and when do you think it'll be higher? Just had a follow-up on this too. Jan Moller Mikkelsen: Yeah. This is a question we have gotten multiple times every quarter. And what we have said in the previous quarter, we expect that it's going to be maturing over time. And it will go higher than that. And that is typical of what we have seen in launches. And I actually had a long discussion with Jay about it today. And, what is when we see it mature brand, is that 85% or is it 90%? Or what is really for the mature brand that you basically some way are ending up at that time. And I think from a modeling perspective is that we feel extremely well where we are today. We still have antibodies block taken into the situation. We're getting the patients. We're getting not only the prescriptions done. We're also getting the approvals done. And we're getting it done in a speed. And as Scott also put emphasis on this, we don't expect anything changing in the contracting environment in Q4. So we some may expect the same GCN for this product that we are seeing in both Q1, Q2, and here in Q3, and no changes to it. But, Jay, you can also take a little bit of our discussion about the future about what is really for a mature brand. Is that where we are today? And, also, we see a much higher number for Skytrofa after it got matured. Jay Donovan Wu: Yeah. Thank you for the question. As mentioned before, we're really encouraged about the 70% approval rate that we're seeing now. It's actually about what we expected or guessed at the beginning of the year just based on what we know about the clinical value proposition of the drug, which again, is incredibly positive and has been resonating with a lot of the payer accounts for which we are speaking with. To answer your question, Gavin, directly in terms of what that peak approval rate could be and at what timeframe, that's really hard to say. Right? When you look at some of the analogs for similar drugs that could, in some instances, take multiple years. And the reality is once you get to a certain high percentage, the remaining becomes a little bit more difficult simply just, given the heterogeneous landscape of the payers. Right? It becomes quite fragmented. A lot of the government payers might review it on different timetables. So we are meeting a lot of those timetables where they're at. And, again, we're continuing to talk about the incredible, positive clinical value proposition that we're seeing. And that alone is resonating with a lot of them, which is why we continue to see that approval rate go up over time. Gavin Clark-Gartner: That is super helpful. And if I could just ask a, like, specific follow-up on that. Like, for the 4,250 forms reported through the end of this quarter, are you guys basically saying you expect the conversion on this to be 70% and then trending higher per everything you just laid out after that? Jan Moller Mikkelsen: Nope. That's not what we're saying, Gavin. Because if we go back and look on the early cohort, meaning it's cohort four, March-April, it's much, much higher than the 70%. So this is what you see. The longer time it takes, the more and more are getting approved. And that is basically the element. And this is the question we have, can we really take this tail and shorten down the tail so we're basically getting the higher percentage that we see from the cohort we had in the beginning of the year, which are much higher than the 70%, can we start that to get it in a shorter time frame? Gavin Clark-Gartner: Okay. The point I'm trying to get at is for a lot of the start forms like, let's take the 3,100 you had through June. Maybe you've had close to 70% conversion, but the rest of the 30% is not really lost at this point. Some more still may come through as conversion. It's just a matter of time. Jan Moller Mikkelsen: Exactly. So if you take, for example, going to the cohort from March, April, much higher. If you take the earlier stage cohort now, that is near this month we have is lower than that. So this is how you see it. It's only a question about time. Gavin Clark-Gartner: Very helpful. Thanks so much. Operator: Thank you. Our next question comes from Joseph Schwartz with Leerink Partners. Your line is open. Joseph Schwartz: A question on Eurvipath and then on TransCon CNP. Can you give us your latest views on how Eurvipath has been penetrating the different segments of the hypoparathyroid market as you see it? Where is it gaining the most traction, and where could it do better? And then, you previously emphasized the desire to do more than enhance linear growth in achondroplasia. So I'm wondering to what extent do you think you can obtain differentiated label claims on the TransCon CNP label? Thank you. Jan Moller Mikkelsen: Let me take the last question. As I said in the prepared remarks, we are in the late-stage discussion about the label, and I cannot really comment about what will really be in the final labeling in this perspective. What is really the key element for me in my discussion with patients, my discussion with physicians, Aimee Shu's discussion, our medical affairs discussion with the teams, it's really to explain the benefit they see beyond linear growth. And it's clear unique effect in leg bowing, unique effect in changing body proportionality. And we will have peer-reviewed publications really supporting all these claims that will come out and really give us an opportunity to take and talk with the patient, talk with the physician about this benefit in it. I think this is the key thing for me. We saw and we saw an element once with hypoparathyroidism where it was impossible to get into the labeling our element of patient benefit related to cognitive function, although quality of life, and everything like that. And everyone recognized it. Everyone sees it. Everyone sees that is the best thing. I think this is the key thing from our labeling discussion is to have no restrictions. Have a really safe product really show our efficacy, and safety in the best possible manner in this way. Jay, will you take the first part of the question in this one to Joe? Jay Donovan Wu: Yeah. Could we repeat the first part of that question? Joseph Schwartz: Yeah. Sure. I was just wondering, you know, you've outlined the different segments of the market based on how controlled the patients are. So I was wondering, you know, how are you making inroads into those segments lately? Where are you getting the most traction, and where could you do better? Jay Donovan Wu: Yep. So when you think about the 80,000 to 90,000 patients that Jan had referenced early in the call, I think there's probably a group that we would describe as, you know, highly symptomatic, patients are well aware of their symptoms, articulating those symptoms to a physician. And within those, I would say we're doing quite well, particularly since the patients themselves are likely the ones that are in the offices most frequently and are keeping the appointments on the books to be able to, essentially get some of that information and also be on their way to actually get prescribed the product. I think where we're continuing to work on are some of the patients for which maybe they're not perhaps they've gotten used to some elements of it and therefore haven't been either self-identifying some of their symptoms as being related to the underlying condition and or as motivated to establish care and retain established care with a specialist. And I think that's why as we think about how we can continue to transform this market, there will be an element of patient activation as well. Simply because there is going to be a certain level of disease education required particularly for a space like this where it is about redefining what's possible, and, kind of the status quo for how to manage this type of condition. Jan Moller Mikkelsen: Yeah. If I can add something, Jay, I see it from two different perspectives, how often you come into the endocrinologist. This is one way. And those how we targeted it and defined something that is not defined on medical terms, but only on how often you see an endocrinologist related to being controlled, partly controlled, or uncontrolled. And what I also try to look at is to look on where are they coming from? Are they coming from the post-surgery? Are they coming from the genetic part? Are they coming from the immunological part? I see them coming from everywhere. So for example... Operator: Ladies and gentlemen, please stand by. Again, please standby. The conference call will begin. Please continue. Joseph Schwartz: Where did you last hear us at? Jan Moller Mikkelsen: I think this was Joe, your question about the... Joseph Schwartz: Yep. Sec. Welcome back. So I guess I was wondering about your progress within the different levels of control and where you can do better and, you know, just how you've been able to penetrate patients in each of these segments. Jan Moller Mikkelsen: Yeah. I think, Jay, at least I heard Jay's response to it. And my additional comments were that when we did the targeting of our physicians, we made it out from the claims database where we defined three groups: controlled, partly controlled, and uncontrolled. It's nothing to do with medical terms. But basically, it's an acceleration, how we basically are looking at the patient seeing an endocrinologist. So what I also look at is do we see all patient groups in our patient being coming on Eurvipath treatment? And when I see that it's pretty clear that we are in a position. We see that obviously post-surgical. But when we look at different elements of genetic, or immunological, we also see all different groups of patients, even patients from the ADH1, which are really, really less than 1% in the claim database. We already have about 15 patients on treatment with this symptom, which really gives us hope that we basically see the same penetration everywhere in all different of the hypoparathyroid patients in this way. Operator: Thank you. Our next question comes from Li Watsek with Cantor. Your line is open. Li Watsek: Hi, guys. Thanks for taking my questions. I guess just on Eurvipath, can you maybe just give us a little color on payer mix and potential contracting not just in Q4, but also in 2026? And should we sort of expect, you know, still minimum contracting and sort of stable growth to net for the next few quarters? Jan Moller Mikkelsen: I think, Scott more or less addressed it in his prepared remarks. There will be no changes into Q4. If we look forward, will there be potentially more contracting than we have seen now? And Jay can comment on that. We are in a position where contracting would not anyway change dramatically our GJN in any kind of financial modeling in this perspective. And we see Eurvipath really have all the characteristics of the product. It's a first-in-class. There's only one treatment option. And we see it actually being not only being prescribed, but also being reimbursed to the level that we have hoped for. Jay, do you have further comments on the long-term perspective of contracting? Jay Donovan Wu: Yeah. I would just reaffirm what you shared. Consistent contracting strategy in Q4 as previously discussed. Given the first and only nature of what we have and the fact that the clinical value speaks for itself, we don't anticipate any major contracting that's gonna deviate above and beyond what we've shared before. Which is