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Operator: Good afternoon. Thank you for attending the Laird Superfood, Inc. Third Quarter 2025 Financial Results Call. My name is Matt, and I'll be a moderator for today's call. [Operator Instructions] I'd now like to pass the conference over to our host, Trevor Rousseau, Head of Investor Relations with Laird Superfood. Trevor, please go ahead. Trevor Rousseau: Thank you, and good afternoon. Welcome to Laird Superfood's Third Quarter 2025 Earnings Conference Call and Webcast. On today's call are Jason Vieth, Laird Superfood's President and Chief Executive Officer; and Anya Hamill, our Chief Financial Officer. By now, everyone should have access to the company's earnings release, which is filed today after market close. It is available on the Investor Relations section of Laird Superfood's website at www.lairdsuperfood.com. Before we begin, please note that during this call, management may make forward-looking statements within the context of federal securities laws. These statements are based on management's current expectations and involve risks and uncertainties that could cause actual results to differ materially from those described. Please refer to today's press release and other filings with the SEC for a detailed discussion of these risks and uncertainties. And with that, I'll turn the call over to Jason. Jason Vieth: Thank you, Trevor, and good afternoon, everyone. Thank you for joining us today for our third quarter 2025 earnings call. I'm pleased to report another quarter of solid top line growth as we continue to execute on our strategy to build Laird Superfood into a leading player in the premium plant-based functional food space. Net sales for the third quarter increased 10% year-over-year to $12.9 million, driven primarily by strong performance in our wholesale channel. For the first 9 months of 2025, net sales were up 15% to $36.5 million. Our wholesale channel continues to be a standout with net sales up 39% in the quarter and 40% year-to-date. This growth reflects our focused efforts on expanding distribution, particularly in grocery and club stores, where we've seen robust velocity gains and increased shelf space. We're seeing strong consumer demand for our core products like coffee creamers, hydration enhancers and functional beverages, as shoppers increasingly seek out clean, functional ingredients that align with healthier lifestyles. The wholesale channel contributed 53% of net sales during Q3 and through the first 3 quarters of 2025, represented 49% of our total net sales. This is well aligned to our strategic intent of transitioning Laird Superfood to being a wholesale-led company. In our e-commerce channel, which represented 47% of net sales in the quarter, we experienced an 11% decline year-over-year, primarily due to softness in our direct-to-consumer platform from lower new customer acquisition. However, this was partially offset by continued growth on Amazon.com. Year-to-date, e-commerce was relatively flat, and we remain optimistic about this channel's potential as we refine our digital marketing strategy and leverage our loyal repeat customer base, which accounted for about 88% of DTC sales in the quarter. Gross profit for the quarter was $4.7 million, down 7% from the prior year, with gross margin contracting to 36.5% from 43% last year. This was fully expected and largely due to commodity cost inflation and channel mix shifts towards wholesale, but also due to the nonrecurrence of a onetime supplier settlement benefit that we recorded in Q3 of last year, which impacted margins by about 3 points. Year-to-date, gross profit increased 9% to $14.4 million, as we have managed to offset a good portion of the commodity and tariff impacts that have swept the national headlines. Anya will provide more details on our financials in a moment, but overall, these results demonstrate the progress that we're making in scaling our business while navigating a dynamic market environment. Turning to business highlights. We're excited about the momentum in our wholesale expansion. We've continued to add distribution points at major retailers and our velocities in core categories like shelf-stable creamers continue to outperform our expectations. This validates our focus on premium functional ingredients that resonate with consumers, shifting away from sugar laden and artificial options. On the innovation front, we're continuing to invest in product development to diversify our portfolio and drive repeat usage. We are excited to be launching our new protein coffee in the next month, and we have already begun shipping our new liquid creamer products. On liquid creamers, this marks an enormous improvement to our existing formulation. We've now replaced the coconut oil with organic coconut cream, increased the level of adaptogenic mushrooms and replaced cane sugar with lower glycemic index coconut sugar. The resulting taste and texture are far superior to our previous products, and I would dare say the best tasting and healthiest products on the market. We are relaunching these creamers as organic formulations and packaging them in a post-consumer recycled plastic bottle that will be really attractive on the retailer shelves. Now back to protein coffee. We have high expectations for this launch. This marks Laird Superfood's first foray into dairy products, a market which is somewhere around 10x as large as the plant-based market that we have been participating in to date. And the product that we are launching is dynamite. It's a high-quality freeze-dried coffee, blended with 10 grams of dairy protein per serving, perfect for anyone looking to add protein to their diet. And with low calories and no sugar, it's also a perfect fit with today's health and wellness trends and great support for anyone taking GLP-1s. As part of our strategy to streamline operations and focus resources on our highest growth opportunities and Laird Superfood brand, we've made the decision to discontinue the Picky Bars brand in the second quarter of 2026. This will allow us to redirect investments toward the core Laird Superfood brand, which we believe has the strongest potential for scale. In connection with this, we recorded a $661,000 impairment charge in the quarter related to Picky Bars intangible assets. From an operational standpoint, we were able to reduce our inventory by more than $1 million in the third quarter. You'll recall that we had strategically built our inventory through the first half of 2025 in order to meet rising demand without the out of stocks that we experienced last year and to mitigate the impact of tariffs on imported raw materials, particularly from Southeast Asia. As we continue to sell through this inventory in the coming quarters, we expect cash flows to improve as a result. And speaking of tariffs, I am also pleased to be able to report that we recently were informed that our coconut milk products will not be subject to additional tariffs, reducing the impact on our go-forward costs and improving our 2026 financials by more than $1 million. For the balance of 2025, we're focused on optimizing our supply chain, managing costs and driving efficiencies to expand margins over time. We'll also continue to monitor the macroeconomic factors like commodity inflation and potential trade policies, but we're well positioned to navigate them as we close out this year and head into 2026. Q3 was another step forward in our journey to build a scalable, profitable business. We're executing on our plan, and I'm excited about the opportunities ahead. With that, I'll turn it over to Anya for a more detailed review of our financials. Anya Hamill: Thank you, Jason, and good afternoon, everyone. I will now provide you with some additional details on the third quarter of 2025 financial results and our outlook for the full year performance. I am pleased to report another robust quarter for Laird Superfood highlighted by double-digit top line growth, healthy gross margins, positive adjusted EBITDA and $1.1 million of positive operating cash flow. Net sales grew 10% to $12.9 million compared to $11.9 million in the prior year period and $12.0 million last quarter. And excluding Picky Bars products, net sales increased 14% in the third quarter. Although net sales growth came in softer than anticipated, primarily due to the timing of large wholesale customer orders, our underlying fundamentals remain strong and unchanged. Our wholesale channel continued to deliver exceptional momentum, increasing 39% year-over-year and representing 53% of total net sales, driven by ongoing distribution gains in both grocery and club. E-commerce sales declined 1% year-over-year, reflecting softness in DTC though this was primarily offset by continued growth on Amazon. Overall, the e-commerce channel contributed 47% of total net sales. Gross margin in the third quarter delivered robust 36.5 points compared to 43.0 points in the corresponding prior year period. It is worth noting that prior year Q3 margins have benefited from onetime favorable supplier settlement that accounted for approximately 3 points of gross margin. Excluding that onetime benefit, Q3 gross margins were about 3.5 points lower than corresponding prior year period and 3.4 points lower than the second quarter of 2025. These results are in line with our expectations given commodity inflation in our key raw materials, such as coffee and coconut milk powder and increased tariff costs. We are confident in our ability to hold gross margins in upper 30s for full year 2025 and beyond, which is at the level of best-in-class CPGs, despite inflationary pressures and even without using pricing as a lever. Our supply chain team continues to drive efficiencies by directly partnering with key raw material suppliers, and co-packing partners to find cost savings to offset rising commodity costs. Operating expenses increased $0.4 million in the third quarter compared to the same quarter last year, driven by increased marketing investment and advertising costs as well as increased selling costs due to higher sales volume. General and administrative expenses were relatively flat during Q3 of 2025 with Picky impairment charges, largely offset by decreased personnel costs and professional fees. Net loss for the third quarter was $1.0 million compared to $0.2 million loss in the prior year period. The increase in net loss was primarily due to $0.7 million impairment charge of long-lived intangible assets related to the Picky Bars brand as well as higher marketing and selling costs on higher top line sales. This was offset in part by decreased personnel costs. Adjusted EBITDA was positive $0.2 million compared to $0.1 million in the same quarter prior year. The improvement in adjusted EBITDA was driven by top line growth and discipline around cost control as we are well on the way to breakeven and profitability. Now turning to our balance sheet. We ended the quarter with $5.3 million in cash and no debt. As we discussed last quarter, we made targeted forward purchases of certain raw materials earlier this year to mitigate tariff-related cost increases. During the third quarter, we began drawing down this inventory, reducing our position from approximately $11 million to $10 million, while increasing our cash balance by $1.1 million quarter-over-quarter. We expect to continually building our cash position in the fourth quarter and into early 2026, as inventory continues to convert to cash. We exited the third quarter with solid momentum in our core categories, a strong innovation pipeline and continued confidence in our team and our brands. While macroeconomic uncertainty, particularly with e-commerce channel and the timing of large customer orders are impacting our near-term top line, our underlying fundamentals remain strong. Reflecting year-to-date trends and these time and effects, we are updating our full year 2025 net sales growth expectation to approximately 15% growth. We continue to expect gross margin to hold in the upper 30s range and to achieve breakeven adjusted EBITDA for the full year. We also remain confident in our ability to deliver a strengthened cash position, supported by our disciplined execution and positive operating cash flow in the third quarter. And now I will turn the discussion back to the operator and open it up for questions. Operator: [Operator Instructions] First question is from the line of Eric Des Lauriers with Craig-Hallum. Eric Des Lauriers: Great. First one for me, I just wanted to zero in a little bit more on the guidance. So certainly understand the volatility and size and timing of some key customer orders in the wholesale channel. I guess I was just a little confused if this negatively impacted Q3 results or Q4 or maybe both? If you could just give bit more color on perhaps where this timing shifted to, would be helpful? Jason Vieth: Yes. Eric, good to hear from you again, and thanks for that question. Yes, I mean the reality is this -- you hit it on the head, this is a timing issue related to reorders and new orders of -- pretty substantial orders, by the way, for new regions in club space, that's primarily what drove this. Similar, because we only have a couple of customers that we ship to that distribute them to the rest of the retail space, that being, of course, UNFI and KeHE, we did experience a little bit of a timing issue there, too. What we're seeing is we have really healthy sell-through, and we just had a timing issue that kind of caught us a little bit off. I think we're being a little bit -- as we go into Q4, we're also being a little bit cautious looking at timing there, too. And everything is just -- it's turning well, and the results look great. It's just moving a little bit slower than we expected with regards to when replenishment schedules come and the inventories that are being carried. And I think there's some rebalancing of inventories that took place also especially with the retail distributors. So we're taking a cautious eye towards that. It's -- for us, it's impacting Q3, Q4, but we don't believe that there's long-term impact from -- in any of those to the long-term health of the business. We think that the business is still exactly as it was. In fact, we continue to gain momentum, especially in that club space. So we think we're exactly where we thought we'd be, just off by -- broadly exactly where we thought we'd be, just off with a little bit of timing. Eric Des Lauriers: Yes. Yes. No, that certainly makes sense to me. And yes, I mean, at this size and the size of the orders, certainly, this dynamic isn't unique to you guys. I just wanted to sort of zero in on Q3 versus Q4, but I got what I need to know. Next question, I suppose is somewhat related. Last quarter, the 750-milliliter product, Refresh, had some nice impact on shelf space and velocities. I just wanted to sort of check in and see how those sales are trending? And any sort of early indications on how you might think of this protein beverage as well? Obviously, not out on shelves yet, but just curious how you're looking at that as well? Jason Vieth: Yes. Yes. Great question. I'll take that one again and probably try and hand everything to Anya from here, she can work out her vocal cords. So on the first piece with regards to the 750 ml, the upsizing worked about as we expected. When I go look at the data now, what I can see are a decline in units and a commensurate increase in dollar sales relative to the resizing that took place. Recall, we went from 500 ml to 750 ml, so up 25%. And we saw units shrink down just about that much on a velocity basis and sales basically hold from a velocity perspective. So it's kind of -- I'd give that one -- maybe I'd grade data, a checkmark at this point, don't really get to an A to F scale because we're going to go right back into it again. We -- that was a 9-month exercise essentially. And as we mentioned, we're leading that co-packer completely and moving to just an incredible formulation in a better package that's 100% organic that we think is really poised to make wave. So we did what we had to on that one. We had to play some catch up, as you guys know, because we had lost some distribution of small accounts right out of the gates and put a lot of pressure on our broker to make that up. We're just getting to where they've made it up and then we're going through the transition again. But we've got all the battle scars on our backs, and we're going to make sure, as we go forward, that those lessons get applied so that we don't relive Groundhog Day on that one. We feel like we know exactly what we need to do. Our broker is very clear. The communication is there. We're into that transition now. In fact, you can find us on a couple of selves already with the new post-consumer recycled plastic bottles, 100% organic formula, great tasting, super healthy creamer at Whole Foods and a few other retailers already. And we think -- we don't have any returns on that yet. It just hit the shelf in the last week, but we think that's going to be dynamite. So we're where we expected to be. When I look at -- if I look at the scanner data, we're right on it, in fact. And so kudos to the team for its forecasting. It just took us longer to get here than we thought it would take. So we finally got caught up, and we'll hold that from here. Eric Des Lauriers: Great. I appreciate that color. Next one just a bit of like a high-level question. So coffee prices obviously at record highs right now. On the one hand, I could see that having a negative impact to volumes of coffee-adjacent products like creamers; on the other hand, it may have a tailwind to coffee alternatives like your mushroom-based coffee and a functional copy. So just curious what you're seeing from a sort of macro impacts on your different product types here? And just kind of how to think about the impact of elevated coffee prices on your business? Jason Vieth: Yes. It's -- this is on our mind pretty constantly, probably everybody in the category. We have done a nice job of acquiring our coffee throughout 2025 to put us in a position to be able to hold the line on price so far. And so we've not -- we've taken in total, I think, $1 at retail in the last few years. And so we're in a position where if coffee continues to climb like this, and we have to make purchases into that headwind, we may need to touch price. But by holding -- and we were a little bit premium price coming in. But by holding price through that time, I think we've been able to capture a lot of volume, and we've been able to gain nice distribution points as well by partnering with retailers to be a strong premium yet not ridiculously priced play for them. And so it's been good for us. I think on the creamer side, we've certainly seen creamer slowdown. We know volumetrically, there's got to be a slowdown that's obvious, but there's still so much share for us on the coffee -- in the coffee category for us to be able to take and we think we have just an incredible proposition with a high altitude peruvian organic coffee with functional mushrooms at the price point that we're at. And so far, what we're seeing is we're being rewarded for that. Eric Des Lauriers: That's great. Congrats on the continued strong wholesale growth, and I appreciate you taking my questions. Jason Vieth: Thanks, Eric. Operator: Next question is from the line of Nicholas Sherwood with Maxim Group. Nicholas Sherwood: Can you talk about some -- what you've seen in limited time offer products? I've seen the pumping spice creamer on the shelves, I was kind of just want to see what you've been seeing from retailers and consumers when it comes to those products? Jason Vieth: Yes, what we've seen is that there's -- it's been a pretty good pumped in year, it looks like across the category. We got a late start with one of our key retailers, just kind of a weird operational SNAFU, but we've done really well. We're catching up on that as well. So for us, it will end up being a pretty typical year. It's not a big part of our business. In fact, I think in the future, it's an opportunity for us, and we are selling aggressively as we move from this year in that space. But we sold out early in almost all retailers. I think we call it a really successful year. Nicholas Sherwood: Okay. Perfect. And then switching gears, looking at e-commerce. How -- what is the strategy for the Amazon sales to start replacing some of those lost DTC sales? And is that something that we can kind of expect to see more in 2026? Can you kind of just walk me through what kind of strategy you're seeing there right now? Jason Vieth: Yes. Yes, great question. So the 2 key strategies that we have from a sales perspective are: one, to take our products to retail. When I got here a couple of years ago, we were a very small portion of retail business, and we're now about running around 50-50. And we expect over the next couple of years that to grow and approach 2/3, 1/3 retail to online business or wholesale to online and then only grow from there. So our expectation is that we become more wholesale-driven over each year as we go forward or at least over the period of a couple of years. Within online, we expect that we become more Amazon than we do wholesale and -- I'm sorry, more Amazon than we do DTC. The problem with Amazon from an overall growth and pricing perspective is, you really have to watch to make sure that you're priced in line with the rest of retail. So we've done that. As a result, we've seen strong growth over the last couple of years. It slowed down most recently, and we hear that that's pretty much an industry issue right now that Amazon has slowed across the food space for most brands. We have some good strategies that we're tweaking right now to implement against that, reapportioning spend across various top and bottom funnel drivers at the site and then driving -- using our awareness to drive folks back to Laird when they get to the Amazon site as well. So we feel good about the future of Amazon. For us, DTC is really intended to be a place where consumers can go to find a full breadth of product, they can sign up for the broadest offering of subscriptions and they can get education, especially as it relates to Laird and Gabby and what they eat and how they -- basically, how they run their lives from a health and wellness position across the, I think, physical, emotional, spiritual dietary spectrum. And that's what it's played out for -- over the year for us, rather. So if you think about the next, I would call, a couple of years, we would expect DTC to be fairly flat. We had a great year last year. This year is a little bit more challenged over the course of the 2 years. I think it's close to flat. And as we go forward, that's really our intent. The growth driver of online should be Amazon and then the wholesale business for the entire company. So for us, DTC plays a more marginal role as time goes on. Nicholas Sherwood: Understood. And then my last question is talking about this new protein coffee. It looks like a really big opportunity for the company. Can you sort of walk me through what you're thinking for the strategy on activating that new product? Are there specific regions, specific types of consumers that you're looking to reach or specific retailers that you're partnering in the early stages of this product activation? And are there any early learnings that you've already had kind of in the early stages of bringing this to market? Jason Vieth: Yes. Great question, and I apologize at the same time to Eric, I forgot to answer that when he'd asked that earlier as well. Yes, we're really excited about this product. This is our first foray into dairy. I think you guys have heard us in the past talk about Laird and Gabby's diet being omnivorous in nature. This is an area that we've always intended to go as a company. It also happens to be the 90% to the 10% that is plant-based, so it just opens up an incredible market for us. This protein coffee product, this has been a really big trend on TikTok for a long time, putting the protein powder into the coffee, and we're excited to bring it to market. We've basically taken the highest quality freeze-dried coffee -- cold-brewed freeze-dried coffee that I've ever tasted. It is so smooth and fantastic, put it together with a pretty unique blend of dairy proteins, I won't go into details for competitive reasons, but it's pretty unique and the ability to get it to blend and froth as a cold beverage is really unique and it tastes great. It's a product that is great for anyone seeking protein, but it's really on trend right now with what's going on with GLP-1. And as folks are having to find high protein products to supplement their loss of protein and overall calories. So we feel like we're right on trend with this product. We've got a really -- we have a partner for a very early big launch, so we'll be putting shippers on their floor and the retail space will come back and talk about that next quarter. So coming out of the gates really strong there and then seeing some good pickup for permanent placement as well. This will be a product that we launch online simultaneously to putting it into the stores, so you'll see it in DTC, on Amazon and out at retail. We're going to support it with some third-party social influencer groups that help to really get the brand out and run a 360-degree campaign on this, where we'll bring in retail activations with that influencer work that I just mentioned, some organic marketing that Laird and Gabby will execute, we'll put onto our website, and then we have strong TikTok execution behind it as well. So you'll really see bring probably our strongest launch effort in my tenure here at Laird to this product. And hopefully, we'll see consumers respond in kind. So we'll make a big deal out of the fact that we're getting into dairy. Yes, we think that, that will be really well received. It's very clean product, as it always is for us. And I think it's a real market-changer with regards to delivering a great taste with that nutritional profile in this category. Operator: Next question is from the line of George Kelly with ROTH Capital Partners. George Kelly: A few questions for you. First, just to follow up on that prior question related to the protein coffee that you're launching. Do you anticipate launching additional dairy products as soon as next year and what might those look like? Jason Vieth: Yes. Great question, George. Thanks for that. We do. We're working on a platform right now to make this much broader than just a singular product that we bring out. We think that there's opportunity across a number of products that we're probably not ready to go into at this point, George, but you can imagine that there are really 2 vectors to that. One is in the dry category space where we see additional opportunity to expand this line and potentially take it into very close but adjacent lines that we're in today. So you can probably surmise a pretty good guess against that. And we also see the opportunity to take this into liquid products. And so we've been working to develop both of these. We think that protein is very important. We believe that we can bring a cleaner protein, not only the protein source, but the ingredients that surround it than what you see at market today and that we have the brand to do that. So you will absolutely see additional dairy products. And yes, we would expect them to come to market over the course of the next 15 months. George Kelly: Okay. Okay. That's helpful. And then the conversation in response to one of the questions just about the sort of how you're going about the instant the protein coffee launch. I was hoping you could do some kind of similar with the new liquid product. And I guess what I'm trying to understand, it's just so hard for me to try to quantify what the ramp could look like and the implications on the model and consolidated growth for the next few years, et cetera. It's just such a big category and such an important category and you've had kind of varying success there historically. So I guess if you could help at all just with what the distribution plan is? Have you lost any distribution points versus the prior formulation? And do you anticipate a lot of promotion behind it? Or just any kind of context you can give about that launch? Jason Vieth: Yes. Yes. Thanks, George. That's another very good question that I wanted to speak to a bit more. So yes, what I would tell you is this: We lost some distribution early on in that transition, as I mentioned. We've largely recovered that. I think we're just about right back to where we expected to be and regained what we had lost. I don't think we've got the right product or proposition in the past. At the 500 ml, we were a little bit too small. We went to 750 ml, I think there was a self-inflicted wound there, if I'm honest, in that we went to 750 ml, and we really didn't capture the consumers, didn't really highlight plus 50% more now at a better price. And so there was a value question. I think people just got confused as we made that transition in general. And so what you'll see now is a very different product that's appearing. I mentioned that plastic bottle that is already recycled and lived one life, which is very important to our consumers. We're highlighting that story. It's 100% organic. That's very important to our consumers, especially in the Natural channel, we're highlighting that story. There's no more cane sugar in there, it's now all coconut sugar. There's no more coconut oil, it's now all coconut cream and the product tastes unbelievable. And so -- and we've added more mushrooms as well. So it's a more efficacious dose of the adaptogens. So there's a lot there to tell and it takes to -- exactly to your point, it's going to take a bigger marketing activation to do that. So that is absolutely underway. We haven't started to execute, we're letting some of the distribution rollout before we do, but you'll start to see that come out very soon with activations, specifically linked to where we picked up the distribution already. That -- all those transitions take place over the course -- most of them over the course of the next 2 months, so into January. Just a couple of small laggards after that. But retailers are really excited. They wanted to get on board, a couple of them cut in ahead of their planned changeovers. And so we -- I think we are really in a fortunate position to be able to turn on marketing in a big way here as we close out this year to start January. So you'll start to see that very similar to what I described. With the protein coffee, you'll really start to see that come to life here over the course of the next few weeks. And relative to the size, you're exactly right. I was having this discussion earlier today with an investor and the reality -- or actually, it was with our Board. The reality is this is a category that's over $6 billion. It's largely comprised of products that contain 4 ingredients. The only healthy one of which is water. We're mostly transporting water and the rest is sugar, bad-for-you oil, hydrogenated oils and chemicals. And there's this incredible opportunity to reinvent, and we just haven't had the right proposition, and I think we do now. So we'll activate early, get the early reads, figure out where we are. And then I hope that we're able to really press this one in a big way based on the feedback that we get in the marketplace. George Kelly: Okay. That's helpful. And then 2 last questions for me. Tariffs, what's the impact this year and the expectation for next year? And then the second question is on Club. I was curious if you have any significant promotions planned in the next quarter or 2? And that's all I had. Anya Hamill: George, this is Anya. So I'll take the questions on tariffs and club, and then Jason, feel free to add anything. So the tariff situation is very dynamic, and we are assessing those kind of as it unfolds. I think Jason mentioned earlier or maybe on the prerecord that we have some favorable developments as far as some of our key raw materials now being excluded from the tariffs such as coconut milk powder, so that was good news. We -- but it's still very much kind of unfolding and emerging. We started seeing the tariffs impact in Q3 and so you see that reflected in our gross margins. Anticipate kind of similar dynamic to continue into Q4. And then we are developing our plans for next year and evaluating what the action items that we need to take and pricing could be on the table if we need to, but our intent and goal is to continue holding the margins in the upper 30s, so even with the additional tariffs and the commodity costs. So that's on tariffs. And then with regards to club, we had a great success in club this year, and we have a strategy, a rollout strategy with -- to support the new regions, distribution and new products, and we intend to continue executing on the strategy in Q4 and into next year. Operator: There are no additional questions waiting at this time. So I'll pass the call back to the management team for any closing remarks. Jason Vieth: Yes. So look, it's -- I think we all know the headwinds that are in the consumer and overall in the consumer economy right now and the challenges that others are facing throughout this year and kind of only magnifying more recently. We're really excited to still be growing this business in the double digits, and we believe we're in a position to continue to do that next year and for future years to come for quite some time. We have a lot of white space. We have an incredible portfolio of products, and as we -- and an incredible team. And as we look to the balance of this year and into next year, we're still incredibly optimistic that despite any headwinds that have emerged and will continue to emerge that we're going to fight our way through and stay at the top of it. So thanks again to everybody for being a part of the journey and listening to the story again today, and we look forward to seeing you in a quarter. Operator: That concludes the conference call. Thank you for your participation. You may now disconnect your lines.
Operator: Ladies and gentlemen, good morning, and welcome to TIM 9 months 2025 Results Presentation. Paolo Lesbo, Head of Investor Relations, will introduce the event. Paolo Lesbo: Ladies and gentlemen, good morning, and welcome to TIM 9 month 2025 Results Presentation. I am pleased to be here with the CEO, Pietro Labriola; the CFO, Adrian Calaza, and the rest of the management team. Today, we will guide you through the highlights and review the main operating and financial results. As usual, we will close with the Q&A session. Before we begin, a brief reminder. As in previous quarters, Sparkle continues to be reported as discontinued operation, in line with the guidance provided last February. It is therefore excluded from the scope of these results, unless otherwise stated. Please also refer to the safe harbor statement in the appendix for additional details regarding the reporting perimeter. With that, I now hand over to Pietro to start the presentation. Pietro, the floor is yours. Pietro Labriola: Thank you, Paolo, and good morning, everyone. Let me begin with the highlights of today's presentation. TIM delivered a solid operational and financial performance in Q3, both in Italy and Brazil. Year-to-date results are in line with our budget, and we remain on track to meet full year guidance. It's important to note that the shape of our performance reflects the seasonality built in the plan. For this reason, we confirm our full year guidance. In Italy, the pricing environment in the consumer segment showed a slight improvement, with mobile front book price increases already visible in the market and some back book adjustment announced for Q4 by our competitors. Meanwhile, we have also strengthened our partnership with Poste Italiane, signing the MVNO contract and launching TIM Energia powered by Poste, an initiative that extends our presence into a new adjacent market. In the enterprise segment, we posted another quarter of robust growth driven by cloud. We also signed a letter of intent with Poste to establish a joint venture focused on developing proprietary solution, leveraging open source cloud and artificial intelligence. This partnership position TIM and Poste as leading players in the country's digital transformation. We will share more details later in the presentation. In Brazil, market dynamics remain highly rational and TIM Brazil delivered strong results with consistent growth and improved cash generation. In September, TIM successfully returned to the debt capital market for the first time since the 2023 bond issuance and the 2024 net cost separation. We issued a EUR 500 million bond that priced the lowest spread in the past 15 years for TIM and was the euro note with the lowest coupon of a sub-investment grade in the last 3 years. It received an exceptional response from investors with demand 6 times the offer, a clear sign of bringing confidence in the group's solidity. Let me now walk you through the key figures for the group in the 9 months. Total revenues were up 2% to 3% year-on-year with service revenue growing 3%. EBITDA after lease increased 5% to 3%. CapEx stood at EUR 1.2 billion, around 12% of total revenues. As a result, EBITDA after lease minus CapEx rose 10%, reaching EUR 1.5 billion. Equity free cash flow confirmed a structural improvement versus last year when NetCo was still consolidated and progress in line with our budget. Adrian will elaborate on cash flow in a moment. Net debt after lease remained stable at around EUR 7.5 billion with a leverage ratio below 2.1x. At domestic level, performance was equally solid. Total revenues grew 1.2% and service revenue 1.9%. EBITDA after lease increased 4.1%, showing that our operational model continues to scale effectively with cost discipline and repricing initiatives translating directly into profitability. CapEx reached EUR 0.7 billion, around 10% of total revenues. Consequently, EBITDA after lease minus CapEx was up 8%, reaching EUR 0.8 billion. In summary, these numbers confirm that our focus on execution and value creation is paying off. Quarter-after-quarter, we are building a more efficient and profitable team, in line with our industrial plan. The detailed Q3 metrics are available in [indiscernible]. Let's take stock of where we stand against our full year targets. Our metrics are in line with guidance. In Q3, the positive drivers we had anticipated started to kick in, supporting the expected domestic EBITDA after lease growth. In fact, domestic EBITDA after lease in Q3 was EUR 30 million higher than in Q2, up 6% quarter-on-quarter. Year-on-year growth was slightly softer at 4%, reflecting a tough comparison base. The Q3 domestic EBITDA after lease margin improved by 0.8 percentage points year-on-year and by 0.9 percentage points sequentially. Looking ahead, year-on-year growth in Q4 will be markedly stronger, benefiting from easy comps. Let me recall the main positive drivers progressively coming into play. First, the full effect of the back book price increases implemented also in Q3. Second, the usual seasonality of the enterprise business, which typically accelerates in Q4. This year, this effect would be amplified by a strong contribution from the National Strategic app. Third, additional OpEx efficiencies generated by the cost transformation program. Fourth, labor cost savings following the renewal in July of the solidarity agreement, which provides for a reduction in working hours for TIM employees until the end of 2026. In terms of cash generation, equity free cash flow after lease was positive at EUR 50 million in Q3. This result was fully in line with our expectations. It was lower than last year, mainly due to one-off effects. Adrian will provide more details on this dynamic in a moment. We expect cash generation to significantly accelerate in Q4, supported by higher EBITDA after lease and a strong contribution from net working capital, which typically benefits from favorable seasonality in the last quarter. We remain confident of lending smoothly in line with our full year target of EUR 500 million of equity free cash flow with some potential upside. Net debt after lease at the end of September was broadly stable at around EUR 7.5 billion, just EUR 50 million higher than in Q2, reflecting the impact of the buyback and minority dividends of TIM Brazil. Overall, our full year guidance is confirmed. Let's now move on to review the performance of the 3 entities. In consumer, the trend remains positive and fully aligned with the objectives of our value strategy. Year-to-date, total revenues for TIM consumers were broadly stable at EUR 4.5 billion down 0.4% year-on-year with service revenue split. In Q3, service revenues were slightly negative at minus 0.5% year-on-year, mainly reflecting a lower contribution from MVNOs, while retail services remained stable. At the end of September, we launched Team Energia powered by Poste, a significant add-on to our customer platform and the first tangible initiative of former cooperation with Poste. We are pleased with the market's positive response, especially considering that we have not yet carried out any dedicated communication campaign. Back book price adjustments continue in Q3, mainly in mobile. Year-to-date, we repriced around 4 million wireline and treated 4 million mobile consumer lines. The benefits are clearly visible. Wireline ARPU increased, mobile ARPU remains stable and churn stayed under control, a remarkable outcome given the multiple price adjustment implemented over time. This validates the effectiveness of our volume-to-value strategy launched in 2022 and we know that similar action have recently been announced in the market, starting from Q4. Wireline net adds were stable in Q3 and on a 9-month basis, the trend improved significantly versus last year. In parallel, we continued our push of FTTH and 5G fixed and wireless access with net debt growing 9% and more than doubling year-to-date, respectively. Mobile net debt saw a slight sequential deterioration. However, the number portability balance remained neutral also in Q3, confirming the trend observed in the first half. As mentioned in previous earnings calls, SIM cards involved in number portability and an ARPU of around EUR 12, EUR 13 compared with about EUR 1 for the other SIMs. This means that most of the mobile lines lost year-to-date had the limited impact on service revenue. Finally, a note on our customer platform. TIM Vision service revenue continued to grow steadily, up around 5% year-to-date. In enterprise, we are pleased to report the 13th consecutive quarter of growth. The performance remains solid and fully consistent with our strategy to focus on high-value ICT services. Over the first 9 months, total revenues grew mid-single digit to EUR 2.4 billion, with service revenue up more than 5%. Following the unboxing event held in October, it is now even clearer why TIM Enterprise continue to stand out in the European context. Our distinctive edge come from the combination of a unique portfolio of assets and advanced capabilities in cloud, IoT and cybersecurity. This positions TIM as a leading provider of secure and sovereign digital services for the country. Year-to-date, cloud remains the key growth driver with service revenue up 23% year-on-year, reinforcing TIM's position as well as Italy's leading ICT players. Revenues from other IT declined by 5% as growth in Security and IoT was offset by a contraction in the licensed businesses, reflecting our deliberate portfolio reshaping to phase out low margin activities and focus on higher value solution. Connectivity performed as expected, showing a slight decline. Within the mix, fixed connectivity remains stable year-on-year, while mobile declined due to the phase out of a major public administration contract that we deliberately choose not renew. This decision is consistent with our strategy to avoid low or negative margin tenders. The value backlog contracts signed but not yet activated is expected to reach around EUR 4 billion by year end, up 5% versus last year. Moving to Brazil, results once again confirm strong execution and market leadership. The market remained healthy and rational and TIM Brazil continued to deliver profitable growth, reaffirming its position as the most efficient operator in the country. Year-to-date, top line grew mid-single digit, driven by mobile service revenue. Customer base monetization remains a key focus with successful upselling from prepaid to postpaid, leading to the highest ARPU in the market. Meanwhile, 5G network expansion continued at pace with TIM maintaining its leadership in 5G coverage. Now reaching more than 1,000 cities. Efficient operational execution supported robust EBITDA growth and margin expansion. In the 9 months, OpEx remained below inflation and EBITDA after lease exceeded 38% of revenues, up 7% year-on-year. TIM Brazil also delivered strong cash generation with EBITDA after lease minus CapEx growing double digit. These results demonstrate that the operational discipline that has driven success in Brazil are the same principle regarding the transformation of our domestic business. In both markets, the formula is the same. Focus, efficiency and value creation and the results speak for themselves. I'll now hand over to Adrian for the detailed financial results. Adrian Calaza: Thank you, Pietro, and good morning, everyone. Before moving to cash flow and debt, let me start a few comments on CapEx and OpEx. At group level, CapEx was stable at EUR 1.2 billion in the first 9 months and EUR 0.4 billion in Q3. Accordingly, CapEx intensity remained soft at around 11% of revenues, mainly due to phasing, but we expect CapEx to pick up in Q4, both in Italy and Brazil as it did last year. About 25% of CapEx was customer-driven, while the majority was allocated to infrastructure investments, in particular, mobile networks, IP backbone, and data centers, where we continue to increase our capacity to cope the significant growth on cloud services. Group OpEx increased modestly in the 9 months, up 0.9% year-on-year, mainly due to TIM Brazil, while domestic OpEx remained broadly flat. Notably, in Q3, domestic OpEx were down 0.7% year-on-year, thanks to lower industrial costs, including the MSA and labor costs, partially compensated by volume-driven costs. I remind you that Q3 last year was the first one with official figures following network disposal. Therefore, we are pleased to confirm similar trends compared to the pro forma basis. In Italy, both OpEx and CapEx discipline continued to be insured by the transformation plan. As a reminder, progress is measured against initial OpEx and CapEx trajectory that is the cost base line we would have incurred without the plan. We currently have more than 80 transformation initiatives underway which have delivered over EUR 130 million of incremental benefits year-to-date. Our efforts are focused on 4 main areas: the commissioning legacy technology consolidating ICT vendors, aligning service levels with actual customer needs and optimizing labor costs through the renewed solidarity agreement. Net debt after lease at the end of Q3 was broadly stable at EUR 7.5 billion. Let me highlight the main differences versus last year to clarify the cash flow dynamics and address the questions you might have in mind. First, working capital. In Q3, absorption was higher than last year, mainly due to a reduction in days payable outstanding. As part of our vendor consolidation efforts, we reduced the number of suppliers in certain purchasing categories, securing better pricing conditions in exchange for a slightly shorter payment terms. This effect was concentrated in Q3 when the change was implemented and will not repeat in coming quarters. Second, financial charges. In Q3 2024, cash interest expenses were EUR 27 million lower, reflecting a remarkable increase of the mark-to-market valuation of securities in our portfolio, keeping aside such 2024 one-off performance driven by the reduction in the interest rates. The financial charges are slightly down year-on-year. Third, cash taxes and other. Last year benefited from dividends received from INWIT through Daphne also a one-off factor. And fourth, payback. In Q3, we had EUR 49 million equivalent outflow related to share buyback at TIM Brazil. As Pietro mentioned, we have good visibility on cash generation for Q4. We expect a ramp up supported by both higher EBITDA after lease and a robust contribution from the networking capital, which typically benefits from favorable seasonality in the last quarter of the year. We remain on track to achieve or even exceed our full year target of EUR 500 million in equity free cash flow after lease with leverage below 1.9x. To conclude, as you know, yesterday was my final day as group CFO. This almost 4 years have been an incredible journey reached with challenges, but mainly of rewarding moments of growth and transformation. Looking back, I am deeply proud to see the group firmly on a positive path, not just financially but above all, operationally. I'm grateful to Pietro for his vision and courage and for giving me the opportunity to contribute to this journey. My thanks to all our colleagues, both in Italy and Brazil for the unwavering commitment. To my peers in Pietro's leadership team for their patient and friendship and especially to my team for their unconditional support and extraordinary capacity. Special thanks to the financial community and our shareholders who believed in this transformation story. It was an honor to serve alongside you all, and I am confident that the group's momentum will continue with Piergiorgio to whom I wish every success as he takes on this role. With that, I hand over to Pietro for the very last time. Pietro Labriola: Thank you, Adrian. Today, we are also sharing some high level updates on the strategic partnership we are developing with Poste. A more detailed disclosure of the expected synergy will come next year when we update our plan. Starting with initiatives within TIM Consumer. The MVNO contract has been signed and customer migration are set to begin in Q1 2026. As mentioned earlier, TIM Energia powered by Poste is showing strong early traction, confirming the cross-selling potential we can leverage together. Additional cross-selling initiatives, targeting retail and SMB customers are currently under evaluation. Moving to TIM Enterprise. We are exploring cost-saving opportunities through joint procurement initiatives and we have signed a letter of intent to establish a joint venture on cloud services, focused on generative AI and open source technologies. This JV will position TIM and Poste as front runners in the country's digital transformation, further strengthening enterprise positioning as a key player in sovereign initiatives. A more comprehensive update will follow next year. Let's now move to the final slide for the closing remarks. To wrap up, our 9-month results are fully on track to meet full year targets, both operationally and financially. We confirm our guidance for the full year. We're advancing the strategic partnership with Poste to generate synergies between the 2 groups. The MVNO contract and the TIM Energia powered by Poste are the first initiatives unlocking mutual benefits with more to come to further expand our respective product portfolios. In the enterprise place, both groups play a central role in Italy's digital ecosystem. TIM in the telecom infrastructure and cross services and Poste in public digital services. Our partnership remains key to enabling secure nationally controlled digital transition. We are delivering what we said we will deliver, and we'll continue to execute with consistency and discipline. Before closing, I would like to take a moment to thank Adrian. His contribution over this year has been fundamentally transforming the company, not all in terms of financial results, but above all, in restoring the discipline, transparency and credibility that's now define TIM. Adrian, thank you for your professionalism and the deep commitment to the group. At the same time, I'm very pleased to welcome back Piergiorgio, returning to TIM after several years. His deep knowledge of the sector and of our company we ensure continuity and competence. Two essential qualities in a market where understanding the business and the technology is an imperative. The best way to predict the future is to bid it. And that's exactly what we are doing because, as I always say, inaction is not an option. With that, we are ready to take your questions. Operator: [Operator Instructions] The first question is from Mathieu Robilliard at Barclays. Mathieu Robilliard: First, I wanted to thank Adrian for all the collaboration, transparency over the years and obviously, welcome Piergiorgio. With that, I had a few questions. The first 1 was in terms of the Consumer division. So obviously, very impressive ARPU progression on the fix continues, a bit less this year -- or this quarter rather on mobile, but the trajectory is good. Meanwhile, however, the volumes continue to be a bit depressed. So my question was a bit forward-looking, which is if we look into 2026, and we think about how this -- the top line, the service revenue can progress. Do you expect to have improving volumes to support the growth of the service revenues? Or is it still going to be based essentially on ARPU progression. And is there room for that? So that's the first question. The second question was about the migration of the use of the Open Fiber network versus the one of FiberCop for fiber. If you could maybe give us a sense of how is your base progressing there? And I wanted to check what kind of contract you had with Open Fiber. I understand that with FiberCop, you have no volume commitment, which gives you a lot of flexibility. I was wondering if that's the same thing with Open Fiber. And lastly, if I may, on M&A, obviously, we've seen some press reported news that some players could engage some discussions. And I was wondering if you would welcome that kind of scenario in Italy. Pietro Labriola: Thank you, Mathieu. I will answer immediately to the third question related to the M&A. I think that I must be repetitive because I'm saying to all the markets since several quarters that. Whoever will be that we proceed with the market consolidation in Italy will be a good sign for us then can be TIM to manage the situation or can be another player. I think that it's really important because this is a trigger that we allow to continue and to improve the network efficiency and the efficiency on the cost base. So I'm very happy if someone will do a first move and will proceed on that. It's important to remember when in 2022, we started to talk about these things, no one was believing us. When we're saying that from volume to value was the driver of the growth, no one was believing us. Now also looking at the result of a lot of players, not only in Italy, but also in Europe, everybody are using this claim from volume to value. And the market consolidation in Italy is no more a dream because the free step succeed, that is Vodafone Fastweb. And I'm quite optimistic that quite soon, there would be a further step. Related to the consumer division, I will leave Adrian to elaborate more on that, having in mind that on the mobile and Adrian will explain better, we can expect also in the reduction of the volume because, as he will explain a part of the cancellation as related to seasonality phenomenon and to the past commercial approach, not only TIM, but of everybody. On the fix, you were mentioning that we are proceeding. And so we are also quite optimistic on the consumer. Let me give also a more strategic outlook on the consumer market. In the past, I was always more confident in the improvement coming from the industrial cost base, market consolidation and these kind of things. And I was more worried about the possibility of a real growth of the ARPU. I spent the last 10 days in an innovation trip, and I have now a more optimistic view. Why that? All the AI, all the new functionality that you are experiencing in the market and everybody described about the future, we request mainly 3 things: low latency, higher uplink and higher throughput. In the actual offer, we have nothing of that. So these 3 pillars will become one of the main driver. I'm talking about medium, long term about potential ARPU increase. And in such a case, different from the customer platform will be mainly connectivity with a very high margin. Now I'll leave Adrian to answer. Adrian Calaza: Thank you, Pietro. Thank you, Mathieu, for the question. So we see a positive outlook going towards '26, meaning that we continue to believe we can go on with the price increases. The price increases of this year proved to be successful, and we also expanded a little bit the segment in Q4. So we will continue in Q4. That will be positive, of course, on the ARPU contribution. Equally, I have to point out that yes, on fixed, we still see some negative networks, but a large proportion of that, very large is due to the voice-only customers that are phasing out the voice fixed technology and that is actually considered in the plan. So if we look at the net broadband, we are improving and we continue to believe we will improve, thanks to several factors. One is exactly what you mentioned, the improved coverage of FTTH network, thanks also to the agreement with Open Fiber. So we are growing in terms of acquisition and transformation of technology on the Open Fiber network that we are continually working on. And also, especially from last summer due to the very wide progression of FWA which, for us, FWA 5G for TIM is a new technology that is also coming with very high margin. As Pietro was pointing out, we see an improvement that you also noticed in our portability trend in the mobile market. The mobile market is somehow stabilizing, and we measure a sizable improvement of the net active customer year-over-year. That is improving. And so we think that this phenomenon will continue to increase because, as Pietro was pointing out, the market is deflating in terms of rotation and volumes, which is, of course, coming with benefits on the ARPU dilution and on the net balance effect. Pietro Labriola: Is it fine, Mathieu? Mathieu Robilliard: Just on -- thank you so much. But just in terms of the type of contract you have with Open Fiber, is it a volume commitment? Or is it on a per-line basis. Just to understand if it's similar to what you have with FiberCop, I don't know if you want to disclose that. Adrian Calaza: It is an agreement that is complementary to FiberCop, of course -- complementary in terms of coverage, we use that mostly on a per line basis but is a wholesale agreement that is complementary to FiberCop. Pietro Labriola: But in any case, immaterial. Open Fiber as offer on the market that are per line or with a minimum commitment based keeping the price flat for the next years. So we use a mix on that based on our convenience in the different areas. Operator: The next question is from Fabio Pavan at Mediobanca. Fabio Pavan: Yes. Before asking questions, I would love also to thank Adrian for supporting this. Yes, very precious and we will also welcome Piergiorgio on board. Coming to the questions. First one is a follow-up on what Pietro, you just said. So there is anything that you can do in order to support sector consolidation even if you are not at the driving seat? Second question is on Poste and the letter of intent signed on the cloud side. Could you give us some more color about how would you, let's say, approach the market? Is it going to be something targeting Poste customer base, is it going to be a bundled offer. Pietro Labriola: Okay. Thank you, Fabio. Let's start from the second question about the JV with Poste. I will leave Elio to elaborate more on that also because this was a very clever idea that Elio elaborate and that was accepted also by the counterpart. But in any case, if you think in this way, we'll talk about unboxing TIM Enterprise 1 month ago, we told to everybody that for us it was very important to fill up the value chain that today we are managing through some external partner. Now the idea is that, that was very well explained by Elio that we want to do that internally. We don't want to do everything internally, but we'll do that, that has a much future-proof reliability. Now I leave to Elio to talk about the JV. Elio Schiavo: Thanks, Pietro, and thanks, Fabio, for the question. So we made pretty clear that in our strategy, there are 3 things that we need to hear about. One is the insourcing of capabilities because this will allow TIM Enterprise to improve margins. The second 1 is we have been very vocal, as you know very well, during the last few months about this opportunity of sovereign cloud and because we believe that from this country and the continent Europe more in general, they need to face -- they need to embrace the opportunity of creating a kind of digital independency. And for doing this, it's clear, you need to develop open source capabilities, which is something that Poste will provide within this -- in the creation of this joint venture. And the third point is that we need to embrace as much as possible model and model by model of artificial intelligence. So the idea is to create a structure which is fast, agile, flexible, able to attract talents and able to integrate vertical capabilities resulting potentially from M&A activities. So -- and so the aim of this company will be to serve both Poste and TIM for embracing the new technologies and at the same time, to provide the market with a solution that today -- an end-to-end solution on new technologies that today, we don't see in the market. And as I said, the 3 areas of focus will be cloud migration and sourcing capabilities, open-source platform and artificial intelligence. Hope I answered the question. Pietro Labriola: And what is really important that for the first time after several years, we are a newcomer. So we don't start from legacy. And this is what will have passed because just to give you an idea, if you are already a system integrator with a lot of developers, you will have to face the challenge of the AI that will have the software development. We start now from scratch. So we'll be able to explore since the beginning, the possibility to increase the productivity with the number of developers that are lower. In the meantime, focus on open source is key in the development also of our sovereign cloud strategy because this is the area in which you have less dependence by other countries' technology. It doesn't mean that this is a complete alternative to the partnership with the hyperscaler. We'll continue to partner with them because they are key also in terms of innovation. About the consumer segment, what they want to highlight Fabio is that, as we told during the call, the performance that we are having today on TIM Energia powered by Poste is a multiple of what we are thinking to have without having launched yet an advertising campaign. So this is a first test to try to understand us, our customer platform strategy can work. Let's remember, sometimes we forget that we are now the second content platform in Italy. And now we started with the Energia that will pass for the increase. We are working also for further activity on the consumer side, as we mentioned, we are starting the portfolio of both companies, Poste and TIM and we are trying to understand how to exploit the channel for this activity. These are all things that will develop more in detail during our next 3-year plan presentation. About the first question that is related to the sector consolidation, it's clear that we are very supportive. It doesn't mean that we can accept anything that will transform in a weaker company TIM, but I think that the rationality in this market is becoming more normality, so we are very welcome in any kind of market consolidation that will make this market more equilibrate and rationale. Operator: The next question is from Keval Khiroya at Deutsche Bank. Keval Khiroya: I have 2 and good luck as well, Adrian, from my side. So firstly, your financial expense remain high whilst your cost of debt on new issuance has been falling and you highlighted the EUR 500 million bond you issued. What financial expenses assumptions have you baked into your guidance for the next 2 years? And is there any opportunity to optimize these further? And secondly, can you give us your latest expectations on the concession fee case? I think you previously expected a year-end outcome on that. Adrian Calaza: Yes. Kevin, thank you for the question. As a matter of fact, financial expenses, we've been mentioning -- I think it was a couple of quarters ago and also in the plan that the run rate for 2025 was something between EUR 150 million and EUR 160 million per quarter, and we are on the lower end of that number. Last year, we had some positives that were one-off mainly coming from some mark-to-markets that we counted, but we are on track. And as a matter of fact, slightly below with what were our projections at the beginning of the year. Going forward, clearly, this is a number that will probably go down, especially because of the net financial position and the gross debt will be reducing going forward. In terms of average interest rate of our gross debt, the domestic, it's clearly that the bonds of lowest coupons, so the ones that were issued in 2015, 2016 are maturing and the weight of the issuance that we did in '22, '23, with much higher coupons is more important. So it's not a matter of average interest rate, but more a matter of the evolution of the gross debt, but obviously, the numbers should be reducing in the coming quarters. But again, just to mention the EUR 150 million of financial expenses of this quarter is it's slightly better than what we projected. Pietro Labriola: About the concession fee, as you can imagine, formally, we don't have any further detail informally too, but the only thing that I can share with you and that is public is that in the process of approval of the state balance, it was put in a provision for 2026 for the payment of some litigation and was expressively mentioned that there could be also the TIM one. It doesn't mean anything. But again, you can understand. Operator: The next question is from Javier Borrachero at Kepler. Javier Borrachero: So my question, Pietro for you, a bit of follow-up on this cash windfalls. So I mentioned the concession. Maybe on the earnouts, maybe you can also give us some color on where you still think that the Open Fiber, FiberCop merger earnout is still possible or maybe now it's too late. And on the energy one, if that is -- if you are more confident that here, you can maybe get some cash. And regarding all the proceeds from all these cash windfall, say, concession fee, earn-out, et cetera, what is now your view given that the share price has had a phenomenal performance year-to-date doubling. What is now your view in terms of the use of that cash in terms of the balance between dividends and share buybacks based both on your own what is already guided in terms of shareholder remuneration for the next few years, but also in terms of any extra proceeds that you may get going forward? Pietro Labriola: Javier, so first of all, about the -- the first point is that the exceptional performance of the stock. If I may, it was strange the previous value because in terms of multiple, you see that we are still slightly below the average of the European Telco. So it's not strange the actual value, it's strange the value in the past. And if I may just for me and Adrian, the plan in place for which we are today at EUR 0.50 is the same that was presented in April 2024 in March 2024, when the stock was down 25%. So it's just a matter of the trust and execution, nothing changed. About all the proceeds, the earnouts on and so forth. About the earnout, I'm still optimistic on the fact that we can get something. We never declare that we get all the amount. We always told that we can get something. And the deadline for the expiration is the end of 2026. But the earnout is due, not only in a case of a merge, but also strategic commercial partnership that will generate synergies. So while I can understand in some way, some worries related to a potential to merge at last time for the approval. Also, if we have to remember that in the case of the [indiscernible] deal at European level, it took 6 months for the approval. So I'm optimistic that something will happen also because looking at what is happening also in the press, I'm optimistic that all the discussions and all the fight we bring everybody to see rational because rationality drive the return on investment also for the private equity and something will happen. It's important to remember that we have 0 in terms of earnout in our plan. Then in the case in which the concession fee and all these things will happen. At that time, we will evaluate what is the best. It doesn't mean that we don't have a clear understanding, but the number of pieces that are moving at the same time, oblige us to have several options. So I don't have -- we don't have in mind, just 1 option. We have several options. But everybody, all the different options will be driven by market-friendly approach. And about the plan, we stay stick to the plan. We continue to maintain the guidance about the shareholder remuneration. And so we move forward in that way. Operator: Next question is from Giorgio Tavolini at Intermonte. Giorgio Tavolini: The first question is on Deutsche Telekom that has recently announced a EUR 1 billion collaboration with NVIDIA to build an AI factory in Germany. Do you believe TIM Enterprise could play a role in developing similar giga factories in Italy possible through joint venture with other national players beyond Poste Italiane. I mentioned this because I saw your role in the national strategic hub and the need to ensure data sovereignty. The second question is on sector consolidation and the recent rumors about a potential Wind Tre Iliad merger. So beyond the team potentially being a passive beneficiary of the market repair. I was wondering if such a merger could pave the way for a consolidation between TIM and Poste Mobile since it would ease the antitrust concern and now that TIM, Iliad deal would be completely off the table. And the third question is on the recent proposal on inflation index fee increase for Telco tariffs that was proposed by a political party. I was wondering if you think this measure could be reconsidered by policymakers to help restore sector profitability and return on investments. And in particular, you raised the prices for the fourth consecutive year. So is it correct that if this measure is introduced, this would extend all the players in the market, including Iliad to push their prices above the current ones? Pietro Labriola: Giorgio, let's start from the third one, then I will leave to Elio to answer to the first one. About the index, we will continue to discuss with the different, let me say, stakeholder about that because I think that this is a rational approach and sooner or later, my expectation is that also on the fiber business wholesale, it will be needed a kind of inflation index. If it will happen, it's quite clear that must be reflected also in the retail price. So this is not this year, but this is something mainly in Italy. I have to remember that it happened already in U.K., if I'm not wrong in Netherlands. So this is a trend in the market. Then let's remember that we have the lowest price in Europe. So I'm quite optimistic to that if it will not be this year, but sooner or later, it will happen. Related to the prices increase, I have to remember and then I will ask Andrea to give also more color that a part of the price increase that we did was with the kind of more formal approach, not in terms of giga because Italy has packaged with a huge amount of Giga, but about 5G. I have to say thank you also to Leo our CTO because we were able to move from the last place in the ranking for the 5G quality to the first place. And it allowed to Andrea also to do price up also based on the 5G., but we are still talking about what they tell the 5G of marketing, not real 5G with low latency, that will be the next step for a further price increase and we'll continue also next year with this kind of approach. About the sector consolidation, we are positive about that. It's clear that any kind of further simplification of the market structure is more than welcome. So let's take the window, we don't have to anticipate, but again, we have a clear idea about the possible scenario. Thanks to God, we are no more playing poker, but we are starting to play a chess game. And so every time we have to think what could be the further moves. And we have a clear understanding about what could be the different further moves that we have to act on in relation to the events about Deutsche Telekom, I leave it to Elio and then if Andrea wants to add something about the repricing, we will do and before to Elio and then to Andrea. Elio Schiavo: Thanks, Pietro. So thanks for the questions. First of all, let me underline that this news about the partnership between Deutsche Telekom and NVIDIA confirms that the Telco industry is back again to the center of the innovation process. And this depends on -- basically on the fact that infrastructure, both the network and the colocation became and will be very, very relevant going forward because as you can imagine, majority of those new technologies will need a house where to stay and a network that can help them to move data at a very fast speed. So -- and we are at the center of that business environment. So in the country, as you mentioned, that there are many giga-motions we look at this in a very pragmatic way. First of all, there is nothing giga that can happen in this country without TIM being involved because at the very end, you need to connect to the market. We are the only one having bandwidth for doing it. And we are in talks with NVIDIA. And as I said, we are looking at this, trying to size how big is the effort, but more importantly, how big is the opportunity that can be taken together. Clearly, and the Deutsche Telekom is the clear example. It's very difficult for them to do this without having a big Telco on board and I guess we are the ones they want to deal with. But -- so we will -- we will try to understand, as I said, very pragmatically this what will mean. And the way we will measure this is what is the length, the duration, and the size of the ROI that we can extract both together from this business. But let's say, we are talking to them, and we do believe that there is a good opportunity to be taken. Pietro Labriola: Before turning to Andrea also to elaborate something on top of what Elio told sometimes we focus too much in something that is real estate or computing capacity. But computing capacity is nothing without connectivity. Also, mask that is much more well-known than me in elastic talk is explained that he's foreseeing a future in 3, 5 years where the computing capacity will be distributed, but what will be needed is low latency and uplink. And we have the 5G frequencies, and so we are the one that can provide low latency. We don't have the ownership of the passive fiber, but latency, throughput at uplink come through the electronic that you put in the last mile and the last you must have a very wide spreaded backbone. And also on that, we are the best player. So if you add this capability, the ones that were mentioned by Elio it's clear that we continue in this kind of technological future to be the best player to get the main part of the cake. Andrea Rossini: Thank you, Pietro. Thank you, Giorgio. So this gives us the opportunity also to talk a bit more about our replacing action and strategy and as also Pietro pointed out, we did price ups, but we also gave more benefits to the customer. And in particular, during the last years, also thanks to great work done by Leo Capdeville with the technology team. We upgraded millions -- literally millions of customers to 5G, to the basic level of 5G. We did also something that other operators have not done yet, which is forward-looking. We created a 2 level of 5G, a basic level, which is optimizing use of network because as you know, 5G is much more efficient in terms of use of bandwidth and energy. And we created a top level of 5G, let me say, quality, which we sell for premium. So this gives us an opportunity also to upgrade ARPU going forward and optimize network efficiency. Now as also Pietro pointed out, we are in favor since many years of a general increase of prices to the customer base. We have worked a lot because we believe that sustainability in a sector in which the usage of network is increasing, is coming with price increase. So we are in favor of price inflation. And we believe that this, especially together with consolidation in the market can be a structural solution to the sustainability of the network. So looking forward, by the way, as Pietro pointed out, also with more segmentation of service on latency, uplink use of network with AI, we can see an ARPU increase in the mobile market because demand of connectivity is always increasing. Operator: The next question is from Domenico Ghilotti at Equita. Domenico Ghilotti: Well, first of all, I joined the other analysts and say goodbye to Adrian, and thanks for your support. And well, just a couple of questions remaining. One is on the Sparkle deal. If there is any update on the transaction? And then on the cash flow, can you help us understanding how was the impact of the vendor consolidation that you were mentioning? And also from the let's call it, extraordinary working capital item that you were flagging in the past for 2025. Pietro Labriola: Thank you, Domenico, about Sparkle. We are proceeding that. We are waiting for the approval from some local authorities. I think there are 2 or 3 for which we are still waiting. So sometimes the closing could be at the beginning of 2026 and not in the last quarter 2025, but all the things are proceeding very well, while about the cash flow, I leave to Adrian. Adrian Calaza: Domenico, thank you for your words. On the cash flow, yes, and this is something that we've been working for a period, and it was also commented during the Enterprise Day, a month ago, it was -- one of the targets was in the consolidation and obviously consolidating those vendors in some of the main OTT is the payment terms clearly are shorter. It has had an impact of something around between 6 and 7 days in terms of DPOs, so it was fully absorbed in the quarter. This is an onetime effect. And going forward, we expect an improvement on Enterprise margin as we projected in the plan. In terms of extraordinary items were those that we disclosed when we presented the plan in February. Remember that there were mainly 2 effects along the year. It was the -- all the unfolding of the -- of the [indiscernible] and there is some effect on this quarter was mainly on the [indiscernible]. So no additional extraordinary effect rather than those. So on the first quarter, we expect only the effects of the [indiscernible]. And as you know, the fourth quarter is always the most intense positively in terms of working capital. So we are on track as we mentioned and probably slightly by better. We'll see the fourth quarter is, again, the biggest in terms of cash flow generation. Operator: The next question is from Paul Sidney at Berenberg. Paul Sidney: Just a couple of questions for me, please, building on a couple of the questions that we've had already. Firstly, in terms of the Poste and cloud and AI JV LOI signing. We know very well what TIM Enterprise capabilities are in this area, but could you just expand a little bit about what capabilities Poste will bring to this JV in this area? And then secondly, just staying on the theme of price changes. We've seen you successfully put through price changes over the year. We've seen some very welcome recent price increases from Fastweb on mobile, Vodafone Fixed Wind on their back book as well. You mentioned the prices have landed well for TIM for yourselves. But I just wondered, has there been any adverse reaction in the wider market from the press, sort of consumer groups, the government even -- because obviously, when you look at these price increases on a percentage basis, they can be pretty material. But great to get your thoughts. Pietro Labriola: About the second question, then I can leave to Andrea, but in practice, what we are doing is that we are increasing the price. There is a right of our customer to cancel the contract if he doesn't agree about that because we are in a more severe market environment from this point of view. So there is nothing specific and then also to be also more clear, we are not doing price increase in a blended way. Andrea has developed a very strong CVM, customer value management. And so the evaluation of the target of the customer or for the price increase is based also on the willingness to pay for an improvement of the service. With the propension to cancellation, so on and so forth. So it's a traditional marketing activity that we're performing better, sometimes than the other. I can tell you that in the past, we've seen us changing the wording of the message, respecting the law can change also the level of churn that you will expire, but again, this is not a Telco activity. This is a marketing activity. So we are -- sometimes we are better than other to work on the marketing side. About the Poste JV, I [indiscernible] but in a nutshell, sometimes some of you are considering Poste as the traditional main services. A lot of you do not know that Poste has hired during the last years, several hundred people expert in open source activity and developing. So they have also specific know-how in this area, and it will help. So this is part of the contribution that they can put inside this kind of activity. Adrian, I don't know if you want to add something? Adrian Calaza: Just to add a few information to what Pietro said. So -- this is clearly unknown as Pietro mentioned as well, actually, Poste has a huge open source operations, they have almost 500 in open source engineers. And the idea is that they will contribute a few hundreds of them. So you believe 250, 300 will join the joint venture. And the idea is that, that will be the Army that will help us to create this open source platform to tackle the cloud sovereign business. So we will contribute the hybrid cloud migration capability that will contribute the open source capability. Both together, we will try to attract talents for developing an AI business that, as I said, will serve both TIM and Poste and the market. Pietro Labriola: As we mentioned during unboxing TIM Enterprise, we are talking about sovereignty, digital sovereignty, and have [indiscernible] also on our side on this project is a further reinforcement of, let me say, a neutrality towards other technology and is reinforcement about the sovereignty. Operator: The next question is from Andrea Todeschini at Akros. Andrea Todeschini: So first one would be on the contract that you have with the tower companies for your mobile network. I believe there -- the contract should be up for a new one in the first half of next year. So I was wondering if you do see some room for potential savings coming from renegotiating that contract and if there's anything you can share with us? And second question regards the equity free cash flow guidance for full year '25. So we clearly know that it's really back-end loaded in the fourth quarter. I was wondering if you could see if you have any visibility for some possible upside, so not just reaching the guidance but maybe doing a little bit better in the full year. Pietro Labriola: Andrea great. You are the less shy person because I think that this is a question that everybody was asking, we confirm the guidance. We're optimistic that we can do also something better. But as we told also in the last call, the market to our company will never forgive any kind of underperformance. So, we want to stay focusing deliver the guidance with the optimism that we can do better. About the TowerCo, I have to remember to everybody the list of the main point of our cost. First one, MSA with FiberCop. Second, cost of labor, third energy, fourth TowerCo. So in a professional and serious way, we are talking with our main partner about possibility of efficiency in the interest of both companies. Operator: The next question is from Andrea Devita at Bank Intesa. Andrea Devita: So on the consumer company, looking at the ARPU, just wondering whether after further EUR 1.7 million reprice in Q3 alone. So we haven't seen yet a rebound, so flattish minus in Q3. So if we could expect a rebound in Q4, at least or otherwise, if it is the balance of customers in, customers out [indiscernible] ARPU pressures again. And again, on consumer, I saw that there was 1 percentage point service revenues took out from the -- from the MVNO. So wondering whether this will accelerate in Q4? And finally, again, on consumer, whether it is already material, the contribution and if you could roughly quantify of adjacency and energy and so on in terms of service revenue growth contribution in Q3. Pietro Labriola: I will Andrea to elaborate on that. The only point about the MVNO that is very important that it was already included in our budget. So just to be clear that we are not surprised is something that we are forecasting and planning and that we are managing. Adrian Calaza: Thank you, Pietro. So on the ARPU, starting from your first question, indeed, you're right, mobile ARPU is basically balancing repricing, price ups with ARPU dilution that is coming from the difference between front book and back book. This is a dynamic that is in the market. And therefore, we consider that, let me say, ARPU stability or slight improvement as we show in the 9 months of '25 is what we are aiming for in the current market condition. As I explained before, we see improvement in the market because we see a declining number of rotation in the market, the mobile number profitability balance has improved and therefore, the dilution effect on the customer base ARPU is somehow decreasing. We also, as Pietro pointed out at the beginning of this presentation, with slight sign of improvement on the front book pricing by some competitors. Therefore, this compensation is probably improving going forward, that's possible to bring a rebound in the ARPU in the future quarters. Now coming to your question on ARPU, still, of course, the effect of radiation services is more visible on fixed ARPU because in fixed ARPU, we incorporate more services and that is also a market that is giving us the opportunity to upsell customers, for instance, with content services. So that is more visible on the fixed side. MVNOs as Pietro pointed out, I think the essential answer is, yes, we see a decrease, but this was planned due to the fact that, of course, Fastweb is bringing more and more traffic on their own network now that they consolidated with Vodafone. And this was in the plan. And the value of aviation market is for the time being, so what we call the customer platform approach is visible mostly on devices, connected devices and TIM Vision, which is bringing actually a growth to the -- as you see also in the chart, in the 9 months of '25, thanks to the fact that we grow the customer base significantly, and we also grow the portfolio of services. Energy, we launched in October, so certainly it's not visible yet, but we started on a good foot. Operator: The next question is from Ben Rickett at New Street. Ben Rickett: I just had 2 questions, please, on Fixed Wireless Access. So firstly, I was really interested in where you're seeing demand for your Fixed Wireless Access product -- is that mainly in rural areas? Or do you also see demand in areas that have fiber coverage? And second question, I was estimating that about 8% of your broadband base is now on Fixed Wireless Access. I was interested, do you have an idea how high that could go before it starts to impact the mobile network quality that your mobile subscribers experienced. Pietro Labriola: Generally speaking, it's so important to explain what we can foresee for the future about the Fixed Wireless Access Technology. With Andrea and with Leo, we have started to see also evolution where the installation of the fixed [indiscernible] assets will become more easy, self-installable and the rate of coverage will move from 3.5 to 5 kilometers. This will be an important element in our pocket to optimize the cost structure. And it's not only a matter of cost structure. Sometimes, and this happened for everything in our life, if you want something, you want to buy and use. If we have to wait as a customer, I mean, too much time and so the installation of the fiber can get more time, it becomes an issue. Why? Because people will change their mind, while mobile today in the easiest way is go in a shop, get a chip, you have a plan, you come back home and with the tethering, you are already working. This is the reason for which with Andrea and Leo, we are working also in the future to a possible solution that is an hybrid solution to [indiscernible] Andrea because if not we say that I speak to Mark. Andrea Rossini: Thank you, Pietro. I mean, this gives us the opportunity to actually beat the expectation of Pietro because we launched that very proposition at the beginning of last week. So we launched, let me say, innovative proposition that is combining FWA connectivity that is immediately available to the customer out of the shop. And that when the fiber comes, then that connectivity can be either given back to TIM or it can be used for a second home. By the way, in a nomadic way, so it can be brought as a sort of super Wi-Fi add-on to the mobile customer. So that proposition we launched last week. It's an initial, let me say, experiment. But we believe that there is market, as Pietro pointed out for a further expansion Equally, on FWA, today, we use it complementary to fiber. So let me point out that today, we do not overlap FWA to FTTH areas. We use it also mostly complementary to FTTC because FTTC performance in many areas is actually quite good. And so customer have better service with FTTC. Today, we see most sales in areas where we do not have FTTH coverage that are not necessarily rural because Italy is a very complex market with many small towns that are not covered by FTTH. So the market is quite huge, and you can also see it from the authority data that the market of the FWA is quite big. Up to a few months ago, team did not have a wide 5G coverage available. And now thanks to the work by Leo, we have a very wide coverage of the territory with 5G, just to your question, what is the amount we can support before affecting mobile traffic. We believe we have a long run to go because at present, we still have a few customers on 5G, and we have capacity that is capacity that is increasing. And of course, we can find also technological solution, but maybe Leo want to comment more that can actually give more capacity to the FWA. Operator: The last question is from David Wright at Bank of America. David Wright: Yes, I think you indicated Pietro before that the [indiscernible] causation still in consideration. It looks like that could drag into next year. That being the case, I don't think that S.p.A. will be net income positive this year. But if you could just give us some guidance there. So is there any obligation to pay, say the share dividends in 2026 as a shift in the cash flow? And if the gas station doesn't trigger those payments this year. Do you consider the [indiscernible] save share take out differently, there's a little bit less pressure to do so. Just your thoughts around that would be useful. Pietro Labriola: David, you can understand that all these hypotheses are price sensitive also on the value of the stock. So due to fact that we have to guess on something, I think that it's better to not go too much in detail. But what I want to reassure you and to everybody is that whatever we will do will be market friendly. And again, we are analyzing all the possible scenario that will help the corporate structure of our company, but also in the meantime, with the best market friendly approach. David Wright: Where is S.p.A. 9 months earnings? Is that published? Have I missed that? Pietro Labriola: No, I was telling that we tried to answer to you as best as possible based on the sensitive data that we are discussing. Before to close the call and to leave to Paolo Lesbo, I want again to thank you Adrian for all these years since 2015. But -- what is important to remember to everybody that Adrian is in the Board of TIM Brazil, and he will continue to stay in the Board of TIM Brazil also for the next year. It will help us also due to high knowledge that he has about the Brazilian country and the one which we work here from Italy. We will continue to help us to drive the group towards a further increase in our evaluation. Thank you, Adrian. Paolo Lesbo: Okay. Thank you very much, everybody, for your participation today. We will be back beginning of next year with full year results, which we are very confident will be fully in line with yours and our expectation. Thank you, have a nice rest of the day. Bye-bye. Operator: Ladies and gentlemen, the conference is over. Thank you.
