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Operator: Greetings. Welcome to the SurgePays, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note, this conference is being recorded. I will now turn the conference over to your host, Valter Pinto, Investor Relations at SurgePays, Inc. You may begin. Valter Pinto: Thank you, operator, and good afternoon, everyone. Welcome to the SurgePays, Inc. 2025 Third Quarter Financial Results Conference Call. Today's date is November 12, 2025. On the call today from the company are Brian Cox, President and CEO, and Tony Evers, Chief Financial Officer. Before we begin, I would like to remind everyone that this call may contain forward-looking statements as they are defined under the Private Securities Litigation Reform Act of 1995. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those expressed in the forward-looking statements. For a discussion of such risks and uncertainties, please see SurgePays, Inc.'s most recent filings with the SEC. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statements to reflect the events that occur after this call. Copies of today's press release are accessible on SurgePays, Inc.'s Investor Relations website ir.surgepays.com. In addition, SurgePays, Inc.'s Form 10-Q for the quarter ended September 30, 2025, will also be available on SurgePays, Inc.'s Investor Relations website. Now I would like to turn the call over to President and CEO, Brian Cox. Brian Cox: Good afternoon, and thank you for joining us. As I mentioned last quarter, today is less about the past and more about what is happening now and what is ahead. The third quarter was that inflection point. During the quarter, we began to see execution across our multichannel growth platform, which yielded strong growth year over year and sequentially. Each of our revenue channels is synergistic, not isolated initiatives, that together strengthen with every subscriber transaction and retailer added to our ecosystem. It consists of Torch Wireless, which is subsidized under the Lifeline program, LinkUp Mobile, our prepaid offering, Hero, MVNE, or wholesale offering, prepaid top-up, and our Clearline SaaS point of sale. We believe our strength lies in our ability to combine cutting-edge technology with a nationwide retail distribution network, bringing telecom and fintech products directly to underserved communities where people live and shop. This powerful combination of technology and retail provides us with a sustainable competitive advantage, positioning us as a long-term leader in a large total addressable market that is very difficult to replicate. Our experienced team has been strategically investing and building since 2022, focusing on integration with AT&T, operational infrastructure, technology, and talent deployment. Today, the platform and development of distribution technology and new products are well established and will support high-margin revenue streams for years of sustained growth. This synergy generates recurring revenue, provides competitive advantages that are extremely difficult to replicate, and lays the foundation for significant year-over-year growth. The 2025 represents our preparation, investment, and ability to execute on a go-to-market strategy once again. Third quarter 2025 revenue totaled approximately $18.7 million, an increase of 292% year over year and over 62% sequentially. Revenue growth year over year was driven by an increase from virtually zero in 2024 to $5.6 million in 2025 from MVNO brand Torch Wireless, under the subsidized Lifeline program. The Lifeline program is a government-subsidized benefit program that provides essential wireless connectivity to those who qualify. Unlike temporary programs, Lifeline remains fully funded and unaffected by the current government shutdown, providing us with a stable, predictable recurring revenue base. Today, we have over 125,000 subscribers and growing. After activating in June with only 20,000 subscribers, what is even more exciting is that we are still well below our current capacity. Many sales channels are still being opened, so we expect continued sales growth. This positions us exceptionally well for continued growth in the months ahead. What excites our management team even more is the new avenues for acquiring customers with little or no cost, completely flipping the front-heavy ROI portion of our model. I will speak more on this exciting development later. While we believe Lifeline will certainly be the accelerator of growth in the short term, we have full confidence that our other revenue streams will scale quickly in 2026. Point of sale and prepaid services, for example, also increased significantly year over year to $13.1 million, a 177% increase. This part of our ecosystem consists of LinkUp Mobile, our affordable prepaid wireless offering, and consumer products like Phone in a Box, a grab-and-go kit for convenience stores, which includes a smartphone, SIM, and thirty-day service. We fully launched LinkUp Mobile in April, activating approximately 10,000 users. In July, we more than doubled that, surpassing 20,500 activations, and today, we are over 95,000 recurring active subscribers. This growth is driven primarily by expanded retail distribution, targeted marketing, and competitive pricing. The grind of market adoption takes longer on the prepaid side of the wireless business, but we are seeing the expected traction. These drivers are sustainable as we continue opening new doors and building customer loyalty. The heart of this model is our proprietary point of sale software. Not only does it facilitate transactions, but it also drives recurring revenue from activations and replenishments right at the convenience store register. It is not just a tool; it is the backbone of our ecosystem and a true competitive advantage. Third-party prepaid wireless top-ups revenue is a key indicator of future revenue growth in our other products. For Phone in a Box, we partner with distributors like HT Hackney, which has mass market reach and services over 40,000 stores. We are in advanced talks with other national convenience store distributors, each with footprints in tens of thousands of community store retail locations like HT Hackney. Our near-term goal is to ramp to 100,000 operating on the SurgePays, Inc. platform, driven by a combination of organic growth and distribution agreements with HT Hackney and other partners. On the wholesale side, our MVNE platform, Hero, is a growing revenue engine with a robust pipeline. As an MVNE, we provide billing, provisioning, SIMs, and eSIMs to other wireless companies. A high-margin model with minimal incremental costs and low overhead. Many MVNOs in the market today are actually sub-MVNOs. We are one of the few with direct carrier access, putting us in a rare and powerful position. To date, we have onboarded three MVNO partners. Collectively, these partners serve thousands of subscribers, and they are looking to grow quickly, providing us with a path to scale our platform and recurring revenue base. In August, we had a successful show at All Wireless and Prepaid Expo with the expectation of onboarding and integrating new wholesale clients over the next six months. Lastly, we have Clearline, our SaaS marketing platform with interactive point of sale and customer engagement tools with offers, coupons, and loyalty programs. We recently announced a strategic partnership with CorePay, a next-generation payment technology provider, to integrate with our Clearline marketing and customer engagement platform into CorePay's cloud-native payment processing solution. This integration brings together two complementary technologies, point of sale payments and digital marketing automation, creating a first-of-its-kind capability that enables retailers to engage customers from the moment of the transaction and beyond. By embedding Clearline's SaaS-based marketing tools directly into CorePay's payment ecosystem, the partnership is expected to create new recurring revenue streams for both companies while offering value-added functionality to merchants and resellers. Our strategy is to layer software and digital engagement tools on top of our existing POS infrastructure to create sticky recurring revenue while adding tangible value for our partners and their merchants. Clearline is active in 17 market basket convenience store locations today. However, there are hundreds of thousands of potential retailers beyond convenience stores, from tire shops, food trucks, restaurants, and salons. SurgePays, Inc. is no longer building the foundation. The foundation is built. Now it is truly all about execution, scale, and growth. Our immediate goal is to achieve profitability with minimal impact on the cap table and dilution. Our strategy is executing precisely according to plan, and I am confident in our highly skilled team that is well-equipped to navigate this industry. We are well-positioned to continue this strategy through the remainder of 2025 heading into 2026. We have proven we can move fast, and with our diversified and competitive moat, we are uniquely positioned to deliver sustainable long-term shareholder value. Therefore, we remain confident in our 2026 revenue guidance of $225 million. We have built a powerful engine that blends technology, innovation, and distribution. Today, we have the products, partnerships, and infrastructure to enter the next phase of high growth. Thank you for your support and belief in our mission. I will now turn it over to Tony for a detailed review of our Q3 financials. Tony? Tony Evers: Thank you, Brian, and good afternoon, everyone. Third quarter 2025 revenue totaled $18.7 million, an increase of 292% year over year, as compared to $4.8 million for 2024, driven by an increase in MVNO and point of sale and prepaid services revenue. Gross profit loss narrowed to $2.6 million for 2025 compared to a gross profit loss of $7.8 million for 2024. We expect to continue the improvement of gross margin in the point of sale and prepaid services segment during 2025. Most of the cost to get Clearline ready for launch has occurred, and we expect the gross margin to be positive by 2025 for this revenue channel. As we continue to expand both subsidized Lifeline and non-products, LinkUp Mobile, of the MVNO segment in 2025, we also anticipate gross margins in the MVNO segment will increase with an aim to return to positive results. SG&A expenses decreased 32.5% year over year to $4.2 million during 2025 as compared to $6.2 million for 2024. The decrease was primarily due to a reduction in contractor and consultant expense along with compensation expense. Loss from operations was $7 million in 2025, compared to $14.3 million in 2024. Our reported net loss and loss per share for 2025 were $7.5 million and negative 38¢ per share. Turning to the balance sheet, our cash, cash equivalents, and investment balances as of September 30, 2025, were $2.5 million compared to $11.8 million as of December 31, 2024. As Brian mentioned, we are providing revenue guidance of $225 million for 2026. At this time, I would like to turn the call back over to Brian for closing statements. Brian Cox: Thanks, Tony. Before we open the call for questions, I do want to take a moment to discuss the recently announced launch of our new growth marketing and data partnerships division. The initiative marks yet another significant step forward in our strategy to transform our expanding consumer data ecosystem into a scalable, high-margin growth engine. This engine was built by reengineering our legacy LogixIQ system, called DigitizeIQ, which was originally developed for consumer intake and lead generation serving mass tort law firms. Management made the decision over a year ago to close down operations as this was a completely different line of business. We wanted laser focus on our business plan. Our development team has now transformed the DigitizeIQ platform into a powerful intake engine designed explicitly for underserved subprime consumer marketing and data collection. Instead of simply signing up wireless customers, we now operate a platform that connects affiliates and publishers within a unified ecosystem. This capability transforms verified consumer data into actionable marketing intelligence, creating multiple revenue opportunities from each customer relationship. While promoting government-subsidized programs such as Lifeline to underserved consumers, we can simultaneously present a targeted marketplace of complementary products and services to our expanding database. Our ongoing objective has been to reduce customer acquisition costs by generating incremental revenue from adjacent services. We have now reached the next phase: monetizing this data ecosystem to produce recurring high-margin revenue and deliver sustained value for shareholders. In essence, we have built a platform capable of generating revenue during the customer acquisition process rather than incurring a cost to acquire each customer. This initiative is expected to generate high-margin recurring revenue through data partnerships, analytics integrations, and targeted marketing programs. We believe the consumer data for this subprime market is valuable, and the market has ballooned to over 137 million people. As SurgePays, Inc. continues to scale its wireless and fintech operations, the combination of customer intelligence and marketing execution will serve as a long-term competitive advantage. To summarize, Q3 was a significant inflection point for our company. We are now in acceleration mode, and the numbers already reflect it. Our activation growth, expanding distribution, and scalable technology platforms give us confidence that we are on the right path to create significant shareholder value. I would like to thank our shareholders for their continued support and the team for their tireless efforts in making this growth possible. Operator, please open the call for questions. Operator: Absolutely. At this time, we will be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 if you would like to remove your question from the queue. Participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, while we poll for questions. If you have a question or a comment. The first question comes from Ed Woo with Ascendiant Capital. Please proceed. Ed Woo: Yes. Congratulations on all your progress that you are making. My question is on the consumer that you are the underserved market that goes to a lot of these convenience stores. What are you hearing from either the convenience store's owners of what they are seeing and whether this customer base is able to, you know, be receptive to these new products that you are introducing? Brian Cox: Hey, Ed. Thanks for the question. The feedback that we get is very similar to some of the, let's just call it, the tough time feedback that we have seen over the past twenty-five years working with convenience stores. At times when there is doubt and uncertainty, that is when people are more open to other values or other products. Or because now they are reconsidering, you know, the life of the rut in the road. They are looking for maybe different paths to make ends meet. So we see this as a huge opportunity for us timing-wise. You know? And we mentioned that there is a research brief that just came out where the subprime market, excuse me, has ballooned from 100 million to 137, 138 million in the past four years. You know, while that could be debated on, you know, the greatness for our country, for our company, it is fantastic because those are the people that we look to provide products and services for, lower cost, better value, and more efficiently than what other companies and our competitors may do because of our distribution model. So the openness from the customer base is fantastic. And let us flip the keep in mind, we have end customer end users. But we also look at those store owners as clients. So those store owners, likewise, are looking for other ways to make money. They are looking for other ways to provide services to their community. So now where you may have had a convenience store owner who is kind of stuck in his way as well, that rut in the road, we call it, now he is looking for ways to make a couple extra $100 a month. So when a company like us comes along that has a point of sale platform, and then has Clearline, and you put those two things together and it does not cost them a dime to launch products through his store. And keep in mind, he will be able to take prepaid wireless payments for any carrier, he will be able to do activations for our prepaid wireless and make a significant commission on that. He will be able to take payments on that. He will be able to also offer anyone that comes in and uses that SNAP EBT card a free wireless service, and he will get paid for that. He will be able to provide those products to his community and, likewise, that foot traffic coming in will increase from the things he is providing his community. So we see it as a win-win-win. Get access to more customers. The store owner increases his revenue and profits through providing more services, and then the consumers who go in those stores who are now more aware, maybe not just in that rut in the road, are going to be looking for other ways to save money and make ends meet. Ed Woo: That sounds good. And my last question is, there has been a little bit of consolidation with the major, you know, convenience store brands. Is that going to impact your business at all? You think that that is, you know, going to be the future of, I guess, convenience stores? Brian Cox: The convenience store market is an interesting one. It is almost a case study in business. You know, the distributors, we have talked about this before. The distributors to convenience stores are usually second and third-generation companies. Quite a few of them, like your H.T. Hackney, Long, McLean, talking about almost 100-year-old companies. So the convenience store business, regardless of what sign is out on the gas pump, or, you know, the coming and going of private equity or acquisition, at the end of the day, even 7-Elevens, it is pretty shocking to see the number of people that actually run that store and have control over the store. And then they have a portion of the store where they can bring in any product they want. And, you know, they have to do the 7-Eleven carry certain products, if you will. But, you know, there is still the autonomy and decision-making of that ultimate store owner, who nine times out of ten is also the clerk. So we work really, really hard to build a relationship with the store owner, the person benefiting from our products. And keep in mind, for those that do not know or do not remember, we are in the checking account. We have a, you know, not just something where people are signing a PO and sending us a check. We are actually integrated with them from a business perspective. We are pushing and pulling money based on commissions they make, based on us ACHing them. So there is a pretty significant trust with that business owner, so we do not see that affecting us at all. If anything, there again, it creates an awareness of who we are and an openness to listen to what we have to say based on what we can bring to the table for their financials. Ed Woo: Great. Well, thanks for answering my questions, and I wish you guys good luck. Brian Cox: Thank you. Operator: Thanks, Ed. We have reached the end of the question and answer session. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings, and welcome to Ibotta, Inc. third Quarter 2025 Financial Results. As a reminder, this event is being recorded. I would now like to pass the call over to the management team. Please go ahead. Bryan Leach: Good afternoon, and welcome to Ibotta, Inc.'s Q3 2025 Earnings Conference Call. With us today are Bryan Leach, Founder and CEO, and Matt Puckett, CFO. Today's press release and this call may contain forward-looking statements. Forward-looking statements include statements about our future operating results, our guidance for Q4 2025, our ability to grow our revenue, factors contributing to our potential revenue growth, and the capabilities of our offerings and technology. All of which are subject to inherent risks, uncertainties, and changes. These statements reflect our current expectations and are based on the information currently available to us, and our actual results could differ materially. For more information, please refer to the risk factors in our recent SEC filings. In addition, our discussion today will include references to certain supplemental non-GAAP financial measures. And should be considered in addition to and not as a substitute for our GAAP results. Reconciliations to the most comparable GAAP measures are available in today's earnings press release and our 10-Q, which are available on our Investor Relations website at investors.ibotta.com. Also, during the call today, we will be referring to the slide deck posted on our website. Unless otherwise noted, revenue and adjusted EBITDA comparisons to prior periods are provided on a year-over-year basis. With that, I'll turn it over to Bryan. Bryan Leach: Good afternoon, everyone. Thank you for joining our discussion of third quarter results. We are pleased to report revenue in the upper half of the guidance range we provided on our second quarter earnings call, while delivering adjusted EBITDA well above the top end of the range. We are also guiding to fourth quarter results that are broadly consistent with our prior expectations. In fact, when combining our third quarter results with our fourth quarter outlook, our total second half performance is right in the range we would have expected mid-year, both for revenue and adjusted EBITDA. So the business is unfolding about as we anticipated. We have continued to make progress transforming our company into a full-service performance marketing platform for the CPG industry. Our product and engineering teams have been working hard to enhance our capabilities in preparation for greater automation and scale in 2026. At the same time, our recently reorganized and upgraded sales team has improved our infrastructure systems and processes, in order to support a stronger and more consistent go-to-market organization. We expect this will result in better service and greater continuity for our clients, which we believe will be rewarded over time. Within the last six weeks, we have made two major announcements that demonstrate our thought leadership within the industry. First, on September 30, we announced a major strategic partnership with Surcana, a leading provider of media measurement services. This will allow our clients to receive independent lift studies from a trusted third party just as they can for other forms of digital media. Second, on November 3, we announced the launch of LiveLift, our latest groundbreaking innovation designed to help brands drive incremental sales at scale in a cost-effective way. LiveLift represents an improvement over our previous approach to measuring sales lift during a campaign. Initial client feedback on both the Surcana and LiveLift announcements has been overwhelmingly positive, and this has increased our confidence that we are prioritizing the right investments and pursuing the right long-term strategy. To ensure that we are all on the same page, allow me to say a word about our nomenclature. Throughout much of this year, we have spoken about incremental sales, which are sales that would not have occurred otherwise, and CPID, which refers to the cost per incremental dollar that a campaign achieves. Both of these are metrics we use to help an advertiser understand the performance of their campaign. Clients will now be able to receive these metrics using LiveLift, which is what we are calling our latest solution for ongoing measurement and optimization. Going forward, we will no longer be using the word CPID as a shorthand for that solution. The current macro environment continues to present challenges for CPG companies. Many of our larger clients are facing a sustained period of depressed organic sales growth. The University of Michigan Index of Consumer Sentiment is near an all-time low, which may indicate increased consumer pessimism and pullbacks in consumer spending, particularly in lower to middle-income consumers. This, combined with the recent disruption to the SNAP program and ongoing uncertainty related to tariffs, has translated into some large clients taking a wait-and-see approach, which can include pausing spending in what they perceive to be discretionary areas like promotions. Expectations for rigorous measurement have gone up, as CPGs demand evidence of demonstrable ROI across their marketing spend. All of this has further validated the importance of our strategic transformation because it underscores the need for us to move toward the outcomes-based world of performance media where demonstrated returns can lead to increased investment, regardless of the external climate. Ibotta, Inc. is working to position itself as an invaluable strategic partner that can deliver profitable revenue growth at scale. Diving into third-party measurement in a little more depth, our partnership with Surcana will enable CPG brands to compare the purchase behavior of consumers who are exposed to an Ibotta, Inc. offer versus those who are not, allowing advertisers to measure the full impact of their promotional campaigns, including the lift in incremental sales that extend beyond the initial promotional period. Brands will be able to access third-party lift studies and benchmark their Ibotta, Inc. campaigns against other media spend that Surcana already measures using the same methodology. Because Surcana is a trusted name in the measurement space, we believe our announcement helps address the concern that we are grading our own homework. In just a matter of weeks, we have already seen significant interest from clients who want to learn more about this new offering. It has also had an immediate impact in at least one instance. Our first pilot partner decided to launch a new campaign on the IPN after receiving a Surcana lift study. For them, the lack of independent verification of household lift had been a critical gating factor. Once it existed, they felt comfortable reengaging. Our other early pilot partner has also recently relaunched campaigns despite a lack of previously allocated budget. While this end-of-year campaign is relatively small, we have had several senior leadership meetings to start Q4, and we believe we are well-positioned to become a more meaningful part of this client's 2026 plans. Beginning next year, we are not planning to comment on specific clients or campaigns, but rather expect to describe the overall transition of our business to our LiveLift solution. In the second half of this year, we have made it easier for our enterprise clients to pilot LiveLift. For those that do not have incremental dollars to allocate, we are allowing them to use existing budget dollars to make it as easy as possible to try out our latest capabilities. We expect that more and more of our clients will launch pilots over the next few quarters. Not every campaign can benefit from these new capabilities because some clients do not run campaigns that are live long enough for us to measure with statistical confidence. But the vast majority of campaign dollars are eligible. As expected, we have seen an uptick in new pilots since our last call, in part because LiveLift is now being pitched by a larger percentage of our sales team. We anticipate our entire team selling the product beginning in Q1. Several of our clients have now used LiveLift long enough to have clearly seen a positive impact on their business. Just a week ago, I was at Brand Week and did a fireside chat with Benoit Vater, the Chief Media Officer of Liquid Death. In case you have not seen it, you can access a recording on our investor relations site. Benoit spoke to the importance of marrying top-of-funnel advertising with effective bottom-of-funnel tactics. He explained that with LiveLift, Liquid Death was able to drive sales in a much more precise and profitable way. Not only were they able to get their offers in front of customers who were new to the brand, but they also managed to reduce the sales cycle and increase the buy rate for existing customers. Another enterprise client said the following after evaluating the results of their pilot: "LiveLift is not just a tool. It is a powerful commitment from Ibotta, Inc. to deliver data from in-flight campaigns that drive smarter decisions. For the first time, we can analyze our customer segments with the depth needed to see exactly how each group reacts to our promotions. This gives us unprecedented, precise, and powerful ways to grow." It is still very early days, and the number of clients who have piloted LiveLift is small relative to our total client base. Nonetheless, we think these initial testimonials speak to both the unique capabilities we are building and the enthusiasm for clients who have experienced LiveLift so far. Turning to organizational updates, as discussed last quarter, we reorganized and restructured our sales organization in early Q3, which resulted in some additional turnover and account handoffs to start the quarter. With these changes now behind us, we expect greater continuity and improved execution with our clients. I am pleased to report that we have filled all open VP-level sales roles as of the '4. Chris and I are happy with the leadership, talent, and energy coming out of the new organization. Improving our B2B marketing has been a clear focus, and that has resulted in greater emphasis on thought leadership. To cite just one example, Chris Reedy hosted a successful fireside chat at Grocery Shop with Mike Elgass, Surcana's EVP of Global Media, CPG, and Retail, and they talked about the future of measurement and digital promotions. Our sales enablement and training efforts have improved dramatically, which has allowed us to reach out to most of our enterprise clients with the LiveLift offering just within the last few weeks. We have already begun to see improvement in several of our input metrics, such as average meetings per sales rep, average opportunities generated, and the number of accounts with in-person engagement. Before I turn it over to Matt, let me wrap up by providing a few thoughts on where we are leading the industry in 2026 and beyond. We believe that CPG marketing is entering what we call the outcomes era. In the past, brand marketers have typically relied on market research to develop a specific hypothesis about how to grow their market share. Once they have that working hypothesis, they pitch it internally hoping to secure funding for their program in the annual operating budget. Assuming it gets greenlighted, they execute their plan several months later, often with the help of a media agency. Finally, they measure a campaign's performance using mixed media models, but they have to wait several months to get a readout. Most of the time, these programs are declared a success even if overall sales did not grow as desired. In the outcomes era, CPG brands will start by clearly defining the specific business outcomes they want to achieve and allow AI-enabled systems to help them find the most efficient path to reaching those goals. For example, they might target a certain number of dollars of incremental sales or a certain percentage increase in market share within a given quarter. From there, they will provide any constraints, such as the acceptable cost per incremental dollar for the program or the duration of the program. Once these parameters are defined, machines will begin testing multiple different hypotheses, all at the same time and at much lower cost. By optimizing program parameters along the way, the best tactics will be emphasized while the underperforming ones will be weeded out. This is how AI-enabled systems will ensure that the goal is achieved at the lowest possible cost. This is not a novel idea. It just has not been made available to the CPG industry at scale because until now, ongoing measurement of incremental sales has not been possible for products that are sold in an in-store environment. Without that reliable signal, optimization has been nearly impossible. We believe Ibotta, Inc.'s capabilities, including most recently LiveLift, are changing all of that, helping to usher in a new golden age for promotions, and demonstrating the power of optimization at scale. This will not happen overnight. In 2026, we expect to bring LiveLift to market in a more scaled and automated fashion to our broader client base. This will require patience as clients need time to go through the testing phase, evaluate their results, commission third-party studies, and then ultimately go through budget cycles to allocate more dollars to Ibotta, Inc. Each year, our company decides on a central theme that will organize our work. In 2026, that theme will be "make it easy." We plan to make it easier for our clients to set up and execute LiveLift campaigns, evaluate their results, and optimize their campaigns. We still have work to do to continue enhancing the core features of a best-in-class performance marketing solution both for clients and internal stakeholders. This includes streamlining the process of setting up offers, projecting results, and optimizing campaigns. This is an ongoing iterative process. I am confident that we are on the right track strategically and organizationally, and I am looking forward to bringing more of our CPG clients on this journey with us. As I said last quarter, transformation on this scale is never easy. But I am proud of our leadership and our whole team for confronting the challenges head-on and putting in the work to bring the proven principles of performance marketing to the world of promotions. It is long overdue. With that, let me turn it over to Matt. Matt Puckett: Thank you, Bryan, and good afternoon, everyone. I am happy to be with you today for my first Ibotta, Inc. quarterly earnings call. I was excited to join Ibotta, Inc. at such a transformative moment in the company, with the opportunity to impact the direction and trajectory of the business alongside Bryan and the leadership team, and the chance to work with great people. I have found all of that, and I could not be more enthused to be here. Now let's jump into the results. In summary, we delivered revenue and adjusted EBITDA that were respectively 244% above the midpoint of the guidance range we provided on our second quarter earnings call. Looking further into our revenue results in the quarter, revenue was $83.3 million, a decline of 16% year over year. Within that, redemption revenue was $72.1 million, down 15% year over year, a reflection of the difficult comparisons after a very strong third quarter last year, the previously mentioned lagged impact of some execution challenges, and the continued noisy macro, particularly in the CPG space. Third-party publisher redemption revenue was $49.3 million, down 4% year over year, while direct-to-consumer redemption revenue was $22.8 million, down 31% year over year, as we have continued to see more redemption activity shift to our third-party publishers. Add another revenues, which now represent 13% of our revenue, $11.2 million, down 21% year over year due to continued pressure on direct-to-consumer redeemers. Turning to the key performance metrics supporting revenue, total redeemers were $18.2 million in the quarter, up 19% year over year. We saw healthy growth in third-party redeemers across the IPN versus last year, highlighting the continued strength of the demand side of our network. Growth was driven by the launch of Instacart during 2024 and the launch of offers to a majority of DoorDash customers in the second quarter of this year. Redemptions per redeemer were 4.6, down 28% year over year, driven by the quantity and quality of offers available to each redeemer, as well as the growth in third-party redeemers, which have a lower redemption frequency as compared to our direct-to-consumer redeemers. Redemption revenue per redemption was 87¢, flat year over year. Now shifting to the cost side of our business, as anticipated, non-GAAP cost of revenue was up $4.8 million versus a year ago, driven by an increase in publisher-related costs. This resulted in a Q3 non-GAAP gross margin of 80%, down nearly 800 basis points year over year but up 30 basis points sequentially. Non-GAAP operating expenses were down 1% versus last year and slightly below our expectations due to the timing of spend between the third and fourth quarters and modestly lower labor costs in the quarter. This resulted in non-GAAP operating expenses being 61% of revenue, an increase of approximately 870 basis points year over year due to the lower revenue, and flat sequentially versus Q2. Within that, non-GAAP sales and marketing expenses decreased by 6%, non-GAAP research and development expenses decreased by 16%, primarily a result of higher capitalization of software development costs and more of the R&D costs being categorized in cost of revenue in the period as compared to last year. Lastly, non-GAAP general and administrative expenses increased by 19%, reflecting higher professional fees and temporarily higher facilities costs. It's important to note that while overall non-GAAP operating expenses were slightly down year over year, our investments in areas related to our transformation, inclusive of both the P&L and what is being capitalized to the balance sheet, were actually up approximately 11%, headlined by higher labor costs in sales and technology. We delivered Q3 adjusted EBITDA of $16.6 million, representing an adjusted EBITDA margin of 20%. Adjusted net income of $16.3 million and adjusted diluted net income per share of $0.56. Our adjusted net income excludes $12.6 million in stock-based compensation and $400,000 in restructuring charges, and includes a $1.8 million adjustment for income taxes. We ended the quarter with $223.3 million of cash and cash equivalents. In Q3, we spent approximately $38.7 million repurchasing approximately 1.4 million shares of our stock at an average price of $26.73. We had 28.3 million fully diluted shares outstanding at the end of the quarter, and as of the end of the quarter, we had $89.9 million remaining under our current share repurchase authorization. Turning to Q4 guidance, we currently expect revenue in the range of $80 million to $85 million, representing a 16% revenue decline at the midpoint. And we expect Q4 adjusted EBITDA in the range of $9 million to $12 million, representing about a 13% adjusted EBITDA margin at the midpoint. With that, let me provide you a little more color on the fourth quarter outlook. While we are encouraged by the larger number of clients piloting LiveLift, we expect that it will take some time before this starts to meaningfully impact our top-line results. And while we have outperformed on the cost side year to date, it's important to recognize we have several million dollars of seasonal marketing expense which will be incremental in the fourth quarter relative to the third quarter, and we will now be more fully staffed for the entirety of the fourth quarter across the sales organization. Finally, I'll share some early thoughts on 2026. We did not see our typical seasonality throughout 2025, but we would expect 2026 to more closely resemble the seasonal patterns of prior years, with both the benefit of improved sales execution and the ongoing success of our business transformation beginning to more clearly show up in the results, particularly as we move into the 2025 to Q1 2026, followed by sequential increases in revenue each quarter thereafter. From a cost perspective, we expect to continue to invest in areas critical to our transformation, but at the same time, we remain disciplined and continue to optimize our cost structure. One area I'd highlight where we will lean into growth investments is in third-party measurement. We expect to purchase for our clients a significant number of third-party lift studies from our measurement partners, subject to certain financial thresholds and program requirements, to independently validate the incremental lift of our platform. We view this as an upfront and transitory investment that is necessary in the early days of any kind of new ad platform. We do not yet know how many of these studies we will purchase on behalf of our clients, but we are estimating several million dollars worth. And frankly, we'd be happy if that number is on the higher end of our estimates. We expect to exit 2025 with a healthy balance sheet, and that coupled with continued free cash flow generation gives us flexibility to both invest in the organic growth and transformation of our business and return cash to shareholders. And both will continue. It's an exciting time at Ibotta, Inc., and as Bryan said, we are confident that we are on the right track and making good progress on our transformation journey. I look forward to sharing more about our expectations for 2026 when we speak again in February. I'll hand it back over to Bryan to sign off. Bryan Leach: Thanks to everyone for joining us on this call. A special thank you to our investors who believe in the new paradigm we are introducing and whose patience we are working hard to reward. With that, operator, let's please open up the call for Q&A. Operator: For today's Q&A session, we will be utilizing the raise hand feature. If you would like to ask a question, click on the raise hand button at the bottom of the screen. Once prompted, please unmute yourself and begin with your question. We ask that you please limit to one question and one follow-up. We will now pause a moment to assemble the queue. Thank you. Our first question comes from Ron Josey with Citi. Ron, your line is open. Feel free to unmute and ask your question. Ronald Victor Josey: Perfect. Thanks for taking the question. Bryan, I wanted to understand LiveLift a little bit more. Very helpful to see all of the insights and early results, but talk to us about the timeline. I think I heard the sales team that's now fully staffed will start to fully sell it in the first quarter. And then, yeah, I think you also talked about some time that goes from trial or setting up to trial to when budgets are all results and then budgets allocated. So would love your thoughts on just how you think the year progresses here. Would the timeline, what could cause the timeline to be accelerated, I guess, is question one. And then just a quick follow-up on macro. Matt, you mentioned some of the CPG sort of headwinds here. Love your thoughts on what you're seeing currently. Thank you. Bryan Leach: Thanks, Ron. Appreciate the question. So I'll take your first question regarding LiveLift progress timeline. Kind of puts and takes on what to expect in the coming year. So we are very pleased with the progress that we have seen so far. As you know, we said in the last call we would be hoping to be on track to have about 20 LiveLift pilots take place before the end of the year, and we are on track to do that. To put that in perspective, we have more LiveLift pilots happening right now than in the first, second, and third quarter combined. We've also seen that of the subset of those that have finished the program, gone through the evaluative process, 83% have already re-upped with campaign investments after the pilot, and the remaining program, we just haven't heard yet. So very encouraged both by the velocity of these pilots and also by the quality as evidenced by the hard data. As far as part of the drivers of the timeline, for one, we've expanded the aperture of people that are able to are trained to sell this in. So what was a much more controlled process with a select few clients, we've now gone out to the great majority of our enterprise-level clients. And that's happened just in the last few weeks, as I mentioned. That's going to mean that we can have many more simultaneous conversations about the solution than we've had in the past. In terms of what the timeline is, you're talking about outreach, then you're pitching them on the benefits of this new solution, then you're setting up the parameters of the pilot, running the pilot. That generally takes, you know, a couple of months at a minimum. And then you have a time period of evaluation. There might be a third-party lift study. There might not. And then there's this conclusion that they want to invest further in the solution. And, you know, then there are considerations relating to their budget cycle and whether or not we can do that out of cycle. It depends on their fiscal year, etcetera. That's sort of the arc of what we've seen over this first year. And I've mentioned that that can take up to twelve months because all those steps I just mentioned. You know, things that could accelerate that, obviously, the performance of the campaigns being good is, all else equal, a really encouraging thing that causes people to say, how do I get more of this? We've seen that happen already. People saying, wow. This is something I can do with much shorter lead times. And they realize this can be used to close gaps. That can cause them to say, give me a proposal right away. And I think just the more we put out news about things like LiveLift and about Surcana, the more we're going to get people talking about it, inbound interest, we started to see that. So I think that could be a tailwind perhaps in 2026. Matt Puckett: Yeah. And, Ron, relative to your question about the macro and the comments that I made there, I don't think we're breaking any news here. I mean, it's been noisy. And in fact, maybe it's even more noisy right now here in Q4 when you consider tariffs or continue to impact particularly for us at the ad revenue space, but generally speaking, tariffs are impacting. You know, consumer sentiment is quite low, I guess, maybe even historically low. Now we're dealing with the disruption of SNAP benefits. You know, so just generally a lot of macroeconomic uncertainty. And clients, our clients are taking, generally a wait-and-see approach and that filters to us as well. That's really the point we're making. Ronald Victor Josey: Thank you, Bryan. Thank you, Matt. Operator: Our next question comes from Nitin Bansal at Bank of America. Your line is open. Please unmute and ask your question. Nitin Bansal: Thank you for taking my question. So AI is increasingly becoming a core driver of performance outcomes. Can you elaborate on how you are integrating AI within the platform? What tangible improvements have you seen so far? And looking forward to 2026, where should we expect, like, the highest AI benefit for your platform? Thank you. Matt Puckett: Thanks, Nitin. Bryan Leach: Yeah. So I think, you know, there are a couple of different places and ways in which we're incorporating AI, particularly machine learning when I say AI. You know? So one of the most important is in how we use AI to model the pre-campaign as well as the in-flight projections of how many incremental sales and what the cost per incremental dollar will be for a given campaign. That's powerful. That gives us the ability to crunch a large amount of data and kind of come up with a set of recommended parameters for that offer that we think are more likely to achieve the goal that our clients tell us that they have. From the outset. That's something that we will continue to refine and iterate on over time, and that will, you know, AI will be an important part, not just of projections, but ultimately of optimization, recommendation, etcetera. That's kind of in the core product itself. As you think about the processes we use internally to configure and launch offers, we use AI across a variety of solutions to make that more efficient. So to use one example, we recently launched our first agentic solution in-house which is reducing the time we spend on setting up campaigns by finding the appropriate UPCs, uniform product codes, that need to be included in each campaign, and that's reduced that setup time by approximately 50%. So those are some examples of how our processes and our product itself are going to benefit from AI going forward. Nitin Bansal: Thank you. Operator: Our last question comes from Andrew Boone. Andrew, your line is open. Please unmute and ask your question. Andrew Boone: Thanks for taking the question. Bryan, I wanted to go back to one of the themes you talked about on the call in terms of just making things easier. You just speak to the roadmap and what that entails, and what gets you most excited about just reducing friction across the platform? Bryan Leach: Thanks, Andrew. Yeah. Look. We've talked about some of the execution opportunities that we've had over the last calls. In going out and talking to our clients and our partners, we've heard consistent feedback. It is not as easy as it needs to be to work with you. That might be a matter of we haven't had continuity in the sales rep. Somebody who understands our business and is working hard, you know, to anticipate opportunities. To use your solutions to benefit our business. It might be something as mundane as, you know, we have a difficult time with the billing or the invoicing aspect of working with you. You need to clean that up. You need to make that easier. But it's also just a matter of creating a set of tools and solutions that are really easy to kind of speak their language. Right? So instead of speaking to them about metrics that ultimately aren't what they're accountable for, like, for instance, clips, or even the pacing of their campaign, to be able to speak directly in terms of incremental sales, directly in terms of market share gain that we think we can deliver, and, you know, compare our costs directly to their profit margin. That makes it much easier for them to go to their internal teams, their finance teams, and get approval. Then there's also just the process of selling. So for our sellers to be able to execute before, during, and after the campaign, means we have to be able to automatically and accurately generate these campaign projections very quickly. So if you have a really exciting sales meeting, it's easy to come back to people and say, Here's what we're proposing. Here's what we think it will deliver. These are the ranges we think we'll be in. We're doing that today, but that process needs to become more automated, less manual. And that'll help our sellers. Same thing during the campaign. Being able to provide that readout, be able to provide it ever more frequently over time. More accurately. The more data we have to feed these models, the more accurate they'll become. And then turning around standardized reporting after the campaign in a way that's very turnkey and doesn't require us to pull in a number of different client analytics resources. Those are all things that I think sellers here at Ibotta, Inc. are incredibly excited to see. These are all investments that we think are going to delight our clients and improve our overall go-to-market motion. Andrew Boone: Thanks. And then, Matt, I wanted to ask about 2026. As we think about some of the new merchants that you guys have added and lapping those ads in 2026, how should we be thinking about third-party redeemer count in a go-forward basis in terms of next year? Thank you. Matt Puckett: Yeah. I think, you know, we certainly are not going to get real specific about 2026 from a guide standpoint. But, you know, I think we have we aren't factoring in any increases in publishers from a networking standpoint. So I think you could assume that that's going to be relatively stable across time. The things I think is really important to remember, though, that we're really driving the business through a significant transformation. And at the same time, we're recovering from big execution challenges that's plagued us over the last few quarters. And a large-scale sales reorganization. So while we're not guiding for 2026 today, really across the P&L or certainly not any of the inputs to that, we did think it was important to provide some shaping. So that's what we did in the prepared remarks around expecting more normalized seasonality, leading from Q1 through the balance of the year, but really importantly understanding that from Q4 to Q1, Q4 2025 to Q1 2026, we'd expect to see as much as a low double-digit decline in revenue. Bryan Leach: Yeah. I'll just add that, you know, redeemer growth is ultimately a function of improving the offer content on our network. And so we're working very hard to do that so that we can both increase the overall number of redeemers and the redemption per redeemer. On third-party publishers to your question, and on D2C. I think both of those factors are very important, and we're starting to see the LiveLift solution increasing investment, and increasing the breadth and quality of the brands that are on the network, you know, even as some of these are still small dollar numbers. So for example, recently, one of our partners, just as recently as last week, said on their earnings call that they were piloting Ibotta, Inc., that they were using performance marketing and incentives, that they had seen promising early results in driving new users and incremental sales across key snack brands and soon formula. That's just one client that's gone public in the last week. You know, we're continuing to see clients contemplate putting in more mainstream brands versus just innovation brands. And so we think that's ultimately going to hit a higher percentage of the basket and increase overall redeemers, to your question. Andrew Boone: Thank you. Operator: Our next question comes from Stefanos Chris at Needham and Company. Your line is open. Please unmute and ask your question. Stefanos Chris: Hi. This is Steph calling in for Bernie McTernan. Thanks for taking our questions. Kind of maybe a different way to phrase the last question, but could you just talk about the contribution from Instacart and DoorDash in the quarter and maybe how to think about that going into next year? And then you said the majority of DoorDash customers are using Ibotta, Inc. How does that get to all DoorDash customers? Thank you. Bryan Leach: Yeah. Thanks, Steph. Appreciate it. Say hi to Bernie McTernan for me. We are pleased with the momentum of our partnerships with both Instacart and DoorDash. You know, we've made progress there this year in terms of improving the functionality at DoorDash. They were taking a cautious approach growing, to make sure that there's no impact on their core, you know, user experience. And I think, you know, they've satisfied themselves to a great extent that this point, you know, to the extent it's not truly 100%. It's a very small holdout at this point. Not worried about functionality, but and that's just to keep an eye on any long-term unintended consequences of having this content. But we are pleased with how those performed. We've also added beer, wine, and spirits in the jurisdictions where that has been possible, the 13 or so states where that has been possible. In those environments. And so, you know, we continue to grow both those channels. You heard that we've grown redeemers year over year. You know, substantially, and those have been a big part of how we've achieved that. Stefanos Chris: Got it. Makes sense. Thank you. Operator: As a reminder, if you would like to ask a question, click on the raise hand button at the bottom of the screen. Thank you. That concludes the Q&A section of the call. I would now like to turn the call back to management for closing remarks. Bryan Leach: Thanks very much to all of you for your questions. We are excited about where the business is heading in 2026, and we look forward to giving you a further report early next year. Operator: Thank you for joining today's session. The call has concluded. You may now disconnect.