more minor contracting around ensuring a frictionless patient experience. So, again, nothing substantial or anything meaningful above and beyond what we've discussed to date. Any changes will be minor. Jan Moller Mikkelsen: And when we look at the competitive landscape, we don't believe any of what we see in the competitive landscape will really make us move into a much more highly contracted product as we see really the best-in-class properties compared to everything we see. Li Watsek: And then, you know, just curious about the TransCon CNP and the phase two meeting. In terms of the phase three, you know, trial design, should we assume that FDA would require a one-year data on annualized growth velocity and anything that you can share on the powering assumption? Jan Moller Mikkelsen: Yeah. That is an interesting question because I basically have never seen anything longer than a one-year clinical trial in any growth disorder. I've seen a lot of perception about something that could be taken up as two years, but I've never seen any regulatory packet that has more than one-year controlled treatment in this. We have already what we call long-term data that will be generated from our phase two trial. So I think that is basically the element of what I never have seen in this way. And Aimee Shu went to the FDA meeting, so she can basically just give you the view about what she basically got feedback from that perspective. Aimee Shu: Yeah. So, Li, happy to say that we found our reviewers at FDA to be appropriately open-minded about duration here. But there's obviously a regulatory pathway, and that's usually one year of data. Operator: Our next question comes from Yaron Benjamin Werber with TD Cowen. Your line is open. Yaron Benjamin Werber: Maybe, Jan, maybe a couple of questions. Number one, just on gross to net. When we're kind of we were at around just over 4,200, and we had, like, a 65% approval. But we were getting to higher numbers for the quarter, so I'm wondering whether and we had 18% gross to net. Is it possible that gross to net discounts are higher than that? That wouldn't make any sense because I got the question kind of, like, what am I missing? And then maybe secondly, are you it sounds like you may be very subtly intimating to expect some impact from the holidays in Q4. Are we reading it correctly? Because didn't see much seasonality in Q3. And then finally, US versus European sales for Eurvipath in the quarter, was it like around $4 million or so in Europe this quarter as well? Thank you. Jan Moller Mikkelsen: Yeah. That was three questions. The element of what I will take what we said in the beginning of the year is still what we really are seeing. We said we will expect ex-US to be around €4 million to €5 million increase every quarter because we have not really expanded it more to fully commercial countries, which we did now in here in Q3. But we first see the effect on that perspective in this way. Related to the seasonality on it, I don't expect any to see any seasonality in Q4. That is pretty clear. I expected it to potentially have seen it in Q3 because I expected the physician to be gone for three weeks. And when we not really saw a major impact in Q3, I don't expect to see any impact in Q4. So Scott, he's really the guy with the numbers and everything like that. So he really is good at that. So Scott, can you take the first question? Scott T. Smith: Yeah. So, I think your question was the, the 70% approvals and the time to time to, revenue. We could probably follow-up offline on, you know, how you're thinking about things. But just remember also when there's an approval, it's this isn't the exact same thing as patient on drug. Right? They get approved, and then sometimes, you know, sometimes it's soon. Sometimes it takes a while. But, that's probably the only thing to keep in mind, Yaron. Operator: Our next question comes from Martin Auster with Raymond James. Your line is open. Martin Auster: Hey, guys. Thanks for taking the question. I'll try not to be too greedy and just keep it to a couple. First, on Eurvipath, and I was wondering if you could comment if you've got any sense of early data on what patient retention looks like from folks who've started up on drug this year. And then second, on TransCon CNP, I guess from a commercial perspective, when we look at this market, it looks a little underpenetrated for a rare disease market compared to some other comps. I'm curious if you guys have a sense as to sort of why that's the case and if you think TransCon CNP is sort of coming to market and improve upon that and improve overall penetration rates of treated folks with achondroplasia? Jan Moller Mikkelsen: Thanks, Martin, for the question. The first one is really, really, we spend a lot of time on it. Spend a lot on the analytical. And we are losing very, very, very, very few when they have initiated treatment. Very few percentages. And if we lose them, it's basic in the first four to six weeks. Meaning is that we are now trying to go back. How can we potentially help them in the titration phase? And I think that is always the element where you start on a system where you are on conviction therapy. You start to do it. You need to take it off, and I believe if there is not a good interaction between both the physician, the case where we get case and monitoring and everything like that. It is a more difficult period for the time. This is why the titration. That was why we started all this one daily product because we know we could never get this titration to function with a once-weekly product. So that is where we see. When we see after four to six weeks when we're starting to be stable, we as exactly as I said here, we expect nearly all patients to be on lifelong treatment. This is like building the fundament stronger and stronger. And Martin, I agree with you. When you have a look on vosoritide, it's doing really poorly in the US. They're saying that they're doing really good outside the US. I think they're doing really poorly in the US. That should be much, much higher. And I believe that because they're not really addressing what we really should address. The comorbidities. And I believe this is where we come in with a differentiated product. This is why when I talk with different patient organization groups, and really, they ask me a simple question. Jan, would you have taken the primary endpoint to be linear growth if you were the first product? And I said, no. We will never have done that. We will really have addressed how we're really addressing the comorbidity because we believe that is really why patients should take the treatment. Help them to the comorbidities, really help them in this way. And this is where I believe we have an extremely positive dialogue with all the patients and the patient related to that topic. Martin Auster: Thanks, Jan. Looking forward to November 30. Operator: As a reminder, please limit yourself to one question and a follow-up. Our next question comes from Paul Choi with Goldman Sachs. Your line is open. Paul Choi: Hi, good afternoon and thanks for taking my question. I also want to stay on TransCon CNP and maybe ask on the commercial strategy as you launch it and particularly for next year. Are you primarily going to target de novo patients? Or are you expecting a good portion of the revenue mix to be from vosoritide daily injection experienced patients? And if you are expecting a decent-sized contribution from the latter, can you maybe speak to what your market research suggests the appetite is on potential switch strategies and just sort of what percentage of the existing, you know, treated patient base might you might think ultimately convert? Thanks for taking the question. Jan Moller Mikkelsen: Thanks so much for the question. Yes. We expect that to be a lot of switches. We enrolled patients in the places where vosoritide is commercially available. Free for the patient. We enrolled it there was other treatment alternatives. You call them treatment alternatives. We were in a position that preferred it. Out from the perspective they'll stay not only the once-weekly profile, but the lack of injection site reaction. Really, to be in a position, you need to worry about any risk of hypertension. And anything like that. That was really one of the key developments. And also at that time, we not even have really the clarity of beyond linear growth, the benefit beyond linear growth. So when I look today, it will going to be a large portion on switch patients. When you have therapy being implemented to a high level. Which it is in some European countries. In some European countries, sixty, seventy percent of all patients will be treated today. And there will be switch. They are just waiting for it. We know they are waiting for it because they ask for it all the time. When will it be approved? In Europe? If you go to the US, because of not high penetration, there will be many more new patients coming in because there's not too many to switch off. So this is what we see how we would build up the commercial strategy. Paul Choi: Okay. Great. Thank you. Operator: Our next question comes from Yun Zhong with Wedbush. Your line is open. Yun Zhong: Hi. Good afternoon. Thank you very much for the questions. So the first question on the label extension, to the higher dose, I assume the pricing is gonna be the same. So would you expect any direct impact on maybe the number of patients on treatment and the reported revenue, please? Jan Moller Mikkelsen: First of all, when we look on treatment in a dose larger than the 30 dose, it's only restricted to the US. And currently, when we see in many countries there is a few percentage of patients that really need it in a commercial setting. We accept some patients that really need it, and they are in many cases, already on treatment in the US. By having this trial, the patients that basically will need more than 30 in the US will now have availability because they can join us in the clinical trial. The clinical trial, as Aimee can explain, is a very rare simple. Single-arm study. You can explain how many patients we have. It's basically just a safety trial. Aimee Shu: Yep. So single-arm, 18 subjects who will be titrated as they need based on serum calcium. Using the higher doses. Jan Moller Mikkelsen: So it's basically an 18 patient, six-month trial. For safety perspective. And that will be the triggering point to also in the US having. I don't think it will have a material impact in any way on our revenue. Yun Zhong: I see. Thank you for the clarification. Then a follow-up question on the payer discussion. I believe that initially, you said roughly it takes about eight weeks to get payer approval. Then I think last quarter, you said three months. And then this quarter, just now, you probably, set a month. Was that just a random maybe fluctuation? Or was there any meaningful change in terms of how long it takes for payers to approve coverage, please? Thank you very much. Jan Moller Mikkelsen: We see an improvement month by month, and when we look at the data today, with about the 50% and the eight weeks that is the data we see today. Yun Zhong: Okay. Great. Thank you. Operator: Our next question comes from Alexander Thompson with Stifel. Your line is open. Alexander Thompson: Hi. This is Charles on for Alex. Maybe a bit of a different question, but in terms of the sort of adolescent buckets