Operator: Good afternoon, ladies and gentlemen, and welcome to the HF Foods Group Third Quarter 2025 Earnings Call. [Operator Instructions] Please note that this event is being recorded. I will now hand over to Madeleine Kettle of ICR. Please go ahead. Madeleine Kettle: Welcome to HF Foods Group Third Quarter 2025 Earnings Conference Call. Joining me today on today's call are Felix Lin, the company's President and Chief Executive Officer; and Paul McGarry, the company's Interim Chief Financial Officer. Before we begin, let me remind everyone that today's discussion contains forward-looking statements based on management's current beliefs and expectations about future events, which are subject to several known and unknown risks and uncertainties. If you refer to HF Foods earnings release as well as the company's most recent SEC filings, you will see a discussion of factors that could cause the company's actual results to differ materially from those expressed or implied by these forward-looking statements. The company undertakes no obligation to update or revise these forward-looking statements in the future. In these remarks, the company will make several references to non-GAAP financial measures, including adjusted EBITDA and non-GAAP diluted earnings per share. We believe these measures provide investors with a useful perspective on the underlying growth trends of the business and have included in the earnings release a full reconciliation of non-GAAP financial measures to the most comparable GAAP measures. Now I will turn the call over to Felix. Xi Lin: Hello, everyone. Welcome to HF Foods Third Quarter 2021 Earnings Call. I'll provide a business update, and Paul will speak to our third quarter financial results. Then we'll open up the line for Q&A. I am pleased to announce that we continued our momentum in the third quarter of 2025. Net revenue increased 2.9% year-over-year to $307 million and gross profit increased 0.5% to $50.4 million. Also notably, adjusted EBITDA increased 41.5% year-over-year to $11.7 million. Our results reflect our continued discipline execution against our strategic initiatives and showcase the resilience of our business model. Despite ongoing macro challenges, including tariff pressures and shifts in consumer spending behaviors, our transformation initiatives are paving the way for continued growth and improvement throughout the business. Our third quarter performance demonstrates the strength of our operational focus and strategic positioning. We have been actively diversifying our supplier base and exploring alternative sourcing strategies to ensure continuity and cost effectiveness in our supply chain. Our strategic inventory management and proactive pricing actions have allowed us to effectively navigate the changing environment while delivering solid net revenue growth and significant adjusted EBITDA growth. We are encouraged by our strong performance in the third quarter and a solid foundation we built. While we have seen some lower foot traffic consistent with broader industry trends, this was offset by strong volume in select markets and pricing actions we have taken. Based on our current trends, we expect Q4 results to be similar to what we achieved in Q3. We remain extremely confident in our long-term growth strategy and are committed to our capital investment in growing our capacity as we continue building momentum for the rest of the year and into 2026. Our digital transformation initiative continues to deliver on its promise. We've reached a major milestone on May 1 with the successful deployment of a new modern ERP application across our entire network. All of our locations are now offering on a single unified ERP platform that will help us to achieve breakthrough levels of efficiency, visibility and control across our operations, unlocking the full potential of our centralized purchasing capabilities over time. I am pleased to report that the ERP system is running smoothly as planned. The next phase of this program is focused on rationalizing our sales force. With our operations unified on a single system, we now plan to restructure our sales operation which will reduce costs over time and further strengthen our competitive positioning. We expect the initiatives to kick off in the second half of Q4 2025 and run through the first part of Q1 2026, providing efficiencies in our sales operations. We're consolidating two sales operations into one, which we believe provides us better control over the overall sales process and provides improved customer service. This represents the final key piece to our business integration transformation. Our strategic facility enhancement initiatives continue to advance across multiple regions, positioning us for sustained growth. Renovation at our Charlotte distribution center are largely complete with the final permits imminent. Our state-of-the-art Atlanta facility project, which we expect will create meaningful organic growth opportunities through expanded cross-selling capabilities is on track for completion later this year. The cold storage capacity expansion in Atlanta is expected to double our capacity in the region and enable us to significantly increase frozen seafood sales to our existing customer base along the Eastern Seaboard, meaningfully expanding our Southeast presence. In the quarter, we announced the acquisition of our Chicago warehouse. This strategic acquisition advances HF's ongoing transformation plan to improve operational efficiency, reduce facility cost and strengthen organic growth through cross-selling opportunities. Acquiring the facility enable us to exit the lease agreement early, improve operating expenses and invest in facility to grow additional capacity and drive consolidation opportunities. These exciting infrastructure investments reflect our ongoing commitment to optimizing our distribution network and creating a stronger foundation for sustainable growth. M&A remains a core pillar of our growth strategy. HF Foods is the only scaled food service provider in the Asian specialty market in the United States. And we believe we are the strategic acquirer of choice within our space. We are focused on expanding our geographic footprint in high-potential markets, capturing operational synergies, broadening our customer base and enhancing our product and service capabilities. We remain disciplined but optimistic about M&A opportunities in 2025 and beyond. We're actively evaluating opportunities, and we believe our proven ability to successfully navigate the tariff landscape positions us uniquely to identify and execute attractive tuck-in acquisitions that will benefit from the operational expertise and scale. Before I turn the call over, I'd like to welcome Paul McGarry, who is joining us on the first earnings call as interim CFO of HF Foods. Paul has been a key member of our finance team as our Vice President, Corporate Controller, and brings extensive finance experience and deep knowledge of HF Foods business operations. We're grateful for his seamless leadership during this executive transition. Now over to you, Paul. Paul McGarry: Thanks, Felix. I will now review our results for the third quarter ended September 30, 2025 versus the same period in 2024. Net revenue for the third quarter increased 2.9% to $307 million from $298.4 million in the prior year quarter. The increase was primarily attributable to volume increases and improved pricing in our meat, poultry and seafood categories. Gross profit increased by 0.5% to $50.4 million for the quarter compared to $50.2 million in the prior year quarter. The increase was primarily attributable to an increase in volume and improved pricing during the quarter. Gross profit margin remained relatively consistent at 16.4% compared to 16.8% in the same period in 2024 due to an increased proportion of sales from lower margin products, particularly seafood. Distribution, selling and administrative or DS&A expenses decreased by $0.4 million to $49.3 million for the third quarter. DS&A expenses as a percentage of net revenue decreased to 16.1% from 16.6% in the prior year period, primarily due to increased net revenue and lower personal professional insurance costs, partially offset by increased rental occupancy and other expenses. Income from operations for the third quarter of 2025 increased to $1.1 million compared to $0.5 million in the prior year quarter. The improvement was driven by the increase in net revenue, gross profit and a decrease in DS&A costs. Adjusted EBITDA increased 41.5% to $11.7 million for the third quarter 2025 compared to $8.3 million in the prior year quarter. Total interest expense increased slightly to $2.9 million for the third quarter of 2025 compared to $2.6 million in the prior year quarter. Net loss was $0.9 million for the third quarter of 2025 compared to a loss of $3.8 million in the third quarter of 2024. The improvement was primarily driven by an increase in net revenue, gross margin and managing certain DS&A costs. Adjusted net income increased to $4.3 million compared to $2.2 million in the prior year period. Loss per share improved to a loss of $0.02 compared to a loss of $0.07 in the prior year period. Adjusted earnings per share increased to $0.08 compared to $0.04 in the prior year period. In summary, our third quarter results demonstrate the effectiveness of our strategic transformation initiatives and operational discipline in driving meaningful progress across our business. While we continue to navigate macro headwinds, including tower pressures, and shifting consumer patterns, our proactive approach to pricing, inventory management and operational efficiency has enabled us to deliver growth and build momentum for the future. These strong results reinforce our confidence in the strategic foundation we've established and position us well as we continue to execute on our growth strategy. I'll now hand it back over to Felix for closing remarks. Xi Lin: Thanks, Paul. As we look ahead to the balance of 2025 and beyond, I want to emphasize our commitment to executing the comprehensive transformation initiatives that are reshaping HF Foods. 2025 is a year of strategic investment for HF and the investments we're making in our facilities, digital infrastructure and operations will establish a strong foundation for our next phase of growth. While short-term uncertainties persist, we remain focused on our long-term strategic objectives. Our investments in digital transformation and infrastructure are strategically designed to drive organic growth through cross-selling opportunities while positioning us to complement this expansion with target M&A initiatives. Our key competitive advantages stem from the growing demand for attended Asian cuisine and our unmatched position as a leading nationwide Asian specialty distributor. We're methodically building the infrastructure systems and capabilities needed to fully capitalize on these strategic advantages. As we move forward, we'll continue to identify and implement additional efficiency measures while maintaining our commitment to service excellence and sustainable growth. Thank you for your continued support as we execute our strategic transformation. We look forward to sharing our progress with you on our next call. I will now hand it over to the operator for a live Q&A. Operator: [Operator Instructions] Our first question comes from William Kirk of ROTH Capital Partners. William Kirk: Felix, you talked about capacity increases for 2026 between the active projects you laid out a couple and I guess, the possibility of M&A. How much do you think capacity increases in 2026? Xi Lin: Bill, yes, that's a good question. I mean capacity-wise, right now, if we think about what we've been communicating, it's limited to the Southeast. So specifically for Atlanta, we talk about cold storage, it's effectively going to double our capacity in the Atlanta market. So we're moving from a 100,000 square feet warehouse to roughly about 190,000 square feet warehouse in that market. William Kirk: Okay. And thinking about restructuring of the sales force, I know you kind of said it goes from 2 to 1. How much cost savings do you think you can generate through that initiative, and maybe more importantly, how do you balance extracting those efficiencies while not losing the uniqueness that your sales force provides. Xi Lin: Yes. I think part of the moat that we've been communicating is the fact that, again, we understand our customers, especially in the way to do business, the language and the product rationalization itself. So all of that, again, will remain the same. This is really more of an efficiency play. So over time, we'll have better control over pricing strategy, promotion with our broader program here in the future. So again, this is one of those things that we've been prepping here for the better part 2025. So really, we're just getting towards the end of execution itself. While at the end of the day, again, there might be some level of disruption, but it's going to be expected and planned based on everything that we've been working on internally. But I do expect going through the end of 2025 and certainly, midpoint through the Q1 2026 everything should get normalized here for us? William Kirk: Okay. And if I can sneak one more in. Were there any standouts or like a differential in the monthly cadence in the quarter? And then when you're looking at the quarter-to-date period, where does that shape up versus kind of how you guided 4Q? And have you seen any impact from -- potential impact from government shutdown? Xi Lin: Yes. I mean, Q3 has largely kind of followed the trend that we saw in Q2, right? There's still the impact from tariffs in terms of inventory, pricing and certainly, foot traffic. Beginning of Q3, we saw it continue to be a little bit softer, but it rebounded nicely towards the end of Q3. And as we kind of get into Q4 as well, selected markets, I think there are going to be a little bit of impact from government shutdown. For example, Virginia where we have a nice frozen seafood business based out of Richmond, Virginia, certainly that the market they service have a large, call it, government employee population. So the shutdown have impacted volume and foot traffic in that selected market. But overall, going through the entirety of 2025, I think the team has done a really good job. Other markets would pick up volume. One specific market, for example, in Salt Lake City where not just in 2025, but over the last couple of years, we've been very effective in rationalizing our product and our business mix to kind of get rid of some of the lower margin business and free up some capacity to drive better business performance. So that's probably one of the biggest reasons why we're still able to deliver year-over-year growth for the quarter. Operator: Our next question comes from Daniel Harriman of Sidoti & Company. Daniel Harriman: Congratulations on the continued progress. Felix, I've got 2 quick questions, one of which kind of follows up on the previous questions, but with 2025 being a year of investment, looking out to '26 and '27, how should we think about maintenance CapEx on a sustained basis year-over-year? And then secondly, again, referencing 2025 as a year of investment, can you just talk a little bit more about the timing of the ramp-up and how we should think about organic growth moving forward? Is it going to be -- are we going to see some of that in 2026 or given the external pressures or is your assumption that we may be needing to look at a little bit further? Xi Lin: Daniel. Yes, so addressing your first question regarding CapEx. I think on an annual basis, our typical maintenance CapEx budget probably fluctuate between $10 million to $15 million a year. So on a go-forward basis, that's largely going to be around, again, driving efficiency improvements, cutting cost out within our D.C. operations. And in '26, I think CapEx might be a little bit higher just given the fact that we announced the strategic acquisition of our Chicago warehouse. And certainly, as we make more progress trying to drive additional capacity in the Midwest market, there might be newer facility acquisition on the horizon. So for the foreseeable future, I think it's going to be more than the $10 million to $15 million that we have previously communicated in terms of normal maintenance. Getting back to the organic growth, I think previously, we talked about, it's likely going to take about 3 to 4 years in terms of ramping up once the capacity is ready. So I do believe that '26 is going to be the first year there will be some incremental volume gains, specifically with respect to frozen seafood in the Atlanta and Southeast market. And it's going to take, again, probably a couple of years for us to get there and fully utilize the entire new capacity that's going to come along here at the end of the year. But I think the larger cross-selling organic growth opportunity, it's always going to be perhaps in the Midwest market. So certainly, the investment is going to go in as we plan to in 2026, which will pay dividends potentially '27 and beyond. Operator: [Operator Instructions] With no further questions in the question queue, we have reached the end of the Q&A session. I will now hand back to Felix Lin for closing remarks. Xi Lin: So again, I'd like to thank everyone for joining the call today. We're pleased with the transformation and progress we've made to date and the results we have achieved this quarter. We remain extremely confident in our long-term outlook and invite all of these continue following the HF story. Thank you, and we look forward to updating you on our next earnings call. Operator: Thank you. Ladies and gentlemen, that concludes this event. Thank you for attending, and you may now disconnect your lines.
Operator: Good day, and thank you for standing by. Welcome to the Third Quarter 2025 Lincoln Educational Services Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Michael Polyviou. You may begin. Michael Polyviou: Thank you, Kevin. Good morning, everyone. Before the market opened today, Lincoln Educational Services issued a news release reporting financial results for the third quarter ended September 30, 2025, as well as recent corporate developments. The release is available on the Investor Relations portion of the company's corporate website at www.lincolntech.edu. Joining us today on the call are Scott Shaw, President and CEO, and Brian Meyers, Chief Financial Officer. Today's call is being recorded and is being broadcast live on the company's website. A replay of the call will be archived on the company's website. Statements made by Lincoln's management on today's call regarding the company's business that are not historical facts may be forward-looking statements as the term is identified in federal securities laws. The words may, will, expect, believe, anticipate, project, plan, intend, estimate, and continue, as well as similar expressions, are intended to identify forward-looking statements. Forward-looking statements should not be read as a guarantee of future performance. The company cautions you that these statements reflect certain expectations about the company's future performance or events and are subject to a number of uncertainties, risks, and other influences, many of which are beyond the company's control and may influence the accuracy of the statements and projections upon which the segmented statements are based. Factors that may affect the company's results include, but are not limited to, the risks and uncertainties discussed in the Risk Factors section of the annual report on Form 10-K and the quarterly report on Form 10-Q filed with the Securities and Exchange Commission. Forward-looking statements are based on information available at the time those statements are made and management's good faith belief as of the time with respect to future events. All forward-looking statements are qualified in their entirety by the cautionary statement. Lincoln undertakes no obligation to publicly revise or update any forward-looking statements, whether as a result of new information, future events, or otherwise, after the date thereof. One other housekeeping matter. During the Q&A portion of the call today, we would ask them to limit themselves to 2 questions and then requeue as an addition. In advance, we thank you for your cooperation. Now I'd like to turn the call over to Scott Shaw, President and CEO of Lincoln Educational Services. Scott, please go ahead. Scott Shaw: Thank you, Michael, and good morning, everyone. Thank you for joining us today for our review of another exceptional quarter of operating and financial performance for Lincoln Tech. Our third quarter student start growth of 6% exceeded our internal forecast and marked the 12th consecutive quarter we grew student starts over the prior year's period. We also continue to realize double-digit growth rates in total student population, total revenue, and consolidated adjusted EBITDA over the prior year periods, while also recording the third consecutive quarter of declining year-over-year bad debt levels. We generated $0.12 a share in net income while continuing to invest in our highly successful and expanding growth strategies, and once again are increasing our guidance for full-year financial results. Brian will provide the details on the guidance. Lincoln has earned a well-deserved reputation for setting the standard of excellence in helping American corporations and organizations in their constant search for employees trained and skilled in trades such as HVAC installation and repair, residential and commercial real estate electrical systems, installation and repair, automotive and diesel systems maintenance and repair, welding, and nursing and other health care professions. Careers in these fields offer graduates secure, rewarding, and advancement opportunities likely to remain in strong long-term demand despite advancements in artificial intelligence. Recently, our growth has accelerated due to the nation's increased interest in skilled trade careers and through our successful development of greenfield campuses and the expansion of successful programs to existing campuses. Since the beginning of 2024, we have opened new campuses in East Point, Georgia, and Houston, Texas, while relocating outdated and space-constrained campuses in Nashville and Philadelphia to new and expanded state-of-the-art facilities. As we reported during our second quarter call, East Point's start rate after 18 months of operation achieved a level we plan to achieve after 3 years of operation. Due to this exceptional growth, we have secured an additional 15,000 square feet of space immediately adjacent to our current facility to meet the increasing demand. Meanwhile, in Nashville, the start of existing programs at the new campus exceeded our expectations. The expanded campus enabled the addition of electrical and HVAC programs, which also added to the momentum. In Levittown, Pennsylvania, we completed the transfer of our automotive program from Philadelphia and have started our first classes in HVAC, welding, and electrical. Finally, we began our first classes in our new Houston, Texas campus during the third quarter, and the response is also exceeding our pre-opening expectations. East Point, Nashville, Levittown, and Houston are generating stronger and faster returns than we anticipated when we made these investments. This both increases conviction in our greenfield and expansion strategy and is accelerating our growth, allowing us to fund our ambitious growth plans from operating cash flow supplemented with our credit facility for seasonal needs. New campus development has driven about half of our recent start growth, and the implementation of our innovative Lincoln 10.0 hybrid teaching platform, increasing returns from marketing efforts, and the expansion or addition of programs have generated good, solid organic growth at existing campuses. As a result, we are realizing increasing levels of instructional efficiencies, space efficiencies, and organizational productivity through Lincoln 10.0 and other initiatives. Brian will provide more details on the progress we are making by leveraging our operating expenses to generate cash flow that is funding our expanded growth objectives in a few minutes. As the overall national growth and new job creation slow, interest in skilled trade training as an alternative to the traditional 4-year college education continues to expand. The federal government's actions impacting student loans have further fueled this interest, and our team is executing our updated growth strategies for the benefit of our students, corporate partners, instructors, and shareholders. Last week, we announced plans to expand Lincoln's presence in Texas by developing a new state-of-the-art campus in Rowlett, Texas, a northern suburb of Dallas. This new campus, our 24th nationwide, is located near major interstate highways 635 and 30 and will complement our highly successful Lincoln Tech campus in Grand Prairie, Texas, which is west of Dallas. The new 88,000 square foot campus will have a capacity for over 1,600 students and will offer automotive, welding, electrical, and HVAC training when it opens at the beginning of 2017. We have found that by having 2 strategically located campuses in growing metropolitan markets, we are able to leverage resources and enhance our ability to serve students, instructors, and corporate partners. In Atlanta, our 2 campuses, located in Marietta and East Point, have both benefited from marketing and other corporate resources, resulting in higher-than-expected starts at both campuses. We are hoping to generate similar leveraging opportunities in the Dallas market when the Rowlett campus opens. Similarly, our new campus under development in Hicksville, Long Island, is progressing towards opening in late 2026 and will be our second campus in the metropolitan New York City area, where we have successfully operated our Queens campus for over 20 years. With each new campus, our objective is to achieve $25 million to $30 million in annualized revenue and $7 million to $10 million in EBITDA for the fourth year of operation, if not sooner. In addition to new campus development, program expansion or replication at existing campuses is contributing to Lincoln's growth. We added or expanded 6 programs at existing campuses during 2024 and are well on the way to adding 5 more this year. In total, these 11 programs are a key contributor to our start growth. Lincoln's partnerships with corporations throughout America have long been a contributor to our success. Our tailored training for these companies helps them close the workforce skills gap while providing graduates with secure, rewarding career opportunities with advancement potential. This year, many potential partners have extended decision-making timelines largely due to ongoing economic uncertainty. However, during the third quarter, we did expand our innovative training program with CMC Corporation, under which we are training their employees at their facilities rather than at Lincoln campuses. We signed our original 5-year agreement with the company in 2023 and believe our extended partnership with CMC illustrates the contribution we are making to closing their workforce skills gap. Another key growth initiative at Lincoln involves our health care programs. Our new leadership for this segment is hard at work developing changes to our instructional model and improving operating effectiveness and efficiency. One area of focus is to expand our offerings beyond the current LPN certificate so that students can earn RN degrees. Such a development would substantially increase our addressable market in the nursing field. Meanwhile, last quarter, we talked about our efforts to regain enrollment status at our Paramus Nursing program. We have now exceeded the graduation benchmark in this program for the past 12 months and have received approval from the State Board of Nursing to begin reenrolling students starting in January of 2026. This is great news and is a testament to our ability to deliver quality nursing training across New Jersey. New Jersey, like most of the nation, faces a severe shortage of nurses at all levels, and we look forward to doing our part to lessen the shortage and bring greater and better nursing care to the state. We also introduced you to our high school share program during our last call and have made some substantial progress with this initiative. For instance, at our Mahwah, New Jersey campus, the number of students enrolled through high school shares has doubled from last year. More and more school districts in New Jersey, as well as other states where Lincoln operates, have inquired about implementing a share program at their schools. Under this program, students attend Lincoln classes during their junior and senior years and then continue after high school to gain their certificate in less time, which accelerates their entry into rewarding careers. With school districts under constant budgetary challenges, our initiative enables the continuation of skilled trades training within the high school while building our enrollment. We are quite excited about the potential for this initiative. It, along with additional investments in our high school outreach programs, leads us to be optimistic about our opportunities to enroll more high school students graduating in the spring and summer of 2026. In addition to these initiatives, we are also exploring expansion efforts through corporate development activities, including acquisitions and joint ventures. Recently, several start-ups targeting skilled trades have contacted Lincoln to explore ways we could facilitate their strategy through our capabilities. These discussions are in the early stage and require little, if any, of our development resources, but do illustrate the expanded interest in increasing skilled trades training in America to address the continuing skills gap. While there is a decided focus on growth at Lincoln, we continue to make investments in people and processes to ensure that we deliver an exceptional learning experience for our students. We want to be the best, and we want the best for our students. To achieve this goal, we are constantly evaluating new software, curriculum, and training aids. In addition, we want our instructors to have industry-recognized credentials that ensure they have the most up-to-date knowledge in their field, so our students have an edge on their competition. With technology ever changing, we are constantly in pursuit of what will help our students master the skills they desire to become the technicians, welders, and health care providers that will lead the next generation of skilled, hands-on professionals. We believe one way to measure the effectiveness of our investments in people and processes is our graduation rate, as well as the employment of our graduates in their field of training. Despite our growth in students, both metrics remain strong, and we are constantly evaluating ways to build on this success rate. For nearly 80 years, Lincoln has remained focused on delivering high-quality, life-changing career education, and no one else has our combination of longevity, scale, and proven experience. By continuing to expand our network of schools, replicating our most in-demand programs at our existing campuses while building new campuses in new and existing markets, we believe we will comfortably surpass the objectives established last year of approximately $550 million in revenue and approximately $90 million of adjusted EBITDA in 2027. Therefore, today, we are increasing our targets, which Brian will review in more detail in a few moments. While we are always evaluating acquisitions that make strategic and financial sense for our company and our shareholders, our new 2027 milestones will be achieved organically through our existing operations and new campuses developed internally. As I've discussed before, our country's existing severe skills gap will likely get worse before getting better, and we believe there are many significant underserved markets in America where employers and employees will benefit from our innovative and proven approach to skilled trades training. Despite all this positive news and solid execution, it appears that the market still does not understand who we are and what we can become. Furthermore, while others in our sector have had their businesses negatively impacted by internal execution challenges and the external environment, we at Lincoln Tech have not. Consequently, I want to bring additional clarity to our story. First, while the government shutdown has been the longest in history, our students have continued to receive timely disbursements of federal aid used to finance their education at our schools. The U.S. Department of Education reminded the higher education community of the minimal impact on students at the beginning of the shutdown, and our businesses have not been affected. Second, we continue to see strong interest in our programs, and the current environment for us has not lessened. Third, the decline in our Healthcare segment is not meaningful, nor is it a concern. We have been rationalizing our program offerings for the past several years to focus resources on our most in-demand programs to meet market demand as well as to ensure that we have the industry-leading curricula and training experiences that will set our students apart and give them an edge in the employment market. Within our reported Healthcare segment, there are non-healthcare programs such as culinary and IT, as well as small allied health programs such as patient care tech and dental assisting. We are selectively exiting these noncore programs, and we'll continue to do so when we see better opportunities for the classroom space. Our focus currently is on our licensed practical nursing and medical assisting programs. And during this quarter, these grew by 2%, and this is without LPN starts at our Paramus campus, which will restart in a few months. As we have mentioned in the past, we are continuing to work on plans to offer registered nursing programs in the not-so-distant future. Fourth, growth initiatives are meeting and exceeding our expectations and guidance. We are replicating our most successful programs wherever there is demand and we have space, and we are opening new campuses that our research tells us are underserved. In simple terms, we are constantly looking to double down on our success. Our minimum expectation is for all of these investments to achieve a threshold 20% IRR on a fully burdened basis, including all direct costs needed to open and operate these facilities. I'm very proud to say that to date, we have exceeded this threshold. Fifth, we've been investing in our team to ensure that we have the talent to not only deliver on what we have announced to date, but also to enable us to capitalize on new opportunities as they arise. One clear example of this is our significant refocus on growing our high school student population. Our recent high school results, along with the increased outreach by numerous high schools around the country who are asking for ways for us to help with vocational training, are clear indicators that the stigma of career technical training is lessening. Students, parents, and even high school guidance counselors are more interested in the trades than ever before. To tap into this opportunity, over the past 7 months, we have hired new talent and are reinvigorating our high school recruiting strategy, and we are already seeing good results. As many of you know, I have been with Lincoln Tech for nearly 25 years, and I believe that our organization has never been stronger nor has had as many growth opportunities as we have today. Moreover, we have consistently proven to ourselves that we can capture opportunities. We have achieved what we have set out to achieve and continue to find new opportunities. Recent survey results show that our employees have never been more engaged and satisfied. We are all working for the common good of our students so that they can graduate, launch their careers, and find satisfaction and pride. As obstacles arise, and they always do, we find solutions. Our business is strong and our company is vibrant. Finally, I'd like to note, we will be continuing our investor outreach during the remainder of the fourth quarter. This week, we have several virtual meetings scheduled by ThinkEquity. Next week, we will be attending the Southwest IDEAS Conference in Dallas. And later this month, we will be in Montreal on November 26 with Barrington. Next month, Brian will be attending Northland's Virtual Conference on December 16. Additionally, we will be hosting an Investor Analyst Day at our new Nashville campus on March 19, 2026, to showcase the site and review our long-term growth plan and operating objectives. I urge you to contact Michael Polyviou if you would like to attend. Finally, with Veterans Day being observed tomorrow, I want to extend our appreciation to our military members and their families for their valued service and sacrifice to our country. Now I'll turn the call over to Brian Meyers, so he can review some of our recent financial highlights and guidance. Brian? Brian Meyers: Thanks, Scott, and good morning, everyone. Lincoln delivered another strong quarter with several key metrics once again exceeding our internal forecast. Continued momentum in enrollment growth, combined with improved operating efficiencies, was the primary driver of this performance. These results reflect the strength of our model and our continued focus on operational execution. Before I get into the quarter's financial results, a couple of reminders about our year-over-year comparisons: first, the financial comparisons in my remarks exclude the Transitional segment, which consists of our former Summerlin Las Vegas campus, which we sold in late 2024. Second, as noted on last quarter's earnings call, our reported Q2 starts include an adjustment for the 2,764 students that start on July 1 to align with the prior year class start timing. For this quarter's comparison, we have excluded those starts to maintain consistency with the prior year. With those points in mind, let's turn to the quarter's financial highlights. Revenue for the quarter was $141.4 million, an increase of 25.4%. The strong performance reflects the continued momentum in student starts year-to-date. Turning to student starts. Starts for the quarter were approximately 6,400, representing a 6% growth. We had originally expected starts to be relatively flat, given the strong 22.5% growth in last year's third quarter. Achieving a 6% growth over such a high comparative base underscores the persistent demand we are seeing for our programs. The outperformance was mainly in skilled trades, which experienced better-than-anticipated starts, particularly in our new programs and replications. Revenue per student increased by 4.8%, reflecting both tuition increases and the timing of book and tool revenue. The average student population grew by nearly 20% and the ending population increased by about 17%. As we closed the quarter with over 2,500 more students than the prior year, the ending population climbed to about 18,200 compared to 15,600 in the prior year. Breaking down the composition of this quarter's start growth. Transportation and skilled trade programs delivered an 11.8% increase in starts, driven by continued strong demand as well as successful program additions and expansions. Excluding the program launches in 2024 and 2025, we still achieved a robust 7.9% growth. As anticipated, our health care and other professional programs experienced a 13.7% decline in starts. Approximately half of this decline resulted from the discontinuation of the smaller programs, which we have determined are no longer part of our core program offering. We continue to refine our program offerings to align with areas of strongest student interest and employer demand. As we sunset smaller programs, we will strengthen our core offerings while improving our profitability, particularly in our licensed practical nurse and medical assistant. In addition, as Scott mentioned, we are pursuing degree-granting approval to offer a registered nurse program. Also, as noted, we will commence new enrollments in our LPM program at our Paramus campus beginning in January 2026. Turning to expenses. Total expenses were $135.1 million compared to $106.3 million in the prior year. The increase was in line with our internal expectations and primarily driven by direct costs associated with the larger student population as well as ongoing investment in our growth initiatives. From a profitability standpoint, our adjusted EBITDA grew by 65.1%, reaching $16.9 million, up from $10.2 million last year, which includes the Transitional segment. This improvement continues to highlight the operating leverage generated by several key initiatives. As Scott mentioned, these include efficiencies from our Lincoln 10.0 hybrid teaching model, which has contributed to lower instructional costs as a percentage of revenue and improved space utilization. In addition, we are seeing improvement in bad debt expenses, which have declined as a percentage of revenue for three consecutive quarters. Net income for the quarter was $3.8 million compared to $4 million, including Transitional. Adjusted net income was $6.3 million or $0.20 per diluted share compared to $4.1 million or $0.13 per diluted share, representing an increase of $2.2 million or 54.9%. Looking at our balance sheet. We ended the quarter with $65.5 million in total liquidity. This quarter, we generated $23.9 million in cash from operations. On a year-to-date basis, cash from operations totaled $15.8 million as reflected on our cash flow statement. Due to our seasonality, most of our income and cash are generated in the second half of the year, with the highest level typically in Q4. We finished the quarter with $8 million in outstanding borrowings and $13.5 million in cash on hand. Based on historical trends and an outlook for a strong fourth quarter cash flow, we are forecasting to end the year without any debt outstanding and a higher net cash balance. Now turning to capital expenditures. We continue to execute on our key expansion projects. The total capital expenditures were approximately $21.7 million for the quarter and $68.1 million for the first nine months of the year, as reflected on the cash flow statement. The majority of our quarter's spending was tied to our growth initiatives, including two recent campus relocations and the build-out of our new Houston campus, which opened during Q3. As Scott mentioned, we are excited to announce our fourth greenfield campus in Rowlett, Texas. The build-out is expected to take approximately one year with an anticipated opening in the first quarter of 2027. We view the expansion as an important step in our growth strategy and are encouraged by the strong performance of our prior greenfield campuses. While new campuses require meaningful upfront investment and take approximately two years before they become operational, they are an exceptional growth driver for Lincoln. These investments are expected to generate internal rates of return exceeding our 20% threshold. Our East Point campus, now in its second year of operation, is well on its way to delivering returns significantly above this threshold. Looking ahead to the remainder of 2025. Based on our performance and strong momentum across our core growth drivers, we are raising our full-year guidance across all metrics. We now expect revenue ranging from $505 million to $510 million, adjusted EBITDA in the range of $65 million to $67 million, net income ranging from $17 million to $19 million, student starts growth of 15% to 16% and capital expenditures unchanged at $75 million to $80 million. As a reminder, our guidance excludes stock-based compensation, one-time noncash pension termination expense expected in Q4, pre-opening and net operating losses from new and relocated campuses, and program expansions. For more detailed guidance, please refer to our earnings release, which was filed earlier today. Beginning in 2026, we will no longer adjust our EBITDA for preopening costs and net operating losses from new campuses and program expansions as we currently do. Going forward, adjusted EBITDA will reflect only the add-back of noncash stock-based compensation and other nonrecurring items. In our discussions of operating expenses, we'll continue to call out the losses incurred from campuses that have not yet commenced operation to provide investors with a clear understanding of the profitability of our current operations in future periods. While we will provide formal 2026 guidance during our fourth quarter earnings call in February, we can communicate today that based on our current growth, improving profitability and current investment plans, we expect our 2026 adjusted EBITDA under the revised methodology to exceed our 2025 guidance of $65 million to $67 million, which excludes approximately $10 million of add-backs for new campuses and program expansions. Finally, looking ahead, we remain confident in our long-term growth trajectory. With respect to our previously communicated 2027 financial objective of $550 million in revenue and $90 million in adjusted EBITDA, we now expect to exceed both of these targets. Based on our current performance trends and strategic initiatives, we are projecting to achieve more than $600 million in revenue and over $90 million in adjusted EBITDA by 2027 without the benefit of adding back approximately $10 million of expenses for new campuses and program expansions that were included in our original long-term plan. In closing, as our nation observes Veterans Day, I also want to extend our sincere gratitude to all members of our Lincoln community, students, instructors, and alumni who have served or are serving in the armed forces. And with that, I'll turn the call back over to the operator for your questions. Operator? Operator: [Operator Instructions] Our first question comes from Alex Paris with Barrington Research. Alexander Paris: I just wanted to ask a couple more clarifying questions on 2026. Actually, Brian's final comments in his prepared comments. So this year, in 2025, the adjusted EBITDA guidance of $65 million to $67 million. That includes the impact or the add-back of roughly $10 million in pre-opening costs and so on? Brian Meyers: Correct. You're talking about in 2025? Alexander Paris: Yes, in 2025. And then you said regarding 2026, it sounded like you're forecasting maybe another $10 million of preopening costs. Brian Meyers: Correct. And even without those add-backs, we'll be able to exceed the $90 million that we originally had in our plan with the add-back of that $10 million. Alexander Paris: And you'll exceed the $65 million to $67 million that you're going to do in 2025 based on guidance? Brian Meyers: Correct. Alexander Paris: This is my follow-up question. What about CapEx for 2026? I think you said $70 million to $80 million this year to my notes here somewhere. Brian Meyers: We haven't put anything out yet for 2026. We'll announce that in February. It will probably be similar or maybe slightly down from this year. Operator: Our next question comes from Luke Horton with Northland Capital Markets. Lucas John Horton: Congrats again on a nice quarter. Just wondering if we could get a sense of what drove this strong performance? I mean, a little bit from a campus level or from a program mix perspective. Just looking at the updated guide for 2025 starts, I mean, this implies nearly a 30% start growth in 4Q. So, a little bit for the quarter, what drove the beat, and then the expectation in 4Q of that strong start from a campus-level or program mix perspective? Brian Meyers: Right. So at the low end of the range, that's actually a 15% stock growth for Q4. And at the high end of the range, it will be about a 20% stock growth for Q4. So, not exactly 30%, but with that being said, we are forecasting robust stock growth for Q4. Scott Shaw: Which is what we guided to before, just based on the trends we're seeing, as we are seeing strong interest overall, as well as the performance of our new campuses and programs. Lucas John Horton: And then you guys did mention building out some more square footage at East Point. Can we get a sense of student capacity with these ads? Is this a meaningful expansion here, just trying to rightsize the space? Scott Shaw: Sure. So we're probably adding, frankly, about 500 student capacity with this addition. Lucas John Horton: And then just lastly, on the health care side, you guys talked about expanding to RN programs beyond just the LPN. You said in the near future, I guess, could you just walk us through the timeline of this, or from a regulatory perspective, what needs to be done here? And then would that give you accreditation to offer these across all campuses? Or is it a state-by-state accreditation? Scott Shaw: Yes, it's a good question. So it's a long process, and it is step-by-step. Today, where we have our LPN program, we're not degree-granting. And in order to offer an RN, we have to become degree-granting. So we have applications to become degree-granting in New Jersey, New York, and Connecticut. And so that process could take anywhere from 12 months to, frankly, 48 months, depending on the state. We're obviously pushing to make it happen as quickly as possible. But we know that our LPN students, a large percentage of them are going on to become RNs as well, as naturally the RN career itself is the largest in the health care sector. And in these states, and particularly New Jersey, is one of the highest that has the greatest shortfall of nurses to population. So we feel really good about the opportunity. It's the process of getting through the regulatory hurdles to get there. But we're also looking in certain other states where we have degree-granting already, but don't have an LPN program; we're evaluating putting an RN program there. But there's been nothing decided as of yet. Operator: Our next question comes from Eric Martinuzzi with Lake Street Capital Markets. Eric Martinuzzi: The 2027 new guide, I just wanted to make sure I'm apples-to-apples with the old guide. I think the $550 million excluded Atlanta, Houston, and then the program expansions at Levittown and Nashville. Can you clarify that? Scott Shaw: Go ahead, Brian. Brian Meyers: No, it always included -- it didn't include Houston because when we first put that out, Houston, what wasn't announced yet. It was really only included for the new campuses, the East Point. So it included revenue from East Point. Now exceeding $600 million, that includes everything announced as of today for revenue. Eric Martinuzzi: So that would be assuming Pikesville and Rowlett are online, they would contribute towards that 600? Brian Meyers: Correct. [indiscernible] online first quarter of '27. Correct. Eric Martinuzzi: And then the decline in the hop starts. You clarified that that was tied to Paramus, and we're going to get the green light for Paramus in 2026. And then the massage and culinary, we're choosing not to pursue those. At what point do we get back to organic positive growth? And were we positive ex the Paramus and the massage and culinary here in Q3? Scott Shaw: Yes. So as I mentioned, the two core programs that represent more than 80% of the students in health care are LPN and medical assisting. And those two programs grew at 2% in the third quarter. I would anticipate next year that we should be positive again, especially with the opening of nursing at our Paramus campus. So in 2026, certainly, those two programs will continue to grow. Operator: Our next question comes from Raj Sharma with Texas Capital. Rajiv Sharma: Congratulations on solid results again, especially given where some of the other players in the education space are talking about. So it seems like in the healthcare starts, there's a lot of noise. There are programs that are going out, and the programs are coming back in. So what starts, and what kind of growth do you expect? I know you just said about 2%. Is that overall, your other noise goes away in the health care arena, and now you're left with LP, and can you talk about just ongoing in the next couple of years, what should we expect from the health care and nursing segment? Scott Shaw: Sure. So again, let's just put this all in perspective. Today, the health care and other segments are 20% of our population. So the bulk of what we're doing is all in the automotive and skilled trades, and those are the programs today that we're replicating. As we said in the call, the core programs in health care, LPN, and MA are still growing, and we would anticipate that to continue into the future. We are going to complement that in the future with an RN. But again, it's too early in the game to say where things are going. All I can share with you is that all of our guidance and all the information that we're sharing incorporates all these changes that are taking place. And the overall message is that our business is very, very robust and our growth rates will reflect that. I don't know if that helps you. Rajiv Sharma: Yes. And then just following on, I know Brian had touched on the guidance of fiscal '26. So the way I read it is you're talking about the EBITDA guidance, the apples-to-apples would be the $65 million, $67 million this year would have been $75 million, $77 million at least for fiscal '24. Are you saying anything about start of next year's revenue growth? Do you see anything on the horizon that would disrupt the current starts growth for transportation or health care? Scott Shaw: No. I mean, as I think we said in our remarks, things are, frankly, very robust, have been very steady, and we're seeing just strong conversions and strong interest, both also, as we said, from the adult market and the high school market. And I'll just highlight that the high school market is seeing increased interest, and that's an exciting opportunity for us, and we're going to capitalize on that more so in 2026, given the investments we're making today. And then that will grow even more, I believe, into 2027. Rajiv Sharma: And then just lastly, on the regulatory horizon, any developments that we should be on the lookout for? I mean, anything happening in the negotiated rulemaking that we should be on the watch out for? Scott Shaw: Sure. There's nothing that I'm aware of that affects Lincoln Tech that's out there. Obviously, we have to stay on top of it because things change in this environment very quickly. But as of right now, Raj, I don't see anything that's going to derail us from what our plans are and where we're going as a company. Operator: [Operator Instructions] Our next question comes from Steve Frankel with Rosenblatt Securities. Steven Frankel: What did you learn from East Point that maybe you're going to change as you open this new campus in Texas? Is there anything that you take away from the early days of East Point that says, well, maybe we could do these things to get an even faster start? Scott Shaw: Yes. I think that the biggest thing we took away is that we made East Point very efficient. It was less than 60,000 square feet, and it filled up so quickly that in planning our next campuses, we already realized that we should be looking at larger square footage, as our more recent campuses, even our relocations, Philadelphia is at 90,000, Houston is at around 90,000. And as we mentioned, Roulette will be around 90,000. And I also highlight that within that 90,000, we have about 10,000 to 12,000 of undeveloped space for future programs. So we just decided, given the success that we were seeing, that we should build facilities that could accommodate more in those local markets, as well as build in some opportunity for future expansion opportunities for us. So that's the biggest lesson. The others are operational. We hadn't opened a new campus in about 18 years. And I think that we've now figured out what the model is and when to staff it, and how to get the excitement within the market up before our campuses open up. I mean, East Point was a market where we already had a presence with our campus in Marietta. Houston is a market where our name isn't as well-known. So we're spending a little bit more to make it well known, but we're starting to see similar results as in East Point. So things are going well, and we constantly learn as we open up new programs and replicate in each market. Steven Frankel: And then from a 30,000-foot view, have you seen any material decline in interest for legacy auto diesel programs? Or does that continue to be a healthy portion of the skilled trade mix? Scott Shaw: We're still seeing positive growth, but certainly, the skilled trades are growing faster at this point. Things fluctuate. Obviously, if you look at our numbers overall or I would say we've replicated the skilled trades the most. Simply because it's the most cost-effective for us to do that. So we have more skilled trades programs today than we have auto programs. But we are still seeing, as I've mentioned, our organic growth has been, frankly, very strong due to improvements in the Lincoln 10.0 and due to increased marketing efforts to get the word out, and frankly, the receptivity that's out there. So skilled trades are definitely growing more for Lincoln than auto, but we're seeing positive growth in, frankly, all segments. Operator: Our next question comes from Griffin Boss with B. Riley Securities. Griffin Boss: So I'll just start off, you sort of back out an average tuition per student. That came in very strong in the quarter. I think Brian mentioned something about structurally higher tuition. But curious if you could expand on that. Is this higher average tuition per student just pricing? Or is it also program mix? Brian Meyers: It's a good question. For the quarter, we got the benefit of the timing of books and tools. I think I might have mentioned that in my prepared remarks. When we give out tools, we earn the revenue when it was given out, but we also have the expense. So, that big start that happened on July 1, we did have a pickup in revenue there, but we also have an offsetting expense on that as well. We benefited from that for Q3 as well. Scott Shaw: But just to be clear, we raised tuition by 3% or less. It varies by program, and that happens just once a year, so usually at the beginning of the year. So the changes that Brian is mentioning could either be a somewhat program mix or, as he said, we got the benefit of all these starts. And so when students start, we book a lot of the books and tools revenue at that point. So that can distort it slightly. Brian Meyers: Right. Because overall, it was about 4%. So as Scott was saying, about, I would say, 2% to 3% is tuition increases. We do benefit from a little bit of our program mix being slightly higher with our starts, but then some of it was due to the book and tool revenue. Griffin Boss: And then just last one for me. Can you remind us what maybe the average ramp-up period is for new campuses? Obviously, you talk a lot about revenue and EBITDA expectations, but you mentioned that this new Routed campus will have 1,600 student capacity. How long does it take you to fill those seats? When you open up a campus, do you expect to have a certain amount of capacity initially that maybe increases over time? How do you think about that? Scott Shaw: Sure. So I mean, just looking at East Point as an example, obviously, a very strong performer for us. Within the first 18 months, it has about 700 to 800 students. We would anticipate that our other campuses will perform similarly in the first 18 to 24 months. When we say it has about 1,600 student capacity to get our return on investment that we're looking for, we don't need that many. Frankly, we're basing that off of closer to, let's say, 850 to maybe 1,000 students. So I hope that helps you. Operator: Our next question comes from Alex Paris with Barrington Research. Alexander Paris: Just a quick follow-up. I meant to ask on the previous -- In light of Veterans Day tomorrow, you mentioned military. Just curious, what is Lincoln's overall military exposure as a percent of total enrollment? And what is the character of that military enrollment? Is it military tuition assistance for active duty? Or is it the Veterans Administration GI bill? Scott Shaw: Yes, it's a good question. Well, as a reminder, we started as a military training organization by our founder to train vets from World War II. And unfortunately, we're down to only about 5% to 6% of our students today who are military. And part of that is because when we move to the Lincoln 10.0 model, you're not allowed to provide housing benefits to our military through the GI bill if it's a diploma hybrid program unless you have a degree program. So our initiative to get degrees in a number of states where we don't have degrees will enable us to start reenrolling veterans in those areas. So they're all using their GI benefits. So these are people who have left the military. And we would anticipate as we get, as I said, degree branding, particularly in the states of New Jersey and New York, that we'll start seeing, frankly, a growth again in our veteran population. Alexander Paris: So to be clear, it's veterans, and that's what I thought. You don't have a material amount of active duty. And GI bill funds are flowing. It had been an issue for another one of your competitors, the American public. Scott Shaw: Yes, that is correct. That's what I tried to say in my remarks, I mean for us, for Lincoln, for what we do, who we serve, the shutdown and the changes that are taking place in Washington have not negatively impacted our business, and that's why we're able to get those strong results that we've been achieving to date and that's why I believe that we'll continue to achieve these strong results going forward. Operator: And I'm not showing any further questions at this time. I'd like to turn the call back over to Scott Shaw for any closing remarks. Scott Shaw: Great. Thank you, operator, and thank you all for joining us today as we reviewed our continued progress, growth, and increased financial guidance for the full year. As more and more high school graduates and adults seek a time-efficient, cost-effective path to develop skills that can serve them a lifetime, interest in our programs continues to grow. And with our student start growth, new campus development, and increasing level of operating efficiencies, we believe we have numerous opportunities to generate increasing levels of shareholder returns over several years. Our success is only made possible by the commitment and dedication of our faculty and staff to our students and their success, and we will continue to share with the world that middle skills careers like the ones we offer lead to rewarding, productive, and fulfilling careers that our nation desperately needs. I'd like to thank our shareholders for their support and our entire team for their dedication to achieving our goals. I hope to see you during my time on the road visiting shareholders, employers, and politicians as I share the Lincoln Tech story. Thank you all again, and have a great day. Bye-bye. Operator: Ladies and gentlemen, this does conclude today's presentation. We thank you for your participation. You may now disconnect and have a wonderful day.