Operator: Good afternoon, and welcome to Airgain's Third Quarter 2025 Conference Call. My name is Paul, and I will be your operator for today's call. Joining us today are Airgain's President and CEO, Jacob Suen, and CFO, Michael Elbaz. As a reminder, this call will be recorded and made available for replay via a link found in the Investor Relations section of Airgain's website at investors.airgain.com. Following management's prepared remarks, the call will be opened for questions from Airgain's covering analysts. I caution listeners that during this call Airgain management will be making forward-looking statements about future events as well as Airgain's business strategy and future financial and operating performance. Actual results could differ materially from those stated or implied by these forward-looking statements due to risks and uncertainties associated with the company's business. These forward-looking statements are qualified by the cautionary statements contained in today's earnings release and Airgain's SEC filings. This conference call contains time-sensitive information that is accurate only as of the date of this live broadcast, 11/12/2025. Airgain undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this conference call. In addition, this conference call will include a discussion of non-GAAP financial measures. Please see today's GAAP earnings release for further details, including a reconciliation of GAAP to non-GAAP results. Now I'd like to turn the call over to Airgain's CEO, Jacob Suen. Jacob? Jacob Suen: Good afternoon, everyone, and thank you for joining us. Throughout 2025, we have remained deliberate about how we built Airgain, focusing on what we can control, refining where we compete, and executing step by step to create a stronger, more scalable company. Our focus continues to show in our results. In Q3, we delivered our third consecutive quarter of sequential revenue growth, met guidance, achieved strong gross margins, and generated positive adjusted EBITDA. We also reached key certification milestones that move our growth platforms closer to scale. Before diving deeper, I want to step back and frame where we are in our growth journey. With the year nearly complete, this is a good time to reflect on the progress we have made and how it positions Airgain for sustainable growth in 2026. Airgain was founded on a simple idea: we simplify wireless. From day one, our mission has been to help our customers' devices, vehicles, and networks connect more reliably by removing complexity from wireless design. Our technology reaches across three core markets: consumer, enterprise, and automotive, connecting leading carriers, service providers, and OEMs that depend on reliable wireless performance. Our business rests on two pillars. First, our core markets that provide stability and a solid foundation to fund growth. Second, our growth platforms, AirgainConnect and Lighthouse, are opening new scalable opportunities in fleet and network coverage solutions. Let me start with our core business, which remains healthy and profitable on a standalone basis. In consumer, we expect revenue to grow at a double-digit rate for the second consecutive year, driven by the WiFi 7 transition among Tier 1 cable operators and growth of FWA antenna sales to a Tier 1 mobile network operator. Looking ahead to 2026, we expect continued growth supported by the WiFi 7 transition and new design wins, such as the one we announced this week with another Tier 1 US carrier for its next-gen WiFi 7 fiber broadband gateway. The new platform is targeted for commercial launch in 2026, with projected shipments exceeding 5 million units within the next five years. In embedded modems, we also expect double-digit revenue growth for the second consecutive year, fueled by rising demand in utility infrastructure monitoring, including energy management and electrical grid applications. We launched our Skywire Tier 1 base embedded modem and recognized initial revenue in Q3, and we expect this solution to be a growth driver in 2026. Embedded modem sales now represent more than half of our enterprise market revenue, and we continue to invest in next-generation development to expand our leadership position. Jacob Suen: While our consumer and embedded modem businesses generated higher revenue and contribution margins this year, other product lines faced challenges that we are actively addressing. Asset tracker sales have moderated, reflecting a lack of traction on customer projects. Aftermarket antenna and enterprise custom products remain weighed down by channel inventory overhang, partly driven by government agency project deployment delays. Given the current government funding climate, we expect this overhang to persist through 2026. Additionally, we are leveraging our high-performance antenna portfolio to expand into emerging markets and applications, including unmanned flight systems, smart infrastructure, and industrial IoT, which are expected to create new revenue streams for Airgain in 2026 and beyond. Taken together, our core markets are performing largely as expected, providing steady revenue and EBITDA. We expect core markets will be up modestly in 2026 and to remain self-sustaining, generating the cash flow that supports continued investment in our platform strategy. With our foundation in place, let's transition to our growth platforms, AirgainConnect and Lighthouse, where we are seeing tangible progress and expanding engagement. Jacob Suen: AirgainConnect is our integrated 5G gateway platform for enterprise applications, such as fleets, utilities, and mobile usage. Following the AT&T FirstNet trustee certification earlier this year, we achieved another significant milestone by obtaining T-Mobile key priority certification last month, validating AirgainConnect for mission-critical connectivity and opening access to T-Mobile's public safety and enterprise networks. As we have shared on prior calls, the AirgainConnect sales cycle varies by fleet size, which impacts the timing of revenue recognition. Tier 3 customers, under 50 vehicles, move the fastest with a sales cycle of roughly three months, providing near-term revenue potential. Tier 2 customers, 50 to 500 vehicles, generally take six to twelve months from engagement to deployment. Tier 1 customers, over 500 vehicles, have the longest cycle, twelve to eighteen months, and often structure RFPs in pilot validation programs. Our sales approach is consultative and multi-pronged, spanning partnerships with carriers, strategic value-added resellers, and distributors to direct engagements with key customers as a trusted solution provider. We have a dedicated sales, marketing, and customer support team, which continues to evolve to better address customer needs. Our sales opportunity pipeline continues to expand, with roughly 80 opportunities in play, two-thirds of which are in pretrial phases. We currently have approximately 60 Tier 3 opportunities, averaging 10 units each, with nearly half already in the post-trial phase. Our Tier 1 and Tier 2 opportunities vary in size, with most still in the early engagement or pretrial stage. About two-thirds are focused on the first responder market, where adoption has been slowed by budget and funding constraints that were further accentuated by the recent government shutdown. While the AirgainConnect value proposition in the first responder market centers around its all-in-one design and integrated eSIM capability, we are finding strong traction in utility and energy infrastructure markets. For these customers, the conversation shifts from replacing their current cellular setup to enabling true edge connectivity, a new level of integrated high-performance connectivity that supports advanced in-vehicle sensing, multi-camera video recording, and image recognition capabilities, and external environmental sensors with continuous cloud connectivity. AirgainConnect is more than a hardware upgrade; it simplifies network management, improves coverage and performance, and meaningfully reduces OpEx by allowing fleets to consolidate multiple SIM-based connections into a single intelligent gateway. A good example is our engagement with a large fleet operator pursuing a digital transformation to improve operational efficiency and reduce annual operating expenses. Today, each truck relies on multiple SIMs to power cameras and sensors. ACP is being evaluated as a single gateway solution with multiple carrier eSIM capability, simplifying connectivity management and enabling remote carrier switching. Jacob Suen: Looking ahead, we are on track for Tier 2 opportunities to begin converting into design wins in 2026, with Tier 1 programs expected to follow in the second half of the year. These milestones reflect steady progress to customer validation and demonstrate strong alignment with our strategic engagement roadmap. Compared to Lighthouse, AirgainConnect is the more immediate growth driver, and we enter 2026 with strong visibility and confidence in the platform's adoption trajectory. As AirgainConnect establishes our leadership in fleet connectivity, Lighthouse marks our expansion into network infrastructure optimization, helping carriers and enterprises expand 5G coverage and offload extra capacity more efficiently. We achieved FCC certification last month, a significant milestone that now enables Lighthouse to be deployed commercially in the U.S. Lighthouse, our 5G network control repeater, provides a faster, lower-cost, and more sustainable alternative to traditional base station infrastructure and passive distributed antenna systems. Equipped with an optional solar package, it can operate autonomously in off-grid or rural locations, addressing both performance and sustainability objectives. We continue to make meaningful progress across our target regions. In the U.S., we have secured a Tier 1 carrier trial that is expected to be completed by the end of this year. Jacob Suen: This trial represents months of technical collaboration and senior executive sponsorship, underscoring its significance as a company milestone. As part of this engagement, we will deploy our first dual carrier installations, validating Lighthouse's capability to aggregate multiple spectrum channels simultaneously, delivering higher throughput, improved signal stability, and a superior end-user experience. This channel aggregation capability is unique to Lighthouse and represents a clear competitive differentiator in the 5G coverage expansion market. While we are excited about this U.S. trial, we remain cautiously optimistic given the lengthy carrier engagement cycle. We're also finalizing a system integrator agreement with a leading U.S. system integrator covering thousands of sites transitioning from 4G LTE to 5G. The integrator plans to use Lighthouse to upgrade these locations and support future deployments. This is a strategic relationship designed to enable and scale customer deployments while also supporting the integrator's enterprise clients. In the Middle East, installations are progressing with Ormatio through the initial phase, and we are planning for a joint sales and marketing rollout in 2026. In parallel, we are engaged in additional regional discussions and expanding Lighthouse adoption across neighboring markets. In South America, we are currently executing a trial with a top five global tower provider in collaboration with two regional Tier 1 mobile network operators. This trial marks the industry's first dual operator deployment with Lighthouse, supporting two independent carriers through a single installation. This capability eliminates redundant hardware, reduces deployment cost, and accelerates network expansion. While the opportunity could be significant, we remain cautiously optimistic regarding the financial impact, which is expected to materialize over the next twelve to eighteen months. Looking ahead, our focus is on completing active deployments, scaling commercial pilots, and expanding system integrator partnerships globally. We expect modest Lighthouse revenue contribution in the first half of next year, followed by stronger growth in the second half as U.S. system integrator engagements expand and international projects advance. Our strategy is working, momentum is building, and execution remains our priority. As we conclude 2025, our focus remains clear: to complete our transition from a component supplier to a scalable wireless systems solutions company. We're maintaining financial discipline, executing on our engineering roadmap, advancing customer pilots, and delivering on our sales and operational goals, all of which position us to scale efficiently and sustain growth in 2026 and beyond. Our model remains capital efficient and supported by the resources needed to execute our strategy effectively. With that, I'll hand over to Michael to discuss our financial results. Michael? Michael Elbaz: Thank you, Jacob. Before I dive into the numbers, I will note that my remarks refer to non-GAAP figures unless otherwise indicated. Reconciliations to GAAP results can be found in today's earnings release. Third quarter revenue came in at $14 million, at the midpoint of our guidance and up 3% sequentially from the second quarter. Breaking this down by market, consumer revenue was $6.7 million, up $1 million sequentially, driven by higher WiFi 7 antenna shipments to cable operators. On a year-to-date basis, our sales to cable operators grew by over 50%, fueled by the WiFi 7 technology refresh. Enterprise revenue was $6.9 million, down $300,000 sequentially due to lower enterprise antenna sales. Our embedded modems product line recorded a third consecutive quarter of sequential sales growth. The growth was driven by end customers in the utility infrastructure monitoring market. Automotive revenue was $500,000, down $300,000 sequentially, driven by lower aftermarket antenna sales. Third quarter non-GAAP gross margin was 44.4%, up from 43.8% in Q2. On a year-over-year basis, margin increased by 160 basis points, driven by improved enterprise and consumer product margins. Third quarter non-GAAP operating expenses were $6.1 million, lower both sequentially and year over year, reflecting an expense realignment within our core product lines and a decrease in our G&A expenses. While total expenses have decreased, we continue to invest in our growth platforms, specifically the sales, marketing, and engineering functions to support a scalable system solution company. On a year-to-date basis, our non-GAAP engineering, sales, and marketing expenses decreased 10% year over year. Within that, we estimate the engineering, sales, and marketing expenses for our core product lines decreased by approximately 30%, while investment in our growth platforms increased by about 30%. Adjusted EBITDA improved to a gain of $300,000 compared to a loss of $400,000 in Q2. Q3 non-GAAP net income was $100,000 or 1¢ per share, compared to a loss of $500,000 or 4¢ per share in Q2. We ended the quarter with $7.1 million in cash and equivalents, down $600,000 sequentially and down $300,000 on a year-over-year basis. Year to date, we received $2.1 million in net proceeds from the employee retention credit we applied for over two years ago. The ERC credits helped offset the impact of $1.7 million year-to-date non-GAAP operating loss on our cash balance. Looking ahead to the fourth quarter, we expect revenue in the range of $12 million to $14 million, with a midpoint of $13 million, representing a sequential decline of approximately 7%. This decline reflects a temporary moderation in our consumer and enterprise sales following strong year-to-date performance. We expect non-GAAP gross margin for the fourth quarter to be in the range of 42.5% to 45.5%, or 44% at the midpoint. We do not anticipate a material impact from tariffs or the recent government shutdown, although this environment may result in supply chain disruption costs. We expect non-GAAP operating expenses for the fourth quarter of approximately $5.8 million, resulting in positive adjusted EBITDA of approximately $100,000 at the midpoint of our guidance range. Now I will turn the call back over to Jacob for his closing remarks. Jacob? Jacob Suen: Thanks, Michael. To put it simply, 2025 has been a year of validation and disciplined execution, and we are entering 2026 with stronger visibility, a clear roadmap, and the foundation to scale. We have achieved key certifications and driven customer engagement across our growth platforms. Our core business provides stability, our platforms create drivers for growth, and our team continues to execute with focus and accountability. The opportunity ahead of us is clear, and our conviction has never been higher. Thank you to our employees, partners, and investors for your continued trust and support. Operator, we are now ready to take questions. Operator: Thank you. We'll now be conducting a question and answer session. It may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Jacob Suen: Thank you. Our first question is from Anthony Stoss with Craig Hallum Capital. Anthony Stoss: Hey, Jacob and Michael, it's Ryan on for Tony. I'm just curious about your recent WiFi 7 design win with the Tier 1 carrier. Is this an existing customer upgrade for you guys, or is it a completely new customer? And then how do you think of the cadence of the ramp on the revenue impact for next year? Jacob Suen: Thanks. Hi, Ryan. Yes, this is Jacob here. The customer is an existing customer, although this is, you know, as far as the end customer, it is a US Tier 1 operator, and this is their flagship gateway for the next generation. So this is, you know, their largest scale. Anthony Stoss: Okay. Got it. And then how do you guys think of the, I know it's ramping in the second half of next year. How do you think of the revenue impact for 2026? Jacob Suen: Look, we talk about the size, it's in excess of 5 million units. You know, it's going to be within five years because that's usually how operators, you know, roll out their deployment. As far as 2026, we would be able to get more visibility, I would say, in the first half of the year because it's planned to be, you know, start deploying in the beginning of the second half of next year. Anthony Stoss: Okay. Got it. And then maybe one for Michael on OpEx. It's nice to see continued cost discipline both in the results and the guide for December. I'm curious how you think about OpEx fluctuation next year as you ramp some of the new products? Michael Elbaz: So our goal is really to be at EBITDA breakeven, if not positive. And so as we have some runway left to have the revenue ramp in the AC fleet and Lighthouse, we will maintain that tight management of OpEx. We're always looking for efficiencies in our G&A expenses. This has always been the case. And at the same time, we're also looking very deliberately at our investment in our core market, mainly because we want to make sure that we continue to invest in the growth platform just like we have done over the past few years. Anthony Stoss: So, it would be basically a tight management of OpEx, it will be deliberate type of investment. It would be focused on the growth platforms. On the core markets, we mentioned, the consumer product line along with the embedded product line, which is part of the enterprise market, definitely have been bright spots for us in FY '25. And so we have as well an engineering roadmap along with increased focus on the sales and marketing effort as we continue to win designs on those two major product lines. Anthony Stoss: Alright. Got it. Thank you, Jacob. Thank you, Michael. Michael Elbaz: Thank you. Operator: Thank you. This concludes our question and answer session. If your question was not answered, you may contact Airgain's Investor Relations team at airg@gatewayir.com. I'd now like to turn the call back over to Mr. Suen for any closing comments. Jacob Suen: Thank you for your thoughtful questions and for your continued interest in Airgain. If there's one takeaway, it's that Airgain is a more focused, disciplined company entering 2026, positioned for sustainable growth and increasing platform adoption. Michael and I will be attending the Quick Conference in New York City on Tuesday, November 18, and we look forward to connecting with many of you there. Operator, you may now conclude the call. Operator: Thank you for joining us today for Airgain's Third Quarter 2025 Earnings Call. You may now disconnect.
Operator: Good evening. My name is Roger, and I will be your conference operator today. Welcome to PagSeguro Digital Ltd.'s Earnings Call for 2025. The slide presentation for today's webcast is available on PagSeguro Digital Ltd.'s Investor Relations website at investors.bagbank.com. Please refer to the forward-looking statements and reconciliation disclosure in this presentation and in the company's earnings release appendix. All participants will be in listen-only mode. Please use the raise hand button to join the queue. Once you are announced, a request to activate your microphone will appear on your screen. Please ask all your questions at once. Today's conference is being recorded and will be available at the company's IR website after the event is concluded. Now, I will turn the call over to Gustavo Sechin, IR Director. Gustavo Sechin: Hello, everyone, and welcome to the PagSeguro Digital Ltd. earnings conference call for the third quarter of 2025. I am Gustavo Sechin, PagSeguro Digital Ltd.'s Investor Relations Director. Thank you for taking the time to join us today. Tonight, I am joined by Ricardo Dutra, our Principal Executive Officer, Alexandre Magnani, our CEO, Carlos Malaj, our COO, and Artur Schunck, our CFO. We will begin by sharing the highlights for the quarter, followed by our live Q&A session. Now I would like to turn it over to Ricardo Dutra. Please, Ricardo. Ricardo Dutra: Hello, everyone, and thank you for joining our third quarter 2025 earnings call. I will begin with Slide four, which summarizes our key operational and financial highlights. This quarter, we continue to execute our strategy with discipline, navigating a more challenging macroeconomic environment while maintaining our focus on long-term value creation. We ended the quarter with 33.7 million clients, growing 1.6 million clients year over year. In Q3 2025, we continue to demonstrate resilience, protect profitability, and navigate a challenging macroeconomic environment while facing tougher year-over-year comparisons from Q3 2024. On our acquiring business, total payment volume remained stable sequentially and reached BRL 130 billion. This performance reflects our ability to sustain momentum even amid broader market pressures. Our credit portfolio and funding base continue to expand at a double-digit pace compared to the same period last year, with NPLs that are half of the industry. During the quarter, we once more accelerated our unsecured lending portfolio with a particular focus on working capital loans. Meanwhile, we advanced our funding efficiency initiatives, further reducing deposits API. These efforts reinforce the strength of our ecosystem and our commitment to democratize access to financial services in a responsible and sustainable way. Moving on to financial highlights, our total net revenue excluding interchange and card scheme fees increased 14% year over year, reaching BRL 3.4 billion. Our non-GAAP net income was flat year over year while diluted EPS on a GAAP basis reached 1.814% higher year over year, supported by consistent cost discipline and capital efficiency. On capital efficiency, we have returned BRL 2 billion to shareholders through dividends and share repurchase. We repurchased 3.3 million shares year to date, distributed more than BRL 600 million in dividends following our May 2025 announcement, reinforcing our balanced approach to capital allocation. In conclusion, our performance this quarter reflects the strength, profitability, and resilience of our business model. We have delivered positive earnings every single quarter since IPO, a track record we are committed to uphold through disciplined execution, operational efficiency, and a clear strategy focus. Moving on to slide five, despite a more cautious economic backdrop, our track record continued to reflect the resilience and consistency of our business model and generate long-term value. Once again, we showcase the evolution of our GAAP diluted EPS since going public in 2018. Over the past years, EPS has grown approximately 2.3 times, translating into a compound annual growth rate of 15% even in a scenario where we navigate global disruptions and ongoing macroeconomic volatility. Throughout this journey, we have reached key strategic milestones that expanded our addressable market and reinforced profitability. These efforts have laid a solid foundation for sustained EPS growth driven by operational leverage and disciplined execution. Our performance reflects a clear focus on building strong earnings visibility with a high share of recurring revenues which enhance predictability and supports long-term value creation. It also stems from a thoughtful capital allocation strategy balancing share repurchase and dividend distributions, with a total yield of approximately 15.5%. Combined with our robust capital position, we remain well-equipped to pursue value-accretive opportunities with flexibility and confidence. As we move to Slide seven, we highlight how our long-term vision continues to shape the way we build and evolve the company. Our fully integrated ecosystem, which integrates payments and banking, creates powerful synergies that allow each side of the business to leverage the other. By delivering a diverse and complementary range of products, we have deepened client engagement, enhancing monetization, and expanded our share of wallet. This approach positions us not just as a service provider, but also as the primary financial partner for our clients, supporting their needs across every stage of their journey. Move to the next slide. As we have emphasized in recent quarters, there is still meaningful room to grow our platform. In several areas of our banking business, our market share remains below 1%, which reinforces our conviction that we are only scratching the surface of what we are capable of building. As we continue to scale our banking operations, we are opening new paths for growth, whether through deeper cross-sell, a stronger and more efficient deposit base, or a broader and more diversified credit portfolio, all handled with discipline. With that, I will hand it over to Alexandre Magnani who will walk through the operational highlights for the quarter. Alexandre Magnani: Thank you, Ricardo. Hello, everyone. In this section, we walk through the performance of our business units for 2025. On slide 10, we highlight the continued evolution of our client base in Q3 2025. We ended the quarter with 33.7 million clients, adding 1.6 million over the past twelve months. Our active client base reached 17.8 million, supported by a 2% year-over-year increase in banking-only clients. On slide 11, we showcase the evolution of our cash-in, which continues to be one of the most meaningful indicators of transactionality on our platform. In 2025, cash-in totaled BRL 95 billion, representing a 14% increase compared to the same period last year. On a per-client basis, the figure advanced to BRL 5,500, marking a 12% annual increase. These results reflect the strength of our platform and the growing intensity of client engagement across our base. In addition, we are witnessing broader uptake of new payments, fixed transactions, investment, and insurance solutions, signaling stronger relationships and monetization as customers increasingly entrust us with a wider share of their financial needs. On slide 12, we present the continuous strength of our deposit base coupled with meaningful progress in reducing our funding cost. During the quarter, total deposits increased to BRL 39.4 billion, representing an increase of 15% year over year. This expansion is particularly significant given our strategy to lower funding costs. This quarter, we have reached a sixth consecutive quarter of reduction in our cost of funding as a percentage of the CDI, demonstrating our ability to attract and retain client deposits while simultaneously enhancing the efficiency and resiliency of our liability structure. When we include other funding sources, total funding reached BRL 43.7 billion in the quarter, an increase of 14% year over year. This performance underscores not only the growth in deposits but also our ongoing commitment to diversifying the funding mix, supporting a more balanced and resilient capital structure. It is also important to emphasize that deposits remain a cornerstone of our funding strategy, primarily allocated to finance merchant prepayment and our loan portfolio. As of September, our loan-to-funding rate, which compares our expanded portfolio to total funding, stood at 113%, reflecting prudent balance sheet management and disciplined capital allocation. On slide 13, let me turn to our credit performance. We see credit as a strategic lever to drive greater transaction activity across both our banking and payment segments. In doing so, we unlock cross-sell and capture the full potential of our ecosystem. In the third quarter, our total credit portfolio reached BRL 4.2 billion, a 30% year-over-year increase. Since 2024, we have been gradually accelerating credit underwriting for unsecured products, particularly focused on working capital loans. This has been supported by continuous enhancement in our risk assessment and collection processes, leveraged by artificial intelligence. This quarter, we originated more than two and a half times the volume of working capital loans compared to 2025. If we include financial operations linked to merchant prepayments, facilitated by our instant settlement feature on the acquiring side, our expanded credit portfolio now exceeds BRL 49 billion, up 12% in the last twelve months. Now turning to asset quality, as shown at the bottom right of the slide, our NPL 90 ratio remains below the market average, underscoring the strength of our risk management practice. With that, I will now hand it over to Artur Schunck who will walk through the financial highlights of 2025. Artur Schunck: Hello, everyone, and thank you for joining us today. I am following the presentation with our consolidated financial results for 2025. Turning to Slide 15, total revenue and income, net of interchange and card scheme fees, totaled BRL 3.4 billion in Q3 2025, a 14% increase year over year. This performance reflects the repricing strategy we began rolling out for acquiring products in 2024. These initiatives have been crucial to offsetting higher financial costs and securing a more sustainable revenue base in a more challenging growth environment. Our revenue growth once again outpaced the TPV, showing that our repricing strategy is working to boost profitability. As we wrap up the year, we are staying alert to economic conditions that could bring challenges. Still, the progress we have made puts us in a strong position to maintain solid growth and profits into 2026 as we stay focused on executing our disciplined strategy. Looking at the charts on the right side, payments revenue, net of interchange fees, totaled BRL 2.7 billion, supported by the successful execution of our repricing strategy. Banking revenue reached BRL 744 million in the quarter, a strong growth of 50% year over year. This performance was driven by the expansion of our credit portfolio, stronger engagement, and higher monetization. It was also benefited by the growth in deposit volumes and increased fee generation, particularly from card usage and account-related services. Moving on to the next slide, here we present a comparison of our gross profit over the last twelve months. Our strong banking performance combined with the repricing strategy we implemented helped partially offset the negative impact of higher interest rates, which rose by more than 400 basis points during the period. Gross profit totaled BRL 1.9 billion, an increase of 2% year over year. Buyback and dividend distribution negatively impacted by BRL 64 million. Excluding this effect, gross profit would have increased 5% year over year. On the right side of this slide, I would like to highlight the robust performance of our banking business, which has become an increasingly important pillar of our overall results. Banking gross profit grew 59% year over year and now represents more than 28% of our total gross profit. In addition, our banking gross profit margin reached 72% in the quarter, up from 68% in the same period last year. These results highlight the strength of our platform, the diversification of our revenue streams, and our ability to efficiently offer complementary products and services. On slide 17, we dive into our cost and expenses structure this quarter. Our disciplined approach to managing expenses continues to be a part of our strategy. It played an important role in helping us navigate the pressures of rising financial costs, allowing us to balance sustainable growth and profitability. On the cost side, financial costs increased 45%, primarily due to higher interest rates and the impact of recent capital structure adjustments. As noted earlier, these effects were partially offset by our funding strategy, which focused on diversifying sources and reducing interest expenses. Concurrently, total losses fell 26%, reflecting improvements in our KYC and onboarding processes, resulting in fewer chargebacks, partially mitigated by the natural increase of ECLs given the acceleration of our credit operation. Operating expenses decreased 3% year over year, reflecting our continued focus on efficiency and cost management. This reduction was driven mainly by lower personnel expenses along with more disciplined marketing investments. As a percentage of total revenue and income, we achieved 400 basis points of operating leverage compared to the same period last year. Moving on to slide 18, we achieved a non-GAAP net income of BRL 571 million, reflecting a 1% sequential growth and stable year over year. Shareholder value creation measured by diluted GAAP earnings per share reached BRL 1.88 in the last quarter, reflecting an increase of 14% year over year. On the right side of this slide, I am pleased to present the improvement of 30 basis points in our annual return on average equity, which increased to 15.1% from 14.8% as reported in Q3 2024. Even with a conservative capital structure, we have consistently delivered solid returns to our shareholders. Now moving on to Slide 19, let's turn to the initiatives we have been executing to drive shareholder value and our capital structure. Throughout 2025, we maintained consistent momentum in our buyback program, repurchasing over 18.5 million shares. In the third quarter, we advanced into our third repurchase program, which authorizes the company to buy back up to an additional $200 million in outstanding shares, demonstrating our commitment to returning capital to shareholders and enhancing long-term value. In addition to the BRL 617 million in cash dividends already paid in 2025, we announced in September a BRL 1.4 billion dividend distribution for 2026, to be paid in four installments, further reinforcing our commitment to enhance shareholder value. Our Basel Index consistently declined from Q3 2024 to Q3 2025, reflecting an improvement of approximately two percentage points in capital allocation. Moving on to the next slide, while our performance has remained consistent throughout the year, we recognize that the outlook for the rest of 2025 is more challenging, driven by slowing economic activity and sustained high interest rates. Accordingly, we are revising our guidance to align with the current market conditions while staying focused on sustainable growth, capital efficiency, and long-term value creation. We are adjusting our gross profit growth guidance from a range of 7% to 11% to a revised range of 5% to 7%, reflecting the impact of elevated financial costs in a high-interest-rate environment. For reference, our gross profit for the first nine months of 2025 grew 6.3% year over year. Our nine-month diluted EPS, calculated using the same share count as of December 2024 and excluding the impact of share repurchases and long-term incentive plan grants in 2025, grew 15.7% year over year, reflecting the resilience of our business model and the disciplined execution of our strategy. For this metric, we are narrowing our full-year guidance from 11% to 15% growth year over year to 13% to 15% growth year over year. Finally, CapEx levels remain aligned with expectations for this stage of the year. With that, I will invite Alexandre Magnani for the closing remarks. Alexandre Magnani: Thank you, Artur. Before we conclude, let's move to the next slide for a few final thoughts. Throughout 2025, we have continued to deliver consistent results even as the macroeconomic environment remains one of the key challenges. In this context, our margin discipline and operating leverage have been critical in sustaining profitability and protecting returns. A key highlight this quarter was the expansion of our banking business, which now accounts for over 27% of total gross profit, growing 56% year over year. This performance was driven by consistent credit acceleration and strong client engagement, reinforcing the strategic relevance of this segment within our ecosystem. Looking ahead, our focus remains on mitigating financial cost pressures while preparing the company to capture growth opportunities in 2026 and beyond. We remain committed to our long-term ambition to become the primary financial interface for individuals, micro, small, and medium-sized businesses, supported by strong growth potential and a proven track record of creating shareholder value. To that end, as a reminder, our 2029 strategic targets include BRL 25 billion in credit portfolio, supported by a balanced mix of secured and unsecured products, with an emphasis on working capital loans and AI-powered solutions like private payroll and fixed finance. Above 10% gross profit CAGR, driven by stronger banking contribution, cross-sell opportunities, and efficiency gains, and above 16% EPS CAGR. As we continue converting growth and operational improvements into consistent shareholder returns, these targets reflect our confidence in the scalability of the platform and the strength of our execution. Thank you once again for joining us today. I will now hand it over to Ricardo Dutra for a special announcement. Ricardo Dutra: Before I move to Q&A, I would like to share some leadership updates. Effective January 1, 2026, as part of our planned succession process started last year, Carlos Malaj, our current Chief Operating Officer, will become our new Chief Executive Officer, and Gustavo Sechin, our Investor Relations Officer, will become our new Chief Financial Officer. Alexandre Magnani, our current CEO, and Artur Schunck, our current CFO, will keep supporting Carlos and Gustavo in their transition to the new roles. The company expresses gratitude to Alexandre and Artur for their extraordinary contribution as executive officers. The company will send notice of a general meeting of shareholders in order to vote to approve the appointment of both Alexandre and Artur to the company's board of directors. Looking ahead, I am confident that Carlos, who joined PagSeguro Digital Ltd. one year ago, will build on this solid foundation and lead the company in this next chapter of growth. He brings more than two decades of extensive experience in the banking sector and credit market in Brazil, which will be fundamental as we continue to expand our digital bank and financial services consistent with our long-term strategy. Gustavo, who also joined PagSeguro Digital Ltd. last year and has more than twenty-five years of experience in the financial sector, brings an extensive background to continue strengthening our financial organization and execution. Finally, I would like to thank all our teams, the people who work hard every day to make PagSeguro Digital Ltd. what it is today. With a strong team, a culture of excellence, and a clear strategic vision, we are well-positioned to capture the opportunities ahead and achieve our full potential in the coming years. Operator: Thank you for the presentation. We will now begin the Q&A session for investors and analysts. Please press the raise hand button. If your question has already been answered, you can leave the queue by clicking on the same button. There is also the possibility to ask questions through the Q&A icon at the bottom of your screen. You may select the icon and type your questions with your name and company. Written questions that are not addressed during the earnings call will be returned by the Investor Relations team. Please wait while we poll for questions. Operator: Our first question comes from Daniel Vaz from Safra. Please, Mr. Vaz, your microphone is open. Daniel Vaz: Hi, everyone. First of all, congrats on the appointments of Carlos Malaj and Gustavo Sechin as CEO and CFO, and also recognize the work so far of Alexandre Magnani and Artur Schunck during this transition. So, in the middle of the quarter, you announced a strategic update, right? So you put together a bunch of KPIs and guidance for 2029. And you have mentioned on your credit portfolio that 2026 could be more of a transition year before a stronger credit origination cycle, right? So especially in working capital. But looking at your numbers in the third quarter, unsecured lending is already showing meaningful sequential acceleration in the origination. So probably the portfolio could close this year at BRL 1 billion. So it feels like there is room to grow well above two times next year, particularly considering your expansion right now. So the question is, given this momentum, how should we think about what is your target for 2026? Is it still a transition year? Or does the run rate suggest a steeper curve in your appetite for working capital loans? Thank you. Carlos Malaj: Hello, Daniel. This is Carlos Malaj. Thank you for your question. Just to give you an overview on how we are thinking about our credit products here, we could say that we have three different work streams on where we are working in a different set of products. We have the secured products that we already have processes and systems in place. We have channels implemented. We have credit policies already developed and tested. And these we have the vision here to keep accelerating, but it is the same thing that we are doing today and we have been doing in the past few years. And we have this second work stream that I am calling here a scale-up work stream, where we are talking about products that we already have the platforms in place, but we are still finding the right credit balance to find different levels of credit production. Those products are working capital that you saw the production increasing in the third quarter of this year, the overdraft, which is a quite important product to us, especially due to the reason, which is a very high-yield product, and credit cards that are still a challenge to us here. So again, we already see the working capital producing something around BRL 70 million in terms of credit production on a monthly basis. And we already have credit clusters in test that can push this production up to BRL 100 million. So this is what we have on a very short time frame. So you can see a little bit where we are in terms of credit production on working capital. And there is a third work stream, which is going to show up in 2026, which is the two main products that are being developed as we speak here, which are the fixed financing and the payroll personal loans that are going to have a perfect fit for us here due to the change that we saw on the FGTS changes or regulatory milestone that we saw a few weeks ago. So that is a little bit how we are. Yes, we are accelerating. But as you know, taking credit risk is a matter of testing different levels, different credit clusters, different ways to collect to test actual collections products here so we can push up observing the right performance in terms of net credit margin. Hopefully, I answered your question. Daniel Vaz: Yeah, that is super clear. If I may follow-up on your scale-up portfolio. You mentioned about the working capital loans. Is it too soon for you to share a bit of the KPIs here on the new origination you could put up of BRL 70 million per month? Is it exciting you for going above this number, or BRL 70 million could be a good estimate for us to work on? Carlos Malaj: No, no. We are going to push this production. We are just at the very beginning of this journey here. We are being very careful to test all kinds of clusters and customer profiles embedded in our database. So probably you are going to see higher numbers as we evolve on the credit strategy. Daniel Vaz: Perfect. Thanks a lot for the answers. Operator: Our next question comes from Ricardo Buchpiguel from UBS. Ricardo Buchpiguel: Hi, everyone, and thank you for the opportunity to ask questions. In the quarter, we saw that acquiring TPV was kind of flat quarter over quarter and fell around 5% year over year. Could you comment on the challenges faced in growing volumes during the quarter? And what initiatives are being taken to enable an eventual acceleration in volume growth and also eventually, if it is alright, that we can already see some signs of reacceleration in Q4 adjusting for the seasonal effect? Thank you. Ricardo Dutra: Ricardo, thank you for the question. Yes, you are right. The TPV was flat sequentially. We do understand TPV is one of the metrics that we should follow here. As we have been saying in the past quarters, TPV per se is not the main important metric for us, but, of course, it is part of the volumes that we need to manage here. I am going to talk to you about the past Q2 and Q3 and then looking forward. But look, past Q3, we have first, it is important to remember we have a very, very hard comp from Q3 2024, where we grew 36% versus the previous year. That was the largest TPV percentage growth in a quarter, I guess, in the past couple of years. So Q3 2024 was a very, very strong quarter, so we have this hard comp. Also, understand the macro and the lower economic activity have impacted our merchants as well, especially those with a lower income profile. And looking forward, when we look at what happened in the last month or the beginning of this year, we had some strategies to go to market that we evaluated and then we adjusted a few months ago. And I would say to you that looking on a year-over-year basis, August was the bottom in terms of growth or decrease in August. September was better than August. October is better than September. So it seems that it reached the bottom in August, with the changes that we did a few months ago when you have these cohorts piling up, we expect to see a better TPV result looking forward. So that is the overall picture here. And remember that we always look at the client as a whole, focusing on increasing the gross profit and EPS. So if you have a TPV that is accretive, we will go for it. So that is pretty much the scenario about TPV. Ricardo Buchpiguel: That is very clear. And just a quick follow-up. If you could also comment about the competitive environment in the current segment, if you notice any changes during Q3 and the start of Q4, it would be very helpful. Thank you. Ricardo Dutra: We do not see changes in the competition in terms of irrationality. We see all players being rational. You know, when you have an interest rate in the country that is 15% per year, everyone is very concerned about profitability, about the cost of funding. So we do not see companies trying to get market share at any price. Everyone is trying to be rational and preserve profitability. So by having this 15%, of course, we have everyone being more focused on the bottom line and less on the market share. So to go back to your question, no big changes in competition in Q3, not even in Q4. Ricardo Buchpiguel: Perfect. Thank you. Operator: Next question comes from Beatriz Abreu from UBS. Microphone is open. Kaio Prato: Hey. Sorry. It is Kaio Prato here from UBS. So I have two questions, please. First, a follow-up on working capital loans. Just wondering if you can share a little bit more about the profile of this client that you are accelerating today, the size, average size of this client? If you can share some numbers on the economics as well, interest rates, and level of upfront provisions that should be required just to understand when this product should start to contribute positively to your gross profit. So this is the first. And the second, if you can talk a little bit more about the improvements that you are doing on your chargeback process. I think we had another solid quarter on that line. Just wondering if you are talking about sustainable levels of chargebacks as a percentage of TPV now or if we can see even further improvement going forward. Thank you. Carlos Malaj: Well, thank you very much for your question. Just to give you a 10,000 feet high number here on the working capital, we are talking about some average tickets between BRL 20,000 and BRL 30,000. The range of our interest rate here is between 4% and 7% depending on the risk level of this customer. And there is not a specific size of customer that we are targeting. What we are trying here is to optimize and to have a deep credit offer to most of our customers here, trying to optimize the net credit margin of this specific product. So again, as long as we are testing a lot of different clusters here with different offers, trying to optimize conversion, optimize net credit margin as I mentioned here. So every month here, we pretty much put a field test to make sure that we can create this environment where we can penetrate most of our customers here that are eligible for a credit offer. Second, talking a little bit about risk management under the chargeback perspective, I could tell you that we have, let us say, a business-as-usual level on chargebacks here. There is no concern in front of us. We are being involved in our, let us say, real-time risk engine to make sure that we can filter the better transactions. And as Artur mentioned here in the first part of the presentation, we have a different level in terms of quality on our onboarding process that also helps filter the bad customers and the bad transactions out of our ecosystem. So looking forward, I could say that this relative level of chargeback that you see in the third quarter, we will see this number across the next few quarters. Kaio Prato: Okay, perfect. Thank you very much. Operator: Our next question comes from Thiago Binsfeld from Goldman Sachs. Mr. Binsfeld, your microphone is open. Thiago Binsfeld: Hi. Good evening, everyone. Thank you for taking our questions. Two questions from our side as well. First one on efficiency. If you can discuss your main initiatives to manage operating expenses into 2026, if there are any big projects in marketing personnel that could allow further gains in margins? And second question, more on the macro side of the business. If you have any views on the impact from the income tax exemption for individuals that earn up to BRL 5,000 in Brazil, your assessment of potential impacts to volumes, and to credit. I think you have been alluding to a more challenging macro, but would like to hear if that could perhaps be a positive catalyst in the short term. Thank you. Carlos Malaj: Well, I am going to jump up here to try to at least answer part of your questions. On the OpEx side here, we are being very diligent as long as we have a macro that is a little tougher than everybody expected, we have been quite, as I mentioned here, diligent in managing OpEx. Of course, that is some of the discipline to prioritize better everything that we are doing here to keep the platform evolving. That goes through marketing expenses also and through some evolution on our, especially on our customer service OpEx here. Where we probably have the most successful AI implementation in the company at this point, which is delivering a better service as a whole with a lower OpEx deployed. So again, we are being very diligent on everything that we are doing here. And probably, OpEx is going to keep offering us some room to reinvest in our customers. So that is the first part of the question here. Ricardo Dutra: Regarding the second part about the taxes for people that have a salary that is lower than BRL 5,000 per month. As we have been saying in the media, that is going to help for the low-income people or for the people that receive this BRL 5,000 or less have more availability of cash to spend. So, of course, that could be beneficial for us. We do not know how big it is going to be, but definitely, it could be slightly positive because there is going to be more liquidity for the low-income people of the country. Thiago Binsfeld: That is clear. Thank you. Operator: Our next question comes from Yuri Fernandes from JPMorgan. Mr. Fernandes, your microphone is open. Yuri Fernandes: Well, thank you all. Good evening. So wish you the best of luck for the current administration and the new management. I have a question regarding expenses here, notably personnel expenses. This was a line that was down this quarter, and it seems to be related to share-based compensation. And I know usually, there is volatility regarding your share prices and all that. But the drop was pretty important here. Right? It seems to be a BRL 40 million per quarter line, and I think it was, like, BRL 34 million this quarter. So if you can provide a little bit of explanation on what drove lower share-based compensation, what is driving this better personnel expenses line here for you. That is my first one. And a second one, just on the NPL, pretty stable, like, 10 basis points increase. I think it is totally fair. But your portfolio is growing a lot on the unsecured mix. Right? So just trying to understand what could we expect for the NPLs on this growth outlook you have. Like, should we continue to see NPLs going marginally up every quarter, not really? Like, any color on what should we expect on asset quality given your mix? I think it would be appreciated. Thank you very much. Artur Schunck: Thank you, Yuri, for the questions. I will answer the first one related to the personnel expenses. Part of the gains that we see in Q3 is related to a leaner structure that we are working on, as Carlos Malaj mentioned, we are so diligent to control expenses here and personnel is so important to us. And part of the decision process that we have, the layoffs that we applied in January, may also have contributed to this performance right now. In terms of long-term incentive plan, it is related to the volatility of the share price, US dollars, and those things impacted the number. Going forward, I am expecting it to increase a little bit, not too much. So the level will be roughly speaking the same as Q3. Carlos Malaj: And jumping to the second part of your question. We are going to keep our NPLs lower than the average of the market here. But, of course, due to the high concentration in terms of mix, that we have unsecured loans today, we are going to see NPLs going up quarter over quarter, slightly respecting the new mix that we are deploying here on our credit strategy. Yuri Fernandes: Super clear. Thank you very much. Operator: Our next question comes from Hasan Shirazi from Citi. Mr. Shirazi, your microphone is open. Hasan Shirazi: Hi, all. Thanks for the opportunity to ask questions. I wanted to dive into the deposits. I see it grew 15% year over year, which is something in line with the last twelve months and a 78. Though I want to understand better the underlying trends, if there are inflows, what you have been seeing. Thank you. Ricardo Dutra: Hasan, can you repeat the metric? We did not get it here. The 15% is the metric? Deposits. Hasan Shirazi: Yeah. We see a 15% increase in deposits year over year, which is in line with the Selic rate. Right? Artur Schunck: The average for the past twelve months, maybe around 12-14%. Hasan Shirazi: So I wanted to understand better the inflows and outflows during this period and expectation from all of this should be growing mostly on. Thank you, Hasan. Ricardo Dutra: Yes. We grew this from BRL 34 billion to BRL 39.4 billion compared year over year. I do not think there is a relationship with Selic. Of course, we try to make the ecosystem stronger and stronger. So if you look at some of the slides, you see the cash-in of PIX that grew 14%, reaching more than BRL 95 billion. So what we try to do here is to make the ecosystem more engaged for the client so that we have this more, I would say, complete relationship with him, not only the acquiring, but also in terms of deposits, in terms of use of cards, and so on. It is a very decent growth when you think that it is 34% to 39%, 15% growth in terms of the deposit. So and with our cost of funding going down, that is important to highlight that even they are growing 15% in terms of deposits with the cost of funding as a percent of CDI going down. Thank you. Hasan Shirazi: Thank you. Operator: Our next question comes from Neha Agarwala from HSBC. Ms. Agarwala, your microphone is open. It was Ms. Neha. Your microphone is open. This is Neha. You are still on mute. Please rejoin the queue if you want to ask a question. Our next question comes from Pedro Leduc from VPA. Mr. Leduc, your microphone is open. Pedro Leduc: Thanks. Good evening, everybody. Question, please, on the gross profit evolution. We talked about volumes here briefly about slightly recovering at the margin. We know year over year when I look at your gross profit margins, they are hurt by the higher rates. But at least, you know, Q4 onwards, they should be more stable with Q3. So if I could maybe get a sense of how that TPV volume mix is recovering, what is driving it? Also for us to have a sense here. And also if you could share your views on how gross profit margins are going to evolve over the next couple of quarters? Thank you. Carlos Malaj: Leduc, thank you for your question here. Our recovery here in terms of TPV and how this is affecting the cost of funds of the company comes with the same mix that we see today. As you saw, throughout the year, our TPV is more sensitive to the cost of funds or to the SELIC rate due to the kind of customer that we have here in the dynamics of the business as long as we pay most of our TPV upfront, and that makes the company more capital intensive. And, of course, when we see the other side of the macro cycle, we also then tend to capture better spreads when we see the basic interest rates going down. So again, the new TPV that we are bringing to push growth and the company is coming pretty much with the same mix. So we do not expect to have a different ratio between TPV and the spreads that we see on our customers. Ricardo Dutra: And just to complement here, Pedro, we, of course, we follow TPV, but most importantly, we follow revenues. So if we look at revenues year over year, growing 14%, it is a very, very decent growth year over year. Because you know that there are low-quality TPV out there that we are not interested in. So the idea, of course, is to grow in a sustainable way. But I would say that one of the metrics that show we are doing a successful work here is the growth of revenues, 14%, and also the growth of EPS is related to the expenses control we have been doing throughout this year. Thank you. Pedro Leduc: Thank you. Ricardo Dutra: Everyone, thank you very much for your time. See you next call. I would like to take this opportunity to say thank you to Alexandre Magnani and Artur Schunck for the excellent and extraordinary job as executive officers in this company. They are going to join us as board directors to keep supporting the company, and we wish luck and to count on all the support for Carlos Malaj and Gustavo Sechin in their new roles. Thank you very much. Operator: This concludes PagSeguro Digital Ltd.'s conference call. We thank you for your participation and wish you a very good evening.