of hypoparathyroid patients you're looking at, I guess, like, what kind of patient size does this represent in the US, and what kind of growth do you expect to see from here? Assuming there's successful label expansion? Thank you. Jan Moller Mikkelsen: This patient group is a quite different patient group compared to the pool of the patients we talk today in the US and other countries. Many of these young children are coming from more the genetic and immunological part. Anoxamos from head and neck operation. Still, that can be posterior to patient at that stage too. These patients are in a severe case because if you have hypoparathyroidism in such a young age, a lot of developmental part is really affected not to have the right calcium hemostasis phosphate hemostasis, and bone hemostasis in the body today. So I see it as really as high level of severity of disease to have it. Also, in this extremely young age. I even have seen young people that had it from young that already have kidney transplantation in the twenties. Because of the high burden of the treatment that has been available today conventional therapy. And when we look at the number, there will not be a number that ever came come up to the level that you see in the adult population but it's not changing the severity of really making a treatment available for this patient group. Operator: Thank you. Our next question comes from Luca Issi with RBC. Your line is open. Luca Issi: Great. So much for taking my question. Based on the unique patient enrollment, is that a metric that you're committed to report going forward, or are you planning to sunset that metric at some point? And if it is the latter, can you talk about whether that could be Q4, or would that be later than that? And then maybe if I can ask about Novo Nordisk. Can you just talk about how that collaboration is going? Obviously, lots going on in Novo, given, again, new leadership in place. And, obviously, just lost the deal on NetSerra. Wondering if you're seeing any disruption with that collaboration with them or maybe the opposite actually, an acceleration of that collaboration. So any thoughts there. Much appreciated. Thanks so much. Jan Moller Mikkelsen: Yeah. Let me take the last question first. About our collaboration. And when I look at the collaboration, and the look on the once, monthly semaglutide which I believe have a unique profile because of the slowly release from the product system to a level where the Tmax is very late, and therefore, you don't have high slope. So likely, the tolerability as we have seen in animal model really can also be established in the clinical trials in humans in this way. As we are responsible for the last element of the collaboration, there has definitely not been any disruption and there has definitely not been any lack of interest in this program. And this is not one single program. It's as I said in our press release, it's a series of programs that we are working on. So we definitely have not seen any kind of lack of interest and is progressing with the speed which we can do it too in this really positive collaboration as fast as we can do. We believe that when they come to the late stage, sure, the muscle of a company like Novo Nordisk to make a last phase three trial in multiple ways is really unique because they really have the capacity and unique level of expertise to do it. Sadly now, I forgot the first question. Scott T. Smith: Enrollment as a metric? Yeah. The enrollment as a metric is a question that we discussed a lot. And we want commerce on it, when you're feeling that we are in a position that revenue coming to a level that we are reporting now really where you're feeling that it's really coming to a stage where the addition of new patients really are not changing so much of the overall. As I said, we're building a strong fundament quarter by quarter. The strong fundament is building a really tall house. And we're now taking bricks by bricks, quarter by quarter, and we're building this revenue base up more and more. And you can nearly from a just a mathematic modeling, think about it. When we are much more further in the launch, the addition of new patients just are not giving the same impact on the overall actual revenue at that stage and therefore, I believe in one time the number of new prescriptions is not really meaningful for you. You will just see a quarterly revenue growth that basically is just reflecting at the addition of new patients. Operator: Thank you. Our next question comes from Maxwell Nathan Skor with Morgan Stanley. Your line is open. Maxwell Nathan Skor: Great. Thank you for taking my questions. I was just wondering when we can expect preclinical data supporting Eurvipath's potential for weekly dosing? And also, could you share your outlook on Eurvipath's trajectory in Europe? Should we think about a potential ramp next year? Thank you. Jan Moller Mikkelsen: Yeah. Typically, what we're doing is that we will like, in the beginning of the year, there is a conference and likely there'll be typically will come up with data and status on our new product opportunities and we expect to repeat the same element. Year by year. So a good time to expect to see data will be at the beginning of this year. Scott T. Smith: Oh, the if the if he's talking the, the guidance on OUS. Ex-US what we said for this year here is a 4 to 5 million increase. Quarter by quarter. What we said this will further be accelerated when we come into '26. Because we will have an addition of more and more. Countries. When we come into January we will give you the perspective of what countries we expect to add in to the being fully commercial in '26 and '27. Operator: Thank you. And we'll take our last question from Clara Dong with Jefferies. Your line is open. Clara Dong: Hi, thanks for taking our question. And just to follow-up on the previous question and apologize if you've mentioned already, but it will be great if you can the US and ex-US revenue split for Eurvipath. And then in terms of the US launch momentum, is there any specific timeline for any upcoming reimbursement decision in any market and any pricing dynamic we should keep in mind as you expand internationally? Thank you. Jan Moller Mikkelsen: Okay. So we gave you an algorithm basic in the beginning of the year. We said that when you look in Q4, '24, that was about 14 million in net revenue. All this net revenue was basic ex-US. And we expect it to add 4 to 5 million net revenue in '25 every quarter. So you can nearly add 14 plus five plus five plus five plus five, and then you have the Q4. What we saw in here in '25 we got Spain. Full commercial. We are in a situation where we not compromise the value because we have a durable product that basically will be here for twenty years. So for us, it's more important to really have the value being created in the right manner. And what we will give you here at the beginning of the year the perspective of what and how many new countries expect. To add on in twenty-six. Operator: Thank you, and that's all the time we have. Thank you for joining. You may now disconnect. Good day. Jan Moller Mikkelsen: Thanks a lot.
Operator: Good afternoon. My name is Irene, and I will be your conference operator for today. At this time, I would like to welcome everyone to AlTi Global, Inc.'s Third Quarter 2025 Earnings Conference Call. During the call, your lines will remain in a listen-only mode. There will be a question and answer session. I would like to advise all parties that this conference call is being recorded. And a replay of the webcast is available on AlTi Global, Inc.'s Investor Relations website. Now at this time, I will turn things over to Lily Arteaga of Investor Relations for AlTi Global, Inc. Please go ahead. Lily Arteaga: Good afternoon to everyone on the call today. Joining me are Michael Tiedemann, our CEO, and Michael William Harrington, our CFO. We invite you to visit the Investor Relations section of our website to view our earnings materials, including today's presentation. I would like to remind everyone that certain statements made during this call may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include but are not limited to comments made during the prepared remarks and in response to questions. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied. For a discussion of these risks and uncertainties, please refer to AlTi Global, Inc.'s filings with the SEC, including our most recent annual report on Form 10-K and subsequent quarterly reports on Form 10-Q. AlTi Global, Inc. assumes no obligation to update any forward-looking statements. During this call, we may refer to non-GAAP financial measures. Reconciliations to the most comparable GAAP measures can be found in our earnings materials and related filings. Lastly, please note that the recast financial results referenced in the presentation for 2025 reflect preliminary unaudited statements with respect to such results based solely on currently available information, which is subject to change. With that, I'll turn the call over to Michael Tiedemann. Michael Tiedemann: Thank you, Lily, and good afternoon, everyone. The third quarter reflects continued execution of the strategy that we have laid out, focusing the firm on our core wealth management business, simplifying the organization, and reducing structural costs so that earnings scale directly with revenue. As previously disclosed, we placed our international real estate business in administration this quarter. The business has been a drag on margins as discussed in prior calls. The charges associated with placing it in administration will be our final restructuring charges related to it, and the business will no longer take management attention going forward. This results in cleaner financials and bottom-line improvements as we move ahead. We also moved to a single reporting segment which provides cleaner transparency into performance and supports a more direct evaluation of operating leverage. We continue to operate from a position of strength. Our platform is global, integrated, and purpose-built to serve the complex needs of ultra-high-net-worth families, foundations, and endowments. By combining institutional investment capabilities, deep access to alternatives and impact, and the infrastructure of a multifamily office, we deliver seamless solutions through teams across nine countries and 19 cities. Our business remains anchored in long-duration advisory and OCIO relationships with ultra-high-net-worth families. Since 2021, having approximately 96% client retention, with an average tenure of ten years, and an average AUM per client above $50 million. These long-standing relationships are built on a foundation of trust, and their wealth compounds over time through market cycles with diversified exposures to both public and private markets. A core differentiator is our ability to deliver independent advice at scale, particularly in private markets. We leverage our platform to negotiate preferred access and pricing with leading managers. A perfect example of this is our partnership allocating capital alongside our largest shareholder Allianz within the private credit space. This joint venture continues to grow, outperform, and accrue to the benefit of our client base. Consolidated revenue for the quarter was $57 million with approximately 95% generated by recurring management fees, and