Kenny Green: Ladies and gentlemen, thank you for standing by. I would like to welcome you to Camtek's Results Zoom Webinar. My name is Kenny Green, and I'm part of the Investor Relations team at Camtek. [Operator Instructions] I would like to remind everyone that this conference call is being recorded, and the recording will be available from the link in the earnings press release and on Camtek's website from tomorrow. You should have all received by now the company's press release. If not, please view it on the company's website. With me today on the call, we have Mr. Rafi Amit, CEO; Mr. Moshe Eisenberg, CFO; and Mr. Ramy Langer, COO. Rafi will open by providing an overview of Camtek's results and discuss recent market trends. Moshe will then summarize the financial results of the quarter. Following that, Rafi, Moshe and Ramy will be available to take your questions. Before we begin, I'd like to remind everyone that the statements made by management on this call will contain forward-looking statements within the meaning of the federal securities laws. Those statements are subject to a range of changes, risks and uncertainties that can cause actual results to vary materially. For more information regarding risk factors that may impact Camtek's results, please review Camtek's earnings release and SEC filings and specifically the forward-looking statements and risk factors identified in the recent press release issued earlier today and such other risk factors discussed in Camtek's most recent annual report on SEC Form 20-F. Camtek does not undertake the obligation to update these forward-looking statements in light of new information or future events. Today's discussion of the financial results will be presented on a non-GAAP financial basis unless otherwise specified. As a reminder, a detailed reconciliation between GAAP and non-GAAP financial results can be found in today's earnings release. And now I'd like to hand the call over to Rafi Amit, Camtek's CEO. Rafi, please go ahead. Rafi Amit: Thanks, Kenny. Hello, everyone. Camtek concluded the third quarter with record performance. Q3 revenues reached a record $126 million, reflecting over 12% growth year-over-year. We also maintained solid gross margin of 51.5%, contributing to a record operating income of over $37.6 million. Our strong cash position of approximately $800 million, including the additional cash generated by our successful $500 million convertible notes offering in Q3 provide us with the financial flexibility to drive growth organically as well as to explore potential opportunities for inorganic growth across our market. Revenue distribution remained in the line with our expectations and closely matched last quarter result. High-performance computing applications contributed approximately 45% of total revenue, while other advanced packaging applications accounted for about 25%. The balance came from CMOS image sensors, compound semiconductor front-end applications and other general applications. We continue to see a shift of CoWoS like production toward OSATs, a trend that is favorable for our business, given our strong position within this segment. We've received significant orders for installation this year from 2 Tier 1 OSATs for CoWoS and CoWoS like applications. We have also received significant orders from several OSATs for fan-out application. Regarding the HBM market, we maintain our leadership position with all the manufacturer. Our tools are not only qualified, but actually are the tools of reference for 3D metrology steps for HBM4 at all the HBM players. We have installed tool for HBM this quarter and through the entire year for both 3D and 2D steps and have orders on hand for HBM shipment for the next quarter. Regarding our guidance for Q4, based on our current order, our sales pipeline and ongoing customer engagement, we expect Q4 2025 revenue to be around $125 million, representing annual revenue of $495 million, a record year for Camtek with a strong growth of 15% over 2024. Let me share some of our recent technological development and business highlights. We continue to enhance our technological capabilities and strengthen our competitive edge. The next generation of devices that will power the future of HPC will require cutting-edge inspection and advanced 3D metrology solutions, area in which Camtek is strongly positioned and continues to innovate. Our new product, Eagle G5 and Hawk were designed to meet the most demanding new requirements and at the same time, perform at very high throughput. These models have been very well received by the market and are expected to contribute approximately 30% of our revenue in 2025 with an even larger share expected next year. The Eagle G5 has been recently selected for 2D applications over our main competitor at major IDM, and we have received multiple orders for installation this year and into '26. We have also won significant business at 2 Tier 1 OSATs after an evaluation of multiple vendors, including our main competitors. Regarding the Hawk, we have already received repeat orders for major Tier 1 player for shipment in 2026 and 2027 after multiple Hawk systems were used flawlessly in production for several months. The Hawk provides the most advanced 3D performance in terms of throughput and accuracy. This is our ninth generation of white light triangulation that provides superior coverage for different bump types and process steps compared with laser triangulation technology used by our competitors. We are planning to introduce an enhanced version of the Hawk early next year, featuring significant improvement in throughput and overall performance across both 3D metrology and 2D inspection. This advancement will further strengthen the Hawk's position as the most advanced tool in the segment. Regarding 2D inspection domain, we have made significant investment over the past year to expand our capabilities of both the Hawk and Eagle G5 in the 2D inspection applications. We have implemented breaking through HI driving algorithms into our detection technologies. We are currently evaluating these innovations with key customers, and we are confident that these new cutting-edge inspection solutions will enable to further grow our market share in this segment. I would now like to share some insight regarding the HPC market. With the accelerated adoption of AI and the recent announcement of a major data center investment by leading industry players, it is clear that the industry is heading toward a significant expansion of manufacturing capacity. Only the HBM portion is expected to more than double itself in the next 3 years. That said, we expect a natural time lag between those investment announcement and the actual purchase of equipment to support this new capacity. Turning to our preliminary outlook for 2026. This industry development, which point to sustained growth and continued investment in wafer fab equipment, strengthen our expectation that 2026 will be another year of growth for Camtek. At this stage, we expect our 2026 revenue to be weighted toward the second half of the year with a somewhat slower start, as the market continues to absorb existing capacity before the next wave of expansion begins. In summary, the massive investment in data centers and the accelerating adoption of AI-driven applications are expected to translate into increasing demand for advanced semiconductor manufacturing equipment. With Camtek's strong market position and the cutting-edge capabilities we have recently added, we are well positioned to capitalize on this trend and deliver significant growth while further expanding our market share in the coming years. And now Moshe will review the financial results. Moshe? Moshe Eisenberg: Thank you, Rafi. In my financial summary ahead, I will provide the results on a non-GAAP basis. The reconciliation between the GAAP results and the non-GAAP results appear in the table at the end of the press release issued earlier today. Third quarter revenues came in at a record $126 million, an increase of 12% compared with the second quarter -- third quarter of 2024. The geographic revenue split for the quarter was as follows: Asia was 93% and the rest of the world accounted for 7%. Gross profit for the quarter was $65 million. The gross margin for the quarter was 51.5%, similar to the previous quarter and an improvement from the third quarter of last year. Operating expenses in the quarter were $27.2 million compared to $22.9 million in the third quarter of last year and $26.6 million in the previous quarter. The increase over last year is mainly a result of increased R&D expenses. Operating profit in the quarter was $37.6 million compared to $34.2 million recorded in the third quarter of last year and $37.4 million in the second quarter. The improvement over last year is due to the increase in gross profit, partially offset by the increase in operating expenses. Operating margin was 30%, similar to the level last year and last quarter. Financial income for the quarter was $6.5 million compared to $6.4 million reported last year and $4.9 million in the previous quarter. Within that, interest income increased slightly due to the increased cash balance from profit cash from operations as well as from the convertible notes issued towards the end of the quarter. Net income for the third quarter of 2025 was $40.9 million or $0.82 per diluted share. This is compared to a net income of $30 million or $0.75 per share in the third quarter of last year. Total diluted number of shares as of the end of the third quarter was $50.3 million. In the next quarter, the number of shares will increase, as the effect of the convertible notes will apply to the full quarter, and it is expected to be around 51 million shares. Turning to some high-level balance sheet and cash flow metrics. Cash and cash equivalents, including short- and long-term deposits and marketable securities as of September 30, 2025, were $794 million. This is compared with $543.9 million at the end of the second quarter. We generated $34.3 million in cash from operations in the quarter. In the quarter, we successfully completed a $500 million new convertible notes offering. At the same time, we repurchased for $267 million existing convertible notes with a balance sheet value of $167 million, less expensive. As a result of the tax asset -- as a result, a tax asset was created in the amount of $12.3 million, which led to a onetime GAAP loss of $89 million net. The positive net cash flow from this activity was $219 million. Inventory levels decreased to $142 million from $149 million, as we have been able to introduce planning efficiencies. Accounts receivables remained stable at $112 million, representing 81 days outstanding. As Rafi said before, we expect revenues of around $127 million in the fourth quarter. And with that, Rafi, Ramy and I will be open to take your questions. Kenny Green: [Operator Instructions] And our first question will be from Charles Shi from Needham. Yu Shi: Maybe the first one, Rafi, you mentioned about the timing lag between announcement and implementation. Just kind of wonder if there is another timing lag, let's say, between DRAM front-end equipment investment versus packaging? And how should we think about when you mentioned about the second half weighted next year, a lot of that probably attributes to that timing lag. But how should we think about the level of, let's say, a little bit of moderation in first half? It seems like that's what you alluded to. And what's the -- based on the order, based on your customer engagement, how big the second half next year could be? Rafi Amit: Okay. In general, we are also in the period of preparing the budget for next year. So when we collect all the information, all the discussion with customers, what we call the pipeline in order, all of these show us that we can feel very comfortable more for the second half and the first half -- because delivery time of us is about 3, 4 months maximum. So it's a little bit not easy for us to predict more than this period. So when I collect all the information, this is -- based on this, we feel more comfortable on the second half to say what we can see and what we can feel. But maybe Ramy can contribute to more details about this. Ramy Langer: Charles, we feel very comfortable that 2026 is going to be a growth year. We feel comfortable. But speaking with customers and seeing all the announcements, and there is no doubt that it's going to be growth. We have the pipelines, and we feel very comfortable about next year. I think at this stage, we cannot anticipate exactly the numbers, and we don't usually give any indications about one quarter after the next one. So at this stage, we cannot provide a solid guidance about the first quarter. So we are very, very comfortable about 2026. It will be a growth year. We feel that the second half will be better than the first half, although the numbers and exactly how will be the details, it's too early to comment at this stage. Yu Shi: Got it. Yes. Moshe, maybe a question for you. The OpEx looks like Q3, there's a good amount of R&D expense increase, maybe offset by a slight moderation SG&A. I think based on all the commentary you talked about Eagle G5, Hawk, it's probably not a surprise R&D expense come up a little bit. But still would like to see if you can provide any more color on the R&D expense. And let's say, going forward, do you expect this level of R&D will continue? And how should we think about a little bit that in Q4 and beyond Q4? How you plan for OpEx? Moshe Eisenberg: Definitely -- Charles, so definitely, the one area within the OpEx that we continue to increase and spend more resources on is the R&D. We see that as an investment for our future growth. We are continuously adding capabilities, as you heard from Rafi in his prepared remarks. So we do not expect any major decline in R&D, but it could vary from quarter-to-quarter based on certain activities, but it will remain at this level and should increase as a percentage of revenue -- as we grow the revenue, sorry. Kenny Green: Our next question will be from Brian Chin of Stifel. Brian Chin: Maybe firstly, China has clearly been a very strong geography for Camtek this year. Can you comment on what has driven the strength? And off a strong 2025, do you expect China up in 2026 and also more second half weighted? Ramy Langer: We feel comfortable with what's happening in China. We see continued investments. As you know, a lot of the business in China is more OSATs related, and there is a lot of room to continue and invest in this space. We are seeing also investments, by the way, from other OSATs in the world. So all in all, I think the OSAT segment is pretty healthy. I think Rafi mentioned in his prepared remarks that we have won business in a couple of OSATs, significant orders. So we definitely expect China to continue and be healthy in 2026. Brian Chin: Okay. Great. Reflecting again also on your commentary about a slower start to next year. It sounds like the preliminary outlook might be for Q1 revenue to decline relative to Q4 levels. Is this more tied to HPC or China? And would you expect 1Q revenue to still improve on a year-over-year basis? Ramy Langer: So I think at this stage, we've said that it's too early for us to comment on accurate numbers. We're not in a position to state them. And I think Rafi mentioned it and we talked about in the prepared remarks. I think what is important that we see 2026 as a growth year. There are lots of opportunities. Definitely, the HPC continues to be very strong. If you take the HBM, the HBM business is growing at over 30% a year. It's going to double in the next 3 years. And we see a lot of investments there. Our market position, as we mentioned, is very strong at all the HBM manufacturers. We are the tool of reference for the HBM4 at each of these locations. So we feel comfortable. And I think in 3 months, we'll be in a much better position to comment on the [Technical Difficulty]. Brian Chin: I should ask a quick follow-up just based on that. When you say tool of record at HBM4, are you talking about 3D? And also, can you also comment on... Ramy Langer: I will elaborate in 1 minute, but I just want to mention one thing. There is no weakness in China. And now let's talk about the tool of record. So first of all, we are tool of record for all the 3D metrology for HBM4 at all the HBM manufacturers. We are also a tool of record for several 2D inspection steps at different steps, at different manufacturer. Kenny Green: Our next question will be from Matt Prisco of Cantor Fitzgerald. Matthew Prisco: First, just maybe a little more detail on that first half versus second half weighting. Any areas of your business or end markets that are seeing this dynamic more pronounced? And then what's giving you that confidence in the second half balance? Is that actual orders on the books today? Or is that more just generally what you're seeing in terms of those industry trends and customer conversations? Ramy Langer: So the way we work with our customers, we hold a lot of discussions with them. We build a very detailed, what we call, a pipeline that is per customer, per the requirements that he's doing. And then we correlate it with what we see on the market. So all in all, and I think you have seen from previous years that we were able to understand the market and more or less be on target with the discussion that we had with you guys. So I think that from those discussions, understanding the market, understanding the HPC market is a market that is going to grow. But I think that what you see from the things that we are seeing around there, as we said, there is a certain time lag. And we don't think it's going to be very long. It's probably going to be pretty short. And therefore, we are very confident with the second half with the first half, we will be able to comment in 3 months. Matthew Prisco: Helpful. And then on that HPC front, maybe can you walk us through the contribution expectations for next year? Are you thinking that grows as a percentage of revenues versus today? And are there any expected difference in that revenue contribution from HPC first half versus second half? Ramy Langer: We -- if you go back, we have grown the business in '24, in '25. And definitely, we expect to do the same in '26. Our -- what we call the high-performance computing was roughly 50% of our business. And definitely, when you look ahead, this business will continue to grow. The HBM is going to grow. The CoWoS contribution is going to grow. We see the applications growing. You are seeing also when you talk about the applications today, the NVIDIA applications with the servers. You are going to see end of '26, '27, also a big growth in the density of the HBM memory that is going to use for the applications. So what we are seeing -- looking away, we are seeing 2 things. On one hand, you are seeing a lot of growth in the capacity that will come as this application -- the current application is going to require more density of memory and also we will see new applications. On the other hand, the move to HBM4 is going to be what we call inspection and metrology intensive because the bumps are getting tighter. There are going to be more bumps, the density grow, they will need to do more inspection and metrology. So if you couple all of these things together, definitely, we will continue to see growth. And I believe that the 50% part of the business is going to be maintained in general over the longer period. So yes, we are very optimistic about the business and the market. And we're listening to all the announcements that are being mentioned every time, the amounts just of the data centers that are going to be set in the next few years is huge. You're seeing it's hundreds of billions of dollars that are going to be invested. And definitely, the fabs that will support it will gradually come online. Kenny Green: Our next question will be from Craig Ellis of B. Riley. Craig Ellis: I wanted to start, Ramy, with one for you that just goes a little bit deeper into some of the things that have come up so far. So as we think about second half weighted calendar '26 growth, can you help us understand how Camtek is positioned for that from a manufacturing capacity standpoint currently? Do you have what you need? Do you need to add? And when will you need to start bringing in working capital? Because I think everything we all see suggest, this will be one of the bigger capacity ramps we've seen in a long time. And then since shipping costs have been an issue at times in the past, in the middle of the income statement, how will we manage shipping costs for a potentially significant surge in shipments in the back half of the year? Ramy Langer: So general form the manufacturing capacity, and I think we discussed in previous meetings, we already about a year ago, added a significant portion of capacity. We are also going to add some capacity in Europe, as we discussed, in order to have another buffer just in case that we need more capacity. So from a capacity point of view, we have enough clean room space. We have enough employees. And therefore, from that point of view, we feel very comfortable. Currently, we are running at 2 shifts. We can always extend it to a third shift. But from that point of view, we feel very comfortable. From a material point of view, we're running, as Moshe mentioned, we're more efficient about the material flow. As a result, we were able to reduce the inventory. But all in all, we have enough material on hand to start the ramp, and we have excellent relationship with our subcontractors and other suppliers if we need to expedite material of any kind. Regarding the shipping cost, yes, we had a surge in the shipping cost in the past year. I think we overcame all of these issues. Shipping costs are back to normal. And hopefully, we do not see any issues regarding that. Did I answer your question, Craig? Craig Ellis: Yes, you did, Ramy. And then I'll ask the follow-up to Rafi. Rafi, you have significantly strengthened your balance sheet with the convert, and you mentioned that one of the things that can do is enhance inorganic growth options. Can you talk about areas of the business where you feel like there's potential to add capability where you see opportunity to augment the current portfolio with something that would strengthen it and add further to the growth down the road? Rafi Amit: Okay. We -- our today, Chairman, Lior Aviram, we hire him to spend 1% of his time only for M&A activities. And now we had another person for this purpose. So they work like a group, and they do a great job. The first map in the industry. And we divided it to, I would say, to inspection to metrology, to software to many, many type of area that could be integrated and interest Camtek. So I think right now, we have about maybe 40 potential customers or companies that we said, look, this about this amount of company could be very interested for us. And on a weekly basis, we do some discussion with them. Even we pay a visit to see them, to talk to them. So I feel very confident that maybe this year in 2026, we can see much better results for that. Ramy Langer: Can I just add a little bit that may be misunderstood. So Lior, our Executive Chairman, is 100%. Most of his time goes to just the M&A activities. And I think we are very comfortable with the progress that we are making and there are quite a few opportunities, but that's something that we will speak in future calls once we have more material information and we can share it. Kenny Green: Our next question is going to be from Tom O'Malley from Barclays. Matthew Pan: This is Matthew Pan on for Tom O'Malley. Just one follow-up on the supply chain in terms of AI announcements. Any more detail you could share on those conversations with the supply chain? And if there's any broadening out in sort of -- in terms of conversations with the leading-edge players? I know you mentioned a lot more conversations with OSATs. Ramy Langer: Obviously, Tom, there are a lot of conversations with all their relevant manufacturers and customers that are related to the high-performance computing. And it's very hard to try and quantify it in very short times. And this is -- and at least this is the reason that we feel very comfortable that 2026 is going to be a growth year because everybody is positive about the future and what's going to happen. It is really a question now of timing, how fast the ramp is going to be. So all in all, I think the activities are there. I think Rafi in his prepared comments talked about the advancement and the process improvements that everybody is making. And so all in all, I think this industry is moving in the right direction. But as we said, to turn all of these announcements into something that we need to start to manufacture tomorrow, obviously, there is a slight time delay and I think we will be able to discuss it more in details in about a quarter. Matthew Pan: Got it. Just one follow-up. We've been asking a couple of companies this. Curious if you've looked into sort of what you think WFE spend as a percentage of total AI compute investments would be. So we've heard a couple of companies saying high single digits, maybe closer to double digits percentage, but not sure if you've taken a look into that. Ramy Langer: Obviously, we see these comments. And I think it's too early today to say the numbers. I see numbers from high single digits to low double digits. I think it's a little premature now to really comment on the WFE in 2026. Kenny Green: Next question will be from Blayne Curtis of Jefferies. Ezra Weener: Do you hear me? Kenny Green: Yes, we hear you. Ezra Weener: This is Ezra Weener on for Blayne. First one would be in Q3 and the guide for Q4 and I guess into the weakness in the beginning of next year, can you talk a little bit about the moving pieces between CoWos and HBM, -- what's strong, what's weak there? Ramy Langer: We bundle it all together as we call it high-performance computing because the reason is basically what is it? It's the CoWos, there is the chiplet and the chiplet is surrounded by stacks of HBMs. So it really is one business. And the orders can shift by quarter here and there per the different vendor. And today, it's a little bit more complex because you get the OSATs and the OSATs are also participating in the CoWos and CoWos like business. And therefore, it's a little bit harder to tell you what is stronger versus the CoWos because we sometimes don't know what the OSATs are doing. So again, what I can tell you is that the business, the HPC continues to be strong. It will be strong also in the fourth quarter. It also will be strong in the range of 50% in 2026. We don't see any change in the pattern. Ezra Weener: Got it. And then second question would be you talked about an improvement in the hawk for early next year. Can you talk about what that means for the applications you can address and pricing? Ramy Langer: So I want to be very careful because, of course, a more detailed information is confidential. What I can tell you what we said in our prepared remarks that as after a year since the introduction of the Hawk, we have identified potential in order to improve the performance and to create even a bigger gap in the market. So we are going to improve the throughput in general for both the 3D metrology and the inspection. We're going to make these changes very soon. And we are speaking with our customers, obviously, very closely, and they understand what is going to come. What I think the -- what I want to say that what is important and the message that I want to say across that we, the Hawk will be the best equipment we have in its segment and we are very proud and it's performing very well. It's been well accepted by our customers. It's already in production at multiple places, very successful. So we believe that with the improved version, our market position will be even stronger once we implement those improvements, and they're going to happen very soon. Kenny Green: Our next question will be from Michael Mani of Bank of America. Michael Mani: Start, could you talk about the utilization of your tools across your main customers, maybe particularly focusing on some of the HBM customers. Is there anywhere where you might be seeing a little more idle capacity given the amount of shipments over the last couple of years? And is that a headwind in the near term and partially explaining maybe the softer first half of the outlook? Ramy Langer: First of all, we don't really know the utilization of our machines at our customers. We sometimes see pressure on us to fix the machines, but we don't really know these numbers. They feel -- they keep them very close to their chest. So this is something that, unfortunately, I cannot comment on. What I can tell you that all the machines that we are shipping are being installed and are being taken into production. I don't see any machines that are held that don't require immediate installation or not used. From that point of view, I think the industry is healthy. People are using the equipment and people want service and people are pushing us to do things and deliver our commitments as fast as possible. So from that point of view, I don't see any slowdown in the industry. Michael Mani: Great. And my follow-up, if you could just give us an idea about how to think about gross margins for next year. It sounds like maybe the first half is at the lower end of the sort of 51% to 52% range that you kind of trended along for the last couple of quarters. Maybe there's an uptick in the second half, especially as some of these higher ASP tools kick in. But any kind of high-level trajectory in terms of gross margins to think about for next year would be very helpful. Moshe Eisenberg: Michael, this is Moshe speaking. Yes, gross margin should gradually improve over the next few quarters as we ship more and more products from our new tools, the Hawk and the Gen 5, which have higher gross margin. Obviously, if there is a slower quarter, this may have an impact on the overall gross margin. But again, in general, the gross margin should improve over the current levels. Kenny Green: Our next question is from Edward Yang of Oppenheimer. Edward Yang: Can we come back to the -- just the competitive environment and market share dynamics. It sounds like you had some -- won some share in 2D. -- competitor talked about 3D. Is it just fair to say the backdrop is relatively stable with some give and take? Ramy Langer: So first of all, we have not lost any market share to our competitor -- to our competitors. And we believe that with our new technologies and the new capabilities we're going to implement will probably enable us to win more -- to increase our market share. And I want to make it as we gain in the 3D and you sort of hinted maybe you lost something -- you gain in the 2D, you may have lost something in the 3D. That's not the case. Our position in the 3D is very strong. We are the reference tool for all the 3D metrology steps at all the HBM vendors and basically across the industry in the OSATs, there are very, very few places where we are not. So definitely, we are in a very strong position. I think the technology that we are implementing today, the new technologies, the new products that we have introduced a year ago are starting to be very meaningful to our revenues. We are gaining a lot of market share. We are gaining in new applications. We are able to do things that we couldn't do a year ago. I think with the new capabilities, we'll do even more applications. And my expectations is that we will win more steps at the HBM level, at the CoWoS and all the different applications. And then definitely, we -- our target is to increase the market share in the 3D and in the 2D. Edward Yang: Okay. And just for my follow-up, can you talk about the outlook for non-HPC advanced packaging. That actually outperformed HPC in 2025. Would that still be the case for 2026? And what's driving that? Is that mobile? Or what are the end markets that's driving that outperformance? Ramy Langer: I'll tell you that if I look at the advanced packaging, in general, advanced packaging for us is around 70%, 50% is the HPC and another 20% is what we call the conventional advanced packaging. I think the main application today is fan-out. And you see fan-out -- in some of it goes to mobile, but I think it's more -- it has a variety of applications. So I would say it's hard for me to tell you which are the end products, but definitely, the application that we see is span out and it's taking more and more, I would say, space you're seeing today in advanced packaging. And I expect this to be similar in '26. Kenny Green: We have a follow-on question from Craig Ellis of B. Riley. Craig Ellis: There's been a lot of inquiry and very helpful color understandably on HBM and CoWoS. But my understanding is that the company is positioned quite well for hybrid bonding. And we do expect that to be very important as leading-edge foundry moves to backside power delivery. Can you talk about specific product traction, breadth of exposure there? And how we should think about hybrid bonding contributing to calendar '26 year-on-year growth? Ramy Langer: So look, in general, hybrid bonding, we see it as an additional opportunity. I think in '26 from a revenues point of view, it's still going to be moderate. What we are seeing is more, I would say, the volumes are still. And we have a few machines at customer sites, major customer sites that are being used for the hybrid bonding, I would say, for the pilot lines or for the initial preproduction that they are doing. So definitely, there is a very nice opportunity there on the 2D inspection side. We see a lot of potential also on the metrology side. And this is something that we've been working on developing capabilities, and I believe this will contribute also in the long run. I think the volumes from hybrid bonding will come more into '20. We'll start to see them higher in '27. I think in '26, it's not going to be so significant. Kenny Green: So that ends our question-and-answer session. Before I hand over back to Rafi for his closing statement, in the coming hours, we will upload the recording of this call to the IR section of Camtek's website. I'd like to thank everybody for joining this call and hand back to Rafi for your closing statement. Rafi, please. Rafi Amit: Okay. I would like to sincerely thank all of you for your continued interest in Camtek. A special note of application goes to our dedicated employees and exceptional management team for the outstanding performance and commitment. To our investors, I am truly grateful for your trust and long-term support. I look forward updating you on our continued progress in the next quarter. Thank you very much, and goodbye. Kenny Green: Thanks, everyone. You may go ahead and disconnect.
Margarita Chun: Good morning, ladies and gentlemen. This is Margarita Chun YPF IR Manager. Thank you for joining us today in our Third Quarter 2025 Earnings Call. Today's presentation will be conducted by our Chairman and CEO, Mr. Horacio Marin; our Finance VP, Mr. Pedro Kearney, and our Strategy, New Businesses and Controlling VP, Mr. Maximiliano Westen. During the presentation, we will go through the main aspects and events that shape the quarter results. And then we will open the floor for a Q&A session together with our management team. Before we begin, please consider our cautionary statement on Slide 2. Our remarks today and answers to your questions may include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by these remarks. Our financial figures are stated in accordance with IFRS, but during the presentation, we might discuss some non-IFRS measures such as adjusted EBITDA. I will now turn the call over to Horacio. Please go ahead. Horacio Marin: Thank you, Margarita, and good morning, everyone. Let me start by highlighting that this was another quarter in which we continued to deliver solid operational performance. Despite the contraction in international prices, we maintained strong profitability levels compared to last year, gaining further operating efficiency and consolidating the tremendous progress that has been achieved in our Shale operations. Revenues amounted to $4.6 billion, 12% below the previous year, in line with the 13% year-on-year decline in the Brent price in addition to other offsetting effects. Adjusted EBITDA reached approximately $1.4 billion, representing a sequential increase of more than 20%, while remaining flat versus the previous year. The sequential improvement reflects higher shale production, coupled with the successful strategy of reducing exposure to conventional mature fields. The year-on-year comparison shows YPF's ability to maintain its profitability despite the contraction in international prices, driven by an improved production mix with a higher proportion of shale and continuous improvement in operational performance. That exit strategy led us to an impressive lifting cost reduction of 28% quarter-over-quarter and 45% year-over-year. During the third quarter, our shale oil production increased by 35% internally, reaching 170,000 barrels per day. More recently, in October, preliminary figures indicate shale oil production expanded by another 12% over the average of the third quarter, totaling around 190,000 barrels per day. This production level is fully aligned with our annual target of shale oil production of roughly 165,000 barrels per day. Moreover, it will enable us to slightly exceed the December 2025 production target of 190,000 barrels per day. Furthermore, the higher shale oil output that generate a remarkable shift in our production mix has allowed us to improve our EBITDA by around $1.3 billion on an annual basis versus 2 years ago. CapEx activity continue to be focused on developing our unconventional resources, representing 70% of our total quarterly investment. At the same time, we maintain our focus on achieving further operational efficiency in our shale operation. In that sense, let me highlight that during the quarter, YPF completed the drilling of the longest well ever in Vaca Muerta, exceeding 8,200 meters with a horizontal length of nearly 5,000 meters at our Loma Campana block. Moreover, during September, in La Malga Chica, we completed the drilling of a 4,000-meter horizontal well in just 15 days, setting the record as the fastest well ever drilled in Vaca Muerta. Lastly, in early October, we drilled one of the fastest well in the Rio Grande block located in the south half of Vaca Muerta. This well has a lateral length of more than 3,000 meters and was completed in just 11 days. Moving on to our downstream segment. During the third quarter, we achieved strong operational performance, reaching the highest processing level since 2009 at 326,000 barrels per day. This processing level was 9% higher than last year, representing a solid utilization rate of 97%. In that sense, we are pleased to announce that La Plata Refinery was named Refinery of the Year in Latin America by the World Refinery Association. Additionally, La Plata refinery ranked in the first quartile across several KPIs in Solomon global refinery benchmarking based on 2024 results. This recognition represents the result of the successful implementation of the third pillar of our 4x4 plan, our efficiency program based on operational excellence and technological innovation. On the financial side, free cash flow was negative as expected for a total amount of $759 million. This negative free cash flow position is mostly explained by the extraordinary effects related to the recent acquisition of the Shell asset from the Total Austral for $523 million and the impact of the mature field exit strategy. As a result, net debt increased to $9.6 billion, pushing our net leverage ratio up to 2.1x. However, excluding the acquisition of total assets and one-off costs related to mature fields, the negative free cash flow pro forma would have been $172 million with a net leverage ratio pro forma at 1.9x. Additionally, a few days ago, we have successfully retapped our 2031 international bond issuing $500 at 8.25% yield, the lowest interest rate for the international bond of the last years, replacing and improving our average life and financing costs. On a final note, let me briefly comment on the recent announcement regarding Argentina LNG project. In early October, within the Stage 3 of the project, we signed a technical FID with Eni for a full integrated LNG project of 12 million tons per year expandable to 18. Moreover, recently, last week, we signed a preliminary framework agreement with a new partner, the Arab company, ADNOC. In addition, we continue working with the Phase 1 and 2. All in all, the project continued to demonstrate the interest of international players in long-term investment in Vaca Muerta, which is essentially for creating a solid structure for the development and financing of the project. In summary, during the third quarter, we continue progressing to achieve the ambitious target set for the year, delivering solid financial and operational results while we continue to strengthen and prepare YPF for new and even more challenging goal in the future. I now turn to Max to go through some details of our operating and financial results for the quarter. Maximiliano Westen: Thank you, Horacio, and good morning to you all. Let me begin by expanding on Horacio's comment about the evolution of our oil and gas production. During the quarter, total hydrocarbon production averaged 523,000 barrels of oil equivalent per day, declining 4% on a sequential basis and 6% on a year-over-year basis as a result of the divestment program of mature conventional fields, partially offset by the expansion of our shale production that accounted for approximately 70% of the total output, increasing its portion once again and as expected, vis-a-vis the previous quarter. Oil production reached 240,000 barrels per day 3% below the previous quarter and 6% down against last year. Nevertheless, it is worth highlighting that shale oil production recorded an impressive growth of 35% against last year and 17% versus the previous quarter, almost neutralizing the conventional production decline driven by the successful exit strategy of our mature conventional fields that accounted to only 14,000 barrels per day in the quarter. Beyond crude, natural gas production totaled 38.4 million cubic meters per day, down 3% on a sequential basis. This decline reflects an 18% contraction in conventional production from mature fields, partially mitigated by an expansion of 5% in shale gas production. Regarding prices within the Upstream segment, crude oil realization price averaged $60 per barrel in the third quarter, essentially flat on a sequential basis and contracting 12% year-over-year, aligned with the variations of Brent. Natural gas prices increased by 6% quarter-over-quarter to an average of $4.3 per MBtu, supported by the seasonal factor included in the planned gas program between the months of May and September. Now let me dive into the evolution of our shale oil output. YPF reinforces its leading position in the development of Vaca Muerta oil, accounting for roughly 1/3 of the country's share. In the third quarter, we continued to deliver a solid performance driven not only from our key core hub assets, but also from contributions from the North and South hub blocks. In the third quarter of 2025, shale oil production delivered an impressive growth rate of 55% when compared to 2023 levels. Based on preliminary figures, October production reached an all-time high of 190,000 barrels per day, representing a strong increase of 70% vis-a-vis November 2023 and ahead of schedule. As Horacio previously mentioned, based on the current production levels, we expect to comply with the average production target announced for the full year 2025 of around 165,000 barrels of oil per day, and we expect to slightly exceed the exit rate of 190,000 barrels of oil per day as of December 2025. In the third quarter, we continued with the strategy of developing Vaca Muerta beyond our core hub blocks. In this context, let me point out the success story of La Angostura Sur, our flagship South hub block 100% owned by YPF under an unconventional concession valid through 2059, underscoring the long-term potential of the south of Vaca Muerta for YPF. Over the past 12 months, shale oil output from this block has jumped from only 2,000 barrels of oil per day in October of last year to more than 35,000 barrels per day in October this year, representing in financial terms, a field with a pro forma annual EBITDA of more than $500 million. The results achieved so far are impressive. Moreover, the block expects to reach a production plateau of over 80,000 barrels of oil per day in upcoming years with a very competitive breakeven price below the $40, demonstrating resilience amid evolving global dynamics. Finally, wells drilled in the block during the initial stage of development have demonstrated promising productivity levels that underscore their long-term potential, recording an estimated ultimate recovery of around 1.3 million BOE per well, including oil and natural gas. Furthermore, the high potential is also driven by a total inventory of roughly 350 wells, of which less than 15% has been developed. Regarding our upstream cost structure, let me point out that the combined strategy of divesting mature conventional fields and growing our shale business has enabled us to generate significant savings in our average lifting cost of more than 40% over the last 2 years, moving from $16 per BOE in the third quarter of 2023 to $9 per BOE in the third quarter this year. This remarkable cost improvement was achieved due to the significant shift in our production mix where unconventional production increased from about 45% of the total output in the third quarter of 2023 to nearly 70% in the third quarter of 2025, while conventional production portion fell from around 55% to 30% in the same period. As a result, since shale lifting costs remained at a very competitive range of $4 to $5 per BOE, YPF was able to improve its cost structure and therefore, its annualized savings would amount to approximately $1.3 billion. YPF will continue and deepen this strategy, supported by the completion of the sale and reversal of mature conventional blocks by the end of 2025, the AndNDEes-1 project and the sale of the rest of the performing conventional fields, the ANDE 2 project, which initial results are expected by the end of this year. Consequently, YPF will become 100% pure shale player with an efficient lifting cost structure of around $5 per BOE in the near future. Now let me walk you through the performance of our shale activities. In the third quarter, we drilled 54 horizontal oil wells on a gross basis, primarily in operated blocks with a net working interest of 58%, bringing the year-to-date to 159 horizontal oil wells on a gross basis. This keeps us on track to achieve our full year target of 205 wells in 2025. In terms of completion and tie-in of oil wells during the quarter, we recorded modest level of activity compared to last year, but year-to-date, we continued growing. In the third quarter, we completed 63 horizontal oil wells and tied in 64 on a gross basis. However, in the first 9-month period of this year, we completed 186 wells and tied in 187 wells, growing around 20% compared to the same period of last year. In terms of efficiencies within our shale operations, during the third quarter, we continued setting new records on drilling and fracking performance. We averaged 337 meters per day in drilling in our core hub, while we recorded 279 stages per set per month on fracking in unconventional blocks, increasing by 7% and 16%, respectively, when compared to the same quarter of 2024. As we have been flagging in previous calls, this constant improvement in operation metrics is the result of the implementation of our real-time intelligence center and the joint efforts of our technical team and key contractors that work relentlessly to introduce further efficiencies to our operations. Finally, regarding the CapEx composition within the upstream business, it is worth noting that how YPF managed to significantly transform the portfolio by reallocating investments from conventional to shale activity in the last 2 years. In this regard, in 2023, investments in conventional business represented 35% of the total upstream portfolio, while in the last 12 months of September 2025, CapEx in conventional assets only represented 5%. Furthermore, within the shale portfolio, investments in facilities represented a significant portion of total CapEx over the last 2 years, which is expected to remain steady in 2026 and begin to gradually decline starting in 2027. Switching to our Midstream and Downstream segment, the third quarter processing levels averaged 326,000 barrels per day, a record high since 2009 with our refinery utilization at 97%, representing an increase of 9% and 8% versus the third quarter 2024 and the second quarter 2025, respectively. This remarkable success is mainly driven by the record processing levels of 208,000 barrels per day achieved in September at La Plata refinery, combined with record production of middle distillates reducing to almost 0 full imports. Domestic sales of diesel and gasoline remained strong in the quarter with dispatch volumes rising 3% quarter-on-quarter and 6% year-over-year, reflecting higher demand across all commercial segments, retail, agribusiness and industrial. Moreover, we managed to modestly expand our leading market share to 57%, which increases up to 60% considering gasoline and diesel produced by YPF and dispatched at third-party gas stations. Furthermore, in the third quarter, YPF achieved an improvement in the premium mix in both gasoline and diesel sales. In terms of prices, during the third quarter, local fuel prices remained broadly aligned with international parities, albeit dropping against the previous quarter based on a very volatile environment. More recently, October preliminary figures show a narrowing of the gap between local fuel prices and import parities while recovering on a healthy midstream and downstream adjusted EBITDA margins of nearly $70 per barrel. Now let me briefly comment on the progress of the quarter regarding the efficiency program for the upstream and downstream businesses. Thanks to the supervision of our upstream real-time intelligence center, we managed to drill 100% autonomously more than 30 horizontal wells in real time using AI complemented with traditional techniques. While in fracking, we became the first company worldwide to perform 100% autonomous fracture remotely from our real-time intelligence center using predictive algorithms. Additionally, we have successfully executed 24 hours of continuous pumping in our fracking operation during 63 hours, fully supervised by our upstream real-time intelligence center. Regarding the downstream segment, as Horacio already noted at the beginning of the call, our La Plata refinery was awarded as the refinery of the Year in Latin America. Also, this refinery achieved the first quarter in several KPIs of Solomon's benchmarking, such as net cash margin, return of investment, operational availability and personnel efficiencies categories. Finally, the record high processing levels in our refineries have started generating a surplus of gasoline and mid-distillates, allowing YPF to export refined products to neighboring countries and replace imports of YPF and other local refineries. For instance, in the third quarter 2025, YPF exported around 30,000 cubic meters of jet and gasoline to Uruguay. And during the first 9 months of the year, we replaced more than 230,000 cubic meters of gasoline and middle distillates imports. Now let me share further details regarding the Argentina LNG project. As briefly anticipated by Horacio, regarding the Phase 3 of the project in early October, we signed a technical FID with Eni for a fully integrated LNG project of 12 MTPA expandable to 18th MTPA. And more recently, during the last week's APEX conference in Abu Dhabi, we signed a preliminary framework agreement with a new partner, the Arab company, ADNOC, that formally announced their intention to join the Argentina LNG project. Moreover, during the quarter, we continued working on the Phases 1 and 2. The project considers the development, design, construction and operation of a fully integrated natural gas LNG plus natural gas liquids NGLs project based on wet gas upstream fields located in the Vaca Muerta reservoir. The infrastructure involved in the project includes a liquefaction capacity of 12 MTPA expandable to 18 MTPA through 2 or 3 floating LNG vessels of 6 MTPA of capacity each, a dedicated 520 kilometers gas pipeline, a dedicated 650 kilometers Y-grade pipeline for NGLs and onshore facilities, including fractionation, storage and port facilities. The CapEx for the entire project is estimated at around $20 billion with a potential expansion to $25 billion in both cases, including the financial costs. Leverage of the project is expected to be around 70% on the total project cost in addition to the upstream investments required to accelerate shale natural gas production. Consistent with present LNG transactions, the project is intended to be financed through nonrecourse financing with multiple sources of funding, including ECAs, development banks and commercial banks as potential anchors of the financial structure. The FID is expected by the first half of next year, while the commercial operations for the first floating LNG is estimated by 2030 and following ones from 2031 and 2032. In summary, Vaca Muerta has the scale, the quality and cost competitiveness to position Argentina as leading global LNG exporter and Argentina's LNG project will unlock Vaca Muerta's full potential, enabling exporting its unconventional shale gas production to the world. Now I will turn the call over to Pedro. Pedro Kearney: Thank you, Max, and good morning, everyone. On the financial front, the third quarter ended with a negative free cash flow position as expected that amounted to $759 million, mainly explained by the recent acquisition of the shale assets La Escalonada and Rincon La Ceniza blocks to Total astral, closed at a purchase price of $523 million by the end of September. Moreover, despite the third quarter adjusted EBITDA surpassed CapEx deployment and regular interest payment, we recorded negative working capital associated with the discontinued operations in our mature fields, income tax payments from our subsidiaries and longer collection days from natural gas clients and blank gas program that started to normalize during October. It is worth noting that excluding the one-off items related to M&A transactions and the negative impact of the mature fields exit strategy, our negative free cash flow would have amounted to $172 million in an environment of lower international prices. Finally, on the liquidity front, our cash and short-term investments totaled at $1 billion by the end of September, remaining essentially flat vis-a-vis the previous quarter. In terms of financing, during the third quarter, we continued progressing on our financial program by securing local loans obtained from relationship banks and by tapping the local capital market at very attractive financing costs. In that sense, during the third quarter, we issued 2 dollar net bonds for a total amount of $300 million at an interest rate of 7.5% and a tenure of 2.5 years. In addition, we issued $225 million from dollar capital bonds with a 5-year tenure and an interest rate of 8.5% tendered in the international market to local investors. That, combined with a $300 million international bridge loan allow us to find the recent acquisition of shale assets. More recently, during October, we issued $100 million net bond with a 15-month tenure at an interest rate of 6%. Considering this last bond issuance, we issued new local bonds for a total amount of $625 million with an average tenure of 3 years and an interest rate of 7.65%. Moreover, aiming to reduce the cost of carry and taking a proactive approach towards debt investors, we scheduled for this month, the prepayment of $120 million of our secured notes due 2026, paying in advance the last amortization, which matures next year and thereby redeeming in full the bond ahead of schedule. Finally, let me share 2 very important news regarding YPF financial strategy. First, during October, we reopened the syndicate corporate cross-border loan market. We signed an export back loan for $700 million with 10 international banks with a 3-year tenure and a 6-month availability period as a prefunding strategy for the financing of our 2026 maturities. This transaction was possible after several months of work, showcasing YPF ability to access cross-border funding. Moreover, the loan was oversubscribed and attracted participation from new banks from Central America and Asia, demonstrating the market support and confidence in YPF. Finally, as Horacio previously mentioned, 2 weeks ago, we successfully returned to the international capital market. After 2 days of virtual meetings with more than 40 international investors, we led the recap of our 2031 international bonds of $500 million at a yield of 8.75%. Demand for this reopening exceeded all expectations with international and local investors oversubscribing orders 3x, reaching a peak order book demand of $1.5 billion. The proceeds will be used to fully repay the bridge loan for the acquisition of Total astral shale assets and to finance YPF investment plan. This issuance represented YPF tightest new issue yield on an international bond issuance in the last 8 years and improved the maturity profile of itself, extending its average life. So with this, we conclude our presentation and open the floor for questions. Operator: [Operator Instructions] Your first question comes from Alejandro Demichelis with Jefferies. Alejandro Anibal Demichelis: Yes. Congratulations on the quarter. Production has been very strong, particularly on the shale oil side of things. Could you give us some indication of how you're seeing production growing into 2026, 2027? That's the first question. And then Horacio, you mentioned all of the improvements that we are doing on the refining side and so on. We have seen you recently taken full control of the revenue asset. So could you please give us some indication of how you see that asset developing on the rest of the refining portfolio? Horacio Marin: Okay. Thank you very much for the question. Regarding the production, we see -- you can expect the same that we talk in line what we see in New York this year but at average for next year in the order of 215 and '27 in order of 290. We can give you a better number in the next call. But we think that we are going -- we are in line with all the program, okay? Regarding the refining side, [indiscernible] what was important was for the [indiscernible]. The [indiscernible] was very, very important for YPF because they give us a very good logistical advantage comparing with our, I would say, our competitors. And that's why it was that we decided to take that step because it was a difficult situation with the partner in that matter. For the gas stations, there is no difference because we were supplying those gas stations. We are going to take the best one with the YPF brand and we maintain the other with [indiscernible] as is today. And on the other side, in the refinery, which is in Campo Durán is close. But our idea is to make value for all the shareholders by doing something of this sort that we say in Santa Fe Bio, okay? So we are working on in that direction. Operator: Your next question comes from Leonardo Marcondes with Bank of America. Leonardo Marcondes: I have 3 from my side. My first question is regarding capital allocation and M&A. We have seen YPF quite active on the M&A front, right? In this regard, what should we expect from the company going forward? I mean, does the company continue pursuing new M&A opportunities? Or is it time to focus on the development of the assets within the portfolio? My second question is regarding the divestments and capital allocation as well. So could you share your plans for Metrogas and also YPF Agro? And when could we expect to hear more news on these matters? And lastly, my third question is regarding the LNG projects. I mean how do you expect to fund this project? And if we should expect any sort of project finance evolving there? Horacio Marin: Okay. Thank you very much for the question. For the first Okay. Thank you very much for the question. For the first one, Pillar 2 of our YPF 4x4, is active portfolio management, that means buy and sell. It depends where you can make more value for shareholders. We were active out with the bat field, and we see -- there was a big opportunity this year for the, I would say, core assets in Vaca Muerta. And that's why we decided to buy the total asset of Vaca Muerta. What you are going to expect, I don't see that there will be a lot of changes in our strategy, but we don't see that we will be active next year for major acquisition in Vaca Muerta, not in the others, okay? So that is what is our thought. Regarding Metrogas, Metrogas, we are in the process of the extension, the 20-year extension of the company, the contract. More than contract is the concession. They tell me concession here because remember I am an old man, I don't remember all the words as there are people here that they say you are wrong iss a concession, okay? So it's a concession. And our idea there is that after that, we start with the bank, and we are going to sell as soon as possible, okay? And for the law, we have to sell because of the -- I don't know how the -- I ask Herman that is the lawyer [Foreign Language] the vertical integration that they have the company, we have to sell before the plant gas is out. And so we are going to sell that. And YPF Agro is not necessary capital allocation. What is there is that we are -- YPF wonderful commercial channel that was built by YPF say, 20 years ago or so and it's extremely extremely successful. That's why there is the other company that refinery also they call with the name. So they copy the YPF. Our idea is because we have the knowledge of selling on the other things is that to have a strategic partner that can make more value for us and for all the shareholders and to have like a mixed company where we put the CFO inside, and we will have 50% and 50%, okay? That is the idea, and they will be very close now. That is on the stake right now, okay? And that is the second question that you asked. Regarding the LIC, you're right, it's a project finance that we are going to do with our partners. You're right. Operator: Your next question comes from [indiscernible] with Morgan Stanley. Unknown Analyst: First one on my end is, could you give us more color on what drove the working capital losses this quarter? And what should we expect in terms of working capital gains or losses in the coming quarters and how this should contribute to free cash flow generation into 4Q? Second one is if you could give us more color on what drove the lifting costs. Was it just higher shale output? Or are there any other factors which explain this decline and how this -- how should we should expect this into 4Q as well? And if I may, a third one, if we should expect an acceleration of 4Q '25 CapEx? And how should your CapEx stand versus the guidance? Horacio Marin: The first question after I will pass to Pedro, so they can explain in more detail than me. But I can tell you the more general, but I will pass to Pedro. For the second one in the lifting cost, remember that we are going out of mature fields and reducing the production from there, but you are increasing a lot of the production as you see in the presentation in the Vaca Muerta fields. So there is several reasons why we reduce. First, we have a clear in Pillar 3 that we have to make efficiency every day in our life. The second thing is when you increase a lot of the production, you reduce the fixed cost. And so you have to expect that we are going to maintain or reduce. But I think to maintain is a good number that we have, I think we are in a very low lifting costs, okay, is very low. Which more you asked any other factors explain this decline? I expected, I explained that. I think I answered that. In the fourth quarter '25, the CapEx, no, we think that we are going to end up in the year with a little less CapEx than we said at the beginning of the year. And the production, if you see the -- while you see, you don't see that, but I see the report, the daily reports, we are -- they -- now we are in more than 190. Today -- yesterday it was more than 284. We have someday 199.94. So I start discussing with the guy why it's not 200, but it doesn't matter. So we are close and we are in better shape than we thought at the beginning of the year. So we are focusing in looking at the results and looking at the best places to drill. That's why we are expecting those results. And with the CapEx, I say. I pass to Pedro so they can explain about the working capital. Pedro Kearney: Thank you very much for your question. So as you noted, during the third quarter, we recorded a negative working capital by about $360 million, and that was driven by multiple reasons. The first, the seasonality of the natural gas sales that was -- that were accrued in the third quarter and are expected to be collected in the fourth quarter. That's approximately $100 million. Second, we recorded in the third quarter longer collection days from the natural gas clients and from the plan gas program that started to normalize during October and November. That's approximately $50 million. Third, in the third quarter, we recorded a positive stock variation in the downstream business for about $60 million. That's the result of higher oil purchases to third parties to restock inventories given the inventory drawdown that we recorded in the second quarter. Then we recorded a particular lag in the OpEx and the CapEx from the mature fields that were out from YPF financial statements since the end of June, and those payments were phased during the third quarter. And finally, this negative free cash flow includes a decrease in the mark-to-market position of our sovereign bonds, which increased and changed fortunately during October and November. Operator: Your next question comes from Daniel Guardiola with BTG. Daniel Guardiola: I have a couple of questions here. The first one is on costs. And I would like to know if you can share with us how do you envision the trajectory of your lifting and D&C costs for 2026 and eventually, if possible and onwards, it will be great, especially considering the asset sale you did of conventional assets and the potential renegotiation of contracts with some of the service companies. My second question is on leverage, given the fact we saw an increase in leverage during this Q to 2.1x. And I would like to know if you can share with us what is the maximum leverage at which the company feels comfortable operating at. And in that sense, given that leverage has been going up in the last couple of quarters, I would like to know if you guys have ever considered to hedge your exposure to oil prices to offset any potential volatility in oil prices. So those would be my 2 questions. Horacio Marin: Okay. With the listing and the drilling and completion cost, I can give you more details in the next call. We are working very hard to reduce the unit cost with all the service company, and we are in negotiation during the week, okay? So I cannot tell you exactly, but I think we are going to reduce the unit cost very important because Argentina is another country. So that's why we are going to work on that. In the listing, I think I answered that, okay? You have to expect that we are going to be in that region, okay, that we say. Regarding, that were -- you say our debt in -- I think you have to take into account that last year, we bought 2 assets, okay? That's why the ratio goes up. We don't go -- we are not going to increase. It's not our goal that we think that we are in the maximum that we want to be. And during '23, you are going to see a reduction. But taking into account what is that we bought 2 good assets in Argentina, the best in gas and the -- I don't say the best in oil, but one of the core that is very important. That's why we thought that was important to buy those assets and make more value in the future in the near future for all the shareholders. Operator: Your next question comes from Guilherme Martins with Goldman Sachs. Guilherme Costa Martins: [indiscernible], is a strong ramp-up of shale operations being seen in the second half of the year. I have 2 quick questions here. My first one is on downstream. I understand you guys were not able to price prices in line with international parity in 2Q, right? I would just like to get a little bit more color on what happened in the competitive environment. You mentioned a volatile dynamics, but any additional color would be grateful. And my second question, if you guys could please provide an update on the ongoing divestment of Metro fields. When we should see next divestments being concluded? When we should see production continue to decline following the exit of those assets? And whether we should see additional cash outflow from the exit of those legacy assets? Thank you. Horacio Marin: Sorry, okay. Talking about prices, we have a policy that I cannot open -- be totally open because it's not we are going to say to our competitor. But we have moving average because there was -- in the last -- this quarter, there was a lot of volatility in prices. And remember that we have the exchange rate, the oil price, the biofuels and the taxes. And so in our country, the consumers need to, we are not accustomed to have changes on prices every day, okay, and big changes. So we have a moving average. And I don't know if you remember that we built a new real-time [indiscernible] center in the commercial side that is unique. I don't know if you are making, I don't know if you are making [indiscernible], okay? We have there everything that you can imagine with use AI and a lot of things. And from there, we are working with the new policy of prices that is micro pricing. And we are working and always trying to maintain our policy in -- but the last quarter was the big volatility in -- also in Argentina. You know that there was a lot of volatility. And that's why it was very difficult to go up because sometimes goes up, sometimes goes down. But now we are in a good shape. And the second one was about the -- I think and all that stuff. Today in the afternoon, we are going to sign [indiscernible] that was the last one. And we have only one area that is in Rio Negro that we are going to sign very quickly. But after that, we are out [indiscernible], okay? It was the most important for the value of our shareholders. But we understood, we are in the process of negotiating now to go out from conventional. Those conventional are areas that make value for all, but it's very important because we have the determination to go to be unconventional -- integrated unconventional company. So that is our goal, and we are going to negotiate in the next month to be out more than we can lots of assets and to be next year or if we can to be totally unconventional company. Operator: Your next question comes from Tasso Vasconcellos with UBS. Tasso Vasconcellos: I have 2 here on my side. First one, Horacio, can you remind us what legislations, I mean, either new legislations or adjustments on existing ones that YPF still relies on to move forward with and projects. As far as I remember here, there wasn't many new regulations that the oil and gas industry as a whole depend on, but there are some specific timing on some projects to be included under the region. So not sure if there is -- actually not check there is any kind of discussion on the 8% export taxes for the industry. So I think it would be great to have a broader recap on this political or regulation landscape. And the second question, actually a follow-up on the domestic fuel prices. You just mentioned about what did you notice in terms of upside or downside potation since the established a more dynamic pricing model, the real-time center and so on? And what can you tell us about the recent news saying that some politicians in Argentina wanted to create a law which you need to give a 72-hour notice advanced before adjusting fuel prices? Those are my 2 questions here. Horacio Marin: Okay. Thank you for the question. I don't know, thank you for the question. But beyond, the -- really is -- if you are refrain to the export duty for conventional, there is something new. I know exactly what you say on the new because remember, we are YPF, we are a private company, and we are not in the, I will say, regulation side. So really, I don't know. And conventional, remember that is not our -- now is not our core, okay? But I read in the news they sent to you that they are negotiation on that, but I have no idea what will happen. Regarding resi, for sure, the resi will be apply for LNG and if supply for infrastructure for LNG. And for LNG, we expect that to be in all the chain. The second one that you say that is -- yes, I read in newspaper the same to you, but that is regulation. I have to answer the same. I'm not working on regulation at all. Operator: There are no further questions at this time. I'll now turn the call back to YPF management team for closing remarks. Horacio Marin: Okay. Thank you very much for your attention, for your questions, and you are always very polite with us. So I would like to say thank you for that. And you have to expect that this is a company that will change a lot the way of management, the way of working every day. I'm very proud for all the work that all the employees is doing now and the energy that we are putting. And so you have to spread '26 a very clean year of the results. The problem of this year, and I imagine for you, it is very difficult to see because there is dirty with mature fees with taxes, with deferred taxes that only account I can understand. And when they explain, they are confused. So it's difficult to understand what you are saying. And so you have to 26, a very clean one, and you will see there how we are making the value for our shareholders that you can see in this quarter. I relate to for you because there are some people that are confused we say that the production is increasing operation where you're making value because we are reducing the conventionals. And if you annualize the value so far only to change the mixture is $1.3 billion. And this quarter, you can see that. So we are really very proud of we are doing all the people that we are an executive committee and all the people that are working there. Thank you very much for all of you. Operator: This concludes today's conference. Thank you for participating. You may now disconnect.
Ilana Goldstein: Good morning, and welcome to Beasley Broadcast Group's Third Quarter 2025 Earnings Call. Before proceeding, I would like to emphasize that today's conference call and webcast will contain forward-looking statements about our future performance and results of operations that involve risks and uncertainties described in the Risk Factors section of our most recent annual report on Form 10-K as supplemented by our quarterly report on Form 10-Q. Today's webcast will also contain a discussion of certain non-GAAP financial measures within the meaning of Item 10 of Regulation S-K. A reconciliation of these non-GAAP measures with their most directly comparable financial measures calculated and presented in accordance with GAAP can be found in this morning's news announcement and on the company's website. I would also remind listeners that following its completion, a replay of today's call can be accessed for 5 days on the company's website, www.bbgi.com. You can also find a copy of today's press release on the Investors or questions section of the site. At this time, I would like to turn the conference over to your host, Beasley Broadcast Group's CEO, Caroline Beasley. Caroline Beasley: Thank you, Ilana, and good morning, everyone. We appreciate you joining us to review our third quarter results. Before we begin, I want to share an important update. Lauren Burrows, our Chief Financial Officer, resigned effective October 17 to pursue a new opportunity, and we thank her for her contributions to the company over the last year, and we wish her much success in this next chapter. Effective immediately, I am serving as Beasley's Principal Financial Officer to ensure continuity and maintain the financial discipline that has always been central to our culture. Sean Greening has been elevated to Chief Accounting Officer. And together, we are working closely with our finance and operations teams to ensure a seamless transition. Many of you know that I served in Beasley's finance leadership for much of my career, including as EVP, CFO, Treasurer and Secretary until 2016. That experience provides both continuity and a deep knowledge of the company's financial framework as we continue to navigate the evolving media landscape. Against this backdrop, our strategy remains clear and our execution remains disciplined. #1, to scale higher-margin digital products; #2, strengthen the quality of our earnings; and #3, pivot our sales organization towards direct data-driven relationships. In addition, I'm pleased to announce that the company closed on the sale of WPBB in Tampa on September 29. However, given the government shutdown, we are still in a holding pattern for our Fort Myers closings. Now moving on to our results. For the third quarter, total company revenue was approximately $51 million, representing an 11% decline on a same-station basis or a 7.5% decline year-over-year, excluding $2.7 million of political in Q3 '24. While this result was broadly consistent with the expectations we outlined last quarter, we are disappointed with our revenue performance this year, and we view these results as unacceptable. Despite disciplined expense management that helped offset much of the top line shortfall, the rate of revenue decline underscores a fundamental need to execute more aggressively across our sales org and accelerate the transformation already in motion. We are taking deliberate structural steps to strengthen accountability, sharpen focus and realign our go-to-market strategy towards sustainable growth. As we discussed last year -- last quarter, we are aggressively retooling our sales org to align with the realities of a modern, digitally led marketplace. This process is well underway, and we are adding dedicated digital AEs and digital sales managers in markets to accelerate adoption and execution. We recognize that this transformation will not happen overnight. Many of our legacy sellers remain more comfortable with traditional over-the-air products. Driving sustained digital growth requires a fundamentally different sales skill. And over the past several months, we focused on redefining roles, compensation structures and training programs to build a culture of digital fluency and accountability. At the same time, our digital business continues to outperform, serving as clear validation of our strategy and demonstrating the long-term potential of the Beasley platform. Year-to-date, digital revenue has accounted for roughly 25% of company's revenue. That compares with 19% at this time last year. And on a same-station basis, digital revenue grew approximately 28% year-over-year, driven by the continued expansion of our O&O products and accelerating advertiser adoption across our digital portfolio. What stands out is not just the growth rate, but the quality of that growth. Advertisers are spending differently, not simply more. Campaigns are increasingly integrated across display, audio and streaming. The result is a healthier, more diversified digital business that is both scalable and durable. Among our products, Audio Plus delivered an exceptional quarter. Revenue from Audio Plus exceeded $1.2 million in Q3, representing over 200% growth from Q2, driven by extraordinary performance in Philadelphia, Detroit and Boston. These markets exemplify the power of pairing our broadcast products with targeted data-rich digital solutions, a combination that is renovating strongly with advertisers seeking both reach and precision. Our digital margins tell the same story. Digital segment operating income reached 28% on a same-station basis, the highest in the company's history. This improvement reflects greater control of our inventory economics with O&O products representing roughly 58% of total digital revenue for the quarter. That mix gives us stronger pricing flexibility and lower transaction friction, all of which compound over time. While programmatic demand continues to grow, the real driver of profitability is our ability to capture and activate first-party insights by delivering advertisers measurable ROI and leveraging campaign automation through Audio Plus for generating higher average deal values with less operational complexity. In short, we're no longer just selling impressions, we're selling intelligence, precision and performance visibility. That evolution is powering the sustained digital margin expansion you're seeing quarter-over-quarter. Now beyond digital, we continue to advance our product innovation initiatives and this is led by Dave Snyder. In Q3, we piloted our self-serve advertising portal in Tampa, enabling small and midsized businesses to plan and purchase digital campaigns across our properties independently. With testing complete, we are preparing to launch in the fourth quarter across more markets. This platform represents an important step in expanding access to Beasley's digital ecosystem. Simplifying how advertisers engage with our inventory, unlocking new customer segments and driving high-margin incremental digital revenues through automation. Local direct revenue, which includes digital packages sold locally, grew 3.5% year-over-year, now representing nearly 60% of total local business. Discontinued rebalancing towards direct relationship-based revenue enhances predictability and reduces exposure to external volatility. Finally, we maintained our focus on efficiency and expense control. In Q3, we executed a comprehensive cost reduction targeting non-revenue-generating functions, duplicative systems and underperforming vendor relationships. Collectively, these measures are expected to yield an additional $1.5 million in run rate savings hitting the P&L by year-end with full benefit realized in 2026. These cost-cutting measures will only compound the progress we've already achieved. Building on the structural efficiencies established earlier this year and last year. In the third quarter, station operating expenses were down 8% year-over-year or nearly $4 million and this is less the [indiscernible] retro adjustment. We do plan to book the BMI retro adjustment in fourth quarter. Also, corporate expenses were down nearly 50% year-over-year, and that's partially due to onetime reclass benefits, which we will discuss in further detail. In the last 12 months, we have centralized core functions such as accounting and engineering support automated manual processes across our business and rationalize vendor relationships to capture national scale pricing and eliminate redundancy. We've also simplified management layers and consolidated corporate services across markets, aligning fixed overhead with our streamlined footprint. For the 9-month period ending September 30, total corporate and station operating expenses are down $15 million, and this includes over $4 million of onetime expenses such as severance, and other expenses. Excluding these onetime expenses, total corporate and station operating expenses are down nearly $20 million. These declines reflect durable structural efficiency gains not temporary belt tightening. Through all of this, our focus remains unchanged. #1, driving higher quality revenue; #2, executing with consistency and #3, positioning Beasley for durable profitable growth. And with that, I'm going to turn the call over to Ilana Goldstein, our Director of Finance, who will provide additional detail on the quarter's financial results. Ilana? Ilana Goldstein: Thank you, Caroline, and good morning, everyone. Let me expand on some of the dynamics behind our third quarter performance and how we're positioning the company as we close out the year, while total company revenue of $51 million represented an 11% year-over-year decline on a same-station basis and 7.5% decline ex-political, the composition of that revenue continues to improve in quality. Agency softness remains the single largest drag on total revenue. However, the story beneath the top line is one of improving mix resilience. National Agency revenue ex-political declined approximately 16% year-over-year reflecting continued contraction in large-scale traditional media buying. This decline is driven by continued pullback in telecom and cable, insurance and quick service restaurant advertising, the category remains under sustained pressure as agencies reallocate budgets toward digital performance channels and reduce forward commitments across broadcast. The rate of decline accelerated modestly from the 12.1% decrease in Q2, reinforcing the importance of Beasley's pivot toward direct client relationships and digital monetization. Local Agency revenue fell roughly 17% year-over-year, a meaningful improvement from the 24.7% decline in Q2 reflecting stronger execution and improved conversion in key markets, including Philadelphia, Tampa and New Jersey. Declines were primarily tied to category-specific softness in auto, retail and sports betting. The gap left by agency contraction continues to be partially offset by the ongoing strength of local direct business, which as Caroline previously mentioned, grew 3.5% year-over-year and now represents nearly 60% of total local revenue. New business remains under pressure, down approximately 12% year-over-year ex-political, but the rate of decline has slowed materially compared to Q2's 21.6% contraction. We are seeing increased pipeline activity across retail, professional services and regional health care categories with health care alone now accounting for nearly 9% of total revenue, up from 6% a year ago, one of the key categories delivering consistent double-digit growth this year. From a category standpoint, the mix continues to evolve in a way that supports our long-term strategy. Consumer services accounted for roughly 30% of total revenue, underscoring the strength of locally driven service-based advertisers across home improvement, health care and personal services. Meanwhile, entertainment, auto and retail continue to show weakness, representing approximately 14%, 9% and 16% of total revenue, respectively. Entertainment declined nearly 40% year-over-year, reflecting delayed commitments from National promoters and a softer event calendar. Auto was down roughly 8%, constrained by manufacturer level budget compression and dealer consolidation. Retail decreased 22% year-over-year as advertisers continue to shift spending towards e-commerce and digital performance platform. Taken together, however, these trends point to a more balanced revenue mix, an incremental recovery across several core categories, while agency and national channels remain under pressure, local execution and digital adoption are helping to offset the headwinds and provide a clearer line of sight into stabilization heading into Q4. Our digital business continues to define the trajectory of our company, as Caroline previously mentioned, revenue grew approximately 28% year-over-year on a same-station basis, accounting for roughly 25% of total company revenue. What's most notable this quarter is the step change in digital profitability. On a total company basis, not to be confused with the same-station basis. Digital operating margin expanded from roughly 7% in the prior-year period to 21% in Q3, reflecting the combined effects of portfolio optimization, tighter cost control and improved monetization efficiency. Turning to expenses. This remains 1 of the clearest proof points of our transformation. As Caroline previously mentioned, operating expenses for the quarter were down approximately 8% year-over-year for $4 million. Corporate expenses are now nearly 50% lower than the prior-year period. However, in Q3 '25, we benefited from the onetime reclassification of $278,000 in capital expenditures and a $526,000 franchise adjustment, which reduced reported corporate expenses in the current quarter. We do expect franchise tax expense to trend higher in Q4, 2025 as those adjustments normalize. Additionally, while we recognized no severance at the corporate level in Q3, 2025, we recognized over $400,000 in corporate severance expense in Q3 '24 all of which makes the year-over-year reduction appear more pronounced than it truly is on a normalized basis. During the quarter, we incurred approximately $1.1 million in onetime costs primarily related to severance from the Q3 workforce realignment and transaction fees tied to the pending Fort Myer sale and sale of WPBB in Tampa. On profitability, station operating income or SOI was $4.9 million. Adjusted SOI, excluding stock-based compensation, severance and onetime items was $5.9 million and adjusted EBITDA was $3.9 million, excluding $50,000 in stock-based compensation, $1 million in severance and $1.6 million in transaction fees and onetime expenses. Interest expense totaled $3.3 million, largely consistent with prior periods. We remain disciplined in capital allocation and continue to prioritize deleveraging as proceeds from the Fort Myers transactions are realized. The combined effect of these actions is a leaner, more efficient enterprise. One capable of generating higher returns on every dollar of revenue and converting cost savings into sustainable shareholder value. From a liquidity standpoint, we maintained a cash position of $14.3 million. Capital expenditures totaled approximately $2.2 million in Q3 primarily reflecting onetime investments tied to our build-out of a combined centralized engineering center and studio relocation project in Charlotte, North Carolina. This initiative is designed to consolidate engineering infrastructure, while also transitioning our local studio operations into a more modern cost-efficient footprint. The project is expected to reduce annual operating expenses by nearly $1 million in 2026. The program remained on track for completion by Q1 of 2026 with the majority of related CapEx expected to occur in Q4, 2025. With that, I'll turn the call back over to Caroline. Caroline Beasley: Thank you, Ilana. Before we move into our ratings recap, I want to take a moment to acknowledge a tremendous loss within our family. Earlier this month, we said goodbye to Pierre Robert, a legendary voice in Philadelphia and one of the most loved figures and rock radio. Pierre's passing marks the end of an era, not only for WMMR, but for our entire company and for the generations of listeners, who grew up with his voice his warmth and his genuine love of music. For more than 4 decades, Pierre embodied everything that makes local radio meaningful. Authenticity, storytelling in a deep connection with his community, his kindness and energy inspired countless colleagues and listeners alike, and his influence will continue to shape our culture for years to come. On behalf of everyone at Beasley, including our colleagues at WMMR. We extend our heartfelt condolences to Pierre's family and the many fans, who welcome him into their life. His spirit will always be part of who we are. Now turning to ratings. Beasley brands continued to deliver strong results during the third quarter. According to the latest Nielsen data, our combined PPM and dairy market ratings rose 6% year-over-year in AQH among adults 25-54, underscoring the continued strength of our content our brands and our connection to the core audiences. Speaking of our connection to our audiences, we were once again recognized at the 2025 NAB Marconi awards, where WMMR, Philadelphia earned 3 Marconi, #1, Legendary Station of the Year; #2 Major Market Station of the Year and #3 Major Market Personality of the Year for Preston and Steve. A remarkable achievement that speaks to both heritage and innovation. As we look to the fourth quarter, we remain much realistic and encouraged, while industry headwinds persist, particularly in agency categories, we continue to see momentum in the areas under our direct control, including local, direct and O&O product growth. Including approximately $8.2 million in political revenue from the fourth quarter of last year, total company revenue for Q4 is pacing down roughly 20% year-over-year. Ex-political, revenue is pacing down in the high single digits, which is generally consistent with third quarter trends. We are expecting the full year 2025 station operating and corporate expenses to be down between $25 million and $30 million. This excludes severance and other onetime expenses. Operationally, we are entering the fourth quarter with clarity and conviction. The sustained improvement in digital margins, the strength of our brands and the dedication of our teams all point to a company that is stronger more efficient and positioned for growth. And easily, we're guided by the same principles that have anchored used for over 60 years. Integrity, creativity and service to our communities. As we look ahead to 2026 and beyond, we remain committed to advancing our strategy of scaling our high-margin digital products, improving our overall margins across all products and pivoting ourselves toward direct data-driven revenue. By executing on these initiatives, we will strengthen our balance sheet and deliver long-term value for our shareholders, partners and employees. So I thank you for your continued support and ilana, I think we have a few questions that came in earlier today. Ilana Goldstein: Yes. Here are the questions that were submitted prior to this call. #1, can you comment further on the agency channel issues? At what point do we anniversary the challenges there? Caroline Beasley: Yes. As I just mentioned, agency business continues to be a headwind, although we do see it as slightly improved in the fourth quarter ex-political. We do expect that we will be anniversary -- the anniversary of these challenges will take shape in first quarter of next year. Ilana Goldstein: The second question -- given the current revenue challenges, do you expect to do more cost savings in 2026? Caroline Beasley: Yes. A couple of things. We anticipate the benefit of savings from our third and fourth quarter cuts to be about $4 million for next year, plus we are looking at further savings as we go into 2026. Ilana Goldstein: And last question. Can you provide a sales price on Fort Myers? Who is the buyer of Fort Myers, do you see the opportunity for more asset sales? Caroline Beasley: So there are 2 transactions that cover the Fort Myers sale. 1 is $9 million, the other is for $9 million, so a total of $18 million to Fort Myers broadcasting and Sun broadcasting. And as I've said this entire year, we're always open to discussing accretive transactions that will help us reduce our debt and our leverage. Ilana Goldstein: Thank you so much. That concludes our conference call this morning. Caroline Beasley: Thank you very much. Colby, we will hand it over to you. Operator: Thank you. This concludes today's conference call. You may now disconnect.