Operator: Good evening. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Sky Harbour 2025 Third Quarter Earnings Call and Webinar. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply submit a question online using the webcast URL posted on our website. Thank you. Francisco Gonzalez, you may begin your conference. Francisco Gonzalez: Thank you, Tiffany, and a warm welcome to the 2025 Third Quarter Investor Conference Call and Webcast for Sky Harbour Group Corporation. We have also invited our bondholder investors and our borrowing subsidiary Sky Harbour Capital to join and participate on this call. Before we begin, I've been asked by counsel to note that on today's call, the company will address certain factors that may impact this and next year's earnings. Some of the information that will be discussed today contains forward-looking statements. These statements are based on management assumptions, which may or may not come true. You should refer to the language on slides one and two of this presentation as well as our SEC filings for a description of the factors that may cause actual results to differ from our forward-looking statements. All forward-looking statements are made as of today, and we assume no obligation to update any such statements. So now let's get started. The team with us this afternoon, known from our prior webcast, includes our CEO and chair of the board, Tal Keinan, our treasurer, Tim Herr, chief accounting officer, Michael Schmitt, our accounting manager, Tori Petro, and Andreas Frank, our assistant treasurer. We have a few slides we'll want to review with you before we open it to questions. These were filed with the SEC an hour ago in Form 8-K along with our 10-Q. They will also be available on our website later this evening. We also filed our third quarter Sky Harbour Capital obligated group financials with MSRB EMMA an hour ago. As the operator stated, you may submit written questions during the webcast using the Q4 platform, and we will address them shortly after our prepared remarks. Let's get started. In the third quarter, on a consolidated basis, assets under construction and completed construction continued to increase, reaching over $300 million on the back of construction activity at the recently completed campuses at Phoenix, Dallas, and Denver. Please note this graph is soon to accelerate its upward trajectory as we break ground in Bradley International, Salt Lake City, Addison Phase 2, and other campuses. Consolidated revenues experienced an increase of 78% year over year and 11% sequentially, reaching $7.3 million for the quarter, reflecting the acquisition of Camarillo Campus last December and higher revenues from existing and new campuses. Operating expenses in Q3 actually dropped slightly as some of the one-time non-recurring startup expenses and new campuses that we experienced in Q2 did not carry into the last quarter. SG&A had a one-time non-cash expense in the quarter related to the recognition of vesting of our former CLO's equity award compensation. We are working hard to keep SG&A stable. As indicated in prior public discussions, we look for these line items not to exceed $20 million on a cash basis when it reaches its peak. This line item has many non-cash elements which Michael, our chief accounting officer, will review shortly. Most importantly, on the lower right-hand quadrant, we are only less than $1 million away from breakeven on a cash flow for operation basis and expect to reach that goal next month on a run rate basis as discussed in prior calls and part of our formal guidance. Next slide, please. This is a summary of the financial results of our wholly-owned subsidiary Sky Harbour Capital, its operating subsidiaries that form the Obligated Group. This basically incorporates the results of our Houston, Miami, and Nashville campuses along with the newly opened campuses in Phoenix, Dallas, and Denver. Revenues in Q3 increased 25% year over year and 8% sequentially. We expect a continued increase in Q4 and the first quarter of next year as these campuses, the new campuses, continue to be leased and Phase 2 at Opa-locka, Miami, is expected to open around early April of next year. Operating expenses decreased moderately as discussed before, while the operating leverage is shown in the strong cash flow generation coming from operating activities. You can see in the lower right-hand quadrant. Let's turn now to our Chief Accounting Officer, Michael Schmitt, for a breakdown of adjusted EBITDA. Michael Schmitt: Thank you, Francisco. Adjusted EBITDA is a measurement tool utilized by us to evaluate our operating and financial performance. You should note that it is supplemental in nature, and it is not calculated in accordance with U.S. GAAP. We have provided a reconciliation from our GAAP net loss results to the three months ended 09/30/2025. Amongst the most significant items that are components of our reconciliation to adjusted EBITDA are the non-cash portion of our ground lease expense, as we discussed in prior quarters. Most of, virtually all of, our new ground leases signed do not actually require us to make cash payments until we receive two certificates of occupancy. Nonetheless, under U.S. GAAP, we are required to recognize straight-line expense. We show in this chart the effect of adding back that non-cash expense to adjusted EBITDA. Another significant component this particular quarter was share-based compensation, which totaled approximately $2 million inclusive of certain non-recurring charges previously addressed by Francisco. With that, I will pass it over to Tal. Tal Keinan: Alright. Thanks, Mike. Just a quick look at site acquisition. I think this is pretty self-explanatory. It's the same chart that we put up every week. We have 19 airports on the chart today. That's airports that are either in operation or development. We gave guidance that we will have 23 by the end of this year, and we plan on hitting that guidance. Excellent. Okay. Our latest airport is Long Beach, California. As we've discussed on previous calls, Los Angeles is a critical market for us, both with a very robust installed base of business aviation and also high growth. Long Beach itself is a real emerging technology hub, particularly in the aerospace and defense sectors. We've identified our first residents already there. A very significant airport for us, and I don't think it exhausts or it comes anywhere near exhausting our opportunity in the Los Angeles market. Next slide, please. This is a bit of an eye chart, but based on questions from the previous earnings calls, we thought we would provide this level of detail here, and I hope it's helpful to everybody. I'm just gonna go through line by line so people understand exactly what we're looking at. Actually, before we say that, all of the green airports are stabilized campuses. The blue ones are in initial lease-up, the campuses that were recently completed construction or about to complete construction. And then the yellow is our initial pre-leasing pilot that we discussed on the last earnings call. So going line by line, revenue run rate is exactly what it looks like. That is the annual total revenue run rate from each campus as of now. Rentable square feet is the amount of square footage of hangar and hangar support space that we have built or are going to build in the yellow case on each of these campuses. People have asked in the past about what is their actual rentable square footage, how do we get to above 100% occupancy in these spaces? We'll get to that in a minute, but it's just important that everyone understands in, you know, BNA, that's Nashville International Airport, we have 149,000 built square feet that can be rented. The next line is private square footage. The private square footage is the square footage of hangar that is leased on an exclusive or private basis. You'll see that there are certain airports where that is the dominant form of lease. So Sugar Land, for example, the first one, 100% of the hangars are fully private. There are no semi-private spaces at Sugar Land. And I don't know. Let's take San Jose, where the vast majority of our space is actually leased on a semi-private basis. I think a good way to look at that semi-private line, the next, the fourth line, is the square footage of hangar at that airport that is not privately leased. Okay? That is available for common use or what we call semi-private. That's the square footage of hangar available for semi-private use on that airport. The fifth line is the actual square footage of aircraft in semi-private spaces. And remember, we don't care so much about the square footage of aircraft in private spaces because you're paying for every square foot in that space, regardless of the square footage of airplane in that section of that space. Semi-private space is leased on the basis of aircraft square footage. So what we're seeing here is the actual aircraft square footage that is sitting in semi-private space. To answer one of the questions from, I think, the previous quarterly earnings call, if you look at, for example, SJC, that's San Jose Norman Mineta, you'll see that we have about 50,000 square feet of airplane sitting in about 41,500 square feet of hangar. Okay? That's an example of getting to more than 100% occupancy. As people who are following us know, we've transitioned from the old Sky Harbour 16, which was the prototype hangar and had 12,000 square feet of rentable hangar space, to the new prototype, which is going up in all of the current campuses, the Sky Harbour 37, which has 37,000 square feet of rentable hangar space. The dividend you get from that is especially pronounced on a semi-private basis. Right? You can get, without getting too crowded, you can get close to 70,000 square feet of airplane into that 37,000 square feet of hangar. And I think if people could look on the website to understand exactly how that works, but we want to give you some empirical data points on what that's looking like. The next line, line number six, is revenue per square foot. And the way that works is very simple. We just take the total revenue, the top line, divide it by the rentable square footage, the second line, that gives you your effective revenue per square foot. Then the last line, which I think is an important nuance, I think it's very important to understand, particularly in light of our current leasing strategy, shows you what the high and lows are on contracted revenue per square foot. Okay? Or contracted revenue per leased square foot. And the reason that's important is, you know, if you look a little bit closer, you'll see that there is a correlation between the recency of a signed lease. The later the lease was signed, the higher the revenue per rentable square foot. And also a correlation between the duration of the lease and the revenue per rentable square foot. Longer duration leases have higher revenues per square foot. Different from what you're gonna find in most real estate, and that has to do with, I think, our tenant community's appreciation of the expected inflation on airports. So we charge a higher rentable square foot on longer-term leases. That feeds into our current leasing strategy before we move to pre-leasing, what you can see on the blue columns, the airports that are in initial lease-up right now, in that, what we're trying to do on those airports is actually get to as quickly as possible to 100% occupancy. And do that in general on the basis of short-term leases. Call it twelve-month leases, with the idea of establishing kind of more permanent occupancy at our target rents. So at the beginning, it's about speed getting to 100%, that puts us in a very different position with regard to leverage in negotiating new leases. And then go back and correct to market. Now that said, in each of those blue airports, we do have one or two residents who are on longer-term leases that are paying full rent. What you can see on the green side is you have the relatively high disparities between the highest and the lowest leases. Again, the highest tend to be the ones that are assigned latest and or the leases that have the longest tenor. Just a couple things to point out before we move on. Is just to preempt any questions. Sugar Land, that campus was gradually taken over by its anchor tenant. Started with seven hangars. The anchor tenant had two of those seven. Every time one of the hangars came due, that anchor tenant took over that lease. Which brings us to the state of affairs today where there is only one resident in the entire campus, so they're paying the same rent across the board. The last thing I'll point out to people is the higher the ratio of semi-private to private space, the bigger the disparity you'll see in the, yeah, between the highest and the lowest revenue per square foot. And, again, that is a nod to our evolving strategy of increasing our emphasis on semi-private space versus private space. In general, you know, under most conditions, that's actually a better business for us. And then the last thing I'll say is the yellow bar is just our initial pre-leasing. That pilot has moved on to a, it's been successful, and we've turned that into a permanent leasing program going forward. And with that, let me turn it over to Tim. Tim Herr: Thanks, Tal. At the Obligated Group, we completed a modification of our construction program by removing the second phase of Centennial Airport and adding in the second phase at Addison Airport. Addison has an earlier expected completion date, at a lower expected construction cost. And with its higher expected revenues, the modification will be positively accretive to our bondholders as we approach the final completion of all of the projects in the Obligated Group. Next slide. We also finalized a $200 million tax-exempt drawdown facility announced with JPMorgan in September. This five-year facility will provide debt funding for our next projects in the development pipeline. We expect to draw on the facility over the next two years as you can see on the chart on the left, followed by an eventual takeout with longer-term tax-exempt bonds once the projects are completed. We recently announced that we have locked in our cost of financing at 4.73%, the four seventy-three, through a floating first fixed swap. Now let me turn it over to Francisco for the discussions on future capital formation. Francisco Gonzalez: Thank you, Tim. We closed the quarter with $48 million in cash and US Treasuries, which are now enhanced with a $200 million committed JPMorgan facility that Tim discussed. We have been served well historically to continue to be a fortress of liquidity and be funded eighteen to twenty-four months ahead of our needs. Given the accelerating growth ahead of us, we continue to explore various private and public alternatives in terms of the right type and cost of growth capital. Until we decide to start paying a dividend, we will reinvest our positive operating cash flow next year into additional hangar campuses. We have also not used our ATM program to issue any equity given that we consider the share price too low. Instead, we are exploring the possibility of issuing yet additional private activity bonds outside the Obligated Group, outside the JPMorgan facility. Specifically, the five-year probability curve looks attractive for an interim issuance while we construct our next portfolio of six to seven campuses. That will provide us with adequate time to come to a long-term fund issuance once our Obligated Group program achieves investment grade. We also announced today that we entered into a binding LOI with an ultra-high-net-worth family office. It is expected to acquire a 75% participation in a new Sky Harbour 34 hangar at Phase 2 in Opa-locka for $30,750,000 in cash. The transaction is expected to close on or about April 1, subject to certain conditions. If completed, we expect to use the proceeds first to fund any remaining capital needs to construct Phase 2 at Addison and then repay certain past payments previously advanced by our holding company to the Obligated Group. The balance will pass to the Obligated Group's waterfall, be subject to the restrictive payments test of the surplus account. This type of asset monetization is a prudent way to generate capital to fund our future growth, if and only if valuations support it and if the alternatives are less attractive to us from a dilution and cost of capital perspective. We continue to explore a few more potential hangar sales from people who simply do not like to rent and prefer to own their own hangar. With this, let me turn it back to Tal for Q3 highlights and for the coming initiatives in the four pillars of our business. Tal Keinan: Alright. Thanks, Francisco. We're breaking it down the same way we always do. Site acquisition, 19 airport ground leases. We're on track to deliver 23 airports by the end of the year. We have begun pursuing same-field expansion opportunities, and I'm going to expand on that on the next slide. And as we've mentioned before, much of the focus has shifted to really targeting tier-one airports rather than just a lot of airports. Development: So our manufacturing subsidiary Stratus is now pumping out steel in full gear, meeting all of our development needs. The construction program under our construction subsidiary, Ascend, is also in full gear. We're on an accelerated track to meet our 2026 construction schedule, which as people have probably noticed, is a real step function in construction volume. Specifically, Miami Opa-locka Phase 2 is on schedule. We have broken ground in Connecticut, Bradley, Connecticut. We've nearly completed site demolition at Dallas Addison Phase 2. It's gonna be probably the tightest schedule spread between Phase 1 and Phase 2 on an airport, and Dallas is a very good market for us. We've begun site work in Salt Lake City. And we have ten airports in development now. Again, hopefully, that expands by four by the end of the year. We've also instituted a comprehensive assurance program. It's kind of a nose-to-tail program starting at the design phase through manufacturing, through construction. You know, as people on the call have heard, this is an industry that's fraught with construction snafus. And one of the benefits of specialization and pumping out exactly the same prototype hangar across the country is it introduces quality assurance tools that are not really available elsewhere in the industry. Leasing: Stabilized campuses continue to grow revenues at a really robust pace, post-stabilization, right? And again, this, I think, we'd like to take credit to a certain extent in the quality of the offering and the fact that Sky Harbour has really kind of become an established brand in the business aviation community. If people have a choice, they will come to Sky Harbour in general. Part of it is just inflation. Right, we're aware of that. Again, that's the central part of our thesis. I call the inflation kind of our macro tailwinds, and the quality of the offering is the thrust on the aircraft. That's how we look at that. And we see no reason for that growth to abate. The airports that are in round one lease-up, that's Deer Valley in Phoenix, Addison, Dallas, and Centennial in November. Like I said before, the objective is to first get to 100% occupancy with compromises on revenue per square foot as long as our lease terms are short. And then in term two, really establish our market rents on these fields, and we're again, already seeing that. Even on those four airports, we're already seeing that the longer-term leases are above our target rents. So we expect that to work nicely. And then, like we said, going forward, pre-leasing will be the strategy. So starting with Bradley, Connecticut, all airports will be subject to that pre-leasing strategy. On the operations side, we've got nine fields in operation today. We've got two phase twos in preparation. Right? That's Miami and Dallas. One of the things I think, you know, the more astute observers will notice is there's actually a very modest change in OpEx when you open a second phase on a campus. So while your revenues might double on that campus, your OpEx change is actually quite small. And we will, you know, hopefully be realizing those efficiencies on a lot of airports going forward. So please stay tuned for that. Industry recognition, we can, you know, it's one of these things that is a little bit difficult to judge objectively. But I think it's a pretty emphatic across-the-board recognition, not just in our own resident community, but in people who are coming in to reserve spots in places like Dulles International or Bradley or Miami Phase 2. We're very satisfied with the ops training program, which we continue to improve. Which has a lot of features that you don't see elsewhere in the industry. Actually, I think we have two pictures on this slide, so I'll call everybody's attention to that. Would you stay on the right side of the slide? Is a training rig that we actually manufacture ourselves. Which allows our line crew to do both initial and recurrent training in operating and towing operating tow equipment and moving aircraft, not on an actual aircraft. Okay? So which means there's no risk of damage to a tenant's property. We do virtually all of our training now on this rig. One of the side benefits of that is you could train much more often. Again, if you're towing a $50 million airplane, you can be very, very judicious about the amount of time you spend on it. We don't do that anymore. Maybe others in the industry do, but that's one example of what we think is kind of an innovative new approach to providing just top, top-level service. We've also instituted what we call the Sky Standard Property Management Program. It's not just about the service. It's also about the upkeep of these facilities, which have to be six stars, and I think our residents have come to expect that. And we've invested quite heavily in managing that centrally and getting really the best property management program in aviation across the country. Next slide. Looking ahead, on-site acquisition, again, we've said it. We believe we're on course to meet our guidance for 2025. That's 23 airports by the end of the year. 2026, the focus will be on, number one, max revenue capture, that is the tier one, the best airports in the country is our primary focus. And then secondarily is same-field expansion. And what we're finding is in the airports that we're already operating, we know the players both on the airport sponsor side and in the resident community. Have real intimate knowledge of how that market works and how it's evolving, there are just great benefits in expanding. I would say if you could double the ground lease at an existing airport, it's probably worth a lot more than establishing a new ground lease on a brand new airport. All of the things held equal. On top of that, as I alluded to with the phasing discussion, there are real operational efficiencies. Right? If you double the size of your campus, you do not need to double the size of your team or double your equipment list on that campus. Moving on to development. We feel ready for all the reasons I enumerated on the last slide. We are ready for the surge in 2026. It's almost an order of magnitude change in the scope and volume of our manufacturing and construction. And there's gonna be another one in 2027. Another phase shift or step up in development volume in 2027, and we're getting ready for that. Leasing, we have grown the leasing team threefold as the volume of leasable space has gone up. That team, all of the growth in that team has been veterans. You know, as some of the people who track us closely know, we've had really great success in recruiting military veterans to our team, a lot of benefits to a team that's so heavily weighted toward veterans. That's been a big advantage. Order of operations, let's start with the short term. We're bringing those blue campuses from one of the previous slides to 100% occupancy. That is mission number one. Mission number two is bringing those campuses to market rent. Meaning cycle those short-term leases to longer-term leases at higher rents. When we call those campuses fully stabilized. And then circle back to our legacy campuses to focus on revenue enhancement. You know, again, we've had perhaps too small a leasing team. You know, it took us a little longer than I would have liked to get to the size of the leasing team that we have today. Now that we have it, though, it's going back, you know, really culling those waiting lists in Miami and in Nashville and, you know, the various other locations. And looking for the best residents to bring in. It's not just a matter of maximizing revenue. It's a matter of bringing the best residents in the industry into Sky Harbour. And then longer term, as we've discussed, we're migrating starting with Bradley, Connecticut, to a pre-leasing model where we go out and lease these campuses up well in advance. Remember, we have ground leases, we have, sorry, tenant leases already in Bradley, which is twelve months out and Dulles, which is eighteen months out for delivery. If, you know, just take a moment to also just note with gratitude that people are affording us the credibility to put down cash deposits and enter binding leases on products that we're only gonna be delivering a year and a half from now. That really is, at least for me, a milestone event in the evolution of this company. Lastly, operations. We have a very active resident feedback loop. A lot of our residents, principals speak to me directly, which we value a ton, both for better and for worse when we do something good and when we do something bad. Which allows us to really institute a rapid feedback loop which I think people increasingly appreciate. We certainly do because it's making us better all the time. On the defense side, I made the same points last time, and I think they're critical and they stand every time. We aim to be absolutely bulletproof on safety, security, and efficiency. That's not where we get creative. That's where we're perfect. And then offense, where we get creative, is continuing innovating, introducing new services or new variations on services, customized services that really delight the residents, and they're often created in partnership with the residents, to continue really growing that value gap between the Sky Harbour offering and really anything else that you can access in business aviation. And with that, I think we are done. Francisco Gonzalez: Thank you, Tal. This concludes our prepared remarks. We now look forward to your questions. Operator, please go ahead with the queue. Operator: At this time, I would like to remind everyone, in order to ask a question, please submit it online using the webcast URL. We'll pause for a moment to compile the Q&A roster. Your first question comes from Tom Catherwood with BTIG. The question is, with the pre-leasing program now becoming the standard approach for all new developments, how will Sky Harbour manage the potential risk of locking in lease economics before the full scope of construction costs is determined? Tal Keinan: Alright. Thanks, Tom. Good question. I'd say two things. Number one, as we systematize and diversify, we think the risk of significant overruns in any of these projects continues to come down. You know, we certainly in early days when we were a little bit more experimental and bringing a different hangar design to each new campus, I think the risk was significantly higher. We've, I think, lowered that considerably. Remember that we're locking in guaranteed maximum price contracts on these projects, which further mitigates the risk. Secondly, the objective is not to get to full occupancy through pre-leasing. You know? So we've yet to determine what the optimum is. You know, it's gonna be north of 50%. But does that mean 60, 70? It's not 100%. But we do want to leave a little bit in reserve for later. Fundamentally, the real risk here, assuming construction is going to cost what it costs, the real risk here is underestimating a market's potential. You know, if we think this is a, you know, a $50 a foot market and it ends up being a $60 a foot market, that is the basic risk we're taking. So I think between those two factors, that risk is significantly mitigated. It's certainly something that's on our mind, I appreciate the question. Operator: Your next question comes from Timothy D'Agostino with B. Riley Securities. The question is, are any properties in operation over 100% occupancy? Can you talk to which ones those would be? Tal Keinan: Yeah. Thanks, Tim. You might have posted this question before we hit the slides. So just in case, you skip back to the leasing slide, you'll see examples, like San Jose, are, you know, significantly above 100% occupancy. What you'll find is the more heavily weighted we are to semi-private hangars versus private hangars, the higher the occupancy is going to be. And remember, all of the new campuses are Sky Harbour 37 Hangars, which just geometrically fit more aircraft. I mean, the ratio of aircraft square footage to hangar square footage can be a lot higher in a Sky Harbour 37 than it can be in a 16. So I think you'll see, well, hopefully, an increase in occupancy as we go forward with these new airports. Operator: Your next question is from Ryan Myers with Lake Street Capital Markets. And is as follows. Congrats on another solid quarter showing progress. First question for me, is there anything from this quarter, qualitative or quantitative, that highlights early signs of scale in the business? Tal Keinan: Yeah. So what I can say on that is, you know, there doesn't have to be too much guesswork, Ryan, on that. Is that, you know, there's a funnel in this business, and it really goes along the lines that, you know, I've been enumerating in all of these calls, which is look inside acquisition, look at development phase, and then look at operations as revenues start flowing. Which will give you, you know, a very solid sense of what that is. If you kind of look at 2025, for most of 2025, we were under construction in three campuses, right, Denver, Dallas, and Phoenix. In 2026, that goes to 10. Okay? So the very significant scale. Now the revenues from that will start accruing a real step function, right? This is not incremental growth. Starting in late 2026, and entering 2027. If you look at the pipeline, watch the pipeline closely. If we hit the 23 airports by the end of this year, and we'll obviously publish new guidance for asset acquisition in 2026. You see how the top of the funnel widens, and I think you can trace directly from that to revenues. So I think that's probably the best way to look at that question. Operator: Your next question is from Gaurav Mehta with Alliance Global Partners. They ask, what are the details on the potential five-year $75 to $100 million tax-exempt bond? What's the potential timing, and what is the expected rate? Francisco Gonzalez: Thank you, Gaurav. This is Francisco. Thanks also for your coverage of our company. Yes. So we're looking at a financing that could come to market certainly as next month. And, as late as January or February. And, you know, it will be a, think about yourself, holding company issuance, meaning that it would be structurally subordinate to the existing bondholders in the Obligated Group and the JPMorgan facility. So it will basically come in lieu of issuing equity. In lieu of, so in terms of expected rates, you know, it's going to be subject to market conditions. But, these are transactions that we hope that will be in the 6% area. And if rates don't come at, you know, at the level that we're looking for, then we'll just not do the deal. One of the things, as I mentioned earlier, to have the flexibility that our liquidity provides is that, you know, we tap the markets that make sense. And if we don't like the pricing, we just, you know, don't do the deal. And look at all the alternatives or wait and things like that. So that's kind of like the short answer to your question. Thank you for the question. Next. Operator: Next is from Peyton Skill. The JV deal implies that the hangar is valued at $41 million. At that valuation, are you looking to do more of these deals? How are you evaluating this strategy versus the core operation of leasing hangars over the life of the ground lease? Tal Keinan: Alright. Peyton, thanks for the question. Let me answer it, and let me ask Francisco to answer it because I think you're coming in from two directions. I think what you're implying here without getting into valuations specifically is that the net present value of a fifty-year stream of lease revenue is probably significantly higher than what you calculated here, and we agree with that. I think that's true. However, I don't know that that should be the only bogey for doing these deals. I think there's a capital formation angle that you need to take into account as well. So Francisco, can you talk to that for a minute? Francisco Gonzalez: Yeah. Sure. Thank you, Tal. Thank you, Peyton, for the question. Indeed, you know, we look, as I mentioned earlier, at all the alternatives in terms of equity, debt, different structures, and so on. We're looking always at what makes sense for the company from a risk-reward perspective, and a cost of capital perspective. So at this juncture, when the equity markets, you know, seem not to fully capture, you know, basically what we believe is the value of this company. Looking at the monetization of very deliberate one or two hangars here and there makes a lot of sense. In lieu of having to issue equity at the current prices. So of course, our core business, as Tal mentioned, is the leasing of hangars over time. If present value of our expected leasing rates and cash flows we believe, are higher even than the implied valuation that you mentioned of $41 million. But still, the analysis doesn't end there, the analysis has to be compared to our alternatives, and right now, we're looking to take advantage of this opportunity. I will say also the following. There are certain potential tenants out there that just intrinsically don't like to rent. So by looking at opportunities where they can actually have opportunities to acquire a hangar rather than rent it, you know, it basically also expands our universe a little bit on that front. Anyway, but very good question, and that's kind of like the balanced approach. And why we're taking advantage of the superclass. Tal Keinan: By the way, Peyton, I'll add to that. I don't know that it's exactly a strategy. I mean, you asked how are you evaluating this strategy versus the core operation? I don't know if it's exactly a strategy. You know, we might do one. We might do two, maybe three of these. I don't see this becoming part of the remember, we don't need that much more equity to fund our development. This is primarily a cost of capital question. So, right, I mean, once you're covered in terms of your equity, it really becomes a matter of maximizing net present value. Next. Operator: Your next question is a follow-up from Tom Catherwood. By our math, the letter of intent for a 75% JV ownership stake in a 34 hangar at OPF LL implies a gross valuation of more than $1,000 per square foot. With an expected cost of roughly $353 per square foot, this deal represents a development margin of more than 180%. Is this indicative of value across your portfolio? Or is the deal unique given the specific needs of your JV partner? Tal Keinan: Yes. Tom, thanks for that. But I really enjoyed your research coverage. I think you've got us dialed in, I think, quite well. Look. I similar question to the previous one. What I'd say is I wouldn't say it's indicative of the value across the portfolio necessarily. But it's also not unique to the specific needs of that JV partner. Anybody who has an appreciation who's living in that market I think comes to the same conclusion that we come to. Which is the airport system is Manhattan. It's Manhattan. You cannot build more airports in this country. There is no room for it. So we are stuck with a static supply of developable land for what a very, very growing demand, a very, very sharply growing demand for aviation hangar space. So yeah, what I'd recommend all the analysts do is look at your model's sensitivity to inflation assumptions. And, you know, again, I'm not saying we're gonna necessarily hit the same inflation rate as Manhattan residential real estate over the past decades, but I wouldn't be surprised if we do. Anybody who shares that view, I think, understands that there is tremendous value here. Again, we think it's we tend to think it's worth more than what we're selling it for today. I think we're creating win-wins with some of these people because, again, for a it's primarily a cost of capital question for us. So I think it's a good compromise for us to be making. Francisco Gonzalez: Yeah. Just want to add on your math, just be aware that given the square footage of the Sky Harbour 34, the implied valuation is roughly about $1,200 per constructed, you know, rentable square foot of that hangar. And we hope to come at a cost lower than $353. So, basically, you're looking at even north of two times maybe even three times our cost in terms of the implied valuation. Next question. Tal Keinan: Right. The cost of the hangar, not the cost of getting to a place where you could actually put these hangars up. Operator: Your next question is from Joe Jackson. Regarding the Miami JV, how was the $30,750,000 valuation for a 75% stake determined? Is this a repeatable financing model you plan to use at other campuses? Tal Keinan: Yeah. So, again, it's a similar question. If we definitely think it's repeatable. We don't know that we're gonna wanna repeat it too much, but it's certainly repeatable. There's definitely demand for this across the country. Next question. Operator: Your next question is from Philip Bristow. Congratulations on the quarter. What are your thoughts about more hangars similar to the 75% in Miami in an SPV? Also, are these more likely to happen if the equity price for Sky Harbour is below that is attractive to raise equity capital, or is that not a major factor? Thanks. Tal Keinan: Okay. So definitely a lot of we get a lot of focus on this particular transaction. Philip, you're bringing a new angle to it, and I think you if I understand your question right, you get this. Right? This is not something this is not the new business model for Sky Harbour. It's about cost of capital. And it's about getting to a place where the company is not reliant on primary equity issuance to fund its growth even if that growth is as fast as we hope it's gonna be. We want to be independent of the primary issuance market. For as a benefit, obviously, to all current shareholders of the company. There is some breakeven. We're probably gonna be debating that late at night, over the coming year or so. Is what is the share price at which it does make sense to raise private equity in the company considering the options that we have. Remember, there's, I don't know how many, 70 some hangars in the network today. It's not taking a significant bite out of your total addressable market. If you do, you know, two or three deals like this. So that is something I think is probably not unlikely to happen over the next, you know, over the coming months. But you're absolutely right that the equity price is a factor that we have to consider. Operator: Your next question is from Ryan Myers. You think you could see similar JV partnerships across other campuses? Like the one you announced at Miami Phase 2? Tal Keinan: I think again, I think all these questions were probably asked before. That's I think we've addressed that. Why don't we go to the next question? Operator: Next is Gaurav Mehta. Is there an opportunity to do pre-leasing at more airports? Tal Keinan: Yep. Gaurav, thanks for the question. That is the strategy going forward. It's starting with Bradley, Connecticut, we want to do pre-leasing at all future airports. Operator: Next is from Future Hendrix. It has been projected that some of the NY area locations can reach rents of $100 per square foot. Do you think this is possible? Where is BDL shaking out in your pre-leasing? Tal Keinan: Yeah. The answer is it's definitely possible. You know, Bradley is not at $100 a square foot today. But let's see how that goes. Again, remember, these are pre-leases that are way out. So we think the willingness to pay when we're ready to open and there's, you know, very short supply will hopefully be significantly higher. Remember also that the closer you get to New York City, the higher the rents on those airports. And of the four New York airports, Bradley is actually the farthest from New York City. So that's actually a significant repositioning flight, you know, from Bradley to New York and back. But yeah, the big answer is yes. We do think that's possible. Operator: Your next question is from Alan Jackson. Two questions. Can you please provide a status update on when Sky Harbour expects to receive investment-grade ratings? I believe the original target was the end of this year. Second question, in general, what percentage of the portfolio leases are expected to expire in 2026? Should we expect the same step up in rental revenue on this second turn of the lease as discussed in prior calls? Francisco Gonzalez: Alan, very good question. I'll answer the first one. Tal will take the second one. In terms of the first one, you know, we as you heard us say before, we're very conscious that we want to take the program to investment-grade ratings, and we want to arrive at the ratings with our best foot forward to, you know, not just be a triple B minus, you know, hanging by the balance, but be a very strong triple B minus. If you let me, I'm gonna make the case to rating agencies that we should go right to triple B, but, you know, let me temper also my everyone's expectation. The idea here is that now that we're completing the leasing of these three new campuses, and then we open Opa-locka Phase 2, and then we finish Addison next summer, is really where we want to approach the rating agencies and save the triple B minus and hopefully triple B ratings. Tal? Tal Keinan: Yeah. So Alan, I don't know what the actual percentage of portfolio leases that are expected to expire in 2026. What I'll say is it's more significant because, you know, if you look at the mature campuses, you know, Houston, Miami, Nashville, you'll see that the average tenure on those leases is very long. Yeah. I don't know exactly what it is, but I'm guessing more than five years. Because those are campuses that are in a relatively permanent state. Right? That we're kind of much closer to finish cycling out of the shorter-term leases where we've compromised both on the identity of the resident and on the revenue per square foot. The new campuses are in that first phase. Right? So Dallas, Denver, Phoenix, are all in that phase where our objective is to get to 100% occupancy first with compromises, at least on the shorter-term leases, and then go back and recycle. So we do think you're gonna get those step-ups. Perhaps even higher step-ups here because that was not the deliberate strategy in Miami, Houston, and Nashville. Operator: Your next question is from Philip Bristow. What are your thoughts on new locations for 2026? Tal Keinan: Well, Phil, thanks. That's probably one of the areas where we think we should be playing our cards as close as possible to our vest. Probably the most proprietary thing that we do is site acquisition. The company. Again, we're structured in a way that we really couldn't find any other company, couldn't find people to hire who have this skill set to do the, you know, the type of site acquisition we do across the country. And the targeting methodology is key to that. It's not always so obvious which airports we should be going after and which airports we actually are going after. So apologies, I'm not going to get any more specific on that. Other than to say the primary focus is on tier-one airports. Operator: Next question is from Tess Tekol. Your projected DSCR is three basis points above your covenant level in 2026. How do you weigh the probability of a cure in the case of a delay or slow leasing? Francisco Gonzalez: Yes. Thank you for the question. You know, it's important for those of you guys following the Obligated Group and the, you know, we, of course, have been slower or a little bit delayed in terms of delivery of these campuses than the time that we projected this portfolio four years ago now when we did the bond deal. But and construction cost, as you all know, has been higher, as you know, we all basically met that with additional equity into the portfolio. The most important thing, as Tal has mentioned before and we mentioned in prior calls, is that rents ended up being higher than what we forecasted and higher on a present value basis than the cost increases. Thus, debt service coverage when you look out into the future is actually higher than what we forecasted at the time of the bond issuance four years ago. And as we mentioned earlier in the press release, and as our team discussed, we just filed the quote-unquote, pivot in the Obligated Group bringing the second phase of Addison into the Obligated Group and pushing out the Centennial Phase 2. And as part of that, you're required to file an updated market and feasibility report, basically. On the entire portfolio of properties. I encourage everybody to, you know, look at the EMMA filing that we did today. And be able to look at this comprehensive report that has a lot of information regarding all our campuses. Obviously, it's their assumptions, their work, and so on, but it gives you a sense of what coverage is gonna be in the future. And so we're very comfortable that the debt service coverage covenant test will be met in terms of compliance. Next question. Operator: Your next question is from Pat McCann with Noble Capital Markets. Can you elaborate on the statement that 2026 will be focused on MAX revenue capture? Tal Keinan: Yeah. Thanks, Pat. If you think about it, you know, we have a defined threshold that we've published that we want to see double-digit yield on cost on the basis of current revenues. An airport and our projected construction costs at that airport. If you only use that criterion, you know, there's 100 airports in the country where you can do that. I'm not gonna name any airport specifically, but there are a lot of attractive airports in the country. Now that we have our methodology in the place that we want it, and we have existing processes at the top airports in the country, we want to shift our focus, at least for the time being, to the airports where you can get much more than just double-digit yield on cost on those airports. And as I've said here before, the denominator of yield on cost, which is primarily construction costs, right, because OpEx is pretty low in our business. That construction cost varies within a fairly tight range across the country. Right? It's not double in one place. It is in another. Whereas the numerator, the revenue is very significant. Like, we're in the real estate business. Right? It's primarily about location. So, you know, as we're in a place where, you know, I don't think we've still seen real competition come into our space, but we're anticipating it. I mean, you know, we're on these calls every quarter, people are seeing the numbers, what this business looks like. We're sure there are gonna be other players in our space. We would like to be, you know, in the best 30, 40 airports in the country before, you know, before we have robust competition. And then we'll compete for the remainder. Right? We'll still be doing, you know, the airports will still be out there. And so I think that's the appropriate shift to the way, by the time we get to those airports, the hope is that our construction cost through prototyping, manufacturing, value engineering, everything that we're doing to get construction costs down, will be significantly lower, which now increases the universe of airports you can achieve those double-digit yields on cost. So, you know, hopefully, we get there. Cost of capital, of course, will also be a factor in that. But for the time being, call it 2026, we think the focus should be on getting the best airports in the country first, then service back. Operator: Your next question comes from Dave Storms. Do you see a greater percentage increase between first and second leases of square feet that is private and compared to square feet that is semi-private? Tal Keinan: Well, in general, we're migrating to a more semi-private model, again, because of the occupancy rates. We do see that there are flight departments in the country who recognize, hey. Look. You can get to a 130% occupancy on this airport like we are in San Jose today. Privacy is important enough to me that I'm gonna pay you a 30% premium per square foot than what you're getting there, which is great for us. We're happy to have that as well. So increasingly, we are migrating to a more semi-private weighted model. Francisco Gonzalez: Also, if I may, it has to do also with our prototype being so much bigger. That's right. And it allows, obviously, the ability to send it private. And as we have discussed in the past, semi-private has that punch in terms of being able to get occupancy theoretically in that 34 all the way to a 140% of economic occupancy. Next question. Operator: Your next question is from Connor Kaim. Do you expect to begin pre-leasing OPF two in the coming quarters? Tal Keinan: Yes. So we've already begun leasing Opa-locka two. I don't know that we exactly call it pre-leasing because we're already there, and a number of the new residents coming into Opa-locka Phase 2 are actually currently Phase 1 residents. And we're very happy because there's a big waiting list on Phase 1, so it's relatively straightforward to backfill those hangars also at higher rent. So that's already in progress. What we've called pre-leasing is really what we're doing on these fresh campuses like Bradley and Dulles. Operator: There are no further questions at this time. Mister Gonzalez, I'd now like to turn the call back over to you. Francisco Gonzalez: Thank you, operator. Thank you for all of you for joining us this afternoon and for your interest in Sky Harbour. Additional information may be found on our website at www.skyharbour.group and you can always reach out directly with any additional questions through the email investors@skyharbour.group. Thank you again for your participation. With this, we have concluded our webcast. Thank you, operator. Operator: This concludes today's conference call. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to the Atea Pharmaceuticals third quarter 2025 financial results and business update conference call. At this time, all participants are in listen-only mode. Following the formal remarks, we will open the call up for your questions. I would now like to turn the call over to Jonae R. Barnes, Senior Vice President of Investor Relations and Corporate Communication at Atea Pharmaceuticals. Ms. Barnes, please proceed. Jonae R. Barnes: Thank you, Operator. Good afternoon, everyone, and welcome to Atea Pharmaceuticals' third quarter 2025 financial results and business update conference call. Earlier today, we issued a press release which outlines the topics we plan to discuss. You can access the press release as well as the slides that we will be reviewing today by going to the Investors section of our website at ir.ateapharma.com. With me from Atea are our Chief Executive Officer and Founder, Dr. Jean-Pierre Sommadossi; Chief Development Officer, Dr. Janet Hammond; Chief Medical Officer, Dr. Maria Arantxa Horga; Chief Commercial Officer, John F. Vavricka; and Chief Financial Officer and Executive Vice President of Legal, Andrea J. Corcoran, all of whom will be available for the Q&A portion of today's call. Before we begin the call, and as outlined on Slide two, I would like to remind you that today's discussion will contain forward-looking statements that involve risks and uncertainties. These risks and uncertainties are outlined in today's press release and in the company's recent filings with the Securities and Exchange Commission. We encourage you to read them. Our actual results may differ materially from what is discussed on today's call. With that, I will now turn the call over to Jean-Pierre. Jean-Pierre Sommadossi: Thank you, Jonae. Good afternoon, everyone, and thank you for joining us. I will begin on Slide three. I am pleased to share with you the significant progress and achievements we have made this quarter, which is a testament to strong execution across our team. Our global Phase III program for the treatment of HCV is on track. We expect to complete patient enrollment for our North American trial, CBEYOND, next month. This timeline leads us to the first Phase III top-line results in mid-2026. For Sea Forward, our trial outside of North America, we anticipate enrollment completion mid-2026 with top-line results anticipated by late 2026. Dr. Horga will provide an update on our Phase III program. A few days ago, new modeling data was presented at the Liver Meeting 2025 in Washington, DC, along with two additional data sets further demonstrating the antiviral potency with short treatment duration of our regimen for the treatment of hepatitis C. Janet will review the highlights of this data next. I am pleased also to report that we announced today new exciting research findings, including evidence of a unique dual mechanism of action for bemifovir against HCV, further demonstrating its differentiation and potency, and I will review this data in a moment. In addition, I am also very pleased to share with you that we are expanding our antiviral hepatitis pipeline for a major unmet medical need of immunocompromised patients living with hepatitis E infection. We have identified two new potent candidates derived from our nucleotide platform. IND enabling studies are ongoing to select a clinical candidate with Phase I initiation anticipated in mid-2026. We will discuss this program in more detail with today's presentation. At the end of the third quarter, we maintained a strong balance sheet with approximately $329.3 million in cash, cash equivalents, and marketable securities, providing runway through 2027. The strong cash position enables us to fully fund our Phase III program, launch the new regimen, and advance our new HCV development program. With that, I will now turn the call over to Janet to review the highlights of the presentation at the Liver Meeting. Janet? Dr. Janet Hammond: Thanks, Jean-Pierre. Let's move to Slide five. I am pleased to share with you that a few days ago, we presented multiple datasets at the Liver Meeting. These data reinforce the strong clinical and pharmacologic profile of our six-dose combination regimen of bemifovir and riluzole for the treatment of HCV. In an oral presentation, multi-scale modeling results predicted that our combination regimen inhibits both intracellular replication of HCV as well as viral assembly and secretion of new HCV virions in the bloodstream. The model predicted a cure time of approximately seven to eight weeks. Because the regimen suppresses the virus at multiple critical stages, these data reinforce the potential of the combination regimen as a patient short-duration therapy for chronic HCV. We also presented two posters. The first poster was identified as a poster of distinction. It highlighted a resistance analysis from the Phase II study of our regimen demonstrating that SVR12 rates were not impacted by NS5A resistant variants at baseline. Viral kinetics and pharmacokinetic analyses indicated that most of the viral failures were due to treatment nonadherence and not to viral resistance. The second poster reviewed the results from a Phase I study in healthy participants which demonstrated the high relative bioavailability of the bemifovir and riluzole commercial formulation for the fixed-dose combination. These data also support dosing of the fixed-dose combination with or without food and with famotidine, an H2 blocker, which can substantially diminish the effectiveness of our antiviral. The fixed-dose commercial formulation is being used in our ongoing Phase III program. Moving to Slide six, we will host a virtual panel event featuring key opinion leaders or KOLs in hepatology, gastroenterology, infectious diseases, and hepatitis C tomorrow, Thursday, November 13, at 10:00 Eastern Time. The discussion will cover a wide range of HCV-related topics, including the needs of the current HCV patient population, the importance of early diagnosis and treatment, public policy initiatives including the test and treat model of care, and whether HCV eradication in North America is an achievable goal, and what benefits a new optimized HCV therapy could provide for prescribers and patients. The link to register for this event can be found in our latest quarterly press release distributed earlier today and on the Investors section of our website under Events and Presentations. The virtual panel discussion will feature several HCV key opinion leaders, including Jordan Feld from the University of Toronto, Toronto General Hospital in Canada, Eric Lawitz from the Texas Liver Institute, University of Texas Health San Antonio, Anthony Martinez from the University of Buffalo, Erie County Medical Center, and Nancy Reau from Rush University Medical Center in Chicago. A live question and answer session will follow the formal discussion. We hope you can join us. I will now hand the call over to Arantxa to review our Phase III program for hepatitis C. Arantxa? Dr. Maria Arantxa Horga: Good afternoon, everyone. On Slide eight, let's now turn to our global Phase III program, which is the first head-to-head Phase III program for chronic hepatitis C, comparing our regimen against the current global standard of care, sofosbuvir and velpatasvir, marketed as Epclusa. Our regimen includes bemifovir, the most potent nucleotide inhibitor, and riluzole, a highly potent NS5A inhibitor. Data support our regimen as a potential best-in-class treatment option for patients infected with HCV, with a differentiated profile featuring a short duration, low risk of drug-drug interactions, and convenience with no food effect. I would like to highlight that we have new study results demonstrating no risk of drug-drug interactions with proton pump inhibitors, which are estimated to be taken by at least 35% of HCV patients. These results will be presented at an upcoming scientific meeting. We view this as a key differentiator since proton pump inhibitors can substantially decrease the effectiveness of currently approved DAA therapies for HCV. Our Phase III program is designed to confirm the efficacy, safety, and tolerability demonstrated in our robust Phase II study where we achieved a 98% sustained virologic response at twelve weeks post-treatment, or SVR12. These Phase II results gave us confidence to move to our current Phase III late-stage program. Historically, in HCV development, Phase II data have proven to be highly predictive of Phase III outcomes given the well-understood biology of the virus and the reliability of SVR12 as an established clinical endpoint for cure. Moving to Slide nine, the global Phase III program is composed of two pivotal trials, CBEYOND, which is enrolling across approximately 120 sites in the US and Canada, and C FORWARD, which includes another 120 sites across 16 countries outside of North America. Combined, these studies are expected to enroll approximately 1,760 patients. Both trials are open-label and randomized one-to-one against the active comparator, and they are stratified by cirrhosis status and genotype, including HIV co-infected patients. In non-cirrhotic patients, treatment duration is eight weeks compared to twelve weeks with the standard of care. For patients with compensated cirrhosis, patients receive twelve weeks of either regimen. The primary endpoint for both studies is SVR12, which is recognized as the definitive measure of HCV cure. Slide 10. I am pleased to confirm that enrollment in the North America CBEYOND trial is on track for completion next month, with top-line results anticipated mid-2026. For C FORWARD, which has a broader global geographic footprint, enrollment completion is expected mid-2026, followed by top-line results by year-end of 2026. I will now hand the call over to Jean-Pierre to review our new mechanism of action data. Jean-Pierre? Jean-Pierre Sommadossi: Thank you, Arantxa. Let's now move to Slide 12. As many of you know, bemifovir is a nucleotide NS5B polymerase inhibitor with an established mechanism of action of inhibiting HCV RNA through chain termination, thus blocking viral production and replication inside the cell. Our collaborators at Los Alamos National Laboratories, headed by Dr. Alan Perelson, have conducted HCV viral kinetic modeling using data from the Phase I bemifovir monotherapy trial. The new modeling suggested that bemifovir may have an additional mechanism of action, inhibiting HCV viral assembly and secretion of new HCV variants in the bloodstream, significantly reducing extracellular HCV RNA, a mechanism previously only associated with NS5A inhibitors such as riluzole and velpatasvir. On Slide 13, in vitro studies conducted under another collaborator at Loyola University confirm this dual mechanism of action for bemifovir. On this slide, the study showed that levels of intracellular HCV RNA were comparable with selected concentrations of bemifovir and sofosbuvir. While both agents produced similar declines of intracellular HCV RNA, as you can see, bemifovir led to a far greater and faster reduction in extracellular RNA, indicating possible inhibition of viral assembly and release into the bloodstream. On Slide 14 now, the other in vitro study shows that intracellular HCV RNA levels were comparable with selected concentrations of bemifovir and an NS5A inhibitor such as velpatasvir. Of importance here, extracellular HCV RNA levels decreased similarly with bemifovir or velpatasvir, an NS5A inhibitor, demonstrating that bemifovir also inhibits HCV assembly and secretion into the bloodstream in addition to inhibiting viral replication. Slide 16, you can see this cartoon which illustrates on the left side the HCV life cycle, and then on the right side, the dual mechanism of action for bemifovir, showing how bemifovir blocks the virus from making copies inside the cell and it also blocks new virus from entering the bloodstream. Therefore, on Slide 16, what the data means. The data demonstrate that bemifovir is a potent and differentiated nucleotide prodrug with a unique dual mechanism of action, which may explain now the higher potency of bemifovir as compared to sofosbuvir. Importantly, even in the presence of NS5A resistance, bemifovir will continue to block viral assembly and secretion due to its dual mechanism of action. Lastly, these results further highlight the differentiation and the potency of the bemifovir and riluzole regimen for the treatment of hepatitis C. With that, I will now turn the call over to John for an overview of the new hepatitis E virus program. John? John F. Vavricka: Thank you, Jean-Pierre. As shared earlier by JP, we are expanding our pipeline of oral direct antiviral candidates to include hepatitis E virus or HEV, a virus with no approved therapies and high unmet medical needs. As seen on Slide 18, the WHO estimates that there are 20 million global infections annually. HEV is an inflammation of the liver caused by the hepatitis E virus. It is a growing public health challenge in both the developed and developing world. In developing countries, genotypes one and two are most prevalent, and the virus is transmitted primarily through contaminated water. In developed countries, genotypes three and four are most prevalent, and the virus is transmitted primarily through contaminated foods such as undercooked meat. Moving to Slide 19. However, in recent years, there's been a growing incidence of chronic HEV genotype three and four infections in immunocompromised individuals. A population that includes solid organ transplant recipients, hematopoietic stem cell transplant recipients, as well as patients with hematological malignancies and preexisting liver disease. In these patients, HEV may not resolve spontaneously, resulting in chronic HEV infection, which left untreated can quickly lead to liver inflammation, rapid fibrosis progression, and in some cases, cirrhosis within three to five years of infection. Currently, there are no approved therapies anywhere in the world for HEV. For at-risk populations, clinicians can reduce immunosuppression, which risks organ rejection or relapse of underlying disease. Some clinicians also use ribavirin, an older antiviral therapy approved for other viral indications, off-label for HEV, which yields inconsistent efficacy results, is often poorly tolerated, and poses risk of significant toxicities. This leaves clinicians and patients with a significant unmet need for a safe, orally available, direct-acting antiviral that could achieve sustained viral clearance or cure. Let's move on to Slide 20. The number of immunocompromised patients continues to rise each year. In the US and Europe, there are approximately 450,000 cases of solid organ transplants, hematopoietic stem cell transplants, and hematological malignancies per year across these markets. While advances in modern medicine, especially in transplantation and oncology, have led to increased survival, it may likely also explain why more HEV is being observed in these at-risk populations. Approximately 3% of these at-risk patients go on to develop chronic HEV. While the overall prevalence of HEV is high in the general population, a relatively smaller proportion of immunocompromised patients are at risk for poor outcomes. As such, there is the potential to seek an orphan drug designation, which can have development and regulatory advantages. These life-saving procedures continue to expand the population of immunocompromised patients who could be susceptible to chronic HEV infections. Using other viral infections such as hepatitis D virus as a guide to pricing, this HEV market opportunity could translate into roughly between $500 to $750 million per year or more. I will now turn the call back to Jean-Pierre to review preclinical data for our two candidates for HEV. JP? Jean-Pierre Sommadossi: Thank you, John. So moving to Slide 21. The in vitro data on this slide shows the potent antiviral activity of AT-587 and AT-2490 against hepatitis E virus genotypes one and three and underscore why HEV represents the compelling extension of our antiviral platform. Our two candidates demonstrate approximately 200-fold higher antiviral activity in vitro as compared to ribavirin, which as John mentioned, is used off-label for the treatment of hepatitis E virus. While in vitro and in vivo activity of any was also shown against HEV, and that's how we start to understand that our platform could have some anti-HEV activity. The tenfold higher activity for AT-587 and AT-2490 led us to advance these two promising candidates. On Slide 22, it is interesting to point out that only a fluoro atom in the sugar ring differentiates the active triphosphate metabolite AT-9068 from the two analogs, AT-587 and AT-2490, as compared to AT-9010, which is the active triphosphate of bemifovir. Of particular importance, these two candidates efficiently convert to the active triphosphate form in human hepatocytes and have a clean preclinical safety profile to date, positioning them as leading candidates for first-in-class hepatitis E antivirals. IND enabling studies are ongoing to select the clinical candidate for Phase I evaluation. We are also pleased to announce that we would be presenting more information on our HEV program at an upcoming scientific meeting early next year. I will now turn the call over to Andrea to discuss our financials. Andrea? Andrea J. Corcoran: Thank you, Jean-Pierre. As Jonae mentioned in her introductory remarks, earlier today, we issued a press release containing our financial results for 2025. The statement of operations and balance sheet can be found on Slides 24 and 25. In 2025, R&D expenses increased compared to the same period in 2024. This increase was principally attributable to increased spend in 2025 in our HCV clinical development program. For G&A, expenses in 2025 decreased in comparison to 2024. The decrease was primarily driven by lower 2025 stock-based compensation. Interest income in Q3 2025 decreased compared to 2024 due to lower investment balances. For the remainder of 2025, we expect our R&D expenditures will be driven principally by the conduct and advancement of our global Phase III HCV program. As Jean-Pierre mentioned at the beginning of the call, at the end of 2025, our cash, cash equivalents, and marketable securities balance was $329.3 million. Continuing our strong financial discipline, we project our cash guidance runway through 2027. With respect to other matters, I would like to note that we continue to evaluate options to maximize shareholder value. As announced, we completed our share repurchase program after having repurchased the full $25 million of shares authorized by the board. Under the program, we repurchased a total of 7.6 million shares of common stock at an average purchase price of $3.26 per share. All repurchased shares were retired and returned to authorized but unissued status. Regarding our strategic process, as we have previously stated, we believe the HCV Phase III clinical development results will drive shareholder value and catalyze business development discussions. While our discussions to date with potential counterparties have been positive, the program's positive Phase III outcome would further significantly de-risk, strengthening our ability to maximize the value of this asset and to secure attractive terms. For this reason, today we announced the conclusion of our formal engagement with Evercore. While we now focus principally on the execution and completion of the Phase III trials, which we believe is the best path forward at this moment to drive shareholder value, we remain open to all opportunities to drive shareholder value, including a potential strategic transaction. I will now hand the call back to Jean-Pierre for closing remarks. Jean-Pierre Sommadossi: Thank you, Andrea. Slide 26. In closing, the significant progress and achievements we have made within the last quarter reflect strong execution across our team. We are on track with patient enrollment in our global Phase III program for the treatment of HCV, and we look forward to the top-line Phase III results from the US and Canada trial, CBEYOND, in mid-2026, followed by top-line results expected for the outside North American trial, C FORWARD, at the end of 2026. We continue to present new data supporting the potential best-in-class profile of bemifovir and riluzole for the treatment of hepatitis C. If approved, we believe we can become the most prescribed treatment for hepatitis C, disrupting and expanding the cure global HCV market of approximately $3 billion in annual net sales. The new data reviewed today demonstrate a new and unique dual mechanism of action for bemifovir against hepatitis C, highlighting its unique and differentiated profile as compared to sofosbuvir. And this data now can explain in part the potency of our regimen for the treatment of hepatitis C. In addition to our HCV program, I am really pleased to share the information today about the potential of our proprietary preclinical candidates derived from our nucleotide platform along with the expansion of our antiviral pipeline. These compounds may help to address the unmet needs of the many immunocompromised patients living with hepatitis E virus infection, and we look forward to providing more updates soon on this program. Before opening the call to your questions, I would like to thank our talented and dedicated employees. Our team's relentless pursuit of excellence drives our dedication to advancing all antiviral therapeutics for patients worldwide affected by severe viral diseases. With that, I will turn the call back over to the operator. Operator: Thank you. We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question comes from Maxwell Skor with Morgan Stanley. Please go ahead. Maxwell Skor: Hello. This is Selena on for Max. Thank you for taking our question. How does your recent dataset at the Liver Meeting showing no interaction with famotidine, in addition to your prior data showing no interaction with PPI, increase your differentiation from Epclusa? Dr. Janet Hammond: Certainly. Thank you, Selena, for the question. So I think we know that there is a label for Epclusa contraindication to the concomitant use of H2 reducing therapy with Epclusa, and the recommendation in their label is for that to be at least a four-hour window of separation between dosing of the one and dosing of the other. Proton pump inhibitor use is widespread in the US. I think I said on the last call about ten to twenty percent of the US population apparently uses this type of therapy, generally over the counter, but it's actually even higher in patients with hepatitis C, and it's estimated to be around thirty-five percent of HCV patients use acid-reducing therapy. So this is a clear problem for patients when they are taking therapy because it can reduce the levels of antivirals that are achieved, and this can compromise efficacy. So we see this as a really important differentiator. Maxwell Skor: Great. Thank you. Operator: The next question comes from the line of Andy Hsieh with William Blair. Please go ahead. Andy Hsieh: Thanks for taking our questions. I have two. One is from the modeling poster that you presented at AASLD. There is a chart basically showing time to undetectable. And interestingly, there is a separation between genotype one and genotype three, with three showing a more rapid time to undetectable. I am curious if there is any significance in that. And also, maybe the observed trend, does that have to do with the dual mechanism that you announced earlier? That's question number one. Question number two... Jean-Pierre Sommadossi: Yes. Maybe I can address the first, and after we go over the second one. So thanks for looking at the slide of the presentation at the Liver Meeting. Indeed, you are correct. The modeling suggests that there is a more rapid decline with genotype three. I think that we know that bemifovir is interestingly more potent in vitro, actually, against genotype three than genotype 1a or 1b. When we did the in vitro study about ten years ago now, that the bemifovir, that's another differentiation with sofosbuvir, for example, where sofosbuvir is less potent on genotype three. So it's possible. We are into the dual mechanism. And as Andy had suggested and wrote in one of his reports a few months ago, that at least in the Phase II, we had a hundred percent cure in our genotype three non-cirrhotic patients, which definitely, at least as compared historically to other regimens, were very high cure rates. Andy Hsieh: Yeah. That's correct. Okay. Great. Thanks for sharing that perspective. The second question has to do with the compound that you outlined in the slides for hepatitis E. You know, maybe more of an academic question, but it doesn't employ the protide technology. So I am curious if that's kind of a deliberate decision or maybe in this context, protide doesn't, you know, it's not optimized for protide. I am curious if you could comment on that as well. Thank you. Jean-Pierre Sommadossi: It is, I can tell you that. We did not include the chemical structure, but it is exactly the same prodrug that we have used for bemifovir, which is a phosphoramidate. So it's identical. So we feel very comfortable with the PK and the safety and the efficacy as well. So as you have seen, interestingly, it's only the fluorine atom at the four prime position that differentiates between AT-587 and bemifovir, for example. And what's interesting is that while we are 10 times more potent with AT-587 and AT-2490 as compared to bemifovir in hepatitis E, these are less potent as compared to bemifovir in hepatitis C by about the same magnitude of about tenfold. So here we have a very specific inhibition of hepatitis E with this active triphosphate. And we are evaluating now the molecular rationale at the binding of the polymerase why we are more potent, but definitely has to be a better binding with the presence of the four prime fluorine atom. Andy Hsieh: Oh, great. Thanks for that, JP. Great. Well, good luck with the Phase III readout, and look forward to information from the hepatitis E program. Jean-Pierre Sommadossi: Thank you so much for your questions. Operator: This concludes our question and answer session. I would like to turn the conference back over to Jean-Pierre for any closing remarks. Jean-Pierre Sommadossi: Again, thank you all for joining us for our third quarter earnings conference call. And thank you for your continued support. Operator: Thank you. This concludes the conference. Thank you for attending today's presentation. You may now disconnect. Thank you.