adjusted EBITDA was $6 million. Our results this quarter also include a non-cash valuation adjustment related to our interest in the arbitrage strategy. This adjustment is accounting-driven, reflecting valuation at a single point in time during a period of lower AUM. Despite this valuation adjustment, the strategy is performing well, up 7.5% through September, driven by an improved regulatory environment and strong market backdrop. At AlTi Global, Inc., our cost base is structurally lower and continues to decline as the efforts of our zero-based budget program come into effect. Once completed near 2026, these initiatives are expected to generate approximately $20 million in recurring annual gross savings across non-compensation categories. This disciplined approach to cost complements the robust organic growth we are seeing across our wealth business. Internationally, we added more than $600 million in assets in the quarter alone, including a $240 million mandate secured through collaboration between Miami and Singapore offices, and a $130 million mandate driven by our impact investing team in Zurich working with specialists from Contura in Germany. Year to date, the international growth has been substantial, with over $1.2 billion added from both new clients and expanded relationships with existing ones. In the US, growth continues to accelerate as we strengthen relationships with large sophisticated families and broaden our presence in priority markets. Through September, we secured nearly $1.1 billion in new and expanded mandates reflecting strong demand for our capabilities. Our pipeline remains exceptionally robust, featuring significant OCIO opportunities, and while onboarding timelines vary, our consistent execution and improved expertise give us confidence in converting these prospects into enduring client partnerships. Building on this progress, we are sharpening our growth focus through four distinct segments: women who manage wealth, family offices, endowments and foundations, and established wealth. By tailoring our investment and service strategies to these segments, we aim to foster stronger internal alignment and create clear differentiation in the marketplace. Early indicators are positive. Collaboration is accelerating, and after a brief slowdown last year, our prospect win rate is returning to normal levels. In parallel, we have built and continue to invest in operational centers of excellence: Lisbon for international operations and Delaware for US operations. These hubs were selected for strategic positioning and cost-effectiveness, enabling us to create meaningful operating leverage as we scale. We are also refining our pricing models, with a particular focus on international wealth management. These enhancements will drive greater consistency across our global platform, align pricing with the complexity and value of services we deliver, and strengthen operating margins, all while ensuring a fair and transparent experience for clients. Alongside these efforts, we are positioned to fully realize the benefits of substantial investments made over the past few years. These projects have strengthened our platform through a unified global tech infrastructure, consolidated investment capabilities, service, and a more robust finance function leveraging best-in-class systems. Taken together, these strengths combined with our singular focus on serving the global ultra-high-net-worth segment position AlTi Global, Inc. as a truly differentiated firm with a scalable control environment that is uncommon in our industry. While these investments have weighed on our short-term profitability, they were made with a clear long-term vision creating a solid foundation for growth. To summarize, restructuring of the international real estate business is complete. The cost base is structurally lower and continuing to decline, and the platform is simplified and scalable. As new mandates and assets move into billing, revenue growth will convert into margin expansion. With the firm now squarely focused on organic and strategic growth within our core segment, we expect results to reflect this clearly as we move forward. With that, I'll turn it over to Michael William Harrington to walk through the results for the quarter. Michael William Harrington: Thank you, Michael, and good afternoon, everyone. Let me begin with two important structural changes that shaped our third-quarter results. First, our international real estate business being placed under administration in July qualified it to be presented as discontinued operations. As such, we have restated prior periods to isolate continued operations in accordance with US GAAP. Second, in line with this presentation, we have unified our financial reporting into a single segment. These changes reflect our strategy to streamline and focus on our core wealth management franchise, and the enhanced transparency improved comparability, and better reflect the business we are building and scaling. Now turning to the quarter. Revenues for the third quarter were $57 million, up 10% year over year and 9% sequentially, reflecting continued momentum in our wealth management business. Growth was led by management fees of $52 million, up 7% versus last year, driven by robust asset growth. Additionally, revenues benefited from a year-over-year increase in incentive fees and the arbitrage fund. Importantly, 95% of revenues this quarter were recurring, underscoring the durability and predictability of our model. Assets under management reached $49 billion at quarter-end, up 6% year over year, fueled by strong underlying portfolio performance and the acquisition of Contura last quarter. Sequentially, AUM increased 4%, reflecting both portfolio performance and meaningful net new asset growth, clear evidence of the momentum Michael highlighted as a core driver of future earnings power. Operating expenses for the quarter were $86 million, up from $61 million in the prior year period. The increase was largely driven by nonrecurring noncash charges, including a $4 million client redress provision and a $16 million write-off of receivables due from our disposed international real estate business that were formerly intercompany balances. The year-on-year increase also reflects the acquisition of Contura. Within onetime items, normalized operating expenses were $51 million versus $43 million in 2024. Normalized compensation expenses totaled $32 million compared to $28 million, primarily reflecting the inclusion of Contura and the bonus provision associated with the arbitrage incentive fee recorded this quarter. Normalized non-compensation expenses were $19 million compared to $15 million in the prior year period, driven by Contura's consolidation and higher professional fees and G&A expenses. Sequentially, normalized compensation expenses rose by $3 million, primarily driven by the bonus provision. In sharp contrast, noncompensation expenses decreased approximately $600,000 from the prior quarter. Even after absorbing an additional month of Contura, which contributed nearly $500,000 in cost, excluding Contura, the quarter-over-quarter reduction exceeds $1 million, underscoring the tangible impact of our zero-based budgeting initiative. This disciplined approach is delivering measurable savings across multiple categories, including technology, professional fees, marketing, and travel and entertainment. Building on these results, the initiatives implemented in these categories are delivering tangible benefits and will continue to contribute meaningfully to the quarters ahead. Importantly, additional savings are expected to come online soon as we begin to realize the impact of occupancy optimization across key offices, and the wind-down of legacy technology and vendor contracts. Together, these efforts represent the next phase of our zero-based budgeting strategy and are central to our trajectory, reinforcing our commitment to operational discipline, and positioning the company for sustained margin expansion. Other loss for the quarter was $28 million, primarily driven by a $35 million noncash impairment of the arbitrage fund. This was partly offset by gains from fair value adjustments on certain investments. Consolidated adjusted EBITDA in the quarter was $6 million compared to $12 million in the prior year period. The 2024 quarter benefited from nearly $3 million in interest income while the 2025 reflects the full impact of Contura adding approximately $3 million of normalized cost alongside higher professional fees and G&A expenses. Importantly, nearly all of the $93 million in EBITDA adjustments, approximately $87 million, are noncash in nature. Of the cash add-backs, only $1 million were nontransaction related. This is notable as it points to the normalization of the business going forward. The tax line this quarter reflects a noncash charge of $30 million, including the impact of the 100% valuation allowance related to our deferred tax asset. This adjustment was necessary due to uncertainty around future realization. Finally, on a GAAP basis, we reported a net loss of $107 million for the quarter, primarily reflecting the noncash nonrecurring charges related to the exit of the international real estate business, the impairment of the arbitrage intangible, and the valuation allowance against our deferred tax asset. Adjusted net income, which excludes nonrecurring items, was $1 million. The net loss from discontinued operations was $20 million for the quarter, reflecting the full impact of placing the International Real Estate Division in administration. Upon deconsolidation, intercompany balances were reclassed as third-party receivables and payables. As part of its commitment to an orderly wind-down, AlTi Global, Inc. will provide financial support and transactional services through the wind-down period ending 12/31/2027. The support will be reflected as an adjustment to the payable balance and reported under continuing operations. While this quarter includes significant charges, these nonrecurring costs should not mask encouraging quarter-over-quarter trends on a normalized basis. The positive impact of our efficiency and productivity initiatives is starting to come through. As we enter 2025, AlTi Global, Inc. stands on a stronger, leaner platform with a normalizing expense base driven by organizational streamlining, zero-based budgeting implementation, and the real estate exit. Combined with a robust organic growth outlook and pricing initiatives Michael outlined, we believe the business is well-positioned for sustainable margin expansion. With that, I'll hand it back to Michael Tiedemann for his closing remarks. Michael Tiedemann: Thank you, Mike. Before we open the line for questions, I want to reiterate what sets AlTi Global, Inc. apart. Our platform is purpose-built for the world's most sophisticated families, combining global reach, deep expertise, and a cultural partnership that endures across generations. The resilience of our business, anchored in long-standing relationships, high client retention, and a commitment to independent best-in-class advice, gives us confidence as we navigate periods of change. As we sharpen our focus on our core wealth management business, we are investing in what matters most: our clients, our people, and the capabilities that drive sustainable long-term growth. We believe the actions we have taken this quarter