Operator: Good morning, and welcome to the American Express Global Business Travel Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. Please note today's call is being recorded. I'll now turn the call over to Vice President of Investor Relations, Jennifer Thorington. Please go ahead. Jennifer Thorington: Hello, and good morning, everyone. Thank you for joining us for our third quarter 2025 earnings conference call. This morning, we issued an earnings press release, which is available on sec.gov and our website at investors.amexglobalbusinesstravel.com. A slide presentation, which accompanies today's prepared remarks is also available on the Amex GBT Investor Relations web page. We would like to advise you that our comments contain certain forward-looking statements that represent our beliefs or expectations about future events, including industry and macroeconomic trends, cost savings and acquisition synergies, among others. All forward-looking statements involve risks and uncertainties that may cause actual results to differ materially from the statements made on today's conference call. More information on these and other risks and uncertainties is contained in our earnings release issued this morning and our other SEC filings. Throughout today's call, we will also be presenting certain non-GAAP financial measures such as adjusted gross profit, adjusted gross profit margin, EBITDA, adjusted EBITDA, adjusted EBITDA margin, adjusted operating expenses, free cash flow and net debt. All references during today's call to such non-GAAP financial measures have been adjusted to exclude certain items. Definitions of these terms and the most directly comparable GAAP measures and reconciliations for non-GAAP measures are available in the supplemental materials of this presentation and in the earnings release. Participating with me today are Paul Abbott, our Chief Executive Officer; and Karen Williams, our Chief Financial Officer. Also joining for the Q&A session today is Eric Bock, our Chief Legal Officer and Global Head of M&A. With that, I will now turn the call over to Paul. Paul? Paul Abbott: Thank you, Jennifer. Welcome to everyone, and thank you for joining our third quarter 2025 earnings call. In the third quarter, we delivered outstanding results. Here are the highlights. Total transaction value or TTV grew 23%. Revenue growth accelerated to 13%. Adjusted gross profit margin was 60%. Adjusted EBITDA grew 9%. We generated $38 million of free cash flow, and we continued to win share with $3.2 billion in total new wins value over the last 12 months. Finally, year-to-date through November 6, our strong performance has enabled us to return $54 million to shareholders through share buybacks. These results reflect 2 things. First, continued strong execution within our core business, which performed in line with our expectations and is tracking in line with the midpoint of our previous full year guidance. Second, incremental growth from the acquisition of CWT, which closed on September 2. This is an important milestone for growth and value creation. As Karen will discuss in more detail, we are raising our full year 2025 guidance. This reflects the acquisition of CWT, and we are reaffirming the midpoint of our previous guidance range for our core business. Importantly, we also have the confidence to provide preliminary expectations for 2026. Before we get into the quarterly details, I want to explain why this is such an important moment for our business with multiple levers for growth and value creation in place. We continue to demonstrate the strong execution in our core business. Proof points include our very high customer retention rate, significant new wins value, disciplined operating leverage and strong cash generation. We are consistently delivering on our commitments. We have made bold moves to transform Amex GBT into a software-driven leader in travel and expense. We've now reached an exciting moment with several significant milestones achieved that we expect will accelerate growth and margin expansion. First, we closed the acquisition of CWT, a global business travel and meeting solutions company. This transaction immediately grows our top line substantially, and we are already executing on the $155 million synergy target to create significant shareholder value. Second, we recently announced a long-term strategic alliance with SAP Concur to strengthen our value proposition, accelerate growth and develop a larger expense revenue stream. Third, we expect to launch a next-gen Egencia Travel and Expense solution in Q1 2026, including full integration into SAP Concur Expense and a new AI-powered booking experience. Fourth, we have an enormous runway in the SME space with even stronger products and distribution to continue to win share. And finally, we are driving AI to further accelerate the digital transformation of our business. Putting it all together, we have a significant long-term opportunity for consistent double-digit adjusted EBITDA growth and margin expansion, and we look forward to sharing more at our March 2026 Investor Day. Turning to CWT. We are delighted to welcome CWT customers and employees to Amex GBT. This transaction grows revenues by approximately 30%, grows our SME business by approximately 20% and brings in new industry verticals to Amex GBT. This is a highly accretive transaction. We expect to deliver approximately $155 million in net cost synergies over the next 3 years, and we have a proven track record of achieving synergy targets. Our experienced integration team has made good progress in the first 60 days, and we expect to achieve $55 million of synergies in 2025 and 2026. Importantly, this transaction diversifies our shareholder base. CWT shareholders, which are primarily investment funds, now own approximately 10% of the combined company, and our leverage stays within the target range of 1.5x to 2.5x. Turning to our new long-term strategic alliance with SAP. Let me first describe how significant this alliance is, and then I will share 2 new ways that our customers and suppliers will benefit. SAP is the world's largest provider of enterprise application software. To put some numbers on it, 98 out of the 100 largest companies in the world are SAP customers and approximately 80% of SAP's customers are SMEs. SAP Concur is the world's largest travel and expense software solution with over 104 million users. By joining forces, we will deliver a step change in our travel and our expense capabilities. First of all, we are co-developing a new solution called Complete, a new flagship solution for travel and expense that will offer an AI-powered user experience. Complete features include richer content, a booking experience that will feel like shopping on your favorite website, one app for everything end-to-end and a seamless customer support from industry leaders. We launched last week to the first customers, so the impact is already starting now. Second, we are integrating SAP Concur Expense with Egencia. This is exciting because it will provide our Egencia customers a seamless travel and expense experience. And additionally, the strategic alliance creates the opportunity to accelerate our growth by marketing a new flagship solution to the large SAP customer base. In Q1 2026, we plan to launch a next-gen Egencia Travel & Expense solution. It will feature SAP Concur expense integration, new Agentic AI search capabilities and a redefined customer experience. Egencia is our all-in-one travel and expense platform that continues to compete very effectively against other software solutions. Egencia is already operating at scale with approximately $8 billion of TTV in the last 12 months, over 90% online transactions and approximately 7,000 corporate customers, all supported by world-class service from American Express GBT. Furthermore, it has gross margins that are higher than our average and very importantly, it is profitable and generating cash. We have an unrivaled value proposition for SMEs. savings, control and service. This strong value proposition drives profitable growth in the over $800 billion SME segment and an estimated $625 billion of the global SME opportunity is unmanaged, representing a long runway for future growth. Over the last 12 months, excluding CWT, our SME new wins totaled $2.2 billion. With the enhancements that we're making to our products and our sales strategy, we think we can further accelerate new wins and capture more share with SME customers. Our overall total new wins value also remained strong at $3.2 billion with an impressive customer retention rate of 95% over the last 12 months, excluding CWT. Finally, when it comes to AI, we are a clear beneficiary. AI is delivering results, increasing revenue, conversion and productivity. Let me give you some examples. The Egencia AI experience is solving customers' needs faster and delivering savings. Egencia Chat powered by AI is driving a 23% reduction in the need for human intervention in chats. Our AI-powered hotel dynamic rate cap delivers average savings of approximately $60 per booking for Egencia customers. And AI is increasing hotel attachment rates, which provides increased revenue opportunity with 85% of booked hotels chosen from the top 10 AI-driven display. We're also driving AI to deliver cost savings and margin expansion. We've previously spoken about the significant opportunity with travel counselor productivity. Excluding CWT, over 40% of our calls are now assisted by AI, driving efficiency gains. And we've seen a 40% quarter-over-quarter increase in daily users of our internal AI productivity tool called AI Assist. This results in a 60% adjusted gross profit margin in the third quarter with significant runway for continued margin expansion. And we continue to increase the share of digital transactions, which now totals 82% with over 60% on our proprietary software platforms. Now let's turn back to the third quarter and the financial highlights. Last quarter, we talked about green shoots that gave us confidence in an improved corporate travel demand environment, and that is exactly what we saw. TTV, which reflects both volume and price, grew 23% to reach $9.5 billion, driven by CWT and 9% growth in the core business. The core growth was driven primarily by higher average ticket prices and hotel room rates in addition to transaction growth and a favorable FX impact. Transaction growth was up 19%, driven by the 1-month contribution from CWT post close and 4% growth in the core business. Within the 4%, same-store sales were up 2% and our net new wins drove 2 percentage points of growth. Revenue was up 13% to reach $674 million. Excluding CWT, revenue growth of 3% was in line with our expectations and largely in line with transaction growth, which drives the majority of our revenue model. Finally, adjusted EBITDA grew 9% to reach $128 million. Excluding CWT, underlying adjusted EBITDA growth was 5%, which was in line with expectations and outpaced revenue growth as a result of our continued focus on driving margin expansion and operating leverage. Going forward, Amex GBT and CWT are one business. But we wanted to give you the breakout between our core business and the impact of CWT this quarter to help you understand the underlying performance. And now I'd like to hand it over to Karen to discuss the financial results and the updated outlook in more detail. Karen Williams: Thank you, Paul, and hello, everyone. Before we get into the specifics for the quarter, I want to reflect on the progress we have made in Q3. I am incredibly pleased with our continued momentum in driving the business forward. We delivered financial results for the core business that were in line with expectations. We closed on CWT and are already making outstanding progress on the integration. And we executed on our share repurchases to deploy capital in a disciplined, value-accretive manner. We continue to deliver on our commitments. So let's turn to our financial performance in more detail. Revenue reached $674 million, up 13% year-over-year. Travel revenue increased 10% due to the acquisition of CWT, underlying transaction and TTV growth and favorable foreign exchange impact. Product and professional services revenue increased 23% from the acquisition of CWT as well as strong growth from dedicated client revenues and consulting. Excluding CWT, transaction growth of 4% was in line with our expectations. TTV growth of 9% had an additional 3 percentage points benefit from higher average ticket prices and 2 percentage point benefit from FX. As a reminder, transactional growth drives 50% of our revenue and TTV drives 30%. The core revenue growth of 3%, was very much in line with our expectations for the quarter. Now it's important to note that our core business revenue guidance of 5% at the midpoint for the second half, which we're reiterating today, assumed lower growth in Q3 versus Q4 due to phasing. If you look specifically at our revenue yield, it declined 40 basis points year-over-year, driven by the prior year baseline, hence, why I would encourage you to look at H2 rather than the quarter in isolation. And from a year-to-date perspective, revenue yield is trending in line with our full year guidance, which is down less than 20 basis points, excluding CWT due to the intentional continued shift to digital transactions and the fixed components of our revenue. So moving to expenses. We continue to drive strong momentum with our focus on driving efficiency and increasing productivity. We are introducing adjusted gross profit margin as a key metric this quarter, which we believe helps measure the success of our automation and AI initiatives and makes us much more comparable to other software-led companies. Adjusted gross profit margin was 60% in the quarter, down modestly due to the impact of CWT, but up 70 basis points for the core business. Importantly, we believe there is a runway for this to go up significantly over time. Adjusted operating expenses were up 14% year-over-year, largely reflecting incremental costs driven by the acquisition of CWT. Excluding CWT, adjusted operating expenses were up 3% in the quarter. And on a constant currency basis, adjusted operating expenses grew slower than revenue for the core business, reflecting our continued focus on driving productivity and efficiency gains. And as a reminder, we expect to drive $110 million of cost reductions in 2025, partially offset by the $50 million in investments we are making to drive growth, and I am pleased to say we are on track with both of these. Putting it together, adjusted EBITDA grew 9% to $128 million. Our adjusted EBITDA margin was 19%, down 70 basis points year-over-year due to the impact of the CWT acquisition. Although the combination with CWT's lower-margin business will temporarily step down our margins on a blended basis, we are confident in the path to return to and then far surpass prior levels, thanks to the significant synergies, additional efficiency potential and scalable revenue growth for the combined businesses. Excluding CWT, our adjusted EBITDA margin was up 40 basis points. And again, I encourage you to look at core business margin expansion of 120 basis points year-to-date instead of the quarter in isolation due to phasing. As Paul mentioned, we wanted to provide this financial detail on the core business versus CWT impact to be helpful. However, going forward, we will be operating reporting as one business. We generated $38 million of free cash flow in the quarter, which declined year-over-year, largely due to the impact of CWT. Free cash flow generation for the core business, excluding CWT, was $54 million, down modestly year-over-year due to investing in the business. Finally, I am incredibly proud of the strength of our balance sheet, our leverage ratio or net debt divided by last 12 months adjusted EBITDA is 1.9x, up slightly from last quarter, given our funding of the cash portion of the CWT acquisition, but still below the midpoint of our target leverage range of 1.5x to 2.5x. With such a strong balance sheet, we are in a position to continue executing on our capital allocation priorities, including additional opportunistic M&A while returning cash to shareholders through share repurchases. Year-to-date through November 6, we have repurchased $54 million of shares. Our share buyback reflects our confidence in the underlying strength of the business and our commitment to driving long-term shareholder value. Now taking a closer look at CWT, this is an incredible synergy story. We have a clear path to a bottom line synergy opportunity of $155 million, entirely driven by what we can control, which is costs. We have significant savings by consolidating the cost base of CWT and Amex GBT, including a large opportunity with AI and automation. This is a highly accretive transaction with a 3.5x multiple on synergies alone. We have previously shared we expect to achieve approximately 35% of our total $155 million synergy target in year 1. While I'm pleased to share we are tracking in line with the expectations we have previously shared. We expect to deliver $55 million in synergies across 2025 and 2026, split between $5 million and $50 million, respectively. These actions primarily include workforce reductions, real estate consolidation and vendor savings. We have a clear and established playbook for M&A. I will now share 2 examples of that track record of highly accretive acquisitions and significant value creation. With HRG in 2018, we added approximately 24% incremental revenue with approximately $80 million in synergies. And with Egencia, in 2021, we added approximately 24% incremental revenue with approximately $110 million in synergies. This proven track record gives us confidence in our ability to deliver the identified synergies from CWT. Now moving to guidance. We are very pleased to raise and narrow our full year 2025 guidance to reflect the acquisition of CWT, which closed on September 2, 2025. There are no changes to our expectations for the core business. We are confident in the midpoint of our previous guidance. We are now guiding to full year 2025 revenue of $2.705 billion to $2.725 billion, which reflects approximately 12% year-over-year growth and adjusted EBITDA of $523 million to $533 million. Versus our previous guidance midpoint, this is $227 million increase in revenue with a $5 million increase in adjusted EBITDA, all driven by the CWT overlay. CWT assumptions for Q4 included an impact on our government business from the current U.S. government shutdown and a continuation of current trends for domestic travel. Please note that CWT is not currently baked into consensus or any sell-side analyst estimates. So this is all extremely exciting top line growth that is not currently reflected in any of the numbers out there and therefore, entirely incremental. Looking at free cash flow, we now expect to generate free cash flow of $90 million to $110 million. At the midpoint, the $50 million change in free cash flow guidance is driven by the cash impact of CWT. Excluding the cash impact of CWT and approximately $60 million in onetime M&A-related cash costs, we would expect to generate approximately $210 million in underlying free cash flow for the core business. And so turning to next year, we also want to share our preliminary expectations for full year 2026 to help you set up your models now that we have closed the CWT acquisition. We have made bold moves to transform Amex GBT into a software-driven leader in travel and expense. We have now reached an exciting moment with several significant milestones achieved that we expect will accelerate growth. We expect to continue to demonstrate strong execution in our business with significant new wins, disciplined operating leverage, delivering on the CWT synergies, introducing our new flagship complete T&E product with SAP, rolling out our industry-leading next-gen Egencia T&E solution and continuing to drive productivity and efficiency across the enterprise whilst investing in the business. Our guidance philosophy continues to be based on the trends that we have seen. Our preliminary expectations for full year 2026 is 19% to 21% revenue growth and adjusted EBITDA of $615 million to $645 million, which represents growth of 16% to 22% year-over-year. And as usual, our official full year 2026 guidance will be provided on our next earnings call in early March. I want to end on why we are so excited about our future and the long-term outlook for the company. We have reached a critical moment with the CWT acquisition and the additional levers for long-term growth and value creation. We have a clear path to consistent double-digit adjusted EBITDA growth, margin expansion and free cash flow conversion, which we will use to drive continued shareholder value. We look forward to providing more detail on the opportunity we see ahead at our Investor Day in March. So we can move into Q&A. Paul and I are joined by Eric Bock, who is our Chief Legal Officer and Global Head of M&A. Operator, please go ahead and open the line. Operator: [Operator Instructions]. First question comes from Lee Horowitz with Deutsche Bank. Lee Horowitz: Two if I could. Maybe as it relates to your 2026 outlook, I wonder what you're hearing from your customers in terms of their expectations on what the big beautiful bill could mean for corporate spending broadly and how that perhaps informs your preliminary outlook? And then maybe one on the new SAP Concur relationship strikes is quite interesting. I wonder how you're thinking these tools may serve to help unlock the unmanaged segment in SME more greatly so that we could see that part of your business continue to come online and take share there. Paul Abbott: Well, thanks, Lee. Thanks for the questions. First of all, in terms of the outlook for 2026, the most recent survey that we did, showed either the same or moderate improvements in terms of the travel budgets for 2026. So I would say we're cautiously optimistic about a slight uptick in organic growth in 2026. We're also seeing a noticeable increase in the number of Meetings and Events. I know I've mentioned before, Lee, that that's an area of our business where we get a longer-term view given the booking patterns for Meetings and Events. And in the last quarter, we've actually seen a double-digit increase in the number of forward bookings for Meetings and Events into 2026. So again, that's an encouraging sign as well. So we'll provide more details on the '26 outlook when we give formal guidance in February. But I would say that we are cautiously optimistic about a moderate improvement in organic growth in 2026. Yes, on the SAP Concur partnership, I think I mentioned in my prepared remarks that 80% of the SAP customer base are actually SME customers and we have over 100 million users. And so with this new flagship solution that we are co-developing with SAP Concur, we will have the ability to market that solution into the SAP customer base, which obviously, as I said, a very, very large established SME customer base. So we do think that, that's going to really help us to accelerate SME growth. And then secondly, Egencia has been our primary product for bringing customers in within the SME segment and also more specifically the unmanaged segment and the ability to integrate now Egencia into Concur Expense, so that it becomes a seamless all-in-one travel and expense solution for those 100 million users is also a significant step forward in terms of our value proposition in that segment. So both those developments should help us to accelerate our SME new wins in 2026 and beyond. Operator: We now turn to Duane Pfennigwerth with Evercose ISI. Duane Pfennigwerth: You touched on it with your comments just now. But can you comment maybe just on where we are in the underlying macro for business travel? We were having a pretty vigorous recovery in the U.S. off of the tariff shocks into the government shutdown. Now it appears the clouds are maybe parting on that front. How would you characterize business travel demand trends now versus maybe the lows of this year back in April or May, and I'm not sure if you agree with that as a trough period. Paul Abbott: Yes. I think we said last quarter that we were expecting to see an improvement in demand into Q3, and that's frankly exactly what we saw. And you see that in the numbers that we've just shared. If you look at our sort of guide for Q4, we're also expecting to see some improvement in the organic growth rate into Q4. So I think what we signaled last quarter in terms of an improvement in the demand environment is exactly what we have seen. Duane Pfennigwerth: Okay. Great. And then on CWT, obviously, you're acquiring customers, a deeper presence in some industries and a significant synergy opportunity. But I wonder if you could just remind us, is there anything on the technology front or on the software front where you feel like they may have had a relative advantage? Paul Abbott: I think there are some areas of the business, particularly in the hotel space and also some of the traveler care, travel counselor tools that we are looking at that we think are interesting and that may help us to create more value for customers and also help us to improve productivity in our servicing teams. But when you look at the software solutions, obviously, the main software solutions that we will be going to market with, will be the Egencia solution, which, of course, now will have full integration into SAP Concur Expense, the Neo suite of solutions and of course, now the flagship product that we are developing with SAP Concur, which is complete, which again will be an integrated travel and expense solution. So those will remain the 3 core software solutions in addition to, of course, third-party software that we integrate with as well. Duane Pfennigwerth: And then just on Concur, I'll sneak one more in. Sorry about that. Just on Concur, obviously, you've worked with Concur for some time. Can you just maybe highlight what is different now about this partnership? Paul Abbott: Yes, sure. So I think what's different about this is that we are now actually co-developing a new flagship solution that will lead the industry for travel and expense. We have teams that are working together to fully integrate the solutions. And that is going to mean improved content for customers. It's going to mean improved savings for customers, and it's without question, going to be an improved experience. We're bringing the expertise of both teams together in travel and expense to create a more integrated experience for the user. That experience will be AI-powered. It will be more integrated across travel and expense. There will be one app essentially for everything. And there will be an improved [ UX and improved ] retailing experience for both travel and expense. So those are the key changes that customers can expect going forward on the Complete product. And then, of course, what's also new is Egencia will have that integration into Concur Expense. Our Egencia customers really likes the user experience on Egencia, the content, the AI-powered experience. But some customers that are operating in that SAP environment want full integration into SAP Concur Expense, and that's what we're going to give them going forward. Operator: We now turn to James Goodall with Rothschild and Co-Redburn. James Goodall: So firstly, just coming back to the SAP Complete and Egencia T&E solutions. What are the key metrics or milestones that you'll be watching and hoping to achieve as these products roll out to the market? Paul Abbott: I am sorry, would you repeat the question? I think we lost you at the beginning. James Goodall: Sorry, sorry. So just coming back to the SAP Complete and Egencia T&E solution. What are the key metrics or milestones that you guys are going to be watching and hoping to achieve as these products roll out to the market? Paul Abbott: Yes. I think what we're expecting, frankly, from the new strategic alliance with SAP is to accelerate our growth. And we're going to have a flagship product that gives us competitive advantage. And therefore, we're expecting that to accelerate the growth of our business. We're obviously going to be cross-selling both the Complete product and the Egencia product into the SAP customer base. So again, we'll be looking for increased growth. We'll also be looking for improved customer retention because we're going to be able to deliver customers with a better experience. We're also going to be bringing more content to customers and more savings. So looking at the savings that we're delivering to customers as well, will be an important metric to track. And then, of course, it tracks very much to the overall digitization of the business and continuing to increase the share of digital transactions, which we referenced in the presentation is now at 82%. And obviously, we expect that metric to continue to grow. And that ultimately feeds into improved gross margin and overall margin expansion for the business. So those are the key metrics that you should expect us to track and report. James Goodall: Great. And then just secondly, just thinking about the synergy number of $155 million. I mean that number hasn't now changed for 2 years, I guess, since you first almost 2 years since you outlined the acquisition. But now that you've got a bit more under the numbers with CWT, I mean, do you see any potential for incremental synergies to be unlocked, whether that's incremental cost savings or revenue synergies as well? Paul Abbott: Well, I think what we've been able to do really post close is to obviously pressure test that synergy number in more detail. And when you own and operate the business, you have the ability to do that. And so we now have just a very high confidence level of delivering that $155 million of synergies. That, just as a reminder, is 100% cost synergies. So that is a net cost synergy number. There, of course, can be opportunities to increase revenues, and we're certainly looking to cross-sell our products and services into the CWT customer base, but we have not baked any of those revenue synergies into our business case or our outlook. But we absolutely have a very high confidence level on $155 million of synergies. And as Karen mentioned in her remarks, $55 million of that, we already have been able to identify an action. And of course, $100 million in additions still ahead of us. Operator: [Operator Instructions]. We now turn to Stephen Ju with UBS. Stephen Ju: So on the Egencia TTV disclosure, I think, trailing 12 months of about $8 billion, has this segment more or less recovered back to the pre-pandemic levels? And I think secondarily, at the same time, the $8 billion of TTV is on potentially an addressable market of $800 billion plus. I mean that's just 1% of the market. So availability of online and software solutions for travel is something that's probably not lost on anybody. So I mean, between Egencia and competitors, we're probably still at less than 10% penetration. So what do you think the unlock here is to get the SMBs onboarded and using Egencia? Paul Abbott: Yes. Thanks, Stephen. Good question. And it's worth remembering that Egencia is a very important part of our SME segment, but our SME segment is approximately 50% of our overall SME volume. So our SME volumes are also on other solutions outside of Egencia. But your point is absolutely correct. There is a significant runway for growth in the SME segment. The investments that we're making in Egencia to evolve that product into a travel and expense solution will obviously, I think, be an opportunity for us to accelerate growth in the SME segment. If you look at the partnership that we just announced with SAP Concur, that gives us the ability to sell our solutions into that SAP customer base that I mentioned earlier. So we expect both of those developments to help us accelerate growth. But look, your point is absolutely valid. There is a huge opportunity to grow in what is still a very, very large and very fragmented segment. Stephen Ju: Okay. And secondarily, I get that there's probably a relatively higher failure rate among SMEs, but has Egencia and indeed your entire portfolio now, has there been any signs that you've been able to hold on to some of these SMEs as they grow and continue to become bigger companies? Paul Abbott: Yes, absolutely. You're right, there is more churn in the SME customer base. Our retention is around 94% in SME versus global multinational is around 98%, which obviously brings us to our average, which has been tracking around 95%, 96%. So you're always going to have more churn within the SME customer base. But our retention rates are very high. And I think what we did see at the back end of last year and the beginning of this year is we did see some softening in the organic performance, the same-store sales in SME. And I think it's been well documented that, that's driven primarily by macroeconomic conditions. And I'm pleased to say that we have seen a steady improvement in that organic performance as we've gone through 2025. So again, we're cautiously optimistic about Q4 and into 2026, continuing to see an improvement in the organic performance, but also the investments we're making in our sales and marketing channels, plus the investments we're making in Complete and the investments in Egencia set us up to accelerate our growth in the SME segment. Operator: We now turn to Toni Kaplan with Morgan Stanley. Toni Kaplan: And thanks for your comments on the AI stuff in the prepared remarks. We've been seeing some new platforms in the space. And we're wondering where do you see the place for sort of those platforms in the market versus -- and I know that you have AI embedded in yours as well. But do you expect that the AI platforms will be more sort of targeted in the SME part of the market? And what type of customer would benefit from using a platform that is like essentially AI forward versus Egencia, for example? Paul Abbott: Well, I think what's really exciting about where we are now on AI and our digitization program is that we're seeing real results, both in terms of revenue performance and cost performance, and I referenced some of those results in my prepared remarks. We're seeing an impact to revenue and conversion through the AI-enabled features that we have in Egencia. We're also seeing cost reduction from the AI solutions that we're implementing across our servicing channels. And so I think AI is very much a tailwind for us in both improving revenue and conversion, improving the customer experience and also taking cost out of the business. And as I said, I think we are starting to see results and real P&L impact on both fronts. In terms of how the broader competitive environment is going to evolve, we are already developing our own Agentic AI capabilities and also working with third-party Agentic solutions, and what we're seeing is that Agentic AI is definitely going to start to become an important channel. But it's going to be one of, I think, many channels that customers use, and they're going to want Agentic AI to be integrated into whether it's chat, whether it's voice and all of the other channels that those customers use to interact with us. And it's going to be important for all of those channels to make sure that they are connected up to the same marketplace and the same content, the same traveler data and traveler preferences, the same company data and company policy data. And what we're finding is that the fact that we essentially orchestrate all of that end-to-end, and we are the ones that actually hold and manage all of that data that it's actually our technology stack and data that is incredibly important in order to actually make that Agentic experience work, whether it's our Agentic AI experience or third-party Agentic AI. So I think you're going to see it grow as a channel. I think you're going to see many different versions of Agentic AI that are powering that channel. But I think you're going to see that effectively all integrate into the technology stack and data that we have, so that customers have a fully integrated and entirely consistent experience across all channels. Toni Kaplan: Great. And just thinking about -- you shared preliminary expectations for 2026. The adjusted EBITDA growth there, are you embedding cost savings from AI in that number? And could you actually do better than that? It's a nice number, but can you do better than that if you are able to find even more AI efficiencies next year? Karen Williams: So thanks for the question, Toni. We've given the preliminary expectations based upon what we see today. And there is margin improvement along with obviously then the synergies embedded in them that we've mentioned from a CWT perspective. So it is based upon everything that we feel confident about at this point. Operator: This concludes our Q&A. I'll now hand back to Paul Abbott for any final remarks. Paul Abbott: Well, look, thank you very much to everyone. Before closing, I do want to thank our team for their tremendous commitment to our customers and the strong results that they have delivered throughout this year and including the third quarter. Thank you to all of you for joining us today and your continued interest in American Express Global Business Travel. Thank you, everyone. Operator: Ladies and gentlemen, today's call has now concluded. We'd like to thank you for your participation. You may now disconnect your lines.
Operator: Hello, and welcome to the Organon Third Quarter 2025 Earnings Call and Webcast. [Operator Instructions] I would now like to turn the conference over to Jennifer Halchak, Vice President, Investor Relations. You may begin. Jennifer Halchak: Thank you, operator, and good morning, everyone. Today, we will be referencing a presentation that is visible during this call for those of you on our webcast. This presentation will also be available following this call on the Events & Presentations section of our Organon Investor Relations website. Please reference Slides 2 and 3 for some brief reminders. I would like to caution listeners that certain information discussed by management during this call will include forward-looking statements. Forward-looking statements can be identified because they do not relate strictly to historical or current facts and use words such as potential, should, will, continue, expects, believes, future, estimates, believes and other words of similar meaning. Actual results could differ materially from those stated or implied by forward-looking statements due to risks and uncertainties associated with the company's business, which are discussed in the company's filings with the SEC. This includes our most recent Form K and Forms 10-Q and those amended forms that we filed earlier this morning, as well as our October 27, 2025 Form 8-K. These statements are based on information as of today, November 10, 2025. And except as required by law, Organon undertakes no obligation to update or revise any of these forward-looking statements. In addition, we will discuss certain non-GAAP financial measures on this call, which should be considered a supplement to and not a substitute for financial measures prepared in accordance with GAAP. Descriptions of these measures and reconciliations to the comparable GAAP measures are included in today's earnings press release and conference call presentation, both of which are available on our Investor Relations website and have been furnished to the SEC on a current report on Form 8-K. I note that while our full year 2025 guidance measures other than revenue are provided on a non-GAAP basis, Organon does not provide GAAP financial measures on a forward-looking basis, because we cannot predict with reasonable certainty and without unreasonable effort, the ultimate outcome of those legal proceedings, unusual gains, and losses, the occurrence of matters creating GAAP tax impacts and acquisition-related expenses. These items are uncertain, depend on various factors and could be material to our results computed in accordance with GAAP. On the call today, Carrie, Joe and Matt will address certain information about our internal investigation. Additional information about the investigation is available in our SEC filings. Beyond the statements today and the information in our filings, we will not be taking questions on the investigation. Today, the team will discuss our business, third quarter results and guidance, and they will take questions on those matters after their prepared remarks. And now I'll turn the call over to Carrie. Carrie Cox: Thank you, Jen. Hello, everyone, and thank you all for joining us today. I've had the privilege of serving as Board Chair of Organon since 2021. I've been in the pharma industry now over 4 decades. And about half of those years were spent in global leadership roles, which required navigating businesses through periods of transformation and growth. A good part of that experience was leading Schering-Plough Global Pharmaceuticals until the merger with Merck. So I have a deep understanding of many of our products and markets here at Organon. Since Organon's inception, our mission has been to deliver impactful medicines and solutions for a healthier every day. there is a shared passion at Organon to advance the complete health of women at all stages of her life, and that's what drew me to Organon from the beginning. While we focus on Women's Health, we also have a diverse portfolio of Biosimilars and Established brands that are important in markets around the world. I'm here today because I have assumed a new role at Organon as Executive Chair. Following the Board's investigation into the company's improper sales practices with two distributors with respect to U.S. sales of Nexplanon. I will be supporting Joe Morrissey, who I will speak about in a minute as our interim CEO. The Board has formed a search committee and will be conducting a search for our permanent CEO. In this role, my focus will be on working closely with our leadership team to ensure that we align our resources to our highest priorities and drive operational performance across the portfolio. I will be deeply engaged in monitoring progress, addressing challenges quickly and ensuring that every part of the business is working towards our shared goals. The independent internal investigation relating to the company's Nexplanon sales to wholesalers in the U.S. is complete. And our remediation efforts are underway, including enhanced control, certain personnel actions, additional training and expanded written procedures. The company's wholesaler sales practices identified through this investigation have ceased. And we have new leadership at the company and in our U.S. commercial sales area to ensure this does not happen again. The Board and I are confident that Joe is the right person to assume the role of Interim CEO of Organon and to oversee the remediation measures. He brings integrity, a strong focus on operational excellence and a deep commitment to executing our strategy. Joe came to Organon from Merck, where he spent more than 30 years. At Organon, he was already a member of the executive leadership team and has served as Head of Global Manufacturing and Supply Chain since Organon's inception, leading the company's efforts to deliver medicines and solutions around the world. We appreciate Joe agreeing to step in at this critical juncture. Importantly, I want to stress that our drive for operational excellence and meeting our goals to move our company forward into the future remains unchanged. With that said, I'll hand it over to Joe so that he can talk a bit about his and Organon strategic priorities. Joseph Morrissey: Thank you, Carrie. I appreciate the introduction and the opportunity to speak with everyone today. As Carrie mentioned, I spent more than 3 decades at Merck, where I led a number of manufacturing businesses, as well as corporate strategy. That experience combined with my deep understanding of our products, our markets and our supply chains made joining Organon a natural step as I was excited to build something meaningful from the ground up, leveraging our strong history. We have faced many challenges in these first 4.5 years, but we have a resilient and capable global team. Our diverse product portfolio and footprint help us to generate meaningful revenue and deliver real value to patients and communities around the world. As Carrie has said, our strategic priorities have not changed. Moving forward, we remain focused on executing against these priorities. As we've previously shared, these include deleveraging the business, driving cost savings and achieving revenue growth. I am -- I believe deeply in Organon's mission, our values and our people around the world. I'm fully committed to helping Organon succeed. And with that, I hand it over to Matt. Matthew Walsh: Thank you, Joe. Beginning on Slide 4. Third quarter revenue was $1.6 billion and adjusted EBITDA was $518 million, representing an adjusted EBITDA margin of 32.3%. Before I go deeper into a discussion of third quarter results, I'd like to spend a minute walking through some specifics about the company's U.S. wholesaler sales practices, that Carrie referenced. It's important that investors understand this issue properly. There is limited revenue impact and no financial restatement is necessary. All revenue was properly recorded in accordance with U.S. GAAP. On Slide 5, you'll see a summary of the revenue impact from these practices for the recent quarterly periods identified by the investigation. The revenue that we're highlighting is that of Nexplanon sales to two U.S. wholesalers with specific emphasis on revenue transactions occurring close to quarter end. Certain revenue transactions were advanced or pulled forward into the current quarter in excess of estimated patient demand and/or contractually agreed inventory holding levels. For example, for the third quarter of 2024, on the left-hand side of this chart, the sales practices in question resulted in approximately $5 million of pull-forward revenue from the fourth quarter of that year. In the fourth quarter of 2024, there was approximately $15 million pulled forward from the first quarter of 2025. So the net impact in the fourth quarter of 2024 was $10 million. Importantly, because we're talking about the pull forward of sales, these quarterly numbers are not cumulative. Our financial statements have been consistently reflecting the net impact, which is clearly not material to our consolidated revenue. Three other important points to make here. First, revenue recognition in all cases was appropriately recognized in accordance with U.S. GAAP, specifically Section ASC 606. Two, during these periods, product returns were at or below historical levels and three, in every relevant period, the units that were pulled forward occurred late in the third month of that quarter, and were absorbed through patient demand by approximately the end of the first month of the following quarter. Since this practice has ceased and will not continue in the future, we will see the most significant impact in the fourth quarter of this year because the $17 million pull forward in Q3 2025 will not have an offsetting buy-in in Q4 2025. As a result, the pull-forward dynamic rolls off in the fourth quarter and will be contained within the 2025 fiscal year with no carryover impact to 2026. One last point on this topic. In the 8-K filing on October 27, the financial impact of these practices for the relevant periods was described as being less than 1% of consolidated revenue for the full year of 2022 and full year 2024 and less than 2% of consolidated revenue for the relevant quarterly periods. Subsequently, we have completed our testing and detailed reviews, resulting in the more narrow estimates that you see here on Slide 5, which are clearly within the ranges disclosed in the 8-K. Now moving to a discussion of third quarter 2025 results. To be clear, when I refer to revenue and revenue variances, unless otherwise noted, those references are to revenue recorded in our financial statements without adjusting to back out the pull forward. So let's go franchise by franchise, and then we'll move to a discussion of revenue by driver. So turning to Slide 6. The Women's Health franchise declined 4% at constant currency in the third quarter of 2025 compared with the third quarter of 2024 with growth in contraceptives Marvelon, Mercilon and NuvaRing, partially offsetting a 9% decline in Nexplanon at constant currency. Global Nexplanon sales in the third quarter were $223 million. In the U.S., Nexplanon declined 50%, while internationally, the product grew 7% ex-exchange. The biggest challenge facing Nexplanon this quarter was unfavorable U.S. policy, which emerged in Q2, accelerated in Q3 and had the biggest impact in the budget constrained public segments. Planned Parenthood and federally qualified health centers, where Nexplanon has a leading market share among long-acting reversible contraceptives. In the second quarter, we cited U.S. policy decisions that impact Title X funding and Planned Parenthood. In the third quarter, formalization of these policies intensified budget and access constraints with the greatest impact being realized in Planned Parenthood. On the commercial side, our Nexplanon business is primarily comprised of integrated delivery networks and to a lesser extent, independent health care clinics. In the independent commercial clinics, we've seen a shift away from both purchasing or buy and bill towards single unit specialty pharmacy fulfillment of these claims, as these small businesses try to preserve cash. This is also largely macro-driven and related to inflationary and economic factors with independent health care clinics are facing. We see these headwinds persisting in the fourth quarter in the U.S. and likely to result in full year U.S. Nexplanon sales that are down mid- to high single digit for the full year. We expect international sales of Nexplanon to grow mid- to high single digits ex-FX this year. Putting that together, that means we expect global Nexplanon sales will be down low single digit in 2025 compared with full year 2024 on an ex-exchange basis. In the fourth quarter, that implies global Nexplanon sales will be down by mid-teens ex-exchange compared with the fourth quarter of 2024. The discontinuation of the wholesaler practices I mentioned will likely explain about 2/3 of the year-over-year variance in the fourth quarter. Turning to other components of our Women's Health business. Our fertility business was flat in the third quarter and up 13% year-to-date, ex-FX. For the full year, we expect high single-digit growth driven by the U.S., which represents about 40% of our global fertility business, as well as market expansion outside the U.S. And rounding out Women's Health. On November 6, we announced that Organon has entered into a definitive agreement to divest the Jada system for $440 million plus another $25 million contingent on 2026 revenue targets. Since acquiring Jada 4 years ago, the Jada team successfully launched the product in the U.S., secured approvals across multiple countries and managed design iterations as part of continuous improvement activities all leading to Jada being recognized as the standard of care in postpartum hemorrhage management. With this divestiture, Organon can delever faster by applying the proceeds to debt reduction, and put Jada in the hands of a med tech company well positioned to build on our great work and the very successful launch of the product. Turning now to Biosimilars on Slide 7. Year-to-date performance is largely driven by Hadlima, which is up 63% ex-FX globally through September and continues to rank among the leading Biosimilars in terms of total prescriptions in the U.S. This performance reflects the strong clinical profile of Hadlima, which includes the recent interchangeability approval in the U.S. Hadlima has also benefited from the effectiveness of our low-price strategy as well as expansion into Canada and Puerto Rico. The third quarter also benefited from an international tender for Ontruzant and to a lesser extent, contribution from our new denosumab biosimilar, which was approved by the FDA and launched in the U.S. in late September and Tofidence, which the company acquired in the second quarter of 2025. Wrapping up the franchise discussion with established brands now on Slide 8. Vtama revenue in the third quarter was $34 million and $89 million year-to-date. Our ongoing focus here remains to differentiate Vtama in the market. We have the largest addressable market with a single product in both indications across all severities. Vtama is notable for its safety profile, powerful skin clearance and rapid effective itch relief. It's once-daily dosing regimen and lack of restrictions on duration of use or percentage of body surface area affected further illustrate Vtama's potential for disease management in adults suffering from plaque psoriasis and adults in children down to 2 years of age with atopic dermatitis. The launch has had a flatter curve than we expected, but we are further investing behind the brand to effect a more rapid uptake in the atopic dermatitis indication. We still believe this product could get close to $0.5 billion globally at peak, even if our $150 million target for this year is now likely out of reach and closer to $120 million to $130 million. Elsewhere in Established brands, the third quarter marked the last quarter of significant impact from the LOE of Atozet since we lapped that event in September. Importantly, we saw a continuation of softening in our respiratory business. Performance in the respiratory portfolio was primarily driven by declines in Singulair, resulting from lower demand outside of the U.S. The montelukast molecule is losing share to newer respiratory products, especially in pediatrics and is facing mandatory price reductions in Japan and China. Dulera was also down significantly in the quarter, primarily due to increased discount rate pressure in the United States, coupled with temporary supply constraints and the negative impact from the loss of a customer contract early this year. As you know, our respiratory business can be seasonal. And given the historical stability of these offerings at midyear, we believe this business would rebound. Based on Q3 results and current projections for the remainder of the year, we anticipate that erosion in the respiratory business will persist through this year and into next year. Moving to Slide 9, where we detail the drivers of our 1% as reported revenue increase year-on-year for the third quarter. Starting on the left, loss of exclusivity was about $50 million for the quarter, which primarily reflects the impact of the LOE of Atozet in Europe, which occurred in September 2024. As we lap that LOE, we anticipate a relatively smaller impact in the fourth quarter. Year-to-date, we're tracking at the high end of the $170 million to $190 million range we provided last quarter. And so we now estimate LOE impact to be about $200 million for the full year 2025. VBP in China was de minimis in the third quarter and year-to-date. We now expect Fosamax's inclusion in Round 11 to be an early 2026 event, so we expect very minimal impact from VBP in 2025, less than our previous estimate of $30 million to $50 million. There was an approximate $30 million impact from price for the third quarter or about 1.9%. That was mainly driven by the mandatory pricing revisions in respiratory that I mentioned, competitive pricing pressures in fertility and the LOE of Atozet. We expect the full year impact from price to be in the range of $135 million to $145 million or about 2% with those same Q3 drivers of price being the most significant. This is an improvement over our prior range of $155 million to $185 million. Volumes increased $70 million in the third quarter, representing growth of about 4.5%, driven by the addition of Vtama to the portfolio, continued growth in Emgality and solid performance of Hadlima. Given year-to-date performance and our view into the fourth quarter, we estimate that volume could grow about 2.5% for the full year 2025, a revision from our former estimate of 6% to 7%. This would imply low single-digit decline in the fourth quarter and is reflective of continued softness in the respiratory portfolio, persisting policy headwinds in U.S. Nexplanon and a flatter-than-expected ramp of Vtama. In supply other, here, we captured the lower-margin contract manufacturing arrangements that we have with Merck, which have been declining since the spin-off as expected. And lastly, foreign exchange translation had an approximate $40 million favorable impact in the quarter or about 200 basis points, which reflects the weaker U.S. dollar versus the majority of foreign currencies in which we transact. For the full year, we now expect the impact for FX to represent about a 50 to 70 basis point tailwind to total revenue. Now let's turn to Slide 10, where we show key non-GAAP P&L line items and metrics for the quarter. For reference, financials and reconciliations to the non-GAAP financial measures are included in our press release and the slides in the appendix of this presentation. For gross profit, we are excluding purchase accounting amortization and onetime items from cost of goods sold, which can be seen in our appendix slides. Adjusted gross margin was 60.3% for the third quarter compared with 61.7% in the third quarter of 2024. This year-over-year decline in the non-GAAP adjusted gross margin is primarily attributable to pricing pressure, unfavorable product mix and unfavorable foreign exchange on our inventory turns. Adjusted EBITDA this quarter was $518 million, representing a 32.3% margin. Year-to-date, adjusted EBITDA margin is running favorable in part based on the timing of SG&A spend. There are planned increases in our SG&A spend in the fourth quarter as we support growing products such as Vtama and Tofidence. Year-to-date, non-GAAP SG&A as a percentage of sales is 25.4% and given the investments I just mentioned, our latest estimate is about 0.5 point higher than that for the full year. Turning to free cash flow on Slide 11. Year-to-date, we've delivered $813 million of free cash flow before onetime costs. Onetime costs related to the spin-off were completed in 2024, following the rollout of our global ERP system. What remains are margin-enhancing restructuring and manufacturing separation activities for 2025, which were $244 million year-to-date. In line with our expectation of $250 million to $300 million for the full year. Year-to-date, these break out as follows: approximately $100 million relates to cash payments associated with the restructuring initiatives that we're executing to deliver $200 million of operating expense savings this year. $20 million relates to the final payment on the Microspherix legal settlement and the remaining $120 million relates to the planned exits from supply agreements with Merck. These are activities that will enable Organon to redefine our appropriate sourcing strategy and move to fit-for-purpose supply chains, while focusing on delivering efficiencies in terms of gross margin expansion, which we expect to begin realizing in 2027. Below the free cash flow line, our estimate of business development cash investments for 2025 is approximately $240 million related to contractual milestones for Vtama, Emgality and the Biosimilar programs with Shanghai Henlius. Through the first 9 months of the year, the majority of those payments have already been made. Turning now to leverage on Slide 12. Net leverage as of September 30 was approximately 4.2x, down from 4.3x at June 30. Earlier in the year, we took action to realign our capital allocation priorities and target a net leverage ratio of below 4x. To that end, in the second quarter, we repaid approximately $350 million in principal of long-term debt instruments. As I mentioned, once the Jada transaction closes, which we estimate will be Q1 of 2026, we will apply the net proceeds after taxes and transaction costs to lowering our debt balance as well. Given our revised guide, we will likely end the year in line with Q3 with proceeds from the Jada sale helping to move the needle on leverage in early 2026. Now turning to 2025 full year revenue guidance on Slide 13. Given year-to-date performance and risk adjusting the fourth quarter for what we see as persisting U.S. policy in Nexplanon and the challenges in the respiratory business, we're lowering our full year range to $6.2 billion to $6.25 billion from $6.275 billion to $6.375 billion, which represents a year-over-year nominal decline of 3.2% to 2.4% negative. Given the approximate $35 million to $45 million tailwind we expect from FX for the full year, that means we're revising our constant currency revenue guide down about 300 basis points at the midpoint. We continue to expect adjusted gross margin to be in the range of 60% to 61%. Year-to-date strength in adjusted gross margin is likely to be partially offset in the fourth quarter due to product mix. For OpEx, as I mentioned earlier, given expected investments in Vtama, we expect full year SG&A spend as a percentage of revenue to be about 0.5 point higher than the year-to-date figure, which puts us in the 26% area for the full year. We continue to expect R&D as a percentage of sales to be in the upper single-digit range. The math on all those components gets you closer to the lower end of the 31% to 32% adjusted EBITDA margin range we laid out in August of this year. So we are revising our adjusted EBITDA margin to approximately 31% for the full year. For below-the-line items, our estimate for full year 2025 interest expense remains at $510 million. The lower interest expense from voluntarily retired debt is essentially fully offset by higher euro-denominated interest expense due to FX translation, and an acceleration of noncash amortization of capitalized fees related to the early debt retirement. As we think about next year, we would expect the interest expense to be closer to a $450 million to $475 million run rate as a result of the voluntary debt repayments completed, lower variable interest rates and applying the net proceeds from Jada to debt repayment. For 2025, we continue to estimate our non-GAAP tax rate to be in the range of 22.5% to 24.5%. The uptick from 2024 is largely due to the impact of the 15% global minimum tax rate required under the OECD's Pillar 2. Depreciation of $135 million remains our estimate for the full year 2025. At a very high level, next year pro forma for the Jada divestiture, we would expect consolidated revenue to be about flat as Vtama and Emgality and Biosimilars growth offset the headwinds across the respiratory portfolio. For Nexplanon, assuming existing headwinds in the U.S. don't worsen and factoring in the volume and price variables associated with a 5-year launch in the U.S. and continued growth internationally, we expect global Nexplanon revenues could be about flat next year. We remain confident in our ability to continue to delever the balance sheet through disciplined expense management and prudent capital allocation, all of which will strengthen Organon's financial position and support greater financial flexibility in the future. Importantly, even in a challenging environment, our diverse portfolio continues to generate strong cash flows and provides a solid foundation for long-term value creation. We are committed to navigating the current headwinds, investing behind our growth drivers and delivering for patients, customers and shareholders. And finally, while the issue raised around certain of the company's wholesaler sales practices is receiving a lot of focus, the financial impacts are small. Remediation is well underway. And as an organization, we are moving forward. With that, operator, let's open the line for questions. Operator: [Operator Instructions] Your first question comes from Jason Gerberry with Bank of America. Jason Gerberry: My question is mainly, given the Jada divestiture, are there opportunities within the portfolio for additional divestitures as you look across? And then as my follow-up, just on Vtama, I appreciate the update as it pertains to the growth dynamics into year-end. When should we start thinking about a growth inflection? Do you feel like next year when the access barriers improve that 2026 is the time point to really evaluate whether or not the growth inflections achieved with the AD label? Matthew Walsh: Thanks, Jason. We'll start with question. So to be clear, we've got nothing that's been announced or is definitively planned on asset divestitures, we're constantly from a strategic basis, looking at all of the assets in our portfolio. and anything additional would be opportunistic. I think in the case of Jada, we looked very hard at what is the economic value created in a hold and invest scenario and compare that against the opportunity to put that product in the hands of a better owner and the right economic answer in the math indicated that divestiture was the right answer in that case, but that is the kind of rigor that we'll put across all the assets in our portfolio. And as regards Vtama, Vtama has grown nicely this year, will grow again next year. To your point, we have -- we have made significant strides to improve access in 2026. And so I think full year 2026 will be a very good basis for us to be judging where we are on the growth trajectory to achieving long-term peak revenue of that roughly $0.5 billion that underpin the investment for us in the first place. So yes, 2026 will be a key year. Operator: The next question comes from David Amsellem with Piper Sandler. David Amsellem: So a couple for me. Firstly, can you talk more about the pressure on respiratory? And should we think of this long term as a declining business, not just '26, but beyond? And then secondly, how are you thinking about other potential trouble spots, I should say, regarding Established brands? So that's number one. And then number two is on Vtama. Just wanted to get your thoughts on competitive dynamics here. Is there anything you feel like you're missing regarding the topical landscape vis-a-vis the roflumilast product in particular and how we should think about that and how that plays into your -- thinking regarding the product? Matthew Walsh: Sure. So we'll start with the respiratory piece of your question, David. So in the early part of the year, we were noting that the allergy season, specifically in the Asia Pacific region, including China, was off to a very slow start. That put a dent in our thinking about the full year performance of the respiratory business. But then as the year progressed, we were noting that competitively speaking, the age of certain products in the respiratory portfolio is working against them. Various health ministries around the world were starting to prioritize other molecules above, for example, Singulair. And then elsewhere in the portfolio, thinking about Dulera, we talked about that in the prepared comments in terms of the rate pressures that product is facing in the United States. And then rounding out just mandatory price downs in China and Japan and also just around the world, hit that business pretty hard this year. So as we said, we expect that softness to continue into 2026. We'll see what sort of allergy season we have with some of the other dynamics I've spoken about are more longer term in nature. Apart from that, the rest of the established brands portfolio is showing the stability that those products have demonstrated over long periods of time. But we've always said about the established brands business, it is a business that we felt, if managed very tightly, we could keep about flat or maybe very, very low single-digit rate of rate of decline. That is on a CAGR basis. Some years will be different than others. We've added to the established brands portfolio, having a global commercial infrastructure like we do is an asset. So products like Emgality tucked in very nicely. And Emgality continues to grow. And now the wave two markets now that we've added them, I think, are a case in point for what we can do with the infrastructure that we have. So no other trouble spots that we're managing at the moment. Vtama from a competitive standpoint, we are forced to market in the atopic dermatitis space with a nonsteroidal offering. So that has set the stage, I think, as what you -- what you would say about competition. The product, as we mentioned in the prepared comments, is really differentiated in terms of drug-to-drug interactions, no restrictions on use, no limitations on a percentage of a body air. So it's a very safe product. And we're looking to differentiate it with those patients for whom those characteristics are very important, including pediatrics. Operator: The next question comes from Umer Raffat with Evercore ISI. Umer Raffat: I wanted to start by commending you for getting the 10-Q out, but I realize we haven't been able to speak at all since the inventory disclosures a few days ago. So I feel like it's only fair that we don't limit to just one question. So here's what I wanted to address on this public call. First, the audit committee investigation focused on Nexplanon. How do we know that the behavior was just limited to Nexplanon? Because inventory visibility is always lower ex U.S. So how do we know? Second, the filings point to the CEO and the Head of U.S. Commercial as where divergence happened. But I also saw your Chief Commercial Officer left back in February last -- this year as well. Why was that? Third, for 2024, your net pull forward is only $10 million, but the discounts and rebates paid to the channel went up by $177 million in '24, which puzzles me. So could you elaborate on that? Additionally, 4Q '22 had some inventory as well, but I didn't see any color on that. And then finally, the scale of these issues seems fairly low, fairly manageable, $10 million, $15 million sub $20 million. But if that's the case, then why the need to start this divestiture plan? Carrie Cox: As I mentioned in my comments, the independent internal investigation around the improper sales practices with Nexplanon in the U.S. was with two wholesalers, and it's now complete. The investigation also looked other product areas and found nothing else at this time. So we believe that we are done with the investigation now and we're moving forward into the remediation efforts. Again, as I mentioned, that's things like enhancing our controls. We have taken certain personnel actions. We believe that's completed. We're doing additional training and we've got more written procedures and more training yet to come. So with the new leadership at the company, we're comfortable that we're moving forward, and we will continue to execute against our goals as stated. Matt, do you want to take the others? Matthew Walsh: Yes. So for the Nexplanon piece, as we stated in the prepared commentary, Umer, the marketplace for long-acting reversible contraceptives has gotten more competitive. And so we are meeting that competition partially on price. So that would result in some of the increases in rebates and discounts that you noted. This is just I would say, normal business and Nexplanon operating in a competitive marketplace where women have lots of options for contraception. Jennifer Halchak: And on the Q4 2022 disclosure here. We didn't -- it wasn't on our slide, but the amount is disclosed in the 10-K. Matthew Walsh: Umer, you had a number of other questions. I just want to make sure we get to them all. Can you repeat the ones that you don't think we've answered yet? Umer Raffat: Yes, sure. Maybe for 4Q '22, that wasn't disclosed also the Chief Commercial Officer, who left separate from the Head of Commercial, why was that? And then why do all the divestitures now? Matthew Walsh: So for Q4 of 2022, the revenue was impacted by -- I think it was about 1.5% on the quarter, 0.3% for the year. And the divestitures, I think we've already addressed that. Umer, we had an opportunistic chance to divest an asset for which the economic value received on an immediate basis was what was superior to the hold and invest option. And we had an employee retire towards the end of last year that was for that employee's personal reasons and not tied to the investigation anyway. Operator: The next question comes from Chris Schott of JPMorgan. Christopher Schott: Just two questions for me. Maybe, Carrie, can you just talk a little bit about the new CEO search and kind of what's the optimal background and profile you're looking for here? And as part of either the search or with the new CEO coming in, should we assume a review of the broader strategy at Organon as part of this process? And then my follow-up, just on Nexplanon. Thank you for the comments about the flat growth next year. Just can you add a little bit more and what that -- in terms of what that implies for these funding challenges and the impact of the 5-year launch on the U.S. revenue? Carrie Cox: Thanks, Chris. The board formed a search committee essentially immediately. The search committee has been hard at work. So we are in the process of conducting that search. And like any company at this point, we need someone who's got the global experience, the strategic experience, the operational depth and a deep understanding of the businesses in which we operate. So we are confident that -- we not only have a great interim CEO that will continue to find good candidates as we go forward. I think the strategic discussion obviously waits for a permanent CEO. But at this point, we've been reaffirming that we don't see any strategic changes. So I would say we are what we are right now, and we intend to continue that way and very much focused on driving towards our goals. Matthew Walsh: I'll take the second part of the question on Nexplanon. So in terms of our current view of Nexplanon being about flat next year, the components of that, we expect the product to continue to grow internationally. From a policy perspective, assuming things don't get any worse, what we would probably see is an annualization of the issues that we experienced in the second half. And then the 5-year which we are assessing the relative weighting of the impacts of volume growth as the product would be appealing to a larger segment of the addressable population with a 5-year indication versus 3. The volume decline that would come from lower reinsertions, right, as women who would be coming up to the 3-year limit can leave the rod in their arms now for longer. And then what we're able to do on the pricing front. So we'll have all of this sorted out more precisely when we guide in February. But these are the things, Chris, that would be pushing and pulling on the overall belief that revenue will be about flat next year. Operator: The next question comes from Terence Flynn with Morgan Stanley. Terence Flynn: I just had one follow-up on the CEO search. I was wondering if you can speculate on the duration of the search when you hope to have someone in place on a permanent basis? And then on denosumab on that product, obviously, one of your newer Biosimilars that you're launching. Amgen has expressed a lot of optimism about maintaining more share on the Prolia side versus XGEVA. Can you just talk through your expectations for fourth quarter, but then also into 2026? Carrie Cox: So on timing of the CEO search, you know it's always impossible to predict how long these things take. The Board did begin right away. So I'm confident we're doing what's necessary to go as fast as we can. But we also feel very good about putting Joe in as our interim CEO, and I've stepped in to assist him along with Matt, of course. So we're confident we can continue to run the company well in the interim, and we'll be moving through the search as fast as appropriately we can go. Matthew Walsh: And on the denosumab piece, we're obviously very excited about that product. It's launched now. We don't guide to specific products, as you know. But what we are excited about is we continuously are adding products to the bag in our U.S Biosimilars business and that's giving us increasing commercial presence and access advantages that we look forward to 2026 for Tofidence and for all of our U.S. Biosimilars. Operator: The next question comes from Navann Ty with BNP Paribas. Navann Ty Dietschi: I have some questions on capital allocation. If you could discuss the future BD in Women's Health biopharma, only I understand and the timing of business development versus deleveraging progress? And second, if you could also discuss your pipeline versus the cost discipline strategy, including lower R&D? Matthew Walsh: Yes. Thank you, Navann. So our business development activities in Women's Health continue. To the question that you're asking, we -- just because of where the balance sheet is, we've had to focus on later-stage assets or currently marketed assets. You can see that clearly in the kinds of deals that we have announced that we've announced recently. And the challenge in Women's Health is there aren't a lot of those assets that are available late stage are currently marketed. A lot of the truly exciting things in Women's Health are preclinical or generally speaking, much earlier in the development cycle. So we are somewhat constrained in our ability to go after those, and that's one of the reasons why we've been prioritizing leverage reduction, debt repayment in our capital allocation strategies so that we can free up the ability, balance sheet and P&L to bring on the clinical programs, especially in Women's Health that are preclinical or early stage. Once again, because of the financial challenges facing the company, we've applied that same rigor, not just to the BD we're looking at, but also to the pipeline that we are managing in-house. And we've had to trim some programs. Those weren't restricted to Women's Health. We've got life cycle management activities across a number of products in the portfolio, but it's incumbent upon a supply that same kind of financial rigor and discipline to things inside the company as well as any capital deployments we might do externally. Operator: The next question comes from Mike Nedelcovych with TD Cowen. Michael Nedelcovych: I have one actually something of a follow-up on the BD response you just gave, I think with today's updates, it's fair to say that business development track record is somewhat mixed. So I'm wondering what you could do from here to improve it, especially given how important BD is to potential growth for Organon. And could that options that include expanding to therapeutic categories well beyond Women's Health? Matthew Walsh: So thank you for the question. I think we've shown success in the BD program, especially with later-stage assets where we've got synergies with our existing commercial capabilities. So the broad strategy just doing more of what we already do well. I think Emgality is a terrific example of that. With the addition of Dermavant, we actually did already add a completely new vertical in the United States with dermatology. Right now, the Dermavant team that we added, which is now Organon's dermatology sales force is selling just one product. So we would have synergies going forward as we look to add additional derm products to that team. And we're already in, when you look at the Established Brands business, we're already in a pretty broad range of therapeutic categories outside the United States. So we believe that we've got lots of opportunities with the therapeutic areas we're already in with what we've already added with Dermavant so that we wouldn't necessarily need to add another therapeutic category in order to be successful with capital deployments, although we certainly wouldn't rule it out if it capitalizes once again on some functional expertise that we already have, whether it's the global commercial network or perhaps there's something that aligns particularly well with our manufacturing capabilities, for example. Operator: This concludes the question-and-answer session and will conclude today's conference call and webcast. Thank you for joining. You may now disconnect.