Operator: Good afternoon. Thank you for attending GCT Semiconductor Holding, Inc. Third Quarter 2025 Financial Results Call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. Joining the call today are John Brian Schlaefer, GCT Chief Executive Officer, and Edmond Cheng, CFO, to discuss the Third Quarter 2025 Results. During this call, statements we make will be forward-looking. These statements are subject to risks and uncertainties, including those set forth in our safe harbor provision for forward-looking statements that can be found at the end of our earnings press release and also in our Form 10-Q that will be filed today, which provide further detail about the risks related to our business. Additionally, except for as required by law, we undertake no obligation to update any forward-looking statements. And now I'll turn the call over to John Brian Schlaefer. You may begin. John Brian Schlaefer: Thank you, and thanks, everyone, for joining us today for our third quarter 2025 earnings call. I'll focus my remarks on the operational milestones we achieved this quarter on our 2025 GS, Year of 5Gs program, while our CFO, Edmond Cheng, will discuss our third quarter financial disclosure in more detail. The third quarter was another important step forward for GCT Semiconductor Holding, Inc. as we continue to execute on our Year of 5Gs. Most notably, we achieved a key milestone this quarter by recognizing our first 5G product revenue. While still small in dollar terms, it marks the first time our next-generation technology has begun contributing to our top line, an early but important indicator. We also completed successfully sampling on our 5G chipset and modules to all our lead customers, which include Airspan Networks and Orbit, as well as other well-known companies who are actively progressing through their evaluation processes and providing increasingly positive feedback. This progress reflects the continued validation of our 5G platform across diverse customer applications as well as growing confidence in the commercial readiness of our solution. One of the most meaningful developments this quarter came from Gogo, the first 5G network operator who publicly signaled full service activation before year-end 2025. This marks the first planned commercial deployment using GCT's 5G chipset and represents the first step in what we expect will be a broader multi-operator transition from chipset sampling to full customer activation. Gogo has been progressing steadily through its field testing phase, which is expected to complete within a few weeks. Their system integration has validated our chipset performance in the demanding airborne environment, demonstrating the exceptional range and reliability of our 5G architecture. As part of this testing, our 5G chipset powered the first 5G air-to-ground call on AirSpan's In Motion 5G platform, an industry first achieved in collaboration with our customer Airspan and Gogo. Gogo's deployment timeline remains aligned with our production schedule, and our program milestones are tracking to support their planned launch later this year. In parallel, we are now confidently moving forward to prepare our 5G product and production flow for the Gogo launch and launches that are expected to follow in 2026. Including the initial sample shipments to date, our 5G chipset orders have already exceeded 2,500 units. The early demand represents strong pull-through from lead customers and growing engagement from others prepared to follow Gogo's lead. We are working closely with our manufacturing partners to expedite shipments and ensure we can fulfill these orders as quickly as possible. Based on current production schedules, we remain on track to support these deliveries in late Q4 2025. Importantly, the volumes already shipped are sufficient to support the first wave of aircraft installations, positioning us to scale as additional operators and network partners begin their own deployment cycles in 2026. To further support our efforts, we also strengthened our financial position in the quarter by securing $10.7 million in debt financing from our largest shareholder. The net proceeds are providing additional capital to accelerate final production readiness, supporting other working capital requirements, and ensuring we are fully prepared for the coming production ramp, including the volume shipments that are expected to begin later this year. Overall, these milestones reflect the company that is executing steadily and methodically. We are entering the later stages of commercial readiness with strong customer engagement, early production revenue, and a strengthened balance sheet to support this next phase of growth. As we look ahead to the fourth quarter and into 2026, our focus remains on scaling efficiently by ensuring our production operations, supply chain partners, and logistics are aligned to support the transition to volume production and sustained 5G sales. And with that, I'll turn the call over to Edmond Cheng to discuss our Q3 results. Edmond Cheng: Thank you, John. The third quarter represents a meaningful transition point for GCT Semiconductor Holding, Inc. as we record our first 5Gs product revenue, an important proof point in our commercialization path. While total revenue remains modest, this initial contribution from our 5G chipset underscores the tangible progress we are making towards broader adoption and accelerated production. With that, I will now turn to our third quarter 2025 financials. Further details can be found in the 10-Q that will be on file with the SEC. Net revenues decreased from $2.6 million for the three months ended September 30, 2024, to $400,000 for the three months ended September 30, 2025. The decline was largely driven by a decrease of $1.6 million in product sales. The prior year period included $1.5 million from the sales of our 5G platform to support the customer in shifting their product development priorities to our 5G products. Service revenues also decreased by $600,000, primarily due to the completion of existing 5Gs product development projects while we are in a transitional phase in securing new projects. Cost of net revenue increased by $0.5 million or 50% from $1 million for the three months ended September 30, 2024, to $1.5 million for the three months ended September 30, 2025. The increase in the cost of net revenue was primarily due to additional production overhead costs and a $500,000 incremental write-down related to slow-moving 4Gs LTE inventory, partially offset by lower service costs. Our gross margin for the three months ended September 30, 2025, was negative and reflects the lower product revenue that is currently not sufficient to fully absorb production overhead costs. This makes our gross margin less indicative of the underlying profitability of our products and services. We expect margins to improve substantially as 5Gs product sales contribute more significantly to our overall revenue beginning in Q1 2026. Research and development expenses decreased by $1 million or 23% from $4.2 million for the three months ended September 30, 2024, to $3.3 million for the three months ended September 30, 2025. The reduction was largely due to a $1.2 million decrease in professional services related to the design of 5G chip products as this development project was completed in 2025, partially offset by a $200,000 increase in personnel-related costs. Sales and marketing expenses were relatively flat year over year, increasing $100,000 from $900,000 for the period ended September 30, 2024, to $1 million for the period ended September 30, 2025. General and administrative expenses increased by $1.5 million or 64% from $2.4 million for the three months ended September 30, 2024, to $3.9 million for the three months ended September 30, 2025. The increase primarily reflects an increase in stock-based compensation expenses and higher personnel-related costs. We ended the quarter with cash and cash equivalents of $8.3 million, as well as net accounts receivable of $3.7 million and net inventory of $1.9 million. As John mentioned, in September, we secured $10.7 million in senior secured debt financing from our largest shareholder. These proceeds are being used to accelerate production readiness, manage other working capital, and support volume shipments. These financing commitments and our existing $200 million shelf registration provide us with the flexibility to fund the next stage of the commercialization of our 5G chipset. With this, I will turn it back over to John Brian Schlaefer. John Brian Schlaefer: Thanks, Edmond. In summary, the third quarter reflected continued progress on all fronts, from technical validation and customer engagement to early 5G revenue and strengthened liquidity. Our focus now is on completing production readiness, supporting customer launches, and ensuring we execute efficiently as we enter the next stage of 5G commercialization. I want to thank our employees, partners, and shareholders for their ongoing support and commitment. We are pleased with the steady progress we are making and look forward to building on this momentum in the quarters ahead. I will now turn the call back over to the operator, who will assist us in taking your questions. Operator: Certainly. Ladies and gentlemen, if you do have a question, our first question comes from the line of Craig Ellis from B. Riley Securities. Your question, please. Craig Ellis: Yes. Thanks for taking the questions and congratulations on moving 5Gs ahead, guys. John, I wanted to start just getting a better sense for the volumes that might ship later this year. I think the press release noted orders for 4,500 units. Is that what you would expect to ship in rev rec in the fourth quarter? Or are you expecting a materially larger amount? John Brian Schlaefer: Yes. So I think the press release indicates that the total orders received so far is around 2,500, and we should be able to, I mean, that stuff that we have already shipped as well as what is on backlog that we will ship this quarter. So it is in that range, and that is what we are expecting right now. Craig Ellis: Got it. Okay. So we will be able to ship a small volume to Auerbek and Airspan, and it sounds like Gogo this quarter. Can you talk a little bit more about how that might evolve when we get into the first quarter? In the past, we have talked about a European equipment customer. Would you expect to be broadening shipments to those that are starting to take product in 4Q and 1Q? And can you help us understand how the customer base might broaden further as you get into the first quarter? John Brian Schlaefer: Yeah, yeah. So we have started acting more wafers already that will significantly increase our supply into Q1. And the backlog that we have right now is what I have indicated already. And we do expect that within Q1 or certainly within Q1 and perhaps by the end of this quarter, we will have more backlog that will be supporting actually Q1. It will be continuing on with AirSpan's demand as well as other customers that we have talked about that we have been sampling. Craig Ellis: Got it. And then, and this may be more of a question for Edmond. Edmond, I think we had previously been looking for adjusted EBITDA breakeven in the 2Q '26 timeframe. Can you talk about the confidence in the business' ability to get there? And what are some of the things that we can look to that will help indicate that that or another date would be the time that we get to that key milestone? Edmond Cheng: Great. Thank you so much for the question. Although we have not been publishing our adjusted EBITDA, but internally, we have been checking our adjusted EBITDA trend. And for the last three quarters, the trend was quite stable from that perspective. And with that trend and with the anticipated scale production and sales ramp into the second half of next year, we are still anticipating that we might be able to have a breakeven adjusted EBITDA in Q3 next year and starting to have more positive cash flow in terms of operation in Q4 next year. Craig Ellis: Okay, that's helpful. Then one other detail as we get to the point where we are starting to ship to customers who have placed orders, how are you finding that pricing is holding up? I think we have historically thought there would be that very significant increase to around $40 ASPs. Is that what you are seeing customers commit to, or are there gives and takes? And if so, to what extent? John Brian Schlaefer: We are seeing prices above that, we are seeing prices below that, but I think that still serves as a good average. Craig Ellis: Okay. That's helpful, John. And then there was mention made of doing things to ready the supply chain for hard volume production. Can you just identify the top two or three things that you have got your eye on as we look to bring our 5Gs chips to customers in more significant volume as we exit this year and move into '26? John Brian Schlaefer: Yeah, I think those things would be the longest lead time, of course, is FAB. So having wafers start in FAB as early as possible to support that sort of a ramp. So that's begun. We will continue to do that as we move forward to support increased demand. The other thing is to make sure that we have got our testing place so that we can yield properly and efficiently. And then the other thing would be to actually prep our assembly house for the demands that are coming, starting to see a little bit of shortage in the marketplace and longer lead times for PCBs. And so as long as we are forecasting properly, that should not be a big problem, and we should be able to actually manage that. Craig Ellis: Got it. Okay, well, thanks for taking all the questions and good luck, guys. Edmond Cheng: Thank you, Steve. Thanks, Craig. Thank you. Operator: Once again, ladies and gentlemen, if you do have a question at this time, please press. And this does conclude the question and answer session as well as today's program. Thank you, ladies and gentlemen, for your participation. You may now disconnect. Good day.
Operator: Good day, and thank you for standing by. Welcome to the Wrap Technologies, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. Webcast viewers can type in questions at any time via the webcast Q&A function. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Louis Springer. Louis Springer: Thank you. Good afternoon. I'm Louis Springer, Vice President of Finance. Joining me today are Scot Cohen, Chief Executive Officer, and Jared Novick, President and Chief Operating Officer. We appreciate your time and continued interest in Wrap Technologies, Inc. Before we begin, please note that certain statements made on today's call are forward-looking statements within the meaning of the federal securities law. These statements are based on current expectations, assumptions, and projections and involve risks and uncertainties that may cause actual results to differ materially. Important factors are discussed in our filings with the US Securities and Exchange Commission, which are available at sec.gov. The forward-looking statements included in this conference call are only made as of the date of this call, and we disclaim any obligation to update forward-looking statements except as required by law. Nothing on this call constitutes an offer to sell or the solicitation of an offer to buy any security. Any offering, if made, will be pursuant to an effective registration statement and prospectus. Unless otherwise indicated, our commentary compares the quarter ended 09/30/2025, with the prior year period. As a reminder, we may reference non-GAAP measures to provide additional insight into our operating performance. Reconciliations to the most directly comparable GAAP measures are or will be provided in our supplemental materials. With that, I'll turn the call over to our CEO, Scot Cohen. Scot Cohen: Thanks, Lou. Good afternoon, everybody, and thank you for joining us. The third quarter represented our strongest in the past two years, delivering $2 million in gross revenue, 12% of which came from subscription-based sales. Suggesting a clear improvement in our core fundamentals. We believe it also marked a pivotal stage in our transformation from being a straightforward device manufacturer to a provider of nonlethal response subscription solutions for law enforcement and counter UAS operations. Through a series of coordinated product launches, strategic partnerships, and the opening of our new US manufacturing hub, we believe we are advancing our mission of safer outcomes while expanding our reach into federal, defense, and international markets. Beyond the financial results, we believe Q3 was a pivotal moment of traction and validation. Demonstrating the strength of our technology in the field and the clarity of our direction guiding us forward. Over the past ninety days, data collected from 516 law enforcement agencies shows a measurable and accelerating shift in use of force practices. Wrap adoption continues to rise while we have observed TASER, pepper spray, and baton use declining. I wish we could take credit for it, but it's the fact that the policies are tightening around the country, making it harder to use the tools on the belt today. At the same time, we're observing a huge run-up in hands-on incidents. And as that happens, this results in officer injury and litigation expenses that far exceed the billions of dollars incurred. Many times, these events occur when the officer is at the highest risk—closing the gap of time and distance. That is precisely where our nonlethal response aims to change the equation. We are now seeing that when departments are fully deployed and properly trained, BolaWrap becomes the most used tool on the belt. Allowing officers to recognize the opportunity to gain safely at a distance through a nonlethal pre-escalation solution. As of today, BolaWrap 150 has demonstrated a 92% field success rate with zero reported deaths, zero serious injuries, and zero lawsuits. A record unmatched by any other known or widely deployed tool in public safety. Departments across North Carolina, Colorado, and Kentucky are reporting to us that their BolaWrap deployments are outpacing TASER use even though there are fewer BolaWraps in circulation. We attribute this acceleration to policy reform, community expectations, and command-level support across the country. As these conversations deepen, we uncover a powerful truth: that successful nonlethal adoption isn't just about delivering devices or providing training. A critical element is policy alignment. That realization—that success deeply depends on training and policies—is driving our evolution. We're now building a nonlethal response ecosystem. Jared Novick: Thank you, Scot. Here at Wrap, we are building a connected ecosystem of training, policy, and tools designed to work together to deliver safer outcomes, measurable performance improvements, and recurring value for our customers. I'll break this down into three areas. For training, our Wrap Tactics platform is a subscription platform. It provides behavioral, scenario-based officer training. It's now active in agencies such as Highland Park in Illinois and Lee County in Florida, both of which have converted to recurring subscription models that combine BolaWrap use with ongoing digital learning, analytics, and performance tracking. Through our collaboration with Lead Tech USA, we're helping departments nationwide create nonlethal responses and policies that align with tactical needs. These aim to ensure agencies not only have the tools and training but also the policy framework to use them effectively. Beyond the BolaWrap 150, we've expanded our product family to include WrapVision, the body-worn camera system, and WrapReality, an immersive VR training platform. And now our new Merlin unmanned aerial payload, enabling drone-based response and interdiction. Together, these three pillars—training, policy, and tools—form the foundation of a recurring systems business model. Transforming what was once a one-time hardware sale into a multi-year subscription contract that integrates hardware, software, and training. We believe this model creates scale, predictability, and enduring partnerships with agencies by shifting Wrap from transactional sales to a long-term systems provider at the heart of modern nonlethal response. This advancement is also reflected in our financial results. While managed services contributed lower-margin professional services, the higher-margin system sales driven by BolaWrap, Wrap Tactics, and WrapVision delivered the majority of our growth. We believe this shift towards recurring and integrated systems revenue is driving margin expansion and positioning Wrap for profitability. Our focus remains on scaling the business responsibly, improving efficiency, strengthening the balance sheet, and expanding high-margin recurring revenue streams. With that, I'll pass it back to Scot. Scot Cohen: Thanks, Jared. Wrap is bringing nonlethal responses back to the forefront. I now predict a clear future where nonlethal responses can integrate with drones, law enforcement, defense, and homeland security. A future where policy leaders demand that ground robots, protecting schools, hospitals, and transportation systems, invest in nonlethal responses. We've already demonstrated the world's first drone-to-person interdiction using BolaWrap's patented technology, demonstrating that Wrap's capability extends beyond the street into the sky, into the future of public safety. We believe our integrated ecosystem positions Wrap to lead the next era of innovation across multiple domains. The US law enforcement market includes roughly 18,000 agencies and approximately 1,000,000 officers. An enormous opportunity to own. But the adjacent markets—the private security market, the commercial market, corrections, healthcare, transportation, and defense—are at least 20 times larger. Looking at the counter-UAS market, which our Merlin and PANDA programs address, is projected to exceed $15 billion globally by 2030. By integrating our nonlethal response technology into aerial and robotic systems, Wrap is tapping into one of the fastest-growing segments in defense and homeland security. Jared, why don't you give an explanation of what we're doing federally? Jared Novick: Yeah. Thanks, Scott. Now that our total addressable market is no longer limited to just law enforcement, it is now expected to encompass all global public safety. To support our expansion into defense and homeland security markets, we established Wrap Federal. It's designed to be our DCAA-compliant federal division, and we've begun building a presence in Washington, DC. We've added new hires and contracted federal advisers to strengthen relationships across key agencies and to ensure that we, as Wrap, are aligned with the Department of Defense and the Department of Homeland Security and their procurement standards. This structure through Wrap Federal positions us to participate in upcoming federal modernization initiatives focused on nonlethal counter-UAS and machine-demand capabilities. Internationally, Wrap continues to demonstrate strong momentum. These international markets also represent significant reorder volume and growing demand for officer recertifications as agencies expand training programs and renew subscriptions under our Wrap Tactics ecosystem. Together, our federal and international efforts reflect a unified strategy, advancing Wrap's mission from a US law enforcement solution to a global provider of scalable, nonlethal response. In September, we officially opened our Norton, Virginia manufacturing and training facility, inaugurated by Governor Glenn Youngkin and state leadership. This facility anchors our Made in America production strategy. We are seeking to expand capacity, create high-tech jobs, and ensure Wrap's eligibility under federal procurement preferences for domestic content. It also serves as our hub for R&D, product demonstration, and immersive training—bringing agencies and partners together to experience Wrap's technologies firsthand. This investment is intended to strengthen our ability to scale, innovate, and deliver systems that keep people safe, all built right here in the United States. We acknowledge that lethal tools will always have a role in policing and defense, but our mission is to ensure that nonlethal comes first. That's the bridge between today's encounters and tomorrow's outcomes—saving lives, reducing liability, restoring trust. Our integrated ecosystem of training, policy, and tools presents a key opportunity to extend into commercial, healthcare, transportation, defense, and education sectors, protecting communities, schools, hospitals, and critical infrastructure across the US and abroad. I'll pass it back to Scot. Scot Cohen: The third quarter has shown that our fundamentals are solid, our systems are working, and our strategy is gaining traction. We're bringing today's momentum to tomorrow's larger opportunity—one that is intended to reshape the role of nonlethal response worldwide. What began as a single device is now a nonlethal response with tools, training, and policy that operate on the ground, in the air, and across public domains. Our mission remains clear: safer outcomes for officers, safer outcomes for the community. And we believe our opportunity has never been greater. Thank you for your continued trust and support. We're now going to turn the line over to questions. Lou? Back in your court. Louis Springer: Thanks, Scott. The first question coming in is from Twitter. Now that the company seems to be heading in the right direction, as you think about your future capital needs, do you see Wrap finally being able to approach the capital markets and execute a public secondary as opposed to very dilutive and expensive private placements and preferred offerings of the past? Scot Cohen: Yes. I do see us being able to tap those markets. The board and management are regularly evaluating financial options, and yes, the capital markets have been open to us, so the answer to that is yes. We will continue to evaluate those options. Louis Springer: Thank you. The next question comes from online. What made you go back to nonlethal, and how is that different than less lethal? Scot Cohen: You know, we started this company as a nonlethal device company. In fact, we started a site, nonlethalnews.com. The Axon, at the time, was called Taser, and pepper spray companies were all categorizing themselves as nonlethal. And, actually, we went to market as a nonlethal tool, if some of you remember from way back in the early days. But it wasn't until the data that we've been so aggressively seeking. And as we've really gotten to look at this data and shared it with a number of different influencers in the space, use of force experts, and a number of different types of lawyers that specialize in this area, we are absolutely clear this device is nonlethal. And you're going to hear us talk a lot more about that. That puts us in a different category than the other companies or products that are on the belt today. They've all gone into a less-than-lethal category. And we feel very strong about our nonlethal status. As we continue to examine the data, and as it continues to build, that nonlethal status just gets clearer and clearer. So I think bringing back that word was really driven by the data we're looking at. And when you look at the datasets that we're looking at, it's super clear to us. So, yes, we're coming back. And yes, we think there's a big difference between less than lethal and lethal. And this is the space that we're playing in. This is the space where we're going to grow, and this is the space where we're going to innovate, both on the policy side, the tools side, and the training front. Louis Springer: Got it. Thank you. The next question comes from Twitter. Can you provide clarity on the bylaws amendment if you guys are planning on doing any splits? Scot Cohen: On the bylaw amendment, there's a detailed explanation in the SEC filings. So anybody who wants the details, it's right there for you. It's pretty lengthy, so I suggest you go to that. And with splits, we have no intentions to split. That was a protective measure that offers flexibility. So there's no intention to do any kind of reverse split. Louis Springer: Thanks. Next question comes from online. What gives you the confidence that adoption is happening and that departments are moving away from other less lethal tools and solutions? Scot Cohen: I want to have a conversation about this. So, Jared, I would like you to weigh in here. Jared Novick: Sure. What's driving our clarity is the documented cases, the documented deployments. The deployment data is spiking, and we're getting reports regularly. Yesterday, we just got a report of a department that had 10 devices. They used it 17 times successfully in less than eighteen months with 70 laser deployments. Those numbers—that's just 10 devices. But if you think about it, there's no reason why that should be an isolated success story. That success was led by a connected trainer who had a certain belief and mindset around our program. I haven't talked to that chief directly, but that dataset right there, if you just take that to a neighboring county, and if you compare that to the TASER use of a neighboring department or county, our device is being deployed 1800% more than a TASER or pepper spray. So I just have to think, with that kind of traction and usage, to me, it's clear—it's being adopted. I'd love to take credit for it, but I think a lot of the success is coming from policies that are getting tighter and tighter. And as a result, they're going to the BolaWrap because their choices are now limited. As we get our training integrated in a more connected way, we're seeing this happening. Deployments continue to take off, and I believe that with the rate we're seeing this, it will have to spread to the rest of the country because it's being used. It's being used because it's needed. It's making officers safer. It's giving them an advantage—a clear advantage they never had. I think our whole company believes in that because we're looking at the videos, the body cam footage, and the data, and it gets clearer every day. Louis Springer: Yeah, I'll add to it. Jared Novick: I can add in on that. Look, the reason we feel that way is because in our conversations—and remember, we've spent time over the last quarter and previous quarters directly engaging with departments that have BolaWraps. We also engage with departments that don't have BolaWraps. For those that do, this data is coming right from them and their conversations. They are using the BolaWrap to gain an advantage in time and distance. We started having these conversations, asking how many arrests you make a day that end up in handcuffs. The answer is, that's probably one of the riskiest things an officer does. When they put their hands on a subject, it's the exact moment when the subject is likely to resist violently. That's when their reality sets in, like this is getting real. When you give an officer a BolaWrap and they have the legal right to apprehend someone, how are they going to close that distance and minimize the risk? They're not maybe legally allowed in their policy to use higher uses of force. They may not be allowed in policy to use a TASER or a baton or anything else. What we're seeing in these discussions—these are trusted conversations— is that hands-on incidents are going up because they don't have a tool. When the hands-on incidents go up with someone who has unknown intentions, they're getting into a fistfight. It means injuries are going up, and claims are going up. So when that light bulb goes off, it's less about the buttons on the BolaWrap. While we certainly have a great training program to teach you how to use a BolaWrap, the real key is when and how. Realizing as soon as there's a legal right to apprehend, and an officer has to get from over here to over there—that's probably one of the riskiest things they do on their job. If we can help them minimize that risk in a pain-free way, that's our core value proposition. It's got to be delivered not just as a product sale—it's not just a widget. We have to make great widgets, and we will and do, but we also have to support it the right way with training. The training has to be allowed to be trained that way with the right policy. What you heard in our earlier call is that we're now going to market with an integrated, policy-led nonlethal response policy that allows officers to deploy the BolaWrap early and often from where they're the most safe to help apprehend subjects and people safely, and all parties win. When that talk track happens and we're pulling data, we are seeing that adoption skyrocket. There are frankly more opportunities every day for officers to use a BolaWrap than anything else on their belt. When that catches momentum, and we believe it does, that's where we're seeing declining usage of other uses of force and increasing usage of BolaWrap. We also said in our script that we do believe a lethal response is part of the job. It's an unfortunate truth to the job, but we support officers in their split-second decision-making to make that lethal call. We also think it's our duty to give them a nonlethal response. Everything else between nonlethal and all the way to lethal means you carry a chance of a fatality. If we have technology today that is out in front of policy, we have to fix that. But if we have technology, tools, training, and policy solutions, it's our company's duty to get that into departments to support them. How they operate and solve things tactically is up to them. We're not going to be Monday morning quarterbacks and always judge with the benefit of hindsight. We have to empower them with what we have as a core offering. When we fully embraced nonlethal, we realized that the cassette doesn't have to just be on a handheld device on the belt. Why not put it on a drone? Are there ways you can give officers multiple engagements for their opportunities with this cassette? Can you put these drones into schools? What does that mean for private security when you have a nonlethal response? As we figured out our go-to-market strategy and got adoption from conversations in law enforcement, and as our technology improved and explored adjacent markets, our whole addressable market grew significantly. It grew into the Department of Defense and the Department of Homeland Security. So, you know, I personally—it’s contagious in the company—everyone feels empowered and has a duty to present these technologies in an integrated way. It’s rooted in data, real conversations, and it’s been a request from us from users to do it. Louis Springer: Thank you, guys. Next question came from the online portal. Do you have any updates on where we're at with the Chile deal you mentioned in Q2? Scot Cohen: I'll take it. We get dealings with Chile on a weekly, sometimes a daily basis. It's a constant effort. There’s just tremendous opportunity that we're all reading about in Chile. We get the news when you get the news. We're seeing it. We're very active, and we're anticipating doing some real business down there. Hopefully, it's next year. But lots of engagement. And we continue to fight the fight and present and show up when we need to show up. But we're tracking it. We think they're looking for a nonlethal solution. When you're looking for a nonlethal solution, there aren't too many options out there. If nonlethal is what you truly want, you're going to find us. Hopefully, we find you, but you'll find us because this is the only place you can get it right now. So that’s why we don’t believe Chile's going anywhere. We don't believe any of these conversations are going anywhere. We've got to get them over the line. We're putting the team together to execute and get these deals over the line to bring what we all want, which is a much bigger business. We had to discover who we were, and that took a lot of work. It took a long time. We apologize for that. But guess what? We're here now, and we're clear. We know what we've got, and you guys invested in the right tool. This tool works. But it just couldn't be a tool that was sold. It had to be coupled with integrated training, and policies matter. We're in policy discussions on a daily basis here now. It's part of our go-to-market strategy. It's part of our talk track. It matters. So the clarity is setting in, and there's a lot of movement. You'll be hearing us unpack over the next couple of quarters how we're positioning and how we're getting after this opportunity. Louis Springer: Thank you. The next question comes from online. What makes DFRX different than DFR? Jared Novick: Hey, Scott. I can take that one. Scot Cohen: Please. Jared Novick: Well, you know, law enforcement and public safety today are now becoming more and more accustomed to drones as a first responder. Just the idea of drones was somewhat new not too long ago. And the way they're being utilized today by a large part, at least in public safety, is to put what we call eyes on in advance and respond quickly with situational awareness to officers. They can be rapidly launched. There's sometimes two-way audio, and they relay video. But in terms of capability beyond that, they are largely limited to just a remote passive observer. Now with the expansion of what we do, just the idea, can you put a BolaWrap on a drone? Well, technically, you don't need a yellow device to launch and deploy a BolaWrap. So that means you now have a small form factor. Because drones have limited size, weight, and power, we're actually able to stack small form factors of cassettes onto the drone. When you do that, you can have four, six, eight, however many the drone can support. Remind you, we can partner with any drone capability that we'd like. So now you're giving officers everything they have with drones as a first responder but now allowing them to do something. That doing something is the X part in DFRX. We believe that when you put these cassettes on the drone, you now can interdict. What does that mean? When you manage the threat and are trying to increase safety and buy time and distance—those are our mottos. You're actually able to deter, delay, and distract with BolaWrap technology. That's novel, unique, and protected. We have a proprietary way to add a nonlethal response that's not just on the belt but also on a drone, taking us to the skies. So what we are doing with DFRX is taking the next evolutionary step in DFR. We're giving a proactive control element before things escalate. Multiple engagement opportunities with the aim of keeping everyone safer. Louis Springer: Thanks, Jared. Scot Cohen: Yeah. We're going to go pretty quick on these last two, Lou. You want to ask the next one, and I'll take the next two. Louis Springer: Sure. Absolutely. The next question came from the online portal. Please comment on your plans to obtain sales. Can you describe your Salesforce? Scot Cohen: Yeah. Probably about eighteen months ago or call it two years ago, we were getting pretty close to 150 or so employees, and we've dropped all the way down to probably 15, I think, at a low point about eight months ago. Now we're ramping. Why are we ramping? Because we're clear. We've taken offense. We've gone from one person in marketing and one person in sales to a total count of close to 18 people that touch sales and marketing, including the DC office. It's a huge push. It's the largest resource, and it's the biggest hiring spree we've done, all in sales and marketing. It shows you what we're thinking. We're going to press this because the time is now. You don't get this opportunity many times in your lifetime. There's a problem out there, and technology got ahead of the policies. No one had ever seen this tech before—nobody had thought of it before. There weren't policies supporting it. There wasn't training. Supporting it. We came up with our own training that is changing, and we get to ride that change. We believe this will move a lot faster now. The heavy work, the heavy lifting, a lot of wood chopped was done. But now, with this kind of Salesforce and team, it's a big indicator. We think there's a very big and large opportunity for us there. I think the final question was where's the company on declassification. The government shutdown didn't help things, but we think we don't think this should have been classified as a firearm to begin with. We've put a lot of effort into it because we know what it unlocks. If we get this declassified, it opens up a very large international opportunity for us, allowing us to sell into a much larger security guard market where guards are basically unarmed and not trained, and they have really lousy policies. So the corporate side, let's call it the commercial side of this, is actually bigger, and that's hard to get your head around. Jared mentioned that TAM has gotten massive here. So if this starts tracking like we hope, and we're all on the call here because you're downloading our latest and greatest. But this company should be going on a hiring spree. This company is going through a growth phase now, and we're certainly putting our money and resources behind marketing and selling the product. That's what we need to do right now. The big step is, we know, we finally know who we are, and we're clear about it. Louis Springer: That's it. I think, Lou, let's wind this up. Operator: Thank you, Scott. That concludes our question and answer portion. On behalf of Scott, Jared, and the entire Wrap team, thank you for your engagement and support. We look forward to updating you on our progress. This concludes Wrap Technologies Third Quarter 2025 earnings call. Have a good evening. Operator: Thank you for participating in today's conference. You may now disconnect.