position AlTi Global, Inc. to deliver on our mission, helping families manage wealth with purpose, and building lasting legacies. Thank you for your trust and partnership. Operator, let's open the line for questions. Operator: Thank you. We will now be conducting the question and answer session. If you would like to ask a question, it may be necessary to pick up your handset before pressing the star keys. The first question we have is from Wilma Burdis of Raymond James. Please go ahead. Wilma Burdis: Hello. Good evening, you guys. Maybe you can help me just a little bit more about normalized EBITDA versus the 6.2% that you guys posted in the quarter. I think you mentioned that normalized expenses were around $35 million lower than the operating expenses on a reported basis. So I do not know. Should we add that back to the EBITDA? How should we think about that? Thanks. Michael William Harrington: Yeah. I'll take that. Yes. Yeah. You should add that back. I mean, going to my comments around the adjusted EBITDA, I think that's what you should focus on. That's what's been normalized. Yeah. So we definitely have the 35 backups gonna be nonrecurring. I'm not sure I'm answering your question. Wilma, could you be more specific? Wilma Burdis: I think what I'm trying to get into a little bit more is just how we should think about a normalized level of EBITDA. So you know, I guess you've done some of the ZBB work. You've had different charges. Just any way you could help bridge me to a more normalized level of EBITDA on a go-forward basis would be helpful. Michael William Harrington: Well, we are avoiding providing guidance. So I think our commentary is trying to point in that direction. We have a lot of confidence in terms of how we are managing costs and the direction that those costs are headed. So as I noted in my comments, we feel good about what's coming online in terms of savings. So any increases we might have, for example, like when you get to the end of the year and Q1, you have merit increases that we should be able to mute that because we are gonna have offsets to that in terms of to keep that from rising. And then as Michael noted, the pipeline activity is very strong. The last couple of quarters, you've seen our management fees really grow over up 15% from Q1. And the combination of those two and some other initiatives we have going on, like the pricing initiative that Michael referenced, should really lead to an expanding margin. And I think we have a high degree of confidence around that outcome. Is that helpful? Wilma Burdis: It is helpful. I guess, you know, if I think about this year, what you guys have posted, you know, probably for the first March, something in the, you know, 40 maybe a little bit more than that, 40-ish million range for adjusted EBITDA, and then you've got the ZBB coming on board as well and then some growth. So is that does that kinda give us a good decent type run rate to build off of? Michael William Harrington: Without giving Well, if I was building off, I build off the $6 million number we were providing as adjusted and then expand off of that number. Wilma Burdis: Okay. So that's a good number. It's kind of a run rate then you think and then, you know, you're adding ZBZ and growth. Michael William Harrington: Got you. Wilma Burdis: Thank you. That helps. And then you made commentary about just noncash versus cash. Is there any way I do not think that this is something that you guys provided a lot of detail in the way on in I can recall historically, but is there a way to back into cash flows or anything along those lines? Thanks. Michael William Harrington: Well, you could or when our filing's made, we do not provide that in this material we have here, when our filings made, you'll be able to see the cash. Changing cash for the period. So we did consume some cash this period. So you'll see that when we file our 10-Q. But on a go-forward basis, I expect cash to or cash and our cash flow to improve. Just based on the performance of our business improving. I got you. Wilma Burdis: Could you just go a little bit more detail on the impairment in the arbitrage fund, which was I think it was around $35 million. Michael William Harrington: Sure. Yeah. So the valuation was used last September was a function of certain projections, certain assumptions that are made around the business and its performance. And part of those assumptions were certain growth rates are applied to the business. And so that as you can see, the results for the year, the assets haven't grown or actually down from 9/30 of '24. So that caused us to have to take a look at the assumptions that we had made around the valuation last year. And so we refreshed all that with new assumptions around that go-forward growth rates. And that when we did the math that also have to earn impairment on the business. As Michael noted, from a performance standpoint, the strategy is doing very well. It just didn't grow last year. Actually, shrank. So in terms of AUM, but it's doing very well. It's having one of its best years in a number of years. So that's the reason for the impairment. Wilma Burdis: Got it. Makes sense. And then I think you guys touched on this in the opening comments. But just to confirm, should we consider the restructuring to be complete? Michael William Harrington: Yeah. The UK yeah. We're that's behind us. We're as with this quarter, there won't be additional charges related to that business. And as we noted in the commentary, we'll provide support for the orderly wind-down, but that'll be that'll be done. We'll be making cash payments to support that, but there won't be P&L impact going forward. It'll just be a reduction of the payable that we have to the administrator. Wilma Burdis: Got you. But I just mean, generally, is there a lot more restructuring needs to be done outside of that piece as well, or maybe just give us a little bit of an indication? Michael William Harrington: You mean, of the entire business? Wilma Burdis: Yes. Michael William Harrington: Not that I'm aware of. No. Wilma Burdis: Okay. And then any plans for a buyback or anything like that? Michael Tiedemann: Michael, do you wanna answer that? Would you like me to answer that question? Michael Tiedemann: The buyback, I mean, buyback share repurchases on the list of topics to be discussed with the board in our next meeting. So we are always evaluating that in the share count and the dilution as part of our strategy conversations. Wilma Burdis: Okay. Makes sense. And are there any additional noncore parts of the business that could be divested potentially hopefully, for a gain? But is there anything that you're considering proving at this point? Michael Tiedemann: Again, we are always looking at the optimization of the balance sheet. In terms of asset values, core segments of growth, utilization of cash from any asset sales or just reduction of costs as we've been more focused on previously. In terms of putting a segment to administration. So these are all parts of evaluations that are ongoing and continuous. So the answer is yes, always, but nothing to be announced. Wilma Burdis: Okay. Great. And then, Mike, maybe you could talk a little bit about the pipeline for deals and other opportunities to grow. Michael Tiedemann: Yeah. So the advantage I believe we have or certainly one of the benefits of being a global business, is the fact that there are opportunities, there are cities that we do not operate in, and there are obviously opportunities globally for us to evaluate. As we've matured as a public company and as we've been growing and executing and successfully integrating teams, we have more and more proof points to explain to any prospective team, individual, or firm that might be a great strategic fit for us. So the pipeline is global. We as obviously, we expanded within Germany. At this point internationally, we would like to focus on densifying the existing jurisdictions and areas in which we operate. And there's a lot of business growth pipeline opportunities in The Middle East, so that is an obvious area for us that we're evaluating quite seriously. And then throughout The US, there are a few cities and major cities that we do not currently have a presence where there are either teams to bring into the firm or potentially firms to add that we're evaluating as well. Wilma Burdis: Great. And then hopefully, I'm okay to ask another question. But are there any other strategic conversations that are ongoing that we should be aware of? Thanks. Michael Tiedemann: We again, as a firm, we are always having internal strategic conversations about the firm, the stock price, acquisitions, and so as just as a firm, we are always evaluating the business at all, but, there is nothing to comment on. Wilma Burdis: Okay. Thank you. Operator: The next question we have is from Chris Kotowski of Oppenheimer and Co. Please go ahead. Chris Kotowski: I was just wondering, the impairment that you cited, I was a little fuzzy on that, is Do we see that on the intangible asset line on the balance sheet? So it's, like, not a part of an investment that was written down. It's the intangible. Right? Michael William Harrington: Correct. That's right. The intangible related to the investment management contract. Yep. Chris Kotowski: Okay. And then I was also wondering the you had, I think, in the past talked about the Contura that, you know, had a fairly large headcount, a lot of service, and you know, that you were trying to recruit more wealth management people there, and I'm just wondering if you can update us on how that's going. Michael Tiedemann: The integration's going very well. We have everything from tech investment team, marketing team, all working on integration plans fully agreed by all teams. And the marketplace of Germany is a very exciting one for us. So there have been some big collaborations already and some early wins that were meaningful. So it's important for us to, number one, evaluate the talent within any firm or team that joins us to make sure that we understand where that talent resides within the organization. There are times where a single office or someone working within a firm in a single office can actually become elevated and be part of the global firm. And so we're also evaluating investment portfolios. There's a lot of integration that occurs in the first year. It's going very well. And the team on the ground is very excited about it. And they're very happy to be integrated and also we're evaluating opportunities jointly. Chris Kotowski: Okay. And then I was wondering about the two-year time frame. I thought I heard you say 12/31/2027 is kind of the final should I understand that as that, like, the final liquidation of all the UK assets and you know, does that time frame incorporate any settlement of any, you know, litigation issues that might still be outstanding? Michael William Harrington: The December 2027 is just the that's the administrator's timeline. That's what they're targeting is to complete their work in terms of resolving all the matters where they get to the liquidation of the assets and the repayment to creditors. We're not involved in that and do not have any influence or on the timing of that. That's just their kind of standard operating plan. We will provide support through December 2027, and then thereafter, we will not. So if the administration continues after that, we will not