Margarita Chun: Good morning, ladies and gentlemen. This is Margarita Chun YPF IR Manager. Thank you for joining us today in our Third Quarter 2025 Earnings Call. Today's presentation will be conducted by our Chairman and CEO, Mr. Horacio Marin; our Finance VP, Mr. Pedro Kearney, and our Strategy, New Businesses and Controlling VP, Mr. Maximiliano Westen. During the presentation, we will go through the main aspects and events that shape the quarter results. And then we will open the floor for a Q&A session together with our management team. Before we begin, please consider our cautionary statement on Slide 2. Our remarks today and answers to your questions may include forward-looking statements, which are subject to risks and uncertainties that could cause actual results to be materially different from the expectations contemplated by these remarks. Our financial figures are stated in accordance with IFRS, but during the presentation, we might discuss some non-IFRS measures such as adjusted EBITDA. I will now turn the call over to Horacio. Please go ahead. Horacio Marin: Thank you, Margarita, and good morning, everyone. Let me start by highlighting that this was another quarter in which we continued to deliver solid operational performance. Despite the contraction in international prices, we maintained strong profitability levels compared to last year, gaining further operating efficiency and consolidating the tremendous progress that has been achieved in our Shale operations. Revenues amounted to $4.6 billion, 12% below the previous year, in line with the 13% year-on-year decline in the Brent price in addition to other offsetting effects. Adjusted EBITDA reached approximately $1.4 billion, representing a sequential increase of more than 20%, while remaining flat versus the previous year. The sequential improvement reflects higher shale production, coupled with the successful strategy of reducing exposure to conventional mature fields. The year-on-year comparison shows YPF's ability to maintain its profitability despite the contraction in international prices, driven by an improved production mix with a higher proportion of shale and continuous improvement in operational performance. That exit strategy led us to an impressive lifting cost reduction of 28% quarter-over-quarter and 45% year-over-year. During the third quarter, our shale oil production increased by 35% internally, reaching 170,000 barrels per day. More recently, in October, preliminary figures indicate shale oil production expanded by another 12% over the average of the third quarter, totaling around 190,000 barrels per day. This production level is fully aligned with our annual target of shale oil production of roughly 165,000 barrels per day. Moreover, it will enable us to slightly exceed the December 2025 production target of 190,000 barrels per day. Furthermore, the higher shale oil output that generate a remarkable shift in our production mix has allowed us to improve our EBITDA by around $1.3 billion on an annual basis versus 2 years ago. CapEx activity continue to be focused on developing our unconventional resources, representing 70% of our total quarterly investment. At the same time, we maintain our focus on achieving further operational efficiency in our shale operation. In that sense, let me highlight that during the quarter, YPF completed the drilling of the longest well ever in Vaca Muerta, exceeding 8,200 meters with a horizontal length of nearly 5,000 meters at our Loma Campana block. Moreover, during September, in La Malga Chica, we completed the drilling of a 4,000-meter horizontal well in just 15 days, setting the record as the fastest well ever drilled in Vaca Muerta. Lastly, in early October, we drilled one of the fastest well in the Rio Grande block located in the south half of Vaca Muerta. This well has a lateral length of more than 3,000 meters and was completed in just 11 days. Moving on to our downstream segment. During the third quarter, we achieved strong operational performance, reaching the highest processing level since 2009 at 326,000 barrels per day. This processing level was 9% higher than last year, representing a solid utilization rate of 97%. In that sense, we are pleased to announce that La Plata Refinery was named Refinery of the Year in Latin America by the World Refinery Association. Additionally, La Plata refinery ranked in the first quartile across several KPIs in Solomon global refinery benchmarking based on 2024 results. This recognition represents the result of the successful implementation of the third pillar of our 4x4 plan, our efficiency program based on operational excellence and technological innovation. On the financial side, free cash flow was negative as expected for a total amount of $759 million. This negative free cash flow position is mostly explained by the extraordinary effects related to the recent acquisition of the Shell asset from the Total Austral for $523 million and the impact of the mature field exit strategy. As a result, net debt increased to $9.6 billion, pushing our net leverage ratio up to 2.1x. However, excluding the acquisition of total assets and one-off costs related to mature fields, the negative free cash flow pro forma would have been $172 million with a net leverage ratio pro forma at 1.9x. Additionally, a few days ago, we have successfully retapped our 2031 international bond issuing $500 at 8.25% yield, the lowest interest rate for the international bond of the last years, replacing and improving our average life and financing costs. On a final note, let me briefly comment on the recent announcement regarding Argentina LNG project. In early October, within the Stage 3 of the project, we signed a technical FID with Eni for a full integrated LNG project of 12 million tons per year expandable to 18. Moreover, recently, last week, we signed a preliminary framework agreement with a new partner, the Arab company, ADNOC. In addition, we continue working with the Phase 1 and 2. All in all, the project continued to demonstrate the interest of international players in long-term investment in Vaca Muerta, which is essentially for creating a solid structure for the development and financing of the project. In summary, during the third quarter, we continue progressing to achieve the ambitious target set for the year, delivering solid financial and operational results while we continue to strengthen and prepare YPF for new and even more challenging goal in the future. I now turn to Max to go through some details of our operating and financial results for the quarter. Maximiliano Westen: Thank you, Horacio, and good morning to you all. Let me begin by expanding on Horacio's comment about the evolution of our oil and gas production. During the quarter, total hydrocarbon production averaged 523,000 barrels of oil equivalent per day, declining 4% on a sequential basis and 6% on a year-over-year basis as a result of the divestment program of mature conventional fields, partially offset by the expansion of our shale production that accounted for approximately 70% of the total output, increasing its portion once again and as expected, vis-a-vis the previous quarter. Oil production reached 240,000 barrels per day 3% below the previous quarter and 6% down against last year. Nevertheless, it is worth highlighting that shale oil production recorded an impressive growth of 35% against last year and 17% versus the previous quarter, almost neutralizing the conventional production decline driven by the successful exit strategy of our mature conventional fields that accounted to only 14,000 barrels per day in the quarter. Beyond crude, natural gas production totaled 38.4 million cubic meters per day, down 3% on a sequential basis. This decline reflects an 18% contraction in conventional production from mature fields, partially mitigated by an expansion of 5% in shale gas production. Regarding prices within the Upstream segment, crude oil realization price averaged $60 per barrel in the third quarter, essentially flat on a sequential basis and contracting 12% year-over-year, aligned with the variations of Brent. Natural gas prices increased by 6% quarter-over-quarter to an average of $4.3 per MBtu, supported by the seasonal factor included in the planned gas program between the months of May and September. Now let me dive into the evolution of our shale oil output. YPF reinforces its leading position in the development of Vaca Muerta oil, accounting for roughly 1/3 of the country's share. In the third quarter, we continued to deliver a solid performance driven not only from our key core hub assets, but also from contributions from the North and South hub blocks. In the third quarter of 2025, shale oil production delivered an impressive growth rate of 55% when compared to 2023 levels. Based on preliminary figures, October production reached an all-time high of 190,000 barrels per day, representing a strong increase of 70% vis-a-vis November 2023 and ahead of schedule. As Horacio previously mentioned, based on the current production levels, we expect to comply with the average production target announced for the full year 2025 of around 165,000 barrels of oil per day, and we expect to slightly exceed the exit rate of 190,000 barrels of oil per day as of December 2025. In the third quarter, we continued with the strategy of developing Vaca Muerta beyond our core hub blocks. In this context, let me point out the success story of La Angostura Sur, our flagship South hub block 100% owned by YPF under an unconventional concession valid through 2059, underscoring the long-term potential of the south of Vaca Muerta for YPF. Over the past 12 months, shale oil output from this block has jumped from only 2,000 barrels of oil per day in October of last year to more than 35,000 barrels per day in October this year, representing in financial terms, a field with a pro forma annual EBITDA of more than $500 million. The results achieved so far are impressive. Moreover, the block expects to reach a production plateau of over 80,000 barrels of oil per day in upcoming years with a very competitive breakeven price below the $40, demonstrating resilience amid evolving global dynamics. Finally, wells drilled in the block during the initial stage of development have demonstrated promising productivity levels that underscore their long-term potential, recording an estimated ultimate recovery of around 1.3 million BOE per well, including oil and natural gas. Furthermore, the high potential is also driven by a total inventory of roughly 350 wells, of which less than 15% has been developed. Regarding our upstream cost structure, let me point out that the combined strategy of divesting mature conventional fields and growing our shale business has enabled us to generate significant savings in our average lifting cost of more than 40% over the last 2 years, moving from $16 per BOE in the third quarter of 2023 to $9 per BOE in the third quarter this year. This remarkable cost improvement was achieved due to the significant shift in our production mix where unconventional production increased from about 45% of the total output in the third quarter of 2023 to nearly 70% in the third quarter of 2025, while conventional production portion fell from around 55% to 30% in the same period. As a result, since shale lifting costs remained at a very competitive range of $4 to $5 per BOE, YPF was able to improve its cost structure and therefore, its annualized savings would amount to approximately $1.3 billion. YPF will continue and deepen this strategy, supported by the completion of the sale and reversal of mature conventional blocks by the end of 2025, the AndNDEes-1 project and the sale of the rest of the performing conventional fields, the ANDE 2 project, which initial results are expected by the end of this year. Consequently, YPF will become 100% pure shale player with an efficient lifting cost structure of around $5 per BOE in the near future. Now let me walk you through the performance of our shale activities. In the third quarter, we drilled 54 horizontal oil wells on a gross basis, primarily in operated blocks with a net working interest of 58%, bringing the year-to-date to 159 horizontal oil wells on a gross basis. This keeps us on track to achieve our full year target of 205 wells in 2025. In terms of completion and tie-in of oil wells during the quarter, we recorded modest level of activity compared to last year, but year-to-date, we continued growing. In the third quarter, we completed 63 horizontal oil wells and tied in 64 on a gross basis. However, in the first 9-month period of this year, we completed 186 wells and tied in 187 wells, growing around 20% compared to the same period of last year. In terms of efficiencies within our shale operations, during the third quarter, we continued setting new records on drilling and fracking performance. We averaged 337 meters per day in drilling in our core hub, while we recorded 279 stages per set per month on fracking in unconventional blocks, increasing by 7% and 16%, respectively, when compared to the same quarter of 2024. As we have been flagging in previous calls, this constant improvement in operation metrics is the result of the implementation of our real-time intelligence center and the joint efforts of our technical team and key contractors that work relentlessly to introduce further efficiencies to our operations. Finally, regarding the CapEx composition within the upstream business, it is worth noting that how YPF managed to significantly transform the portfolio by reallocating investments from conventional to shale activity in the last 2 years. In this regard, in 2023, investments in conventional business represented 35% of the total upstream portfolio, while in the last 12 months of September 2025, CapEx in conventional assets only represented 5%. Furthermore, within the shale portfolio, investments in facilities represented a significant portion of total CapEx over the last 2 years, which is expected to remain steady in 2026 and begin to gradually decline starting in 2027. Switching to our Midstream and Downstream segment, the third quarter processing levels averaged 326,000 barrels per day, a record high since 2009 with our refinery utilization at 97%, representing an increase of 9% and 8% versus the third quarter 2024 and the second quarter 2025, respectively. This remarkable success is mainly driven by the record processing levels of 208,000 barrels per day achieved in September at La Plata refinery, combined with record production of middle distillates reducing to almost 0 full imports. Domestic sales of diesel and gasoline remained strong in the quarter with dispatch volumes rising 3% quarter-on-quarter and 6% year-over-year, reflecting higher demand across all commercial segments, retail, agribusiness and industrial. Moreover, we managed to modestly expand our leading market share to 57%, which increases up to 60% considering gasoline and diesel produced by YPF and dispatched at third-party gas stations. Furthermore, in the third quarter, YPF achieved an improvement in the premium mix in both gasoline and diesel sales. In terms of prices, during the third quarter, local fuel prices remained broadly aligned with international parities, albeit dropping against the previous quarter based on a very volatile environment. More recently, October preliminary figures show a narrowing of the gap between local fuel prices and import parities while recovering on a healthy midstream and downstream adjusted EBITDA margins of nearly $70 per barrel. Now let me briefly comment on the progress of the quarter regarding the efficiency program for the upstream and downstream businesses. Thanks to the supervision of our upstream real-time intelligence center, we managed to drill 100% autonomously more than 30 horizontal wells in real time using AI complemented with traditional techniques. While in fracking, we became the first company worldwide to perform 100% autonomous fracture remotely from our real-time intelligence center using predictive algorithms. Additionally, we have successfully executed 24 hours of continuous pumping in our fracking operation during 63 hours, fully supervised by our upstream real-time intelligence center. Regarding the downstream segment, as Horacio already noted at the beginning of the call, our La Plata refinery was awarded as the refinery of the Year in Latin America. Also, this refinery achieved the first quarter in several KPIs of Solomon's benchmarking, such as net cash margin, return of investment, operational availability and personnel efficiencies categories. Finally, the record high processing levels in our refineries have started generating a surplus of gasoline and mid-distillates, allowing YPF to export refined products to neighboring countries and replace imports of YPF and other local refineries. For instance, in the third quarter 2025, YPF exported around 30,000 cubic meters of jet and gasoline to Uruguay. And during the first 9 months of the year, we replaced more than 230,000 cubic meters of gasoline and middle distillates imports. Now let me share further details regarding the Argentina LNG project. As briefly anticipated by Horacio, regarding the Phase 3 of the project in early October, we signed a technical FID with Eni for a fully integrated LNG project of 12 MTPA expandable to 18th MTPA. And more recently, during the last week's APEX conference in Abu Dhabi, we signed a preliminary framework agreement with a new partner, the Arab company, ADNOC, that formally announced their intention to join the Argentina LNG project. Moreover, during the quarter, we continued working on the Phases 1 and 2. The project considers the development, design, construction and operation of a fully integrated natural gas LNG plus natural gas liquids NGLs project based on wet gas upstream fields located in the Vaca Muerta reservoir. The infrastructure involved in the project includes a liquefaction capacity of 12 MTPA expandable to 18 MTPA through 2 or 3 floating LNG vessels of 6 MTPA of capacity each, a dedicated 520 kilometers gas pipeline, a dedicated 650 kilometers Y-grade pipeline for NGLs and onshore facilities, including fractionation, storage and port facilities. The CapEx for the entire project is estimated at around $20 billion with a potential expansion to $25 billion in both cases, including the financial costs. Leverage of the project is expected to be around 70% on the total project cost in addition to the upstream investments required to accelerate shale natural gas production. Consistent with present LNG transactions, the project is intended to be financed through nonrecourse financing with multiple sources of funding, including ECAs, development banks and commercial banks as potential anchors of the financial structure. The FID is expected by the first half of next year, while the commercial operations for the first floating LNG is estimated by 2030 and following ones from 2031 and 2032. In summary, Vaca Muerta has the scale, the quality and cost competitiveness to position Argentina as leading global LNG exporter and Argentina's LNG project will unlock Vaca Muerta's full potential, enabling exporting its unconventional shale gas production to the world. Now I will turn the call over to Pedro. Pedro Kearney: Thank you, Max, and good morning, everyone. On the financial front, the third quarter ended with a negative free cash flow position as expected that amounted to $759 million, mainly explained by the recent acquisition of the shale assets La Escalonada and Rincon La Ceniza blocks to Total astral, closed at a purchase price of $523 million by the end of September. Moreover, despite the third quarter adjusted EBITDA surpassed CapEx deployment and regular interest payment, we recorded negative working capital associated with the discontinued operations in our mature fields, income tax payments from our subsidiaries and longer collection days from natural gas clients and blank gas program that started to normalize during October. It is worth noting that excluding the one-off items related to M&A transactions and the negative impact of the mature fields exit strategy, our negative free cash flow would have amounted to $172 million in an environment of lower international prices. Finally, on the liquidity front, our cash and short-term investments totaled at $1 billion by the end of September, remaining essentially flat vis-a-vis the previous quarter. In terms of financing, during the third quarter, we continued progressing on our financial program by securing local loans obtained from relationship banks and by tapping the local capital market at very attractive financing costs. In that sense, during the third quarter, we issued 2 dollar net bonds for a total amount of $300 million at an interest rate of 7.5% and a tenure of 2.5 years. In addition, we issued $225 million from dollar capital bonds with a 5-year tenure and an interest rate of 8.5% tendered in the international market to local investors. That, combined with a $300 million international bridge loan allow us to find the recent acquisition of shale assets. More recently, during October, we issued $100 million net bond with a 15-month tenure at an interest rate of 6%. Considering this last bond issuance, we issued new local bonds for a total amount of $625 million with an average tenure of 3 years and an interest rate of 7.65%. Moreover, aiming to reduce the cost of carry and taking a proactive approach towards debt investors, we scheduled for this month, the prepayment of $120 million of our secured notes due 2026, paying in advance the last amortization, which matures next year and thereby redeeming in full the bond ahead of schedule. Finally, let me share 2 very important news regarding YPF financial strategy. First, during October, we reopened the syndicate corporate cross-border loan market. We signed an export back loan for $700 million with 10 international banks with a 3-year tenure and a 6-month availability period as a prefunding strategy for the financing of our 2026 maturities. This transaction was possible after several months of work, showcasing YPF ability to access cross-border funding. Moreover, the loan was oversubscribed and attracted participation from new banks from Central America and Asia, demonstrating the market support and confidence in YPF. Finally, as Horacio previously mentioned, 2 weeks ago, we successfully returned to the international capital market. After 2 days of virtual meetings with more than 40 international investors, we led the recap of our 2031 international bonds of $500 million at a yield of 8.75%. Demand for this reopening exceeded all expectations with international and local investors oversubscribing orders 3x, reaching a peak order book demand of $1.5 billion. The proceeds will be used to fully repay the bridge loan for the acquisition of Total astral shale assets and to finance YPF investment plan. This issuance represented YPF tightest new issue yield on an international bond issuance in the last 8 years and improved the maturity profile of itself, extending its average life. So with this, we conclude our presentation and open the floor for questions. Operator: [Operator Instructions] Your first question comes from Alejandro Demichelis with Jefferies. Alejandro Anibal Demichelis: Yes. Congratulations on the quarter. Production has been very strong, particularly on the shale oil side of things. Could you give us some indication of how you're seeing production growing into 2026, 2027? That's the first question. And then Horacio, you mentioned all of the improvements that we are doing on the refining side and so on. We have seen you recently taken full control of the revenue asset. So could you please give us some indication of how you see that asset developing on the rest of the refining portfolio? Horacio Marin: Okay. Thank you very much for the question. Regarding the production, we see -- you can expect the same that we talk in line what we see in New York this year but at average for next year in the order of 215 and '27 in order of 290. We can give you a better number in the next call. But we think that we are going -- we are in line with all the program, okay? Regarding the refining side, [indiscernible] what was important was for the [indiscernible]. The [indiscernible] was very, very important for YPF because they give us a very good logistical advantage comparing with our, I would say, our competitors. And that's why it was that we decided to take that step because it was a difficult situation with the partner in that matter. For the gas stations, there is no difference because we were supplying those gas stations. We are going to take the best one with the YPF brand and we maintain the other with [indiscernible] as is today. And on the other side, in the refinery, which is in Campo Durán is close. But our idea is to make value for all the shareholders by doing something of this sort that we say in Santa Fe Bio, okay? So we are working on in that direction. Operator: Your next question comes from Leonardo Marcondes with Bank of America. Leonardo Marcondes: I have 3 from my side. My first question is regarding capital allocation and M&A. We have seen YPF quite active on the M&A front, right? In this regard, what should we expect from the company going forward? I mean, does the company continue pursuing new M&A opportunities? Or is it time to focus on the development of the assets within the portfolio? My second question is regarding the divestments and capital allocation as well. So could you share your plans for Metrogas and also YPF Agro? And when could we expect to hear more news on these matters? And lastly, my third question is regarding the LNG projects. I mean how do you expect to fund this project? And if we should expect any sort of project finance evolving there? Horacio Marin: Okay. Thank you very much for the question. For the first Okay. Thank you very much for the question. For the first one, Pillar 2 of our YPF 4x4, is active portfolio management, that means buy and sell. It depends where you can make more value for shareholders. We were active out with the bat field, and we see -- there was a big opportunity this year for the, I would say, core assets in Vaca Muerta. And that's why we decided to buy the total asset of Vaca Muerta. What you are going to expect, I don't see that there will be a lot of changes in our strategy, but we don't see that we will be active next year for major acquisition in Vaca Muerta, not in the others, okay? So that is what is our thought. Regarding Metrogas, Metrogas, we are in the process of the extension, the 20-year extension of the company, the contract. More than contract is the concession. They tell me concession here because remember I am an old man, I don't remember all the words as there are people here that they say you are wrong iss a concession, okay? So it's a concession. And our idea there is that after that, we start with the bank, and we are going to sell as soon as possible, okay? And for the law, we have to sell because of the -- I don't know how the -- I ask Herman that is the lawyer [Foreign Language] the vertical integration that they have the company, we have to sell before the plant gas is out. And so we are going to sell that. And YPF Agro is not necessary capital allocation. What is there is that we are -- YPF wonderful commercial channel that was built by YPF say, 20 years ago or so and it's extremely extremely successful. That's why there is the other company that refinery also they call with the name. So they copy the YPF. Our idea is because we have the knowledge of selling on the other things is that to have a strategic partner that can make more value for us and for all the shareholders and to have like a mixed company where we put the CFO inside, and we will have 50% and 50%, okay? That is the idea, and they will be very close now. That is on the stake right now, okay? And that is the second question that you asked. Regarding the LIC, you're right, it's a project finance that we are going to do with our partners. You're right. Operator: Your next question comes from [indiscernible] with Morgan Stanley. Unknown Analyst: First one on my end is, could you give us more color on what drove the working capital losses this quarter? And what should we expect in terms of working capital gains or losses in the coming quarters and how this should contribute to free cash flow generation into 4Q? Second one is if you could give us more color on what drove the lifting costs. Was it just higher shale output? Or are there any other factors which explain this decline and how this -- how should we should expect this into 4Q as well? And if I may, a third one, if we should expect an acceleration of 4Q '25 CapEx? And how should your CapEx stand versus the guidance? Horacio Marin: The first question after I will pass to Pedro, so they can explain in more detail than me. But I can tell you the more general, but I will pass to Pedro. For the second one in the lifting cost, remember that we are going out of mature fields and reducing the production from there, but you are increasing a lot of the production as you see in the presentation in the Vaca Muerta fields. So there is several reasons why we reduce. First, we have a clear in Pillar 3 that we have to make efficiency every day in our life. The second thing is when you increase a lot of the production, you reduce the fixed cost. And so you have to expect that we are going to maintain or reduce. But I think to maintain is a good number that we have, I think we are in a very low lifting costs, okay, is very low. Which more you asked any other factors explain this decline? I expected, I explained that. I think I answered that. In the fourth quarter '25, the CapEx, no, we think that we are going to end up in the year with a little less CapEx than we said at the beginning of the year. And the production, if you see the -- while you see, you don't see that, but I see the report, the daily reports, we are -- they -- now we are in more than 190. Today -- yesterday it was more than 284. We have someday 199.94. So I start discussing with the guy why it's not 200, but it doesn't matter. So we are close and we are in better shape than we thought at the beginning of the year. So we are focusing in looking at the results and looking at the best places to drill. That's why we are expecting those results. And with the CapEx, I say. I pass to Pedro so they can explain about the working capital. Pedro Kearney: Thank you very much for your question. So as you noted, during the third quarter, we recorded a negative working capital by about $360 million, and that was driven by multiple reasons. The first, the seasonality of the natural gas sales that was -- that were accrued in the third quarter and are expected to be collected in the fourth quarter. That's approximately $100 million. Second, we recorded in the third quarter longer collection days from the natural gas clients and from the plan gas program that started to normalize during October and November. That's approximately $50 million. Third, in the third quarter, we recorded a positive stock variation in the downstream business for about $60 million. That's the result of higher oil purchases to third parties to restock inventories given the inventory drawdown that we recorded in the second quarter. Then we recorded a particular lag in the OpEx and the CapEx from the mature fields that were out from YPF financial statements since the end of June, and those payments were phased during the third quarter. And finally, this negative free cash flow includes a decrease in the mark-to-market position of our sovereign bonds, which increased and changed fortunately during October and November. Operator: Your next question comes from Daniel Guardiola with BTG. Daniel Guardiola: I have a couple of questions here. The first one is on costs. And I would like to know if you can share with us how do you envision the trajectory of your lifting and D&C costs for 2026 and eventually, if possible and onwards, it will be great, especially considering the asset sale you did of conventional assets and the potential renegotiation of contracts with some of the service companies. My second question is on leverage, given the fact we saw an increase in leverage during this Q to 2.1x. And I would like to know if you can share with us what is the maximum leverage at which the company feels comfortable operating at. And in that sense, given that leverage has been going up in the last couple of quarters, I would like to know if you guys have ever considered to hedge your exposure to oil prices to offset any potential volatility in oil prices. So those would be my 2 questions. Horacio Marin: Okay. With the listing and the drilling and completion cost, I can give you more details in the next call. We are working very hard to reduce the unit cost with all the service company, and we are in negotiation during the week, okay? So I cannot tell you exactly, but I think we are going to reduce the unit cost very important because Argentina is another country. So that's why we are going to work on that. In the listing, I think I answered that, okay? You have to expect that we are going to be in that region, okay, that we say. Regarding, that were -- you say our debt in -- I think you have to take into account that last year, we bought 2 assets, okay? That's why the ratio goes up. We don't go -- we are not going to increase. It's not our goal that we think that we are in the maximum that we want to be. And during '23, you are going to see a reduction. But taking into account what is that we bought 2 good assets in Argentina, the best in gas and the -- I don't say the best in oil, but one of the core that is very important. That's why we thought that was important to buy those assets and make more value in the future in the near future for all the shareholders. Operator: Your next question comes from Guilherme Martins with Goldman Sachs. Guilherme Costa Martins: [indiscernible], is a strong ramp-up of shale operations being seen in the second half of the year. I have 2 quick questions here. My first one is on downstream. I understand you guys were not able to price prices in line with international parity in 2Q, right? I would just like to get a little bit more color on what happened in the competitive environment. You mentioned a volatile dynamics, but any additional color would be grateful. And my second question, if you guys could please provide an update on the ongoing divestment of Metro fields. When we should see next divestments being concluded? When we should see production continue to decline following the exit of those assets? And whether we should see additional cash outflow from the exit of those legacy assets? Thank you. Horacio Marin: Sorry, okay. Talking about prices, we have a policy that I cannot open -- be totally open because it's not we are going to say to our competitor. But we have moving average because there was -- in the last -- this quarter, there was a lot of volatility in prices. And remember that we have the exchange rate, the oil price, the biofuels and the taxes. And so in our country, the consumers need to, we are not accustomed to have changes on prices every day, okay, and big changes. So we have a moving average. And I don't know if you remember that we built a new real-time [indiscernible] center in the commercial side that is unique. I don't know if you are making, I don't know if you are making [indiscernible], okay? We have there everything that you can imagine with use AI and a lot of things. And from there, we are working with the new policy of prices that is micro pricing. And we are working and always trying to maintain our policy in -- but the last quarter was the big volatility in -- also in Argentina. You know that there was a lot of volatility. And that's why it was very difficult to go up because sometimes goes up, sometimes goes down. But now we are in a good shape. And the second one was about the -- I think and all that stuff. Today in the afternoon, we are going to sign [indiscernible] that was the last one. And we have only one area that is in Rio Negro that we are going to sign very quickly. But after that, we are out [indiscernible], okay? It was the most important for the value of our shareholders. But we understood, we are in the process of negotiating now to go out from conventional. Those conventional are areas that make value for all, but it's very important because we have the determination to go to be unconventional -- integrated unconventional company. So that is our goal, and we are going to negotiate in the next month to be out more than we can lots of assets and to be next year or if we can to be totally unconventional company. Operator: Your next question comes from Tasso Vasconcellos with UBS. Tasso Vasconcellos: I have 2 here on my side. First one, Horacio, can you remind us what legislations, I mean, either new legislations or adjustments on existing ones that YPF still relies on to move forward with and projects. As far as I remember here, there wasn't many new regulations that the oil and gas industry as a whole depend on, but there are some specific timing on some projects to be included under the region. So not sure if there is -- actually not check there is any kind of discussion on the 8% export taxes for the industry. So I think it would be great to have a broader recap on this political or regulation landscape. And the second question, actually a follow-up on the domestic fuel prices. You just mentioned about what did you notice in terms of upside or downside potation since the established a more dynamic pricing model, the real-time center and so on? And what can you tell us about the recent news saying that some politicians in Argentina wanted to create a law which you need to give a 72-hour notice advanced before adjusting fuel prices? Those are my 2 questions here. Horacio Marin: Okay. Thank you for the question. I don't know, thank you for the question. But beyond, the -- really is -- if you are refrain to the export duty for conventional, there is something new. I know exactly what you say on the new because remember, we are YPF, we are a private company, and we are not in the, I will say, regulation side. So really, I don't know. And conventional, remember that is not our -- now is not our core, okay? But I read in the news they sent to you that they are negotiation on that, but I have no idea what will happen. Regarding resi, for sure, the resi will be apply for LNG and if supply for infrastructure for LNG. And for LNG, we expect that to be in all the chain. The second one that you say that is -- yes, I read in newspaper the same to you, but that is regulation. I have to answer the same. I'm not working on regulation at all. Operator: There are no further questions at this time. I'll now turn the call back to YPF management team for closing remarks. Horacio Marin: Okay. Thank you very much for your attention, for your questions, and you are always very polite with us. So I would like to say thank you for that. And you have to expect that this is a company that will change a lot the way of management, the way of working every day. I'm very proud for all the work that all the employees is doing now and the energy that we are putting. And so you have to spread '26 a very clean year of the results. The problem of this year, and I imagine for you, it is very difficult to see because there is dirty with mature fees with taxes, with deferred taxes that only account I can understand. And when they explain, they are confused. So it's difficult to understand what you are saying. And so you have to 26, a very clean one, and you will see there how we are making the value for our shareholders that you can see in this quarter. I relate to for you because there are some people that are confused we say that the production is increasing operation where you're making value because we are reducing the conventionals. And if you annualize the value so far only to change the mixture is $1.3 billion. And this quarter, you can see that. So we are really very proud of we are doing all the people that we are an executive committee and all the people that are working there. Thank you very much for all of you. Operator: This concludes today's conference. Thank you for participating. You may now disconnect.
Operator: Good morning, ladies and gentlemen, and welcome to the LEM Holding S.A. half year results 2025-'26. [Operator Instructions] Let me now turn the floor over to your host, Frank Rehfeld, CEO. Frank Rehfeld: Thank you very much. Good morning, ladies and gentlemen, and a warm welcome to the presentation of our half year results '25-'26. My name is Frank Rehfeld. I'm the CEO of LEM, and I'm here together with Antoine Chulia, our CFO. For those who are not yet familiar with LEM, LEM is providing sensors for measuring electrical parameters, namely current, voltage and energy, and with those help our customers and society to transition to a sustainable future. Here, you see the agenda for today's presentation. After my opening remarks, I will give you more detail on the business performance of LEM. Antoine Chulia, our CFO, will then introduce the financial results. And I'm going to outline what we expect in the future as well as talk about the adjustments we did with respect to our midterm ambitions. As you might remember, we had a tough start into '25-'26. Flat sales at constant currencies in comparison to the previous year. However, both the gross margin and consequently also the EBIT margin were under pressure in Q1. Despite not seeing a significant improvement on the top line in constant currencies in Q2, we managed to improve in Q2, both before mentioned KPIs and Antoine will go here in greater detail. For the first 6 months, the 5.3% decline in our top line can be fully attributed to FX losses, whereas the segments growing and those declining were balancing out each other. We were in particular happy with the development in Automation, Automotive and Track and saw good momentum in China. We are also happy to share that we are fully on track with our Fit for Growth program that helps us to trim our indirect costs. You might also remember that we reported a CHF 12 million negative cash flow a year ago and managed to improve the cash flow to CHF 5.6 million in '25-'26 first half. We will come to the guidance for this year that you see here in the numbers as well as the updated midterm financial ambitions at the end of the presentation again. Now with that, let's move on to the business performance in more detail. Following our business structure, you see here the development of the 5 businesses in comparison to the same period in '24-'25. I will focus on the numbers in constant currencies, as you know, that LEM is doing about 40% of its business in renminbi. That has been strongly depreciating after the announcement of the tariffs by the U.S.A. We are happy to share that the Automation business that started to slightly grow again after 4 rather flat quarters. Our Automotive business with strong focus to China has been growing by 9% H1 versus H1 last year, and saw an even more significant volume growth. And the Track business was growing even stronger. However, we also saw weak segments like Renewable Energy and Energy Distribution that I will explain in greater detail in the following slides. On this page, you see the distribution of our businesses relative to each other. What becomes clear is that there has been movement in all businesses. Looking at our 2 biggest businesses first, Automation grew, in particular, in the second quarter nicely by more than 4% since inventories normalized and Automotive, despite seeing a shrink in Q2 in CHF, continued to grow in renminbi. The businesses in the smaller segments have been changing position. The very strong development of our Traction business has been making it our third biggest business, whereas Renewable Energy has been shrinking by 2 percentage points, similar to the Energy Distribution & High-Precision business that also lost 2 percentage points relative. Now let's go through the businesses one-by-one, starting with our biggest business, the Automation business that almost represents 30% of our global business. You see a small growth in Q2 against Q2 last year, linked to normalized inventory levels, as already mentioned. This growth materializes mainly in power levels above 1 kilowatt for LEM and happens across all regions. Nevertheless, this a 3% reduction 6 months on 6 months that is to be attributed to currency -- in constant currencies, this business has been growing by 3%. Our Automotive business saw a nice growth of 9% in constant currencies, 2% in CHF. Growth areas were China and Europe, where in particular, the Americas suffered from the policy changes the U.S. administration has been implementing. We continue improving our market position in China. We are working mainly with Chinese OEMs and Tier 1s that we are expecting to further expand globally. We also saw positive momentum in Europe with increasing new energy vehicle sales and the ramp-up of some of our automotive products in the market. Rest of Asia depends very much on exports that were weak, in particular, towards the Americas, and we don't see a short-term change coming. Renewable Energy representing now 14% of our global business declined in constant currencies by 15%. Despite growing photovoltaic installations, the average content of current sensing by inverter is going to further decline step-by-step and the price pressure is going to remain high. We are expecting this to remain a segment that is as competitive as Automotive. The developments in Europe go into 2 directions. Domestic solar will be completely dominated by Chinese players and therefore, served by us in China, whereas large commercial projects will see European sources, and we expect that we are restarting to grow in this subsegment with our European customers. Notable are the positive developments in Rest of Asia, both in Japan and India with local government investments that we expect to continue. The Energy Distribution & High-Precision business became our smallest segment with 13% of our total turnover, and it also continued to shrink at 15% 6 months on 6 months. The lion's share in this segment is the DC metering for fast chargers that remained challenging both in Europe and the U.S. as the new energy vehicle sales developed below the installation rates on the one hand. On the other hand, some of our customers also lost market share. The Chinese export business for DC fast chargers remained stable. The High-Precision subsegments were rather weak due to lower demand in automotive EV testing, whereas the UPS, the uninterruptible power supplies were nicely picking up with the increasing installations in data centers. Looking at the Track business was the surely biggest [ fund ] in this quarter. This takes up now 17% of our total business and developed with a growth rate of 15% in constant currencies very positively. The development happened across all regions based on the ongoing investments into public infrastructure and the increasing standardization of regulations across Europe. The consequence of the standardization is that this requires to retrofit energy meters across all of Europe. Projecting this business now from a regional perspective, we see important changes in comparison to last year. Our business share in China remained stable at constant currencies, however, shrank due to the depreciation of the renminbi. Therefore, it takes now 37% of our total business, 2 percentage points less than for the first 6 months last year. The segments Automation, Automotive and Track contributed, as previously mentioned. The Rest of Asia business showed a slight growth 6 months over 6 months and an even nicer growth in Q2 with more than 12%. The main contribution was coming here from traction. Just to report here the progress of our plant in Malaysia. We are meanwhile producing the same volume than in Bulgaria despite the fact that the sales share is still substantially lower, and we see an increasing demand of customers who look for either a dual sourcing both from China and Malaysia or even a relocation of their production towards Malaysia. This confirms our strategic decision to set up this new site and that, on the other hand, is still burdening our P&L since it reduces the overall loading of our manufacturing footprint. Clearly, disappointing sales in EMEA shrinking 7% 6 months over 6 months, where the reduction in EDHP and Renewable was balanced out by Automotive, Traction and Automation. The Americas numbers are including the tariffs that we are passing on to our customers, and the business is overall stable, albeit below expectation looking at the development in Automotive. Nevertheless, the successes with catalog distributors give us positive signals for the future. With this, I would like to hand over to Antoine for the financial results. Antoine Chulia: Thanks, Frank. Good morning, everyone. Thank you for joining our Q2 earnings call, and I'm Antoine Chulia, Chief Financial Officer. I'm happy to walk you through LEM's financial performance for the period ending September 30, 2025, broadly showing a welcome recovery trend after some challenging results recently. As Frank explained, at CHF 148 million, our sales declined by 5% in the first half of the year, which translated to a positive growth of 0.5% at constant exchange rate. Q2 saw a slightly higher performance at minus 4% or plus 1.2% at constant exchange rates. Our gross margin dropped by almost 15% to CHF 59 million in the first half, mainly due to Forex, price and mix, but Q2 showed early signs of recovery at CHF 30 million, down roughly 10% from Q2 last year. Thanks to a large reduction in operational expenditures under the Fit for Growth program, EBIT reached CHF 11.4 million in the first half, of which CHF 7.2 million in Q2, an increase of more than 7% from the prior year. This represents about 7.7% of return on sales for the half year and just south of 10% for Q2. Now before restructuring costs, this margin is topping 11%. As we reported in Q1, our gross margin slipped in H1 from prior year's level, just out of 40% of revenue. This is a 400-bps drop. Now we observed a 150-basis point recovery in Q2 following the Q1 drop due to price pressures pretty much across the business spectrum, but driven by China in renewable and industry in particular. We've explained some of these pressures by overcapacity in some of these markets, combined with an aggressive commercial stance since the end of last year but we've started to adjust towards a more selective approach. In addition, supply activity in Q2 is coming with better manufacturing and sourcing variance contribution. Our SG&A spend landed on CHF 31.5 million for the first half, a sharp decline from the prior year by 13% and with further sequential savings in Q2. These savings are heavily concentrated on the general and admin expenses, both in personnel and non-personnel, leveraging reduction in force as well as productivity gains from our [ Pulse ] program with our recent ERP implementation. In addition to the SG&A reduction, savings in R&D were achieved with Fit for Growth through a reduction in overall R&D personnel, but more importantly, an alignment of our footprint towards Asia. This yields a reduction of more than 20%, which is enabled by constant prioritization of R&D efforts as we aim to increase the overall R&D efficiency and time to market. Our financial results improved by CHF 1 million to a CHF 30 million loss for the half year period. The loss is mainly driven by the service cost of our debt, but the improvement from last year stems from a more favorable Forex drag. Income tax-wise, we're back to our historical effective tax rate performance around 18%, on par with last year's, especially in the second half. The first half performance last year was lifted by a favorable onetime affecting the country tax mix, both in expected and effective rates. So our overall P&L performance in H1 showed an overall compression from the prior year, landing on a net profit of 6.8% of sales, representing a 90 basis points drop. This flipped in Q2, though, thanks to a recovery on all lines, except for revenue. Margin rate improved and both operational expenses and financial expenses decreased further, yielding to both operational and net profits well above last year at CHF 7.2 million and CHF 4.8 million, respectively. Working capital inflated due to large catch-up payments since March, including severance and separation costs in the context of the Fit for Growth program. Our net debt position improved in the meantime as we continue to derisk and deleverage this balance sheet and aiming for and lending above 40% equity ratio. Aside from cost control, we focused our efforts this past semester on cash management, generating CHF 5.6 million in free cash flow to the firm from a large burn of CHF 11.6 million in the prior year. On a lower profit and EBITDA than last year and in spite of large restructuring outlays, we managed to stay on top and lift our operating flows and reduce our capital expenditures and tax flows. This cash flow focus will remain one of our core priorities in the current environment. So with this, I'll hand it over to Frank, who will explain on how we see this environment moving forward. Frank Rehfeld: Thanks a lot, Antoine. So let me now share our outlook for the business. Overall, the business environment is not substantially changing. We hear anecdotically about some positive outlook expected for 2026 in some segments. However, we don't see those reflecting in our bookings yet. Therefore, we remain prudent considering the volatile business environment as well as our -- and as the possible exchange rate developments and the fact that historically, the second half of our business was always weaker than the first. Consequentially, we guide towards a sales range of CHF 265 million to CHF 290 million and a high single-digit EBIT margin as a result from the Fit for Growth efforts. We've decided to update our midterm financial guidance reflecting the developments in our market. As a reminder for all of us, LEM's core market of current sensing has been going through different phases. For a long time, LEM has been acting in a niche market in which we had a rather dominant position. This was a small market with limited growth potential, however, very stable. Things changed once sustainability gained importance around 2018, where the market size as well as the growth potential increased. But at the same time, the market became also more attractive for additional competition. We saw faster growth in this phase and we were accordingly more optimistic with reference to our outlook. COVID, the semiconductor crisis and the strengthening of Chinese competition was ending this market phase, and we find ourselves back in a new reality, a new market reality for us, our customers like the machine building industry or automotive as well as our peers to which we reacted with our Fit for Growth program that was launched a year ago. So we expect now a market adjustment and stabilization to continue through '26-'27 and afterwards, an annual growth rate in the corridor of 4% to 7% in constant currencies. We target an EBIT margin corridor of 10% to 15%, depending on currency and market development since we will maintain strict cost discipline and focus on financial resilience. What remains unchanged, however, is the base on which our strategy has been built. We are convinced that the trend to sustainability is going to continue despite the headwinds that we are currently seeing. We are well positioned to capture the growth that is eventually coming back from this megatrend towards electrification, renewable energy generation and energy efficiency. The important R&D investments that we made towards integrated current sensing, TMR as well as forward integration like the DC meter get encouraging customer feedback that gives us confidence that those investments will pay back. The importance to be close to our increasingly Asian customers as well as being fast is reflected in our footprint and the time-to-market improvements that we are seeing. And the manufacturing footprint, strongly Asia-based but balanced between China and outside of China enables us to flexibly react to geopolitical shifts. I close here and would like to thank you all for your attention. Before opening the Q&A, I would like to invite you already for the 9 months earnings call on February 6, 2026. With this, we are ready to take your questions. Operator: [Operator Instructions] And the first question is from Charlie Fehrenbach, AWP. Charlie Fehrenbach: My question regards your midterm guidance. A year ago, you postponed your goals already for 2 years. You still mentioned there a sales level of CHF 600 million and an EBIT margin of 20% and more, which should be able to reach, I think, after the year '29 and 2030. Now you have the new guidance, 10% to 15% margin, and this growth perspective of 4% to 7%. So the old goals, can we forget about them, this CHF 600 million and this 20%? Frank Rehfeld: Yes. Thanks a lot, Charlie for your question. So let's first understand that the business realities have been further, let's say, burdened by geopolitical decisions, tariffs. So the market reality has been changing. So do we -- you said, can we forget about the CHF 600 million? I would clearly say no. However, the time until this will be achieved is probably even longer than what we were believing a year ago. What is for sure not helping is that on the one hand, our core markets move more to Asia, but at the same time, we report our growth in Swiss francs, right? And every depreciation of the renminbi basically costs us several percentage points in our growth story. So I hope this answers the question. Charlie Fehrenbach: Okay. Yes. You mentioned the sales now the EBIT margin of 20% also is something which could be reached far in the future? Frank Rehfeld: I mean, let's be careful to talk about far in the future, in particular for EBIT because here the question is how the markets are further developing. As you've been hearing, business in China is, for sure, confronted with higher competitiveness levels and higher price pressure. So therefore, we've been moving 5 percentage points down at least for the foreseeable future. Whether this is possible again it's probably possible again to reach 15% to 20%, probably a bit too early to say. Operator: And the next question is from Tommaso Operto, UBS. Tommaso Operto: So a couple of questions. I'll take them one-by-one. Firstly, maybe on Nexperia, I mean, there's been lots of headlines. Could you share if this has impacted you as well as the supplier? Frank Rehfeld: Yes. Tommaso, so we were in the lucky position to be, for the time being, not affected. Obviously, we've been starting a lot of actions to see also how vulnerable we would be, what sort of second sources we have. And as you know, we do more than 60% of our manufacturing in China and Nexperia supplies out of China, out of Dongguan, and we were basically not affected and believe that potentially this remains like this because what I hear is that the situation becomes less critical than we were expecting still a couple of days ago. Tommaso Operto: Okay. And then maybe on your margin guidance, those 10% to 15% EBIT margin, what kind of gross margins does that imply? I mean you -- in Q2, you managed to go back to above 40% gross margins. Is that more or less what you can expect? Basically that would enable you to reach those 10% to 15%? Or is gross margins further improving from here in order to achieve those 10% to 15%? Antoine Chulia: Tommaso, I'll take this one. Yes, we're expecting 40% to be kind of the new floor moving forward. As we grow, and you heard our cautious stance here on future growth. As we grow, we should be able to expand on this one a bit. But remember that we're facing kind of structural headwinds here, especially if growth happens in Chinese markets and/or automotive markets, right? So we'll battle both these headwinds as we grow. The 40% is probably the new benchmark moving forward and anything north of this. Tommaso Operto: So better capacity utilization basically compensating for higher price competitiveness? Antoine Chulia: Right. Tommaso Operto: Okay. And last question on the full year guidance for sales, I mean, in H1, you achieved CHF 148 million. If I just would annualize that, it would be already clearly above the top end of your guidance range. Frank, you mentioned some seasonality impacting here. Is that really the main driver why you think H2 is going to be so much lower than H1 at the midpoint? Or is that also taking into account further FX headwinds or even potentially deteriorating end markets? Frank Rehfeld: Yes. I think a very good question. And so in particular, one end market will be surely deteriorating, and this is the renewable end market because here, the feed-in tariffs will have -- or the abandoning of the feed-in tariffs in China will have a negative impact on growth for the Chinese market, for sure, not for the export from China, but at least for the local market. So there, we will -- we basically expect weaker numbers. And we also have indications that the Chinese market overall will potentially develop in the second half and less strong than it was in the first half. Operator: And the next question is from Bernd Laux, ZKB. Bernd Laux: Two questions I have left. One is regarding free cash flow. You have achieved the turnaround in the first half. Do you expect that to be continued, so free cash flow to also be positive for the second half of this year? And the second question is regarding your investment in integrated current sensing and in TMR in particular, you slightly mentioned you have made progress. Can you be more specific here and tell us about how far away are you from maturity so that these products can really be sold in large quantities into the market? And do you expect cannibalization of existing applications? Or is this only or almost only new applications that can be entered? Antoine Chulia: Thanks, Bernd. I'll take your first question on free cash flow. We're definitely expecting free cash flow to be positive moving forward. Thanks to a lift in our working capital performance as we keep focusing on these actions. And that's a very high-level summary, but it's been the focus of our efforts in the first half. So we're expecting to see more results in the second half from this. We're staying very cautious from a capital expenditure standpoint as well. So overall -- and we're expecting also probably less cash outlays from restructuring, right? So overall, we're cautiously optimistic here free cash flow for the second half. Frank Rehfeld: Good. And I take the ICS TMR question. And for sure, you basically had a multitude of some -- sub-questions. Maybe allow me to quickly summarize the picture here. So this is the activity that we do in cooperation with TDK. And the products that we've been developing there together has now been sampled to several customers, both in the automotive and in the non-automotive business, and we've been receiving overwhelmingly positive feedback. Do we expect cannibalization? Rather not because our today's business in the area of integrated current sensing is rather small. So therefore, there is majority growth, growth, growth. Talking about launch, so we will launch the product in 2026. However, looking into, let's say, the typical qualification cycles that we have at our customers, we should not expect now an enormous sales contribution in '26. Even '27 will be probably still a bit slow until really the applications are then picking up and getting launched and getting them in mass production. So I think here, we need to be a bit more patient. This market is not an, let's say, iPhone market where suddenly everybody switches to a new iPhone. These are rather slow ramp-up processes. Operator: And the next question is from [ Raymond Renahon with Asaybanc] Unknown Analyst: Yes. Looking at your midterm new growth target in sales of 4% to 7% in local currencies, not in Swiss francs. I mean, given that you are moving more and more into volume markets, mass markets, there must be an underlying assumption here about volumes and prices. The only conclusion can be that volumes have to go up much more than the 4% to 7% that prices, of course, then on the other hand, will continue to go down. Is that the correct assumption? Frank Rehfeld: Yes. I think -- thanks for the question. I think this is precisely the correct assumption. By the way, not a surprise for a component business, where you see regularly a price down per measuring point like we also see. And the more this business becomes in Chinese business, and the more volume increase you need to see a bit of increase in the sales eventually, yes. So that is exactly the right assumption. Unknown Analyst: Okay. Now could you share these assumptions with us? I mean there must be numbers behind this 4% to 7% on volume assumptions and price assumptions you have baked into that? Frank Rehfeld: Unfortunately, we cannot share them. You can imagine that these are also relevant, not only for you, but also for competition. And let's be honest, we have seen certain developments in the past and for sure, taking them, extrapolated them into the future, whether all that holds true, it also depends a little bit on the product mix, the more, let's say, high-value products like a DC meter come in, that also distorts the picture. So it will be not that easy to construct here a picture. Unknown Analyst: Okay. when looking at the margins, I mean, taking out the restructuring costs, you should basically already be around 10% EBIT this year. I mean if you say high single-digit EBIT margin, but there are restructuring costs still there. So basically, net of restructuring, you would already be at the lower end. So from that perspective, you should reach the lower end clearly next year, right? That is the first one. And then the second question, looking further in the future, it is a race between catching up the lower price levels, which will go down further versus operating leverage. I mean, higher utilization rates. They have to overcompensate the price pressure. That is basically what then results in the margin, right? Frank Rehfeld: Yes, that's right. You're basically confirming the bottom and the floor of our guidance. So that's exactly what we're seeing. So we expect to be at 10% post -- well, post and pre restructuring actually moving forward, right, at current levels. There's -- the uncertainty here on the price front is actually -- we're looking at the net contribution of price and cost, right? So basically, the difference between what we're able to save on throughput costs as opposed to how much we're giving away. I mentioned that we can extract from the market. And we expect that to be a slight negative moving forward. Obviously, in the scenario where we're growing in more competitive markets, it's going to be more of a negative. But that's basically the main reason why we don't want to signal too much of an upside from the bottom, right, from the floor of 10% as well as you noted, there's upside if the content of that growth is favorable. Remember also that we are quite highly leveraged from an operational standpoint, which has affected us in the short-term since our investment in Malaysia. It is actually a good thing moving forward as we expect to leverage on that fixed base of manufacturing costs, right? So that's one, that's another driver that would offset some of this negative net cost impact. Operator: [Operator Instructions] I would like to hand over for the questions from the chat. Unknown Executive: We have a question from [ Jose Veros ] who is asking if he could give some color regarding the restructuring program going forward and what cost base we target in the next 2 years? Antoine Chulia: So we -- thanks for the question. We intend to fully execute Fit for Growth. We're not quite there yet, even though we've seen some strong contribution to the P&L so far. So we will -- first, we will execute Fit for Growth as intended in the coming months. Our objective is to defend the current profitability level, as I was explaining in the previous questions. Hence, adjust our cost footprint depending on the sales development. And that's the key here, right? Everything depends on sales development moving forward. So we've shown that we're able to adjust to lower volumes and be cautious and selective with our spend. So we'll continue doing so. But no one knows at this stage what the future holds, right? So we will continue to be extremely nimble and flexible with our cost base. Unknown Executive: Then we have a second question from Jose Veros who is asking if you could speak a bit about competition, how is LEM differentiating vis-a-vis other players? And if there would be a way to target more niche markets like in the past in order to avoid high competition? Frank Rehfeld: I think a very good question for sure, referring a bit also to the strategic reflections that we have in the team. So LEM differentiates clearly by having the widest portfolio in application, having customer closeness across the world with all our American, European, Chinese customers, and having the application experience and basically having probably overall the biggest scale that we have in terms of applications, products, but also volumes. And this brings us into the privileged position that the products that we are defining are really very close to the customer needs and allow us to basically deliver really what customers expect that the rounds of optimization are reduced. And we clearly see this reflected in the feedback that we are getting from our customers. Now talking about the niches versus, let's say, the big volume. I think in the past, LEM has been always playing in both areas. And I think we also have to -- and on the one hand, the level of competitiveness that you need in order to be successful in the Chinese market, I think, is a must and an important reference or benchmark to understand where we are. And at the same time, for sure, you try to discover more growth areas, be it in smart grid, be it in new technologies like TMR, where we also basically then see the next level of development. To only do niche business will not allow us to be really on a competitive scale. So I'm deeply convinced we need to do both. Unknown Executive: Then we have a third question from Jose Veros regarding M&A. Would LEM consider M&A? And if yes, how would this be financed? Frank Rehfeld: Maybe I take this. We've been saying in the past, we would not go for M&A in order to increase our sales turnover. And I can tell you that there are a couple of competitors on the market where basically the mother companies look for alternative solutions, but we don't really consider this as the right way moving forward because we would in the midterm lose their business because customers would then look for other alternatives when that all goes to them. So here, our customer strategies actually speak against such a growth option. However, what we said is when we see technologically and that partnering or M&A would make sense, then we would move forward. And you've seen this when we, for instance, been acquiring R&D teams in Munich in order to strengthen our ICS capabilities or when we moved into the partnership with TDK in order to bring the ICS business forward. Unknown Executive: Then we have received a question from Gian Marco Gadini from Kepler Cheuvreux. Could you give a bit of color on the impact of volumes and prices on revenue in Q2 and H1 of '25-'26? Antoine Chulia: Yes. Thanks, Gian Marco. So this has been a hot button here since Q1. And I think not just for them, by the way. We've seen a large price drag in most markets in the past 6 months, but it's been led by our Chinese business, especially in Automation and to a lesser extent, in Automotive. So this impact has somewhat slowed down in Q2 as we've been more selective and prudent in our commercial efforts. Also remember that there was a demand trough in Renewable in China following the end of the feed-in tariffs, and that resulted in overcapacity in the market and the corresponding price pressures. Now overall, you can think of our flat revenue performance as a 4% to 5% volume increase, offset by 4% to 5% price drag in the first half. We expect this level of delta price to reduce moving forward to improve moving forward as we're learning to operate in this kind of environment. I hope that answers your question. Unknown Executive: There's a second question from Gian Marco, whether we are able to reallocate production capacity from one segment to another to offset negative developments of specific segments like Energy Renewables? Frank Rehfeld: I would answer the question with partially yes. So we don't have -- or we try when we plan product and plan our new developments to allocate those products not only to a single market. This sometimes works, not always. And this -- in these cases, we have the opportunity to basically shift demand between different segments. However, with increasing volumes, the -- let's say, specific solutions that you need in order to be competitive and that eventually also create payback, this is increasing. So also the more and more specific very segment directed products need to be developed in order to be competitive. Right. I hope this answers the question. Unknown Executive: And then we have a question from [ Thomas Boorie ], who's asking whether the goal for R&D is still 8% to 10% of sales? Frank Rehfeld: Yes. So that's still the sort of range in which we operate. Obviously, when you suddenly see a dip in your top line, it looks like an artificial inflation of your R&D cost. We obviously don't then trim digitally the percentages down. But we believe that for a company active in the high-tech sector, that is a healthy amount that we need to invest in order to remain competitive and prepare for the future. Unknown Executive: So operator, we have no more questions in the chat. So there are more questions in the telephone conference. Operator: There are now new questions in the phone conference. One is coming from Miro Zuzak from JMS Invest. Miro Zuzak: Can you hear me? Frank Rehfeld: Yes. Miro Zuzak: I have a couple of them. I take them one-by-one, please, if I may. The first one is regarding the range that you have given for sales in the current year. It's quite a range. So CHF 25 million from CHF 265 million to CHF 290 million. And if I try to model the lower end now in the segments, it's really hard to model the lower end in the sense it would be really a collapse more or less in the sales. Is it fair to assume that the lower end is really like really the lowest that you could imagine? Or are there scenarios where you think could be even worse? I'm also reflecting on the comments that you made on China and also on the fact that China was flat on a constant currency basis year-to-date? Frank Rehfeld: Good. So thanks, Miro for your question. Now true, the range is a rather big range. Now unfortunately, we've been seeing a lot of rock and roll in the market in the past. And unfortunately, 2 weeks ago, we were even not clear whether the whole electronics business would not see a more severe hits based on a player like Nexperia basically not being able anymore to deliver. So we were considering all this, considering the uncertainty from the exchange rate and therefore, came up also with a guidance that rather have this big range. But it's true. We work every day on actually rather being at the higher end if this is possible. So that's where we are standing. But unfortunately, the last probably 12 years have been teaching us that we were also probably sometimes a bit too positive in our expectations what is still possible in this market. Miro Zuzak: Okay. Very clear. And connected to that, and second question regarding the EBIT guidance. So high single digit implies 7%, 8%, 9%, something in this range, which is not such a large range. So it seems like there is not much operating leverage in the top line regarding your incremental margin. Is it because like the less secure or the areas with the least visibility has the lowest margins? Antoine Chulia: It's a good question. Look, I think it has to do also with the -- again, the content of the growth, right? We are being cautious here price-wise. We are defending our price levels. The top end, the high end of our sales guidance I think might assume some or it may include some more, I'd say, aggressivity price-wise, right? And so obviously, we would benefit from the volume, but this would be a scenario where we're operating at current prices or even or slightly lower prices in some segments. So that would -- the tailwind on volume and on operating leverage would be partly offset by the price drag. The other around, it works too, right? So the low end of the range is -- we would definitely defend our profitability and defend the low volume and the low cost coverage through more selectivity price-wise. Miro Zuzak: Very clear. And third question, if I may, you elaborated on the 40% as a floor for the gross margin. Now looking into the upcoming 2 years where you gave guidance on EBIT, it's almost unthinkable to or even possible to model 15% EBIT margin, taking only 40% gross margin? Or is the cost lines, the G&A cost really to decline even significantly further than it already did in Q2. I mean you did a great job. We can see that in the numbers. But is it -- can you elaborate on that? Would the 15% imply a higher gross margin than 40%? Antoine Chulia: Yes, there's -- definitely, yes. Miro Zuzak: Okay. Antoine Chulia: To reach 15%, we would have to generate more than our floor for margin, yes. Miro Zuzak: And the last question regarding cash flow and net debt. So your net debt went down by CHF 5 million more than the cash flow statement would imply. And you can see that on Page 13, if I'm not mistaken, in the report, the fair value changes and others, CHF 4.8 million negative number, which declined or decreased your interest-bearing debt. Could you please explain what that is? Antoine Chulia: There's a Forex lift on this one. I mean, lift -- some of the improvement is coming from Forex, the same way it's impacting our sales the other way, right? So that's the biggest contribution. Miro Zuzak: But that means that would be, for example, U.S. dollar liabilities or Chinese renminbi liabilities that you have? Antoine Chulia: Yes, there would be non-CHF liabilities. Miro Zuzak: And which currencies is it U.S. dollars or Chinese renminbi? Antoine Chulia: It's a blend, and it's -- yes, some of that is renminbi, yes. Operator: And the last question is a follow-up from Tommaso Operto, UBS. Tommaso Operto: Just a quick follow-up on the Fit for Growth program. I mean this cost program was -- so I mean, I apologize in case this is repetitive. But what I didn't quite understand, it was announced a year ago when you still had a different midterm ambition or a guidance of the CHF 600 million. And now you kind of adjust to this new reality. So my question is, does this mean -- does this new top line guidance indicate that potentially there would be an additional cost program? Or are you still fine even with the new market reality with the current Fit for Growth program? Frank Rehfeld: Right. I think very, very good question, Tommaso, I think probably one cannot be repetitive on this question because it's one of the -- let's say, really complex topics. So you remember, we basically started to implement the program in -- planned it in November and then basically saw some effects in Q4 where we saw the restructuring cost and the positives we started to see in April. Now this program runs according to plan, and we clearly see that we are saving the planned range in this financial year and also go for further savings. You remember, we said CHF 18 million to CHF 22 million in '25-'26 and an additional CHF 15 million then in the next financial year. So that's what we currently plan, and that's what we are all aligned about. Now it depends for sure how the market is developing. At the moment, we don't -- clearly don't foresee any further restructuring necessary because we do have a base that will allow us to go forward in the way we've been planning this. But again, therefore, also, you remember we were cautious with '26-'27. On the one hand, we hear positive, I called it anecdotically evidence that maybe '26 comes better, but our bookings don't show that yet. So therefore, we rather talk about the stabilization this year and then a pick up and then after '26 and '27. So that's basically the current planning base. But when this, for whatever reason, would be again put into question because geopolitically short-term something happens, then a potential further restructuring could not be excluded. Tommaso Operto: Okay. Got it. And then a last question on order levels. And I mean, in Q2, orders were sequentially down quite significantly, right? And at the beginning of this fiscal year, you started to take into account different shorter-term orders as well, and yet they have declined so significantly. So could you maybe elaborate where that cutoff is and how we can kind of compare the current order levels to the levels a year ago? Frank Rehfeld: I mean looking at orders, and you remember what we already exchanged in previous discussions, the times where you can mathematically take order levels and then extrapolate them and mathematically say that is then exactly the sales is getting increasingly difficult. I give you a couple of examples, what we saw when, for instance, the tariffs were announced is that some important OEMs, car OEMs were canceling certain new energy vehicle car lines or pushing them out. We saw suddenly drops in our Rest of Asia business that is mainly guided towards exports into the Western market. So we saw quite some surprising effects that then also were reflected in the order book with negative orders of pushouts and cancellations. So therefore, unfortunately, lead times are a bit difficult to simply extrapolate out of the orders what then the real sales is going to become. Hopefully, you can live with this level of uncertainty as we have to. Antoine Chulia: And Tommaso, things are technically comparable, right, year-over-year. I think what we're looking at here is -- this is a reflection of the subjective part of how we book orders. And here, the keyword is caution, right? We've learned from the noise in the market and in customers' behavior in the past 6 months. We are being very cautious with how much orders we're capturing in our book and especially as the long-term visibility is very, very muddy, very blurry, right? So overall, we're seeing less visibility. So we're being more cautious in how we're capturing orders. Frank Rehfeld: Right. Looking at the time, I would like to thank each and everybody of you for your interest in LEM, for your time, you've been invested to follow us here, and looking forward that we stay in touch and that we latest talk again on the 6th of February. Thanks a lot and have a great week. Thank you. Bye-bye. Antoine Chulia: Thanks, everyone. Bye.