Operator: Thank you for standing by. My name is John, and I will be your conference operator today. At this time, I would like to welcome everyone to the WEBTOON Entertainment Inc. Common stock 2025Q3 earnings call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. To withdraw your question, simply press 1 again. I would now like to turn the call over to Soohwan Kim, Vice President of Investor Relations. Mr. Kim, please go ahead. Soohwan Kim: Good afternoon, and thank you for joining us. As a reminder, remarks today will include forward-looking statements, including those regarding our future plans, objectives, expected performance, and our guidance for the next quarter. Actual results may vary materially from today's statements. Information concerning risks, uncertainties, and other factors that could cause these results to differ is included in our SEC filings, including those stated in the Risk Factors section of our filings with the SEC. These forward-looking statements represent our outlook only as of the date of this call. We undertake no obligation to revise or update any forward-looking statements. Additionally, the matters we'll discuss today will include both GAAP and non-GAAP financial measures. Reconciliations of any non-GAAP financial measures to the most directly comparable GAAP measures are set forth in our earnings press release. Non-GAAP financial measures should be considered in addition to, not as a substitute for, GAAP measures. Joining me today on the call are Junkoo Kim, Founder and CEO; David J. Lee, CFO and COO; and Yongsoo Kim, Chief Strategy Officer. With that, I will now turn the call over to our Founder and CEO, Junkoo Kim. Junkoo Kim: Thank you, everyone, for joining the call today. I will briefly discuss a few highlights from the third quarter before turning the call over to David to provide our results. For additional details about the call, please see the earnings press release and shareholder letter, both of which are posted on our Investor Relations website. We are pleased to report our 2025Q3 results that demonstrate the underlying strength of our model, with adjusted EBITDA of $5.1 million coming in above the midpoint of our guidance range. Total revenue of $378 million was up 8.7%, or 9.1% on a constant currency basis, compared to the same quarter in 2024. This was an exciting quarter as we broadened our relationship with Disney. On September 15, 2025, we announced a nonbinding partnership with Disney to develop an all-new digital comic platform. This new platform, which WEBTOON Entertainment Inc. Common stock will build and operate, will feature more than 35,000 comics from across Disney's portfolio, including Marvel, Star Wars, Disney, Pixar, and Twentieth Century Studios, available in a single digital comics service with one convenient subscription. Alongside the strategic commercial collaboration, we entered into a nonbinding agreement for Disney to acquire a 2% equity interest in WEBTOON Entertainment Inc. Common stock. We have already made progress; as of today, we have launched all five titles from our initial announcement in August, including Amazing Spider-Man, Star Wars, Alien, Avengers, and Disney's Frozen: Breaking Boundaries, as well as another new format title, Predator. Additionally, at New York Comic Con last month, we announced another five new titles coming to WEBTOON, including Astonishing X-Men, Star Wars: Lost Stars, Star Wars: Darth Vader: Black, White, and Red, The Unbeatable Squirrel Girl, and Peach and the Samurai's Complete Collection. Disney's extraordinary storytelling legacy is second to none, and we are honored to work with them to build the future of digital comics. This is a powerful next step for our growing global business and a strong foundation for even greater collaboration with Disney in the years ahead. Moving on to our innovation in short-form video, we launched video episodes on our English-language platform in August. Video episodes reimagine the experience of enjoying webcomics by adding motion, sound effects, background music, and human voice acting to the original webcomics, all in a five-minute video. We believe this feature will deepen engagement with existing users, reach new users, and deliver a new medium for amazing storytelling. In Korea, we launched "The Cut" in September, another short-form video innovation. This feature allows creators and fans to create, upload, and enjoy short-form animated videos under two minutes in length. Within just a month since we launched "The Cut," we have already hosted over 1,000 creators, with some videos already surpassing 1 million views. Finishing up with IP adaptation, today we announced plans to develop a slate of animated projects with Warner Bros. Animation. We intend to enter into an agreement to co-produce ten animated series for global distribution. Our creators are building franchises that Gen Z audiences love, and working with Warner Bros. Animation gives us an incredible opportunity to test those stories further alongside one of the most respected names in animation. As outlined in the shareholder letter, we also continue to see success with our guest speaker and streaming releases, including "My Daughter is a Zombie," "Your Letter," and "Shikimaki." We believe that IP adaptations are an important part of our flywheel as we work to attract more users to our platform, and we are confident in our strong pipeline of adaptations over the long term. As we close out an exciting quarter marked by meaningful progress made towards our strategic priorities, I am confident in our ability to deliver further growth in upcoming quarters. We would like to thank our users, creators, and employees for their continued support. With that, I will now turn the call over to David. David J. Lee: Thank you, Junkoo, and thank you, everyone, for joining us today. I will be discussing the details on 2025Q3 results compared to the comparable quarter in the prior year, unless otherwise noted. During the third quarter, reported revenue was up 8.7%, and we grew revenue 9.1% on a constant currency basis, with growth in paid content and IP adaptations, partially offset by a decline in advertising. Net loss was $11.1 million compared to a net income of $20 million in the prior year, primarily due to lower other income as well as a higher income tax expense. Adjusted EBITDA was $5.1 million compared to $28.9 million in the same quarter of 2024. As a result, our adjusted earnings per share for the quarter was $0.04 compared to adjusted earnings per share of $0.22 in the prior year. Turning to operational health, we delivered another successful quarter of webcomic app user growth, attracting a highly engaged audience with better monetization opportunities. While app MAU declined 4.2% overall, webcomic app MAU, which excludes the impact of web novel users, increased 1.5%. This growth was led by increases across important English-speaking markets. Our English platform webcomic app MAU was up 12% year over year, demonstrating continued momentum in this important region. We believe recently introduced reformat title launches and product changes will continue to drive increased user activity over time. Global MAU declined 8.5% in the quarter, primarily driven by Wattpad, which continues to be impacted by a government ban in the two countries we discussed last quarter. Encouragingly, we fully resolved the search engine indexing issue we discussed earlier this year and saw sequential stability in Wattpad MAU, with 0.8% revenue growth on a constant currency basis year over year, driven by strength in Japan and the rest of the world, offset by a decline in Korea. ARPU grew 3% on a constant currency basis in the quarter, with increases in all three regions. We see continued ARPU growth as an indicator of the health of the business, with additional opportunity for further monetization ahead. There still is a large variety of free content for our users to enjoy before they hit the paywall, and we believe our ARPU is still relatively low for our offering. Through our product initiatives, partnerships, and new content, we believe that we will continue to drive engagement and monetization over the long term. Advertising revenue decreased 8.9% in the third quarter on a constant currency basis year over year, as growth in Japan was more than offset by constant currency declines in Korea and the rest of the world. In Korea, we saw a decline from a major e-commerce advertising partner, partially offset by an increase from other partners. Ad sales from Naver were relatively consistent with the prior year quarter. In the rest of the world, the decline was primarily driven by Wattpad impacts. Japan's growth was the result of continued growth in pre-roll ads. Finally, our IP Adaptations business saw revenue increase 171.8% year on year on a constant currency basis in Q3, driven by revenue growth on a constant currency basis in Korea and the rest of the world, offset by a decline on a constant currency basis in Japan. Korea benefited from the theatrical release of "My Daughter is a Zombie." In Japan, we are still in the early days with our IP adaptation business, with a small revenue base that fluctuates based on milestones, but we're pleased with the pipeline of upwards of 20 anime projects for the year. Now let's look at our results in the context of our core geographies. In Korea, during the third quarter, our revenue grew 22.2% year over year on a constant currency basis, driven by triple-digit constant currency growth in IP adaptations, offset by a double-digit constant currency decline in advertising and a single-digit constant currency decline in paid content. During the quarter, Korea MAU was 24.6 million, decreasing 12.3% year over year. MPU was 3.7 million, declining 4.9%. We saw growth of 4% for ARPU on a constant currency basis, and the paying ratio was 14.9%, up 116 basis points year over year. Moving to Japan, revenue growth on a constant currency basis was 2% year over year. This was driven by single-digit constant currency revenue growth in paid content and advertising, offset by a double-digit constant currency revenue decline in IP adaptations. As mentioned in our shareholder letter, Line Manga was the number one overall app for revenue, including mobile games, for the third consecutive quarter according to Sensor Tower. Japan's MAU increased 12.6% year over year to 25.3 million, driven by strong growth in eBook Japan. We've expanded eBook Japan's marketing budget and established strong partnerships. While it may take time for new users to start spending, we expect their ARPU to increase over time as their engagement grows. MPU grew 0.2% year over year to 2.3 million, and the paying ratio was 9.1%, down 112 basis points year over year. Our paid users remained strong, with ARPU of $23.60, growing 1.3% year over year on a constant currency basis. The rest of the world saw our revenue decline of 0.7% year over year on a constant currency basis, driven by a double-digit decline in advertising, offset by single-digit growth in paid content and double-digit growth in IP adaptations. While the rest of the world MAU declined 11.6% year over year, driven primarily by Wattpad, MPU increased 0.8% year over year, and the paying ratio of 1.6% was up 20 basis points year over year. ARPU of $6.80 grew 1.4% year over year on a reported and constant currency basis. Our English platform, Webcomic App MAU, was up 12% year over year, reflecting all the investments we're making in this region. After several quarters of healthy MAU growth, we are pleased to see an increasing number of English webcomic users converting to paid users. Turning now to profitability, gross profit for the quarter declined 9.4% to $82.8 million. This resulted in a gross margin of 21.9% compared to 26.3% in the prior year. There were a number of items that contributed to this change. As previously disclosed, free point expenses were moved from marketing to cost of revenue. We invested in labor to make further improvements to our platform. While these discrete items temporarily affected our results, we believe our gross margin can improve over time as we execute on our cross-border content distribution strategies. Adjusted EBITDA for the quarter was $5.1 million compared to $28.9 million in the prior year. Total G&A expenses for the quarter were $62.5 million compared to $66.7 million in the prior year. Interest income for the quarter was $4.6 million compared to $6.5 million in the prior year, and other loss for the quarter was $1.9 million compared to other income of $11.8 million in the prior year period. Income tax expense was $600,000 in the quarter compared to an income tax benefit of $9.9 million in the prior year. Depreciation and amortization for the quarter was $7.9 million compared to $10 million in the prior year. Net loss for the third quarter was $11.1 million compared to a net income of $20 million in the prior year quarter due to lower other income as well as higher income tax expense. As a result, GAAP loss per share was $0.09 compared to earnings per share of $0.15 in the prior year period. Adjusted earnings per share was $0.04 in the quarter compared to adjusted earnings per share of $0.22 in the year prior. Moving to our business outlook for the fourth quarter, for 2025Q4, we expect revenue decline in the range of 5.1% to 2.3% on a constant currency basis. This represents anticipated revenue in the range of $330 million to $340 million. This guidance is based on current FX rates. We expect pressure from IP adaptations related to the timing of milestones. We are close to finishing our infrastructure updates in Q4, but there may be a few items that linger in early 2026. We expect to see improved product flow starting next year. We anticipate fourth quarter adjusted EBITDA loss in the range of $6.5 million to $1.5 million, representing an adjusted EBITDA margin in the range of negative 2% to negative 0.4%. Adjusted EBITDA guidance includes $16.5 million non-cash expenses, of which actuarial losses on retiree benefits and minimum guarantee write-downs are the largest contributors. We expect to maintain our investment in marketing to drive future growth. We are pleased with the performance this quarter, underpinned by a number of exciting partnerships and collaborations as well as the introduction of new product features. As we head into the fourth quarter, we remain confident in our ability to drive further progress, positioning us well to continue growing our content platform and brand long term. With that, I'd like to turn it back to our operator to begin the Q&A session. Thank you. Operator: Ladies and gentlemen, we will now begin the question and answer session. At this time, I would like to remind everyone, in order to ask a question, please press star followed by the number one on your telephone keypad. Thank you. Your first question comes from the line of Benjamin Black with Deutsche Bank. Please go ahead. Benjamin Black: Good evening. Thank you for taking the questions. Maybe first, can you elaborate on the long-term vision of the Disney partnership? You know, beyond the initial slate of titles, how should we be thinking about maybe the revenue potential and the margin profile of the new joint platform compared to some of the core WEBTOON app? And then secondly, you know, you launched video episodes. You know, what early engagement or monetization metrics are you seeing relative to sort of static webcomics? Thank you. David J. Lee: Thanks, Benjamin. Let's start with your first question. I wanted to remind you, as Junkoo mentioned, that there were two particular parts to the Disney announcement. In early August, we talked about these wonderful 100 reformatted adaptations that would be on our platform. And then separately, in September, we discussed the opportunity to have access to these 35,000 stories. And I would say I would remind us just how early we are. We have great progress with the five to seven titles that we mentioned, and these are great stories, Star Wars, Alien, Avengers. You saw the list. But seven out of 100 is quite early. And another opportunity which we discussed in the last call and you and I discussed is we love the opportunity to create original stories in collaboration with Disney that can be new but carry on the history and the origin of the franchises that we're talking about. These have yet to come. You'll note we did not provide disclosure that in Q3, there was any material impact from this great collaboration with Disney, nor did we highlight it for the Q4 guide. And I think that reflects how early we are. Having said that, as we said before, we are building this collaboration for the long term because we think it's a game changer. And in terms of your question on economics, as you heard, we believe as a category leader that we can partner with a great company like Disney in a way that doesn't materially change or hurt the fundamental margin structure of the business. That's why we didn't preannounce or disclose any financial impacts other than the wonderful collaboration opportunity and their interest, which is yet to be consummated in a final agreement, on a 2% equity stake in the company. At this point, however, it's too early for us to provide any more additional color beyond what we've said. With regard to the second question, I think it's important that we recognize that we believe our existing WEBTOON webcomic format is working extraordinarily well. And when we talk about video episodes, which we launched the first batch of 14 English originals just last quarter, this is also very, very early and represents a way for us to ensure we maintain our dominant leadership. Remember, in the US, a very large portion of our users are Gen Z. We're proud of that. This for us represents demographic gold because we know from other markets they can grow old with us. So while this is very early, think of video episodes and separately, work in Korea on "The Cut," as the active experimentation we will persist with to ensure we maintain the leadership role we already have with our webcomic format amongst what we think to be the most interesting demographic, which is this 18 to 25-year-old demographic. And candidly, the 12% webcomic English app MAU growth and now seeing them turn into paid users, which I think is very promising, is a product of everything. This overall product update that Yongsoo and his team has led, but as well, I think the very early steps we've taken on new formats like video episodes. That said, I think that upside is down the road, and it's not one that we would promise. It's too early at this stage. Benjamin Black: Very helpful. Thank you very much. Operator: Your next question comes from the line of Matthew Cost with Morgan Stanley. Please go ahead. Matthew Cost: Hi, everybody. Thanks for taking the questions. Two, if I could. I guess just starting with the new Warner partnership, anything you can share about the timing of when that rolls out? And anything that you're able to share in terms of the economic terms of it from a revenue or margin perspective. And then secondarily, just on the user figures, so you provided the very helpful context about kind of Wattpad and the web novel MAU growth versus the webcomic MAU growth. I guess, are you considering in the future kind of breaking those out as part of your regular disclosure? And if not, how should we think about the web novel users going forward? You know, or is that a number that could continue to decline? Is it something that is of any concern or just, you know, kind of a natural variation of the business if it does? Thank you. David J. Lee: Thanks, Matt. This is David Lee, and I can start. First, all very good questions. Let's start with your first one. With regard to Warner Bros., we're very proud of the announcement we've made with them. We think it suggests two things. Similar to the work we've announced with other partners, Slate as we've mentioned 10. At this point, while we want to be very transparent and announce these major partnerships, we, again, are not really in a position to offer more specifics, but I think that says something. We're not talking about a change to our financial business model. We're talking about a continued catalyst for our growth, particularly in markets globally. At this point, we're not ready to provide any more specifics, but I'm very encouraged by it. I think it's the opportunity to partner with well-established high-quality companies to be their source of stories in new formats and has the potential, I think, to continue the growth that we have outside of our core legacy markets. With regards to your several questions in the web novel ones, let me back up and start with MAU. Because it's interrelated into how we think about Wattpad. First, with regard to MAU, you've heard me say this before. While total MAU is an important metric, and we know that it is down 8.5%, the best predictor of our paid content, which remains 80% of our revenue, is really the new innovation in products that we are bringing to our app. And webcomics, in particular, is the format that we leverage. So the reason why we keep on talking about the 1.5% global webcomic app MAU growth in the quarter, I think more importantly, in the largest addressable market, the newest largest addressable market, what we call English webcomic app MAU, we focus on that 12% number. Noting that it's turning into higher monthly paid users, MPU, is because those are the metrics I would have Street focus on with regard to the majority of our future revenue growth. Now I want to be clear, Wattpad itself is the single largest driver of the total MAU declines. And I do think we need to be clear on what drives them so that you can model persistence. Wattpad is an important business. It's a great source of IP. We talked about in my script. Sidelined the sequel coming out in Thanksgiving. We're very excited about the crossover IP, and we're very excited about its advertising potential. We've talked about how advertising saw a decline partially related in the rest of the world to the MAU declines in Wattpad. Having said that, when we look at Wattpad, we talked about three drivers. We talked in the previous quarter about a search engine indexing issue that we described as fully resolving, which is good news. But we also talked about two countries. Let's call it instead of three, the drivers let's call them two. The second driver is we were banned in a country along with great other companies like Roblox and Discord. And as we lap those two, we will eventually in 2026 begin to see more of the sequential stabilization that we mentioned in my script. But at this point, it's very hard for us to call the ball on when some of these country issues resolve. What we can control, search engine issue we've made progress on. But I think you'll have to hear more in coming quarters for us to provide definitive guidance on the total MAU associated with the company driven by Wattpad. Your next question Oh, hold on. Hold on. Hold on one moment, John. Yongsoo, our chief strategy officer and lead of our global business, is gonna offer a comment. Yongsoo Kim: Yep. Another important aspect of our partnership with Warner is that it includes not only Korean WEBTOON titles, but also a significant number of English original titles. We believe the impact on the WEBTOON brand and English platform will be especially meaningful once these English original titles are developed through a major US animation studio like Warner and reach the market. Operator: Okay. And the next question comes from the line of Doug Anmuth with JPMorgan. Please go ahead. Doug Anmuth: Thanks so much for taking the question. David, can you just talk a little bit more about the drivers of the 4Q guide, the slower revenue growth? Just trying to understand, I know you mentioned IP adaptations and some of the lumpiness there, but also trying to understand how much is tied to the Korea advertiser advertising from the e-commerce partner that declined in 3Q and what kind of visibility you have there? And then just putting that altogether, like, how you're positioned into 2026. Thanks. David J. Lee: Great. Thanks for the question. First, let me start with the last part of your question. We feel very good about the fundamental business health and growth opportunity mid to long term for this business. In particular, in paid content to see the emerging signals of continued webcomic English app MAU growth and now paid user signs of future monetization, we feel very good. And frankly, the announcements that we've made with great partners like Warner Bros. and Disney make me feel even stronger about the future of this company for '26 and beyond. Having said that, Q4 does represent a quandary for us to explain. Let me try. First, while we do not usually disclose great detail, I wanted to mention that within the 2.3% to 5.1% revenue decline as forecasted, this $330 million to $340 million range with the $335 million midpoint. Within that range at current FX rates, paid content is up, reflecting what we believe to be the strength in paid content. The primary driver, frankly, year on year is not a function of paid content. It's a function of the timing of IP adaptations. I want you to remember that IP adaptations play a really important role for us with regard to having some of the lowest cost ways to create awareness for our creators and for our own content on our platforms. And in Korea, where we've talked about a 50% market penetration, that is a great strength. However, when you have that much market penetration, the flow of when crossover IP hits a quarter can really change the optics of the total revenue. Recall in 2024, a year ago relative to guidance, we had major breakouts. We had the success of "A Star Is Born." We had "Trauma Code." We haven't even in North America the impact of "Sideline the Quarterback in Me." So when we think about the guide, I would characterize it as primarily on revenue being driven by the timing across crossover IP. And I'll note that despite the fact that we're guiding to a decline in total revenue, we're still guiding to the same adjusted EBITDA, the same definition, and the same number of roughly minus $4 million, and that reflects how strong we're managing G&A, and it also reflects the fact that we're managing our mix and our gross profit. In fact, we added another disclosure, which I think is important on the bottom line, which is within the guide, there is inclusive in it, a $16.5 million non-cash set of costs that include, amongst other things, the actuarial adjustment for the pension expense for some of our Asian-based employees and the non-cash write-down of minimum guarantee held on balance independent of what we actually pay in terms of liquidity. And the reason why we did so is to really note that we feel that the quarter guide, while appropriate, reflects the strength we think that we are building for the long term. I know that's hard perhaps on the surface to see. Now with regard to your question in advertising, we are so early in the rest of the world that you should think of advertising as disclosed as primarily being driven by Korea. And it goes to the same market penetration point. When you have 50% market penetration, we described a movement in one large e-commerce customer affecting the quarter. You'll note we also disclosed the strength of our relationships with other advertising partners in Korea, inclusive of Naver, and we did not talk about this issue as being a persistent one in our business model beyond the quarters that we have described. So you'd have to read into that as you will. But again, we're not talking about a fundamental business health issue anywhere, particularly amongst where we are strong in Korea, including our advertising business in the mid to long term. Doug Anmuth: Thank you, David. Operator: Next question comes from the line of Andrew Marok with Raymond James. Andrew Marok: So maybe first, just if you could elaborate a little bit on the engagement that you've seen with some of the Disney content to date. I mean, obviously, you've mentioned that there's a lag between the content coming onto the platform and the monetization because of the free episodes, but just how that engagement curve is progressing relative to expectations? And then maybe one more on advertising. If you could just maybe talk a bit about advertiser appetites for new platforms and new channels to devote spend to and kind of what we were hearing is maybe a little bit of a mixed or an uncertain environment into Q4. Thank you. David J. Lee: Sure. On your first question, unfortunately, Andrew, while everything that we've seen is positive, it's too early for me to give you specific quantified metrics. I will tell you that we've talked about in the past how the timing of this engagement with Disney is a great time. Because the leadership, Yongsoo and the team have already rolled out fundamental improvements in product. We call it Global WEBTOON 2.0. And we've also talked in the last quarter. Previously, we talked about a 9% increase in things like when we look at engagement from new products, we look at not just the webcomic English app MAU growth or the MPU growth that we mentioned that's great, but we look at episodes read. We look at quality metrics. Early for me to disclose them quantifiably. But I would tell you we're very encouraged by the progress we're making. And it's the largest upside market for us because we've only started. So I can't give you more that I can't disclose in the short term on Disney, but I can tell you we're very bullish about business in the rest of the world, particularly in North America. Andrew Marok: Great. Thank you. And then maybe on the advertising point for advertisers looking to invest through the appetite for incremental platforms or channels? Thank you. David J. Lee: There is definitely strong interest. I would point you to Japan. The continued success of pre-roll video, which we think is a wonderful way to deepen engagement even in paid content. Right? This is the opportunity. And I think as we get better and better at targeting, the opportunity for people to see pre-roll video that has better and better affinity to the paid content they're already engaged with. We talked about that being a strength in Japan. We did talk about the dislocation from one customer in Korea. In terms of the rest of the world, we are early. And while we're building for the long term, we're not yet realizing, I think, the very large offerings that I believe customers want. So at this point, I can't give you specifics. I will tell you it was a wonderful opportunity to engage with advertisers publicly. We were at New York Adweek. We had a very large presence along with our New York Comic Con. I'm really encouraged personally by the interest in the differentiated products that we can offer, but I also need to be candid that we're still fundamentally building out the infrastructure in places like North America to begin to realize them down the road. Operator: Okay. Thank you. And it seems that we have no further questions at this time. This concludes the Q&A session and today's conference call. I would like to thank you all for your participation. You may now disconnect your lines. Have a pleasant day, everyone.
Operator: Good afternoon, and welcome to the BioCardia Third Quarter Financial Results and Business Update Conference Call. All participants will be in listen-only mode. After today's presentation, participants of this call are advised that the audio of this conference call is being broadcast live over the Internet and is also being recorded for playback purposes. A webcast replay of the call will be available approximately one hour after the end of the call. I would now like to turn the call over to Miranda Peto of BioCardia Investor Relations. Please go ahead, Miranda. Miranda Peto: Thank you. Good afternoon and thank you for participating in today's conference call. Joining me from BioCardia's leadership team are Peter Altman, President and Chief Executive Officer, and David McClung, the company's Chief Financial Officer. During this call, management will be making forward-looking statements, including statements that address BioCardia's expectations for future performance and operational results, references to management's intentions, beliefs, projections, outlook, analyses, and current expectations. Such factors include, among others, the inherent uncertainties associated with developing new products, technologies, and obtaining regulatory approvals. Forward-looking statements involve risks from those statements and other factors that may cause actual results to differ materially. For more information about these risks, please refer to the risk factors and cautionary statements described in BioCardia's report on Form 10-Ks filed with the SEC on 03/26/2025, and in subsequently filed reports on Form 10-Q. The content of this call contains time-sensitive information that is accurate only as of today, 11/12/2025. Except as required by law, the company disclaims any obligation to publicly update or revise any information to reflect events or circumstances that occur after this call. It is now my pleasure to turn the call over to Dr. Peter Altman, BioCardia's President and CEO. Peter, please go ahead. Peter Altman: Thank you, Miranda. And good afternoon to everyone on the call. This has been another quarter of solid accomplishment for BioCardia. As we have been working on regulatory submissions on the strength of our clinical data for cardiac cell therapy for the treatment of ischemic heart failure of reduced ejection fraction, and for our Helix transendocardial delivery system, as well as advancing the cardiac Heart Failure II clinical study. Today, I will provide brief updates on our active clinical programs and progress on our Helix delivery system and heart 3D fusion imaging. On BCDA-one, our CARDI Amp autologous cell therapy to treat microvascular dysfunction for the treatment of ischemic heart failure, which has potential to help roughly two million ischemic heart failure patients with New York Heart Association Class II and III symptoms. Many of these patients have a prognosis worse than many cancers and few remaining options. This places a terrible burden on patients, their families, and the healthcare system. The CardiAmp cell therapy selects patients based on the nature of their marrow cells, which are then harvested, processed, and delivered to the heart in a single procedure. The CardiAmp system has received FDA breakthrough designation based on our clinical results, and we now have three remarkably consistent clinical trial results demonstrating promise for the treatment of these patients. Even as we are actively enrolling in the confirmatory cardiac heart failure two clinical study, we are having discussions with the FDA and PMDA on the approvability of the CardiAmp system for these patients. In this third quarter, we announced a positive preliminary clinical consultation with Japan's pharmaceutical and medical device agency, or PMDA. We have since responded to all questions from this meeting and anticipate our next consultation with PMDA soon, the outcome of which could enable us to submit for approval of the CardiAmp system for market entry in Japan. Japan has a strong interest in heart failure therapies due to its aging population, the limited use of heart transplantation and left ventricular assist devices, due in part to cultural issues, and Japan's PMDA has approved other cell therapies, including for heart failure. Our CardiAmp Cell Processing Platform is approved in Japan for orthopedic applications, which makes our Helix catheter system the only new product to be introduced with good performance in more than 400 clinical procedures. In parallel, we anticipate requesting a meeting with the FDA on the approvability of the FDA-designated breakthrough 2025. The Cardio Amp Heart Failure II confirmatory Phase III 250 patient randomized placebo-controlled trial is starting to accelerate now. Staff is coming off the enormous effort of closing up the CardioM HF study. Four centers are actively enrolling, three have randomized their first patients, and additional centers are actively being onboarded. The CARDI AMP HF2 study uses a similar three-tier composite primary outcome measure to the CardioM HF study consisting of all-cause death, non-fatal major adverse cardiac events, and a validated quality of life measure. In both our Phase two TAKHIFT study and Phase three CARDIAP HF study, both randomized double-blind placebo-controlled studies, this CARDI M HF2 composite efficacy endpoint was achieved with statistical significance in the patients with elevated NT proBNP, who are the focus of the CARDI AMP HF2 study. David McClung: CARDI AMP heart failure two trial advances include using the cell population analysis at screening to define treatment dose and improvements to the Helix system, including our FDA-approved morphDNA steerable guide platform. These advances are expected to enable more patients to qualify for the therapy, enhance the ease of enrollment, and improve physician control during the interventional cell therapy procedure. CardioMF HF2 is supported by the Center for Medicare and Medicaid Services with reimbursement for both treated and control patients. In addition to the potential for approvals based on existing data, we are pursuing pathways to fund this study to completion. BCDO2 is our second indication for this therapy. The CARDI amp cell therapy in chronic myocardial ischemia. The top-line primary outcomes from the open-label cohort rolling cohort of the cardiac cell therapy and chronic myocardial ischemia trial show patients experienced increased exercise tolerance of an average of eighty seconds, an average of 82% reduction in angina episodes at the six-month primary endpoint when compared to measurements prior to cell therapy treatment. Sixty percent of the patients showed substantial improvements in both measures. The minimally invasive therapy was well tolerated with no treatment-emergent major adverse cardiac events. We are preparing results for scientific presentation and publication. The promise of these results suggests that the opportunity to positively impact patient lives may be double that of the ischemic heart failure indication we are pursuing as our lead program. BCDA-three is our second therapeutic platform. Our CARDI allo allogeneic mesenchymal stem cell therapy. This off-the-shelf cell therapy is manufactured at BioCardia and is being advanced in the first prospective trial focused on inflammatory ischemic heart failure of reduced ejection fraction. We believe this program is well-positioned for near-term non-dilutive funding to complete the Phase one-two 39 patient trial. The results of this trial, if in line with our previous experience in the 30 patient dose escalation TRIDENT study, are expected to enable submission for conditional approval in Japan. We expect clarity on the anticipated non-dilutive funding in 2026. On the Helix agent delivery front, we have completed an update to our master file for this delivery device, which supports our therapeutic agent programs and those of therapeutic agent partners. We are actively preparing a de novo 05/10 submission based on the strength of our clinical data. This Helix submission and anticipated approval of our low-risk agent delivery device should enhance support of regulatory agencies for the CardiAmp programs. As the CARDiAmp cell processing is already approved in The United States, the European Union, and Japan for other indications. Related to biotherapeutic delivery, in August we announced our partnership to develop and commercialize Heart 3D Fusion Imaging, for biotherapeutic delivery and cardiac biopsy with CAR TECH, a Netherlands company developing enhanced real-time fusion imaging solutions for interventional procedures. Together, we have already realized promising results for Heart 3D Fusion Imaging in animal studies using both MRI and CT imaging and intend to advance to the clinic in 2026. Looking forward, we have updated our milestones in our press release today for BCD01, our cardiac autologous cell therapy in heart failure. We expect Japan PMDA clinical review in Q4, FDA meeting request on approvability also in Q4, and a manuscript published in Q1 with cardiac heart failure two enrollment continuing. For BCDO2, cardiac autologous self-therapy in chronic myocardial ischemia, we are seeking peer-reviewed publication of the positive results in Q1 2025, 2026, excuse me, and for BCDO3, cardio allogeneic mesenchymal stem cell therapy in heart failure, we anticipate non-dilutive funding coming together in 2026. For our Helix biotherapeutic delivery system, we anticipate FDA submission for approval in the fourth quarter of this year. I will now pass the call to David McClung, our CFO, who will review our third quarter 2025 financial results. David? David McClung: Thanks, Peter, and good afternoon to everyone joining us. For the third quarter 2025, research and development expenses increased to $936,000 from $931,000 in 2024. And also increased to $3,800,000 in the nine months ended September 2025 from the $3,000,000 in the nine months ended September 2024. The increases were driven by closeout for the cardiac heart failure study, including statistical data analysis and new enrollment in the subsequent cardiamp heart failure two trial, coupled with regulatory activities in support of potential approvals. We anticipate R&D expenses will increase modestly in 2025 year over year as we continue advancing our therapeutic candidates in The United States and in Japan. Selling, general, and administrative expenses decreased to $600,000 in 2025 compared to $800,000 for 2024, primarily due to lower compensation expense. Selling, general, and administrative expenses decreased to $2,400,000 during the nine months ended September 25, as compared to $2,800,000 for the nine months ended September 2024, primarily due to lower professional services coupled with lower share-based compensation expense. We expect 2025 SG&A expense to track close to the 2024 levels year over year. Our net loss was $1,500,000 for the three months ended September 2025 compared to $1,700,000 for the three months ended September 2024. And it was $6,200,000 for the nine months ended September 25 compared to the $5,500,000 for the nine months ended September 2024. Net cash used in operations during the third quarter 2025 decreased to $1,500,000 compared to 1.7 for the third quarter of the prior year. Net cash used in operations for the nine months ended September 2025 decreased to $4,900,000 as compared to 5,500,000.0 for the nine months ended September 2024. The company ended the quarter with $5,300,000 in cash, reflecting both the $6,000,000 September financing and 304,000 shares of stock sold during the quarter under the company's ATM program. Cash currently on hand is expected to provide runway into 2026 without additional financing. This concludes our prepared remarks. We're happy now to take questions from attendees. Operator: At this time, we will begin the question and answer session. The first question comes from Joe Pantginis with H. C. Wainwright. Please go ahead. Lander Egaña-Gorroño: Hello, everyone. This is Lander on for Joe. Thanks for the updates and thanks for taking our questions. So for the CardiAmp CMI data announced in September, could you please clarify, Peter, how many patients were part of this dataset? How are these results incremental to the initial four patient rolling cohort data presented in April? Thank you. Peter Altman: Appreciate the question, Lander. The cardiac CMI data contains the five patients that have been enrolled at their primary endpoint out to six months. We have additional longer-term follow-up data, and the key takeaway is that the results in this open-label rolling cohort are pretty compelling relative to what has been out previously. It is a modest increase in data. But that roll of report is now completed. And we're wrapping it up for submission for publication. Lander Egaña-Gorroño: Okay, perfect. So you're wrapping it up with five patients, right, for the rolling cohort, open label? Correct. Peter Altman: Correct. And the cardiac CMI study benefits from the extensive clinical experience we have in the CardiAmp ischemic heart failure trials. Fundamentally, to advance in this indication, the rolling cohort's goal is fundamentally to see, are there signals that we can observe that are compelling? Are there any safety issues that are not expected? And so the trial design is actually designed as a trial for approval with the rolling cohort. So we have updated the FDA on all the experience. And it is well-positioned to go forward, although resources will have us focusing on the cardiac HF2 program because we see it as much closer to market in the near term. Lander Egaña-Gorroño: Perfect. Thank you very much. This is helpful. Thanks. Peter Altman: Appreciate the question. Thank you. Operator: The next question comes from James Molloy with Alliance Global Partners. Please go ahead. James Francis Molloy: Hey guys, thank you very much for taking my questions. Was wondering if you could walk through, I know you have three patients in four centers enrolling. Could you walk through any anecdotal stories on how recruitment is going and what the challenges or not challenges get the patients in that trial that the docs are seeing out there? Peter Altman: Well, Jim, thank you for the question. The status of CardiAmp Heart Failure two is that it's coming along actually rather smoothly. The enrollment is easier in this trial because of our use of the cell population analysis to essentially set dosage where patients previously might have been excluded. The FDA has blessed an approach where we can modify the dosing in patients who had fewer cells available to essentially increase the dosing. And so as far as challenges that we have, there's no real challenges. In fact, this is going to be relatively straightforward based on the experience we have. I think our fundamental challenge, Jim, is just resources and bandwidth. We are completing a Phase III trial wrapping that data set up for a manuscript for the FDA and for the Japan PMDA. And so as I'm sure you can expect, all of the clinical data gets woven through that and we have a relatively lean team and that same team is doing that work. So that is being essentially closed up now. All those projects, pretty much all the work is done. And so as you've seen in recent weeks, centers will be treating their first patient and we'll be moving forward. We've actually treated more patients you've alluded to. And the way this works for the patient, there is a delay in the time that a patient from the time that they are randomized, excuse me, from time that they are screened until the time that they are actually complete the baseline measures because we've built into this trial something a delay actually to address the Hawthorne effect. The Hawthorne effect is a process where as soon as a patient is observed they begin to change their behavior. If they're on meds and they haven't been taking them, they start taking their meds for example. And so as soon as a patient is consented for the trial, we do some preliminary measures to make sure they're likely to qualify. And then we essentially observe them for a month before we then advance them to care. So the patients that you're seeing treated in recent press releases in these centers getting start up, have been in the queue for a very long time. And so you'll start seeing more patients coming through the queue. I think that the challenges in enrollment are this is still a larger trial. It's 250 patients. We do benefit from Medicare reimbursement for both treatment and control patients. The trial is overpowered. And so I think what we'll see ahead as the team comes off these big initiatives we have to pursue pathways to approval in The United States based on the existing data. And in Japan based on the existing data, this trial will be accelerating. Of course, the conversations with Japan PMDA and with FDA may change some of our prioritizations here as well. So these are all interwoven into really a fundamental concept is that we have some really nice data. Phase one data, the Phase two data and the Phase three data are all consistent and support safety and benefit from our perspective. That is a shared perspective from other parties. Is it sufficient for us to actually secure an approval is to be determined. But that strength of that data underlines our enthusiasm for Cardi M Heart Failure II as well, as well as that of the physicians. So all of the physicians involved in cardiac heart failure one are continuing with cardiac heart failure two. And this is not just the executive steering committee, but the physicians on the data safety monitoring board and the physicians on the clinical events committee. So everybody was positive and supportive of this subsequent trial. And is excited to see what the outcomes will be. The enrollment will come a pace. And it's just it's resource driven primarily. There's no extra hurdles or unusual issues. In fact, I would say now that we've completed Cardiamp HF one, the second trial is much, much easier for us to do. James Francis Molloy: Thank you. My apologies, did I mishear? On the prepared remarks that you said you had four centers enrolling and three of them had their first patients enrolled? Peter Altman: That's correct, but some of them have had more than one patient enrolled, Jim. James Francis Molloy: I'm sorry, is do you have the, did you said what the current count is? Peter Altman: We're not sharing current count as we go. We're just we will announce as each site does their first patient and, just to basically to acknowledge the efforts to get there and to help them in with their communication to their colleagues and peers on enrollment. But we're not going to give a blow by blow this many patients this week, this many patients next week. James Francis Molloy: Understood. Makes sense. And then maybe last for worries. You said in the first quarter, you guys are very sort of clear that you're could is that you're to complete a non-dilutive funding first quarter 2026 for BCDA03. Is there a partnership or something lined up that is expected to close first quarter 2026? Yes, Peter Altman: Yes. So what we have is, we actually have some, federal grant funding assuming the federal government opens up. And there are some nuances to it, but we have we've had some really interesting conversations with the NIH and we're expecting the NIH to step up and fund this program. Because of not just because of their enthusiasm, for the data in this clinical indication of these cells at this very high dosage we're delivering, but also because of some of the things that are under the hood, shall we say. And so, yes, so right now I put the handicap on that. Nothing's guaranteed, but I put it as a high probability that will come through. And, that program will be fully funded to go forward. Our team, it's what we do. And so, it's basically going to be turning the crank running another trial in parallel to CARDI AMP HF2 that trial will be fully funded. James Francis Molloy: Great. Thank you very much for taking the questions. Peter Altman: I appreciate the time, Jim. Thank you. Operator: The next question comes from Kumar Guru Raja with Brookline Capital Markets. Please go ahead. Kumaraguru Raja: Thanks for taking my questions. So I just need some clarification with regard to the interactions with the Japanese regulatory authorities. So what are the next steps here that needs to be done before you can submit for approval in here. And also with regard to the interactions positive interactions, any other additional color you can share, that would be great. Peter Altman: Absolutely. Well, appreciate the question, Kumar. So where we're at right now, so the process in Japan is a series of consultations. And the key hurdle for us is a formal clinical consultation. And if we've been having preliminary clinical consultations and they are fully apprised of the data. And so the process and what they're deciding is, is the CARDIamp HF clinical data in combination with the Phase two TAKHIFT clinical data in combination with the Phase one TABME data is that sufficient for them to say that the clinical data is sufficient to support safety and efficacy in Japan for this population that right now really has no other option. And that's the key question. So the clinical consultation is the challenge. We respect that the cardiac HF2 trial is far from perfect. But there are some very strong signals in the data, particularly in the sickest of patients and greatest need of therapy. And so we are going to have that conversation with them. I would say ninety five percent to ninety nine percent of the work with respect to these submissions and conversations are done. And so we're in a waiting mode currently. With respect to the FDA, as shared in my comments, they have all of the updated annual reports and details on the study. We have breakthrough designation, but we are going to be submitting the de novo 05/10 application for approval of the Helix system. As a first step to get the agency comfortable that Helix system on its own should be approved. To basically eliminate a key bottleneck in the field of biotherapeutic delivery to the heart. And then come to them with CardiAmp once they have received the submission for approval on the Helix system, we would like to engage them on this is an autologous cell therapy, if it was a homologous usage, would be no regulatory approval required. The data we have is excellent. And yes, it's not perfect. But from an outcomes basis, and a risk-benefit basis, it's actually quite remarkable. And so we're going to have those conversations. I think that the potential in Japan is greater than the potential in The United States at this time. And if these conversations don't bear great fruit, data we are full bore on Cardi M Heart Failure II program. And the efforts that we've taken to prepare these submissions is substantially similar to the effort and it's overlap with respect to the peer-reviewed manuscript that's in process. And so that is going to be a critical element for enhancing enrollment in the trial as Jim Molloy just was touching on. So drives enthusiasm and we think, the physicians who know the data are pretty jazzed but, we need to get it out there more broadly to enhance referrals and beyond. That's sort of the timeline on those two efforts on Cardium. Kumaraguru Raja: Okay. That's great. With regard to the HF2, you said four clinical sites are on board. What are your expectation with regard to getting additional sites on board? Thank you. Peter Altman: The additional sites onboard, it's really a bandwidth issue on our side. There's also a slight challenge here that's a new element that's happening because of the reduction in some of the overhead funding that the federal government has put in place a lot of clinical research sites are asking for quite a bit more for startup costs and beyond. But because we've already been working at many of these sites, don't expect that to be a significant issue for BioCardia. So really it's just our bandwidth moving through the there's going to be new contracting, there's going to be new budgeting and that just takes staff time. And right now, some of that staff is working on closing out the regulatory submissions and making sure the manuscript is dialed in for submission. So, I we're not putting out numbers on the timing other than it's at least another year of enrollment in this trial. Kumaraguru Raja: Okay. Great. Thank you. Peter Altman: Appreciate Kumar. Thank you for the question. Operator: This concludes our question and answer session. I would like to turn the conference back over to Dr. Peter Altman for any closing remarks. Peter Altman: Appreciate it, Drew. So we thank BioCardia investors who enable our efforts developing enhancing therapies broadly for cardiovascular care. There's great promise for value creation from our therapeutic and biologic delivery development activities with potential transformative near-term catalysts from active regulatory and partnering discussions. On behalf of our entire team, I thank you for your continued support. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Welcome to the Immuneering Corporation Conference Call to discuss the company's Third Quarter 2025 financial results and share investigator-presented clinical case studies in pancreatic patients. At this time, all participants are in listen-only mode. Following management's prepared remarks, we will hold a Q&A session. To ensure that we have ample time to address everyone's questions, we would like to ask each person to limit themselves to one question and one follow-up. As a reminder, this call is being recorded today, Wednesday, November 12, 2025. I would now like to turn the conference over to Laurence Watts of New Street Investor Relations. Laurence Watts: Thank you, Operator. Joining us on the call today from Immuneering Corporation are Chief Executive Officer, Benjamin Zeskind, Chief Scientific Officer, Brett Hall, Chief Medical Officer, Igor Marchanski, Chief Accounting Officer and Treasurer, Mallory Morales, and Ibi Brakewood, our Chief Business Officer. Benjamin Zeskind: During this call, management and our two investigators will refer to slides you can find in the updated version of our corporate deck available in PDF on our IR website. Throughout this call, management will be making forward-looking statements, including statements related to its Phase IIa trial of atezvastib as well as the timing of additional data from the study and the company's development plans. Our actual results and the timing of events could differ materially from those anticipated in such forward-looking statements as a result of risks and uncertainties. Factors that could cause these results to be different from these statements include factors the company describes in its security filings, including its annual report on Form 10-Ks and our quarterly reports on Form 10-Q. Immuneering Corporation undertakes no duty or obligation to update any forward statements as a result of new information, future events, or changes in its expectations. With that, I will turn the call over to Benjamin Zeskind, Chief Executive Officer of Immuneering Corporation. Ben? Benjamin Zeskind: Thank you, Laurence. Good afternoon, everyone, and thank you for your interest in Immuneering Corporation. We do not always hold quarterly calls, but we try to do so when we have something interesting to share. And today, we are very fortunate to be joined by two investigators from our Phase 2a trial, who will walk us through two remarkable case studies of first-line pancreatic cancer patients treated with atebimetinib in combination with FOLFIRINOX. The investigators are Dr. Allison J. Ocean, Professor of Clinical Medicine at the Weill Medical College of Cornell University, and Dr. Gregory Bata, Associate Professor of Medicine at the Moores Cancer Center at UC San Diego. Doctors are, of course, busy individuals who plan to start the call with their respective case studies, after which we will let them get back to their patients. Then we will share a summary of the third quarter and why it was so transformational for Immuneering Corporation. In September, we shared an update on 34 first-line pancreatic cancer patients treated with atebimetinib in combination with gemcitabine nab-paclitaxel, with remarkable overall survival. We are as excited as ever about the overall survival we are seeing in that cohort, and we are very excited to share an update soon. We are currently planning to do so in 2026, possibly at a major medical meeting. Today, we wanted to talk about patients from a different arm of our study, a study of first-line pancreatic cancer patients treated with atebimetinib in combination with FOLFIRINOX. FOLFIRINOX is also a standard of care chemotherapy in the first-line setting. Compared with gemcitabine nab-paclitaxel, it has shown slightly longer survival in pivotal studies but with harsher side effects. So it's typically given to younger, higher fitness patients at centers that are well equipped to manage the harsher side effects. Atebimetinib in combination with gemcitabine nab-paclitaxel remains our top priority because the chemotherapy itself is so much better tolerated and the overall survival we have reported is so encouraging. That being said, down the road, the ability to combine atezvimetinib with FOLFIRINOX may ultimately give oncologists more options. And certainly, when we see remarkable outcomes in this cohort, it just lends further robustness to the data we have previously reported and highlights atebimetinib's potential to drive differentiated outcomes for cancer patients. With that introduction, let me hand the call over to Dr. Ocean, who will walk you through the first case study. Dr. Allison Ocean: Thank you, Ben. My name is Dr. Allison Ocean, and I'm a medical oncologist and attending physician in gastrointestinal oncology at New York Presbyterian Hospital Weill Cornell Medical Center. I am also an investigator in Immuneering Corporation's Phase 2a study of atebimetinib and an occasional paid consultant for Immuneering Corporation. In my career, I have treated a large number of pancreatic cancer patients, and I can assure you the unmet need here is vast. The case study I'm about to walk you through comes from the arm studying atebimetinib in combination with FOLFIRINOX in first-line pancreatic cancer. So this case study involves a 71-year-old female patient with metastatic pancreatic cancer with a KRAS G12D mutation who is currently being treated with daily atebimetinib plus FOLFIRINOX. Initially, she was unable to tolerate irinotecan, so her chemo now is essentially FOLFOX. The patient has now been on treatment for approximately five months and remains on treatment. The patient's target lesion located in the liver steadily reduced over the course of three scans to the point of being undetectable for an unconfirmed complete response. On the right, you see the combination of atebimetinib with FOLFIRINOX led to, at the first scan, an unconfirmed partial response, a 54% reduction in some of the longest diameters, and then that partial response confirmed with an 81% reduction in some of the longest diameters at the second scan. By the third and most recent scan, the patient had a 100% reduction in their sum of longest diameters. In other words, the lesion was rendered undetectable for a complete response that is technically considered unconfirmed until we see it repeat at a second scan. Importantly, the patient has seen improved quality of life, stable weight, and describes feeling extremely well. In fact, she tells me she has never felt better. This is not surprising because our institution's experience with atebimetinib has generally been one of good tolerance in the trial patients. It is very unusual to see a complete response with chemotherapy alone in a non-BRCA mutated adenocarcinoma patient like this one. So I believe atebimetinib has made a real difference for this patient. Our institution has treated several patients in various arms of the atebimetinib trial, including the combination of atebimetinib with gemcitabine nab-paclitaxel, and we are very excited that it is moving into a planned Phase III study. This is a huge area of unmet need, so potential advancements like this are even more meaningful. With that, let me hand things over to Dr. Bata, who will walk you through a second case study. Dr. Gregory Bata: Thank you, Dr. Ocean. My name is Gregory Bata. I'm a medical oncologist who specializes in treating solid tumor cancers of the gastrointestinal system at the University of California San Diego. I'm also an investigator for Immuneering Corporation's Phase 2a study. In my career, I have also treated a large number of pancreatic cancer patients. The patient in this case study, again from the arm studying atebimetinib in combination with FOLFIRINOX in first-line pancreatic cancer patients. For this case study, the patient was a 61-year-old female patient with confirmed metastatic pancreatic cancer to the lung and a confirmed KRAS G12D mutation. The patient initially achieved an unconfirmed partial response and then stabilized for about five to six months. During that time, the primary lesion in the pancreas continued to shrink, achieving a 56% reduction by around seven months. The patient's response measure at Candidate for treatment with curative intent. The remaining primary lesion was irradiated, and then the patient underwent a Whipple procedure to remove the remaining pancreatic lesion and has now restarted treatment on atebimetinib monotherapy in the post-surgical setting. At the time of this call, the patient has now been on atebimetinib either in combination or as a monotherapy for over fourteen months and has experienced great quality of life and stable weight. Much like the patient Dr. Ocean spoke about. Let me take a moment to talk about how rare that sequence of events is. Patients are not typically eligible for surgery once their condition has turned metastatic. But in this case, combination treatment with atebimetinib and FOLFIRINOX was deemed so successful that surgery, preceded by radiation, with curative intent was considered a viable option. I believe that atebimetinib helped us convert this patient to a surgical candidate with curative intent, an outcome that I have rarely seen with chemotherapy alone. And today, the patient has no radiologic evidence of new disease. Now, while the patient has to be censored from survival measurements, the patient continues to do well approximately fourteen months after starting treatment and remains on atebimetinib monotherapy treatment. Our site has also treated many other patients with atebimetinib, and we have seen other responses that would be unexpected with chemotherapy alone. Atebimetinib's tolerability is also unexpectedly good, even relative to RAS inhibitors. We are very excited for the planned Phase III study of atebimetinib in combination with gemcitabine nab-paclitaxel. And with that, let me hand the call back over to Ben. Benjamin Zeskind: Thank you, Dr. Bata. Let me take this opportunity to thank both you and Dr. Ocean for taking time out of your busy schedules to join us and provide your insights. We're very grateful to have both of you involved in our ongoing studies and for everything that you do every day for patients with cancer. And with that, let you get back to your important work. What I take from the two case studies just presented is several fold. Firstly, that these impressive results we are seeing for atebimetinib in combination with FOLFIRINOX provide another pillar of robustness supporting the extraordinary overall survival we presented for atebimetinib plus modified gemcitabine nab-paclitaxel in September. Secondly, that patients dosed with atebimetinib plus FOLFIRINOX could potentially provide additional optionality alongside our top priority planned pivotal program for atebimetinib plus modified gemcitabine nab-paclitaxel. Thirdly, we believe the tolerability of atebimetinib is going to be a real differentiator. Of course, the most important differentiator is extraordinary overall survival. And when you layer onto that, Dr. Bata saying a patient has experienced great quality of life, and Dr. Ocean saying her patient has never felt better, it really gives you a sense of what we mean when we say we want to keep patients alive and help them thrive. These patients are clearly thriving, we couldn't be happier for them. Now, let me take a step back and just recap why 2025 was truly transformational for Immuneering Corporation. In September, we announced extraordinary overall survival data in 34 first-line pancreatic cancer patients treated with atebimetinib in combination with gemcitabine and nab-paclitaxel and strengthened our balance sheet with $225 million of cumulative financing, including a $25 million strategic investment from Sanofi. Importantly, these achievements extend our cash runway into 2029 and fund the top-line readout of our planned pivotal program for atebimetinib plus modified gemcitabine nab-paclitaxel, along with our clinical work in lung cancer and preclinical work in other areas. In September, we reported 86% overall survival at nine months in 34 first-line pancreatic cancer patients treated with atebimetinib plus modified gemcitabine nab-paclitaxel, with a nine-month median follow-up. For context, the standard of care reports approximately 47% overall survival in nine months. We are excited to share an update on atebimetinib in combination with gemcitabine nab-paclitaxel and currently plan to do so in 2026, possibly at a major medical meeting. We also made progress across a number of other fronts in the third quarter. In July, the U.S. Patent Office granted our U.S. Composition of Matter patent for atebimetinib, which is expected to provide exclusivity into 2042 with potential eligibility for patent term extension. We have patent applications pending that extend exclusivity until late 2044. Then in August, we announced a clinical supply agreement with Eli Lilly intended to evaluate atebimetinib in combination with olomiraciv, a second-generation KRAS G12 inhibitor, in a planned Phase 2a trial in lung cancer patients who have progressed on prior therapy. Remember that earlier this year, we also announced a clinical trial agreement with Regeneron intended to evaluate atebimetinib in combination with Libtayo, an anti-PD1 inhibitor, in advanced lung cancer. Together, we believe these agreements position us to demonstrate atebimetinib's combinability across a variety of tumor types, potentially expanding its market opportunity beyond the already considerable unmet need in first-line pancreatic cancer. It's having that the durability and tolerability make it ideal for a wide variety of combinations across many different types of cancer. Before I cover the multitude of catalysts we believe we have coming up, let me quickly turn things over to Mallory to walk you through our third-quarter financial update. Mallory Morales: Thank you, Ben. Our third-quarter financial results press release issued post-market this afternoon covers our financial results in detail, so I will not go through them at length on this call. What I will highlight, however, is our significantly improved cash position, which was bolstered by three successful offerings that took place in August and September. Namely, a $25 million private placement in August, a $175 million underwritten offering of Class A common stock in September, coupled with a $25 million private placement of Class A common stock to Sanofi. As a result, our cash and cash equivalents as of September 30, 2025, were $227.6 million compared with $36.1 million as of December 31, 2024. Based on management's current operating plans, the company now expects its cash runway to be sufficient to fund operations into 2029. With that, let me hand the call back over to Ben. Benjamin Zeskind: Thank you, Mallory. In terms of upcoming near-term milestones, in 2025, we expect feedback from regulatory agencies and continued preparations to begin dosing patients in the pivotal trial of atebimetinib in combination with gemcitabine nab-paclitaxel in first-line pancreatic cancer patients. In 2026, we plan to announce updated circulating tumor DNA data on acquired alterations at a major scientific meeting. In 2026, we plan to report updated survival data from first-line pancreatic cancer patients treated with atebimetinib plus modified gemcitabine nab-paclitaxel, potentially at a major medical meeting. In mid-2026, we expect to dose the first patient in the pivotal Phase III trial of atebimetinib in combination with modified gemcitabine and paclitaxel in first-line pancreatic cancer, pending regulatory feedback. And in 2026, we expect to dose the first patient in the trial of atebimetinib in combination with Libtayo in non-small cell lung cancer. Our third-quarter press release includes a detailed list of the near-term catalysts we have coming up, each one an opportunity to create value for our shareholders and each one a step forward in helping patients live longer and feel better. Coming out of the third quarter, we have never been better capitalized, nor have we ever had more evidence of atebimetinib's ability to shrink tumors slowly and surely with remarkable durability and tolerability. In summary, then, I could not be more proud of the benefits we're delivering for patients and I could not be more excited about what the coming weeks and months will bring for Immuneering Corporation. With that, we're happy to take questions. Operator? Operator: Thank you. And we will now begin the question and answer session. If you would like to ask a question, please press 1 on your telephone keypad to join the queue. If you would like to withdraw your question, simply press 1 again. If you are called upon to ask your question and are listening via loudspeaker on your device, please pick up your handset and ensure that your phone is not on mute when asking your question. Just a reminder, we ask that you please limit yourself to one question and one follow-up only. And after that, you can just simply join the queue again. Thank you. And your first question comes from Jay Olson from Oppenheimer. Please go ahead. Jay Olson: Oh, hey, guys. Congrats on all the progress, and thank you for providing this update. Had a couple of questions. To start, can you talk about, based on these new case studies, and the clean safety profile, for atebimetinib, are you considering opportunities for PDAC in the adjuvant setting? And then we had a follow-up if we could. Benjamin Zeskind: Hey, Jay. Thanks, thanks for the question. You know, right now, our top priority is the first-line setting and the combination of atebimetinib with the modified gemcitabine nab-paclitaxel. I mean, I think the, you know, the overall survival that we announced in September, 86% overall survival at nine months, is just so remarkable. And the, you know, the tolerability that we saw with only two categories of adverse events at the Grade 3 level in more than ten percent of patients. So that's really our top priority, but, you know, I think you're absolutely right. There's a wide range of potential opportunities kind of down the road a little bit. And certainly, adjuvant is one that we're thinking carefully about among others. So no decisions to report there today, but certainly, I think you're absolutely right. There's a lot of potential in a lot of different areas, and you know, I think first-line pancreatic cancer is really just the beginning for atebimetinib, but it's, you know, it's our top priority, and it's a place we're gonna start. Jay Olson: Okay. Understood. Thank you for that. And maybe just to follow-up, recognizing that you're prioritizing the combo of atebimetinib with gemcitabine nab-paclitaxel. Given these new case studies and again, the clean safety, would you consider potentially combining atebimetinib with 5-FU based regimens? Benjamin Zeskind: Yeah. It's absolutely something that we're thinking about, Jay. For all the reasons you pointed out. You know, again, it's not currently our top priority. The top priority certainly remains the atebimetinib combination with the modified gemcitabine nab-paclitaxel in first-line pancreatic cancer. Just because, you know, we see such exciting overall survival there. But we're, you know, I think part of the reason for sharing these cases today, number one, they kind of further validate the data that we presented with gemcitabine nab-paclitaxel in September. They show that we can combine with FOLFIRINOX, which not everyone can. And I think to your point, that certainly demonstrates the potential for greater optionality down the road. So, you know, it's certainly something that we're thinking about and considering. You know, I think these cases also really emphasize what a differentiator tolerability is for atebimetinib. Right? I mean, you heard Dr. Bata saying his patient has experienced great quality of life. You heard Dr. Ocean saying her patient has never felt better. And so I think that does really give you a sense of the tolerability and, you know, it creates a lot of potential options down the road, whether it's combining with FOLFIRINOX, going into the adjuvant setting, and many more. So, you're absolutely right. There's a lot of possibilities for that. But, you know, our top priority remains the first-line setting in combination with gemcitabine nab-paclitaxel. Jay Olson: Okay. Thank you. That makes perfect sense. Maybe if I could sneak in one last question. Sure. Just based on the totality of data that you've shared so far and the differentiated profile for atebimetinib that's emerged. Can you just update us on your latest thoughts about where atebimetinib fits into the competitive landscape in PDAC? Benjamin Zeskind: Yeah. I think the overall survival that we shared in the first-line setting is extraordinary. Right? I mean, you know, and look. We welcome every company that's working in pancreatic cancer. This is a huge unmet need that's not gonna be solved by any one company alone. But, certainly, we believe we're the company that's gonna solve it first and best in the first-line setting. Right? There's, you know, there's not another company working in this pathway that we're aware of that's shared first-line overall survival data. And first-line is the real prize in pancreatic cancer because sadly, half the patients don't make it out of the first-line setting. We really hear over and over from oncologists that your first shot is your best shot, and first-line pancreatic cancer is the real prize here. We're the only company in this pathway that we're aware of that's shared overall survival data in the first-line setting. I think our overall survival data is extraordinary. I mean, to have 86% overall survival in nine months in the data we shared in September, that's a 39% separation from the pivotal study of standard of care. Your differentiation on tolerability certainly from, you know, from anything else in this pathway. Right? And, I mean, I think you heard Dr. Bata say that directly, you know, kind of unexpectedly good tolerability even relative to RAF inhibitors. So, you know, I think we're the front runners in first-line. You know, we've shared survival data. That's the gold standard. That's what matters most. And you know, we don't think anyone's gonna beat that. Even if they could match it, we think we'd win on tolerability. So we feel very good about where we sit in the competitive landscape. Jay Olson: Great. Congrats again on all the progress, and thanks for taking the questions. Benjamin Zeskind: Thank you, Jay. And your next question comes from Andrew Berens from Immuneering. Please go ahead. Emily: Hi. This is Emily on for Andy, from Leerink. So, yeah, congrats on the data and those case studies. I guess I'm kinda curious, do you have any plans to share the full data from that FOLFIRINOX combination cohort in the near term? And then, you know, sort of looking ahead, if this data from that cohort continues to look robust, do you have any plans to try and get a compendia listing for this combination so it could be potentially, you know, used and reimbursed in the future? Thank you. Benjamin Zeskind: Yeah. Hey, Emily. Great question. And certainly, you and Andy are affiliated with Leerink. I think I appreciate Immuneering Corporation, but we're not breaking any news on that today. And Andy works for Leerink, but, just joking around. You know, I think the, yeah, we're not guiding to timing yet in terms of when we might share data from the FOLFIRINOX arm because it's just currently not our top priority. Right? Our top priority is first-line pancreatic cancer in combination with gemcitabine nab-paclitaxel where we're just seeing this extraordinary 86% overall survival in nine months in the, you know, in the data we announced in September. So that's the top priority. But, you know, I think what we shared today certainly further validates those data we shared in September. You know, I think it really creates a lot of additional optionality for us that we, you know, we can combine with FOLFIRINOX, and we can see these remarkable outcomes. So you know, we're still considering that relative to everything else. So certainly can't guide on that today. But it's, you know, it's great to see how well these patients are doing and, you know, great to hear Dr. Bata and Dr. Ocean talk about how truly rare these kind of outcomes are with chemotherapy alone. I mean, to have a complete response in pancreatic cancer is just remarkable. And to be able to have a patient that can go on from metastatic disease to be able to go on to surgery with curative intent. These are really just exciting outcomes and we're really happy about them. So yeah. Very excited. Emily: Thanks so much. Benjamin Zeskind: Thank you, Emily. And your next question comes from Greg from Mizuho. Please go ahead. Greg: Hi. Good afternoon. Thanks for taking my questions. And congrats on the newer data as well. I was curious, given that you've provided some timing with regards to a new study with your combination with Regeneron's Libtayo that I think the comment was you'd be able to start that sometime in the second half of 2026. Given that you also have a very interesting collaboration with Lilly, two questions. One, do you think, based on what you know today, whether that study too can get started in '26, or do you think that's more of a 2027 timeline? And then also related, how do you see, on the assumption that they're both going into non-small cell lung cancer, how do you see kind of the differential like positioning between those two combinations? And then a last question is, with regards to your runway, which is out to 2029, and congrats on the success with the financings. But what do you particularly or specifically fund for in terms of clinical development, clinical trials, pipeline advancement? Just trying to get a sense of what you're currently funded for. Thanks. Benjamin Zeskind: Hey, Greg. Thanks, thanks for the questions. We appreciate it. So you're absolutely right. We, you know, we gave new guidance today on the timing of the study of atebimetinib in combination with Regeneron's anti-PD1 Libtayo in lung cancer. And we said not just I think you used the word start, but we specifically said we're going to dose the first patient in 2026. And, you know, I think that's important. Different companies use kind of ambiguous words that can really mean very different things around trial timing, but dosing the first patient is just a really clear and unambiguous milestone. So, you know, that's why we like to be clear with that. So absolutely, dosing the first patient in that study in the second half of 2026. And we're really excited about that because of all the preclinical data, both from us and from the luminaries in the immunotherapy field. Like, Wolchuk, who, you know, has a paper showing that pulsatile inhibition of MET can really enhance the activity of immunotherapy in a lung cancer model in a preclinical setting. So really excited about that study and looking forward to dosing that first patient. With regard to our agreement with Eli Lilly, to evaluate atebimetinib in combination with olomirafen. You'll recall we, you know, that agreement is much more recent. Right? So while we had announced a Regeneron agreement in February, that one we announced over the summer, towards the end of the summer. So it's just a little early to guide on that yet. So we're just not gonna guide on the timing of the first patient dosed. But, certainly in due time, you can expect guidance on that. You know, in terms of the kind of the dynamic between those two, look, I mean, you know, there's, again, a vast unmet need in lung cancer. You know, obviously, the olomirafen is a KRAS G12C inhibitor, so that trial would be focused on patients with a KRAS G12C mutation. Whereas, you know, the use of immunotherapy would potentially address, you know, a different population of patients. So, you know, I think it's early to really comment further on that, but I will say we think atebimetinib with its ability to durably inhibit the MAP kinase pathway with this really kind of excellent tolerability that I think you just heard about from two of the investigators. You know, we think it's really an attractive backbone, frankly, for combinations with a wide variety of agents. And, you know, we've shared preclinical data on quite a few and are exploring quite a few more. So there's just really a broad potential for combinations here, and we don't, you know, we think of these two as kind of just the beginning of the potential for atebimetinib. So just really excited for what we'll be able to do for patients with, you know, what we believe we'll be able to do for patients with lung cancer, colorectal cancer, melanoma, just a really vast number of types of cancer that are frequently driven by the MAP kinase pathway. So really excited about the breadth there. And then, you know, with regard to our cash guidance with runway into 2029, we're certainly funded to conduct Phase III as we've laid out to conduct these studies in lung cancer and then to advance our preclinical pipeline as well. Right? So keep in mind that atebimetinib is the first and most advanced of our pipeline of deep cyclic inhibitors, but we're pursuing and developing deep cyclic inhibitors against a variety of targets in oncology and a variety of pathways. So we're, you know, we're certainly excited to continue that work because I think the ability that atebimetinib has demonstrated of deep CYP1 inhibitors to mitigate resistance mechanisms to durably inhibit tumors and to do so with just really remarkable tolerability. I mean, to hear a cancer patient say they've never felt better as Dr. Ocean mentioned, is just really remarkable. So we're excited for that preclinical pipeline as well. Greg: Thank you, Greg. Operator: And your next question comes from Ami Fadia from Needham and Company. Please go ahead. Ami Fadia: Thanks. Good evening. I have a couple of questions. Firstly, based on the data that we've seen so far with the combinations with FOLFIRINOX and gemcitabine nab-paclitaxel, given the clean safety profile of atebimetinib, what type of patients would you consider, you know, as being best suited for the combination with FOLFIRINOX instead of gemcitabine nab-paclitaxel? And then, you know, as I think as we sort of think about the first-line PDAC positioning, you know, how do you see the safety profile translating into the durability of benefit? And, you know, you mentioned earlier that you're gonna be presenting some additional circulating DNA data next year. If you could sort of talk to how you know, what you've learned from the ctDNA analysis so far and how that might contribute to the overall durability of benefit, particularly in the first-line setting. Thank you. Benjamin Zeskind: Yeah. Thanks, Ami. Great questions. So you're right. Certainly, you know, I think we've demonstrated clearly the ability to combine with FOLFIRINOX, with gemcitabine nab-paclitaxel, and with a clean safety profile in first-line pancreatic cancer patients. And we think that really means that atebimetinib could help a really broad set of patients in the first-line setting in pancreatic cancer. And in fact, one of the things that's nice about our trial is, you know, we don't have to do any genetic testing. Right? So that, you know, there have been trials of BRAF inhibitors where they, you know, they have to confirm the presence of a RAS mutation, and we just haven't we don't need to do that because atezvimetinib targets MEK, which is further downstream in the pathway. And so, you know, it blocks a wide variety of mutations that drive this pathway. And I think that's important for durability because, again, with RAS inhibitors, and maybe this is a good segue to your next question. You know, with RAS inhibitors, you often see resistance mechanisms. You know, you see with RAS inhibitors progression that can sometimes come from, say, KRAS amplifications or BRAF mutations, that's been reported to be common. And, you know, atebimetinib being further downstream at MEK, you know, it blocks those kinds of mechanisms. Right? So the acquired alteration data that we've shared previously that's in our public deck, you know, we saw no acquired alterations in RAS genes and very few in the MAP kinase pathway at all. So what this tells us is, you know, atebimetinib is effectively blocking all the lanes of the highway, if you will. It's, you know, it's blocking a lot of the MAP kinase pathway, it's just it's very hard for the tumor to get around atebimetinib using the MAP kinase pathway. And that's just not the case for RAS inhibitors based on the data that's out there. So, you know, I think that alone by virtue of the target lends durability, and then, of course, the fact that atebimetinib is a deep cyclic inhibitor and has this pulsatile mechanism, you know, I think that also really helps to mitigate resistance. Right? Because instead of providing the tumor with just a steady constant signal that frankly makes it easy for the tumor to adapt. You know, we have this pulsatile approach where we hit the tumor very hard, and then release. And that, you know, it basically keeps the tumor off balance. If you will. It makes it harder for the tumor to adapt and get around the treatment. And this, you know, this was a design goal from the very beginning. Right? I mean, we started this company around the goal of driving overall survival. And so, you know, things like mitigating resistance, things like tolerability, like counteracting muscle wasting. I mean, these were the priorities from the beginning. And, you know, I think that's why we really developed this differentiated class in deep signaling inhibitors and why we're seeing such differentiated survival like the 86% overall survival at nine months and the atebimetinib in combination with gemcitabine nab-paclitaxel that we announced in September. Ami Fadia: With that, thank you, Ami. Operator: Yeah. Next question. Mallory Morales: There are no further questions at this time. Operator: And now I would like to turn the call back over to Benjamin Zeskind for the closing remarks. Please go ahead. Benjamin Zeskind: Great. I want to thank everyone for joining our call today. And we'd like to thank all the patients and investigators involved in our ongoing studies. And we very much look forward to updating everyone on our future progress. Thank you, everyone.
Louisa Smith: Greetings. And welcome to KORU Medical Systems third quarter 2025 earnings conference call. Operator: At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please note this conference is being recorded. I will now turn the conference over to Louisa Smith, Head of Investor Relations. Thank you. You may begin. Louisa Smith: Thank you, operator, and good afternoon, everyone. Joining me on the call today are Linda Tharby, President and CEO of KORU Medical Systems, and Tom Adams, Chief Financial Officer. Earlier today, KORU released financial results for the third quarter ended 09/30/2025. A copy of the press release is available on the company's website. I encourage listeners to have our press release in front of them, which includes our financial results and commentary on the quarter. Additionally, we will use slides to support further commentary in today's call, which are also available on the Investor Relations section of our website. During this call, we will make certain forward-looking statements regarding our business plans and other matters. These comments are based on our predictions and expectations as of today. Actual events or results could differ materially due to risks and uncertainties, including those mentioned in the associated press release and our most recent filings with the SEC. We assume no obligation to update any forward-looking statements. During the call, management will also discuss certain non-GAAP financial measures. You will find additional disclosures, including reconciliations of these non-GAAP measures with comparable GAAP measures in our press release, the accompanying investor presentation, and SEC filings. For the benefit of those listening to the replay, this call was held and recorded on Wednesday, 11/12/2025, at approximately 04:30 PM Eastern Time. Since then, the company may have made additional comments related to the topics discussed. I'd now like to turn the call over to Linda Tharby, President and CEO. Linda, please go ahead. Linda Tharby: Thank you, Louisa. Good afternoon, everyone. Thank you for joining today's earnings call. I'll begin with some commentary on our third-quarter highlights and strategic progress, and then Tom will review our financial results before we open the call for questions. During the third quarter, we delivered strong results. Accelerating revenue growth, outstanding performance in our core immunoglobulin business, new additions to our PST pipeline, and continued progress towards sustained profitability. We achieved our second consecutive quarter with more than $10 million in revenue, representing 27% year-over-year growth. The key growth driver was our core subcutaneous immunoglobulin or SCIG business, which grew 30% driven by international expansion, continued global share gains, and strong underlying patient growth. While we saw some quarterly shifts in purchasing patterns between domestic and international markets, both underlying businesses remain robust. Tom will provide additional details on the shift in geographic mix. From a strategic standpoint, we advanced several important initiatives this quarter. We recently announced two new PST collaborations underscoring our commitment to expanding our pipeline, broadening our label, and reaching additional patient populations. I'll share more detail on those collaborations during our pipeline discussion. We also made meaningful progress toward our goal of expanding into oncology infusion centers, successfully completing a US-based oncology study that validated Core's value proposition in this market. We remain on track for a 510(k) filing by the 2026. On the financial front, we delivered gross profit growth of 21% year-over-year, achieved positive adjusted EBITDA, and generated positive cash flow. To reflect our confidence in the business and continued execution, we are raising our full-year revenue guidance to $40,541,000, representing growth of approximately 20% to 22%, and we are reaffirming our guidance for gross margins and cash flow from operations. Now turning to our US SCIG business, which represents our largest recurring revenue base. As shown on slide four, external forecasts project SCIG market growth of approximately 9% annually over the next five years, outpacing the IVIG segment. This growth outlook is supported by several key factors. First, an increasing number of new patients are being diagnosed and treated with SCIG as their first-line therapy. With approximately 20% market penetration today, SCIG still has significant headroom for expansion in the broader immunoglobulin therapy market. Second, we're seeing broader diagnosis of secondary immunodeficiency or SID, driven by an aging population, higher prevalence of chronic illnesses, and increased use of immunosuppressive treatments such as chemotherapy and CAR T cell therapy. Importantly, we're also seeing growing clinical activity in the SID area, which could ultimately support new reimbursement coverage and add further momentum to SCIG adoption. Finally, pharma partners continue to invest heavily in the SCIG space through device innovations such as prefilled syringes, a strong pipeline of clinical trials, and label expansions. Our leadership position in this category remains very strong. US end-user demand and sales to specialty pharmacies are at or above market growth rates, reflecting solid execution and the continued health and momentum of our US SCIG business. Now turning to international, which continues to be one of the most exciting areas for our accelerated growth potential. Over the past year, we've grown our international market share from roughly 10% to 15% to 20% of the underlying $60 million OUS SCIG market. We see further growth potential in several key areas. First, the shift to prefilled syringes in Europe. This represented the majority of our growth this quarter. The efforts to convert a market from vials to prefilled syringes, using our Freedom Infusion System, including both the pump and consumables, have been very successful. By simplifying administration steps, our system makes it easier for patients to use and for healthcare professionals to train them. Several additional EU countries are planning similar conversions, and our innovation pipeline, combined with strong alignment with pharma partners, positions us well to further penetrate the top European markets. At the same time, we continue to grow infusion set sales in markets that still primarily use vials. Overall, we feel very confident about our momentum. We are targeting to accelerate our overall market share from the 40% range, representing a $10 million to $20 million opportunity over the next several years. This next slide highlights our progress with IG Pharma Partners. Today, we have seven active collaborations across all four major IG manufacturers, which continue to drive core growth alongside their new drug, device, and indication expansion. Commenting on changes from last quarter, we saw two previously announced collaborations push their launch dates into 2027. We have updated our pipeline accordingly. Importantly, we don't see this as having any material impact on current projected revenue. Highlighted in green on the bottom row is our most recent collaboration, which we announced last week. This is particularly exciting because the relationship with this drug manufacturer expands our potential into the broader patient populations for an IG drug where we currently hold a lower global share position. Overall, these IG collaborations are a key driver of both share gains and geographic expansion in the subcutaneous market, reinforcing our strategy of partnering with pharma companies to accelerate adoption and growth. Turning now to new drugs outside of IG. We currently have nine active collaborations, with four potential new drugs expected to be added to our system by 2026. Recent updates to this pipeline are highlighted in green on the slide. First, a rare disease candidate has been pushed by one quarter to Q1 2026 following an FDA request for additional testing data. We do not expect this to materially impact our timeline or 2026 revenue opportunity. Second, we are seeing expanded commercial potential for an additional Empivalli indication, a prior clear drug, which we are currently supporting in phase three trials. Finally, we recently announced our collaboration with Forecast Ortho, supporting their clinical trials for treatments that address complications from joint replacement surgeries. This marks our first opportunity in the orthopedic space and adds approximately 140,000 potential infusions. We estimate that the non-IG drugs in our pipeline with an anticipated launch date between now and 2027 have a commercial potential for KORU of up to $10 million by 2028. With a clinical pipeline of more than 95 drugs exceeding 10 mls across the pharma landscape, we continue to actively pursue additional assets to expand and strengthen our pipeline. This quarter, we also continued to advance our entry into the oncology infusion space. Currently, there are seven subcutaneous oncology drugs administered in infusion clinics using manual syringe push, which requires nurses to stand over patients and inject highly viscous drugs over a period of five to ten minutes. Following our successful EU study, where 97% of nurses preferred the FreedomEdge infusion system over manual syringe administration, we launched a US pilot study in Q2, which concluded in Q3. In total, five oncology infusion clinics participated, administering two leading oncology drugs. The results were very encouraging. We achieved a 100% success rate in administration and met all safety requirements. We also observed high satisfaction among nurses and patients with improvements in physical strain and patient comfort using the Freedom system compared to manual syringe push. Importantly, 70% of nurses reported the ability to multitask, including treating other patients, adding the potential for improved clinic workflow efficiency. Our value proposition continues to resonate across all sites studied. We are progressing in collaboration with one of the seven oncology drugs and remain on track for a 510(k) submission to the FDA, either in Q4 of this year, subject to federal timing, or in Q1 2026, with anticipated commercial market entry in 2026. The total addressable market for oncology infusion consumables is significant, projected to grow from approximately $60 million in 2025 to $138 million by 2030. We are being very diligent about our market entry and regulatory strategy, ensuring that when we enter oncology, we do so in a way that supports patients, providers, and long-term growth. Overall, I'm extremely proud of the team's execution and the strong momentum we built across our business during the first three quarters. With robust growth in our US and international markets, meaningful pipeline progress, and strategic advances across both IG and non-IG opportunities, we're well-positioned. With that, I'll turn the call over to Tom to review our financial results and share our updated guidance for 2025. Tom Adams: Thanks, Linda. Starting with revenue, we are pleased to report our second consecutive quarter of revenue above $10 million with 27% year-over-year growth, which is a record high for KORU. We delivered 30% growth in our overall core business, reflecting the fundamental strength of the underlying demand for our products and KORU's growing market position. The geographic mix this quarter does require some context, for which I'll provide some additional commentary. Our reported domestic revenues declined 5% while international revenue grew by 230%. There were three specific factors that drove this geographic shift in revenue imbalance across our businesses. First, in the domestic core business, as we discussed and anticipated on our previous call, one of our US distributors reduced their on-hand inventory levels this quarter, which temporarily impacted their order volume and moderated our domestic growth. Second, in the international core business, we had some outsized stocking orders to support the exceptionally strong demand we're seeing with prefilled conversions in Europe. We're encouraged by this momentum in PFS and believe that it will continue to be a meaningful driver of international growth moving forward. And third, one of our international distributors sold product to a US distributor, and that transaction had a dual effect. It inflated our international revenue figures while simultaneously reducing our domestic revenue growth. We have since corrected for this dynamic and do not anticipate it occurring again. Altogether, we estimate that these three factors had an underlying impact of approximately $1,200,000 between the two businesses. The bar chart on the right provides a visual to normalize for the imbalance we saw from these factors in the quarter. The bottom line here is that our core business is solid, end-market demand is robust, we continue to grow our market position, and we are really pleased to have posted 30% overall core growth, which underscores the strength of our business on a global scale. Our pharma services and clinical trials businesses fluctuated slightly year-over-year due to the inherent nature of revenue recognition timing associated with the staging of work and milestones. Moving on to gross margin, we continue to consistently deliver margins greater than 60%. This quarter, we reported a gross margin of 60.2%, a decrease of 320 basis points from the prior year period, driven primarily by a combination of higher manufacturing costs and lower yields, geographical customer mix from the strength of our international business, and tariff impacts of approximately 50 basis points. Looking ahead to the fourth quarter, we expect the cost of manufacturing to improve, and as we have indicated throughout the year, we will continue to see a higher mix of growth in our international markets with lower ASPs and a modest tariff impact from our suppliers. We reiterate and expect our full-year margin to stay in line with our guidance of 61% to 63% as we have laid out since the start of the year. We finished this quarter with $8,500,000 in cash, representing cash generation of $400,000, which was driven by lower net losses from higher revenues and disciplined operating expense spending. Additionally, our working capital was balanced, and we saw lighter investments in manufacturing equipment. Our non-cash items were primarily driven by stock comp expenses and depreciation. We continue to see the benefits of our discipline in our cash flow results. Our year-to-date financial highlights that we are progressing towards profitability. Revenue grew 22% to $30,200,000 compared to $24,800,000 in the prior year's first three quarters, with a corresponding operating expense increase of 3%, demonstrating our ability to run a disciplined capital allocation process. Gross margin remains over 60% at 62.1%, despite some Q3 headwinds with manufacturing costs and tariff impacts. We cut net losses in half from $4,500,000 to $2,200,000, and we have delivered positive adjusted EBITDA this year, showing a 109% improvement. As it relates to the balance sheet, our cash usage has dropped to $1,100,000 year-to-date, representing a 60% decrease from last year. Looking ahead for the full year 2025, we are raising our revenue guidance to $40,500,000 to $41,000,000, representing a 20% to 22% growth, an increase from our prior range of $39,500,000 to $40,500,000. This is driven by opportunities for further growth internationally and a strong SCIG market in which we will continue to gain new patient starts. We are reiterating our gross margins in the range of 61% to 63%, as well as reiterating our positive cash flow from operations. We expect to end the year with at least $8,200,000 in cash. I'll now turn the call over to Linda for some closing commentary on future milestones and our vision for continued growth. Linda Tharby: Thank you, Tom. We are making strong strides across our strategic priorities, setting the stage for accelerated revenue growth. In our efforts to expand the number of drugs on our Freedom system, this year to date, we have advanced four new pharmaceutical collaborations and submitted a 510(k) for our rare disease infusion drug. Upcoming 510(k) filings in early 2026, including opportunities in oncology, position us for meaningful pipeline and commercial growth. In our international expansion efforts, we launched commercial sales in Japan and rolled out our Phase I flow controller. Growth in our top 10 markets will be further driven by prefilled conversions, expanding our global footprint and patient reach. Our core domestic SCIG franchise continues to outpace the market's 8% to 10% growth. With key submissions ahead, including the Phase II flow controller and NextGen IG pump, we are poised to expand our SCIG leadership. Overall, these achievements combined with upcoming milestones reinforce our confidence in meeting 2025 financial targets and sustaining long-term momentum. In summary, I'll leave you with some of the core elements we believe make KORU an attractive opportunity not only now but also in the future. Market dynamics continue to support a shift towards subcutaneous delivery, and our technology is well-positioned to capture the benefits of that shift. Each quarter, we make great strides in executing against our plan. We achieved another excellent quarter with revenue expansion exceeding 25%, driven by steady recurring revenue from our core IG franchise, ongoing patient base expansion, with a compelling opportunity for growth acceleration internationally with prefilled conversions. Additionally, we have a robust and growing pipeline, including 11 new opportunities to bring new drugs outside of IG onto our label in the coming years. And finally, our updated guidance underscores our confidence in continuing to accelerate revenue growth in 2025 and beyond, while maintaining a healthy P&L and improving balance sheet to optimize flexibility and support our growth strategies moving forward. Before closing, I'd like to thank the entire KORU team for their continued efforts and passionate work to further our mission and treat even more patients worldwide. Operator, please open the line for questions. Operator: Thank you. We will now be conducting the question and answer session with selected analysts. The format will be for one question and one follow-up. If you would like to ask a question, please press 1 on your telephone keypad. You may press 2 if you would like to remove your question from the queue. It may be necessary to pick up your handset before pressing the star keys. Our first question comes from Frank Takkinen with Lake Street Capital Market. You may proceed with your question. Frank Takkinen: Great. Thanks for taking the questions. Congrats on all the progress. I was hoping to start with the oncology setting. Happy to hear the pilot's done, and you had some great outcomes there. I think I heard you comment on the nurse feedback. Has been particularly positive, with the ability to service a few patients at once. Maybe a little bit deeper into that would be helpful to understand how that feedback has been. And then as a second part in the oncology setting, can you maybe talk about the reimbursement model, any work that needs to be done there? Or is there currently a structure in place that'd be conducive to adoption in that setting? Linda Tharby: Thanks, Frank. Obviously, we're very excited about oncology being a major expansion into a new market for KORU. So the clinical study that we did was really based in five clinics in the US. We had very large centers and much smaller regional centers. We had good diversity in terms of that. But the outcomes across all the clinics were fairly synonymous. So, you know, a glide quickly past nursing and patient satisfaction, you know, very, very high in the 90 plus percent range. Obviously, the safe dosing of all of those drugs. Your specific question on workflow efficiency was the one that we were really excited about, where 70% of nurses reported the ability to multitask. So right now, they are completely wed to that patient with the manual syringe push administration. So what we were hoping to validate was that by using our pump, the clinic could see improved throughput of patients. And indeed, what we saw was that many nurses were comfortable being able to leave that patient and attend to other patients, do administrative duties, etcetera. So really, huge opportunities for these clinics. On your last part around reimbursement, the great news is we don't have anything to do on the reimbursement front. The reimbursement codes that exist today cover for the administration of these drugs in infusion clinics using a pump. So that reimbursement coverage exists for the products, and so we're very excited about the opportunity. Know, charging ahead now to we've been doing the work to get the submission completed. Provided that everything gets passed, we hope that the FDA will be receiving that submission confident by the end of this year, and we're looking forward to what's ahead for us in the oncology market. Frank Takkinen: That's great. Thanks for that. And then maybe a clarifier on guidance for Q4. Any color you can provide on that? Linda Tharby: So overall, if you look at our front half performance for the business, we grew 19% overall for the business, with back half growth implied at the midpoint of our guidance at 23%. So that's the first thing as everybody should feel comfortable about the acceleration revenues between the front and the back half. As for the splits between business and what you can expect, given the dynamics of the Q3, I'll let Tom go ahead. Tom Adams: Yes. Thanks, Frank, for the question. If you look at our first half of the year and you look at that split, we split around 70% or so for the US business and around 23% to 24% for the international business. So you can assume that's that sort of split for the Q4, the expectation on revenue, with the remainder of that obviously being the PST business. Linda Tharby: Thanks, Tom. And then regarding 2026 guidance, so the first thing I want to say is, obviously, when you post two 20 plus percent quarters in a row, we feel great and excited about the position that we're in. So if you look back over what we've been talking about for pretty much the course of the last year, it's taken the company to this new level of sustainable plus 20% growth. So while I'm not comfortable giving exact guidance for 2026, what I can say is that a number that starts with a two is something we're feeling good about at this moment in time. Obviously, we're looking for those accelerations, which opportunities from pre fills, more international expansion, oncology, those new drugs, all of those things, the 20 plus percent you're seeing today is being done without those things. So, obviously, acceleration, whether that comes in '26 later in '26, early in '27. But that's what I would say that the number starting in the '2 is what is what we're comfortable with. Today. Given what we know today. Frank Takkinen: Yep. Got it. Makes a lot of sense. Thank you. Our next question comes from Caitlin Roberts with Canaccord Genuity. Caitlin Roberts: Hi. Thanks for taking the questions, and congrats on a great quarter. You know, just starting with the EU, I think you noted that several countries are, you know, preparing for the change to PFS. I mean, any more color on the size of those opportunities and potentially the timing of those? Linda Tharby: So thank you, Caitlin. And congratulations on the new last name. Thank you, though, for the course. We're very excited about the international expansion opportunity. As I mentioned on the call, we see international taking our share position pretty much doubling it over the next little bit, and we see that as a $10 million to $20 million opportunity overall. Most of it being driven by pre fills. We have converted just one large market, and why this opportunity is such a big lift for KORU is that the standard of care in Europe has been electronic pumps. Our studies in head-to-head show a 50% reduction in the number of steps required for patients to use our system versus electronic pumps, and also, it's easier for healthcare professionals to train. So I'm not going to give details of what the next countries are. But suffice to say that we've only got one down, and we think we have a lot of headroom in front of us. With a lot of work to do. But it is a major growth opportunity, and we're putting a lot of effort into that today. Caitlin Roberts: That's great. And then, obviously, you know, pay share gains have been a big piece of, you know, the SCIG growth for you. But you know, any color on the just market growth dynamics at this point in the year, maybe with early flu season starting and how you feel about you know, that going into the end of the year and into 2026? Linda Tharby: Yeah. So just overall, what we've seen is the underlying rate of patient diagnosis is going up. I would say we've seen definite acceleration quarter to quarter. It's a little early yet. Usually, the diagnosis lags a couple of months by the infection. So while flu season starts, usually these patients require four, five, six infections before their PID may be diagnosed. So we'll wait and see. But fingers crossed on that one. We've had a strong year thus far. I would say the second dynamic, which I introduced in the call today, was we're seeing a lot more SID, secondary immunodeficiency, with general underlying dynamics like aging populations, etcetera, driving it. But the big one is the cancer treatments. The chemotherapy drugs, the CAR T cell therapies that reduce the immune system by design. So that those drugs can work. Then the patient needs immunotherapy. So we see a lot of the IgM manufacturers now starting trials for SID. Because currently that is not reimbursed in the US. So we see this as being a potential today that's not built into our numbers. That's probably a story that plays more into 2027. By the time they complete those trials. But we're certainly seeing a lot of off-label use of SID today. Caitlin Roberts: Great. Thanks for taking the questions. Operator: Our next question comes from Joseph Dowling with Piper Sandler. You may proceed with your question. Joseph Dowling: Hey, guys. Thanks for taking the question. I'm for Jason today. Just a quick question on gross margin, looking at the four Q and then and then the 26 as well. I know you're probably not too keen on divulging any specifics here. But just directionally, can you provide any commentary on how we should expect gross margin to develop here over the next, call it, twelve to eighteen months? I know there's, you know, international mix dynamics, some manufacturing efficiencies, tariffs, some pricing, new launches, things like that. But any color there would be really helpful. Tom Adams: Yes. Hi, Joseph. Thanks for the question. Yes. So as we mentioned, just starting with this year, we have seen that geographic mix change. And, obviously, the geographic mix change where you think about the ASPs in the different markets as you grow more internationally, you have a lower ASP, you know, driven by emerging markets or established markets. When you think about that dynamic and you accelerate that into the next twelve to eighteen months, you know, we are doing our best to hold our margins. You know, we are always working on our cost and manufacturing with our operational excellence programs to identify opportunities, you know, driven by volumes. Right? Because we're a growing business. So we will continue to work on our margin profile. You know, we have long-range plans to get our margins, you know, 65 plus. So that is our strategy and that we will continue to focus on as we grow international. Linda Tharby: And maybe just to add on to what Tom said, obviously, we started the year with a 61% to 63% margin range. With a couple of manufacturing issues, the growth in international, which we did not anticipate. We knew it was gonna be good, but as good as it is, you know, growing, you know, through the year. I think Tom will probably double that business through the third quarter already. So the fact that we're able to maintain that original margin gain. Also, I forgot tariffs as well. Know, just a huge credit to our operations team who have really done a great job of bringing back some efficiencies, which is why we're still confident despite those things holding on to that 61 to 63. And, you know, continued march towards that 65% range that we're headed for over the next three to four years. Joseph Dowling: Great. Appreciate that, guys. And then one quick one on Japan. Can you just give us any color on maybe like the cadence of the ramp into next year? That'll just be helpful for as we look at our models here. Linda Tharby: Sure. So, on Japan, I would say the great news is we're in the market. We've got sales. I think I said, this year, the sales would be somewhere just 3 to 500,000. I think we're feeling pretty good about that range. Japan is primarily today an in-system. And so we think it'll take a little bit longer for Japan to evolve. But I would say the overarching comment on international that is more than made up for that is the strength of the pre fills. So we're excited still about Japan. And now I would say it's come it's still a growth driver, but it's probably now number three or four on our list versus, you know, the broader presale opportunity is number one by and large. Joseph Dowling: Great. Thanks, Linda. Appreciate it. Our next question comes from Chase Knickerbocker with Craig Hallum. You may proceed with your question. Chase Knickerbocker: Good afternoon. Congrats on the nice quarter here. Thanks for taking the questions. Maybe, maybe just to start on US core. So just to clarify, I guess, a couple of things. So that $1,200,000 was basically adjusting for those ordering dynamics from OUS distributor to US distributor. And then that would make US growth, call it, you know, 14% kinda year over year if we add that 1.2 there. And then maybe just give us an update on what SCIG growth was from a market perspective in the third quarter. Linda Tharby: So thank you, Chase. Yes, excited about the quarter. And appreciate the well wishes. The order dynamics, I think, Tom laid them out well. And you got it perfectly. It's a combination. The only thing I would correct, yes, it's the $1,200,000. That should have been in the US. That was a combination of three things. It was the stocking deceleration from one of our major US distributors and then the order dynamic between the US and OUS. Regarding the broader SCIG market growth, we don't have the numbers yet for Q3. Those usually lag a couple of months behind for us. But we know that from quarter one and quarter two, that that number was in that 8% to 9% range overall. With acceleration between quarters in the growth levels. Being driven by PID, just really strong demand and patient growth. And PID and then also the SID piece that I mentioned earlier. Chase Knickerbocker: Got it. Maybe just you know, you noted some stocking related to the presold conversion. In Europe as well. Can you just maybe speak to whether or not this is a new geography or the same one that we were talking about last quarter? And then I know you don't wanna give specifics as far as the geographies that you expect kind of these rollouts prefilled conversions to take in. But can you maybe just give us your overall thoughts as far as how you see the cadence? Is this gonna be something that's a phase in kinda country by country? And it, you know, happens over the course of the next eighteen to twenty-four months, or just give us your overall thoughts there on the cadence? Linda Tharby: Yeah. So, one thing I should have mentioned on the last call, you said the 14% growth, and I think yes, that that's about right, the number for the US market. So regarding prefilled syringes and the first country, that country was a country that was dominated by pumps. We had very low share positions in that market with our consumables. And they converted very quickly. They delisted their vials completely in that market and went 100% to prefilled. And we were very fortunate to they did that, you know, pretty rapidly. We still see some upside in that market because the pharma company continues to win new tenders based on their pre fills. So that's great news. Regarding the cadence for pre fills, we believe that the manufacturer that we're working with will complete most of the work in the major markets by 2026. They are being, you know, quite aggressive as they see it to be a competitive advantage for them today. And what I would say is that the decision making, though, is done on a country by country basis. So reimbursement is different. How the patient receives the product is different. So we've got a lot of work to do with each of those country leaders to ensure that, you know, we work with them on very specific go-to-market plans to make sure that the patient experience and the healthcare professional experience is what we all want it to be. So we think most of the opportunity will be over the next twenty-four months in total for that opportunity. Chase Knickerbocker: Got it. Makes sense. Maybe just sneak one last one in. Just kinda check the box. I mean, this dynamic with the OUS distributor to the US distributor that kinda cross geography ordering, how are you able to confirm I mean, how are you able to, you know, make sure it doesn't happen again? Linda Tharby: Thanks. So I'll start and then maybe see if Tom wants to add anything. So we and and by the way, right in my career, in this space, it's not the first time I've seen something like this happen. Typically, what we do in all of our contracts is we protect any pricing we provide per the market. And we require tracings to say, where is that product going to? That's why we were able to catch it pretty quickly. And so we've since worked with both distributors to ensure that, you know, we're now ensuring that product goes to the right markets for which the contracts have been written. So we're confident that it will not happen again. And, we were we had it corrected within the quarter. Thanks for the questions. Operator: This now concludes our question and answer session. I would like to turn the floor back over to Linda for closing comments. Linda Tharby: So thank you all for joining us this afternoon. We'll look forward to providing updates on our strategic progress. We've got several upcoming investor events ahead of our fourth-quarter call in March. Have a great rest of your evening. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. Please disconnect your lines and have a wonderful day.