be obliged to. We will have provided all of our support that we're going to provide at that point. Chris Kotowski: And what's the nature of this? Michael William Harrington: I'm sorry. Go ahead. Chris Kotowski: I was gonna ask. What's the nature of the support that you have to provide? Michael William Harrington: Well, we put in a funding agreement between us and we're in the final stages of negotiating that, but that the funding agreement will be consistent with the payable that's on our balance sheet now that's due to a third party. When you get to read our 10-Q, this is described in a lot of detail on there. And you'll see we have a payable to a third party. That third party is the administrator and we will relieve that payable by sending cash to the administrator over on a set schedule, which we're again in the final stages of negotiating that schedule. So it'll be over that time of the administration, which is the next eight quarters because the first payment won't be due till 2026. Okay. And from a legal perspective, the matters that were related to the international real estate business, they are now the responsibility of the administrator. Part of the reason we took the action we did was to have those matters be then transferred to the administration. So on a go-forward basis, we mitigated that exposure. Chris Kotowski: Okay. Great. Alright. That's it for me. Thank you. Wilma Burdis: Thank you. Operator: There are no further questions at this time. I would like to turn the floor back over to Michael Tiedemann for closing comments. Michael Tiedemann: Thank you all for dialing in today for your interest and support. And if there are any further questions, please do contact Lily Arteaga and our IR department. I wish everyone a happy Thanksgiving and happy holidays for us in the month of then. Cheers. Operator: That concludes today's conference. Thank you for joining us. You may now disconnect your lines.
Operator: Good morning. This is the Chorus Call conference operator. Welcome, and thank you for joining Fincantieri 9 Months 2025 Results Conference Call. [Operator Instructions] At this time, I would like to turn the conference over to Mr. Folgiero, Chief Executive Officer and Managing Director. Please go ahead, sir. Pierroberto Folgiero: Good afternoon, ladies and gentlemen, and thank you for joining us today to discuss Fincantieri's 9 months 2025 results. We are pleased to present another solid set of results, building on the positive trajectory of the first half of the year. Revenue growth remains robust across all segments, supported by favorable market tailwinds while increased operational efficiency in Cruise and higher contribution from the defense business keep driving margin expansion at the group level. Our underwater segment is growing according to plan and continues to deliver premium margins, strengthening its position as a key value and profitability driver for the group. We also enjoy exceptional visibility on our long-term business outlook, backed by a record high backlog that provides a strong foundation for future growth. Finally, our initiatives to improve working capital dynamics are supporting our rapid deleveraging trajectory, enhancing both financial flexibility and capital efficiency. Let's now move to Page 4 for a brief summary of the financial and commercial highlights of the period. Revenues grew by 20.5% year-on-year to EUR 6.725 billion, supported by strong contribution from all business segments, in particular, Shipbuilding. We also achieved a significant increase in profitability with EBITDA posting an impressive double-digit growth of 40.4%, reaching EUR 461 million. EBITDA margin improved materially to 6.9% compared to 6.3% at year-end 2024 and 5.9% in the first 9 months of 2024. This substantial and rapid growth is particularly noteworthy given that operate in a heavy industry sector with low by rhythms. Our net debt came in at EUR 1.65 billion, slightly better than EUR 167 billion recorded at year-end 2024, with a net debt-to-EBITDA ratio of 2.6x, improving compared to the ratio of 3.3x recorded at the end of 2024. Turning to Page 5. Our commercial performance was remarkable in the first 9 months of the year. We recorded an order intake of EUR 16 billion, rising by 88.4% compared to the previous year and higher than record value achieved in the whole of 2024 with a book-to-bill of 2.4x. The backlog reached EUR 41 billion, increasing 32.3% compared to the end of 2024 with a total backlog reaching a record level of EUR 61.1 billion, approximately 7.5x 2024 revenues. This gives us an exceptional visibility on the long-term business outlook and revenue stream and represents a key part of our strategy. With delivery schedule all the way to 2036, we can turn to our supply chain partners and agree on terms, which favor both parties, thanks to the long-term commitment and higher volumes we can guarantee. Let's move to Page 6. 2025 represents the consolidation and progress of our vision and strategy. We confirmed our guidance for year-end as a demonstration of our ability to set an ambitious trajectory and to deliver it. Revenues for 2025 are expected to reach approximately EUR 9 billion. EBITDA margin is foreseen in excess of 7%, building upon the material increase in profitability already recorded across all our business segments in the first 9 months of this year. The deleveraging part is well ahead of our 2023-2027 business plan target, and we confirm the net debt to EBITDA to remain between 2.7 and 3x in full year results. Finally, we expect positive net income at the end of the year. Let's move now to Page 7 for some insights on the commercial opportunities ahead. Our order intake continues to benefit from a solid pipeline with further tangible commercial opportunities valued at approximately EUR 26 billion, supported by our strong market positioning and favorable dynamics across all business segments. Cruise maintains its extraordinary momentum with a vertical increase in order across all product segments. Last September, we signed a contract with TUI for the design and construction of 2 vessels belonging to the intuition class, confirming once again our strong relationship with all world's most prominent cruise operators. In defense, a preliminary agreement was signed with Greece for the transfer to the Atlantic Navy of 2 vessels of the Italian Navy. Hence, we expect this to ship to be replaced with new orders to the Italian Navy in the near future. Demand in the offshore and specialized vessel segment remains solid, with several new orders finalized during 2025 through our subsidiary, Vard, including the contract for 2 hybrid SOVs for North Star, confirming our leading position in this market. Lastly, in the underwater segment, we are seeing the tangible benefits of our strong commercial positioning, also thanks to Vard's solution for top tier navies and to a broad portfolio of products with application in defense, commercial and use as we can see more in detail on Page 8. A clear example of excellence in our unmanned management system and underwater business is the SAND Marine drone, an unmanned surface vessel designed for a wide range of missions. Enhanced by the onboarding integration of the large system, which enables the deployment of underwater unmanned vehicles. In the field of offshore subsea infrastructure protection, we signed an agreement with Jan De Nul for the design and supply of an advanced system developed by Remazel for the transport and laying of rocks on the seabed to protect cables and pipelines called rock dumping. More recently, we signed an agreement with Defcomm, supporting Fincantieri in developing and integrating deployment capabilities for autonomous surface vehicles on its naval units. Finally, last October, we presented DEEP, an integrated and cutting-edge solution for the protection, development and maintenance of critical underwater and port infrastructure. The system consists of a network of underwater sensors for early warning, a command and control center, a team of autonomous underwater vehicles and an AI-based platform for data analysis and processing. These high-tech solution and partnerships showcase our positioning as an orchestrator in the underwater domain. Moving to Page 9. You can see how our commercial efforts are translating into an impressive order book. The first 9 months of the year, we secured a significant number of new orders, further consolidating Fincantieri's expansive global reach across all business segments and ensuring deep visibility up to 2036. In the first 9 months, we delivered 19 units from 9 shipyards. And as we speak, we have a full slate of deliveries scheduled up to 2036 with more to come. One prototype ship we expected to deliver at the end of 2025 will be delivered at the beginning of 2026, being a highly technological project for which we want to ensure the utmost quality of delivery. Now I will hand the call over to Giuseppe, who will discuss our financial results in more detail. Please, Giuseppe. Giuseppe Dado: Thank you, Pierroberto, and good morning, ladies and gentlemen. I'll move on to Page 11. On the order intake, which was at EUR 16 billion greater than the whole of 2024 with a book-to-bill at 2.4x revenues. This indicates a very strong and sustained growth of Fincantieri Commercial pipeline, fueled by demand across all our core business segments. In shipbuilding, in particular, we posted EUR 4.6 billion in orders that is more than twice the first 9 months of 2024. Also in offshore and the other segments, orders were robust and accounted for almost EUR 2 billion. On Page 12, of course, the very high order acquisition brings us again to a record high backlog of EUR 61.1 billion, which stands at over 7x full year 2024 revenues and a backlog of EUR 41 billion with a soft of EUR 20.1 billion. In this backlog, Cruise accounts for 34 units, defense, 29, underwater 4, submarines and offshore 33 vessels for a total of over -- of roughly 100 units with a clear and deep visibility for the years to come with deliveries, as we mentioned before, deliveries up to 2036. In the first 9 months of this year, we have so far delivered 19 units from 9 different shipyards. On Page 13, on financial revenues, a little in excess of EUR 6.7 billion, up 20.5% year-on-year. Here, we have a strong contribution coming from the Shipbuilding segment, which posted a 22.7% growth. And this growth is across cruise and defense, but particularly in defense, we grew 38.5%. This is partly -- this growth is partly driven from -- by the contract that we finalized in the first quarter of 2025 for the sales of 2 multipurpose combat units to the Indonesian Navy. Shipbuilding roughly accounts for 68% of all group revenues, and offshore, which accounts for 14% of total revenues, rose as well by almost 13%, and this reflects the sustained growth trajectory of recent years, underpinned by the progressive development of the group's order backlog. Underwater revenues came at EUR 386 million, also driven by the consolidation of bus submarine systems in the first quarter of 2025 and the ramp-up of the construction of the first submarine for the Italian Navy, which is going to be delivered in 2029. Finally, Equipment, Systems and Infrastructure revenues are stable year-on-year at EUR 927 million. This is despite the reclassification of the subsidiary Seaonics to the offshore and specialized vessel segments. Let's