Jostein Løvås: Good morning, and welcome to DNO's Third Quarter 2025 Earnings Call. My name is Jostein LøvÃ¥s, and I'm the Communication Manager here at DNO. Present with me in Oslo on this morning -- in this morning are Executive Chairman, Bijan Mossavar-Rahmani; Managing Director, Chris Spencer; and outgoing CFO, Haakon Sandborg. At first, Bijan will give an introduction. It will be followed by a presentation of the results. And after the presentation, we will open up for questions in our usual Q&A session. And as always, shareholders first, but analysts are also welcome to ask questions. [Press-held ] will be dealt with afterwards. [Operator Instructions] With that, I leave the stage to Bijan. Bijan Mossavar-Rahmani: Jostein, thank you, and good morning, everyone. It's a pleasure to be back with you in all of these quarterly earnings calls or presentations. And we've had a very strong quarter, and we're going to be very pleased to report on it. And again, as Jostein mentioned, answer as best we can any questions that you have. Before I start, I'd like to introduce to you Haakon. Haakon needs no introduction to many of you who followed the company. He has been the company's Chief Financial Officer for the past 24 years. He is, I think, not the oldest DNO employee, but the one who's been here the longest. And he knows the company's history. He knows the company -- he's seen the company through many period ups and downs, the number of transformations over the past I think it's now 53 years of the company approaching 54. So as you know, as many of you may know that DNO has been Norway's oldest oil company, the first to be formed, the first to go on the Oslo Stock Exchange. And through much of that history, all of it and much of it, Haakon has been a major player in the company. We are -- he's decided to step down from his role. And it's been a privilege for all of us, myself, especially, to have worked with him in that role. I've learned a lot from Haakon, a lot about the history of the company, and he's been a very valuable colleague to me and a leader, one of the leaders of DNO throughout the period that I've been here and prior to my coming here as well. So we are sorry to see him go. We wish him well. He's probably best known outside of DNO for his -- as the person who initiated, led our very successful run on bond markets. That's not all he's done here. He's been involved on the stock side as well, the stock markets and shareholders and analysts, but he's perhaps best known for his stellar record of 21 successful bond raises over this period of time and he mentioned to me that he has raised through these bond raises over these periods, $5 billion, which is quite a large number for a company of our size. So thank you again, Haakon, for all of us. We wish you well, but I know Haakon wanted to have an opportunity to say goodbye to many of you who he's worked and stayed in touch. So I give the floor to Haakon to say those words to you. Haakon Sandborg: Yes. Thank you. Thank you, Bijan. Thank you for those very kind words. Everything in life has its time. And I think now it's a good time for me to retire from DNO after 24 years in the company. It's also at the age of 67, it's also a good time to do something else and go on to new chapters in life is my thinking. And looking back, it's been a great journey in many ways. And I'm very proud of all the growth we have achieved and the market value that we have built in the company during these years. And I now wish all our -- all my colleagues and all our investors the best of luck and continued success and progress staying with DNO. And I'm very happy to hand over to our new CFO, Birgitte, now taking over after me. And I know she will be doing a very good job. So again, thank you, everybody, and best of luck. Thank you very much. Bijan Mossavar-Rahmani: To continue, I would like to introduce Birgitte to you. We've already posted a notice about this transition. But I'll say a word about Birgitte. And of course, she will deal with the finance part of our presentation this morning and also moving forward. Birgitte Wendelbo Johansen has come to us from the shipping sector in Norway, the company Reach Subsea, where she was the Chief Financial Officer, and we had a long search process, a deep search and we're able to persuade her to join the company, and she's hit the ground running. And we look forward to many, many years, maybe 24 years here at Vienna. I look forward to that Chris and the rest of us. So welcome to the company. We had a very, very strong quarter in many respects. And my colleagues will have a chance to go into detail on those and I'll be available to add some color and answer questions. But I'm very proud of the performance of our teams, both in Kurdistan and in the North Sea. In Kurdistan, we've continued to ramp up production. When we last met a quarter ago, we were coming out of the period of damage to our surface facilities in Kurdistan, particular Peshkabir field, but we were able to ramp up production pretty quickly from 0 to I think we had -- we hit 55,000 barrels a day between Tawke and Peshkabir fields in our last quarterly presentation. And I indicated to our team, I was in Kurdistan, I said we're going to have our quarterly presentation. I want to have 55 -- hit the 55,000 barrels a day figure. We're going to announce that when we meet in Oslo, and they jumped to the challenge, and we were able to do that. For this quarter, we challenged them again. I said when I had the presentation on the 6th of November in Oslo. I want to be able to announce that we've hit 80,000 barrels a day of production, so up from 55,000, which is up from 0 and 80,000 was where we were before the drone strikes and the damage to the fields. And I'm very pleased to say that we've -- that team has hit the 80,000 barrel a day figure, and Chris will go through the details as some more specifics about that. So I'm very, very proud of that team, and they do a terrific job. What DNO does and has done in Kurdistan, no other company has even come close. And we're very proud of that record and proud of the performance of that team. In the North Sea, we also have a fantastic team. We've announced today as part of our release, and then we'll go into the detail on the slides about how our team in the North Sea now is similarly getting off the sofa and developing -- being to develop the extensive discoveries that the company has made in the Norwegian continental shelf. And again, Chris will go into some details on our joint efforts with a like-minded company, Aker BP with respect to one of our discoveries, the Kjøttkake discovery. And we're very pleased. And again, we expect to bring that field on production to develop it in record time. We don't do it as fast in Norway as we do in Kurdistan for many reasons. Most importantly, in Kurdistan, we're onshore and the lead times are much smaller than they are with an offshore project, but we hope to be also do in Norway, what we've done uniquely well in Kurdistan. I expect our next quarter will be even stronger than this quarter and that it will reflect some of the recent developments. And I look forward to meeting again with you for our first quarter -- fourth quarter 2025 presentation in 2016 (Sic) . But before then, I'll turn first to Chris to go over our operational performance this past quarter with a bit of a look ahead as well. Christopher Spencer: Thank you, Bijan, and good morning from Oslo. So we now have our transformational quarter on the back of our transformational acquisition. So we were highly expected following the hugely important acquisition of Sval Energi back in -- which completed in June. And this is the first quarter that you see the full effect of that acquisition and that runs through all of the numbers that I'll be covering and really will be coming into on the financials. And of course, immediate visual impact on the production. We are now up to 115,000 barrels of oil today during Q3 and actually, Q3 will be a relatively weak quarter on the production front, both in the North Sea due to the summer maintenance season, but also in the Kurdistan region because of the -- we were recovering from the Kurdish attacks as Bijan has described. Similarly, the revenue follows the production, obviously, and even more so for us because the Sval acquisition, of course, is in the North Sea, where we have full exposure to global oil and gas pricing. We got back into the black with a $20 million profit. And then operationally, we continue to have successfully drilled it. And as we'll go into in some detail, we are now making great strides in terms of monetizing discovered barrels at a record pace in the North Sea. Happily, all of this allows us to continue making our shareholder distributions the way we've been doing for some years now and the increased -- increase in the quarterly dividend payment that we announced last quarter is maintained. If we go to the next slide then. please, I think that -- I hope that this slide sets the tone for many quarters ahead in our North Sea. We talked about this on the back of the acquisition of Sval, that we're taking a huge step up in the North Sea, and we are determined to not only maintain but grow our production in the North Sea over the next few years. And we will be doing that by continuing to explore and we've got 3 wells running at the moment and importantly, accelerating the development of discoveries into production. At the same time, we're going to be high grading and optimizing the portfolio we have and that is -- a great example of that in the bullet points here where we've done a nice swap transaction with Aker BP. Both companies are very happy with it. For us, we are strengthening in our core area around the Norne FPSO up in the Norwegian Sea and increasing our share of the Verdande field, which is tied back to Norne. Both of the projects that are coming on in the [ Andvare ] and Verdande are up in that area. And so the Norne area is going to have 8000 barrels of oil equivalent contribution just from those 2 projects by the year-end. In exchange, of course, we handed over some assets. And again, it really is a tieback to Alvheim. So that's a core area for Aker BP, non-core for us. So a nice rationalization for both companies. Lastly, here are the final pieces of the financing on the back of the Sval transaction being put in place. We were very pleased to announce the gas offtake agreement we had with associated financing last quarter, and we are copying that now on the oil side. Not quite, the ink isn't quite dry on the signatures here. So we can't give full details, but we're confident these will be in place very shortly. and well ahead of the 1st of January date when those sales will commence. And again, there's the prefinancing on sales similar to the gas arrangement at very attractive interest rates way below the type of interest rates you see on our bonds. So we will have once these 2 deals are completed, facilities of over $900 million on the prefinancing associated with oil and gas -- oil liquids and gas sales in the North Sea. If we move to the next slide, then this obviously is a key component now of our engine room for value creation in the North Sea. So we're going to continue to discover resources and then we are going to bring them on very rapidly. As Bijan mentioned over the past few months in the North Sea, we need to find like-minded partners or like-minded companies to be able to do this together. It's -- and we're very pleased to be collaborating very closely with Aker BP here to make Kjøttkake very fast in Norwegian continental shelf terms development going from discovery in Q1 of this year to production starting in Q1 of 2028, which is obviously 3 years. And that compares to 6 years or so as the average for subsea tiebacks that have been brought on stream so far this decade according to the data we have. So that underlines the acceleration that we are going to achieve together with Aker BP and Sval here. And indeed, the operator of the host that we'll be getting tied into, which is [indiscernible]. So we're very excited for that, and we are determined that this won't be a one-off. We will be discovering hydrocarbons, working with license partners to develop this sort of speed. And as we move forward, we're aiming to improve this further. We see internationally that, that is possible. and we're setting the bar very high for ourselves. For investors, why should you care? It's not just fun to accelerate developments, but obviously, in terms of the net present value on the original investment in exploration, it's quite transformational on the return on capital invested when you can reduce the time from discovery to production by 50%. And that, of course, is the value proposition behind the whole exercise. Next slide please. This is in the front end of that funnel. We've had an exciting exploration program this year. This, of course, is reflecting both the portfolios of DMO and Sval as they were as we enter 2025. And we've got results for 3 wells coming up very, very soon. And we have an exciting program ahead of us next year. In fact, we have a luxury problem of probably too many opportunities next year that we are working to high grade. Next slide. Turning to Kurdistan and Bijan touched on it, but we've been ramping up production here and -- the Q3 numbers are still, of course, impacted by the terrible experience we went through in mid-July, where we were hit by drones and that caused damage to critical processing equipment at the Peshkabir field, having rushed ourselves down over a couple of weeks, put in place new security protocols to protect our staff and so forth. The team got back to what they do best, and that is overcome challenges in an amazingly speedy fashion. And so within 3 months of the attack, we had replaced the damaged processing equipment by repurposing some redundant equipment we had over at the Tawke field and got back up to 75,000 barrels earlier this month. Well, actually, sorry, mid-October. And then as Bijan has announced this morning, they've pushed it even further, and we're back to the 80,000 mark as we speak. Of course, the big event in the quarter for Kurdistan oil and gas business in general was finally the reopening of the export pipeline through Türkiye to Ceyhan. That was after 2.5 year closure during which the entire industry, as you know, has been selling locally. from our side, we've been -- as we've been talking about quarter after quarter, we've not been drilling in Kurdistan to properly manage our reservoirs, and we need to get back to drilling and increase the production again. And so that means we are moving into a period of higher investment again in the Tawke PSC. And for us, therefore, the certainty of payment is even more important than it has been in the past. And that has pushed us to lean on continuing to sell our oil to local buyers. The other element with respect to restarting exports that was not addressed in the agreements with other companies have signed up to is also the significant debt that the Kurdistan regional government still has outstanding with us, and we continue to look for ways to resolve that with the KRG. So we're very pleased that exports have restarted. We're also very pleased to have the certainty of payment that we have with our arrangements. And on the back of that, we will be ramping up our investment, and we set another hairy target for our team. We're going to get to 100,000 barrels -- back to 100,000 barrels gross through restarting drilling on the Tawke PSC and as Bijan commented in September, we may look back a year from now and feel we have left a little bit of money on the table with respect to exports, but the value creation from getting back to drilling and pushing the reproduction up will exceed that in our view. With that, I've done my operational update, and I will hand over for the first time to Birgitte for the quick run through of the financials. Over to you, Birgitte. Thank you. Birgitte Johansen: Thank you very much, Chris, and good morning to everyone. As Chris and Bijan mentioned, we present a strong quarter where we now see the full effects from the Sval acquisition, which was completed in mid-June this year. So let's jump right into the financials and the details. Starting with the income statement. The strong contribution from Sval Energi, now included in DNO's North Sea business units is clearly visible. Revenue was $547 million, up 112% from the last quarter. As much as 92% of the group's revenue in the third quarter came from the North Sea business compared to 65% in 3Q '24. Our operating expenses have increased following the inclusion of Sval, which is natural, and operating profit ended at $222 million, up more than 100% from the last quarter. Net profit in 3Q back in black, as Chris mentioned, at USD 20 million. Next slide, please. So let's move to -- let's move to the cash flow. Yes. Thank you, Jostein. The high revenues led to a near threefold increase in cash flow from operations to a high level of $407 million in Q3, up from $135 million in Q2. This Q3 cash flow includes $53 million in positive working capital changes. Stronger earnings in the North Sea also means higher taxes, and we paid 2 tax installments in Norway, totaling $53 million in Q3. As you may recall, we indicated last quarter cash taxes of around $150 million in the second half of '25. The cash tax will increase in the fourth quarter. We again had substantial investments at $225 million in Q3, consisting of $183 million in CapEx, mainly for North Sea development projects and also $34 million in exploration expenditures. We also spent $10 million on decom in this quarter. Net finance outflow of $386 million primarily covers repayment of $300 million bank bridge loan that was part of our acquisition financing for Sval Energi. We also paid a dividend of $36 million in Q3, as you know. So with the investments of $225 million and $300 million in debt repayment, our cash balances were reduced by $257 million to $531 million at the end of 3Q. But again, the key takeaway here is the very substantial increase in our operational cash flow from the first full quarter with the Sval assets in operation. Next slide, please. Now as discussed in DNO's Q2 presentation, our balance sheet and capital structure were substantially changed through the Sval acquisition and related financing transactions. Compared with the Q3 last year, we now have quite diversified funding sources with a good combination of long-term bonds and short- and medium-term offtake financing. The size of the balance sheet, thereby increased by close to 70% in Q2, primarily through higher property, plant and equipment values as PP&E was up by 135% in the second quarter, as you can see on the slide. For Q3, the PP&E value remains fairly stable from Q2 as expected. Similarly, we went from a net cash position in Q1 to a net debt of $860 million in Q2, whereas we now show a reduction in the net debt in the third quarter. The key driver for the reduced net debt is close to $100 million in free cash flow, partly offset by the dividends paid. Total equity increased with the $400 million hybrid bond that we placed in Q2, and this metric also remained stable in Q3. All in all, it's a very strong quarter from DNO, no surprises or special items. So by that, I hand the word back to you, Jostein, for the Q&A session. Jostein Løvås: Thank you, Birgitte. That was a good run through, and we'll take questions now. Nikolas is with us, Nikolas Stefanou. Nikolas Stefanou: Congrats on the very strong quarter. And congratulations for a long and rewarding career with the company. And thank you for the engagement with the sell side this year. So I want to wish you all the best in your next step in life. So I've got 3 questions to ask, please. The first one is about Kurdistan. And the other one in kind of like broader on the balance sheet. So in Kurdistan, if you're ramping up production, drilling was there, but then you sell them locally and someone else is making this kind of like crazy sort of like margins on the exports. I'm just wondering what is the incentive from the KRG to make a deal with you in order to -- in first for you to kind of like sell the crude directly. So that's kind of like the first question. And if you can talk about how the negotiations there are going, that will be good. And then on the Sval assets and in general, the North Sea kind of like outlook, you've got these assets for a few months now, would you be able to give us maybe a production target for '26 and 2027 in the North Sea? And then finally, on the balance sheet, you have been quite conservative in the past few years. I mean, obviously, that was because of Kurdistan. Now that you have repositioned the business in the North Sea, how do you think about the balance sheet going forward? And more specifically, is there an optimal level of debt or leverage you guys target. Bijan Mossavar-Rahmani: Let me try to answer the question on Kurdistan. I'm not sure I fully understood it. You mentioned something about crazy margins and some other things. I'm not quite sure I understood it or I understand what you understand we've done. What we decided to do was to continue selling our entitlement crude to the buyer -- who have been the buyers who have been buying our crude at the same prices more or less as prior to the exports. The amount that we receive, again, is the same under the same mechanism when we are prepaid, we're paid in advance by these buyers and we deliver the oil to them. In the past, these buyers have sold the oil into the local market. We're not -- we don't follow exactly who that oil is sold to and on what basis, but we continue -- we had an existing contract with them, and we elected to continue that -- those arrangements. Our buyers have made their own arrangements as they had done previously to sell that oil. But this time, they've sold the oil onward into the pipeline that oil as we understand it, is exported with all the other oil from Kurdistan, whether it's produced by the other IOCs or other, what terms they have set into place with Kurdistan, we don't know. All we know is we continue to be paid in advance and at the price that's known to us, it's predictable. There are no delays. There's no calculation of price by an outside consultant. There are no issues we have about delay in payments and where those payments come from. We decided that we were better placed, continue to receive money in advance at predictable and set prices that we would be under the terms of the export that other companies have elected. This is important to us because we -- this allowed us and allows us now to make these very, very substantial investments, including the drilling of 8 wells next year, which will start right away. We've signed up a contract for a drilling rig. We're going to be deploying our own rig. And as Chris says, we believe that the investments we're making and the increased production that we will get from these investments will more than offset any money that we might end up leaving on the table. It's possible. We know that there is a formula. Everyone knows that there's a mechanism that the companies get paid, hopefully, by December it's $16 a barrel, less I think an estimated average $2 in transportation fees, that's $14 to then be supplemented at some point next year by additional monies to be calculated based on an outside consultant retained by the Iraqi government coming in and saying what the contractual number should be based on some other principles, fairness or otherwise that we're not privy to. It's possible that as we participated in this, we would eventually receive more than we're receiving now. We have announced what we're getting. We're getting paid per barrel, payment of -- low $30 a barrel for every barrel that we are putting selling based on our entitlement, which is now roughly, I think, 20,000 barrels a day with our share, we get paid in advance, and we are happy with that arrangement. Now perhaps if we participated in the export pipeline project, this number would have been higher. That's quite possible. And as we said last quarter and as Chris again said, we may end up looking back, see that we left some money on the table. Maybe we will have left some money on the table and maybe we won't have left money on the table. We don't know. But we thought that the predictable receipt of money would allow us to ramp up production. As I said, we've now ramped it up based on this thinking from 0 when we were -- just after we were hit by the drones to 55,000 3 months ago to 80,000 now and to 100,000 at some point next year. I think this is best for us. It's best for Kurdistan. It's best for Iraq since they're selling the oil. I think it's a win-win-win situation. If we find that the -- as we've ramped up production, that the terms and conditions and payments for the export arrangements are attractive that they continue beyond the end of this year. My understanding is that these arrangements were done until the end of this year and don't have to continue. There's an election in Iraq. There will be elections in Kurdistan. There'll be changes perhaps to conditions, we'll see. If we find that those terms are attractive to us, we will participate in exports. If we find that the current arrangements give us predictability, we will stay with our current arrangements. And hopefully, we'll be able to ramp up our prices. Already, our prices for our sales -- local sales as we call them, in November are higher than they were in October when we started, and we expect those prices will continue to rise. So we're happy with it, this arrangement, and we're happy to be drilling again. We're happy to be producing larger volumes. As I've said, DNO is great at this. And we have great fields, we have great people, and we're able to deploy $1 and get more value for it than other companies have. So we're very pleased with the way things are progressing. We hope exports will continue. We wish everyone well as part of the exports team and their success will eventually be our success as we'll participate in exports and some other arrangements that we might make ourselves. But in the meantime, we are investing in Kurdistan. We're the only company doing drilling and planning to drill as many wells as we are. And that's what we've always been. We've been the largest producer, the fastest mover. We've said this before -- sometime before the end of this year, we will produce our 500 million of barrel of oil from Tawke's license. That's a great achievement for us. It's been great for Kurdistan. And it's a record we want to improve on. And I think we're set well to do that. On the issue of what our North Sea production is going to be, I'll ask Chris to refer to that, but we haven't given that sort of longer-term guidance because our situation changes as much as it does. Historically, that's been the case in Kurdistan, but even the North Sea, a year ago, who would have thought that our production in the North Sea would quadruple, which it has for a small acquisition. And we shared with you our plans to fast track production. We've shared with you our record of discoveries, which has been quite significant. And you know from us, what we've been saying for quite some time and again repeat it today that we're going to fast track the monetization of our discoveries by bringing them into production quicker. So you can do some back of the envelope calculations. We are still on the lookout as we've been for some time for additional acquisition of additional production. We will ramp up production from our own discoveries, and we have long pipeline discoveries, but we'll be on the lookout to do swaps and as we've announced again and to acquire bolt-on acquisitions, smaller ones, we've been doing some of those in the past that we reported and maybe more significant acquisition as well. Our ambitions for the North Sea are as large as our ambitions have been for Kurdistan. That I can say with some confidence. But Chris, would you like to? Christopher Spencer: I think that's a good summary. We think that we have mentioned in our material this quarter that -- and as I said in my remarks that Q3 was impacted by the summer maintenance season and so forth, and we indicated an exit rate in the North Sea of 90,000 barrels of oil equivalent per day roughly. And that gives obviously a good sense, we feel of the scale of the business we have there. We've put -- and we've made similar comments in several presentations since we completed the acquisition. So yes, we feel we've given a good indication of what you can expect from the North Sea business. And then with the comments that Bijan has made and mine earlier, we're trying to help the market understand how we are planning to generate a lot of value out of this new portfolio that we have. We've used the term repeatedly, but the 2 portfolios went together like a hand in glove with the production strong portfolio of Sval combining with the exploration and development strong portfolio of D&O. And that's -- again, I think Kjøttkake is just the first example of that, where Sval have an increased -- a much stronger presence in the hosts and potential pieces of infrastructure that could be relevant for Kjøttkake development. We made the discovery, and that is going to be on stream in early 2028. This is something, as I mentioned earlier, we are going to be working hard to replicate. And not forgetting in the backbone that will maintain production as well is the type of legacy assets we have in the [indiscernible] area, which came with Sval is everyone who follows the Norwegian Continental Shelf activist just goes on and on, that type of asset, Martin Linge, the broader asset from the D&O portfolio, these also will provide a tremendous core of long-term production to which we're adding this machine of explore, develop and to create value for the shareholders. So I hope that gives you enough color on what we're aiming to achieve in the North Sea. Bijan Mossavar-Rahmani: On your other question about our balance sheet, let me say the following. Yes, you're right. We've been conservative. And we will continue to be conservative. We're not going to bet the company on anything. Part of that's been driven, as you said, by Kurdistan because of the movements up and down in payments in the past and other challenges. But that wasn't just about Kurdistan. It's not just about being conservative. The Kurdistan part is being prudent. I think generally, we're conservative in how we think about the business. But we've also been opportunistic. We built out large cash reserves, and we're looking for an acquisition several years ago, and we're able to deploy those cash -- additional cash through the acquisition of Faroe. We then started building up again our cash position, looking for another larger opportunity, and we used it in part to finance the acquisition of Sval. Right now, as we reported, we have something in excess of $500 million in cash on the balance sheet. We have $900 million in total availability of prefinancing. We've drawn down, I think, $340 million of that. Again, as part of the small transaction, the repayment of our debt, which Birgitte discussed, that we have another significant amount of money available to us if and when we need it, either for an acquisition or for some other purpose. So we build up these cash reserves. We'd like to always have a significant amount of cash on the balance sheet both because of the ups and downs of the market and the price of oil goes up and down, and we want to be prudent and in a position to continue to pay dividends to our shareholders. We continue to service our bond debt, which we've done now for 22 years and quite successfully. We're proud of that record. And our investors on the equity side or the debt side are really important to us, our credibility and our wish to perform is really important. So in that sense, too, we're conservative. Not all companies have these sort of targets of continuing to pay dividends and continue to service the debt we do. And for that, we need to have enough cash on the bank and be prudent and be conservative. And we're proud of that, but we do build up cash and we do look for opportunities. And we'll grab those when we can. We don't have a specific sort of target figure other than whatever is prudent and conservative and opportunistic, we will -- that will drive our thinking and our... Jostein Løvås: Next one up is another analyst, Teodor Sveen-Nilsen. Teodor Nilsen: A few questions from me. First, on Tawke, congrats on reaching the 80,000 barrels per day target. Regarding the 100,000 barrels per day, how should we think around timing of that and also potentially the duration that should we like expect from 100,000 barrels per day flat out for entire 2026? Or should we factor in a lower average production for next year? Second question, that is just following up on the export potential. As far as I understand, you now sell at local prices in Kurdistan, how does your route to export prices look like? Is it only a deal around the receivables so, that is between us now and you getting international oil prices? Or are there any other outstanding issues? And my third question is for guidance 2025. In your second quarter report, you gave some guidance on operational spend and CapEx for the Norwegian portfolio. I didn't see that in the Q3 report, can you just confirm that, that guidance is still valid? Bijan Mossavar-Rahmani: Thank you. I was amused when you and your back and forth about unmuting who's ever unmuted Teodor [indiscernible] but thank you for your question. You always have interesting and important questions. The easiest one is on 100,000 barrel target. For us to get from 80,000 to 100,000, that's about 5,000 additional barrels a quarter. That's not difficult for us. We were over 100,000 barrels a day, if you recall, before the pipeline was shut 2.5 years ago. So we know how to get there. As you know that in the 2.5 years or so that we weren't drilling any new wells, we were still able to maintain production by tweaking the wells and by doing workovers. And we really -- our tracked production team as we learned so much about the Tawke field and about the wells and how to with minimum amounts of spend and effort to keep those wells flowing. And this is really quite spectacular because as we've discussed many times in the past, these fields typically, these reservoirs have a 15%, 20% decline rate. How we were able to stop that decline rate without drilling any new wells is, again, an amazing achievement, but it speaks to the 20 years or so of DNO working in that field and learning how to optimize it. So with that base knowledge and understanding and they've already -- during this period, they've located other wells they want to drill at other locations, some of them are production wells, some of them are a bit of a step out and 1 or 2 of them have an exploration component that's quite exciting. And we're going to drill into those in 2026. When we're going to hit 100,000 a day, the target we set for them is towards the end of the next year, but they've surprised us pleasantly every time we set targets for them, they've achieved those targets and achieved in record time. So I wouldn't be surprised if we once again beat those targets. But let's give them a chance to do what they do very well as they get going. And as I said, we're bringing a rig back in again, and that's going to drill the deeper wells. Our own Sindy rig, which has been doing all the work over in the last couple of years, we'll focus on some of the shallower targets that we have and those are even shallower horizon in the target Tawke field. So we'll get to 100,000, we'll get to 100,000, we'll set new targets and see if we can achieve that. It will get harder over time. But if we can drill 1 or 2 of these exploration wells and are successful, we can have a step-up in production from the two fields. But to give us a chance to do it and our history is a good predictor of our future, certainly in the Southeast. On exports, how would we participate in exports, if it looks like the payments are greater than we can get in the local market. That's a good question. There are several avenues to that, that we were considering. We can sell our entitlement oil to whoever we want to sell it to for our new production sharing contracts. It was helpful for everyone for us to have this 3-way arrangement between ourselves, our local buyers and Kurdistan and Iraq for our oil to be sold under arrangements we were comfortable with, but find its way into the pipeline. And again, that DNO is 80,000 barrels a day, a very substantial part of the total production of Kurdistan. And without it, the pipeline project wouldn't have worked. So we didn't want to block the export project. That's an important project for many stakeholders. But we just want to make sure we were getting paid $30 or low 30s before we put the oil into the pipeline, then be paid maybe $14 -- $12, $14, maybe sometime in December to be topped off maybe sometime in the future or reduced maybe sometime in the future, depending on what an outside consultant would decide would be a fair price or a price that was somehow acceptable to other companies. That uncertainty, we didn't want to live with. And we believe that by, again, selling in the low 30s and getting paid in advance, we can invest and get more production and more revenue to offset any money we leave on the table, but there are several ways to get there. And because we're not signed up into the larger project, we have our rights under our PSC to sell the oil to wherever is the best buyer from our point of view in terms of pricing and payment terms of that oil. And we had said and all the companies that said that we would not participate in exports unless the arrears was resolved, we've kept to that. Our arrears are important for the other companies, maybe the arrears were less that we know there were less, our areas were the greatest. And we said consistently that we will not participate in that export project until our arrears were addressed. So we get comfort that we would receive those arrears. We have different mechanisms to achieve that and none that have been finalized that we can announce now. But we will get our arrears back one way or the other as happened in the previous time we built up even much larger arrears during the ISIS period, maybe you remember that period well. For us, they've always been good for all of the contracts eventually. We understand sometimes other squeezes, we work with them, but we expect one way or another and there are different ways of doing this. So we will get the arrears paid. And at some point, we hope to participate in exports. If not in the next few months, the export agreements between Iraq and Turkey end -- expire in July. We don't know what -- how that pipeline will be used by whom and under what terms and conditions. But things will change in July. And we haven't been participating in the export stream directly now. Perhaps from July, there will be other opportunities for us to participate in a different way in an export project and we're comfortable with that decision. And we have the cash to drill wells to raise production. So all that is, I think, on track as far as D&O is concerned. Jostein Løvås: It's okay and how time flies when you're having fun, we're approaching the 1-hour mark and unless there are any more questions from the audience, I think we'll wrap it up. And thanks for listening in, and see you around soon. Bijan Mossavar-Rahmani: Thank you. Birgitte Johansen: Thank you.
Operator: Greetings, and welcome to the Bakkt's Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. As a reminder, today's program is being recorded. I will now turn the call over to Cody Fletcher, Investor Relations Adviser at Bakkt. Please go ahead. Cody Fletcher: Hello, everyone. And thank you for joining Bakkt's Third Quarter 2025 earnings call. Before we get started, I'd like to remind everyone that during today's call, we may make certain forward-looking statements. These statements include, but are not limited to, our expectations regarding Bakkt's transformation into a pure-play digital asset infrastructure company, the performance and future development of our Markets, Agent and Global, our international expansion strategy, including anticipated actions related to our Japan investment and future jurisdictions, our plans for platform upgrades, cost optimization, hiring and brand initiatives, expectations regarding the StableCoin, Bitcoin and tokenization markets and our outlook for 2026 KPIs in our planned Investor Day. These statements are based on management's current expectations and are subject to risks and uncertainties, which may cause actual results to differ materially from those expressed or implied in such forward-looking statements. For additional information regarding forward-looking statements and risk factors, please refer to our filings with the Securities and Exchange Commission. Further, in addition to discussing results that are calculated in accordance with generally accepted accounting principles, we will also make reference to certain non-GAAP financial measures. For more detailed information on our non-GAAP financial disclosures, please refer to our full earnings release, which can be found on our Investor Relations website. Thank you. And I will now turn the call over to Akshay. Akshay Naheta: Thank you, everyone. Thank you for joining the call. Today, our focus is around one clear mission to power the next generation of global finance. That clarity of purpose matters. It allows us to align our people, sharpen our strategy and channel our resources with conviction towards the future we see emerging. Across the world, individuals and institutions are reevaluating what money really is, how it moves and how markets operate. We believe this shift will define the next era of global finance, and we see it unfolding across 3 major fronts. First, Bitcoins continue to rise as a globally recognized digital store of value, the new foundation for trust and savings. Second, the rapid transformation of banking and payments accelerated by AI and stablecoins, which are reshaping how value flows through the economy. And third, the tokenization of real-world assets, redefining how everything from bonds to commodities to property is traded and settled in the future. Bakkt stands at the center of this evolution, building the compliance, secure and scalable infrastructure that enables these systems to connect and grow. Our vision is simple, yet bold, to be the trusted bridge between the physical and digital world of finance, enabling seamless value transfer as society accelerates into an AI-driven economy. If we take a step back, it's clear the evolution of global finance is already underway, and the scale of opportunity is extraordinary. Out of an estimated $700 trillion in global assets, only a small fraction currently live on blockchain rails. That's rapidly changing as digital infrastructure becomes increasingly integrated into traditional systems. Bitcoin continues to gain acceptance as a credible treasury asset among corporates, sovereigns and institutions. Stablecoins, meanwhile, now settle over $30 trillion annually surpassing Visa and new policy frameworks such as the U.S. Genius Act, are establishing clear regulatory guardrails that legitimize this market. At the same time, tokenization is moving from pilots to production. Financial institutions are beginning to issue and settle assets on programmable rails with BCG forecasting nearly $19 trillion in tokenized value by 2033. The takeaway, the total addressable market for digital asset infrastructure is enormous, and we are still in the very early innings. Bakkt is positioning itself at the center of this transformation with a regulated rails custody and settlement layer that will power this ecosystem. We are aligning our capital talent and road map to deliver tangible outcomes shaped by these powerful global trends. This quarter represents an important milestone in Bakkt's journey. We delivered strong results with $29 million in adjusted EBITDA, which demonstrates the scalability and efficiency of our evolving business model. On the balance sheet, we closed the quarter with approximately $64 million in cash and restricted cash and no debt, reflecting disciplined execution and a significantly strengthened financial foundation. While I'm pleased with these results, I want to be absolutely clear, this is just the beginning. The heavy lifting of our transformation is largely behind us, and I expect to complete the process by the end of Q4 as the elements of our restructuring, product launches, distribution partnership and cost initiatives all start coming together. This quarter also affirms the strength of our Bakkt Global business model, a framework built for durability and scale. It validates the structural and strategic changes we made are already translating into tangible performance. And as we look ahead, I'll walk you through the decisive actions we've taken since I became CEO, what remains in our road map and how Bakkt is uniquely positioned to power the structural rearchitecture of global finance. When I stepped in as CEO following the Cooperation Agreement with DTR, Bakkt was spread too thin, a collection of disconnected initiatives burdened by noncore assets and inefficient cost structure and a lack of strategic focus that had built up over years of missteps. We acted with immense urgency. Over the past 2.5 quarters, we've executed a disciplined and deliberate transformation, one that touched every part of the business. We exited noncore operations, reconstituted the Board, streamlined our organization and refocused entirely around one mission, building a leading regulated digital asset infrastructure platform. We rebuilt Bakkt from the ground up, simplifying our technology stack, reducing external dependencies and attracting top-tier talent to lead our 3 core verticals. Bakkt Markets, Bakkt Agent and Bakkt Global, which I'll discuss shortly. We also strengthened governance and leadership. Phillip Lord, our President of International, is driving our expansion across Japan, Korea and India, connecting us to some of the world's most dynamic capital markets. Ankit Khemka, our Chief Product Officer, who was the former Head of Growth at Revolut is accelerating innovation and integration across our products primarily on the stablecoin front. At the Board level, we previously welcomed Mike Alfred and Lyn Alden, and today, I'm very pleased to welcome Richard Galvin, 3 deeply independent thinkers and accomplished entrepreneurs. These are not professional "directors" collecting fees. Each conducted their own diligence, challenged our assumptions and joined the Board after gaining conviction in our vision, our road map and the integrity of our transformation. That engagement brings institutional discipline and intellectual rigor to Bakkt's covenants, not box sticky. We eliminated structural overhangs, significantly reduced costs and strengthened our balance sheet. Today, every dollar we spend is driving monetization through trading spreads, custody fees, stablecoin flows and recurring revenues. This has not just been a cleanup exercise but instead a full-scale reboot of the company that is now ready for the exciting disruption currently underway for the next few decades of finance. And we did it at what many would consider lightning speed. As we approach the end of Q4, our transformation enters its final phase. From here the focus shifts from transformation to acceleration, integrating our platforms, expanding our regulated custody and advancing strategic partnerships across markets and stablecoin infrastructure. A key milestone this quarter was the simplification of our capital structure. In Q3, we announced, and on November 3 close, the collapse of our Up-C structure, eliminating the dual-class share system that dates back to our deSPAC in 2021. That structure serves its purpose early on, but over time, it's become a total drag. It added complexity, reduced liquidity and created friction for institutional investors. With the Up-C collapse complete, Bakkt now operates as one company, one cap table, one mission. Shareholders, management and employees are now aligned under a single corporate entity, a major step forward in transparency, governance and shareholder alignment. We also strengthened our balance sheet. Between Q2 and Q3, we raised roughly $100 million in new capital and eliminated all outstanding debt giving Bakkt a cleaner, stronger financial foundation. We carry more than $120 million of tax loss carryforwards, a valuable asset that will offset future taxable income as profitability scale. To underscore my own conviction, I personally invested about $1.5 million in Bakkt shares in August through open market purchases. And as of October 31, shareholders have authorized me to purchase up to 13.4 million more stock through an option plan. I view this not as a signal, but as a statement of belief. I'm fully aligned with our shareholders for the long term. And let me make one point very clear, Bakkt is not in the business of perpetual equity issuance. We are not "a digital asset treasury vehicle" chasing exposure through dilution. We've turned the corner financially, debt-free, disciplined and focused. Any future capital raising will be done strategically, selectively and with a deep respect for shareholder value. This new structure and capital position gives us the flexibility to pursue opportunities, but always with the discipline and alignment that shareholders expect and that I personally demand. With our foundation reset and capital structure simplified, we are now focused on what defines Bakkt our 3 growth engines: Markets, Agent and Global. Bakkt markets is the foundation. It provides institutional-grade infrastructure for digital assets, connecting clients to liquidity, market-making and regulated custody through our nationwide money transmission licenses and New York BIT license. This is how institutions trade on Bakkt, compliant, efficient and secure. Bakkt Agent is how money moves. It's our programmable finance platform, combining stablecoins, AI agents and cross-border payments into one seamless system, making sending, spending, saving and transacting as easy as messaging. This positions Bakkt at the heart of the stablecoin adoption wave and global remittance demand. Bakkt Global takes our technology into new jurisdictions through a minority investment model designed to generate investment gains and our long-term recurring revenue. We started in Japan where early progress in validating the model, and we'll share more updates as it scales in the quarters ahead. Together, these businesses form a unified regulated digital asset company, connecting how markets trade, how money moves and how value is stored. Let's start with Bakkt Markets, our core business, the engine of our infrastructure and the foundation of how modern digital markets will eventually trade in my opinion. This division is primarily U.S.-based and built around a simple but powerful flywheel, market infrastructure, balance sheet strength and regulatory licensing, each reinforcing the other as volumes grow and liquidity deepens. Our regulated core is anchored by MTL licenses across the U.S. and our New York BIT license. It's designed for institutional-grade performance, offering deep liquidity, stablecoin on and off ramps, OTC trading and secure custody through the new partnership of Bakkt ICE Storage with Intercontinental Exchange scheduled to launch in Q1 2026. We are also expanding through Bakkt FX and evolution of our brokerage-in-a-box business. It provides a single point of access for B2B2C clients to route, trade, settle and custody assets, serving exchanges, fintechs and brokers that want to operate compliantly in the U.S. without building the regulatory stack themselves. Together, these elements make Bakkt Markets, the engine room of our platform compliant, connected and built to scale. Next, Bakkt Agent is how money moves seamlessly, intelligently and globally. Stablecoins have become one of the most disruptive forces in modern finance. They're reshaping how money is stored, sent and earned at a fraction of the cost of legacy rails. Bakkt Agent is our response, a programmable finance platform operating behind the scenes as the AI-driven architecture powering the next wave of digital banking. Under the hood, Bakkt Agent is an AI-first modular stack, built from the ground up. Multiple AI agents coordinate workflows across payments, compliance and treasury, integrating with partner banks, card networks and payment providers worldwide. The result is a white label customizable foundation that allows any partner to launch a neobank grade experience quickly and compliantly. Rather than building a direct-to-consumer business, our model is distribution partnerships driven and asset-light. Partners embed Bakkt Agent into their products, leveraging our licensing coverage, global partnerships and modern APIs without the heavy integration costs. Through our conversational interface, Zaira we are starting with cross-border remittances, a nearly $850 billion market, where consumers still pay up to 7% fees. Bakkt Agent enables faster, cheaper and more intuitive transfers built for scale. At its core, Bakkt Agent is the programmable financial stack unifying global money movement, rewards and AI-driven finance into one seamless platform. We expect to announce significant distribution partnerships in the near term as we move to a scale rollout in the quarters ahead. Bakkt Global is where our infrastructure model meets international scale, enabling entry into high-value markets while compounding long-term shareholder value. At its core, Bakkt Global may give our shareholders look through exposure to Bitcoin through publicly listed entities and select jurisdictions if those entities decide to pursue a strategy to hold Bitcoin on their balance sheet. When these entities deploy capital into Bitcoin, Bakkt earns recurring custody and management fees by being the lowest cost regulated provider to these entities, while our shareholders indirectly participate in Bitcoin upside. Each of these entities will maintain independent governance and boards to ensure transparency and credibility. Our first investment is already underway in Japan for which the EGM is set for November 11 and where we expect the company, Bitcoin Japan Corporation, to outline its strategy. This model deliberately extends our markets and agent infrastructure globally, enabling us to own minority stakes in high-potential jurisdictions, expand our footprint, compound fee income and generate recurring revenue, all while maintaining discipline on capital intensity. As we look ahead for 2026 KPIs, I want to provide a clear view of how Bakkt makes money going forward ahead of the Investor Day scheduled for some time in Q1 2026. Our model is diversified, recurring and designed to compound as we scale dramatically over the coming quarters. Across markets, Agent and Global, each vertical contributes revenue streams, each reinforcing the other. Bakkt Markets generates B2B and B2B2C revenue through market-making OTC spreads, trading volume and lending fees, the core liquidity engine of the platform. Bakkt Agent earns stablecoin on-ramp, off-ramp revenue from transaction volume, spreads and FX conversion, powered by our AI-first architecture and embedded through distribution partnerships. Bakkt Global adds licensing, management fees, NAV accretion and investment gains from our minority holdings in international partners. Together, these form a resilient multilayered revenue engine where Markets provides liquidity, Agent drives stablecoin and payment flows and Global expands our reach into new jurisdictions that can amplify both. As we look across our milestones for the fourth quarter, our goals are clear: Bakkt aims to complete its transformation while strengthening the core engine that will position us to drive growth in 2026. Everything we've done, the operational reset, technology upgrades and cost optimization moves in one direction towards a leaner, faster and more disciplined platform built for scale and sustained profitability for which we've already seen the green shoots in this quarter's results. At the same time, we're expanding our reach across all 3 growth engines. In Markets, we are driving customer growth, completing key technology upgrades that will enhance liquidity and trading performance. For Bakkt Agent, we are opening new distribution corridors and advancing partnerships that will expand our stablecoin and cross-border flows and through Bakkt Global, we are extending our infrastructure into additional jurisdictions beyond Japan continuing to do so in a capital-light disciplined manner. We are also staying focused on the foundation, continuing to fine-tune our cost base, bringing in exceptional talent and rolling out the refreshed brand and website much needed that will reflect who we are today. As we released our 2026 KPIs and prepare for our to-be-announced Investor Day in Q1, shareholders will have a clear line of sight into how all these pieces come together into one cohesive strategy. And if we keep with the baseball analogy, I've been using on X recently, it feels like we are at the top of the ninth. The transformation innings are nearly behind us. Now it's about execution, closing out the quarter cleanly, staying focused and finishing strong. By December 31, I'm feeling quite confident sitting here that we'll be able to look back and call this turnaround complete at that time. With that, I'd like to hand over the call to Karen Alexander, our CFO, for a deeper dive into the financials. Karen? Karen Alexander: Thank you, Akshay. Before I get into the numbers, I want to acknowledge that this quarter still reflects some residual impact from our Loyalty business, which remains part of our results through year-end 2025. This means you'll continue to see some accounting noise as we report both continuing and discontinued operations. While this may make the GAAP figures appear uneven, the underlying economics of our core digital asset business are much clearer when you look at our adjusted metrics. As a reminder, beginning in Q1 2026, once Loyalty is fully behind us, our financial reporting will be clean and directly aligned with the diversified revenue model, Akshay, outlined earlier. For the quarter, total GAAP revenue was $402 million, up 27% year-over-year, primarily driven by higher crypto trading activities. Crypto costs and execution clearing and brokerage fees increased proportionately consistent with volume growth. Operating expenses, excluding those costs, were roughly flat at $26.7 million, reflecting lower compensation and SG&A following restructuring initiatives. Excluding about $5 million of nonrecurring restructuring charges, operating expenses would have declined by over 18% year-over-year, demonstrating continued cost discipline. As a result, adjusted EBITDA reached $28.7 million compared with a loss of $20.4 million in Q3 2024. And adjusted net income from continuing operations was $15.7 million. These measures better represent the earnings power of our digital asset infrastructure platform. They exclude discontinued operations and onetime noncash items, such as fair value changes and warrants, allowing investors to see the true progress of our core business. We expect the remaining transition noise to taper through year-end by Q1 2026, Bakkt's financials will be -- will fully reflect the leaner, more focused company we've rebuilt with clear visibility into sustainable growth and profitability. Turning to the balance sheet. We ended the quarter with $64 million in cash, cash equivalents and restricted cash and importantly, no long-term debt. As we complete our transformation, this balance sheet reflects a disciplined financial foundation, strong liquidity, no structural overhangs and sufficient flexibility to support both near-term commitments and future growth. We expect to use a portion of this cash in the fourth quarter to close the Loyalty divestiture and fund working capital, as we complete the transition to a pure-play digital asset platform. In our financial statements this quarter, you'll also notice the inclusion of current and noncurrent assets held for sale, which represents the Loyalty business and associated balances. Upon closing, these will roll off the balance sheet, leaving behind a streamlined digital asset infrastructure company that clearly reflects the economics of our continuing operations. Our focus remains on maintaining a resilient and efficient balance sheet, ensuring that we have the liquidity and flexibility to execute on our road map, pursue strategic opportunities responsibly and continue delivering long-term value for shareholders. With that, I'll hand it back to Akshay for closing remarks. Akshay Naheta: Thank you, Karen. To reiterate, this quarter marks another important step forward in Bakkt's transformation. As we move through the fourth quarter, you'll begin to see the changing of the guard, a new Bakkt taking shape. What's emerging reflects the culmination of a year of tough decisions, disciplined execution and the establishment of a foundation built for scale and long-term profitability. The heavy lifting is largely behind us, and the momentum heading into 2026 is not just exciting, it's real. The structure is now in place. The strategy is clear and the alignment across our people, partners and shareholders has never been stronger. Over the coming weeks, we'll work to finalize the remaining elements of this transformation. And by the time we speak again, I'm confident Bakkt will have completed its restructuring phase and will be operating with a clear line of sight to sustain profitable growth in 2026 and beyond. To our partners, our customers and especially our shareholders, thank you for your continued trust, patience and belief in what we are building. That concludes our third quarter 2025 earnings call. I'll hand it back to the operator. Operator: [Operator Instructions] And our first question comes from the line of Chris Brendler from Rosenblatt Securities. Chris Brendler: Congrats on the progress here. I'd just like to think about the business as it stands today? And maybe, Akshay, if you could sort of give us a little more insight on to the core offerings on the sort of the brokerage side? And how that might compare to Bakkt Zero Hash is offering? I think that's been a pretty major transaction in the space. And it feels like they're kind of similar to what Bakkt is doing, but I feel like I'm not quite sure where all the dots connect and how this sort of fits from a competitive standpoint. So maybe you could help me with that sort of area of questioning sort of how is Bakkt compared to Zero Hash? Akshay Naheta: Sure. Look, I think as far as Bakkt and Zero Hash, the direct comparison is concerned, I think we're both looking at being the picks and shovels layer, the regulated infrastructure that lets the ecosystem operate securely and at scale. I think there are lots of similarities and comparisons on that front. And as you can see, I think there is a lot of talk around stablecoins and the new payment rails these days. And so from my perspective, when I look at everything that's happening in the space from the recent M&A activity, whether it's Zero Hash and others as well as private market valuations in the space, you can really draw your own conclusions in terms of what their value is relative to Bakkt, et cetera. But I think that, look, we bring a pretty similar product suite just on the Bakkt Markets business relative to Zero Hash, except that we are doing this in a public setting where we plan on doing it without any heavy burn and not chasing top line volume and revenue growth, which is not profitable and doing it in a disciplined manner. So that's my perspective on this from what I know. Chris Brendler: Okay. Great. Very exciting. Towards the back of the slides on your milestones. #9 is release KPIs for 2026. I'm not looking for a sneak preview of what your targets are. But what are the key KPIs? If you can talk about them at this point, just sort of what should we be following here to monitor the progress on the new Bakkt? Akshay Naheta: So look, that's the reason why I laid out the slide earlier because I knew that there would be this question around key KPIs for 2026. And the slide earlier gives you exactly how we look at our business in terms of how the revenues are generated and how that all flows down to the bottom line. And so I would just say that in terms of KPIs, I think it will be driven from each of these 6 different boxes that I've highlighted. And the key variable for each of these boxes to actually make money and for it to actually flow down into revenues and then finally into profit. So I think when you look at Bakkt Markets, as an example, it will be around trading volume and the spreads that we are generating -- spreads and fees that we're generating, which then flows down to revenue. So that's very straightforward. On the Bakkt Agent side, I think you'd look at something around stablecoin transaction volume and the combined blended spread and FX conversion rates that we are making on that front. And when it comes to Bakkt Global, I think you're looking at 2 aspects of it. One is the NAV accretion of our investments that we are making because that's -- all of the investments that we're making are booked based on an equity method of accounting. So for example, our $11 million investment or so in Japan is today worth significantly higher than that, but we haven't put it through the P&L statement. And so that's something that sits on our balance sheet marked that at -- sorry, at our cost value. But -- however, depending on -- as I mentioned in my prepared remarks, depending on whether these companies, that we invest in, decide to go and pursue a Bitcoin treasury strategy or want to leverage some of our technology and license that, then there will be additional licensing and recurring revenue in terms of revenues that we'll end up generating. And I think we'll give you more color on all of these fronts as we go ahead and release the KPIs for 2026. Operator: And our next question comes from the line of Mark Palmer from Benchmark. Mark Palmer: I know you touched on this during your prepared remarks, but just wanted to dig into it a little bit more, can you talk about the role of partnerships, joint ventures on the one hand and M&A on the other as potential accelerants of each of the company's strategies? Akshay Naheta: So we are very focused on organic growth, Mark, for the moment. And so I can't really speak too much about M&A because we really haven't thought about that. But in terms of distribution partnerships, as I said, we are -- we've been hard at work to work on these distribution partnerships. In my prepared remarks, I alluded to the fact that we expect to have something that we can publicly share with everyone over the next -- over the coming quarter or two. And I think that is actually one of the gating factors for actually releasing the KPIs because until we get this in hand or are very close to doing it, we don't want to go out and release the KPIs. So our model is to grow through partnerships because that's the best way to grow. We don't want to be consumer-facing directly. I think that costs a lot of money to go out and expand and spend the money on customer acquisition costs. And so we will definitely continue pursuing a distribution-led partnership model to get the volumes onto the platform, and we look forward to updating everyone as and when we are ready to announce these partnerships publicly. Mark Palmer: Congratulations on the progress. Akshay Naheta: Thank you. Operator: [Operator Instructions] Our next question comes from the line of Justin Pan from Clear Street. Justin Pan: It's Justin on for Brian. Obviously, a ton of exciting work over the past quarters on [ deploying ] the structure of the business and paving a clear path for next year. I guess when we think about '26, what are some of the considerations on both the macro and the policy side you would call out that would be both potential tailwinds and headwinds to growth as we think about the outlook for 2026? Akshay Naheta: I mean, the most exciting thing is the CLARITY Act that's hopefully going to get passed soon, certainly, hopefully, next year. I think that's a very exciting development for us. And just getting the regulatory clarity as it relates to real-world asset tokenization is a big opportunity for us in general. Other than that, I think not much else on the policy front in the U.S. I think the administration has already paved away. And from day 1, they've declared their intention to make sure that America becomes a crypto capital of the world. And increasingly, it's already -- if it hasn't already become that, it's definitely well along its way to become that. I think the other thing that's very exciting is looking at all of these very large financial institutions getting their sleeves rolled out to participate in the stablecoin space because we are the picks and shovels, and we are stablecoin agnostic, and I just see a very, very bright future in terms of volume growth, cross currency, stablecoin FX-related growth and so on. And so we built a business which is ready to take advantage of all of those opportunities that lie ahead of us. And like I said, we're very early in the story, very, very early innings for what's to transpire here over the next several decades. So that's my view. Justin Pan: Got it. That's helpful. And just one more for me. You talked a bit about your international expansion model, beginning with Japan. I guess could you touch on some geographies that you're focused on next? And what's the strategy for scaling beyond the U.S. and Europe? Akshay Naheta: I think the model is the same. I explained it in my prepared remarks. But I think, look, you're going to hear from the company in Japan tomorrow, there is the EGM tomorrow. And I think it will become clearer as to what that company's strategy is going forward. The other jurisdictions that I alluded to in my prepared remarks are South Korea and India. And again, the idea will be to see what we can leverage on the markets and agent infrastructure side to grow in these high potential jurisdictions and expanding our footprint, so that we are very focused on our core market, which is the U.S., but then these companies are leveraging either our product services or technology to then grow, but then also give back some licensing and other revenue back to Bakkt. Operator: If there are no further questions from analysts, I'll pass the call back to Cody Fletcher for some questions from the retail community. Cody Fletcher: Thank you, operator. We have our first question from X user at [indiscernible] 333. His question was Visa, Mastercard, Zelle, they're all now talking about stablecoins. So how can Bakkt kind of compete with these companies. Akshay, you want to take this one? Akshay Naheta: I mean, it's similar to what Chris was alluding to as it relates to Zero Ash. But look, I'll answer this as well. So it's a fair question. We don't really see ourselves competing head-on with the big card networks of peer-to-peer systems. What Bakkt is doing is more of the picks and shovels layer, the regulated infrastructure that lets the whole ecosystem operate securely and at scale. And so there's a lot being said about stablecoins and new payment rails these days, and it's a good thing because it validates the overall direction that we are heading in. But there are still some very big gaps in how those systems work, particularly around compliance, custody, the payment rails and then the integration of it all into the TradFi rails. And for Bakkt, the cooperation agreement with DTR brings those capabilities directly inside Bakkt. And that really gives us a very solid footing as this market continues to evolve and grow materially over years to come, in my opinion. So the fintech space is huge. That's why I left a very lucrative career to be involved in this space because I believe that it's never going to be a winner-take-all space. It's that big. Different players can coexist, some consumer-facing, others like us providing the regulated backbone underneath. And if you look at, generally speaking, what's happening in terms of the recent M&A activity, by some of the very companies that you were mentioned in the questions and the private market valuations in the space, you can draw your own conclusions. Many of these companies are being bought by the very large names that were mentioned while they might not be showing any top line growth and are doing it with a lot of heavy burn and with our profitability. At least that's what the bankers are telling us. So we are taking a much more disciplined approach. We're building a sustainable compliant business that can scale responsibly and as the transformation ramps up here at year-end, I think that discipline combined with where the broader market is headed would speak for itself as to what Bakkt is building at this end. Hope that answers the question. Cody Fletcher: That's great. And our last question here is from another X user at [ Amir X Trades ]. Amir said, being invested in your company for 4-plus years like so many other shareholders, Bakkt time and time again loses all of its gains due to poor decisions and lack of updates. What will this new leadership team do differently to improve shareholder value over time. Akshay Naheta: So yes, Amir and a few other users on X have messaged me from time to time directly or tweeted at me, and I completely understand their frustration. I mean this is exactly why this new leadership team came in to fix the structure, clean up the balance sheet and refocus Bakkt on its core mission. I definitely cannot control or manage the company based on short-term stock price moves. As Mr. Buffett famously says, in the short term, the markets are voting machine. But in the long term, it's a weighing machine. And our job really is to build the kind of substance that the market will weigh over time. I believe we've made a lot of strong progress on the transformation, and we expect to have it largely completed by year-end. Either before year-end or at our Investor Day in Q1 '26, we'll share clear KPIs. We hope to announce the distribution partnerships that are currently being worked out, and we'll outline the next phase of our road map accordingly. And I hope that, Amir, you will see that progress and you'll continue supporting us as a long-term shareholder. Back to you, Cody. Cody Fletcher: Thanks, Akshay. That's all the questions we have in retail. So back to you, operator, to close this out. Operator: Certainly. Thank you, ladies and gentlemen, for your participation in today's conference. This does conclude the program. You may now disconnect. Good day.
Anand Ramachandran: Hello. Good afternoon, and good morning to everyone. Thank you for joining us today for VEON's Third Quarter 2025 results for the period ending 30th September 2025. My name is Anand Ramachandran, Chief Corporate Development Officer for VEON. Allow me to introduce our senior management in the room today. Next to me is Mr. Kaan Terzioglu, our Group CEO; and next to him, Mr. Burak Ozer, our Group CFO. Today's presentation, as usual, will begin with the key highlights and business update from Kaan, followed by a discussion of the financial results from Burak. We will then open the line for Q&A. Before we begin, please note that today's presentation may include forward-looking statements, which involve certain risks and uncertainties. These statements relate to the company's anticipated performance, 2025 guidance, market development, operational and network investments and the company's ability to realize its targets and initiatives. Our actual results may differ materially due to risks detailed in our annual report on Form 20-F and other filings with the SEC. The earnings release and presentation, including reconciliations of non-IFRS measures are all available on our Investor Relations website. With that, let me hand it over to Kaan. Muhterem Terzioglu: Thank you, Anand. Good morning, good afternoon, and welcome to everyone. Let me begin with a remarkable milestone. In September, our monthly digital service users surpassed monthly telecom SIM card users for the first time, a defining moment in our journey as a true digital operator. This signals the scale of the opportunity ahead of us and the extraordinary growth still to come. Across our footprint, more than 0.5 billion people, and we see a rising digital adoption, expanding connectivity and powerful demographic momentum. These markets are not just large. They are accelerating, underpinned by innovation and low base effects that create multiple vectors of sustained growth. At the heart of this opportunity is our digital operator model, uniquely positioned to capture and drive this transformation. By combining connectivity, digital platforms and financial inclusion, we are unlocking sustainable growth and enduring value creation for customers, communities, governments and shareholders alike. And now let's start the key messages from our Q3 results. I am pleased that we have delivered another strong quarter, starting with our financial performance. Our revenues grew 7.5% year-on-year in U.S. dollar terms. U.S. dollar EBITDA increased by 19.7% year-on-year. This is yet another $1 billion-plus revenue quarter and a $0.5 billion plus EBITDA quarter. On the back of this performance, we are raising our fiscal year 2025 EBITDA outlook. We now expect 16% to 18% EBITDA growth for the year in local currency terms, up from 14% to 16% earlier. Second, we are driving exceptional momentum in expanding our digital services portfolio. Direct digital revenues grew 63% in U.S. dollar terms and now contribute 17.8% of our total group revenues. Our AI 1440 strategy is becoming central to our operations with ongoing work on large language models and increasing integration into Agentic AI-powered customer-facing solutions. We are delivering localized multilingual features at scale through our super app platforms. Third, we continue to make good progress in executing our asset-light strategy. We have completed the sale of our Kyrgyzstan operations this quarter, further streamlining our portfolio and focusing on core growth markets. Our global framework agreement with Starlink aims to bringing direct-to-sell satellite connectivity to all of VEON's operating markets, ensuring resilient connectivity even in hard-to-reach areas. Kyivstar is on track to launch nationwide coverage subsequent to approvals. Beeline Kazakhstan is planning to launch services in Kazakhstan as we plan to test activities over the next couple of months. And finally, we continue to deliver for our shareholders. The landmark listing of Kyivstar on NASDAQ unlocked significant value with a current market valuation of $2.8 billion compared to $1.25 billion of equity, which is 2.3x of its book value. We retain an 89.6% stake in Kyivstar, which is worth $2.5 billion at Kyivstar's current market price. We are pleased that uncertainties regarding VEON's going-concern status have been mitigated, reflecting stronger liquidity and a more resilient balance sheet. And finally, our Board has approved another $100 million share and/or bond repurchase program, a clear demonstration of our confidence in our growth prospects and our continued commitment to deliver value to all our investors. Let's move to Q3 key financial metrics. Let me summarize our performance for the quarter. Telecom and infrastructure segment revenues on a like-on-like basis that adjusts for TNS+ this divestment grew 3.5% versus the reported 0.5% number that you see on this page. This reflects the impact of our differentiated networks, products and services in continuing to drive ARPU and subscriber engagement while reducing churn. Our direct digital revenues were up 63% and represents 17.8% of total group revenue. On profitability, our EBITDA margin continues to grow. Year-to-date margins have expanded by 320 basis points year-on-year and reflect both scale efficiencies and cost discipline. Last 12-month EPS stands at $8.89, up 60.2% year-on-year. However, the reported EPS for Q3 alone was a loss of $1.84 per share as we recorded 2 noncash charges totaling $259 million. First was a charge of $162 million related to the SPAC sponsor shares in connection with the Kyivstar listing, which is treated as a share-based compensation according to IFRS and has been recognized in the third quarter. Second was a charge of $97 million for the sale of our Kyrgyzstan business, triggering a cumulative currency translation adjustments. For the avoidance of doubt, Q3 results has contributed $76 million to our shareholders' equity. I will emphasize that these noncash charges have no impact on VEON's underlying operational performance, cash generation or financial guidance, which remains firmly supported by our strong organic growth and margin expansion across our key markets. Moving on, our last 12 months CapEx intensity, excluding Ukraine, was 17.7%, and it is in line with our guidance. Net debt, excluding leases, stood at $1.72 billion as of September. The improvement in leverage to 1.13x reflects our operational and financial discipline and the success of our asset-light strategy. Our last 12 months equity free cash flow reached $584 million. Finally, we ended the quarter with a cash balance of $1.67 million, including $653 million at the headquarters level. Let's look at our growth trajectory, and I will highlight 3 key points. First, on a like-for-like basis, which adjusts for deconsolidation of TNS+, the Uklon acquisition and the sale of Deodar and Kyrgyzstan business, our revenues would have grown 10% in U.S. dollars versus the reported 7.5%. Secondly, our EBITDA rose 19.7% in U.S. dollars, underscoring the resilience of our strategy and the quality of execution. Finally, I am pleased that our momentum continues to exceed inflation and nominal GDP growth, showcasing our ability to implement fair pricing while capturing greater share of customer wallet share. Let me dive into our digital revenue performance. Starting last quarter, we began breaking out the components of our digital service revenues to provide you with greater transparency into growth and potential of our digital businesses. Let me make 3 points here. First, financial services are the largest component, accounting for 54% of total digital revenues, growing 33% year-on-year. Second, growth is pretty broad-based with solid contributions across our entertainment, ride-hailing, enterprise and premium digital brand segments. Third, our sustainable cost advantages are how our low customer acquisition costs and optimized distribution model is driving this growth. These enable us to scale profitably and maintain strong unit economics. Let's look into our progress with regard to multiplay users. Multiplay users count customers that use at least one digital service in addition to our voice and data connectivity services. Multiplay is a key feature of our digital operator strategy and growth story. 4G enables multiplay, making increased 4G adoption is a key growth driver. And it is this 4G base that is increasingly shifting to multiplay, driven by our extensive and relevant suite of digital products and services. The multiplay segment drives growth through stronger customer engagement, higher data consumption, more frequent usage of voice services, improved retention and ARPU expansion. Our multiplay customers generate 3.8x the ARPU of a voice-only subscriber. Encouragingly, this ratio continues to sustain even as multiplay adoption expands as a proportion of our overall subscriber base. In the third quarter, 55.4% of our total customer revenues were generated by multiplay customers, and this segment grew revenue-wise 23% year-on-year. Let's look into different operations growth performance. And I'll use local currency terms across our markets for this. We have delivered strong double-digit revenue growth across all of our markets, apart from Bangladesh. While the headline revenue growth for Beeline Kazakhstan shows as single digit, revenues on a like-for-like basis, adjusting for TNS+ deconsolidation was up 23.3%. In Bangladesh, we are encouraged that the revenue returned to year-on-year growth for the first time in 14 months in September 2025. Our profitability trends across markets were strong as well. Headline numbers for Beeline Kazakhstan and Beeline Uzbekistan were impacted by tax effects. However, after adjusting for these, organic profitability trends remain very strong. Finally, please note that our consolidated financial results for Ukraine include full consolidation of Ukraine Tower Company, UTC, whereas the stand-alone disclosures for KGL Group that are also released this morning excludes UCT. We can take specific questions and discuss market-specific issues during the Q&A session. Let me now turn into the Financial Services business success story in Pakistan. This business is the largest component of our Financial Services business, which I have highlighted earlier. This quarter, we completed the operational separation of JazzCash. JazzCash will continue to provide technology and services to MMBL. Both are now fully owned subsidiaries of VEON. This is a key step in accelerating growth and unlocking value across our digital financial services portfolio. The business continues to deliver strong growth, as you see on this page. Gross transaction value for the quarter rose 40% year-on-year, representing 13% of Pakistan's gross domestic product on a last 12-month basis. This was driven by a 48% increase in total transactions and a 38% increase in transactions per user. JazzCash with its over 700,000 merchant base processes over 80% of all Raast payments value under the Prime Minister's Cashless Society initiative. Loan origination expanded sharply this quarter with the daily average number of digital loans rising by nearly 26%. The average of 153,000 micro loans disbursed on a single day in Q3. More recently, JazzCash achieved a major milestone with its highest ever single-day lending disbursement of PKR 1.1 billion through 200,000 loans. We are extremely proud of what JazzCash has achieved. With its trusted brand, deep market reach and a growing ecosystem, JazzCash is leading Pakistan's rapid transition to a cashless economy and is positioned to unlock meaningful long-term value for VEON. Let us now have a closer look at the continued momentum of our digital ecosystem. We continue to see strong and broad-based growth across platforms with the total monthly active users growing now to 143.3 million, up 39% year-on-year. Our digital-only user base has more than doubled to 50 million and now represents nearly 35% of our total digital users. As I highlighted earlier, digital engagement exceeded mobile engagement for the first time in September, an important milestone that highlights how our platforms are becoming the primary customer interface and unlocking new opportunities for cross-sell, advertising and digital services monetization. Over the last 12 months, transaction values grew 50% to reach $48.8 billion throughout our financial services platforms. Let's look in a more detailed outlook to our digital portfolio, and we focus on consumer-centric platforms on this page. Our Financial Services segment has increased by 25% to reach 42.1 million users across all platforms. I highlighted JazzCash earlier. Simply in Kazakhstan, Beepul in Uzbekistan continue to scale their roles as the financial layer of our digital ecosystem in their countries. Our entertainment platforms delivered a strong quarter as well. Tamasha in Pakistan and Toffee in Bangladesh achieved record levels of engagement, fueled by the excitement of Asia Cup Cricket tournament. This also drove a sharp uptick in advertising demand. In Ukraine, Kyivstar TV's revised partnership has elevated direct customer engagement to an entirely new level. Meanwhile, BeeTV in Kazakhstan and Kinom in Uzbekistan continued to gain solid traction, reinforcing the growing strength of our regional entertainment portfolio. Our super apps continue to scale, positioned as one-stop digital hub. These platforms are seamlessly integrating essential services from health care to entertainment and driving deeper customer engagement across our footprint. Uklon's ride-hailing service reached 3.6 million users and recorded strong growth in active riders, trip volumes and digital engagement in Ukraine and Uzbekistan. Our premium digital brands, spanning life cycle, digital identity, productivity tools saw users grow strongly to 3.3 million. With evolving lifestyle and content integrations, these platforms are designed to meet evolving customer needs with curated high-value experiences. Let's move to our enterprise platforms. These platforms are transforming from internal enablers to market-facing technology leaders, driving next generations augmented intelligence and innovation. This opens up new revenue pools and strengthens our position as next-generation digital operator. QazCode, Kyivstar Tech, Garaj, U-Code and bCloud are winning new contracts, delivering augmented intelligence solutions, cloud services and data center solutions to corporate and government clients, expanding our presence in fast-growing enterprise technology markets. Across these companies, we have now nearly 2,000 engineers, software developers, data scientists executing at scale to build commercializable next-generation digital products. Our advertising technology business, VEON AdTech, is scaling rapidly, powered by augmented intelligence and big data. It reaches over 70 million screens across our footprint, delivering measurable return on investment for advertisers. Built on our own AI and data infrastructure, the platform provides 360-degree advertising ecosystem, enabling precise audience targeting, real-time optimization and creating a powerful new monetization layer across our digital portfolio. Let's turn now how we are embedding augmented intelligence across our ecosystem. We call it AI1440, augmented intelligence for every single minute in a day. In Kazakhstan, our Kaz-LLM is now alive in 4 languages, Kazakh, Turkish, English and Russian. -- powering agentic features across multiple platforms. In Ukraine, Kyivstar Tech is co-developing the country's first sovereign Ukrainian language model with the Ministry of Digital Transformation, a landmark step in building national AI capabilities. We will extend this capability to Uzbek, Bangla and Urdu and deepen market-specific intelligence. Across our applications, AI is becoming truly agentic and reshaping customer engagement from self-service to entertainment and education. In entertainment, AI recommendation engines now reached nearly 35 million monthly active users across Tamasha, Kinom, Kyivstar TV, [ Rithmm ] and Hitter. On Tamasha, AI already drives over 1/3 of all live TV sessions and nearly 60% of video-on-demand plays. Its AI news channel has alone became the third most watched channel on the platform. The news channel is sometimes having male or female news anchors that presents the news on live TV. In customer care, our SIMOSA AI chat assistant now autonomously manages customer journeys for nearly 1 million users every month. Our customized personal growth solutions are seeing strong adoption with our consumer audience. Janymda AI Tutor engages 17,000 monthly users, while Ryze AI tools processed over 16,000 requests, helping students write their CVs. We are also innovating with AI for enterprise. QazCode successfully launched Aventa AI, an enterprise-grade AI native platform designed to scale agentic workflows across HR, finance and procurement functions. In summary, augmented intelligence is now a leading layer in our ecosystem, delivering measurable impact for us across all our markets. I will now hand over to Burak, who will take you through the financials in more detail. Burak Ozer: Thank you, Kaan. Looking at group revenues, we delivered total revenue of USD 1.115 billion in the third quarter, representing a growth of 7.5% in U.S. dollar terms. As previously noted by Kaan, the quarter included the deconsolidation of TNS+ in Kazakhstan, the consolidation of Uklon and the sale of Deodar and our Kyrgyzstan business. On a like-for-like basis, that adjust for this, our revenues grew 10%, underscoring the continued momentum across our operating markets. Direct digital revenues grew 63% year-on-year to reach $198 million. Digital services now account for 17.8% of total revenues, up from 11% a year ago. Turning the page to profitability. EBITDA for the quarter was USD 524 million, representing growth of 19.7%. The EBITDA margin stood at 47% for the quarter, up 410 basis points year-on-year and was supported by operating leverage and disciplined cost management across all markets. We note that our digital services now account for 17.8% of group revenue. While digital margins are structurally lower, their significantly lower CapEx intensity ensures comparable cash conversion relative to telecom services. As our revenue mix continues to shift in this direction, we remain focused on sustaining EBITDA growth at scale while enhancing group-wide capital efficiency and long-term free cash flow generation. Turning now to the balance sheet. We ended the quarter with USD 1.67 billion in cash and deposits, of which USD 653 million is held at headquarters. Net dividends upstream from operating companies during the quarter totaled USD 96 million and USD 285 million for the year-to-date. Gross debt stood at USD 4.86 billion, up slightly from June and reflected the completion of our USD 200 million bond issuance during the quarter. Approximately half of our external debt is now held at operating company level, providing natural currency hedging. Net debt was USD 3.48 billion, while net debt, excluding leases, improved to USD 1.73 billion, bringing leverage down to 1.13x EBITDA. Let me now hand the call back to Kaan. Muhterem Terzioglu: Thank you, Burak. Let me conclude with our outlook for the year. Despite ongoing macro and geopolitical challenges, VEON continues to execute strongly across all markets. We are revising our EBITDA outlook for the full year and now expect EBITDA growth of 16% to 18% in local currency terms for the full year. We are maintaining our revenue guidance of 13% to 15% growth in local currency terms. In U.S. dollar terms, we expect this to translate to 7% to 8% revenue growth and 10% to 11% EBITDA growth for the full year, assuming no significant fluctuations in exchange rates from current levels. Our capital intensity, excluding Ukraine, remains with 17% to 19% range. These targets are based on a blended weighted average inflation rate of 8.2%. In closing, we are pleased with our business momentum. Looking ahead, we remain confident in VEON's trajectory and the opportunities before us. As I highlighted earlier, the Board has approved another $100 million share and/or bond repurchase program, reinforcing VEON's confidence in long-term value creation. VEON is well positioned to sustain growth and long-term value creation for our shareholders, customers and communities we serve. Thank you for your attention and support. Now we can open the line for Q&A. Operator: [Operator Instructions] Our first question comes from Jesse Sobelson with BTIG. Jesse Sobelson: This is Jesse Sobelson with BTIG. I just wanted to ask about the recent transaction involving Kyivstar and the decision to bring the asset public via SPAC. Could you share the motivation for choosing a SPAC structure for this process? And then additionally, you noted that you own nearly 90% of the asset. Looking ahead, how are you thinking about your future ownership stake? Would you consider selling a portion of the holdings to generate liquidity? How would you balance the liquidity versus maintaining control of the asset? Muhterem Terzioglu: Thank you very much, Jesse, for the question. So with regard to Kyivstar's de-SPAC transaction, we are a true believer in Ukraine's future, and that's why we are championing invest in Ukraine now initiative throughout the world. And we thought it would be the right thing for us to find a deal certain fast track to list Kyivstar. And that's why we have opted for a de-SPAC process. And I'm very glad to conclude it on a successful basis as Kyivstar is now listed in NASDAQ at a valuation, which is 2.3x its net equity value of $1.25 billion at $2.8 billion. I think this was a very, very successful transaction from our side. Now naturally, SPAC comes with additional cost, given that deal certainty element and the speed of transaction process. But overall, I think being a pioneer in making sure creating opportunities for international investors in Europe and U.S. in participating for the future growth of Ukraine, I think it was the right thing. Now looking with the same perspective, we are keen to allow more investors to invest in Kyivstar. So we will be open for diluting our current position further to allow people from Ukraine, first of all, to have a chance to invest in Kyivstar and any credible international investor to also come in and be part of the success story that will be built in Ukraine. And we will continue championing our invest in Ukraine now initiative all around the world as well. Thank you. Operator: Our next question comes from Nicholas Paton with Edison Group. Nicholas Paton: Just a quick question on Kyivstar. There's quite a lot of cash at the head office level. I think it's $600 million or so. What's the plan for that? And how easy will that be to repatriate up the chain? Muhterem Terzioglu: I think Nicholas, $653 million is the headquarters cash at VEON, not Kyivstar. Anand Ramachandran: Kyivstar $470 million. Muhterem Terzioglu: $470 million would be the right amount for Kyivstar. And as you know, we are still at war. So Martial law still stays in place. During the Martial law, there are limitations on upstreaming. There is $1 million per company type of a dividend limit. But what we would like to see actually is just in line with our Invest in Ukraine Now initiative, you will see us actually investing in Ukraine. And we have been active with Helsi acquisition and Uklon acquisition. We believe that there is a unique opportunity to build a digital ecosystem in the country. And naturally, based on the needs of the country, whether it is energy resilience, energy storage needs or investing in growth opportunities, we will be also looking into those. But in the meantime, our objective is to make sure that we keep our cash safe in assets that are in either generating cash or creating capacity for us to protect ourselves from potential devaluations. Operator: Our next question comes from Adrian Cundy with Emerging & Frontier Capital. Adrian Francis Cundy: Sorry, my video is not functioning well today. So I just [indiscernible] you can see my picture. I have 2 questions. First, relating to UTC and just infrastructure in general within Kyivstar, will we be seeing you continue to pursue divestment on the Pakistan model of tower assets in the Ukraine? Or is VEON planning to retain control of that for the foreseeable future, particularly given that Kyivstar is now talking about a significant network upgrade and is beginning to touch on 5G in line with the national development strategy. And the second question I have relates to the financial services in Pakistan. Now that JazzCash and the bank are stand-alone entities, how do you sort of see them working with the [indiscernible] business? Can we get some more color on what type of loans are being extended? And finally, do you sort of see further initiatives and value extraction for the Pakistan business? Muhterem Terzioglu: Well, let me start answering your first question about our tower business in Ukraine. Naturally, it's no surprise, I think no secret that we have a strategy of being asset-light, and we see actually tower operations more valuable under the management of independent tower companies, which allows sharing of infrastructure among multiple operators. So it's no different in Ukraine. So the first step was us creating our independent tower company is, I think, a move in the right direction, but we will be looking for opportunities around sharing infrastructure in the country in a more effective way and ultimately, making sure that the tower operations are owned and operated by an independent party, which can further focus on marketing activities of this infrastructure. There are multiple benefits of separating towers from the operating companies. As you know, our telecom industry has been heavily penalized by cross-subsidization of business models like infrastructure businesses and service businesses. And in everything we do, we try to avoid that and make sure that we focus on the right customer rather than cross-subsidizing different businesses. So you will see more actions and news on that front. We are one of the biggest infrastructure providers, of course, in Ukraine, but I believe no telecom company can afford to have its own exclusive networks. We need to learn to share networks, and that's the path for increasing cash generation capacity for our businesses. So -- and that's the first question. The second question, financial services business. In countries like Pakistan, the unmet demand in financial service area is huge. People who are unbanked, who have no way of having access to financial services is an existing opportunity that we have supported. So that's why we have our microfinance bank, MMBL as well as our digital wallet operator, JazzCash, serving our customers there. We have close to 50 million bank accounts and a monthly active user base of 22 million people. On an average day in Q3, we issued 153,000 nano loans. These loans are around $30 to $40 in nature. And they are really the type of money that a taxi driver would need if they would have a flat tire or they need to have 1 day advance of putting gasoline into their tank or a housewife would need that $30 to buy some flour, sugar and eggs to make some cookies and sell in the marketplace. These are really the type of loans that provides lifeblood to practically to small businesses, to family businesses, and we are very proud to make this work. Now naturally, we have also a merchant network of 700,000 merchants. These networks also allow us to significantly drive cashless economy in the country. We operate a significant portion of entire Raast transactions, which is the mobile payment clearance platform, and we transact almost 13% of total GDP. So for us, it's not only being big, but it is being really serving the customers on a daily basis. And this business is growing at 33% year-on-year, and it is, I think, going to be an extremely successful case study when it comes to the digital banking and fintech businesses. We will, of course, be looking into how we can take this business even at a higher scale. And you might see actually some strategic investors also looking into this together with us. Anand Ramachandran: What was the third question again? Can you repeat it, please? Adrian Francis Cundy: I guess the follow-up is just on that on even a stand-alone, is there any -- are you looking at value extraction or value recognition for your digital assets in places like Pakistan? Muhterem Terzioglu: I think the answer is clearly, yes, as the opportunities come to the right level and scale. For us, digital services portfolio we have serves 2 important purposes. One is the multiplay strategy that we have on our regular telecom business. As our customers use our digital services, they stay longer with us, they consume more. And then, of course, the direct digital revenue potential of these service lines from entertainment to financial services drives additional growth for us. And to be precise, the ARPU level increase and the churn reduction of digital services impact on our SIM user base has nothing to do with the direct digital revenues that we report. These are 2 different growth. The growth on one side drives our business on telecom side and the other one drives the business on the digital services. And when the right scale arrives, of course, we will be looking for crystallization of the value of our digital services portfolio. Operator: Our next question comes from Ahmed Mostafa with Inam. Ahmed Mostafa: I have two questions. Jazz delivered a strong EBITDA margin uplift this quarter. And yet you have indicated that consolidated margins may soften over the long run as digital services say. So how do you manage this trade-off between scale and profitability? And second, you have raised your EBITDA growth guidance for this year. So could you walk us through the main drivers behind this improvement in the EBITDA margin? Muhterem Terzioglu: Ahmed, good point. We thought the digital services businesses would be having a bigger dilution on our EBITDA margins. So far, we failed on that. Yes, our EBITDA margins are also improving compared to the business as our digital services are growing. But I think I attribute that on really discipline when it comes to operational cost management of our operations. But let me also give the word to our CFO, Burak, anything you would like to add on that? Burak Ozer: Yes. On top of the discipline in terms of driving efficiencies on cost side, we are also having disciplined price actions, price increases that we are taking in line with the market conditions that would beat the inflation, devaluation plus the GDP growth. So those 2 combined together definitely is helping our margin. Operator: Our next question comes from Vincent Fernando with Zero One. Burak Ozer: We can't hear you yet. Anand Ramachandran: Operator, shall we try again move to the next question maybe come back to Vincent. Vincent Fernando: Can you hear me now? Anand Ramachandran: Yes. Vincent Fernando: I apologize for that. I just want to ask again on the JazzCash and MMBL. Now that you have these more operating independently, do you plan to also try to take some of the capabilities in that -- in those businesses and then maybe bring it to expand your fintech business in other markets? The other question is that when you look at the MAUs for JazzCash, it's about 20.6 million, I think, most recently. Your total telco subs are 72.7 million. So there's still a lot of room to actually convert just your existing subs into JazzCash or MMBL customers. So are there other strategies you have to sort of increase the penetration for that as well? Those are my 2 questions. Muhterem Terzioglu: Vincent, I think you're spot on in terms of both organic and accelerated growth opportunities in this business. Now you need to keep in mind that Pakistan is still a frontier market where 4G penetration as well as smartphone penetration has certain limits in terms of the penetration capabilities. I translate those into upsides that are in front of us. So one of the key initiatives that you will see us focusing on in Pakistan is smartphone ownership. Affordable smartphones will be critical. And they will come up with, of course, their own embedded digital services on top of that. So we have quite a lot of appetite in this conversion. And I would like to make sure that everybody who is our customer is having access to the digital services, whether it be on financial services or entertainment or health care or education to have access to these platforms. So you're right. In addition to the growth that we see, I think the organic growth can accelerate, and that's the basis of the sustainable growth expectation we have from the marketplace really. Now with regard to our ability to leverage the competencies and the experiences that we built in Pakistan in other markets, absolutely. And that's why we are very excited about the growth potential in Bangladesh and potentially in Ukraine. And the know-how that we have in terms of risk managing a bank, first of all, but also having credit scoring engines fine-tuned for these type of nano loans, all these capabilities are applicable in all the markets. And of course, our intention is to make sure that we leverage these, just like our intention around making Uklon or Helsi, our health care platform or our ridesharing platform also be available through all the super apps we have in all the countries. Vincent Fernando: Got it. Just one little quick follow-on on that. So Pakistan, I believe, has a digital bank licensing framework. But I guess under MMBL, you also have a license there. Do you -- is there value in you having one of those digital bank licenses? Or is it that you can actually operate -- you can have MMBL, I guess, operate on parts where you want more banking services, JazzCash and payments? Just want to understand if that's something that's part of the road map or maybe just not needed? Muhterem Terzioglu: We operate currently under the microfinance banking license. However, I believe that we can do more and we can contribute more to the Cashless Economy Initiative of Prime Minister, that will require us to upgrade our license to a digital bank, full digital bank license, and we are in the process of looking for ways of achieving that sooner rather than later. I think the success story of JazzCash is very visible and recognized very strongly by the Pakistani government as well. They want the same. We want the same. And I think we will get to a level of much higher capabilities if we upgrade it to a full digital bank license, and we are working on it. Operator: Our next question comes from Ali Zaidi with Inam. Ali Zaidi: So my question is related to ride-hailing. We have seen that it already contributes -- it's like the third largest contributor to the digital revenue. So do you have any plans to like explore other markets for this business, specifically Pakistan considering recent exits of the major player in that country. Do you see a potential for like an entry and growth in this segment? Muhterem Terzioglu: So Ali, the ride-hailing business is really -- when you look to the markets, it's a city-by-city operation. So currently, it operates in 28 cities, 27 of those cities are in Ukraine. One is in Tashkent in Uzbekistan. And we clearly have an ambition and appetite to grow this business in a certain priority list to other markets. Whether this will be starting from Kazakhstan or Pakistan or at the same time, we are working on different sort of initiatives, but it will be a city-by-city decisions as every city has different characteristics. Operator: Our next question comes from Matthew Harrigan with The Benchmark Company. Matthew Harrigan: I feel more confident in putting out a positive VEON preview than I do on T-Mobile or Comcast, which is -- I'm not sure whether that's good or bad from my perspective. But one thing that's interesting and clearly, the dynamics for you are different because you're such a market leader. But when you look at T-Mobile in the U.S., they have a very strong benefit from switching share relative, obviously, Verizon and AT&T to other large competitors that don't have as good a network, but still definitely big animals that they're wrestling with. And if you really assume that there's not a lot of growth in the U.S. mobile market, just by virtue of their switching share, they can continue to put up really, really nice numbers. And your -- that analysis, I guess, would be pertinent to you on the full gamut of apps that you're running as well as mobile. But are you such a market leader that anything that comes along with device innovation or any perceptions of network quality don't affect you that much because almost by definition, you're so much larger than your competitors that it's -- you almost definitionally have to erode a little bit? Or do you think that as you do get CES, you see -- and I know people are not buying iPhone 17 Pros in Pakistan very often. But do you feel like with switching share and device innovation and awareness of how powerful these apps are and how good it is to have the best mobile network when you're running these apps that it can help you? Or do you think that you're kind of largely a function that just really, really correlates with the overall market growth in mobile and the demand for the app? Sorry, a little long-winded there, but I'm sure you get the gist of it. Muhterem Terzioglu: Matthew, I think the opportunity that in front of us is exciting from 2 perspectives, not only that we have the digital services, which are attractive to our customers, but also there are so many customers who are still not yet connected even. We're going to be having 90 million additional people who will be having access to 4G networks, who will be buying their first smartphones. And hopefully, those smartphones will be bought from us with our applications installed on them with their ability without having maybe a credit card that they can pay for the services for the games, for the videos for the channels that they need. And that's why I'm excited because, yes, we are big. We are -- except for Bangladesh, we are #1 in all the markets that we operate in. And in Bangladesh, we are #1 if you compare our entertainment platform and the other super apps that we have. And I truly believe that as our customers who have never touched yet any other service than calling somebody, and there are 40 million of them on our network. Those people will have a smartphone. They will have their first connection. They will watch their first movie online on mobile networks. And we are looking forward to those days and 40 million of them will be there to basically be our customers. That's why I believe the organic growth is an incredible opportunity. That's why I opened it with that slide. But the acceleration that will come through digital services will just be unmatchable as an opportunity for us to grab. Matthew Harrigan: Okay. No, that's -- you're in a better position than having to fight to grab market share in a privileged position, but you kind of are the market growth. That's a good place to be. Operator: [Operator Instructions] Our next question comes from Vincent Fernando with Zero One. Vincent Fernando: There's a little lag, but I'm here. So I just want to double tap again on the fintech in Pakistan. You reported $23.8 million EBITDA for the third quarter. Are you able to give any color on maybe how much of that -- like where can we start to look at a run rate? Because you did $20.3 million in the second quarter, USD 23.8 million EBITDA in third quarter. I'm just trying to try to find a base for run rate. Is it relatively recurring in nature? I just want to understand that. Muhterem Terzioglu: Yes. Our financial services business in Pakistan is actually quite a steady growth business. So over the last 6 quarters, every quarter, we have been seeing a continuous growth of 40% to 30% every single quarter. And looking into our future, I see no reason for this to go down. I think we'll continue keeping that lines. Clearly, the lending business has a balance sheet criteria in terms of growth. But currently, I feel comfortable with those. Operator: We have no further questions at this time. I will now pass back to Anand Ramachandran for closing remarks. Anand Ramachandran: Thank you. Thank you. Well, guys, thank you so much for dialing in as usual. Thank you so much for your support of VEON. As always, please e-mail us, call us here if you have any questions at all, and we'll continue talking. But till then until the next quarter, thank you, and bye-bye. Muhterem Terzioglu: Thank you very much.