Gary C. Evans: Greetings. Welcome to the United States Antimony Corporation Third Quarter and Nine Months Ended September 30, 2025, Financial and Operating Results Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference call and webcast is being recorded. I will now turn the call over to your host, Gary C. Evans, Chairman and CEO. You may begin. Gary C. Evans: Thank you, Paul, and welcome to our listeners today. First, I'd like to start by introducing other members of our company's management team that are joining me on this conference call today. We have Lloyd Joseph Bardswich, who's a director and executive vice president and our chief mining engineer, Rick Isaak, who's senior vice president as well as our chief financial officer. We've got a new participant today, Aaron Tinesh, who's vice president of our antimony division. And then Jonathan Miller, who's vice president of investor relations. So I thought I would start today out doing something a little different and give everybody a little lesson on antimony because no question as I've gone around the country, whether it be with investors or bankers or stockbrokers, even the government, a lot of people don't know what antimony is. So let me give you just a little bit of education here. Antimony is one of those raw materials that has historically been completely unknown to the public. But for the military and industrial sectors, this mineral is absolutely essential. So in military applications, antimony is diverse and far-reaching. Antimony alloys play a significant role in making ammunition production extremely difficult to replace. Hard lead alloys enriched with antimony significantly increase the hardness and the dimensional stability of projectiles. This not only improves penetration and accuracy but also enables more consistent ballistics, which is essential for reliable weapons. In percussion caps and ignition mixtures, antimony sulfide, also known as stibnite, ensures the reliable ignition of the propellant. This is an application where failure rates can lead to catastrophic failures. Furthermore, antimony in specialized forms is used extensively in high-frequency electronics and sensor technology. It is essential for night vision devices such as cameras and goggles, thermal imaging cameras, infrared sensors, and used in modern warheads, drones, reconnaissance systems, and air-to-ground communication systems. These are technologies that define our modern warfare today. In civilian applications, antimony is invaluable, primarily as an alloying element. When antimony is combined with lead, it fundamentally alters material science. In car batteries, lead always contains small amounts of antimony to ensure the necessary structural integrity of the battery. The global automotive and energy storage industries would be inconceivable without this rare critical element. The industrial applications of antimony extend far beyond batteries, though. In glassmaking, it's an indispensable refiner. It is used to remove bubbles and defects from molten glass and to improve the optical quality of that instrument. Antimony has gained increasing importance, particularly in the solar industry, as it enhances the transparency and light transmission of solar glass modules. With the global expansion of solar energy, demand for high-quality solar glass has risen exponentially. And I just read within the last, oh, three weeks that China has come up with a new solar panel that is about 12% more efficient, which is huge in the solar panel business, and it's all because of antimony. So the majority of antimony use, however, is in flame retardants. People don't realize this. Approximately 30 to 40% of the world's antimony production is used to manufacture flame retardants for use in plastics, textiles, and polymers. This is not just an academic chemistry issue. It's one that protects human lives. So with that, I'd like to turn over our call to Rick Isaak. He's gonna give more details regarding our operating and financial results. Rick is our CFO. Rick, you wanna take it from here? Rick Isaak: Sure. Thanks, Gary. I'll start with some comments on our consolidated operating results and then go to the balance sheet. Sales for the first nine months of this year were $26.2 million, up 182% over the prior year. This increase was largely due to price increases with some volume increase in our zeolite business. Looking ahead, our antimony sales volume increased in October with some of the expansion efforts that we've been talking about, and our consolidated sales were $5.6 million for the month of October, compared to third-quarter sales of $8.7 million. Our gross margin increased by four percentage points from 24% last year to 28% this year. There'll be some pressure on our gross margins in the fourth quarter, with a declining antimony market price. We're looking to offset as much of this decline as we can with lower costs and higher-margin long-term contracts. Also, we're pushing to increase antimony sales volume to increase our gross profit dollars and generate more cash flow. Our consolidated net loss was $4.1 million for the first nine months of this year. However, this loss included $5.2 million of non-cash expenses. From a cash flow perspective, our operating activities generated positive cash flow when you exclude working capital changes, which I'll talk a little bit about later. And that positive cash flow improved compared to the same period last year. Next, looking at the balance sheet, there were three main drivers that increased several accounts more significantly in our balance sheet. First, antimony inventory was up about 300,000 pounds this year, which increased our working capital account, specifically inventory, prepaids, accounts receivable, and accounts payable. The sales value of our inventory similarly increased from about $3 million at the end of last year to $9 million at the end of the third quarter of this year using today's antimony market price for both values. Second, we acquired mining claims this year in Alaska, Canada, and Montana, and we're expanding our Montana processing facility. These were the main drivers increasing our fixed asset balance. Third, nearly $43 million of cash was generated this year from the exercise of preexisting warrants and stock sales, which increased our common stock and additional paid-in capital balances. We ended the third quarter of this year with cash and best investments of $38.5 million, which is an increase this year of $20 million. And we had long-term debt of only $229,000. The antimony industry has had its opportunities and challenges over the past year, which makes the financials a little more complicated. However, we cut through the noise, and we really remain focused on generating positive cash flow. We're also focused on creating a solid foundation for the future of our company. To accomplish this, we strengthened our ore supply by securing a three-year supply agreement with a new supplier of antimony ore and by expanding our capabilities and becoming a fully vertically integrated business with the ability to mine, process, and sell antimony products. We also strengthened the sales side of our business by securing a five-year sole source sales contract with the DLA and another recently announced five-year sales contract with a commercial customer. In addition, we had seven acquisitions of mining claims over the past twelve months, with the expectation of several critical minerals being generated from these mining claims. We will continue to be focused on being the preferred provider of critical minerals, which will provide growth, diversification, and sustainability for our company. I'll pass it back over to you, Gary. Gary C. Evans: Thanks, Rick. And I'd like to now turn the next section of today's conference call over to Lloyd Joseph Bardswich. Joe is our chief mining engineer. He's also a director and executive vice president of the company. He's gonna provide everyone with an update on all of our mining operations located in Montana, Alaska, and Ontario, Canada. Lloyd Joseph Bardswich: Thank you, Gary. I will start with Stibnite Hill in Montana. Stibnite Hill has been mined from underground by many previous owners and then by US Antimony from 1968 until 1983. In '83, the decision was made to shut the operation down and depend on Mexico with lower labor costs to provide stibnite feedstock for our Madero smelter and for the supply of military spec antimony trisulfide for primers for ammunition. We believe we remain the only North American supplier of military spec antimony trisulfide. We assembled a great team of geologists, both employees and consultants, throughout the company operations. From Alaska to Montana to Ontario, one of them did the record search at Montana Tech and at the US Forest Service. And the fieldwork on Stibnite Hill itself provided sufficient evidence that enabled the start of a bulk sampling exploration program to uncover and excavate the narrow and flat-lying vein of high-grade stibnite on the patented Eliza Monoclean. With the cooperation of Montana DQ, we were able to modify our operating permit to include taking a bulk sample from the Eliza and immediately start extraction of that stibnite bulk sample. There's an old adage in the mining industry that grade is king. We are blessed with good grade and geologists who are experienced in grade control at the face. Where the bucket meets the ore, the grade control is visual. Pure stibnite is about 71.4% antimony, and we endeavor to load only rock that contains economic quantities of stibnite. The ore is loaded directly into the typical tandem highway dump truck 10 wheelers and hauled down off the mountain to the yard of a local contractor where the material is reloaded onto standard highway semi-trailer tractor-trailer 18 wheelers for haulage to a flotation mill in Montana. A more detailed description of our Stibnite Hill operation is available in the October 30 news release posted on our webpage. Production as of 8 AM this morning, we've loaded and trucked 35 loads of 16 tons each off of the mountain for a total of 560 tons. To get an average grade of the material trucked, we have commissioned an independent geologic consultant recognized as a QP, a qualified person, by the SEC under the new SK 1,300 regulations. We commissioned him to sample the crushed material and maintain custody of the samples when submitted for assay at a recognized professional assay firm. Samples have been submitted for assay and results will be reported when received. Each 1% of antimony would mean 20 pounds of antimony per ton for 10% would be 200 pounds per ton or 3,200 pounds of antimony per truckload. So these are expected to be valuable truckloads. I expect a grade better than 10%, but 10% would still total 112,000 pounds of contained antimony hauled to date. Significantly, we had planned a similar operation in Alaska. We applied for permits on April 14. However, we did not receive permit approval until mid-September, so we barely got started before inclement weather hit us. We were able to do some work on the Mohawk Mine Patnaik claims prior to the permit approval. The Mohawk was a former gold producer from underground, which reported significant antimony in the wall rocks of gold veins. Our initial work on Mohawk was site cleanup with the site. The locals had used the property as a disposal area for abandoned cars and other garbage. It's followed by a trenching program that allowed us to map the old workings and identify areas of possible future antimony extraction. After receipt of the Alaska permit, we barely got started on our original plan of trenching beneath antimony in the soils anomalies. Antimony is one of the pathfinder minerals used in gold exploration. The data for the antimony soil anomalies were derived from previous gold exploration work by major companies. Placerdome, Inco, Silverado, etcetera, following the discovery of the Fort Knox 10,000,000 pounds gold deposit that's presently being mined by Kinross. Other activity in Alaska included the use of an exploration contractor at the remote Stibnite Creek property. Work included mapping and sampling, but the major expenditure was in the cleanup of the mess left by former claim owners who attempted to construct a mill on-site. Access to this site was by helicopter, although winter roads have been used by past operators. Presently, we thought that this deposit could be further developed and mined with underground access provided by an adit and drifting along the vein into the mountainside. In the community of Fox, very near to our optioned exploration properties, we purchased a 17-acre site to be used as an HQ location. There are three homes on the property plus a larger storage-type building. We constructed a large reinforced concrete pad on the site just before winter weather hit. So we'll be ready in the spring for staging of stibnite from our trenching operation, sorting, and bagging for transportation to Montana or Mexico for milling and or smelting. We've had preliminary discussions with local prospectors and placer miners regarding the purchase of their production. In Ontario, first, the Iron Mask Cobalt property northwest of Sudbury, fieldwork at the property was completed in late October. Outcrops, stripping, and cleaning of the rock exposures along with geological mapping to provide a clearer indication of the property's geology, which was not properly evaluated in any previous exploration by other parties. There are delays in receiving assay results for samples or progress. 20 grab and channel samples were submitted to ALS Quebec in October. And results are also awaited for an earlier batch of 25 samples. Cobalt mineralization has been encountered thus far only in the Iron Mask ultramafic intrusion. Previous works by others yielded a range of cobalt values from 2.1% to 6.5%. Ontario government records show values of 16.4% cobalt and 8.8% nickel across four feet in a drill core. Mafic, ultramafic, arthritic layered complex was initially recognized at the Iron Mask outcrop and trades for a minimum 60-foot strike length southwest of the copper zone. This zone has the potential for copper, nickel, cobalt, and platinum group mineralization, which we're all on the 2025 critical minerals list. Permits for mechanical stripping are in place for the Iron Mask. At the Fostung, the tungsten deposit, detailed investigation of the main mineralized zone commenced in October. Work here involves hand stripping and cleaning of numerous outcrops followed by selective channel cuts in a transect of more than 100 feet. The cuts were necessary to observe scheelite and other minerals such as powellite with an ultraviolet light unencumbered by fluorescent organic matter that would occur on the weathered outcrop. The channel cut material, which revealed numerous intervals of garnet-rich scarn associated scheelite mineralization, was recently submitted to ALX Quebec for analysis. Further slides were cut from seven samples that will be submitted for electron microprobe analysis. Stripping of additional outcrops south of the road is being undertaken but will soon be supplemented by mechanical stripping. We just got the permit for the mechanical stripping this past week. It is suspected that the mineralized zone could extend 600 meters west of the road and connect with the discovery showing. The ministry has recently issued a permit for mechanical stripping of this area. Metallurgical test work, testing gravimetric separation was completed at Lakefield Research. An analysis of heavy liquid separation was conducted by CPRO Vancouver. Lakefield has been asked to submit a proposal utilizing cross flotation as the next step in metallurgical testing. SRK Consulting Group out of their Toronto office has previously calculated an inferred resource of the tungsten deposit at the Fostung. We've commissioned SRK to do a new report that includes the additional drilling completed by former owners. This report will be done to the new SEC SK 1,300 standard and is scheduled to be completed by mid-January. The company is twenty-seven days to hike. Quality group of geologists, employees, and consultants with many contacts in the mining industry. We are continuing to seek out critical minerals opportunities and to identify properties that we believe are available at low acquisition costs and which have the potential to be enhanced by basic exploration methods which we believe can be brought into production quickly at a low CapEx. The availability of in-house pyrometallurgical and hydrometallurgical expertise and operating experience provides a next-step capability in assessing opportunities. I'll turn it back to you, Gary. Gary C. Evans: Thanks, Joe. And let me make a couple of comments to make sure our listeners understand the magnitude of what Joe is saying. I'll talk about I wanna talk about the two prospects up in Canada. That we are involved in being the cobalt and tungsten. There is no cobalt or tungsten currently being mined in the United States or Canada. Nobody. Just like no antimony is being mined in the United States and Canada until we started it about forty days ago. So we have a contract with the government, have a contract with industrial customers to sell antimony. We want to do the exact same thing with tungsten and cobalt. As Joe mentioned, the work that he's done since we acquired the tungsten property about five to six months ago has been significant to the point where we can now get a reserve report. With that reserve report, we can get federal government funding, we believe, and we know what we have to do on the downstream side to make that product saleable. We hope to duplicate what we've done in antimony and continue to do in antimony with the critical minerals of tungsten and cobalt. We have other irons in the fire related to these two critical minerals and are excited about it. And so we don't wanna be just a one-trick pony, antimony only, even though that is our primary business. We think that we can duplicate what we've done in these other two critical minerals, and those discussions continue with the US government. So I'm gonna now introduce another gentleman by the name of Aaron Tinesh. You've never heard from Aaron before on these conference calls. Aaron has been secretly hiding out in Montana. He is our vice president of the antimony division and has been with the company since July. Aaron's one of our chemists. And I promise he will not get into the mineralogical characteristics of antimony today, which I'm quite sure he would love to do. Aaron is in charge of all of our third-party antimony procurements from various countries around the world. He's going to give you an overview of where we currently stand on all these efforts and the inventory that we have built and are continuing to build every week. And it's quite immense. And it's been a huge project for Aaron and something that I think he's done an exceptional job in. You have to understand, when he's talking to all these various countries and these producers and these traders and these brokers around the world, he has to weed through all the crap. There's a lot of it out there. And it takes a lot of time. It takes a lot of effort. And it takes a lot of work to wind down to find the antimony necessary for us to make the products that we have to make for our various customers. So, Aaron, why don't you tell everybody what you've been up to? Aaron Tinesh: Thank you, Gary. You're correct. I miss the lab from time to time. But on our supply, throughout 2025, USAC has developed over 15 separate supply contracts for materials sourced from 10 different countries around the world. Over 30 other parties are engaged in contract development and negotiation at this time. Primary supplies for ore, concentrate, and metal are being developed in North America, Australia, Africa, South America, Central Asia, and Southeast Asia to diversify supply and support capacities with favorable economics. This year, our smelter in Mexico has received approximately 330 tons of antimony feedstock. Supplies and deliveries continue to ramp up, with roughly 20 tons of concentrates presently clearing Mexican ports. Approximately 275 tons are currently on the water or being loaded for shipping in overseas ports. We are most excited about our developments in Bolivia and Chad. Bolivia is a well-established antimony producer with extensive history and mining experience. Our operating partner and existing associated supply agreement should result in the delivery of approximately 150 tons per month of antimony metal beginning in the next few months. This metal stream will go directly to the smelter in Thompson Falls to support our proprietary antimony trioxide production. Monthly delivery of this volume should commence in 2026. USAC is very interested in the developing mining sector in Chad. The PND conference in Abu Dhabi demonstrates Chad's intent to diversify into the mining sector to attract foreign capital beyond traditional markets such as oil. USAC's strategic engagement is well-timed, allowing synergistic development of the mining sector in Chad that may lead to opportunities in and beyond antimony. To take full advantage of this environment, USAC has engaged a gentleman as our African critical mineral director. Our consultant has dual citizenship in Chad and the US and will provide a regional foothold for immediate outreach and intelligence gathering on Chad's evolving mining sector. It is important to note that we can fulfill our contract commitments with the $245 million DLA award with products produced from either Mandalay feedstocks in Mexico or traditional feedstocks in Thompson Falls, Montana. These supply developments position USAC to continue with growth and facility expansion initiatives that will ultimately support domestic demand and domestic production as it becomes available. Thank you. And back to you, Gary. Gary C. Evans: Thank you, Aaron, for that very good overview. Just I like to put things in perspective because we hear all these numbers out there that we're throwing around, volumes and tonnage and all. When you look at our 10-Q that we filed this afternoon, and as Rick mentioned on the call, we're continuing to build inventory. And that inventory is necessary for us to meet the contractual commitments we have with our long-term customers, the new contracts discussed today. So just to put it in perspective, today, if you look at our financials from September 30 all the way to January year, you'll see we've been averaging about 100 tons a month of production of finished product coming out of Thompson Falls. That is going to change dramatically. It already began changing in the month of October as Rick gave you some new numbers. That's what gives us the comfort to meet our revenue projections that we talked about in the press release today. But what's really gonna change is 2026. 2026 will be a banner year for this company. We will not only have the expansion of Thompson Falls completed, and hopefully, January, we're on target. We're 65% complete with that expansion effort. And everything is going as planned. But Madero, all these new supplies that Aaron mentioned that are coming into Madero, we're sorting through, we're starting to refine, and we're having finished product. And we have consistent new shipments coming in each month of 2026. So you combine that international procurement with what Joe has found up in Montana, and we haven't produced anything yet out of Alaska, and we know that's gonna change beginning in the 100 to 500 to 600 tons a month, which we will have the capacity of doing, it will have a dramatic change in this company's future and financials. So I just feel like it's important for people. You get lost in the numbers to understand what we're doing today and where we're going. So I'd like to now introduce to you our vice president of investor relations. You've heard from him before. His name is Jonathan Miller. He's gonna update everyone on our IR and marketing activities achieved during this quarter and what our plans for the fourth quarter are. Jonathan, you wanna take over? Jonathan Miller: Great. Thank you, Gary, and good afternoon, everyone. The third quarter was one of the most dramatic re-ratings in our company's history. From July through September, our share price climbed from about $3.8 to $6.20, up more than 100% and now trading at $7.62 per share, making it the best-performing quarter in our history. Average daily trading volume nearly tripled, a clear sign that institutional investors are paying attention and that the seeds we planted over the past year are starting to take root. Since the start of 2025, our market cap has expanded almost fourfold, rising from around $200 million to more than $1 billion. Our Russell 2,000 inclusion at the end of the second quarter gave us another tailwind, broadening our exposure to ETFs and institutional funds and firmly establishing US Antimony within the national security and small-cap growth space. And our recent listing on the NYSE Texas Exchange is another step forward. It gives us greater visibility, stronger liquidity, and puts US Antimony squarely in the spotlight of a growing market that's deeply aligned with America's energy, defense, and industrial base. Now none of this happened by chance. It's all the result of a focused, data-driven investor relations strategy we built internally and executed with precision. Over the quarter, Gary and I have met with more than 100 institutional investors through conferences, non-deal roadshows, and direct outreach. Institutional ownership has gone from almost zero just a year and a half ago to about 30% today, one of the fastest transformations among our peers. We also strengthened our research coverage with a new house, William Blair, with a $20 target price and maintained continued support from our existing research analysts being AGP, HC Wainwright, and B. Riley. All have reaffirmed confidence in our growth story. On the media front, we continued the groundwork we laid maintaining strong momentum with Reuters, Bloomberg, and Fox Business and most recently, The Wall Street Journal, securing national TV and print coverage that highlighted US Antimony as North America's only operating smelters and the sole vertically integrated antimony supplier outside of China and Russia. We also leaned into shifting global dynamics to frame our story around supply chain security. Recent reports out of China suggest that the country continues to restrict defense-grade antimony, underscoring why domestic supply is critical. That, together with executive order 14017 under the Defense Production Act, which requires suppliers to the US government to obtain their antimony supplies from US sources, further reinforces the role US Antimony plays in America's mineral independence. And while not a direct IR initiative, our $245 million award from the Defense Logistics Agency speaks volumes about this new management team's ability to execute. It tells investors and the market that US Antimony has moved from potential to performance, from promise to proof. Earning validation at the highest levels of national defense. Internally, we've been modernizing how we communicate. We've started the process of building a new corporate and investor relations website that reflects who we are today. Our multichannel communications approach has strengthened transparency with both institutional and retail shareholders. We've also recognized X, formerly Twitter, as a formal SEC-recognized disclosure outlet, letting us address breaking news and correct misconceptions in real-time. So all investors have equal access to accurate information. In September, we took another big step with an ambitious investor media campaign. Our film crew followed our geologists across the Alaskan frontier, capturing the of historic antimony reserves and later filmed our Thompson Falls expansion groundbreaking ceremony, offering the first real inside look at America's only antimony smelter. The upcoming operational docuseries titled America's Final Supply Chain features experts in geology, academia, and defense, telling a story that's bigger than just US Antimony. It's about America's industrial revival, our capacity to produce, defend, and lead again. You will soon see the story displayed in various media outlets. As we close out the year, we'll be on the road presenting at several more investor events. Including the IDEAS Investor Conference in Irving, Texas next week on November 19-20, the NY Growth Equity Symposium in New York on December 1, the B. Riley Convergence Conference on December 4, also in New York. Each of these will further expand our institutional reach and give us more opportunities to bring our story to new audiences. Altogether, these efforts from narrative positioning and outreach to media engagement and capital markets access drove the significant share price gain as well as the broader recognition we're now earning across defense, mining, and investment circles. By the end of the quarter, sentiment around US Antimony had completely shifted from a quiet micro-cap stock into an internationally recognized critical minerals growth story aligned with America's defense, industrial, and technology priorities. It was one of our most value-creating quarters in our history. Looking ahead, our focus is on deepening institutional relationships, broadening outreach into the European, Canadian, and Australian markets, and sustaining the momentum that's positioned US Antimony as the definitive American story in Critical Minerals. To you, Gary. Gary C. Evans: Thanks, Jonathan. To round up our discussion today, before we go into our Q&A, I've broken down my remaining presentation into five different parts that I think the listening audience would be interested in hearing about. The first is long-term sales agreements. The second is our competitive landscape. The third is our mining our own antimony properties. The fourth is Lervata Resources in Australia. And the fifth is China, which is the 10,000-pound gorilla. So as announced over the last forty-five days, actually, the last ninety days, your company has completed two significant sales contracts that total $352 million. To put that in perspective, this company reported $15 million of revenues last year. So that's a one heck of a big boost. The first contract, as you know, is with the Defense Logistics Agency, the DLA. That's up to $245 million. And we announced a new one just yesterday with an industrial customer for approximately $107 million. So these two most difficult parts of any successful business have now been accomplished. Source material, as outlined by both Aaron and Joe, here today, and sales contracts of significant proportions after we complete the processing that have terms as far out as five years for delivery. We look at the competitive landscape and the antimony business. We don't see any other antimony company, either domestic or foreign, as competition today. We have the only two operating smelters in North America. The time, the cost, the permitting, and industry knowledge prohibit our competition from being true viable competitors for at least three years, most likely four years. I would encourage all investors, whether on this call or looking at the antimony industry, to peel back the onion and do your homework. There are some tremendous promoters out there who have done a wonderful job of salesmanship. For that, I give them 100% credit. But we are, and I repeat, the only vertically integrated antimony company outside of China and Russia. There simply is no one else. Those that profess to wanna be, all I can say is good luck. And you better put your big boy pants on. Because you've got a long road to hoe. So I'm not gonna name names of competitors. It's comical when I listen to them on TV or in newspaper articles. Do your homework. Look at the quality of the material. At how they're gonna get the material out of the ground. Look at how they're gonna process it. Look at who they're gonna sell it to. So it's just it's comical. And so as an investor, do your homework if you're gonna look at this industry. I cannot emphasize enough how important and meaningful our recent mining success achieved in Montana that was outlined by Lloyd Joseph Bardswich today. And I give Joe complete credit for this. This is the future of our company. The timing of these outstanding mining results as he's achieved just in forty days is completely aligned with our smelter expansion efforts in Montana, which are contemplated to be completed in January, just two months from now. US Antimony's gross margins grow to over 60% utilizing our own material versus that acquired from third parties, we're doing, obviously, through all the work that Aaron has outlined. When Alaskan operations restart in April, May, with the spring thaw, we anticipate further increasing. The board of directors of Lovato, just one week later. We continue to own 10% of Lovata's outstanding shares, which makes us their largest shareholder. And that amount, that investment is worth approximately $40 million of value today. Our board and financial advisers have yet to determine what, if any, further action we may take concerning this previously proposed transaction. I'm sure we won't be making some decisions over the next sixty days. China. China is the big gorilla. I always like to say the 10,000-pound gorilla. We continue to see and hear mixed signals coming out of China as well as our current US administration. First of all, we are not involved in rare earths. We are only involved in critical minerals. Too many investors lump these two types of minerals together. That is a huge mistake. So in military applications, antimony is diverse and far-reaching. Antimony alloys play a significant role in making ammunition production extremely difficult to replace. Hard lead alloys enriched with antimony significantly increase the hardness and dimensional stability of projectiles, as I mentioned earlier. So let's talk about go back to China. China's position in the antimony market is huge. It stands out from the competition. China possesses a production capacity that dwarfs all other countries combined. Global antimony production was estimated around 100,000 tons last year in 2024. China alone produces 60 times that much. 60 times. The second point is equally critical for western strategy. China also dominates the downstream value chain. It's not just the mines that China controls, but also the smelting, the refining, processing, which is what we do. Approximately 85 to 90% of global antimony refining capacity is today in China's hands. This means that even antimony ores mined in other countries often have to be transported to China for processing, but you get nothing back. China will not release any finished products back. So this is a form of structural dependency that gives the country immense power over not only the United States but the rest of the world. So the United States finds itself in a position that could be described as strategically embarrassing. As the world's leading military power, with technology advanced at global active defense, this power depends on material the US does not control. The last commercial antimony mine in America closed decades ago until we opened up the only mine producing antimony today in Montana. Dependence is not new. But it has become acute. Historically, stockpiles were sufficient because trade functioned smoothly and China was willing to export antimony. But now with China's export controls, the system has completely collapsed. The US strategic reserves totaling only about 1,100 tons are enough to cover demand for just a few weeks. Or at most a few months. This is not just insufficient. It's absurd. It's completely absurd for a superpower in a time of heightened geopolitical tensions. So we feel like what we've accomplished in such a short period of time is truly significant. All of our employees are working hard to meet the demands of our country. And we're not only bringing this antimony in from other countries, but we're gonna be able to do it right here on our own home turf. And so we're extremely excited about where we sit today. What our future lies, and we welcome the investors that are on this call today and operator, we'd like to now take a few questions. Operator: Certainly. At this time, we will be conducting a question and answer session. If you would like to ask a question, click on the ask a question box on the left side of your screen. Type in your question and hit send. We do ask that each participant limit themselves to one question when submitting. Moment, please, while we poll for questions. And we did have a few questions coming in from the webcast. The first question: we have a five-year contract with a fabric manufacturer for antimony trioxide for $106 million and a $245 million contract with the US Defense Agency. What is the difference between the two types of antimony? Gary C. Evans: There are definitely differences, and I'm gonna let Joe and or Aaron you guys are better suited to answer that question than me. Go ahead, Aaron. Aaron Tinesh: Well, I think that one's pretty simple. The DLA contract is for metallic antimony in ingot form. And the commercial supply contract is for antimony trioxide, which is essentially a white powder in a bagged form. Gary C. Evans: And taking that a step further, the requirements of what we have to do for the DLA are very specific. We make an antimony metal. It's an ingot. It weighs about five pounds. We have to stamp it with a serial number. It's stacked on a pallet, shrink-wrapped, and shipped to the DLA. When we announced that contract, I don't know, sixty, ninety days ago, we also immediately got an order for $10 million that we're in the process of fulfilling. And we're anticipating another order of $50 million in short order. So $60 million coming out of the $245 over the next probably six to eight months. Operator: Okay. The next question. Is management considering building an additional smelter or processing facility? And if so, what would drive that decision on the location? Gary C. Evans: Okay. Great question. Something I think about all the time. The addition of the smelting capacity we're doing in Thompson Falls, we are done. Whatever we complete in January is the most we can do on that footprint. It's got to do with the amount of land we own and the location of the facility up between two mountain ranges and surrounded by US Forest Service. So no more can be done there. We do have some other things going into Montana. We'll be announcing soon that will allow us to do some other expansion efforts. But not likely a smelter. Now Mexico is a different story. We have a large land position down there. We have a capacity to do about 200 tons a month. Once Aaron is able to get that going smoothly and full, we will then entertain expanding that facility. That's the easiest place. There's no problem hiring, and we have lots of natural gas tied to a Pemex pipeline that we helped build. And it's in the area where, you know, we're being left alone out in the middle of a kind of a desert. So that is the area from, I think, my perspective and the management perspective would be the most logical. Now we have looked seriously in Alaska. And the problem with Alaska is that there's no natural gas. Believe it or not, being a state with such fossil fuels, everything's up in the Arctic. North Arctic Circle, and not available in Fairbanks or Anchorage. There's been other companies talking about building a facility at Fort McKenzie. Good luck. You have to use LNG. You'd be paying six to seven times the price of an MCF of natural gas from a pipeline. So we don't see that as economically viable. So if there was natural gas, I think we'd be all over Alaska, but that is not the case. You gotta have natural gas for smelters, in our opinion. So, we do have some other ideas that I'm not at liberty to talk about. Some new technology that Aaron's working on and this Bolivian group that we have actually invested in and are receiving material from here in early January. Has some new technology that we hope to further review. We think that that could be advantageous. So to answer your question, I think if there's any growth in 2026, it will most likely be at Madero and Mexico. Operator: Okay. The next question, congratulations on a successful quarter. My question is, what is the expected production volume ramp for Montana and Mexico? Gary C. Evans: Gosh. Aaron, that would be a good one for you, but I'm not gonna let you answer it. So it's like throwing darts at the wall. Okay? We've outlined today all the new material we've received and are continuing to receive. You know, part of the problem in predicting the output of these facilities is that this material that we're getting from all these countries, there's problems at a port, there's problems on the ocean. As we said earlier this year, we had material held by the Chinese customs for over six months. There's material that has high arsenic. There's material that has high lead. Material has high sulfur, so we're always dealing with these various mechanics. I feel comfortable in saying that 2026, we will see a ramp-up. You already saw it. In the numbers that Rick mentioned today for the month of October. I mean, October almost beat the whole quarter of the third quarter. So you're seeing that happen. And I think you'll continue to see it happen. It's gonna be bumpy. I don't think it's gonna be a straight line. But I hope and pray that by 2026, we'll be at 500 plus tons a month. That's where I really hope we get to. And if we can get our own material coming out of Alaska, the certainty of that goes up significantly. Operator: Okay. The next question. With the expanded processing facility and new furnaces coming to Montana, can you quantify efficiencies expected or detailed technological improvements in processing? Gary C. Evans: I'm gonna answer the first part of that, and then I'm gonna let maybe Aaron or Joe jump in. One of the issues that we've had, I think I've mentioned this before, in prior calls in Montana, was people. It's a small community, about 10,000 people, and I'm, you know, 35-mile radius of Thompson Falls. And, unfortunately, 75% of them are retired and don't wanna work in the smelters. So we made a decision about sixty days ago that we need to find housing. The problem is we find people, but they got no place to live. So we actually have contracted. We haven't closed yet. A little housing development that would house, you know, 25 people. This is at the bottom of the mountain in Thompson Falls. So we think we have solved that problem, and I know from talking to the two key managers in Thompson Falls, just we had a conference call on Monday, that they have been continuing to hire people and we've been able to find new employees and getting them trained. So we're already in the mode of hiring people to get ready for the additional expansion in Thompson Falls. So as far as efficiency, Aaron, you probably better able to answer that question than me. Aaron Tinesh: I can answer that question to some extent, but it's sort of a two-tiered situation. So in a mechanical sense, there is some increase in efficiency in this expansion in that there's a little bit larger equipment, some increases in automation, and sort of the ease and equipment efficiency with new technologies or improved technologies such as modern bag houses and other things of that type. That should see some general efficiencies. But it's also important to consider the type of feed material. And we are basing our own metrics on traditional feed materials, but our efficiency and capacities increase even more than Gary's going to let me say anything about if we get the right kind of feed into that plant. And so it's again sort of a two-tiered approach. Where we do have some mechanical efficiencies, but then the feedstock can also have a very beneficial effect. Operator: Okay. And the next question, how close are current smelting operations to running at full capacity? And what are the bottlenecks, if any, to reaching 100% throughput? Gary C. Evans: Montana is running pretty much at capacity, but as Aaron mentioned, there's some efficiencies that the team up there are getting which will allow it to probably well, you saw in the month of October. We were able to increase throughput. The only the issues at Madero have been the quality of material. We continue to deal with some inferior quality material, but we've gotten some new material from, I think, Peru and even in Mexico that seems to be of better quality. So that's what we're trying to get to. We're trying to get to a consistent supply of quality material from producers of antimony that allows you to run more efficiently. You can imagine when you have this number of different products of raw antimony coming from these different countries, it's hard to be super efficient when you're having to check the quality of each material that goes into these furnaces. So having consistent material, that's what I think Aaron was really alluding to with respect to Bolivia and Chad. We're excited about the quality of the material we're seeing coming out of those countries. Operator: Okay. The next question, you spent $9.2 million on expanding capacity at your smelting ops. Any required spend in the current queue? Or maybe some color even on what you spent thus far given we're halfway through the period? Gary C. Evans: I would imagine we're probably $12-13 million. Rick may be able to jump in here. But the total CapEx is around $22 million. So that will likely get spent all by the end of the year. Rick Isaak: Yeah. No. It's yeah. Probably about $23 million and probably at least $10 million additional from the $9 million we're already at. Will get spent in the fourth quarter. Operator: Okay. The next question, are you able to provide any color on the targeted mix of internally sourced ore versus third-party purchases? And how that might evolve in the coming quarters. Gary C. Evans: Well, the targeted mix is 100%. But I doubt if we'll be there in the near future, I think we'll gradually continue to increase company-owned ore. So it just depends on, you know, our biggest issue, quite frankly, is weather. Our mine in Montana is obviously up in the top of a mountain. They have to deal with snow and cold. The activities in Alaska are completely shut down for winter. And won't start up again till April, May of next year. So, our goal in 2026 if we find the kind of antimony we hope to find in Alaska, is we bought a piece of property in town, closed on it, laid a cement pad before winter kicked in, and that will be a staging area where we'll be taking that antimony from Alaska, and we'll sort it probably low, medium, and high grade. And we'll probably even do some rock crushing there. And then load that material into SuperSacks to ship it to Montana. So we're getting prepared for a very active summer. I know that our geologists up in Alaska are working on getting additional permits filed, so we have no delays there. And can really hit the ground running when they can do. Due to the thaw-out of weather. Operator: Okay. The next question, you recently updated 2026 revenue guidance to $125 million. Does this include revenues from the new trioxide contract? Gary C. Evans: No. Operator: Okay. And the next question, any more government support in the pipeline or grant additional potential contracts? Gary C. Evans: Yes. Operator: Okay. And this does conclude have reached the end of the question and answer session, and I will now turn the call over to Gary C. Evans for closing remarks. Gary C. Evans: Okay. Hopefully, our call today was informative for everybody. We tried to give you some much more detail than what's obviously in the press release or the 10-Q. None of us at the company could be more excited about our future. And we look forward to telling you what all we're doing. Everybody's working hard. The loss we had in the quarter all related to cash compensation, I mean, stock compensation, not cash. It's very important. I mean, I think you want your management team and your board incentivized with stock, not cash. And so that should be a very good positive that you know, all this hard work we're doing, we're aligned with you as a shareholder. We want to participate in the future growth of this company and the stock performance that we hope to be able to provide. And so we're taking that compensation in equity rather than cash compensations. We are trying to preserve our cash. Our goal is to be the lowest-cost producer of antimony in the world. Bar none. And with everything we're doing in this sector, I'm highly confident that we'll be able to accomplish that goal. That ensures our viability in the future. We are in a market that has obviously variants and prices. And if we can control our destiny by being our own antimony miner, then that gives us longevity and certainty. So that's where we're headed. Thank you, operator. Operator: Thank you. This does conclude today's webcast. You may disconnect your lines at this time. Thank you for your participation.