turn to Page 14 with the EBITDA, which is up 40.4% versus the first 9 months of last year and reached EUR 461 million. EBITDA margin grew to 6.9%, steadily improving from 6.3% reported at year-end 2024 and 5.9% reported in the first 9 months of 2024. Shipbuilding recorded an EBITDA of EUR 316 million, increased by 33% versus the previous year with an EBITDA margin of 6.5%, up 0.5 percentage points compared to the same period of 2024. And this is thanks to 2 drivers mainly results of the operational efficiency initiatives deployed in the cruise sector and the growth in the defense business, which, as you know, is characterized by higher profitability. The Offshore and Specialized Vessels EBITDA reached EUR 57 million, increased by 21.4% compared to the EUR 47 million at the end of September of 2024 and EBITDA margin of 5.4% was roughly 5% in the first 9 months of last year. The underwater delivered an EBITDA of EUR 67 million with a margin of 17.3%. This confirms the sectors -- the segment's premium profitability. In the Equipment, Systems and Services and Infrastructure segment, EBITDA increased by almost 37% compared to the first 9 months of 2024, reaching EUR 68 million with an improving EBITDA margin at 7.4%. This is mainly driven -- the improvement is mainly driven by the Mechatronics and the infrastructure business. Finally, on Page 15, net working capital and net debt. As of the end of September, we posted a net debt of EUR 1.6 billion roughly, in line with the [ EUR 1,648 million ] recorded at the end of the first half of 2025 and slightly better than the 2024 year-end figure, which was EUR 1.668 billion. The leverage ratio improved to 2.6x, and this is significantly lower than the 3.3x of year-end 2024. In this matter, we continue to work on the optimization of net working capital, which stands at negative EUR 465 million, and it's stable compared to year-end 2024. We have an increase in inventories and advances and trade receivables that more than offset the increase in trade payables and the decrease in work in progress, construction contracts and client advances. With that, I will now hand the call back to Pierroberto for his closing remarks. Pierroberto Folgiero: Thank you, Giuseppe. Let me now summarize some key takeaways on Page 17. We have delivered strong operational and financial results, which provide full visibility on achieving our year-end targets. Margins improved solidly year-on-year, supported by higher operational efficiency in Cruise, a greater contribution from defense and the continued strong performance of our underwater business. Cruise, we benefit from deep backlog visibility up to 2036, enhancing profitability and cash flows, thanks to working capital optimization, capacity saturation and increased procurement efficiency. At the same time, the current global geopolitical environment is creating significant growth opportunities in defense, which we are well positioned to capture. We are consolidating our position as a leading orchestrator in the underwater domain, expanding both our product offering and business development capabilities, also through targeted acquisitions and strategic partnerships. Finally, as we speak, we are working on the new business plan to be approved by year-end that will lay the foundations for the next phase of growth and value creation. The strong results achieved in the first 9 months of 2025 allow us to confirm our guidance for the full year 2025. Revenues at approximately EUR 9 billion, EBITDA margin greater than 7%, net debt-to-EBITDA between 2.7 and 3x and positive net income. With that, we are now open to take your questions. Operator: [Operator Instructions] The first question is from Emanuele Gallazzi with Equita. Emanuele Gallazzi: Three questions from my side. The first one is if there is any news from the U.S. market, I'm referring to, let's say, both the constellation program and the new opportunity in both civil and the naval shipbuilding. The second one is on Cruise. If you can just give us a sense of the current profitability for the business? And also considering the strong momentum on the order intake, would you say that last orders have a better profitability embedded? And third one is on the net debt. Given that you are already at 2.6x net debt on EBITDA in the last 12 months, are you, let's say, more confident to be at around 2.7x by year-end? Or is there something on, for example, net working capital we should consider for the fourth quarter? Pierroberto Folgiero: On the U.S.A. question, thank you, Emanuele, for your intervention. On the U.S.A. question, there are no significant information to be shared. We continue to pursue the strategic market of U.S. as a very important investment, very valuable contribution to the renaissance of shipbuilding in U.S. And we strongly believe that Fincantieri long-term mentality, which led our investment, again, 20 years ago. But this long-term mentality will pay back very soon. What about Cruise and profitability of Cruise? Yes, we are experiencing a level of interaction with our partner shipowners, a level of interaction that is giving us the perception of better profitability. More in general, I strongly believe that this big wave and multiple wave of awards will create the preconditions for a stronger execution, first of all, simply because our business is since ever a business of saturation. The more you can achieve saturation in your infrastructure, the more you can optimize the common cost and fixed cost. One and two, this very profound, very long-term aggregation of job and orders creates another very important precondition, which is the ability to negotiate, I would say, repetitive contracts with vendors, giving to vendors extensive visibility and therefore, apply a level of prices and entrepreneurship in general, which is higher and higher. So there's good momentum in Cruise. Let me summarize, creates very good conditions with the clients, but most importantly, saturation in the employment of the infrastructure and optimization of the pricing and the relationship with the supply chain with the mentality of having a long-term alliance rather than a pure commercial play. Moving to the debt. I would rather leave the floor to Giuseppe, but I believe it is very linear. Giuseppe Dado: Well, the answer straightforward is yes, we're very confident on stay where we are and close year-end between 2.6, 2.7 ratio. So in the lower part of our guidance, very confident. Operator: The next question is from Antonio Gianfrancesco with Intermonte. Antonio Gianfrancesco: I have 2. The first one is about future margin expansion because looking back over the last couple of years, Fincantieri demonstrated strong execution and efficiency reflected in a strong margin improvement. Now looking ahead, I would like to understand the main factors that could lead to a faster margin expansion in the coming years. I mean, it is fair to say that most of cruise efficiency work has been done and that faster margin expansion will be more linked to a better business mix with a greater contribution from Naval and underwater activities? Or do you think that there is even more space also in the Cruise business? The second one is more specifically on defense underwater business. The market there remains extremely supportive. And I imagine your pipeline of potential new orders is quite strong. So I would understand in which geographical areas there is greater push to convert briefly the higher defense budget into actual investments and therefore, the greatest likelihood of orders in short to medium term. Pierroberto Folgiero: Thank you, Antonio, for your questions. With respect to the first, we still reiterate and we still believe that we have 2 engines in terms of enhanced profitability. The first engine is the continuation of the activities and efforts we are injecting in the cruise business, which is a business of volumes, which is a business in which the enhancement of margins is strongly dependent on the circulation, again, of the infrastructure and fixed cost. And as I just finished to say, your ability to negotiate with the supply chain with a long-term deal rather than with an opportunistic deal. So I believe that this engine is still on. It is still pushing forward. Then as you properly said, there is a second engine, which is the engine of the revenue mix, which is an engine whereby the improving the marginality kicks in as soon as the defense revenues will go up. So I think there are still both the opportunities there, and it is our, I would say, relentless effort to make it happen. And the new business plan will be the place in which these dynamics will be factored in. Moving to your second question, which is more on defense, which are the geographical areas in which we feel the commercial temperature "up and up." I would say there are 3 concentric circles. The first one is Italy, where the Italian Navy is accelerating as the rest of the armed forces, the cycle of investment and contractualization. So according to the existing, I would say, public planning of future investment in naval defense, there are expected in short term, several possible awards, namely the Destroyer, namely the [ PPA program ], the LSS logistic ships program, the LXD, which are lending platforms. So there is a very clear road map of acceleration for the Italian Navy, let me say, which is the first circle. Then there is a second concentric circle, which is Europe. As you may know, the SAFE program is a facility for EUR 150 billion, which is reserved to nations, which already secured an allocation of this EUR 150 billion, which is secured to nations according to 3 criteria to be verified. One is the ability to spend money within 2030. The second one is that at least 2 nations have to collaborate, i.e., European Union is pursuing defragmentation. Condition #3 is that 65% of the content of the supply chain of the ship of the Armament system has to be produced in Europe. So this is happening. So it's EUR 150 billion. There are many navies that are discussing, I would say, each other, including with us. And so we believe that the 2030 condition, which is, again, 1 of the 3 compulsory conditions, but the 2030 condition will be a big push for this defense market to accelerate because basically, the European Union wants to -- wants nations to invest in defense and is prepared to give money if you are doing it now in the short term. Then there is a third concentric circle, which is the export outside Europe. And as several times specified, we are very focused on 2 regions, in 2 extra European regions. One is the Middle East and the other one is Southeast Asia. In Middle East, we have a lot of presence already. We have very good credentials. And therefore, we are very active in very important nations such as Emirates and Saudi -- and Saudi Arabia, having domestic ambition, but also international ambitions. Middle East and Southeast Asia. We are, as you know, very well, very happy with the flag we put in Indonesia, which is an emblematic example of what is the level of attention to the naval, I would say, environment of that part of the world. But the same is Malaysia, the same is Thailand, Philippines, Vietnam. So there are several programs going on. I would say, in Southeast Asia, Fincantieri is very well positioned to pursue them. Obviously, with the level of velocity, with the level of speed that is typical