Operator: Thank you for standing by. This is the conference operator. Welcome to the K92 Mining 2025 Third Quarter Financial Results Conference Call. [Operator Instructions] And the conference is being recorded. [Operator Instructions] I would now like to turn the conference over to David Medilek, President and COO. Please go ahead. David Medilek: Thank you, operator, and thanks, everyone, for attending K92 Mining's 2025 Third Quarter Financial Results Conference Call. We hope you and your families are doing well. In addition to myself, we have on the line John Lewins, Chief Executive Officer and Director, and Justin Blanchet, Chief Financial Officer. I would also like to remind everyone that after the remarks from management, the call will be followed by a Q&A session. As we will be making forward-looking statements during the call, please refer to the cautionary notes and risk disclosure in our MD&A and Slide 2 of the webcast presentation. Also, please bear in mind that all dollar amounts mentioned in the conference call are in United States dollars unless otherwise noted. Now I'll turn it over to John to provide you with an overview. John Lewins: Well, thank you, David, and welcome, everyone. We begin with safety, K92's highest priority. I'm very pleased to share that the company recorded no lost time injuries during the third quarter, marking 9 consecutive LTI-free quarters, a notable achievement as activity levels continue to increase with the advancement of our Stage 3 Expansion. Over the last 2 years, there's been a substantial increase in field-level risk assessments, hazard identifications, safety observations, safety technologies and safety team capacity and capabilities, all strong leading indicators of a strong safety culture. Safety always is one of K92's core values, and we remain steadfast in our commitment to achieving our ultimate goal of zero harm across our workforce. Subsequent to the end of the quarter, the company achieved a major milestone with the official inauguration of our Stage 3 Expansion process plant on September 16 and the first production of our saleable concentrate. The event was attended by the Prime Minister of Papua New Guinea, the Honorable James Marape; the Minister for Mining, the Honorable Rainbo Paita as shown in the photo; other distinguished government representatives, landowners, members of diplomatic and business community and the K92 Board and project partners. The process plant was delivered safely, efficiently and under budget, making a major achievement for the construction team. The Prime Minister and the Minister for Mining also attended a gold pour at the new process plant as shown in the accompanying video. Additionally, they conducted a helicopter tour of the mine site and regional exploration areas as well as an underground tour showcasing several completed major infrastructure upgrades, including the twin incline and material pass, which, of course, are key enablers for our Stage 3 Expansion. In August, we're also honored to host a delegation led by the Mining Minister, the Honorable Rainbo Paita. The in-depth visit showcased the company's key Stage 3 Expansion growth projects, ongoing exploration activities and progress on the Konkua-Bilimoia Road Infrastructure Tax Credit Scheme project as well as productive discussions with local community business leaders. K92 remains committed to transparent engagement and open dialogue with all of our key stakeholders. We truly appreciate the support from our stakeholders, which have been a major factor in our success. Now moving on to operations, during the quarter, the Kainantu Gold Mine produced 44,323 ounces gold equivalent at a cash cost of $694 per ounce of gold and all-in sustaining cost of $1,254 per ounce gold. On a co-product basis, cash costs were $797 per ounce gold equivalent and all-in sustaining costs were $1,330 per ounce gold equivalent. As annotated on the chart, all-in sustaining costs have been notably higher than cash costs since the beginning of 2023, which, of course, is due to K92's significant investment in the Stage 3 Expansion. So costs are expected to decline considerably after delivering the Stage 3 Expansion, which we'll be discussing later in the presentation. The mill throughput for Q3 was 137,172 tonnes, which was in line with budget and at a head grade of 11.2 grams per tonne gold equivalent. With more than 80% of the lower end of annual guidance achieved for the first 3 quarters, plus we ended Q3 with approximately 4,900 gold equivalent ounces in the commissioning stockpile, K92 remains on track to meet its 2025 production guidance of 160,000 to 185,000 ounces gold equivalent. Now in terms of our key operational quarterly physicals, total material mined of 353,770 tonnes was a record and multiple daily tonnes to surface records were also achieved in late September, which demonstrates the increased material movement benefits realized from the commissioning of our first material pass during the quarter, combined with the commencement of surface trucks operating in the twin incline. Total mine development was 2,477 meters. The operation continues to balance lateral development priorities between the completion of key underground projects, including prioritizing of low equivalent lateral advanced jumbo activities such as the Puma ventilation drive and the underground pastefill chamber. Pleased to report that development rates achieved a significant milestone in October, supported by a number of the recently completed infrastructure and operational improvement initiatives. A new record was sent for monthly development totaling 1,028 meters. The first time K92 has exceeded the 1 kilometer per month target outlined in the Updated Definitive Feasibility Study for the Stage 3 Expansion. This achievement is particularly notable given that since June, one jumbo has been offline at any given time for an on-site mini-rebuild program aimed at improving equipment reliability. We're now completing the rebuild of the final jumbo with the completion expected later this quarter. Once finalized, this will effectively increase our active jumbo fleet by one rig, which will further support high development rates going forward. In addition to this, as more key enabler projects are completed, which will be discussed later in the presentation, we expect development and mine physicals to continue to ramp up. Total ore mined during the quarter was 152,485 tonnes, second highest on record, with mining activities across 13 levels at Kora and Judd. Long-hole stoping executed to design. Process grades benefited from a positive gold grade reconciliation versus the latest independent mineral resource estimate. The Stage 2a process plant continued to perform well, exceeding the Updated Definitive Feasibility Study recoveries for the sixth consecutive quarter, achieving 95% for gold and 94.6% for copper, which compares to 92.6% for gold and 94.2% in the Updated DFS. I'll now turn the call over to our Chief Financial Officer, Justin Blanchet, to discuss the financial results for the third quarter. Justin Blanchet: Thank you, John, and hello, everyone. During the third quarter of 2025, K92 had record quarterly revenue of $177.5 million, an increase of 45% from the same period prior year. We sold 45,006 gold ounces at an average selling price of $3,361 compared to 45,248 ounces at an average selling price of $2,388 in the prior year. As at September 30, 2025, there were 7,913 gold ounces in inventory, including both concentrate and doré, a decrease of 500 gold ounces when compared to June 30, 2025, due to timing of sales. During the third quarter of 2025, K92 had quarterly cost of sales of $43.8 million compared to $41 million in the prior year or $35.5 million compared to $30.7 million when excluding noncash items. The increase in cost of sales was driven by higher underground activity and greater tonnes mined with year-to-date ore mined and processed significantly higher versus the prior year. This is consistent with the higher mining and processing activity associated with the ramp-up of the Stage 3 Expansion. Q3 2025 cash flow from operating activities before changes in working capital was $101.8 million compared to $61 million in the prior year, the highest quarterly increase on record. As of September 30, 2025, K92 had a record $185.4 million in cash and cash equivalents. We had a record working capital balance of $227.8 million, and we had a record net cash balance position of $131.2 million. The company has a loan balance of $55 million as of September 30. K92's receivable balance as at September 30 increased 88% or $39 million as compared to June 30, of which a significant portion was received in the first half of October, resulting in a significant increase to our cash balance subsequent to quarter end. Importantly, the Stage 3 and 4 Expansion projects are fully funded and our financial position is strong. We also have access to a significant amount of liquidity through undrawn credit facilities with $60 million available to draw down on demand plus an additional $30 million of liquidity through an accordion feature. We also would like to highlight that our commodity price downside is protected through the cost-effective purchase of put option contracts, which extend until the end of 2025, allowing for 15,000 ounces of gold per month at a strike price of $3,000 per ounce. Subsequent to quarter end, K92 purchased additional put option contracts allowing for 10,000 ounces of gold per month at a strike price of $3,500 per ounce in 2026. To be clear, this is not a hedge. We will sell at spot if it is higher than $3,000 per ounce in 2025 or $3,500 an ounce in 2026. This is insurance, and we retain full exposure to the upside in commodity prices. As John mentioned, during the third quarter, the Kainantu Gold operations produced 42,244 ounces of gold; 1,323,538 pounds of copper and 34,831 ounces of silver or 44,323 ounces of gold equivalent. We sold 45,006 ounces of gold, 1,480,151 pounds of copper and 43,271 ounces of silver. On a byproduct basis, we incurred a cash cost of $694 per ounce and an all-in sustaining cost of $1,254 per ounce of gold. Our all-in sustaining costs in Q3 was significantly below our net realized selling price of $3,361 per ounce. For the 9 months ending September 30, 2025, our byproduct cash cost per ounce was $669 and our all-in sustaining cost was $1,202 per ounce, both below our 2025 guidance of cash costs between $710 to $770 per ounce and all-in sustaining costs of between $1,460 to $1,560. It is important to note that we will see downward pressure on costs via economies of scale as operations ramp up and the Stage 3 Expansion is complete. I will now turn the call back to John to discuss exploration and growth. John Lewins: Well, thank you, Justin. Turning to growth and exploration. We begin with an update on the Stage 3 and Stage 4 Expansions, which are expected to fundamentally transform K92 into a Tier 1 mid-tier gold producer. As mentioned earlier, the Stage 3 Expansion process plant achieved its first saleable production in mid-October. The Stage 3 Expansion as outlined in our Updated Definitive Feasibility Study supports a 1.2 million tonne per annum throughput rate producing approximately 300,000 ounces gold equivalent per annum at that run rate. Commissioning of the process plant is nearly complete. Stage 4 is expected to further increase production through expanding the Stage 3 process plant at a low capital cost to 1.8 million tonnes per annum producing around 400,000 ounces gold equivalent per annum, targeting commissioning late 2027. The Stage 2a plant provides additional capacity for future expansion beyond Stage 4. In late October, K92 was pleased to host a large group of analysts and investors for a comprehensive 2-day visit to the Kainantu Gold Mine to see firsthand the major transformation underway on site and to also showcase the mining-friendly jurisdiction of Papua New Guinea. These photos show key parts of the surface and underground site tours, including the new 1.2 million tonne per annum state-of-the-art Stage 3 process plant, as shown on the image on the left and the underground paste silo excavation as shown on the image on the right. On the following slide, as shown on the image on the left, the visitors also toured the primary fan chambers, which is a 15-meter wide by 9.5 meter high excavation, 35 meters long at that profile, tapering off for a total length of 75 meters. The image on the right is from the top of the material pass, which was also visited. More details on these projects will be discussed over the next few slides. We believe the site visit clearly demonstrated the strong momentum across the operation and the significant progress being made on multiple transformation projects that will underpin further growth and productivity gains of Stage 3 and Stage 4 Expansions are delivered. I'll now provide an update on the construction progress of Stage 3 Expansion, which as of 30th September 2025, had seen 90% of growth capital spent or committed and the expansion remains on budget. In terms of the major underground infrastructure transformation, the twin incline is complete. The first material pass is complete, and the Puma vent incline is now within 40 meters of breakthrough. Following the breakthrough of the Puma and the energization of the primary fan system in Q1, the ventilation circuit will be configured to enable both twin inclines to be fresh air intake and therefore, enable highly productive one-way traffic in the twin incline in late Q1 2026. The internal ramp system, which will connect the main mine and all mining fronts to the highly productive twin inclines is advancing rapidly. It's scheduled for completion also in Q1 2026. Upon its completion, combined with the Puma vent drive and the energization of the fan chamber, it will also enable all inclines to transition to a more efficient one-way traffic flow. The twin incline has already begun to transform underground material handling efficiencies as shown on the image on the right versus the image on the left, which is the existing incline to access the main mine since commercial production commenced. The twin incline can run 50% larger trucks than the existing single incline at a much faster speed and will also eliminate rehandling at the portal as surface trucks will haul directly through the process plant from loading in that twin incline. Productivity gains from the twin incline infrastructure will be realized in stages as supporting infrastructure is completed and equipment added. I'm pleased to report that in Q3, we completed our first material pass, leveraging gravity to deliver tonnes approximately 350 meters vertically from the main mine to the highly productive twin inclines. This was further augmented by the introduction of surface articulated trucks into the twin inclines in September. This combination resulted in several daily tonnes to surface records being established, including 5,769 tonnes on September 27 and 6,404 tonnes on September 29. Now that's equivalent to an annualized approximately 2.3 million tonnes per annum. A second material pass, enabling dedicated passes for ore and waste, respectively, is planned for late Q1 2026. As noted previously, with the completion of the Puma vent drive and energization of the primary fan chamber plus the completion of the internal ramp system, both scheduled for Q1, we expect further near-term productivity gains throughout the mine. We're also pleased to report that the Phase 2 ventilation upgrade, which involved the development of 2 large vertical fresh air intake raises has recently been completed, and it has resulted in a notable increase in our primary ventilation airflow, increasing airflow by approximately 30% to now over 200 cubic meters per second. This, in turn, has resulted in a significant reduction in our blasting reentry times to clear the fumes. Work is nearly complete to commission our centralized blasting system to reduce blast initiating time. And once this is complete later this quarter, we plan to transitioning to blasting twice a day from the current once per day. These combined improvements will increase available underground operating hours per day in addition to the operational flexibility gained by firing twice per day. Further reduction in reentry time is expected upon the breakthrough of the Puma, which as noted earlier, is approximately 40 meters from the surface. This is estimated to increase airflow from 200 cubic meters per second to 250 cubic meters per second. Now this, combined with the energization of the fan chamber is expected to result in a threefold increase in primary air flow from current levels to something over 600 cubic meters a second. This air flow is well above the requirement for the Stage 4 Expansion and is designed for life of mine. It could also be further expanded to 740 cubic meters per second through benching of the Puma incline. Currently, as shown in the images, the fans are being installed. The completion of this project is planned for the first quarter 2026. Now the underground mine has recently been further enhanced with the completion and commissioning of the primary power station, which added 8.8 megawatts of generating capacity subsequent to the quarter end. This, of course, is our standby power. This plant is now capable of powering both the process plant and underground mine, delivering improved power reliability and synchronization with grid power to help with power supply stability. This project was successfully completed by our owners' team on schedule and for approximately half the cost of the EPC tender bids, which we received, highlighting just one example of how the construction team has been able to keep Stage 3 Expansion on budget. And since commissioning in mid-October, the operation has seen minimal power disruptions to both the process plant and underground mine, which shows the positive effects of these key infrastructure projects will deliver in terms of minimizing disruptions to increase our mine physicals. We also expect to realize material operating cost benefits from the plant relative to the previous interim power plant configuration as when operating is notably better fuel efficiency. The next phase of expansion of this power station Phase 1 to 10.4 megawatts is planned for completion by the end of the year and a further expansion to 15.2 megawatts which is required for Stage 4 Expansion is planned to be completed first half of 2026. In addition to completing various infrastructure enablers for the expansion, mine development continues to open up 2 new fronts, the twin incline and the lower Kora with 5 and 4 new sublevels being opened up, respectively. Both fronts are expected to be notable contributors to production in 2026. It's important to highlight that for years, K92 has prioritized waste material movement to open up the mine through developing sublevels, twin inclines, internal ramps and mine infrastructure. The plan maps shown are levels from the lower Kora mine front or front #2 on the previous slide, which show not only extensive development completed today over multiple levels but that we have not mined a single long-hole stope yet from this front. Importantly, this means we have developed a significant amount of stoping inventory ahead of our expansion. The area in the red ellipse, which is the K1 vein, where development is well advanced on approximately 250,000 tonnes of long-hole stoping ore. It's a similar case at the twin incline. We plan to commence production of highly productive long-hole stoping in first quarter 2026 at the lower Kora front and late first quarter 2026 at the twin incline front, and these will be key drivers in the ramp-up of ore tonnes. I think it's also important to note we have already demonstrated production rates of over 500,000 tonnes per annum from a single mining front on the main mine. In addition to the completion of key enabler infrastructure projects and expansion to the number of mining fronts, we've made considerable investment in technology and equipment. On the left is our surface operated tele-remote system, which leverages our underground fiber optic backbone to operate loaders from surface, including during shift change and reentry to allow up to 24-hour operation per day. Concurrently, a significant amount of new equipment is expected to arrive between now and the end of 2026, including 4 new loaders between now and June, of which 2 are replacement and 2 are additional units, 2 new haul trucks as replacement around midyear next year. A new development jumbo to add our fleet around midyear next year, plus 2 explosive loading rigs, 1 cement agitator and 1 production drill rig. The fleet of surface trucks is significantly expanding for operation in the twin incline with 8 new 60-tonne trucks planned to arrive in 2026. The first batch of 6 arriving in the first quarter. Recently, 5 new 30-tonne haulage trucks arrived on site are being used initially to augment haulage from the twin incline ahead of the arrival of the 60-tonne trucks and the upgrading of the river crossings. These trucks will then be repurposed to haul filter cake to the pastefill underground later in 2026. These trucks are planned to be owned and operated by one of our local joint venture contracting companies. This substantial fleet investment ensures that we have adequate capacity to meet not just Stage 3 Expansion but also Stage 4 Expansion equipment requirements. Commissioning of the Stage 3 Expansion process plant is nearly complete. First ore was received in September, first saleable concentrate produced and shipped in mid-October. As noted earlier, we held an official inauguration for the process plant on October 16. The Stage 2a process plant has now been idled and is available to be reactivated, if required. We expect to have commissioning the new plant completed later this month and hand over to operations. In terms of ancillary buildings, the interim power station warehouse Kumian Creek camp and primary power station are all complete. The maintenance facility which is a low priority and is not on the critical path for Stage 3 is targeting completion late Q1 2026. In Q3 2025, significant progress was made on the surface pastefill filtration plant, surface storage facility and underground pastefill plant packages. The surface pastefill filtration plant civil works are progressing as shown on the image on the left and are benefiting from a recent shift to both day and night shift operations. Site establishment is being completed for the surface storage facility with earthworks underway as shown on the image on the right. Major excavations of the underground pastefill plant are approaching completion with planned handover to the projects team this quarter. Detailed engineering now complete. All long lead items for all packages are either ordered or are now on site. Commissioning is expected to commence in mid-Q1 2026 with practical completion of the full pastefill circuit scheduled for mid-2026. Substantial progress has also been made on the surface haul road and river crossing project during the quarter. This project enables the surface truck payload to increase from current 20 tonnes to 60 tonnes while also improving cycle times. It involves upgrading 3 river crossings together with widening, straightening and gradient improvements of selected areas to improve haulage efficiency and payload. Phase 1 which is focused on river crossing upgrades and haul road widening to enable higher capacity 60-tonne trucking fleet to operate is on track for completion by late Q1 2026. Phase 2, which is focused on road alignment and grading improvements in select areas of the haul road is scheduled for completion by Q4 2026. Now in terms of exploration, we're drilling at Kora, Kora South and Judd, Judd South systems from underground with 6 rigs plus we have 5 surface rigs drilling at the Arakompa vein system and 1 rig drilling at Wera. At Kora, drilling is underway at Kora Deeps, Kora North and Kora South Deeps with access to the deeper zones enabled by the twin incline and the 1205 Level drill drive. As shown in the annotated intersections, we continue to extend high-grade zones, define dilatant zones and step-out mineralization from our drill program. Over the next 12 months, our step-out program is predominantly focused on Kora Deeps down to the 500-meter RL level as shown in the green rectangle. Drill drives and step-out drilling to the south are also planned. At Judd, the vein system remains significantly underexplored and open in all directions. Recent results have continued to expand the high-grade zone as shown in the selected annotated drill results. Over the next 12 months, like Kora, step-out drilling will focus on depth extensions as shown in the green rectangle in addition to southern step-out drilling. As shown from our initial drill results at depth, the system remains thick and well mineralized. Exploration activity at Arakompa vein system located approximately 4.5 kilometers from the Kainantu process plant continues to advance rapidly. Drilling is now supported by up to 5 active rigs and the deposit has grown substantially in both scale and geological understanding. As shown in the graphic, recent drilling has expanded the Arakompa bulk tonnage zone to approximately 1.1 kilometers in strike and 800 meters vertically with an average true thickness of 39 meters. The bulk zone remains open in multiple directions and continues to demonstrate strong potential for large-scale near surface bulk mining. The latest key intercepts include 96 meters at 2.6 gram per tonne gold equivalent and 62 meters at 1.1 gram per tonne gold equivalent. We're also excited about the discovery of the porphyry style copper gold mineralization in drill hole KARDD0065, stepping out 250 meters to the south from previous drilling. This was our first hole testing a 600-meter by 600-meter copper-in-soil anomaly and an intersected 690 meters at 0.3% copper equivalent including 395 meters at 0.38% copper equivalent within the 600-meter by 600-meter copper-in-soil anomaly. The intersection is interpreted to be distilled to a potassic porphyry core and marks the first porphyry style mineralization identified at Arakompa, a highly prospective target for ongoing drilling. This step-out discovery reinforces Arakompa's scale and strengthens our understanding of the project as a large integrated system linking high-grade vein mineralization with potential underlying porphyry center. Our latest drilling also continues to define the high-grade AR1 and AR2 loads along strike and at depth confirming continuity within the broader Arakompa system. We're also seeing the emergence of a potential high-grade thick zone, highlighted by standout intercepts, including 7.1 meters at 27.9 grams per tonne gold equivalent, 14.5 meters at 17.3 grams per tonne gold equivalent and 20.6 meters at 9.9 grams per tonne gold equivalent. Together, these results demonstrate strong vertical continuity of up to 200 meters at a substantial true thickness of 7.3 meters, reinforcing the potential for a high-grade core within the Arakompa system. Arakompa has advanced incredibly quickly, increasing from just 2 holes reported in early 2024 to 67 holes reported and 5 drill rigs currently operating. The rapid expansion of the drill program reflects both the exceptional results received to date and the scale of the system with mineralization continuing to extend along strike and at depth. We remain on track to deliver a maiden mineral resource for Arakompa first half of 2026. Now in addition to Arakompa, we've begun drill testing the newly discovered Wera vein system, a large 3.5 by 3.5 kilometer low-sulphidation epithermal gold system located approximately 10 kilometers southwest of Kora and Judd. The maiden exploration program focused on rock chips and trenching outlined multiple mineralized structures with numerous high-grade samples, including assays up to 26.3 grams per tonne gold. Importantly, this area has never been accessed or tested by previous operators and lies within the same mineralized corridor that hosts Kora, Judd and Arakompa. We're very encouraged by the potential of this new greenfields discovery and look forward to results from our maiden scout drill program. Lastly, we highlight the significant pipeline of highly prospective exploration targets. The colored icons indicate a current exploration focus, and the black icons indicate where we plan to drill in the next 24 months. In the near term, drilling is planned at the historic Maniape target located approximately 1.5 kilometers west of Arakompa and at the Mati, Mesoan target situated within 1.6 kilometers of the current mine workings. Both programs will utilize a new small footprint heli-portable drill rig scheduled to commence drilling in late 2025 to early 2026. These targets represent the next phase of near-mine exploration designed to expand our understanding of the broader mineralized system and potentially extend non-mineralization corridors. Upon delivery of the Stage 3 Expansion, we expect not only a major inflection in our production and free cash flow, but a significant ramp-up in our exploration budget, aiming to progress many of these highly prospective targets concurrently. Two additional surface rigs have been ordered and commissioning is scheduled for Q1 2026 for future ramp-up. With up to 5 rigs turning at Arakompa, 1 rig at Wera, 6 rigs focused on expansion of Kora and Judd underground, K92 is well positioned to close out another successful year of exploration. In summary, Q3 2025 was another strong quarter for K92 from an operational, financial, projects, exploration and safety perspective. We're fully funded through the expansion via our record net cash balance and mine cash flow. We're tracking well to our 2025 operational guidance, and we are confident that we will continue the positive mine physicals momentum for the remainder of the year and into 2026 as we realize the benefits of the delivery of a number of key underground infrastructure and operational improvement projects. With that, operator, we'd now like to commence the Q&A session. Operator: [Operator Instructions] The first question today comes from Harrison Reynolds with RBC. Harrison Reynolds: Congratulations on a strong quarter, K92 team. Great to see the significant progress and momentum being made on site firsthand back in October. Just a couple of questions from me. First, wondering if you could talk about cost performance and sustaining capital spend. It's good to see ASIC below expectations and the guided range again. But wondering if you could talk about your expectations for sustaining capital spend in Q4 and maybe into early next year and sort of separate what percentage of this performance has been based on cost control and things coming in under budget versus what's capital just yet to be spent. David Medilek: Yes. Thanks, Harrison. I'll jump in for this one, John's flight arrived late this morning. So in terms of sustaining capital, we expect it to be elevated in Q4 and also going through 2026. There's a few reasons for that. One, as you saw in the presentation is the haul road upgrade. The river crossings are growth capital for the Stage 3 Expansion. The haul road upgrade is sustaining. And that work will go through 2026. A large part of that gets done in the first half of 2026, but there is a component for certain parts of the haul road, select areas that do get upgraded in the latter part of 2026. The other thing I'd like to flag is the lateral advance. We've obviously ramped up the lateral advance, delivered a development record in October, and we're certainly looking to build on that, not just in Q4, but in 2026 as we continue to ramp up, ultimately targeting the 1.2 kilometer per month rate that's required for the Stage 4 Expansion. Just on the input cost, we have done a good job in terms of the input costs. If you look at labor, if you look at fuel, if you look at power, there's obviously the opportunity for economies of scale with the improved material movement rates that you will get in Q4. So in terms of both ASIC and cash cost guidance, we certainly are looking well for the remainder of the year. Harrison Reynolds: That's good to hear. And maybe just switching gears, looking forward to the Arakompa resource next year, and I appreciate all the details in the prior remarks. And just it's early days still and -- but it might be interesting to hear the latest thoughts on how soon this could be an ore source for the Stage 2 mill and sort of what the focus following the resource will be whether that's continuing to step out and understand the scale and size of this deposit or derisking it and trying to get it in the reserve category and putting it into the mill as soon as possible. David Medilek: Yes. Thanks, Harrison for that question. Arakompa is a very exciting prospect for us. There are 2 kind of projects within the project. There is the high-grade vein system component with the AR1 and AR2, which you have seen from the results, and John went over that in the conference call. What you do see is still a requirement for greater drill density to really define these high-grade areas. Many of the drill holes are in spacing of excess of 100 meters. And there are some areas where we have tightened the spacing, and we've gotten some really good results. One is that discrete high-grade thick zone that was highlighted in the presentation. We are looking at, as we do step out to the north there is a change in host rock to the same host rock as Kora and Judd. So we are quite intrigued by what that could mean as we get closer to that artisanal working that was highlighted on the plan view. So there certainly is this high-grade vein system potential, which is a logical source for the Stage 2a plant, but it ultimately requires more drilling to firm that up. And then there clearly is a bulk project, which we continue to define. The thing that I'd like to point out here is we see the project that's potentially beyond Arakompa as an Arakompa and Maniape. When you look at Maniape, similar host rock and the historic drilling does show really real similarities between Arakompa in terms of both having bulk intercepts and high-grade vein potential. So we are excited about what we have at Arakompa. We'll see where we get to in terms of the first half of the year 2026, where we are targeting a resource. It certainly has a potential to be a higher-grade feed for the Stage 2a, but we certainly have to let the drill bit play out here. Operator: [Operator Instructions] There are no further questions at this time, which concludes our question-and-answer session. I would like to turn the conference back over to David Medilek for any closing remarks. David Medilek: Yes. Thank you, everyone, for joining us today and for your continued interest in K92 mining. We're very proud of the progress achieved this quarter, both operationally and financially. I'd also like to take a moment to thank our employees, contractors and partners for their hard work and dedication and also various levels of government and our communities for their ongoing support. If you have any further questions following today's call, please do not hesitate to reach out to our Investor Relations team. Thank you again for joining us, and we look forward to updating you on our continued progress next quarter. Operator: This concludes today's conference call. You may now disconnect your lines. Thank you for participating, and have a pleasant day.
Operator: Good afternoon. My name is Nadia, and I'll be the conference operator today. At this time, I would like to welcome everyone to Paramount's Q3 2025 Earnings Conference Call. [Operator Instructions] At this time, I would now like to turn the call over to Kevin Creighton, Paramount EVP of Investor Relations. You may now begin your conference call. Unknown Executive: Good afternoon, and thank you for taking the time to join us for the Paramount Third Quarter 2025 Earnings Call. I'm Kevin Creighton, EVP of Corporate Finance and Investor Relations. Joining me today is our Chairman and Chief Executive Officer, David Ellison; our President, Jeff Shell; our Interim Chief Financial Officer, Andy Warren; and our Chief Strategy and Operating Officer, Andy Gordon. As a reminder, we will be making forward-looking statements today that involve risks and uncertainties. Our remarks will also include non-GAAP financial measures, and reconciliations of these measures can be found in our earnings letter or in our trending schedules, which contain supplemental information. These can be found on our Investor Relations website. I'll now turn it over to David for a few brief remarks before we take analyst questions. David Ellison: Good afternoon. Before we get to Q&A, I'd like to take a moment since this is our first earnings call to share some thoughts on what we've accomplished so far and where we're heading. We launched the new Paramount just 96 days ago. And as we approach the 100-day mark, we're encouraged by the meaningful progress we've made in a relatively short time. We moved quickly, laid a strong foundation for what's ahead, and there's a real sense of energy and purpose across the company. Our goal in bringing these 2 companies together was simple, to honor Paramount's incredible legacy of storytelling while taking the necessary steps to transform it for the future. The combination unites an extraordinary and diverse collection of entertainment assets, spanning film, television, animation, interactive games, news and sports, supported by a rich library of celebrated and award-winning content. This powerful portfolio gives us the tools to achieve scale and succeed in today's fiercely competitive media landscape, and we intend to build on this strong foundation, investing the necessary resources and talent to ensure our company is not only well positioned to compete, but to lead in the industry. Our vision is to transform Paramount into the global home of world-class storytelling, powered by one of entertainment's most storied studios, the leading broadcast network and a scaled global streaming platform that delivers much-watched programming to audiences everywhere. Achieving this vision requires reimagining how we operate, driving greater efficiency, unlocking new opportunities for creativity and positioning the company for sustainable long-term growth. With this in mind, on day 1, we identified our North Star priorities, the areas where we see the greatest opportunity to drive meaningful progress. They are: first, investing in our growth businesses, anchored by our creative engines and exceptional storytelling. Second, scaling our direct-to-consumer business globally; and third, driving efficiency enterprise-wide with a focus on long-term free cash flow generation. Over the past 3 months, as part of a thorough review of our assets and organization, we've taken early but significant steps towards advancing these priorities by making key leadership hires, pursuing high-impact partnerships, expanding our world-class roster of creative talent, reigniting performance across our studios, maximizing the value of our highly profitable CBS portfolio and driving efficiencies across the organization, all while staying true to our mission as a creative company. Storytelling is and always will be the heart and soul of everything we do. Every effort serves a single purpose to bring the best stories to the broadest possible audience. Thanks to our actions to date, we are now well positioned to align resources with strategic priorities and invest boldly in areas with the greatest long-term potential. Just prior to this call, we issued a letter to shareholders outlining our third and fourth quarter results and expectations, which we encourage you to review. The letter details our 2026 guidance, including total revenue of $30 billion, driven by strong growth in D2C revenue and global profitability as well as adjusted OIBDA of $3.5 billion. Additionally, we have increased our run rate efficiency target from $2 billion to at least $3 billion. Building on these financial and operational priorities, we're also taking decisive steps to streamline studio operations and elevate performance, particularly at Paramount Pictures. In the near term, this includes adjustments to our film slate. Our plan is to grow theatrical output, targeting at least 15 movies per year over the next few years, beginning in 2026. While this rebuilding will take time, we are confident that our creative direction and business strategy will deliver the quality films that will enable us to engage and expand audiences worldwide. More broadly, over the next year, we plan to make incremental programming investments in excess of $1.5 billion across both theatrical and direct-to-consumer platforms. These investments are designed to expand our pipeline of premium films, television, sports, news and gaming content for global audiences. We've clearly demonstrated this commitment through a series of major creative partnerships and long-term deals from South Park and the UFC to the Duffer Brothers, James Mangold and our landmark collaboration with Activision to bring Call of Duty to life on the big screen and much more. Our top priority is our direct-to-consumer business, where we are focused on rapidly and efficiently scaling subscribers, engagement, revenue and profitability. Since 2023, Paramount+ has achieved the largest U.S. subscription growth among all major streamers, excluding bundles, and we aim to aggressively build on that momentum. In Q3, we added 1.4 million new subscribers for a total of 79 million. We are committed to scaling our subscriber base and are pursuing a more balanced year-round programming strategy to drive higher engagement. As we know, this is the single greatest factor in subscriber growth and loyalty. Over the past 12 months, Paramount+ is ranked as one of the top 3 most sought-after sources of preferred content among major streaming services. We believe we can do even better, and we are fully committed to doing what it takes to become consumers' top choice for great storytelling. Finally, our goal is to accelerate innovation by making technology a core competency of our company. Competitors from Silicon Valley have quickly expanded into media and broader forms of entertainment. And if we want to remain competitive long term, we must strengthen our technology and do what it takes to position ourselves as the industry's most technologically capable media company. Again, I want to stress that technology at Paramount is not and never will be a replacement for human creativity. Rather, it serves as a powerful multiplier, enhancing performance, elevating the consumer experience and equipping our creative teams with the tools that will enable them to tell even better stories more efficiently and effectively. We're excited about several innovation initiatives already underway, and we'll be sharing more details soon. While we're still in the early stages, as I mentioned, this is only day 96, we're energized by the progress we've made and the clear path ahead, and we look forward to answering your questions. Operator: [Operator Instructions] The first question goes to Robert Fishman of MoffettNathanson. Robert Fishman: Can you talk more about your confidence for Paramount+ to gain global scale? And what role does growing your overall content spend play into better competing with the other large SVOD platforms in the future? And then just on a related note, when you think about this global scale, how do you balance growing the overall subscriber base while reducing investments in select international markets that you called out? David Ellison: Yes, absolutely. By the way, David, thank you so much for the question. First, we just highlight, we had a really good quarter as it relates to our DTC business, 75 million total subs. Paramount+ revenue growth was up 24%, and we're up 17% for the segment. So I think we've made really good progress in that arena. To achieve scale, I think we really need to accomplish 2 main priorities. One is we need to increase our investments, obviously, in content. As you guys know, high-quality storytelling, sports, entertainment, all increase engagement, which drives subscribers. We've been doing that across our business. That we've made the investment in the UFC and Zuffa Boxing, incremental, obviously, storytelling investments as well in addition to bringing over talents like the Duffer Brothers, all of which will be telling stories across our ecosystem and on Paramount plus. We're also making investments on the technology side of our business to really improve the product. We brought over Dana Glasgow, formerly of Meta. And we're really in the process of converging the 3 streaming services that we have now onto one platform. For clarity, the company currently operates 3 separate streaming services across multiple clouds and multiple stacks. By unifying those all into one platform, we'll be able to significantly improve the user experience. We'll be able to significantly improve our recommendation discovery, obviously, work on platform. That will also improve our capabilities across the ad tech we'll be able to deploy. And we think while improving the content and the tech that's available on platform, that will lead towards incremental subscribers, growth and engagement. Jeff, anything you want to add to that? Jeffrey S. Shell: Yes. I just -- let me touch -- let me just touch really quickly on the international part of your question. So interestingly, the 2 big things that David just outlined, content investment and platform investment, both are global investments. So let me give you an example. One of the biggest content investments we're making is scaling up our studio output and film studio output, and there's nothing that drives platforms in most markets internationally other than filmed entertainment and good movies, both animated and live action. So that's a perfect example of where our content investment is going to be global, not just domestic. And then obviously, the platform investment that we're making is a global investment. It's not market by market. And one really important piece of that is that Pluto, which is an asset we don't talk about that much, is a very critical asset in some international markets. which are low ARPU, which could be a weigh in for our DTC business and often a good business on its own. Right now, Pluto is on a separate tech stack, you can't even upgrade somebody from Pluto to Paramount+. So I am very hopeful that once the platform investment is live, we will be able to use that product to start with Pluto in some international markets and over time, use that to scale in markets which are not a high ARPU. Operator: The next question goes to Steven Cahall of Wells Fargo. Steven Cahall: So David, if I have maybe an initial conclusion from the shareholder letter, it's that you want more, more originals, more licensing, more sports, news, wide releases, tech and I guess, a lot more efficiency. Is there any way you can help us think about how much investment you plan to put into Paramount Skydance over the next several years? I'm guessing it's well in excess of that $3 billion, and there's a lot of revenue as well. But just in terms of the size of the company, any way to put this into sort of a big number? And then just on the studio side, with the turnaround you're looking to do and the additional wide releases, what did you learn from your experience at Skydance, especially creatively that you all think you can now apply since the studio, at least financially has kind of underperformed historically? David Ellison: Yes. No, look, I really appreciate the question. Again, everything for us is really going back to driving our North Star principles that we outlined in the letter. We're going to continue to obviously invest in our growth businesses, anchored by our creative engines and superior storytelling and scaling our D2C business is absolutely one of our North Stars. So to your point, we're going to continue to do both of those 2 things. And the company we acquired, we think has an incredible foundation. But we do think that there's obviously more to be done there. We talked about in the letter the additional $1.5 billion of content investments that we're going to make. And our goal is to be a global scaled streaming service. So from that standpoint, we are going to obviously invest accordingly. But please note, everything for us as owner and operators of the company the way we think about this is really how do we drive long-term value creation. And as we're currently the largest shareholders and will continue to be the largest shareholders in the company, we really are looking at this in terms of how do we increase and drive value long term for all of our shareholders. Then I would say one of the things that we've obviously learned on the creative side at Skydance is a lot of our core principles was always quality is the best business plan when it comes to storytelling and a dedication to aiming high and you just don't stop working until you get there. That enabled us theatrically to deliver films like Top Gun: Maverick, and we've always had -- when we were just a stand-alone company at Skydance had an incredible partnership with Paramount. But we've consistently obviously delivered hits on all of the platforms that we've worked. What we're really doing now is taking everything that we've learned at Skydance and that incredibly powerful creative content engine, partnering it with the phenomenal creative engines at Paramount to really be able to get to scale across all of our growth businesses. That includes direct-to-consumer, but also for reference on the film side, as you said, the studio was making 8 movies a year roughly when we acquired the business. And we're getting to 15 movies a year minimum starting next year, and we will be -- and that will obviously lead towards increased scale and profitability across all those segments of the business. Andrew Warren: So David, maybe I'll just add, Steve, I think it's important to also understand that every investment we make, we're looking at how it drives value for the entire company and has a proper return on investment. Two, we definitely want to get to investment grade so that we do want to get delever. And three, the goal is to have high cash flow conversion as we get through the initial investment cycle. So all those things should be factored into how we think about investments. Operator: The next question goes to David Karnovsky of JPMorgan. David Karnovsky: With the TV Media segment, just be great to get your updated view on your portfolio of networks. How are you thinking about advertising and cord cutting trends from here and within your 2026 forecast and then within that context, investing into or optimizing these brands? David Ellison: Absolutely, Jeff, why don't you take that? Jeffrey S. Shell: Great. David. So one of the original things that we, as a group, were kind of united on is that people talk about linear as one homogeneous business. It's really very different. And when you start to look at it that way and you look at the disconnect between broadcast and cable, it's pretty stark and growing more stark. And that's why CBS was one of the cornerstone assets that we were excited about when we acquired Paramount. And that -- those trends are continuing since we've owned the company, and we expect them to continue in the future. On the broadcast side, obviously, it's declining. It's a linear asset like any other linear asset, but the declines are very modest compared to the cable side. And those don't even take into account the fact that the content on the broadcast side is increasingly a huge driver on DTC both in terms of subs and engagement, not just the sports, which is becoming barbell. If you look at where leagues are going, they want reach and they want dollars. The dollars increasingly come from streaming and the reach still comes from broadcast. And we have a perfect company for that barbell with the biggest reach vehicle in CBS, which is the most watched broadcast network for the last 17 years and will be so again this year. It's off to a great start, by the way, in this season. And then the streaming product, which is our North Star to grow and scale globally. So increasingly, we will put investments into the CBS side of the coin, and we see those trends continuing. On the flip side, cable is continuing to decline and each quarter is accelerating decline, not just for us, but for everybody around the media business. And -- it's increasingly clear that streaming, first and foremost, is a replacement for the multichannel cable environment. We're fortunate, yes, we have cable channels, but we don't have -- they're not as large proportionately for us as for others. So we're really focused on taking those brands and seeing what we can do as far as driving value long term, both in terms of overall and in terms of for our streaming product as it scales. We're not going to spin off cable assets. This company has a history of spinning assets and it hasn't gone very well for us, and we think for others. So one of the big rationales for spin is that when companies are stand-alone, they can focus on driving the value of the brands that they have in a more specific way. We are going to do that, but we're going to do that within our company, so our shareholders get the value of that. We think we have some pretty good brands on the cable side. Obviously, Nickelodeon is a core kids and family pillar for us, and that's going to be a very important segment for our company, not just in terms of streaming, but in terms of licensing and consumer products. So we just brought in a new leader for that business. But if you look at music, which is an important category, MTV is the traditional leader there, comedy, where Comedy Central is a great brand and then BET, which has a great position with that audience. So our goal is to look at those brands, see if we can transform those businesses in a digital way to drive value long term and make them increasing pieces of our overall scaled global streaming strategy, which is our core business. So that's our plan. Operator: The next question goes to Jessica Reif Ehrlich of Bank of America Securities. Jessica Reif Cohen: One of the things that differentiates your narrative from other media and entertainment companies is the focus on entertainment and tech. I'm just wondering, David, can you give us your vision of how tech and entertainment interrelate and how you drive growth? Like can you give us concrete or specific examples or color on how you think about that? And then just one thing in the release, when you talked about your partnership with IPG and Publicis for digital ad sales, what did they bring to the company? Like what tools will they bring to help drive revenue growth? David Ellison: Jessica, great question. I'll take the first part of it, and then I'll pass it off to Jeff to jump into the second part of it. So Again, what I would say is, as we've stated, our goal is to become the most technologically capable media company. And there are several areas where that's going to directly impact our business, and I'll just talk about a couple of initiatives that are underway currently. When we acquired the company, as I said previously, we kind of -- we're operating in 3 streaming services currently, Paramount+, Pluto and BET+. Those are 3 completely independent tech stacks. They operate across 2 different clouds, and there's no connectivity, obviously, between those businesses currently. Convergence is currently underway to basically unite them into one unified platform, which should be done around the middle of next year. Then from there, we have a road map to obviously significantly improve the overall product for Paramount+. And again, when you improve products, you get benefits like you increase engagement, you get -- your recommendation engine obviously improves dramatically. Your ad sale monetization will improve as you improve the ad tech. So there's several areas where obviously that this is going to impact the direct-to-consumer business. I'd say another bucket is we're currently in the middle of an Oracle Fusion integration. The company when we acquired it, did not have an enterprise solution. We're currently in process of deploying that across the business. That will lead to significant operational efficiency across the entire company. It will also give better real-time information to managers to be able to think of it kind of like if you're a pilot, do you know I am, instrumentation is important. The better visibility you have in terms of how the company is doing on a day-to-day basis, that improves your decision-making. So we're in the process of deploying that. We also -- artificial intelligence, obviously, is going to have a significant impact across every business, and we do plan to utilize that here. We obviously feel that frontier technology, working with more traditional machine learning is going to really impact how things like search, rec and discovery work on platform. There will be increased efficiencies across the business by deploying those tools. And we also believe it will have an impact on content creation. But I want to be really clear that when it comes to content creation, we really view AI as a tool for artists to be able to iterate more quickly, to be able to tell better stories and basically create even further accessibility really across the entire content creation pipeline. So from that standpoint, we think technology is going to impact all aspects of our business, and we want to be a leader in that space. And with that, I will turn it over to Jeff to talk about the second part of your question. Jeffrey S. Shell: Thanks, David. So Jessica, when we signed our deal before we owned the company, one of the things we found in due diligence is that the company hadn't done the traditional media reviews in a long time of their buying relationships with the agencies. So we worked with prior management to do a review. And the initial objective of the review is more traditional, which was we -- the cost by which we were buying marketing were much in excess of what I have seen in my previous employers and we've seen in the market. So the initial objective was try to use this review to lower the cost of buying marketing for our various marketing entities, most notably our streaming and our film divisions, which are the 2 largest buyers of advertising. Once we got into the process, we realized that the opportunity was significantly bigger than that. And we met with all the top holding companies multiple times, us and previous management, and we ended up doing 2 deals with the 2 largest agencies, Publicis and IPG. And the relationships, the deals that we did were much broader than just buying. On the buying side, we're going to get significant savings in the cost of buying marketing across the company in addition to a lot of more benefit in going with the 2 largest buyers. But the real opportunity here is more 2 other areas. The first is just these agencies, these holding companies are not just buyers of advertisers, but represent all of our sales clients. And as part of the deal, we got significant revenue commitments over 3 years with both Publicis and IPG. As you can imagine, part of the nuance of this was what's incremental. We didn't just want to get advertising buys that we're just replacing current advertising. So we expect to see most of this advertising in the digital area where we need it the most, and that you should see that in our numbers over the next couple of years. But more broadly, we're now partnered on a broad basis with the 2 biggest agencies as the world transitions from linear to digital. And we see lots of opportunities as we do the things that David talked about in building our platform and building our ad tech and our capabilities to work with the 2 biggest and most forward-looking partners we have. And as part of that, we brought in a new head of our advertising business, Jay Askinasi, who most notably, he came from Roku, but before that was the Head of Digital for Publicis, who is one of our 2 new big partners. So this is obviously a big micro thing that we did. But on a macro basis, we see a lot of opportunities in the coming years to grow our business in this way. Operator: The next question goes to Ben Swinburne of Morgan Stanley. Benjamin Swinburne: David, I'm guessing you probably can't talk about all the WBD speculation out there in the press. But I was wondering if you could talk a little bit about Paramount S guidance's broader M&A philosophy and just how you think about industry consolidation as something that could benefit the company or benefit overall returns in the industry. Obviously, we've sort of seen kind of rolling M&A through this sector for a number of years. And I noticed you guys divested some assets, so it would be interesting to hear how you think about just the portfolio broadly going forward. And then just one kind of clarification question from the letter. You guys talked about getting to investment-grade metrics by 2027. I was just curious if you could talk about what that actually entails in terms of leverage level that you're aiming for to help us think about your balance sheet goals. David Ellison: Yes, Ben, thank you for the question. And so look, first and foremost, we're focused on what we're building at Paramount and transforming the company. And today, 96 days in, we are more confident than ever in terms of our ability to achieve all of our North Star principles that we've discussed in the letter and previously on this call. And so -- and I appreciate that we can't comment on numbers and speculation. So first, I just want to say thank you, honestly, for saying that. Look, what I would also say, as it relates to M&A in terms of our mindset, I think it's important to know that there's no must-haves for us. We really look at this as buy versus build, and we absolutely have the ability to build to get to where we want to go. We believe we can achieve our goals with our creative content engines. We believe we can achieve our streaming goals and that we can drive enterprise efficiency and create value and long-term free cash flow generation, all through the building standpoint. As it relates to M&A, everything for us is going to tie back to does it accelerate those 3 core principles. And for us, we're fortunate that we have the balance sheet to be able to be opportunistic when we think that M&A will accelerate our goals. But we're also long-term disciplined owner operators. So from that standpoint, we'll always approach things through the lens of how do we maximize value for shareholders. And from an M&A standpoint, it's always going to be how do we accelerate and improve our North Star principles. So that's on that standpoint. Actually, Jeff, do you want to talk about the divestitures? Jeffrey S. Shell: Yes. I mean we -- as I think we mentioned in the letter, we are divesting 2 of our over-the-air businesses in Spanish-speaking Latin America. The company has a lot of different assets. We clearly laid out in the letter, as David just said, our North Star priorities. If there's assets in the company that don't -- aren't critical and aren't essential to our North Star priorities, then we'll look at them case by case and make decisions to divest when they don't -- we have enough to do and invest in without investing in things that are noncore to what's going to get us to global streaming scale. So I think you will periodically see us divest smaller assets. Andrew Warren: Yes. And I would just add on the leverage point, it's Andy, Ben, that we're not sort of investment grade across all the agencies today. So we want to get all 3 remaining agencies to rate us as investment grade. And as you know, there's a numerator and denominator to that equation relative to leverage ratios, and we're going to focus on. Operator: The next question goes to Rich Greenfield of LightShed Partners. Richard Greenfield: I guess from a really high level, David, it would be great to get your view on the UFC strategy. It was obviously by far, the biggest sort of statement you've made since acquiring Paramount. And how do you think about earning a return? You obviously put up a much bigger price than what was being paid before. And so between the subscriber base of Paramount+ getting this included, price increases, you said one is coming, but you didn't specify how much. Like how do we think about how you drive return and how you'll use the UFC assets across Paramount plus, CBS and even maybe some of your cable networks. I'd be curious just how you think about that. And then just for Andy, just a couple of housekeeping points. One, you -- the projections you made, and I realize this transaction took way longer to close than you had expected. But obviously, the projections in the original filings were, I think, like $3.4 billion and $4.1 billion for '25 and '26. Those are now $3 billion and $3.5 billion, it looks like. Just would love any color beyond just took longer, but any color on why those came down or major issues to think about? And then you also made a comment about content write-downs that have helped Q3 and will help the go forward. How significant dollar-wise? Is there anything you can give us to quantify those comments would be really helpful as we think about modeling the next 12 months. David Ellison: Yes, Rich, thank you so much for the question. I'll obviously take the first part and then pass it off to Andy. One, we could not be more excited about our partnership with TKO, Dana White and UFC. And look, I'd also loop into that Zuffa Boxing. Those 2 deals obviously makes Paramount plus really the home for combat sports in -- obviously, in the United States, and we also have rights in Latin America and Australia. And when you also look at the UFC, it is the largest sport that is not basically split off across multiple platforms. And so it really is a unicorn sports property, and we think it's going to drive a tremendous amount of value in terms of both subscriber growth and engagement across Paramount plus as well as CBS, where there will be some aspect of the UFC that also lives on CBS. In addition to that, I think when you think about the UFC and the opportunity there, there's 100 million fans in the U.S. alone. It's grown 25% since 2019 to date. And it's been doing all of that behind the double paywall in its previous home. And so from that standpoint, we think when you eliminate the double pay wall, it's going to become much more accessible, and we think that growth rate will increase. Additionally to that, we think we're offering to our subscribers at Paramount+ really significant value in the fact that for approximately pay-per-view, you basically can access all of the UFC across Paramount plus. And so from that standpoint, we think it's a great value for consumers. And really going back to kind of our North Stars of scaling our direct-to-consumer business, we need to obviously invest into more content. I mean, Rich, you know this, you talk about this all the time. having an asset like the UFC is going to increase engagement on platform. It's going to drive subscribers, and we're feeling incredibly confident in the investment that we just made. With that, I'll -- and then look, bridging into the second part of the question, one of the things I would just note before Andy dives into some more of the details here versus kind of the -- where we were in the investor announced round numbers 18 months ago is I think what's important to note there is we are investing significantly more into content than was contemplated at that time. And we're also driving greater efficiencies. And we believe the combination of those 2 things will drive greater long-term value from a company perspective. With that, Andy, I'll let you. Andrew Warren: Yes. I mean I think you kind of hit it, which is when we put the investor deck out there is what we expected at the time of the announcement. And as David just mentioned, we had some really significant opportunity that came to us right around closing, South Park, UFC and all the different talent deals we've done between August 7 and today. You combine that with our increased goal and understanding and now actually confidence in our expense efficiencies going forward. And we think we made the right decision based on where we were last year versus today, i.e., the $4.1 billion that we put out versus our $3.5 billion guidance. So we think given those investments, we're making the right choice for the long term. And then I would just say, on the efficiencies, we're going to start '26 with $1.4 billion of those accomplished and run rate. By the end of '26, we'll have accomplished most of the $3 billion plus that we've outlined in our letter. So we feel very good about our ability to hit our projection next year. And then look, on the -- on the content write-downs, I think, as you may know, in transactions like this, there is a review of all the content and all of the libraries, and we made the appropriate economic and accounting adjustments to make sure they're consistent with our strategy and the company going forward. Jeffrey S. Shell: Can I add one thing on UFC? David Ellison: Yes. Jeffrey S. Shell: To go back, Rich, if you don't mind on UFC. If you were going to go design a sport for us, UFC is perfect in so many ways. It just if I want to punctuate what David said, when we started looking at this asset Paramount, we had a real desert of sports that ended at the end of the masters and started again in the NFL, and we saw lots of churn over the summer as people turned off the service and then turned it back on for NFL. And this is a year around sport, which is very unusual for major sports. And then the second thing I'd want to add is the sports are not homogeneous. They're increasingly bifurcated sports that are kind of regular and sports that are events. You kind of look at the recent NBA deals, there's a lot of regular season and then there's a lot of postseason. And I think everybody who bought those rights would say that post-season NBA is different than regular season NBA. And with the UFC, there is no regular season and postseason. Every one of these numbered events that David talked about coming out from behind the paywall is an event and the ability to have events throughout the year is exactly where we think sports is going. And then I will add one thing. We talk about CBS under George Chef's incredible leadership. We have huge volume of engagement on DTC and CBS. These tend to be older female. They skew a bit over female all of our procedurals and the shows that are awesome on CBS and ad hoc and Blue Buds and you can go down the list. So having a sports property like this that was available that year-round event-based and drives young male is like perfect. So this was a bit of a unicorn for us and where we were trying to go. Operator: The next question goes to John Hodulik of UBS. John Hodulik: Two, if I could. First, David, how should we think of the long-term profitability of the D2C business? And what are the major levers to get there? It sounds like from the letter, you think ARPU is one of them where you guys could make some substantial headway in the near term. And then getting back to the comments on the investment, is this a situation where you guys are investing so heavily on the front end that, that free cash flow may turn negative in the near term before the platform scales up? Or how should we think of free cash flow trends over the next couple of years? David Ellison: Yes, Bob, I'm going to turn it over to Andy to take that question, and then I'll fill in after that. Andrew Warren: Sure. Yes. So the -- John, it's Andy. The free cash flow is one of the biggest opportunities that we have and we see going forward. For '26, we are -- we know there's going to be about $800 million of transactional and transformation costs. So on a reported basis, it will be negative. But on an adjusted basis, taking out those kind of onetime items, it will still be positive. But I think most importantly, when we look at going forward, it really comes down to our ability to do 2 things. Working capital has been a big negative for this company for many years. It's a real opportunity for us to both get better payable and sales terms, but also one thing David spoke of was our ability to get better systems in place, visibility into accumulating receivables by customer and by area is going to be a big driver of this. The other area I mentioned that's going to, I think, accelerate our free cash flow growth is cash tax rates. Ours is marginal today and will get significantly better over time. One real benefit of having, as you know, a global portfolio of IP is where you domicile that IP has big influences on cash tax rate, and that's something else we're focused on. David, do you want to answer -- do you want to go back real quick and double-click on D2C profitability? David Ellison: Yes. No, absolutely. Look, I think if you go and it's obviously outlined, the D2C segment, obviously, will be -- it is profitable next year. It will be increasingly profitable in 2026. And so from that standpoint, when we look at the growth rates across the business, we believe that we can grow and scale in service, and we're doing that in a fashion that is profitable. Operator: The final question goes to Kutgun Maral of Evercore. Kutgun Maral: I just had a follow-up on the content ROI discussion, maybe away from the UFC specifically and speaking more broadly in the context of the plan to make incremental programming investments in 2026 in excess of $1.5 billion. What does the $1.5 billion look like across the various categories or verticals, whether it's between sports, originals, licensing, DTC, theatrical? However way you're able to slice it would be helpful, along with what the total content spend budget looks like in 2025 versus 2026? And then how are you approaching the decision-making process and ROI analysis of these investments as we move forward and manage the balance between investing for global scale while also anchoring around profitable growth? David Ellison: Yes. No, absolutely, great question. So as we've talked about, really revitalizing our creative content engines is obviously a key driver and goal for us. So from that standpoint, like a couple of examples to talk through. We've talked about the UFC. We talked about Zuffa Boxing. South Park as an exclusive for -- obviously, for Paramount+ in terms of the streaming rights is another investment that we've obviously made, which has performed incredibly well for us, both in cable as well as on the DTC platform. Having the Duffer Brothers join next year is another area we've obviously invested in the content -- obviously, in the content space. We obviously announced the film with James Mangold and Timothée Chalamet. So we really are investing really across the board in our growth businesses. I also think everything we do is through the lens of long-term value creation. So whether that's streaming, whether that's sports, whether that's our film business, it really is how do we grow and scale for -- to create long-term value for our shareholders. When you think about Paramount Pictures in particular, that's definitely an area where there was some weakness when we obviously came into the studio. And so from that standpoint, we are diverting a lot of resources from the combined content engines, Paramount Pictures as well as Skydance to make sure that we can get that studio to scale and get that studio to scale profitably, which we're incredibly confident in our ability to be able to do that, especially with the great leadership under Dana Goldberg and Josh Greenstein. And so that's really kind of how we look at it. Andy, anything you want to add. Andrew Warren: Yes. I would just say also there's a unified review of our big content spending across all the verticals and the segments and corporate finance. And there's definitely buying that we're all trying to do is grow the top line, grow value creation for the company, which means share price appreciation and nothing is done in isolation. We're very careful about that with regard to our big content spend across film, television, DTC and broadcast and cable. Unknown Executive: All right. Sounds good. David, do you have any closing remarks? That's our last question. David Ellison: Just one. I want to just thank everybody for -- who took time to dial into the call today. And just want to reiterate, there's tremendous energy and excitement across the company, and we're really excited for what we're going to get to build in the future. So just thank you. Operator: Thank you. This now concludes today's call. Thank you all for joining, and you may now disconnect your lines.