Operator: Hello, and thank you for standing by. I would like to welcome everyone to the Serve Robotics Third Quarter 2025 Financial Results and Conference Call. Now I would like to turn the call over to Aduke Thelwell, Head of Communications and Investor Relations. Please go ahead. Aduke Thelwell: Thank you, operator, and good afternoon, everyone. Welcome to Serve Robotics' third quarter 2025 earnings call. With me today are Serve Robotics' Co-Founder and CEO, Ali Kashani, and our CFO, Brian Read. During today's call, we may present both GAAP and non-GAAP financial measures. If needed, a reconciliation of GAAP to non-GAAP measures can be found in our earnings release filed earlier today. Certain statements in this call are forward-looking statements. You should not place undue reliance on forward-looking statements. Actual results may differ materially from these forward-looking statements, and we do not undertake any obligation to update any forward-looking statements we make today except as required by law. For more information about factors that may cause actual results to differ materially from forward-looking statements, please refer to the press release we issued today as well as the risks and uncertainties described in our most recent annual report on Form 10 and in other filings made with the SEC. We published our quarterly financial press release and our updated corporate presentation to our Investor Relations website earlier this afternoon, and we ask you to review those documents if you have not already. With that, let me hand it over to Ali. Thanks, Aduke, and thank you, everyone, for joining us. Ali Kashani: We are at a pivotal moment for Serve Robotics. This past quarter, we crossed the threshold for 1,000 robots deployed. That's not just some round number. It's an inflection point. You can feel this in the sidewalks that we serve. The future of cities is autonomous, and we are at the forefront of this. Turning it into daily reality in these neighborhoods across the country. This is not just swapping humans for robots. We are unlocking new possibilities for cities. We are rewriting the operating system of our cities function. How goods move, how spaces are shared, how businesses reach residents. When the whole system upgrades like this, everything gets better. Safer streets, friendly and greener cities, and more prosperous businesses and workers. So why now? What's possible today that wasn't possible before? There are four forces that have really converged. First is physical AI. It's really finally caught up with our ambitions. Advances in distributed training, also the better onboard compute that is now available, lets us ingest orders of magnitude more sensor data. And that leads to incredibly more capable AI models that can help machines really understand the world in real time. Our perception and planning models are improving on the streets every single day. Each mile traveled enriches our dataset. Each model update expands where, when, and how quickly, and how safely we can move. And this all has a compounding effect. Second, every hardware component needed to create these advanced, inexpensive, and intelligent machines has matured. This includes powerful sensors that are now at mass scale and low cost, paired with motors and batteries that enable new vehicle form factors. Technologies like LiDAR sensors were unaffordably expensive just a few years ago, but now we have partners like Ouster who are shipping thousands of sensors each quarter in record numbers. That benefits everybody in the ecosystem because of the economies of scale. Third, consumers have adopted the convenience of online and on-demand ordering, and merchants need CapEx light and labor light capacity so that they can economically serve the demand. Restaurants have optimized their operations in the post-pandemic reopening. But they now need a way to unlock and realize that full potential. They want dependable, right-sized logistics that matches their demand by the hour. And that's what our fleet can deliver. And last but not least, it's the cities themselves. Cities are asking for quieter, cleaner, and less congested streets. Smaller vehicles made for specific use cases can now replace those two-ton vehicles that we've become so addicted to. And this is the future. Our robot's footprint is small. With an electric powertrain and a friendly presence. We earn the right to scale when we operate with safety and transparency and community respect, and when we are working closely with the cities that we serve. And we create these new jobs, full-time employee jobs, in neighborhoods that we're serving. Our third-quarter results prove that we are on the right track with all this. Our delivery reliability was nearly 100%, while our delivery volume increased 66% in a single quarter. And we continue to maintain a strong safety record. We now deliver for over 3,600 restaurants, which is an amazing 45% increase from the last quarter and more than a ninefold increase since last year. This is all proof that autonomy can be safe, reliable, and predictable even as we scale rapidly. We did all this while also expanding faster than anyone in our industry. In less than a year, we grew our fleet size 10x, our cities 5x, and our major platform partners 2x. Last month, we announced partnering with DoorDash, the largest delivery platform in the US and one of the largest in the world. Combined, Uber and DoorDash serve over 80% of the food delivery in the United States, which provides us an incredible reach to consumers and merchants. The scale that we've achieved in the last few months really changes things. Here's how to think about it. With a few dozen robots, you're running pilots. At a few hundred, you're starting to prove repeatability. Beyond a thousand, the system tips. We run more efficiently. The economics improve. The national partners really lean in, and our learning really speeds up. All of which makes every new city launch smoother and every new robot smarter than before. As we scale with precision, we've gone from one market to five fully operational hubs. Covering over 3,000,000 population. And well over 1,000,000 households. That's nearly a 70% increase in a single quarter and more than a tenfold increase in our coverage compared to the same time last year. Not only have we 10x'd our fleet, we've 10x'd our reach. And as importantly, each neighborhood adds to our reach data sets. With new and novel edge cases, which really accelerates our ability to learn across the network, and it compresses our timeline for future city launches. On that note, I'm excited to share with you our next three expansions. We've just been greenlit to expand into Buckhead, Georgia, Fort Lauderdale, Florida, and Alexandria, Virginia. Before the end of this year. Alexandria also gives us a toehold in the Washington DC area. We're building the first truly national interconnected autonomous delivery network on a common AI software platform and operations stack. So that a single partner integration would light up multiple metros and thousands of restaurants at once. For example, in Q3, we announced our partnership with DoorDash. Coming in addition to our existing contract with Uber, this allows our existing robots to unlock an incredible amount of additional volume. A robot that's completing a delivery for DoorDash could do a delivery for Uber on its way back. So this would actually improve utilization levels for robots. And we are not done yet. In addition to our existing partnerships with Shake Shack and Little Caesars, we've also started delivering for Jersey Mike's Subs. The famed sub sandwich chain with over 3,000 locations nationwide. And while it's too soon to give details, we also expect to add another well-known national QSR brand to the lineup. So the partnership platform is growing nicely. And concurrently with that, we are also developing an unparalleled map of cities, the Kerck cuts and slopes and potholes and obstacles and patterns, a living atlas. That becomes a valuable asset and an operational advantage. And while we do that, we are also deepening our community bonds. At a very hyper-local level. With merchants and landlords and HOAs and precincts, we need to integrate respectfully. Into these neighborhoods as we grow. Now let's take a step back. Serve Robotics is pioneering a robotics and autonomy as a service platform. That packages the full power of our autonomy stack, our hardware, and our urban robotics operation playbook. With the last quarter's acquisition of YU Robotics, our platform is now increasingly reinforced by AI foundation models and scalable simulation-powered data engine. Under the hood of all these is the physical AI flywheel that powers everything. Our third-generation fleet leverages the best-in-class sensors. Which creates these proprietary urban datasets. And that in turn leads to better AI models, which then creates more efficient and more autonomous fleets. A better fleet expands our TAM and increases our operating domain and verticals that we can do. And that, in turn, creates more pull in the market for more robots. So more miles, it's more robots, it's more data, it's better AI and the cycle repeats itself. The integration of YU will actually accelerate this loop. Because it turns data into better models faster. And that leads to tangible gains in our delivery speed and autonomy and the market reach. Our library of long-tail edge cases is expanding faster than ever. And the latest data that we gather on weather and obstacles and prey and detours it all provides the learnings that are applied network-wide. So every robot is learning from every robot. And this AI flywheel that we are building the flywheel that's now accelerating, in turn, attracts exceptional talent. Our rare data scale and this real-world fleet presence that we have is pulling in elite builders, and they, in turn, ship better systems. And better systems attract even more elite builders. So the talent flywheel is also compounding. All the forces, that I mentioned are helping us execute our vision. I'm really proud of our team for reaching the 1,000 robot milestone last quarter. In September alone, we shipped over 380 robots. That is in a single month. That means we launched more robots in a single month than the prior quarters. This was a pivotal milestone. We promised to ship 2,000 robots by the end of the year, during our IPO, and we are on track to do it. With robot number 2,000 planned to deploy in Miami in mid-December. But we are not going to stop there. We envision a future where Serve Robotics' fleet reaches 1,000,000 robots deployed across cities globally. They will travel billions of miles annually. They become embedded into the core fabric of a modern city. And they unlock new possibilities. Our conviction is simple. We are entering the age where things will move at our will. But on their own. Autonomy will become this essential infrastructure in our lives. It's rarely noticed. Because it just works. But it's sorely missed. It's not available. And we want to be the company that you will trust to run this. On the path to 1,000,000 robots, we are still early. But with 1,000 robots operating from coast to coast, we've really just crossed that chasm where the technology and the market all say go. From here, every additional robot, every additional hour, every additional block, makes the whole Serve Robotics ecosystem more essential and more valuable to the entire network. We're building something durable, and we are just getting started. With that, I'll turn it over to Brian to cover our Q3 results in more detail. Brian Read: Thank you, Ali. It's great to be with you all today. This quarter marked another step change for Serve Robotics. One defined not only by scale, but by strategic execution. We advance in every meaningful area, expanding our fleet, strengthening our technology base, and executing with greater precision across operations, engineering, and finance. We've also been extremely opportunistic. During the quarter, we integrated two key acquisitions that deepen our competitive moat. Acquiring YU, a pioneer in urban robot navigation, using large-scale AI models, we're expanding our physical AI capabilities by accelerating our roadmap. As we further integrate YU into our autonomy stack, we expect it to create opportunities to enhance our leadership in autonomous delivery as well as to reduce data infrastructure costs and improve operational metrics over time. These integrations allow us to convert more of our operational data into faster model improvements and richer monetization layers. All while reinforcing Serve Robotics' position as the category's innovation leader. Our focus remains clear. To scale efficiently, deploy capital strategically, and translate our growing operational advantage into sustainable financial performance, all in service of building an enduring business in this new age of autonomy and physical AI. As Ali described, the Serve Robotics flywheel is accelerated. More robots, richer data, smarter AI, and stronger economics. Let's dig into our Q3 results showcasing how these effects translate into measurable financial impact and expanding leverage across our business. Total revenue for Q3 2025 was $687,000, an increase of 210% versus last year, and in line with our guidance provided for the quarter. Fleet revenue was $433,000. Significantly, this quarter, we saw branding revenue jump 120% sequentially over Q2. As we've mentioned previously, the growth of our robot fleet into the thousands unlocks a pipeline of large-scale branding opportunities, and we delivered on that in Q3. Software revenues continued to transition from one-time to recurring, and were $254,000 in the quarter. We delivered exactly what we said we would. Fleet revenue is becoming the predictable growth engine we've envisioned, and we're now meaningfully stacking platform and data services on those same routes. Gross margin performance this quarter reflected the balance between rapid fleet expansion and deliberate investment in our long-term efficiency infrastructure. As planned, we continue to build capacity ahead of 2026 scale. Expanding our operations footprint, onboarding new cities, and integrating the systems and teams from our recent acquisitions. These near-term investments are already yielding returns in the form of measurable operational gains across reliability and autonomy. Average daily operating hours per robot increased another 12.5% sequentially from Q2. Driven by the growing mix of Gen 3 hardware across our fleet. This is a strong leading indicator that each unit is capable of contributing more value. Robot intervention rates saw a meaningful reduction through the quarter, and further, our best-in-class sidewalk autonomy is getting more and more capable. We saw a consequential increase in the proportion of miles driven in autonomous mode in the last week of Q3 compared to the first week of the quarter. Indicating the return on continued R&D investment. Taken together, these factors drove higher autonomous run times which in turn drive improvements in our average speed. This leads to compounding gains. Even a small increase in the average speed corresponds to an increase in our potential delivery volumes. These efficiency improvements are compounding. Each additional robot, each additional mile, and each new market contributes data that sharpens our models and reduces human touch points across the network. On the expense side, we remain disciplined. Investing in the capabilities that drive our competitive advantage. GAAP operating expenses for Q3 were $30,400,000, increasing from Q2 from deliberate investments in new market launches, M&A integrations, and expanded operational capabilities to support our national scale. On a non-GAAP basis, operating expenses were $21,800,000. R&D remained our largest investment area, totaling $13,400,000 on a GAAP basis or $10,700,000 on a non-GAAP basis. Primarily directed towards advancing our autonomy stack, expanding our AI foundation models, and integrating new data and hardware capabilities from our recent acquisitions. These initiatives are accelerating our pace of innovation while positioning us for long-term cost structure. G&A and go-to-market spending remain disciplined and aligned with our city expansion cadence. We're executing with leverage. Adding cities, partners, and robots without literally increasing headcount or our overhead. Our approach remains consistent. Invest where we have clear line of sight to efficiency differentiation and scale advantage. While maintaining financial discipline and measured growth. On the balance sheet, we ended the quarter with $211,000,000 in cash and marketable securities. In October, we executed a soft sale that generated approximately $100,000,000, which will be used to fund working capital and expansion activities. CapEx for the quarter was $11,000,000 tied to robot production, market launch, and expansion infrastructure. Our strong liquidity and debt-free balance sheet remain a competitive advantage, providing us flexibility to scale responsibly and invest opportunistically. Adjusted EBITDA was negative $24,900,000, driven by operational expansion in the quarter expected to accelerate efficiency through 2026. And now to our outlook. Once again, we delivered results at the high end of our Q3 guidance range. Building on this momentum, we now expect to generate more than $2,500,000 in revenue for the full year 2025. Our underlying recurring fleet revenues, which exclude nonrecurring software, is projected to grow 3x year over year from roughly $600,000 in 2024 to roughly $2,100,000 in 2025. 2025 was a pivotal year focused on establishing our national footprint, deploying 2,000 robots, expanding into new markets, and deepening our partnership portfolio. With this groundwork in place, we remain confident in our ability to generate an annualized revenue run rate of $60 to $80,000,000. We intend to update 2026 full-year guidance early next year. Initial indications show our expansion and operational plan positions Serve Robotics to deliver roughly a 10x inflection in revenue during 2026. Q3 marked another step forward in both scale and precision. Executing with discipline, expanding intelligently, and translating operational progress into tangible financial results. Each quarter, our fleet becomes more capable, models more refined, economics more efficient. The foundation we've built across technology, partnerships, operational excellence, position us for sustainable growth through 2026. We're proud of what the team has accomplished this quarter and even more excited about the opportunities ahead. Serve Robotics is defining this category, and we're confident in our ability to lead it for years to come. With that, I'll hand it back to Aduke for Q&A. Aduke Thelwell: Thank you, Ali and Brian. We will now move into the Q&A session. First, I'd like to say a big thank you to all the investors and analysts who submitted questions via email. We really appreciate your engagement. First question, I think this might be for Ali. Do you expect to add more robots in 2026? If so, what would be the timing and magnitude of the addition? Ali? Ali Kashani: Thank you, Aduke. Yeah. I can take this one. So good question. We aren't going to share the specific numbers right now. Hopefully, we have more to share early next year. But I do want to explain how we are thinking about growth. As we are looking to get towards our 1,000,000 robots goal, what we want to do is make sure we grow quickly but also with precision and discipline. We've been really laser-focused in getting the fleets really efficient and effective every day and driving utilization. While at the same time layering new partners, going to new geographies, all of this makes that scale-up easier. So in a way, being efficient and growth kind of line up together. So in that sense, it's the same type of effort that it takes to get there. So we are definitely going to push on growth, but we want to do it responsibly. Aduke Thelwell: Alright. Thank you. Next question is about robot design. Could you provide details on robot design simplification and cost reduction, beyond economies of scale? Ali, do you want to take this one? Ali Kashani: Yeah. I'll take this one too. I think there's a few different factors here. First of all, there's a ton of progress that we've made when it comes to the robot design. We've made it a lot more modular, easier to manufacture, fewer custom assemblies. We've also really strengthened our supply chain to get better parts and at lower prices. So this both cuts down the cost of the material, but also the cost of assembly. At the same time as we improve our design, we've also benefited from our scale manufacturing. Obviously helps bring the cost down as well. And while all of that is happening, the broader kind of ecosystem of suppliers, they're also getting more mature. I think a really good example that I'm excited about is Ouster. They have done a phenomenal job bringing these advanced LiDAR sensors to market at scale. They're shipping a record number of sensors right now, I think thousands per quarter. And we are directly benefiting from that. And I think a lot of folks in the autonomous space would benefit from more affordable LiDAR sensors that just didn't seem within that realm just a few years ago. So combining our improvements to the design and our improved supply chain and our scaled manufacturing and the maturity of the ecosystem, that per unit cost of the robots is definitely coming down substantially to the point that as we've shared in the past, our Gen 3 robots are a third the cost of our Gen 2 robots. And, you know, we are going to keep pushing these improvements forward. Aduke Thelwell: Okay. Thank you for that. Next question. What are the next steps in your DoorDash relationship? How do you see that helping the business? Ali? Ali Kashani: Yeah. We are working very closely with our partner DoorDash. First and foremost, it's about integrating the robots into the fleet in a thoughtful way and planning the market rollouts over time. DoorDash obviously unlocks an enormous network of restaurants and consumers for us. We have over a thousand robots right now and soon 2,000 that can deliver for those customers. So the timing is perfect. And I expect that in the next few months, we will start to really grow the volume under the new channel with DoorDash. Basically. I do want to emphasize this is a really important milestone for us because we've always envisioned this multiplatform app approach. I think, you know, a single robot being able to alternate between the device from each platform from DoorDash and Uber, it's really, really important that we are able to do that, and I think we are now proving that we can. And this kind of interoperability actually increases our utilization, which in turn lowers the cost per day rate. And that actually benefits all of our partners as well. Aduke Thelwell: Perfect. Thank you. We have a question on acquisition. Can you quantify the autonomy effect from YU? For example, with average speed increase or with the ratio of robot to operators improve? Brian, do you want to take this one? Brian Read: Yeah, good question. And, I mean, I think the simple answer to start here is, you know, we're very early in this integration process to dive into those results exactly. And this is the type of integration that can take months. But, you know, we're actually doing the call here today from YU's office, and the excitement from the teams to hit the ground running as soon as the merger was completed was tremendous. And there's just a lot of excitement on both sides to go faster and deeper into that roadmap to bring those new capabilities into the fleet. You know, I think we think about it as part of a flywheel where over time, that integration will allow our robots to be faster and smarter, while maintaining the safety and reliability that we focus on daily. And that, in turn, then drives efficiency and utilization ultimately landing in unit economics, and overall the benefit for these acquisitions. Aduke Thelwell: Okay. Thank you. Our next question: What are some differences between deployments in different cities? What have you learned from new deployments and expansions that will help you scale further? Ali, can you take this one? Ali Kashani: Certainly. Yeah. You know, each city has its own distinct personality. It's like they're different in ways that's actually very helpful for us and honestly, fun for our team as we've been expanding, seeing, for example, in Atlanta and Miami. Learning about humidity and the different kinds of pedestrian intersections and city design compared to, you know, what we had in Los Angeles before. They have different widths in their sidewalks, different nuances about how, you know, the best routes traversing would actually look like. Or our new market in Chicago, it's an incredible place for getting data on really dense urban environments, with cold weather where you have to look at battery efficiency and snow detection and traction. So a lot of things that we tried to test in advance now are being put to test in real life. And we are learning a lot from that. What's really powerful, I think, is that as we go to these new cities, it really enriches the models. And the data in this new environment actually helps the model across the boards for the entire platform. And that actually means that every subsequent city launch, as I mentioned earlier, gets more reliable and better. In fact, we saw this in Chicago when we first launched. It was the fastest market for us to get to our SLAs that were comparable to our more mature markets. So it kind of proves that the playbook is working well and the robots are getting smarter. Brian Read: And just to finish that from a financial standpoint, I think too is we're using these learnings. We're translating them directly into efficiency through our operations teams. So we're seeing, you know, shorter payback periods with the expansion. We're seeing the higher utilization as we deploy into new markets and neighborhoods. To continue the expansion. And that's exactly what we're building towards. So we've been, you talking internally about, you know, describing this as being sharper with our scale, and we believe all of these technology improvements are going to compound which will show up in our financial results. So, you know, that is really what's positioning us to expand in a disciplined capital-efficient way in 2026. Aduke Thelwell: Okay. Thank you. Next question. What can you share about the pipeline for software and data sales? How are you looking to accelerate software revenues in 2026 and beyond? Ali Kashani: Yeah. This is a good question. You know, the revenue pipeline for these other opportunities, like the delivery platform, the software that's powering the robots, as well as the data that's generated by the robot. It's been a really strong pipeline. We are in substantial discussions with multiple partners that want to basically use the platform or the data that we are creating. And think, you know, we are trying to be smart and selective, in terms of who we engage with. And, you know, apply some filters there to pick the right partners. But the amount of inbound interest we're getting really reinforces that what we have is quite differentiated. And I'm hoping that as we move some of these conversations forward and, you know, have more updates to share, we'll actually tell you more about those relationships as well. Brian Read: And if I can to also wrap a financial aspect into this question is, you know, as the fleet scales, these data and AI insights are going to become more valuable, right, to all of the people Ali just mentioned that we're talking to and the substantive discussions we're having. So that's going to enable our team to look at opportunities for, you know, adding more recurring software as we go throughout '26 and focus on that robotics and autonomy as a service offering. So it's really a long-term vision. Right? This is a balanced model. We're focused on diversifying revenue, and fleet revenue is that foundation. With software and data as that real high-margin accelerant. That we're focused on as we enter 2026. Aduke Thelwell: Okay. And our last question, you mentioned the $60 to $80,000,000 run rate. When do you expect to reach that run rate? Brian, can you take this one? Brian Read: Yeah. Let me give a little bit more color on, you know, in the script, we did mention the, you know, outlook for 2026. So we'll point everybody back to that commentary, but, obviously, this is a good question to end on here as we think about this Q3 update. So the path to hitting $60 to $80,000,000 is underway. Right? And that's really the final step when we think about the ambitions we laid out a few years ago to deliver 2,000 robots. Right? $60 to $80,000,000 is the, you know, the endpoint. But along the way, we've exceeded a lot of expectations. Especially as we near the end of 2025. And that's been a testament to the team and how we've delivered. I mean, to summarize what we've talked about on a lot of the earnings calls, you know, we are on track to deliver the 2,000 robots. We've expanded into multiple markets with more coming. We talked about new partnerships and adding, you know, top-of-the-funnel orders into our pipeline. But last but not least, we have the acquisition. So across all of these, you know, verticals, we are firing, and we're really exceeding what we set out to achieve in 2025. I'd like to remind investors and anybody that wants to understand our story that that's all, you know, great. But, critically, we're maintaining the safety and the reliability throughout that network as we're building. And so the final boss, as Ali likes to say, is to achieve that financial milestone is continuing to improve the utilization across the fleet. And so we have that momentum through 2025 and accelerating into 2026. To approach that $60,000,000 run rate target. Be clear, I think we're still more than twelve months out and we'll certainly, as we indicated, we'll have more to say on this in the next call. Early next year. Aduke Thelwell: Okay. Thanks so much. That's all the time we have for today, and that concludes our session. Thank you for your thoughtful questions and participation. And with that, I hand it over to the operator. Operator: That concludes today's call. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the authID Inc. Q3 Fiscal Year 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. You will then hear an automated message advising that your hand is raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your first speaker today, Graham N. Arad, General Counsel. Please go ahead. Graham N. Arad: Thank you, Operator. Greetings and good afternoon. This is Graham N. Arad, General Counsel of authID Inc. Welcome to the authID Inc. third quarter 2025 results conference call. As a reminder, this conference is being recorded. Joining me on today's call are our CEO, Rhoniel A. Daguro, our CFO, Edward C. Sellitto, and our founder and CTO, Tom Szoke. By now, you should have access to today's press release announcing our third quarter 2025 results. If you have not received this, the release can be found on our website at investors.authid.ai under the news and events section. Throughout this conference call, we will be presenting certain non-GAAP financial information. This information is not calculated in accordance with GAAP and may be calculated differently from other companies' similarly titled non-GAAP information. Quantitative reconciliation of our non-GAAP adjusted EBITDA information to the most directly comparable GAAP financial information appears in today's press release. Before we begin our formal remarks, let me remind everyone that part of our discussion today will include forward-looking statements. Such forward-looking statements are not guarantees of future performance. Therefore, you should not put undue reliance on them. These statements are subject to numerous risks and uncertainties that could cause actual results to differ materially from what we expect. Some of these risks are mentioned in today's press release. Others are discussed in our Form 10-Ks and other filings made available at www.sec.gov. Finally, if you are listening to this call via the webcast, you will be able to see the results presentation and advance the slides yourself as prompted by our speakers. I'd now like to introduce our CEO, Rhoniel A. Daguro. Rhoniel A. Daguro: Thank you, Graham. Thank you all for joining us today. I will walk you through our top-line performance, our customer and partner updates, our product and technology updates, and our priorities for the remainder of the year. Since becoming CEO, our management team has sought to build a balanced portfolio of both FAST 100 companies with potential for explosive growth and FAT 100 companies with stable operations and strong balance sheets. Initially, we focused on the FAST 100 as authID Inc. had not yet built the reputation to be credible with the FAT 100. That began to change in 2025 with the addition of several FAT 100 clients I will be sharing with you today. While making great progress this year with numerous prospective key customers, unfortunately, we saw two major early FAST 100 engagements underperform, resulting in negative net revenue for the third quarter. In 2024, we signed a customer contract with clear assurances and the expectation that the customer would meet their contractual obligation. However, reflected in our financials, the customer faced significant challenges to meet the agreed-upon requirements. As disclosed in our 10-Q, we proactively stopped recognizing revenue from them. We are still in active conversations with this customer, who continues to make introductions to more potential customers, but we do not plan to recognize any further revenue from them until we agree on revised terms and they complete the changes they are making to implement their new business model. Regarding the second customer contract, we recorded approximately $700,000 in estimated concessions that relate to an annual usage minimum fee payable at the end of the year. While this customer is experiencing its own business challenges, they remain a valued and strategic partner to us as we believe their activity will ramp over time. But we have adjusted our revenue to reflect this timing. The accounting adjustments for these two contracts drove the negative net revenue for the quarter. On the next slide, in terms of new contracts, in the third quarter, we booked two large enterprise customers and we booked two smaller customers, which were not enough to offset the revenue adjustments. These four contracts represent $200,000 in BAR for 2025. The first contract, as announced in a press release, is one of the largest global retailers based in the UK and represents significant validation of authID Inc.'s technology. They are initially using authID Inc.'s biometric authentication to protect their back-office employee workforce and call centers. The second contract is a phase one of a multiphase strategy where we embed authID Inc. inside NESIC's platform. NESIC, a subsidiary of NEC, will use authID Inc. for identity verification and employee onboarding. The third contract is with the Pipeline Group, a fast-growing lead generation company that will use authID Inc. to onboard remote workers, monitor worker activity, and authenticate remote workers into core systems. This represents our entry into the growing lead generation market. The final contract is with an international bank for identity onboarding, identity verification, and authentication. Onto the next slide. It's important to note that authID Inc.'s new customer list and target customer list is much different today than a year ago. The caliber and the scale of customer opportunities we are now engaged in have improved significantly and reflect the excitement around our unique technology. To that end, I think it is important for me to share some of the descriptions of the customers we are actively engaged with. While we are not permitted to provide the names of these customers for contractual reasons, some notable examples include household names across target industries that will expand our reach. First, a global leader in payroll technology, the largest global biometric hardware provider, a global leader in digital payments, a tier-one AI chip manufacturer, global professional sports organizations, one of the largest European retail chains, a major US healthcare network, a global cosmetics retailer, a national US specialty retailer, a leading US energy company, a Fortune 500 identity and access management company, a major luxury hotel operator, and one of the largest hotel brands. Again, these are not just targets but active engagements with industry principals. Even a year ago, none of these top-tier organizations would have considered authID Inc. Today, they are actively engaging with us because of the quality of our technology. Just this list alone represents over $20 million in BAR authID Inc. is actively engaged in closing. Our goal was to close enough of these opportunities to achieve our $18 million BAR target for 2025. Unfortunately, due to the longer sales cycles of these enterprise deals, our new BAR target for 2025 is now reduced to $6 million. Moving to the next slide. The strongest endorsement of our technology comes from our current channel partners. We have over 25 partners, many of which are the most established category leaders in their respective markets. Let me tell you about three partners specifically. Last quarter, I described our enthusiasm and appreciation for our partnership with NESIC, a part of NEC Corporation, which is a $20 billion global company that can work with anyone they choose. They chose authID Inc. An incredibly powerful statement about our technology. AuthID Inc. is now embedded in NESIC's software. Building on this partnership, NESIC and authID Inc. have agreed to work together to deliver enterprise identity management and AgenTek AI security solutions. Another key partner is Prove, one of the largest identity security platforms in the industry. Prove has selected authID Inc.'s PrivacyKey product as the biometric authentication solution for their next-generation platform. The unique cryptographic signing capability of PrivacyKey opens new business opportunities for Prove and authID Inc. Last quarter, I mentioned that we were working on signing a joint customer with Prove. I'm happy to note that this joint customer, a fintech company that provides digital infrastructure for more than 150 banks, has contracted with authID Inc. directly to launch our technology into their platform. We signed a contract with them in October, with their first bank going live next month. Finally, MajorKey, one of the largest Microsoft providers of identity solutions and services, announced last week their launch of ID Proof Plus leveraging biometric technology developed in collaboration with authID Inc. This is another example of companies launching their most important services and capabilities on authID Inc.'s core technology. Just discussed how our partnerships lead us to new opportunities. Now I'm going to talk about our greatest strengths, authID Inc.'s products and technology. On the next slide, as part of the foundational rebuild needed when I joined authID Inc., we had to make significant product breakthroughs to unlock enterprise adoption, specifically for our FAT 100 large enterprise accounts. In response to this need, we introduced two major innovations that I've already mentioned. The first one is PrivacyKey, which is biometric authentication without storing biometrics. As expected, with the existing contract signed, PrivacyKey adoption is ramping. The next one is IDX, which provides enterprise scalability and identity assurance for distributed workforces and supply chains and biometrically secures humans, nonhumans, and AI agents. Let me comment on the term AI agents. On the next slide, AI agents represent a massive opportunity in the market today. Industry analysts project trillions to flow through AgenTek AI commerce and hundreds of billions of that will be for AgenTek AI security. We've already heard from customers that they are slow-rolling the launch of AgenTek AI projects due to the lack of governance because unaccountable AI agents bring substantial risk of misuse and abuse. In response, we have added new capabilities to our IDX platform to tie each AI agent to a human to create accountability for all AI agent actions and behaviors. IDX provides accountability, compliance, security, and audit for the AgenTek AI-driven enterprise, and I believe we are going to be the most important company leading that category. The development of these innovations was required to deliver strong foundational capabilities and tech innovation. Many customers, partners, and industry experts acknowledge we have some of the best technology in the market. If you pick any industry, you're talking to the number one and the number two in that space. The best companies want to use the best technology available, and I believe we have that capability, which brings me to my final slide. The market is starting to value biometric solutions as an indispensable technology. To us, this has been obvious for years, but the market is waking up to the identity risks of AI. I say all of this to reiterate that authID Inc. is viewed as one of the few leaders in the marketplace for biometric authentication, AI deepfake detection, and now AgenTek AI security. The demand is so high for biometrics that a major identity company just recently acquired a biometrics company. We have received incredible validation of our technology with some of the largest and most valuable companies in the world. Therefore, our mandate for the remainder of the year into 2026 is clear: continue to serve the companies that entrust us to manage their biometric authentication needs and win the $20 million-plus in enterprise deals we are currently engaged in. We have made incredible progress to date. As a shareholder myself, I've never been more excited about the future of authID Inc. Thank you very much for listening. And now I'll turn it over to our CFO, Edward C. Sellitto. Edward C. Sellitto: Thank you, Ron. Thank you all for joining us today. I'll now review the financial results for the quarter. As Ron discussed earlier, our third quarter was impacted by contractual challenges with two customers. Our resulting third-quarter revenue adjustments exceeded our sales in the quarter, resulting in negative net revenue. I will expand on these adjustments in a moment. Looking at our GAAP results, for this quarter, we are breaking out our revenue into both gross and net revenue. Net revenue is equal to gross revenue minus any customer discounts and concessions. Gross revenue for the quarter was $600,000 compared to $200,000 last year. Net revenue, which reflects Q3 concessions totaling $700,000, was a negative $100,000 compared with a positive $200,000 last year. For additional context, I'll expand on Ron's earlier comments regarding the two contracts impacting net revenue. The first contract is with a partner signed in October 2024, which is delayed in ramping their usage due in part to a change in their own go-to-market strategy as well as recent challenges that arose with doing business in international markets. After we experienced delays in payment from this customer in 2025, the customer ultimately made a partial payment in the third quarter but requested a contract amendment before committing to making further payments. Since then, we have received no further payments nor have we amended our contract. Until any further negotiations are concluded, we have ceased revenue recognition for this contract and adjusted contract balances to reflect only the amount, approximately $400,000, that has been paid to date. The second contract that impacted our third-quarter revenue relates to the $700,000 in concessions estimated to be granted to a customer who is also delayed in their usage and is tracking significantly below their annual minimum usage commitment. This customer was signed in 2023 and began ramping in 2024 toward their commitment. The customer's usage declined unexpectedly due to shifts in their marketing strategy and remained significantly below the minimum commitment by September 30, 2025, despite consistent communication from the customer that they projected their usage to resume its growth. That said, the customer has paid all amounts due for their actual usage in compliance with our agreements. Given the customer's strategic importance to the company, as well as management's belief in their future anticipated usage growth and ongoing new business development opportunities, the company expects to make a concession on the annual minimum fee in order to maintain the relationship going forward. Revenue and performance obligations for this customer were adjusted in the third quarter to account for the estimated concession. Before moving on to the remaining financial results, I want to reiterate Ron's sentiment. We hope these customers can deliver growth in their business to fulfill our signed contracts. We are encouraged by the fact that we maintain relationships with each customer, are able to collect partial payments, and have year-over-year growth in our remaining customer base. We also proactively addressed this issue by focusing our efforts to work with larger, established enterprise organizations. Moving on to the remaining GAAP metrics, operating expenses for Q3 were $5.1 million compared to $3.8 million a year ago. The year-over-year increase is primarily due to increased headcount and investment in sales and R&D as we continue to execute our enterprise sales strategy. Net loss for the quarter was $5.2 million, of which non-cash charges were $1.1 million. This compares to a net loss of $3.4 million for the same period last year, which included $600,000 in non-cash charges. Net loss per share for the quarter was $0.38, compared with $0.31 a year ago. Turning to RPO on the next slide, remaining performance obligation, or RPO, represents the minimum revenue expected to be recognized from our signed contracts based on our customers' contractual commitments. As of September 30, 2025, our total RPO was $3.6 million, a decrease of approximately $10.9 million over the prior quarter as we recognized contracted revenue in Q3 and adjusted for payment issues and concessions related to the customer contracts I described earlier. Our RPO for the quarter is slightly below the RPO at the same time last year, which was $3.8 million. The combination of the one-off challenges we incurred with earlier contracts and our resulting proactive shift to pursue major enterprise customers with longer sales cycles has resulted in a temporary decline in our RPO, which we expect to resume its upward trend as we gain traction closing deals in our pipeline in the coming months. On to our non-GAAP results on the next slide, adjusted EBITDA loss was $4.1 million for Q3, compared with a $2.9 million loss for the same period last year. As described with our operating expense results, the year-over-year increase in EBITDA loss is primarily due to increased headcount and investment in sales and R&D. Next is annual recurring revenue, or ARR, which is defined as the amount of recurring revenue recognized during the last three months of the relevant period multiplied by four. ARR as of Q3 is $1.7 million, compared to $1 million of ARR as of Q3 2024. The year-over-year growth reflects our proactive efforts to sign and go live with established market leaders, including Prove Identity and the major global retailers signed this year. Turning to BAR, or booked annual recurring revenue, which is the projected amount of annual recurring revenue we believe will be earned under contracted orders, looking at eighteen months from the date of signing of each customer contract. The gross amount of BAR signed in 2025 was $200,000, down from $1.15 million of gross BAR a year ago. The decrease in BAR for the quarter is a result of the longer sales cycles associated with our enterprise deals as we progress through these more expensive sales conversations. As previously explained during our quarterly earnings call, BAR comprises two components, which we refer to as CAR and UAC. CAR, or committed annual recurring revenue, represents the total annual customer contractual commitment through fixed license fees and minimum usage commitments. These commitments are directly recognized as revenue in each contract year after each customer goes live with the service. Q3 2025 CAR represents $110,000, approximately 58% of reported BAR. UAC, or estimated usage above commitment, is an estimate of annual customer usage that will exceed contractual commitments. Q3 UAC represents the remaining $80,000, or 42% of reported BAR. Turning to our revenue growth stages on the next slide, I'll conclude by revisiting our progress aligned to the revenue growth stages we report each quarter. The first milestone we use to monitor our growth is bookings as measured by BAR. Through Q3, we realized a total gross BAR of $2.4 million. We've seen the momentum build with a number of new enterprise prospects in our pipeline, and we've seen others progress to more advanced sales stages. While the timeline for larger enterprise deals is drawing out longer than expected, the demand for biometric solutions and excitement over our technology is there from our customers and prospects. We're focused on bringing more of these deals with market-leading organizations over the finish line as we exit 2025. The next milestone is our remaining performance obligation, or RPO. As I detailed earlier, as of Q3, we have approximately $3.6 million in RPO, a number that we expect to climb back towards its previous levels as our bookings come in during the coming months. Our third milestone is revenue recognized in accordance with GAAP. Our Q3 year-to-date revenue of $1.6 million continues to surpass our 2024 full-year revenue, and we expect this growth to continue in Q4 as our core customers continue to go live and ramp. As we've called out in prior earnings calls, customer retention and expansion remain an important focus of ours, particularly in establishing that our customers get value from using our solutions and want to continue working with us as their needs grow and we offer new product capabilities. I'll end by saying that despite the turbulence we've faced as a younger company, we are witnessing a growing market, particularly in the enterprise, that is increasingly turning to biometrics. We're watching our prospects' excitement to engage as we demonstrate our solutions. As we've already started to do, I strongly believe we can continue to sign up large household brand names to use authID Inc. to secure their workforce and their customers. I hope that at least a few will even allow us to reveal their names to you all and share in our excitement along the way. With that, Operator, we'd now like to open up for questions. Operator: Certainly. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. And we do have a question in queue. Rhoniel A. Daguro: One moment. Operator: At this time, I would like to turn the call to Rhoniel A. Daguro, CEO, for closing remarks. Rhoniel A. Daguro: Thank you. We'd like to thank everyone for listening to today's call. If you have any further questions about our progress, please reach out to Investor Relations at investor-relations@authid.ai. We'd be happy to address the questions accordingly. We look forward to speaking with you when we report our full-year results in March. Thank you again for joining us. Operator: And this concludes today's program. Thank you for participating. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to Urgent.ly Inc. Common Stock's Third Quarter 2025 Conference Call. As a reminder, today's call is being recorded. Your participation implies consent to such recording. At this time, all participants are in a listen-only mode. A brief question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press. With that, I would like to turn the floor over to Jenny Mitchell, Vice President of Finance Strategy and Investor Relations. You may begin. Jenny Mitchell: Thank you, Operator. Good afternoon, everyone, and thank you for joining us for Urgent.ly Inc. Common Stock's financial results conference call for the third quarter ended September 30, 2025. On the call today, we have Urgent.ly Inc. Common Stock CEO, Matthew Booth, and Urgent.ly Inc. Common Stock Controller and Principal Accounting Officer, Andrea Makkai. Following Matthew Booth and Andrea Makkai's prepared remarks, we will take your questions. Before we begin, I'd like to remind you that some of our comments today may contain forward-looking statements that are subject to risks, uncertainties, and assumptions, which could change. Should any of these risks materialize or should our assumptions prove to be incorrect, actual company results could differ materially from these forward-looking statements. A description of these risks, uncertainties, and assumptions and other factors that could affect our financial results is included in our SEC filings, including our most recent annual report on Form 10-K for the year ended December 31, 2024, our quarterly reports on Form 10-Q, and other filings and reports that we may file from time to time with the SEC. Except as required by law, we do not undertake any responsibility to update these forward-looking statements. During today's call, we will also discuss certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in our earnings materials and press release, which are available on our website at investors.geturgently.com. A replay of today's call will also be posted on the website. As you learned from our 8-K and press release filed on September 22, 2025, NASDAQ formally notified Urgent.ly Inc. Common Stock that its net income from continuing operations had fallen below the minimum requirement and that it did not meet the alternative listing criteria for market value of listed securities or stockholders' equity for continued listing on the NASDAQ Capital Market under NASDAQ Listing Rule 5,150. In response, Urgent.ly Inc. Common Stock requested a hearing and presented before the NASDAQ panel on October 23, 2025. At the hearing, Urgent.ly Inc. Common Stock presented its plan to regain compliance with the NASDAQ listing rules and requested an extension through February 16, 2026, to achieve and demonstrate long-term compliance. Last week, on November 5, 2025, the NASDAQ panel granted Urgent.ly Inc. Common Stock the continued listing extension through the requested date. With that, I'll now turn the call over to Matthew Booth. Matthew Booth: Thanks, Jenny, and good afternoon, everyone, and thank you for joining us today. I'm very pleased with our performance during the third quarter. The momentum is building across the business, and I'm excited to provide an update on our recent progress. To begin, we're happy to announce that for Q3, we have achieved positive non-GAAP operating income. This is an important milestone. Let me begin with some other important highlights from our financial performance. We delivered $32.9 million in revenue for the third quarter, which was in line with our expectations. And notably, our eighth consecutive quarter where we delivered on our revenue guidance commitment. In addition, we delivered our second quarter of modest sequential quarterly revenue improvement, which demonstrates early signs of our return to growth. For the third quarter, we achieved a gross margin of 25%, which is again within our midterm outlook of the 25% to 30% range that we continue to reference as our longer-term target. This is a four-point improvement over the third quarter last year. Over the last three years, we've improved Q3 gross margin by 13 points, from 12% in Q3 2022 to 25% in Q3 2025. In all, we reduced the non-GAAP operating expenses by $2.7 million or 25% when compared to the same period last year. And most notably, as I mentioned at the top of the call, we achieved non-GAAP operating income for Q3 2025. I am so proud of the team and their hard work for achieving this milestone. The results reinforce our commitment to disciplined execution and long-term value creation. This signals a profitability inflection point. As we have discussed previously, we are now focused on new account growth and expanding our market share. First, let me talk about revenue starting with renewals. As we've discussed on prior calls, a portion of our annual capacity is dedicated to securing revenue through renewals. This is a big year for us. We're on pace for a productive renewal cycle with a handful of our OEM and fleet customer partners up for renewal. The specifics vary, but generally, we are looking at contracts from two to five years in length. Next, we would like to provide an update on our progress in the insurance markets. Last quarter, we mentioned that we signed a new contract with a premium insurance provider. This contract is now scheduled to launch later this month. We are also currently in red lines with two additional insurance providers in the mid-tier space. We are looking forward to providing transparent, high-quality service to this previously underserved segment of the insurance market. We still believe that most of the single-source roadside contracts will have two providers in the future, and this champion-challenger model produces better results for partners. To this end, we have been awarded a pilot with a large-scale insurance provider, which provides us with an excellent opportunity to feature our technology and prove our value. We will provide more details on this in the coming months. We are also gaining momentum in securing revenue from new logos across the fleet, autonomous vehicle, and affinity brand verticals. We have signed two new contracts and are in red lines with two others. Last quarter, we discussed that we signed a contract with a new EV manufacturer. In our October 7 press release, we announced this partnership with Sony Honda Mobility of America to provide its Aphelio owners with reliable nationwide coverage across all 50 states and the District of Columbia. The vehicle and the Urgent.ly Inc. Common Stock logo were proudly displayed in Las Vegas at the InsurTech Conference held in September. Beginning with the US delivery of the Aphelio I in 2026, Sony Honda Mobility customers will have access to Urgent.ly Inc. Common Stock's extensive network of mobility assistance providers. Our partnership with Sony Honda Mobility and their Aphelio brand centers on delivering an exceptional customer assistance experience that matches their groundbreaking vehicle. We anticipate Aphelio customers to be digitally sophisticated, expecting seamless high-quality service when assistance is needed, which perfectly aligns with our technology-driven approach to roadside assistance. With this agreement, we are already preparing service integration to align with the Aphelio One delivery to ensure that roadside assistance will be ready from day one. Our digitally native platform leveraging AI and machine learning has given us substantial operating scale and credibility in the market by creating predictive models to enhance performance for partners using temporal, spatial, and network data. On that front, we look forward to sharing even more about our capabilities in these areas. Our company website is undergoing a much-needed refresh and update. We have transformed this experience to showcase our platform, product features, data analytics dashboards, products, including our full suite of AI machine learning capabilities, and our service and solutions offering. Our website relaunch will be in the next few weeks. As Jenny mentioned earlier, we are actively pursuing strategies to comply with our NASDAQ listing requirements. More specifically, these strategies are focused on recapitalizing our balance sheet. For those that have been following our journey and are familiar with our financials, the recapitalization of our balance sheet is expected. We do believe that this is a key and necessary step to unlocking incremental value for shareholders, especially as we are pivoting to profitability, gaining momentum in new account growth, and producing high customer satisfaction scores, which are currently at 4.6 out of 5 stars. We are looking forward to providing updates on all of these topics as we are able. As we look ahead to 2025, our growth priorities remain returning to growth by expanding our existing B2B incident business through securing renewals, expanding relationships with existing customer partners, and developing new customer partner opportunities. Continuing to maintain non-GAAP operating breakeven through our operational improvements, margin expansion, and managed growth, transforming the market for roadside solutions with product innovations that differentiate Urgent.ly Inc. Common Stock from our competitors, improve our margin, and provide exceptional experiences for our customer partners and drivers. We plan to enter new and adjacent markets in the future. It's been a fantastic quarter, and I am proud of all the progress we have made. The momentum is exciting, and I look forward to the remainder of the year ahead. Thank you again for your time and continued support. I'll now turn the call over to Andrea Makkai to discuss our financial results. Andrea Makkai: Thank you, Matthew, and good afternoon, everyone. Today, I will discuss our results for the third quarter ended September 30, 2025. For the third quarter, revenues were $32.9 million, which was ahead of the midpoint of our guidance range of $31 million to $34 million and a decline of 9% or $3.3 million from the same quarter last year. The year-over-year revenue decline was in line with our expectations and was primarily driven by the reduction in dispatch volume from the early termination of a top-five global original equipment manufacturer customer partner referenced in our Q1 2025 filings and the reduction of revenue due from the Autonomous business. This was partially offset by volume and rate increases from new and existing customer partners. Gross profit was $8.1 million, an increase of $346,000 compared to the same period last year, driven primarily by margin improvement initiatives. Gross margin was 25% compared to 21% for the same period last year. The increase in gross margin is primarily related to the mix of service dispatches and our continued technology optimizations allowing us to better manage our service provider costs. We remain focused on executing against our strategic initiatives to drive profitable growth and continue to make steady progress to maintain our long-term gross margin target of 25% to 30%. Now let's move on to operating expenses. Operating expenses were $9.9 million, a decrease of $3.8 million or an improvement of 28% from the same period last year. Research and development expenses were $1.8 million compared to $3.1 million during the same period last year, a decrease of $1.3 million or 42%. The decrease was mostly related to the reduction in the autonomous-related research and development expenses and the reduction in employee and employee-related expenses. Sales and marketing expenses were $700,000 compared to $1.5 million during the same period last year, a decrease of $800,000 or 53%. The decrease was mostly related to the reduction in the autonomous-related sales and marketing expenses. Operations and support costs were $2.5 million compared to $3 million during the same period last year, a decrease of $500,000 or 16%. This decrease was mostly related to the continued optimization of customer support representative resources and operational process improvements. General and administrative expenses were $3.7 million compared to $4.9 million during the same period last year, a decrease of $1.3 million or 26%. The decrease was mostly related to the reduction in the autonomous-related general and administrative expenses along with continued cost optimization. We remain focused on driving operational improvements, which include continued optimization of business processes to drive further operational efficiencies. We also review non-GAAP operating expenses, which is defined as GAAP operating expenses plus depreciation and amortization expense, stock-based compensation expense, and nonrecurring charges such as transaction costs and restructuring costs. Non-GAAP operating expenses for the third quarter were $8 million, an improvement of 25% from $10.7 million in the prior year period. This non-GAAP operating expense is in line with our expectations and demonstrates the significant operational efficiencies and leverage we have achieved. GAAP operating loss for the third quarter was $1.8 million, a decrease of $4.1 million or an improvement of 70% from the prior year period. Matthew Booth: We also review non-GAAP operating loss, which is defined Andrea Makkai: as GAAP operating loss plus depreciation and amortization expense, stock-based compensation expense, and nonrecurring charges such as transaction costs and restructuring costs. Non-GAAP operating income for the third quarter was $123,000, an improvement from a non-GAAP operating loss of $2.9 million in the prior year Matthew Booth: period. Andrea Makkai: This is a significant milestone for the company as we met our stated guidance to achieve breakeven on a non-GAAP operating basis during 2025. While this represents a meaningful accomplishment, we view it as one step in our ongoing journey and not the destination. We remain committed to optimizing our business and operating model to drive continued improvement in this metric going forward. Now a few comments on our balance sheet. As of September 30, 2025, Urgent.ly Inc. Common Stock had a cash and cash equivalents balance of $4 million and a principal debt balance of $61 million. During the third quarter, we capitalized approximately $1.5 million in software, mostly to make enhancements to our platform by adding features and functionality which benefit all our customer partners. We expect this practice to continue with approximately $1 million to $1.5 million to be capitalized in 2025. During the third quarter, we sold 181,000 shares of common stock under our ATM program to raise approximately $273,000 in net proceeds after fees and commissions at a weighted average price of $4.19 per share. As of September 30, 2025, we had 1.6 million shares of common stock outstanding. Turning now to our outlook. For 2025, we expect revenue to be between $30 million to $33 million and our non-GAAP operating loss to be again less than $500,000. Additionally, we continue to target maintaining non-GAAP operating breakeven in the fourth quarter. With that, we are now happy to open the call for questions. Operator, please open the line for Q&A. Operator: Ladies and gentlemen, at this time, we'll begin the question and answer session. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Once again, that is star and then one to join the question queue. Our first question today comes from Christopher Alan Pierce from Needham. Please go ahead with your question. Christopher Alan Pierce: Hey, just one big picture question and then one kind of more smaller, like, near-term question. How should investors think about Urgent.ly Inc. Common Stock positioning if we do see a weakening economy, maybe less new car sales, but I know you guys are levered more towards premium OEMs, but then you have insurance customers sort of coming on. As you see older cars on the road perhaps, I guess I'd just love to kind of hear you kind of refine how to think about parts of the economy and parts of your business and how you have hedges and kind of where investors should think about that going forward? Matthew Booth: Yeah. Hey, Christopher. It's Matthew. Good to hear from you. Good question. We get this a lot. So I think in a lot of ways, Urgent.ly Inc. Common Stock is an anti-cyclical business. So the more that the economy starts to fall through or get worse or consumers start to put off repairs in their vehicles, what you'll start to see are an increased amount of incidents or breakdowns on our side. So we should look at our revenue actually improving as consumers put off needed repairs. And in terms of the OEM side, seeing that pretty good deliveries on the OEM side so far, so I don't think we've seen any tariff impacts as far as that goes. So I think, you know, as the economy gets worse or if it gets worse and cars break down more, Urgent.ly Inc. Common Stock will continue to do better. Christopher Alan Pierce: Okay, perfect. And then I know I heard the revenue guidance. I guess it's probably maybe too early to start thinking about '26, but the fourth quarter of 2025 is your first quote-unquote easier comp given toward the customer transact customer and forth that you had at the end of last year. How should we think about moving forward with the renewals you talked about and the new customer wins and the insurance customer trialing going forward? I know you still have a 25% to 30% revenue target over time. But I just kinda wanna think about or 20% to 30%. Sorry. Just think about, you know, the time frame around that. I want investors to get comfortable around. Matthew Booth: Yeah. I think we're, as we mentioned before, now that we've shed the Autonomous assets and removed the expenses from the Autonomous business, we have started to put the foot on the gas pedal, so to speak, and started to grow revenue. We have a lot of really good opportunities in the pipeline. Mentioned in the script that we have one with a top insurance company that we're starting that'll start at least the pilot will start this year, which we're very excited about because as we've mentioned previously, moving back into insurance is pretty important. Additionally, we also signed another insurance company. So a couple more fleet customers on top of it. So I think the revenue is definitely starting to tick up. Renewals look great. Customers are very happy with us so far. We don't have any issues with customers, and we expect to finish this year with an extremely strong renewal cycle. Christopher Alan Pierce: Okay. Trevor. Thanks. Good luck. Matthew Booth: Thanks, Russ. Operator: Once again, if you would like to withdraw your questions, you may press star and 2. Ladies and gentlemen, at this time, showing no additional questions, I'd like to turn the floor back over to Matthew Booth for any closing remarks. Matthew Booth: Great. Thanks, everybody. In closing, we're proud of the significant progress we've made to position the company for profitable growth. We look forward to providing you with future updates on our progress on future calls. If you'd like to meet with management, by all means, please reach out to us at InvestorRelations@geturgently.com, and we can schedule a call. Thanks again for your interest in Urgent.ly Inc. Common Stock and for joining our call today. Operator: And with that, ladies and gentlemen, we'll conclude today's conference call and presentation. We thank you for joining. You may now disconnect your lines.
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