of the procurement cycle of the public administration, i.e., there are no bleeds overnight. It's a business for farmers. It's not a business for hunters, but you have to be there. You have to take care of the soil, pour the water and look after the small opportunity until it becomes a large award. We are very satisfied with our international expansion with our commercial internationalization process, which is leading us to have a very, very, very detailed and ramnified presence all over the world. Operator: The next question is from Marco Vitale with Mediobanca. Marco Vitale: I have a couple of follow-ups on the Defense segment. The first concerns the underwater business. You were mentioning that you're making a lot of efforts to expand the product portfolio in this division. Are you targeting also export opportunities for the system you are putting now into the market? Or do you expect this to be specifically devoted for your domestic customer? Second question is about -- we read about memorandum of understanding signed between Emirates and Angola to cooperate on the say, defense and Navy upgrade program. Do we expect this to provide you with additional growth opportunities for your export segment considering the JV that you have with the main defense conglomerate of the Emirates? Pierroberto Folgiero: Thank you, Marco, for your question. Number one, underwater product, whether there is an -- sorry, an export opportunity or not. Absolutely, yes. I would say that the new navies that are looking into new international navies that are looking into the opportunity of expanding in naval base, those navies are particularly interested also in new technologies, in new attributes, I would say. So by the way, the more your new technology is validated by the National Navy, the better it is. So this is the old school, I would say. But in the new industrial environment, it is true also the contrary, i.e., that new navies, international navies are more than happy also to shortcut and become themselves the partner of choice for those new technologies, also depending on the specific characteristic and requirements of the missions that these new drones or new technologies are expected to perform. So there is a lot of demand. The market is very, very "sparkling" and we feel very well positioned because we can associate the traditional products and the new attributes and new products in a way that is maximizing the sum of the parts. Moving to your second question, the Emirates agreement with Sub-Saharan Africa, I would say, at large. We were kind of pioneer in the idea of joining forces with Abu Dhabi in order to go to Sub-Saharan Africa and to other regions. The joint venture we put together with EDGE or better one of the most important tasks and objectives of the joint venture we put together with EDGE was exactly this one, i.e., to join forces where we contribute our industrial capabilities and strength. They join their industrial capability and strengths and behave as an export platform in geographies in which the Abu Dhabi perspective, the Abu Dhabi geopolitics, the Abu Dhabi ability to financially support the defense capabilities and defense industrial base is very strong. So whenever Abu Dhabi is working and cultivating government-to-government relationship in the defense, our joint venture with EDGE, which is called MAESTRAL is naturally involved because this is the core strategy for Fincantieri and for EDGE in order to address those markets. Operator: The next question is from Gabriele Gambarova with Intesa Sanpaolo. Gabriele Gambarova: The first one is on, again, on underwater on the Philippines and the Polish opportunities. Is there an idea of when the award may take place? And what is your, let's say, competitive advantage, I mean, in your perspective? I mean, is it possible that you could, say, provide better delivery times apart from the product? I mean, everybody knows it's very, very strong. But are there other, let's say, aspects that may position you better than the competition? So this is number one. The second is on Rheinmetall, the move they made that they announced this, let's say, purchase of the Lürssen shipyard. So I was wondering what's your opinion on that? And the third one, if I may, is on Norway. There was the award of the Frigate contract that chose the Type 26. I understood, this is my interpretation that there was also politics, let's say, played a role there. I was wondering if you got some feedback, some comments on the products you submitted that is the constellation. Is it too young as a platform or something similar? I mean, any lesson learned from this experience would be interesting. Pierroberto Folgiero: Thank you very much, Gabriele. On Poland, obviously, we depend on the public announcement of the "procurement officer" of the nation of the government, of the Polish government. Our latest news are the same, i.e., that the process is expected to be very fast. There is a lot of, I would say, preparation work already performed in the last months. So my information is that it's a short-term development. It is not a long shot. I believe that our offering is very robust. First of all, from the technical perspective because we have extensive experience and the summary we offered is very well proven. But most importantly, I believe that it's better to go fast because this opportunity can be financed with a SAFE facility. And in order for it to happen, it's very important that the process is finalized very, very soon. So I strongly believe that the access to SAFE will obviously create kind of advantage of European players against non-European players for the bid. So technical expertise and reliability to "financeability", it's SAFE. Point number three is delivery time, as you hinted before. I totally agree with you that in the new defense environment and space, it is so important that you can be faster than expected and you can be -- you can, in a sense, cut corners in order for the asset to be at sea sooner rather than later. So also in that respect, we are putting together very, I would say, very, very solid ideas that can truly procure that there is a strong differentiation of our offering vis-a-vis the others. Moving to your second question, what's my gut feeling about what's my gut feeling on Rheinmetall and Lürssen. I think it's always good news when Europe gets more and more focused on the defense industrial base. This is exactly what nations are, I would say, constantly and consistently asking to players, to industrial players. So I'm very happy to see that Germany is -- which is a very important country, so focused on defense, so focused also on naval defense. I think that the involvement in the shipbuilding is not, I would say, downhill exercise. I think it's a very different business model with very different constraints with very different, I would say, dynamics from many respects in terms of supply chain, in terms of labor, in terms of appetite for risk, in terms of dependence on external parties' infrastructure. So it's a totally different exercise. But at the same time, I believe that Rheinmetall is a very sophisticated company, and they will find their way to become knowledgeable about such a different business. Moving to Norway and the partnership with U.K. I 100% agree with you. It's a very clear example of geopolitical exercises rather than business exercises, which is the name of the game because when you sell defense, you don't sell a product. It's not a commercial game. It's a very serious geopolitical story. So our interpretation is that Norway is taking a view, which is a kind of, I would say, geopolitical view that U.K. is a partner in the defense and not only a supplier of ships. That's our interpretation of the tender. And I think that's what consistently happened throughout the -- our process. That's it. We have Fincantieri, we have very well-proven frigate platform, which is much more fashionable in the Mediterranean Sea. Operator: The next question is from Michele Baldelli with BNP. Michele Baldelli: I have a couple of questions. The first one relates to the Greece order. Can you elaborate on the timing that we may see it in your P&L, if you can share it with us? And the second question relates -- I know that there could be a business plan presentation, therefore, more details around it. If you can anticipate something around the expansion CapEx plan. How do you see the defense capacity going on in the next few years? And what steps will you do? Pierroberto Folgiero: Thank you, Michele. On your question with respect to your question on Greece, I think it's not possible nor appropriate to give details because it's a commercial prospect we are working on. What I can tell you is that this is the result of a long-term effort to create the partnership between Italy and Greece. This long-term effort has been pursued by the Italian institutions. The Italian Navy, first line, Minister of Defense, the Minister himself. So I believe it's a very strong and very win the stone kind of partnership. There are a number of next steps very clearly agreed by the parties, which are being managed in accordance with expectations in terms of timing. I think that the -- I don't want to give too many details, but I think that the signature will be obviously in 2026. And this signature will be, I would say, a big achievement for Fincantieri because you know that once the Italian frigates will be sold and delivered to Greece, at the same time, the Italian Navy will place an order for 2 new frigates. We call it FREMM EVO, the evolution model, so the latest of the family. So new order intake for 2 frigates will take place at the same time. So it's very good news. On your second question about the expansion of capacity, I think that the business plan disclosure will be the right time to give all the relevant details, which will be directly proportional to the market we see in front of us in terms of awards in the defense. What I can anticipate today is that we have a lot of elasticity and flexibility. So what we discovered in these months of preparation, what we discovered is that the system of shipyards of Fincantieri is a formidable tool source of flexibility in moments like that. So we have, I would say, kind of production footprint that can truly move and get along with the priorities of the market in a way that is, for a big part, seamless. What seamless means with the same existing infrastructure, with the same existing footprint, we can build much more. Working on the production techniques, methodologies, small investment in incremental equipment, but we can do a lot with the same infrastructure, which means that we can pursue this growth in defense without the necessary time lag for the new investments to happen. So that's what I mean by having a versatile system of shipyards and being able to be flexible and very responsive to market demand. So we can increase a lot our construction hours in defense with the same existing installed infrastructure. That's what I would like to anticipate today. The rest of the, I would say, disclosure and unveiling will be done with the numbers in the right location. Operator: Gentlemen, there are no more questions registered at this time. The floor is back to you. Pierroberto Folgiero: Thank you very much. Thank you very much for your attendance. Giuseppe Dado: Thank you. Bye-bye. Pierroberto Folgiero: Thank you. Bye.