Operator: Greetings, and welcome to Mineralys Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Dan Ferry. Thank you. You may begin. Daniel Ferry: Thank you, operator. I would like to welcome everyone joining us today for our third quarter 2025 conference call. Earlier this afternoon, we issued a press release providing our third quarter 2025 financial results and business updates. A replay of today's call will be available on the Investors section of our website approximately 1 hour after its completion. After our prepared remarks, we will open the call for Q&A. Before we begin, I would like to remind everyone that this conference call and webcast will contain forward-looking statements about the company. Actual results could materially -- 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 press release and our SEC filings, including our annual report on Form 10-K and subsequent filings. Please note that these forward-looking statements reflect our opinions only as of today, November 10, 2025. Except as required by law, we specifically disclaim any obligation to update or revise these forward-looking statements in light of new information or future events. I would now like to turn the call over to Jon Congleton, Chief Executive Officer of Mineralys Therapeutics. Jon Congleton: Thank you, Dan. Good afternoon, everyone, and welcome to our third quarter 2025 financial results and corporate update conference call. I'm joined today by Adam Levy, our Chief Financial Officer; Dr. David Rodman, our Chief Medical Officer; and Eric Warren, our Chief Commercial Officer. I'll begin with an overview of the business, our clinical programs and recent milestones, followed by Adam to review our third quarter financial results before we open up the call for your questions. We're excited to have this opportunity today to provide an update on the progress our team has made over the past couple of months. Last month, we received pre-NDA feedback from the FDA. There were no surprises in this feedback and we're moving ahead with our NDA filing, which we expect to submit either late this quarter or in the first quarter of 2026. In preparation for the submission, we developed a robust data package featuring results from multiple clinical trials across the spectrum of distinct and diverse participants with lorundrostat, which we believe support its potential as a best-in-class treatment for high-risk patients with uncontrolled or resistant hypertension and beyond. Earlier this year, we announced data from the Launch-HTN and Advance-HTN pivotal trials. The results from both trials demonstrate that lorundrostat offers a clinically meaningful and sustained reduction in systolic blood pressure. These data have generated broad interest across the medical community, underscoring the unmet need, the desire for innovation and the management of hypertension and the commercial potential of lorundrostat. These findings form the foundation of our NDA submission, which includes data demonstrating that lorundrostat maintains a durable and clinically meaningful response across diverse patient populations, a key consideration for its potential use in treating uncontrolled and resistant hypertension. This includes subgroup analysis from the Phase III Launch-HTN trial and data from confirmed hypertension patients in the Advance-HTN trial. The Launch-HTN trial enrolled a diverse group of participants. Nearly 1/3 were black or African-Americans, half the participants were women, the majority of participants were overweight or obese and over half had resistant hypertension, requiring 3 or more background antihypertensive medications. Across all subgroups, lorundrostat 50 milligrams once daily demonstrated consistent, statistically significant and clinically meaningful reductions in blood pressure. All systolic BP reductions generated in Launch-HTN were measured at 24 hours after a dose, proving the sustained effect and true once-daily profile. The Advance-HTN trial designed and executed in conjunction with the Cleveland Clinic, enrolled a diverse group of hard-to-treat participants with confirmed uncontrolled and resistant hypertension by design with over half of the subjects being black or African-Americans. Now let me pause for just a second to describe what I mean by confirmed. In any trial that allows participants to remain on their existing background medications such as Launch-HTN, patients may have apparent hypertension, meaning if they optimize their treatment with the existing medications, they may get to goal. In Advance-HTN, participants' existing background medications were removed, and they were started on an optimized background treatment, aligned with the AHA guidelines, confirmed daily compliance with smartphone technology and randomized only if they remained hypertensive after a 3-week run-in, utilizing the measurement of 24-hour ABPM. In these most difficult-to-treat participants, lorundrostat again demonstrated a significant and clinically meaningful reduction in systolic blood pressure and was well tolerated. I would now like to briefly touch on the other development activities we're pursuing to enhance and extend the lorundrostat profile in hypertension with comorbid conditions, which are largely driven by inadequately controlled blood pressure and dysregulated aldosterone, starting with our proof-of-concept Explore-CKD trial, which evaluated the safety and efficacy of lorundrostat in subjects with hypertension and comorbid chronic kidney disease on a background of SGLT2 inhibitor. Last week, we were excited to have data from this trial presented during a late-breaking session at ASN's Kidney Week 2025. Lorundrostat demonstrated a clinically meaningful reduction on systolic BP in 4 weeks and was well tolerated. The key secondary outcome measure of reduction of urinary albumin creatinine ratio, or uACR, an accepted surrogate for renal protection was clinically meaningful and highly statistically significant. Immediately after the release of these data, First Word Pharma surveyed 133 health care professionals, with 77% indicating they would consider prescribing lorundrostat to CKD patients with uncontrolled hypertension on either an ACE inhibitor or an ARB. Turning to the ongoing Phase II Explore-OSA trial. In the third quarter, we completed enrollment in this trial, which is evaluating the safety and efficacy of lorundrostat in participants with moderate-to-severe obstructive sleep apnea and hypertension. We anticipate reporting top line results from the trial in the first quarter of 2026. If the trial is successful, these data would complement the previously announced Explore-CKD results and further our strategy to extend lorundrostat's profile in treating patients with hypertension and comorbid conditions. Our rationale for targeting OSA is clear. A significant portion of patients with obesity and resistant hypertension also have OSA, which is often undiagnosed and untreated. These conditions are biologically linked, as blood pressure and the hypoxia rise during sleep due to upper airway obstruction. Both are drivers of major adverse cardiovascular events, including death. Prior small studies of MRAs or adrenalectomy have demonstrated reduction in AHI, which is the primary endpoint of the Explore-OSA trial. The trial will also test the effect of lorundrostat on nighttime blood pressure using 24-hour ABPM as well as the novel measurement of continuous blood pressure through the evening. While we have already clearly demonstrated lorundrostat's efficacy as a once-daily morning antihypertensive, this trial will explore nighttime dosing since the triggers for aldosterone production in OSA or reduction in oxygen delivery leading to increased sympathetic activation of aldosterone production that occurs in the night during sleep. Uncontrolled and resistant hypertension remain major unmet needs, affecting over 20 million people in the U.S. and contributing significantly to cardiorenal complications. Our clinical data highlight the differentiated value of targeting aldosterone with an aldosterone synthase inhibitor like lorundrostat, especially compared to current third and fourth-line therapies. As we advance toward commercialization, we are prioritizing market access planning and payer engagement to ensure the value of lorundrostat is well understood. We have also expanded our medical communications capabilities to support data dissemination through peer-reviewed publications, scientific meetings and our field-based medical science liaisons. These efforts are central to ensuring commercial readiness for this potentially transformative treatment and the successful launch of lorundrostat. As we near the end of 2025, we've seen significant advances in the ASI space, including multiple trial readouts. As we reflect on these data and their clinical relevance, we are more confident than ever in lorundrostat's best-in-class profile based on the meaningful blood pressure reduction that demonstrated 24-hour control, its benefit across the spectrum of difficult-to-treat patients and its safety and tolerability. As we move forward with our NDA submission, we do so with confidence in the strength of our data, our team and our mission to develop lorundrostat as a potential best-in-class therapy for the high-risk often difficult to treat patients living with uncontrolled or resistant hypertension. I will now turn the call over to Adam to review our financial results for the third quarter of 2025. Adam? Adam Levy: Thank you, Jon. Good afternoon, everyone. Today, I will discuss select portions of our third quarter 2025 financial results. Additional details can be found in our Form 10-Q which will be filed with the SEC later today, November 10. We ended the quarter with cash, cash equivalents and investments of $593.6 million as of September 30, 2025, compared to $198.2 million as of December 31, 2024. We believe that our current cash, cash equivalents and investments will be sufficient to fund our planned clinical trials and regulatory activities as well as support corporate operations into 2028. R&D expenses for the quarter ended September 30, 2025, were $31.5 million compared to $54 million for the quarter ended September 30, 2024. The decrease in R&D expenses was primarily due to a decrease of $26.8 million in preclinical and clinical costs, primarily impacted by the conclusion of the lorundrostat pivotal program in the second quarter of 2025, partially offset by increases of $3.2 million in higher compensation expense resulting from additions to headcount, increases in salaries and accrued bonuses and increased stock-based compensation and $1.1 million in higher clinical supply manufacturing, regulatory and other costs. G&A expenses were $9.7 million for the quarter ended September 30, 2025, compared to $6.1 million for the quarter ended September 30, 2024. The increase in G&A expenses was primarily due to $2.2 million in higher compensation expense resulting from additions to headcount, increases in salaries and accrued bonuses and increased stock-based compensation, $1.3 million in higher professional fees and $0.1 million in other administrative expenses. Total other income net was $4.2 million for the quarter ended September 30, 2025, compared to $3.8 million for the quarter ended September 30, 2024. The increase was primarily attributable to increased interest earned on investments in money market funds and U.S. treasuries as a result of higher average cash balances invested during the quarter ended September 30, 2025. Net loss was $36.9 million for the quarter ended September 30, 2025, compared to $56.3 million for the quarter ended September 30, 2024. The decrease was primarily attributable to the factors impacting our expenses that I described earlier. With that, I will ask the operator to open up the call for questions. Operator? Operator: [Operator Instructions] Our first question comes from Umer Raffat with Evercore. Umer Raffat: I have a question on your resistant hypertension population. And my question specifically is, if you don't adjust for the discontinuations, basically, no imputations involved, what would your minus 9-millimeter mercury have been? Presumably something in the teens, but is that a number you guys have evaluated if you were to not do any imputations and only look at completers like Astra did? Jon Congleton: Umer, thanks for the question. Maybe Dave can opine on this. But the -- we haven't done that analysis. It wasn't part of the plan. And from our standpoint, you have to account for all subjects enrolled that account for the execution within the study, discontinuations and patient outcomes as well. But Dave, do you want to give some comment to that? David Rodman: Yes. So you're right, Jon. We did exactly what we negotiated with the FDA should be done in the situation of missing data. As you probably know, numbers above 15% and certainly 20% are extremely problematic. And sometimes those trials can't be evaluated by the agency. So we wanted to make sure. So we really didn't do that. And I will caution you that it's complicated to do any kind of estimates on imputation because you need the raw data. You can't take, say, the [ lead square ] means and try to figure out what it would be. But it can be a reasonably substantial reduction. So you're right, it would -- it can go up or down 3 to 5 millimeters of mercury depending on what sort of imputation you do, et cetera. Operator: Our next question comes from Rich Law with Goldman Sachs. Jin Law: Congrats on the progress. So one advantage that AstraZeneca has been highlighting for Bax is the longer half-life. So in Bax24 presentation over a weekend, I think we saw -- I mean it was interesting to see that the Bax show 14-millimeter placebo-adjusted SBP reduction for both day and night. Have you guys looked at that the day and night for Advance-HTN? And was there any difference between the 2? And then I have questions later on follow-up. Jon Congleton: Rich, the 24-hour control, long-term acceptable tolerability profile, these are all things that physicians are looking for as they're treating the chronic condition like hypertension. With 4 studies completed, we're very confident in the 50-milligram and the 25-milligram once daily, providing that 24-hour control. And with the profile that's going to really aid long-term adherence compliance. I noted it in our prepared remarks, I think it's worth repeating. We have always measured blood pressure in the morning before that day's dose. So we're measuring it at trough. Lorundrostat in Mineralys is the sponsor. We're the first to look at 24-hour ambulatory metrics with an ASI with our Target-HTN study. We're very comfortable with daytime and nighttime blood pressure reduction. Advance-HTN, the most rigorous study down in the truly confirmed population, which is distinct from any other steady population of at least temporal current ASI studies, again, validated the 24-hour control. We've yet to publish or disclose the nighttime, but we're comfortable with what we're seeing from Target-HTN, Advance and really for the entire program and providing 24-hour control for patients. Jin Law: I see. Got it. And then -- so then, I want to follow up to your previous discussion on the data, the missing data and how to handle that. Based on your understanding of FDA's requirement, are you -- can you exclude any missing data or invalid baseline measurements in the primary analysis? Do you have to consider the entire population, the ITT population and then perform imputation to it? So just curious to see how your -- what your thoughts are in terms of what the FDA require in these scenarios? Jon Congleton: As Dave noted, and I'll have him add some color to this. In the case of Advance-HTN, this was pre-discussed with the FDA and set in the SAP. But Dave, do you want to maybe add some color to Rich's question? David Rodman: Yes. Thanks for the question, Rich. So one thing I'll mention is you can't go back and do it. You have -- it needs to be in the statistical analysis plan and spelled out. And depending on what the circumstances are you will probably have to do a number of different ones. And one is called jump to reference. That means you have to assume every single person randomized to active actually behave like placebo, that's obviously the most conservative, but it's also the one that they're going to want to look at. There are other ones that are more complex. And -- but you have to negotiate all that in advance. And generally speaking, you would do that by looking ahead and seeing what you're missing these numbers are and then decide whether a conversation like that is needed. We did that when we had a risk of missing data and we're able to handle the problem. So it's complicated. But if you haven't already done it before database lock, you can't just do it later and try to make up for it. Operator: Our next question comes from Tim Anderson with Bank of America. Alice Nettleton: This is Alice on for Tim. So you mentioned there were no surprises in the pre-NDA feedback. But are you able to provide any more color on this feedback? And could you update us on any final steps before filing? And then I have a follow-up as well. Jon Congleton: Yes, Alice. We're -- we haven't really disclosed that, but we're comfortable with the feedback. As I noted, there were no surprises. We're very confident in the data set we've put together across Advance-HTN, Launch-HTN and Explore-CKD. As I noted in the past, in public statements, the other critical part is the on-label extension, having sufficient long-term safety data, including the randomized treatment withdrawal, all of that is progressing well. So we're comfortable with the guidance that we've given, and that is mentioned by the end of this year or into Q1 of next year. Alice Nettleton: And then just following the -- now that you're on track for submission, can you provide any updates on any partnering discussions you may be having? Jon Congleton: Thanks, Alice. No, we continue, as we've said in the past, believing that partnering is going to be a key component of the Mineralys story. That is for ex U.S. commercialization opportunity, maximization of value, but also in the United States. We feel very confident in the best-in-class profile that exist with lorundrostat right now. We want to make sure that we give it the appropriate commercial lift in the United States as well as rest of world as well as looking at co-development partnerships. And so I think we have a well-characterized molecule at this point on the cusp of an NDA submission. And I think that continues to support the partnering dialogues that we're having. We're at the end of the day, we're focused on how do we maximize the value of lorundrostat for patients, for physicians and certainly for investors. Operator: Our next question is from Annabel Samimy with Stifel. Jayed Momin: This is Jayed, I'm on for Annabel. Just 2 questions. The first one is around the open-label extension trial. What are your expectations there? And when can we expect an update on the data? Jon Congleton: Yes. We continue to progress well with the open-label extension. There's been no surprises as we continue -- it's open label, obviously, so we can see data within that, the DSMB continues to review it. We continue to be confident with the safety profile that we're seeing. We will certainly look to publish the results of the open label as well as the randomized treatment withdrawal when the last subject has completed that aspect. Jayed Momin: Got it. And then one more on the ongoing Explore-OSA trial. How do you expect to leverage the data that comes out of that trial? Jon Congleton: Yes. Our goal with Explore-CKD and Explore-OSA is really an acknowledgment that lorundrostat has a benefit that extends beyond just the reduction of blood pressure. And we know there are comorbid conditions that hypertension patients are dealing with chronically, whether it's proteinuria, whether it's CKD, whether it's OSA in the basically related cardiovascular risk that each carry. And so from our standpoint, adding further data beyond blood pressure reduction to the profile of lorundrostat is going to help its image and view within the prescribing population. It's going to help inform how they think about providing benefits to their patients that don't just deal with blood pressure but are dealing with the related comorbidities. And so I think it really fully round out the profile of lodrundrostat and shows the promise of this molecule for addressing hypertension, but again, for those related comorbidities. Operator: Our next question comes from Mohit Bansal with Wells Fargo. Mohit Bansal: Congrats on all the progress. So I have 2 questions. So I wonder -- overall, Jon, based on the data we have seen so far with lorundrostat and Bax so far, do you see any major differences between the 2 at this point? Or do you think it kind of validates -- like all those data validate the class? And the related question is, that AstraZeneca has talked about this being a multibillion-dollar opportunity. Some of it is unlocked -- some of it would be unlocked with the combination and all those trials. So to help enable those trials, what kind of partnerships you as a company would be looking at? And what kind of partner would be the better partner for you to collaborate with at this point? Jon Congleton: Yes. Thank you, Mohit. I would say -- and going back to my remarks, we've seen a lot of data in 2025 from us with lorundrostat as well as competing ASIs in the space. We feel very comfortable with our best-in-class profile at this point. Clearly, the ASIs are going to be a differential class and addressing the significant unmet need, a population of 20 million just in the United States alone that could benefit from a drug that's targeting the dysregulated aldosterone that we believe is probably accounting for a significant portion of those patients not being able to get to their ideal goal and basically risking poor cardiovascular outcomes if they do not. At this stage, where we have a complete data set from Advance-HTN, where we are truly looking at the most difficult to manage because they are confirmed hypertension to the really broad study Launch-HTN as well as Explore-CKD. We feel very confident in the consistent effect that we're seeing. The magnitude of reduction of systolic blood pressure that builds over time. We see a nice response within 2 weeks that continues to grow out to the 12-week period of these studies. The safety profile, clearly, the on-target safety signals with electrolytes. We believe we've got best-in-class molecule as far as the really modest increase in potassium that's transient upon reducing or discontinuing the drug, and the tolerability of the profile. So again, I think this is an exciting time for us. I think it's going to be informative for our partnering dialogue. It's very easy at this point to say this molecule is being derisked as an aldosterone-reducing agent and doing so safely and effectively. We know that aldosterone plays a critical role in conditions beyond hypertension, such as CKD, such as OSA, conditions like heart failure. We believe that it's that breadth of opportunity that will continue to inform those partnering dialogues, and that's why it's critical for us. We've said it early on. We've not -- we've not had a "for sale sign" in front of this company. We've been developing this molecule to make sure that we maximize the value for that. I think at this stage, we've done so. We think there's continued value that we can unlock on our own, but certainly a partner both in the commercial and the developmental perspective would help inform that and drive that even further. Operator: Our next question comes from Rami Katkhuda with LifeSci Capital. Rami Katkhuda: AstraZeneca seems to have only enrolled a small number of African-American patients in Bax24 at least for the primary endpoint analysis, which doesn't seem super representative of the resistant hypertensive population. Do you think this could have affected the results? And can you remind us how large of a difference in efficacy you see with lorundrostat in this patient population? And then secondly, have you noted what percentage of patients get to goal with lorundrostat in Advance or Launch? Jon Congleton: Yes. Rami, thanks for the question. It was with intent that we really wanted to ensure that we had a good diverse representation of patients within our clinical program. We know that black or African-American patients tend to be underrepresented in studies. We also know they carry some of the largest cardiovascular risk for uncontrolled hypertension. So I was really proud of what the team did across the program. In Advance-HTN, over 50% of those studies were black or African-American descent. In the larger global study, Launch-HTN, we're nearly at 30%. And so we have a really clear understanding of the benefit that lorundrostat can provide these patients. In the case of both trials, when we look at forest plots, we see that race is not a determinant of response. In other words, whether you're white or black or African-American, you're going to respond to lorundrostat and have a significant opportunity to get to your respective goal. And so it was important for us to have that population within our clinical program to be able to speak to the effect of lorundrostat to that at-risk population that typically is underrepresented. As to the percent to get to goal, what we have shown in the past was, I believe, 44% in Launch got to goal at week 6, and I believe it was 42% got to goal at week 4 with Advance. I want to make sure I got that right, 44% with Launch, 42% with Advance. And I believe for the placebo groups, they were about half. I do know the odds ratio of getting to goal was over 3 in each study within those time frames that I described. And I hope that answered your question, Rami. Rami Katkhuda: Definitely, yes. Eric Warren: I'll just add -- Rami, it's Eric. I'll just add that the definition of goal was different when you're looking at that Bax24 data, where they used a [ 1 30 ], we used a more stringent [ 1 25 ]. I'll also say that it wasn't just Bax24 that didn't have a high quantity of black or African-American patients. It was also BaxHTN where they were about 8%. David Rodman: And this is Dave. As long as we're all jumping on this question because it's such an important question. As a developer, my perspective is this. There's a reason why we had a high percentage of people in the Advance-HTN trial of confirmed uncontrolled and resistant hypertension. Black, African-Americans have a higher percentage of not being able to respond to the generic drugs as well as Caucasian patients. And so we have a higher percentage there. The need is higher and yet we showed that the response once they get on our drug is just as good as the Caucasian population. I think that's important distinction because as we've said many times, doing that trial and getting established confirmed hypertension is what the experts ask us to do, and it's what the real gold standard is to know what this drug can do beyond generics. And in African-Americans, it's obviously an extremely effective drug there. Operator: We have reached the end of the question-and-answer session. I'd like to turn the floor back over to Jon for closing comments. Jon Congleton: Thank you, operator. We believe the strength of the clinical results for lorundrostat show the potential benefit for uncontrolled and resistant hypertension and related comorbidities such as CKD. We look forward to our upcoming NDA submission and results from Explore-OSA. This is an exciting time for our team. The uncontrolled and resistant hypertension patients who may benefit from treatment with lorundrostat, the physicians and researchers that have worked so hard and supported bringing lorundrostat through our clinical trial program and our shareholders. We're excited for upcoming key milestones and look forward to sharing updates with you in the upcoming quarters. With that said, I'll thank everyone. Thank you for joining us today, and we'll close the call now. Thank you. Operator: This concludes today's conference. You may disconnect your lines at this time. And we thank you for your participation.
Operator: Good afternoon, and welcome to VirTra's Third Quarter 2025 Earnings Conference Call. My name is Julian, and I will be your operator for today's call. Joining us for today's presentation are the company's CEO, John Givens; and CFO, Alanna Boudreau. Following their remarks, we will open the call for questions. Before we begin the call, I would like to provide VirTra's safe harbor statement that includes cautions regarding forward-looking statements made during this call. During this presentation, management may discuss financial projections, information or expectations about the company's products and services or markets or otherwise make statements about the future, which are forward-looking and subject to a number of risks and uncertainties that could cause actual results to differ materially from the statements made. The company does not undertake any obligation to update them as required by law. Finally, I'd like to remind everyone that this call will be made available for replay via link in the Investor Relations section on the company's website at www.virtra.com. Now I'd like to turn the call over to VirTra's CEO, Mr. John Givens. Thank you. You may proceed, sir. John Givens: Thank you, Julian, and thank you, everyone, for joining us this afternoon. After the market closed today, we issued a press release that provided our financial results for third quarter and 9 months ending September 30, 2025, along with highlighted business accomplishments. In Q3, VirTra continued to manage through a slower Federal funding cycle while keeping strong engagement with our customers and expanding our reach. The timing of Federal award and customer acceptance affected revenue recognition in Q3, but our backlog grew again during the quarter. We also entered Q4 with a larger pipeline of opportunities tied to grant awards. Our operational discipline and continued focus on sales and marketing position us well as funding flows improve and pent-up demand converts to orders and deliveries. The operating environment is still being shaped by Federal funding delays. Agency procurement cycles are still moving slower than normal as agencies wait for budget clarity and grant awards. While this timing has affected the short-term revenue recognition, agency engagement remains strong, and we see demand building in the background. Regarding the funding environment, the Department of Justice's COPS grants program has already identified the agency slated to receive funding based on applications that closed on June 30. Announcements were delayed by the Federal shutdowns. We believe VirTra will be among the beneficiaries once those awards are posted and spending authority normalizes. We've also seen progress as key Federal director roles are being filled, which should facilitate authorizations and releases of funds. We've been active in Washington, D.C., helping policymakers understand the importance of the immersive training and supporting funding initiatives that benefit our customers. When the government shutdown ends, the grant awards resume, we expect revenue conversions to improve. We made solid progress in Q3 and how we reach and support customers. Our redesigned website launched in September, and the early results are encouraging. Visitors are spending more time evaluating products and requesting information, and we are generating more qualified leads than ever. Meanwhile, our sales model continues to improve accountability and responsiveness across territories. We've made targeted personnel changes to ensure we have the right people in the right roles which is strengthening our customer engagement and follow-through. We also remain positioned to benefit from our recent entry into the GSA procurement cycle of channel, which streamlines sales processes and shortens delivery time lines. This is another positive step forward in our long-term go-to-market strategy. In parallel, our marketing cadence has increased as we placed a greater focus on press, trade events and targeted industry awareness such as law enforcement leadership gathering. I also want to note that we've appointed Grant Barber to our Advisory Board. Grant brings over 3 decades of financial leadership including public company CFO experience to our Board. He will be instrumental in supporting our team as we scale. Turning to STEP. The program remains a strong selling point, especially for smaller agencies that may not have access to full Federal funding. Agencies are using STEP to ensure they have the critical training they need which has driven consistent adoption and high renewal rates. It also creates reoccurring revenue from VirTra and provides us with stronger baseline revenue performance from quarter-to-quarter. On the product side, our focus remains on delivering best-in-class training for agencies of all sizes. At the IACP last month, we introduced the V-One Portable Simulator designed specifically for a smaller department. The early response reinforces how important it is to offer high-quality training across a wide range of budgets. This product expands our addressable market and positions us to serve departments that may have previously been priced out of advanced simulation technology. Our focus on product quality continues to be a major differentiator. Customers consistently report that our systems deliver superior training capabilities and withstands years of rigorous real-world use. This validation reinforces our reputation as trusted long-term training partner and helps drive repeated business and renewals. It's worth noting that we are driving initiatives in our sales organization to accelerate adoption of our new systems. We continue to strengthen our value proposition ensuring that VirTra remains well positioned to win and retain customers across multiple market segments. International markets continue to gain momentum in Q3, as we more than doubled revenue compared to the same period last year, while international activity can be lumpy, we're encouraged by new developments in Canada and Colombia. These wins demonstrate the growing global recognition of VirTra's training solutions as they diversify our revenue beyond our core U.S. market. Our military work is also progressing. Early this month, we demonstrated our next-generation Soldier Virtual Trainer or SVT system for the U.S. Army at our Orlando training facility. The system exceeded expectations and showed how our portable V-100 can deliver a complete ready-to-deploy solution for weapon skills, joint fires and the use of force training. We also introduced our new analytics platform, APEX, which tracks performance in real time, measuring accuracy, reduction time and decision-making. APEX gives commanders valuable insight into soldier readiness. Every new VirTra's simulator will now include APEX at no additional cost, further demonstrating our commitment to provide data-driven science-based training aligned with the Army's modernization goals. While these sales cycles are longer than our traditional law enforcement market, we are building strong relationships with our military partners as part of our long-term growth strategy. Overall, Q3 showed continuous progress despite ongoing funding timing challenges. Our core law enforcement business remains a central focus as we are seeing stronger engagement across our customer base. Our meaningful backlog expanded product portfolios, improved marketing foundation and international momentum give us a solid base to convert opportunities into revenue as grant awards and customer acceptance picked back up. With that, I'll turn it over to Alanna for the details of the financial review. Alanna? Alanna Boudreau: Thank you, John, and good afternoon, everyone. Now let's review our unaudited financial results for the third quarter and 9 months ended September 30, 2025. Our total revenue for the third quarter was $5.3 million compared to $7.5 million in the prior year period. The decrease can primarily be attributed to lower revenues from the government sector due to those funding delays. Breaking this down by market, our government revenue for the third quarter was $4.1 million compared to $6.9 million in the prior year period. International revenue for the third quarter was $1.2 million compared to $0.4 million in the prior year period. Our total revenue for 9 months was $19.5 million compared to $20.9 million in the prior year period. Gross profit for the third quarter was $3.5 million or 66% of total revenue compared to $5.5 million or 73% of total revenue in the prior year period. Last year's unusually high gross margin reflected capitalized labor on development of the XR and the IVAS program and a greater mix of high-margin service and STEP revenue. Our gross profit for the 9 months was $13.5 million or 69% of total revenue compared to $15.7 million or 75% of total revenue in the prior year period. The change in gross margin reflects that higher mix of capital sales in 2025 relative to the service and STEP revenue as well as the absence of unusual low cost of sales recorded in 2024 due to the capitalized labor and development projects. Our net operating expense for the third quarter was $4 million down 16% from $4.7 million in the prior year period. Our net operating expense for the 9 months was $11.7 million or down 11% from the $13.2 million in the prior year period. These decreases reflect our disciplined cost management while maintaining investment in our core growth initiatives. The operating loss for the third quarter was $0.5 million compared to operating income of $0.8 million in the prior year period. Operating income for the 9 months was $1.8 million compared to $3.3 million in the prior year period. Net loss for the third quarter was $0.4 million or $0.03 per diluted share compared to net income of $0.6 million or $0.05 per diluted share in the prior year period. Net income for the 9 months was $1.1 million or $0.09 per diluted share compared to $2.3 million or $0.21 per diluted share in the prior year period. Adjusted EBITDA, a non-GAAP metric, was $0.1 million for the third quarter and $2.5 million for the first 9 months of 2025. As of September 30, our cash and cash equivalents totaled $20.8 million compared to $18 million at December 31, 2024. Working capital was $32.9 million, and we maintained a debt-like balance sheet. VirTra that define bookings as the total of newly signed contracts awarded RFPs and purchase orders received in a given period. Bookings for the third quarter was $8.4 million, up from $4.6 million in Q2. VirTra defines backlog as the accumulation of bookings from signed contracts and purchase orders that are not yet started or are incomplete in their performance obligations, and therefore, cannot yet be recognized as revenue until delivered in a future period. We segment these backlog into 3 primary categories: capital, which includes our simulator systems, accessories, installation, training, custom content and design work, service, which is primarily extended warranties and support contracts and STEP our long-term subscription-based program. Our backlog as of September 30, 2025, stood at $21.9 million. This includes $10.2 million in capital, $5.3 million in service and $6.4 million in STEP contracts. Additionally, we are continuing to track renewable STEP contract options, which are not yet included in the backlog total. New capital bookings are largely expected to convert to revenue in the upcoming quarters due to customers having requested deferred deliveries. As always, our ability to convert backlog into revenue remains dependent on customer-driven installation time lines, which can shift based on factors outside of our control. So in review, our backlog, recurring revenue base and strong balance sheet provide flexibility as funding will resume. Looking forward, we believe the combination of our disciplined cost management and enhanced contract structures and ongoing demand recovery will support continued progress. Our updated STEP program with its 3-year commitment and strong 95% renewal trends improves recurring revenue, visibility and reinforces long-term customer relationships and position VirTra for sustainable growth. That concludes my prepared remarks, and I'll turn the call back over to John for his closing comments. John? John Givens: Thank you, Alanna. As we finish out 2025 and look towards 2026, we stand ready to deliver critical training tools to our law enforcement partners when budgets open back up. We have remained focused on improving our sales process, products and operations to strengthen our foundation. . We look forward to reaccelerating our business growth in the quarters ahead. That concludes my prepared remarks. Operator. Operator: [Operator Instructions] And our first question comes from the line of Richard Baldry with ROTH Capital Partners. Richard Baldry: Looking at the booking strength in the quarter, can you talk a bit about were there any multiyear deals that skewed that result? Or is it a fairly typical cadence versus prior? And then maybe -- was a lot of that international versus domestic or disproportionately? . John Givens: Alanna, you want to take that. Alanna Boudreau: Yes. Yes. Actually, at the end of the quarter was when we received a booking of about $4.8 million that we anticipate most of becoming revenue in 2026, and it did skew to the international customer. Richard Baldry: Okay. And then how does the shutdown or the funding backdrop impact military and your prospects there versus your typical police agency business? . John Givens: Well, it affects both proportionately. Most of the agencies that we're dealing with have -- they rely a lot on government funding, whether it's full funding for the system under the COPS or some of these grant programs or if it's a matched funding, it affects them pretty significantly. As far as the military goes, when it shut down, we get no funding, the $4.8 million that came in from the Colombian that we -- the Columbia deal that we looked at was from INL, which is International Narcotics Law Enforcement. And there was a window where everything started to open up, they awarded it very quickly and then we went into the shutdown. So there's a lot of pent-up demand and there's a lot of folks looking at our systems and wanting to talk the SVT program that we reported on. They continued even during the shutdown asking questions and us providing information. So we're gaining a lot of traction there. Unfortunately, that probably moves the slowest, but it's the most rewarding. So we'll see some activity here coming forward as the shutdown ends and the funding continues to open up. The other side of that, though, Rich, is that a lot of these agencies that we have been talking to and the ones that have funding and that we have quotes in or have had deep discussions, a lot of them since the new administration came in last January, haven't had their official directors there. So they've been very hesitant to award or use any of the firms whether they do not have the authority or whether they don't want to take the responsibility. So we're seeing a lot of the directors are now being assigned to that the government opening up and the funding starting to open. I think that was the trifecta that put us in bad shape, but it's all coming together now. So we should see a lot of positivity moving forward in the next several quarters. Richard Baldry: Okay. And is there a way to think about the backlog in terms of what is actually funded, but maybe waiting certain milestones or something deployable on the client side versus what's awaiting funding to try to get a figure -- for a feel for how much of that you can convert to revenue near term before the bottlenecks hopefully open up. John Givens: Yes, that's a good question. Remember, several years ago, we decided to break up the backlog, so gave you a little better idea of what was in the backlog. So when you look at those components to capital, capital is 10.5. Let me scroll back 10.2 in capital. The only thing that affects the conversion of that and has happened to us on several occasions, is the customer purchasing it, it's sitting on our docks but for some reason, whether right now, some of it's funding or whether the building is ready to take it or whether they have everything lined up that they can take it. Sometimes, it's as little as 30 days, and we've had some there as long as a year. So those are the items that we talked about out of the control. The 5.3% in service contracts go -- we don't break it down of -- we have warranty of service in there for 2026, 2027, 2028, 3 years out, we don't break that down. So there's a portion of that, that would also be recognized. And the same thing for the STEP program. The STEP program since we've changed our contracts and it's not an option for this STEP, but more of a obligation we can now recognize out years. So again, there's up to 3 years' worth of STEP contract to 6.4%. So if you have to look at it, you could do -- as you look at it, Rich, a good portion of the 10.2 minus things we can't foresee. And maybe 1/3 and 1/3 would be something very, very rough for services and STEP because of the out years. And we do have some remaining on the 5-year step, which may be 2 more years out. That's about as much as I can break down for you. Richard Baldry: Yes. Got it. So even in a pretty tough quarter, you managed to be slightly EBITDA positive. I'm sort of curious the balance sheet is well funded. During this period, would you view acquisitions or something as a way to bolster your offerings, waiting for things to move forward or buybacks? Or do you feel like first, we want to see the bottlenecks ease up and then we start to think about what to do strategically with the balance sheet. John Givens: Yes, we've thought strategically for several years now, and with our Board and other advisers, we've looked at. There was too much uncertainty to make a move into the market. So we're just waiting to see as this clears up, but just like any good company, we'll eye technologies companies that would add something that's accretive to the balance sheet, accretive to our product offering without bearing too far off from our main focus. So we're always on the look and always for the hunt for those. But I think the STEP set back slightly and find out where it's going first is probably the safest bet and most protective for the shareholders at this moment. Operator: And our next question comes from the line of Jaeson Schmidt with Lake Street Capital Markets. . Jaeson Schmidt: Just curious if you could give an update on the [ BXR ] and if you're seeing the same sort of headwinds you're seeing in the broader business in this market as well. . John Givens: Yes. The BXR is fully developed when it comes to training using our -- the, I would say, the library of training scenarios that we have, along with our V-VICTA, that's the certified training courses through the nationally recognized IADLEST program. There's over 105 hours of certified courses that they can get what would be called their equivalent continuing education. We're seeing the same headwinds for funding. It really doesn't matter how much it is, whether it's the funding or directorship or the leadership making those decisions. A lot of good market acceptance. It's just released at a time where things were a little tight. But we see a lot of good comments from the sector and from the space and we're looking forward to host opening up and selling more. Jaeson Schmidt: Okay. That makes sense. And then just as a follow-up, I mean gross margin, understanding the dynamics the STEP back in Q3, but what should we be thinking about gross margins going forward? . John Givens: Go ahead, Alanna. Alanna Boudreau: You would anticipate that our gross margins stay similar to what we are seeing in this quarter and potentially going down a little bit more? Like we've always kind of talked about the fact that we'd like it to be somewhere between 60% and 65%, right? And that's where -- so anything above that for us is a win. John Givens: Yes, Jaeson, the only caveat I would make to that and I've reported in the past, I'm willing to sacrifice a little bit of gross margin to gain market share, especially in our segment as we start offering some of these new products for our first to market in a certain space with our type of content offering. I'd like to just jump in there, so we get the first foothold on that market segment and with that type of product, especially as the new technology comes out. . Operator: Thank you. And with that, at this time, this does conclude today's question-and-answer session. I'd now like to turn the call back over to Mr. Givens for his closing remarks. John Givens: Thank you for joining us today and for your continued support of VirTra. We've made meaningful progress so far this year. We'll stay focused on execution, customer success and advancing our growth initiatives. We do appreciate your trust and look forward to updating you on our continued progress in the quarters to come. God bless you all and let's continue to make great strides together. Operator: Thank you for joining us today for VirTra's Third Quarter 2025 Conference Call. You may now disconnect your lines, and have a wonderful day.
Operator: Good day, everyone, and welcome to Guardian Pharmacy's Third Quarter Earnings Call. [Operator Instructions] I will now hand the call over to Ashley Stockton. Ashley Stockton: Good afternoon. Thank you for participating in today's conference call. This is Ashley Stockton, Senior Director of Investor Relations for Guardian Pharmacy Services. I'm joined on today's call by Fred Burke, President and Chief Executive Officer; and David Morris, Chief Financial Officer. After the close today, Guardian posted its financial results for the quarter ended September 30, 2025. A copy of the press release is available on the company's Investor Relations website. Please note that today's discussion will include certain forward-looking statements that reflect our current assumptions and expectations, including those related to our future financial performance and industry and market conditions. Such forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. We encourage you to review the information in today's press release as well as in our quarterly report on Form 10-Q to be filed with the SEC, including the specific risk factors and uncertainties discussed in our SEC filings. We do not undertake any duty to update any forward-looking statements, which speak only as of the date they are made. On today's call, we will also use certain non-GAAP financial measures when discussing the company's financial performance and condition. You can find additional information on these non-GAAP measures and reconciliations to their most directly comparable GAAP financial measures in today's press release, which again is available on our Investor Relations website. And now I will turn it over to Fred for commentary on the quarter. Fred Burke: Thank you, Ashley, and good afternoon, everyone. Thank you for joining us as we review another strong quarter for Guardian. Before diving into the details, I want to take a brief moment to reflect on how far we come. This quarter marks an important milestone, our first full year as a publicly traded company. A little over a year ago, we stood on the floor of the New York Stock Exchange to ring the bell, not as the culmination of a journey but as the beginning of a new chapter in the 20-plus year life of our company. When we went public, we made a commitment to continue to execute with discipline, grow with purpose and carry forward the entrepreneurial spirit that has always defined Guardian, all while earning the trust of our new shareholders along the way. I believe that thus far, we've delivered on that promise, and I'm very proud of what our team has achieved. As I look ahead, I'm even more energized by the opportunities in front of us to continue building a company that provides exceptional service to our communities and the residents they serve, creates value for our partners and deliver sustainable long-term growth for our shareholders. With that foundation in mind, let's turn to our third quarter performance, which marked another period of strong double-digit growth across revenue, resident count and adjusted EBITDA, which yielded adjusted EPS of $0.25. Revenue grew 20% to $377 million, a top 13% resident growth driven both organically and through acquisitions. Adjusted EBITDA grew 19% to $27 million, with margins holding steady at 7.2%, including the continued dilutive impact from recent greenfields and acquired pharmacies. Given the strength of the quarter, we are raising full year revenue and adjusted EBITDA guidance, which David will go over in detail later in the call. Now turning to the policy environment. The unintended consequences of an Inflation Reduction Act remain an issue for our industry as a whole. Consistent with our long-standing approach, we're working closely with our peers and trade group to advocate for legislative and policy solutions that address these impacts and support the long-term stability of our sector. But at the same time, we've continued to take proactive steps with our payers. Those initiatives are taking shape and combined with other strategic actions across the business, we are growing ever more confident in our ability to offset the anticipated EBITDA headwind, even as reported revenue growth is expected to remain relatively flat in 2026. Our philosophy on addressing policy issues remain simple, control what we can and navigate thoughtfully around what we cannot. It's becoming increasingly clear how important the right people and scale are to executing successfully through these challenges, and that same mindset, disciplined, proactive and grounded in leadership extends across our organization. To that end, our pharmacy entrepreneurs fuel our growth with ingenuity and commitment to the clients we serve and the specialized teams supporting them strengthen our platform every day from purchasing the PBM contracting to data analytics, to name a few. Most of our pharmacy leaders have been with Guardian for more than a decade, some going on too. Prior to joining, they were highly skilled clinicians who built successful independent pharmacies from the ground up entrepreneurs in their own right. They recognize the opportunity to combine their local expertise and community relationships with the strength of Guardian's national platform and scale, unlocking new levels of performance and profitability within their pharmacies. Many have since built on that success launching greenfield locations in adjacent markets. Guardian has continued to invest in these professionals, helping them deepen their business acumen. Today, they are exceptional operators who embody a rare combination of clinical expertise, entrepreneurial drive and business-minded execution. That blend is central to our model and underscores why selecting the right local leadership teams is so critical, and why we remain highly selective and targeted in our acquisitions. Collectively, our operators have helped propel us to be the clear leader in serving assisted living facilities. While our national market share is 13%, we have a much stronger presence in the markets where we operate. In fact, 37 of our pharmacies have 20%-plus market share with 12 pharmacies operating at over 40%. Additionally, we now serve nearly 204,000 residents, the vast majority in ALF. Looking ahead, we expect to benefit from powerful demographic tailwinds as the aging population grows, while continuing to gain share through new facility partnerships, higher resident adoption and greenfield expansion with the help of our existing operators. At the same time, at the corporate level, we'll continue to pursue targeted acquisitions such as the recent additions in Oregon and Washington, which put us on the map in the Pacific Northwest and answered demand from our national customer partners. Integration with both pharmacies is tracking as expected with both teams already onboarding facilities operated by our national customer partners. Over time, we expect this geographic area to become an important growth contributor. On the heels of these acquisitions, our pipeline continues to be very attractive and active. Furthermore, as the assisted living facility market continues to consolidate, we believe Guardian scale, sophistication and partnership-driven model positions us as the provider of choice. Looking back, we've accomplished a lot in the last year. We've expanded our pharmacy footprint, delivered consistent financial performance, strengthened our balance sheet and deepened relationships with a broader investor base. Internally, we've enhanced our infrastructure and continue to navigate policy-related headwinds. Together, these accomplishments give us confidence as we enter our second year as a public company, stronger and better positioned for the opportunities ahead. Our priorities remain clear: drive organic growth through new customer facility wins, higher adoption and greenfield expansions, expand our network through disciplined acquisitions aligned with our culture and vision, enhance profitability by integrating new pharmacies, implementing our technology advantages and leveraging procurement, reimbursement and logistics efficiencies and lastly, navigate policy changes thoughtfully with confidence and discipline, advocating for fair outcomes while managing risks proactively. These are the same levers that have propelled Guardian's growth for over 2 decades, but today, enhanced by greater scale, visibility and financial flexibility. So on that note, happy birthday Guardian. We're still early in our journey as a public company, but our foundation is strong, our strategy is clear and our momentum is real. With that, I'll turn the call over to David Morris, our CFO, who will take you through the quarter's financial results and outlook in more detail. David Morris: Thank you, Fred, and good afternoon. Before I begin with a review of our 3Q results, I wanted to quickly mention the recent shelf S-3 filing and lockup agreement we announced in mid-October. Having been a public company for a year now, we recently became eligible to file an S-3 Registration Statement. As such, we filed an S-3 Shelf Registration for up to an aggregate 6 million shares, which has since become effective to provide flexibility to efficiently access the public markets if and when needed and subject to market conditions. In conjunction with that filing, we also announced that we work with our pre-IPO shareholders to lock up approximately 93% of the shares until June 30, 2026. There are no immediate or specific plans to offer securities pursuant to the shelf registration. We view the shelf as a tool for financial flexibility rather than a near-term catalyst, and we will continue to take a disciplined, long-term approach to capital markets activity. Turning to the financial results. I'm pleased to announce another strong quarter for Guardian with adjusted EPS of $0.25. Revenue grew 20% to $377.4 million, reflecting mid-double-digit organic revenue growth. Total resident count ended the quarter at 203,766, up 13% versus a year ago. Upside in revenue this quarter came from several areas. First, a higher percentage of new residents joined early in the period, providing a full quarter benefit. Second, plant optimization efforts continue to perform well, improving coverage for residents while reducing co-pays. Third, vaccine activity was strong as many communities launched their clinics earlier in the season. And finally, acquisitions contributed meaningfully with a full quarter of revenue from Washington and 2 months of contribution from Oregon. This pharmacy is a great strategic fit for Guardian, bringing on board an experienced leadership team with a strong reputation for service excellence. Alongside our operations in Washington, this expansion gives us a solid foothold in a new growth region, the Pacific Northwest. Gross profit increased to $74.7 million, posting a 19.8% margin. Adjusted SG&A was 13.7% as a percentage of revenue. Adjusted EBITDA rose 19% to $27.3 million, which included pubco costs of $1.3 million that we didn't have in the prior year. Adjusted EBITDA margins held steady with the second quarter at 7.2% and was down roughly 10 basis points year-over-year, reflecting the dilutive impact of recent acquisitions and greenfield startups along with pubco costs that weren't included in last year's results. Underlying core margins continue to expand as we see stronger profitability from pharmacies that are now maturing within our network. Our 4- to 5-year locations are performing at or above our consolidated adjusted EBITDA margin and our 2- to 3-year locations are tracking steadily toward that same level. As I've mentioned before, our most recent acquisitions, those made in the last 2 years, are still dilutive. Without them, margins will be closer to 8%. Given the upside in the quarter, acquisitions year-to-date and the overall momentum of the business, we are raising our 2025 guidance. Revenue is now expected to be in the range of $1.43 billion to $1.45 billion, up from our prior range of $1.39 billion to $1.41 billion. We are also raising our adjusted EBITDA guidance to $104 million to $106 million, up from the previous $100 million to $102 million range. The midpoint of this range represents solid 16% growth year-over-year. A couple of reminders for Q4. Starting with SG&A, we expect it to trend slightly lower as a percent of sales in the fourth quarter consistent, but the seasonal revenue lift we typically see from vaccine activity this time of year. Stock-based compensation is expected to decline meaningfully in Q4 to approximately $1.1 million as we sunset the pre-IPO equity program-related expense. Finally, reported income tax expense was elevated at 42% this quarter, which is higher than the previous quarter, primarily due to nonrecurring income tax expense associated with the corporate reorganization and related to the IPO from 2024. We expect the fourth quarter tax rate to be in the high 20s and step down to the mid-20s in 2026. Turning to the balance sheet. We ended the quarter with $36 million in cash, an increase of $18 million, even after funding our Oregon acquisition. This performance highlights the strength of our cash generation, with the cash conversion continue to track above 60%. We remain in a very strong financial position with no debt outstanding under our credit facility and ample liquidity to fund ongoing strategic growth, including M&A with internally generated cash flow. Our acquisition pipeline remains very active, and we continue to take a disciplined approach, prioritizing the right local operator in markets that enhance our regional density and national scale. In closing, on our first anniversary as a public company, I want to echo Fred's thanks to all of our employees and shareholders. We're proud of the momentum we've built, and we are confident in our ability to continue executing on our strategic growth plan. Guardian was built pharmacy by pharmacy, relationship by relationship and that's exactly how we'll continue to grow, anchored in local leadership powered by our national scale and with an unwavering commitment to service. Ashley Stockton: Operator, we'll now open the line for questions. Operator: [Operator Instructions] Your first question comes from the line of John Ransom from Raymond James. John Ransom: So just a question about the fourth quarter. How would you compare the contribution of the vaccine program this year to last year? I think this is what the third year you've done it and I'm sure you learn a little something every year. But the backdrop is interesting because there's a little less vaccine uptake among the greater world, especially COVID. But I'm just curious kind of what you're seeing with your population, how the uptake looks and just how the program overall compares to what you did last year, which was also very successful? Fred Burke: John, Fred here. Did I hear you say, third quarter or fourth quarter? John Ransom: Fourth quarter. So in your implied guidance, what's going on with your vaccine program this year compared to last year? Fred Burke: It's steady as we go. You did mention an interesting anomaly that we wondered about, which is the CDC guidance potentially could have caused fewer people to want to be vaccinated, particularly COVID. We are not seeing that. It's steady as we go. However, I will comment that we started the clinic season with a stronger September this year than last. So some of the total perhaps has been pulled forward into Q3. John Ransom: Okay. And as we think about resident count, it looks like you're only missing one month of an acquisition. So this resident count is a pretty good placeholder for 4Q with a little bit of one month of that one acquisition. Fred Burke: That's correct. Generally, we measure residents served as of the end of the quarter. So the acquisitions that were completed recently are included in the Q3 number. And so recognize that we do see fluctuations quarter-to-quarter, particularly in Q4 as some loved ones are reluctant to move their mother or father into assisted living in certainly the November, December period. So I would expect to see steady as we go in Q4 on resident count. John Ransom: And just last for me. I know you hit on the IRA issue and the conversations with the PBMs. Using the baseball analogy, how close are you to wrapping up these negotiations and kind of putting a bow on this issue? Fred Burke: John, as you know, these are very sensitive discussions, literally covered by NDAs. So I don't want to comment on specifics with respect to the PBM negotiations other than to reiterate what I said before, which is they're taking shape, and we're growing ever more confident in our ability to offset the headwind. John Ransom: And Fred, we've talked about this before, but is there any more -- it's always interesting to me like some industries, the payers are more willing to give providers some bogeys that would result in upside to their -- and as we know, you're paying a dispensing fee and you paid a spread. But is there any more indication that they might be -- especially with all the issues going on with Part D and more Part D plans embedded in MA and sensitivity around Part D losses, is there any more chopping of wood -- that's a bad expression, but is there any more kind of fulsome discussion around, "Hey, look guys, why don't we throw in an upside kicker for X or Y?" Or is it still just kind of mechanically the same in terms of just dispensing fee and spread? Fred Burke: Well, we, at Guardian, as having mentioned before, are very willing to think about value-based models because we're very comfortable in the value that we are providing to their insured lives. But it's evolving. There's not a major shift, but each is interested in exploring this idea as are we. So we're working our way towards that, but it's an evolution. John Ransom: So the normal glacial pace of health care is still -- we'll think about it next year. Fred Burke: One Georgia boy to another, we'll keep chopping that wood. Operator: Your next question comes from the line of David MacDonald from Truist. David MacDonald: Just a couple of additional ones. One, can you guys spend just a quick minute on some of the areas where, from a margin standpoint, if I just look at the amount of acquisition activity that you've had and just kind of the impact in terms of margins as those come on, any couple of key areas that you would flag in terms of where you've done better to continue to maintain those flattish margins despite the meaningful M&A activity? David Morris: David, it's David. We've talked about the various cohorts that I mentioned in the comments, our 4- or 5-year cohorts are performing well ahead of our overall margins and the 2- or 3-year cohorts are coming along as well. And we have a substantial investment we've made in the last 18 to 24 months in 11 locations, probably greater than 10% of our overall revenue that are a drag on our overall EBITDA margin. So it takes on average 4 years to get these businesses up to performing where they need to be and some are performing quicker and better and some take longer. So I think it's pretty much steady as she goes. And we're pleased with all the various businesses and where they are in the various cohorts. So it's pretty much steady as she goes. David MacDonald: Okay. And then just one other quick follow-up in that same vein, when you think about the pipeline, it sounds like there's still a fair number of opportunities sitting in front of you. How do you think about pacing, I guess, on 2 fronts. One, just the margin impact as they come on, but also, number two, just are there any kind of operational bottlenecks internally in terms of how many of these things you want to take on at the same time? David Morris: Yes. I think we've talked about in the last 24 months, things have been accelerated specifically with the large Heartland acquisition at 4 locations. So I'm not sure we can set expectations to continue at that level. But the pipeline is robust. And as I said, very active, and we see '26, '27 us continuing our similar type approach. We have many contiguous startups that we're looking at as well as an active pipeline. So no real bottlenecks that would impact us being able to continue to execute much as we have this past year. Operator: Your next question comes from the line of Raj Kumar from Stephens. Raj Kumar: Maybe just kind of touching on the implied 4Q here. It seems like the dilutive impact to margins is slightly accelerating. So maybe just kind of want to get your thoughts on if that's conservatism or kind of anything to call out on that front? David Morris: Raj, it's David. I think our adjusted EBITDA margins were forecast to remain relatively steady. And the biggest impact there would be the investment that we've made over the last 12 to 18 months, depressing overall margins. I think the Q4 will tick up slightly because of the seasonality with the vaccine clinics. Raj Kumar: Got it. And then maybe just as a follow-up. I appreciate the commentary on the mature pharmacy kind of margin. Maybe just kind of thinking about what the ceiling or the kind of theoretical ceiling is there from a margin perspective? And kind of also thinking about one of your mature pharmacies, what kind of the available expansion capacities to those pharmacies as we think about that helping out in this overall high single-digit organic revenue growth framework they kind of laid out long term? David Morris: We've talked about the impact that our investment in the contiguous start-ups and acquisitions has on overall margin, it's plus or minus 80 basis points. And where can the business be, say, in 24, 36 months or even longer? We hope to continue to optimize these acquisitions, that's going to enhance our overall margin. We're going to leverage the platform that we've built, not only in each pharmacy where we're not to full market share but also leverage our support infrastructure. So 8% higher, we're going to be working on that every day, every quarter. But hopefully, we'll see things continue to improve. Operator: [Operator Instructions] Your next question is a follow-up from John Ransom from Raymond James. John Ransom: Just going back to the fun topic of Medicare Part D, as you no doubt know, there's a lot of turmoil in the market. There's fewer stand-alone Part D plans. There's more MA-PD plans. And I just wonder how does Guardian look at that? And your plan optimizer tool, are you seeing more switching within your residents? Is it creating more kind of churning behind the scenes? Or is it not something that's risen to the level of something that you've noticed? Fred Burke: I'll start on that one, John. It's very early in the process because the details were late in coming this year. So the big effort is underway as we speak, and we'll know more as we move through the next few weeks. John Ransom: Okay. And do you -- I'm sorry, do you have a general preference for stand-alone versus MA-PD or do you care? Fred Burke: We're relatively agnostic. We want to help the residents find the best plan for their particular situation in their drug regimen. John Ransom: Okay. And if you all noticed anything kind of different. I was just looking at some numbers that suggest some small moves. But has there been any change to point out in terms of the mix of brand versus generics or the mix within brand? And I know you're not real levered to expensive biosimilars. But is there anything to call out in the average drug consumption this year versus last year? And does that -- is that bigger than a breadbox for you? Fred Burke: We've mentioned in previous communications that we see increasing levels of acuity, which manifests itself with greater utilization of some of these brands, and that has continued. It's -- I would call it just steadily -- a steady growth in acuity. Obviously, that is also greatly impacted by resident mix this being a market where our residents are turning over. So it can fluctuate quarter-to-quarter, year-to-year depending on that. But in general, these residents that we serve have a high acuity level. John Ransom: And the fact that the whole Part D deductible and out-of-pocket max has changed, are you noticing that in a shift to the plans being more in the hook in the fourth quarter? Are you seeing any kind of change versus last year when that wasn't the case? Fred Burke: We have not, and I'm surprised at that. Perhaps, it may take more than 1 year. Operator: Thank you very much. There are no further questions at this time. This concludes today's conference call. Thank you very much for your participation. You may now disconnect.
Operator: Ladies and gentlemen, greetings, and welcome to the Chegg, Inc. Third Quarter 2025 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Tracey Ford, Vice President of Investor Relations. Thank you. Please go ahead. Tracey Ford: Good afternoon. Thank you for joining Chegg's Third Quarter 2025 Conference Call. On today's call are Dan Rosensweig, President and CEO; and David Longo, Chief Financial Officer. A copy of our earnings press release, along with our investor presentation is available on our Investor Relations website, investor.chegg.com. A replay of this call will also be available on our website. We routinely post information on our website and intend to make important announcements on our media center website at chegg.com/mediacenter. We encourage you to make use of these resources. Before we begin, I would like to point out that during the course of this call, we will make forward-looking statements regarding future events, including the future financial and operating performance of the company. These forward-looking statements are subject to material risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. We caution you to consider the important factors that could cause actual results to differ materially from those in the forward-looking statements. In particular, we refer you to the cautionary language included in today's earnings release and the risk factors described in Chegg's annual report on Form 10-K for the year ended December 31, 2024, filed with the Securities and Exchange Commission on February 24, 2025, as well as our other filings with the SEC. Any forward-looking statements that we make today are based on assumptions that we believe to be reasonable as of this date. We undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and non-GAAP financial measures. Our GAAP results and GAAP to non-GAAP reconciliations can be found in our earnings press release and on the investor slide deck found on our IR website, investor.chegg.com. We also recommend you review the investor data sheet, which is also posted on our IR website. Now I will turn the call over to Dan. Daniel Rosensweig: Thank you, Tracey. Hello, and thank you, everyone, for joining Chegg's Third Quarter 2025 Earnings Call. Despite our current challenges, I'm honored to return as the CEO and Executive Chairman of Chegg. The Board and I believe the company is undervalued and see a significant opportunity to rebuild and reinvent Chegg and return it to a growing company with strong adjusted EBITDA margins and cash flow. We split the company into 2 units: Our growth business, Chegg Skilling, which we expect to have sustainable double-digit growth and our legacy academic services, which will focus on generating cash. This new structure gives us the cash and the assets we need to rebuild, and I firmly believe we will create significant long-term value for our shareholders. It's clear that the rise of AI and the subsequent negative impact on traditional sources of traffic have disrupted almost every direct-to-consumer industry. We are dealing with these realities head on. Two weeks ago, we took decisive action restructuring the company to enable our academic services to operate more efficiently and generate significantly more cash flow while repositioning Chegg Skilling to become a larger, more profitable B2B SaaS business. This was hard because of the impact on a large number of employees, but it was necessary and a positive decision for the future of Chegg. Our clarity of purpose and lower cost structure is energizing and gives us the ability to invest in our skilling business, which is experiencing tailwinds and already generating double-digit growth. We're now in the right categories with the right business model and are beginning to see momentum from our efforts. The impact of AI has resulted in a large number of companies needing to reskill their employees, especially around AI. The skilling market is already large, more than $40 billion today and has turned its attention to workforce, AI and language learning. We start from a position of strength. We have 2 valuable Skilling assets. The first is language learning with Busuu and the second in skills with Chegg Skills. Busuu is helping the true language learner differentiated by its focus on speaking, not just translation. Shape skills already has a strong catalog of courses on in-demand topics, which will only get stronger. We are combining them, investing in them and over time, will expand with additional assets. We plan to report them as a single unit called Chegg Skilling for external revenue reporting so you can track our progress and our growth. In that spirit, Chegg Skilling is ending 2025 with strong momentum, expecting a 14% year-over-year growth and a full year revenue of $70 million. Looking ahead, we expect the business to continue to grow at double-digit pace. I've spent 42 years in the technology industry, and the one constant has been that platform changes bring both incredible disruption and opportunity. We reinvented Chegg and created a bigger, more valuable company, and we can do it again. We started as a textbook rental company, transformed it into an education technology company that helped tens of millions of students succeed. Our next chapter, Chegg Skilling, is in a very large and growing market. We have the ability to use our skilling assets and our balance sheet to build a great company, and we are excited about the opportunities ahead. I'm confident that Chegg will evolve and thrive, and I'm grateful for the opportunity to lead our team through the next chapter. With that, I'll turn it over to David. David Longo: Thank you, Dan, and good afternoon. Today, I will be presenting our financial performance for the third quarter of 2025, along with the company's outlook for the fourth quarter. We delivered a good third quarter, surpassing our revenue expectations and outperforming our adjusted EBITDA guidance by $5 million as a direct result of our cost cutting and restructurings. With our strategic shift toward the large and growing skilling market, we are now well positioned to enter the next phase of our growth. In the third quarter, total revenue was $78 million, a decrease of 42% year-over-year. Reduced traffic impacted our business in 2 key ways: First, it led to fewer subscribers and less subscription revenue; and second, within our skills and other, it led to fewer sessions, which significantly reduced advertising revenue. As Dan mentioned earlier, going forward, we will break out our skilling business, which only includes Busuu and Chegg Skills so you can track our progress. Moving on to expenses. Non-GAAP operating expenses were $49 million in the quarter, a reduction of approximately $41 million or 46% year-over-year, driven by the execution of our restructurings. Our third quarter adjusted EBITDA was $13 million, representing a margin of 17%. To position ourselves for future growth, we overhauled our cost structure to be more efficient and allow us to invest in future growth. To put this in context, in 2024, our total non-GAAP expenses were $536 million and we are on track to reduce them to under $250 million by 2026. Our investments in AI have enabled us to continue to reduce our CapEx, which was $6 million in Q3, down 63% year-over-year. We anticipate full year 2025 CapEx of approximately $27 million with a targeted further reduction of approximately 60% in 2026, while still delivering a high-quality experience that our students expect from us. Free cash flow for the third quarter was negative $900,000, which was primarily impacted by a onetime $7.5 million settlement payment to the FTC and $5.5 million in severance payments related to our restructuring. Our company will continue to generate strong cash flow, although it will be temporarily affected by $15 million to $19 million in cash expenditures for employee transition and severance costs associated with our recently announced restructuring. These payments will occur over the fourth and first quarters. Considering this, we are still on a path to generate meaningful free cash flow in 2026. Looking at the balance sheet, we concluded the quarter with cash and investments of $112 million and a net cash balance of $49 million. Looking ahead and using our new revenue breakout, for Q4, we expect $18 million of revenue from our skilling business, which represents an increase of 14% year-over-year. Total revenue between $70 million and $72 million, gross margin to be in the range of 57% to 58% and adjusted EBITDA between $10 million and $11 million. In closing, the path has been difficult, but the outcome will be positive. We are now a more lean and efficient company with a skilling business that is expected to grow 14% in Q4. We believe we are turning the corner and are on a path to future growth and profitability. We look forward to sharing more detail on our February earnings call, including greater visibility into our multiyear growth plan for skilling and how we intend to drive additional value in the years ahead. With that, I will turn the call over to the operator for your questions. Operator: [Operator Instructions] Our first question comes from the line of Eric Sheridan with Goldman Sachs. Eric Sheridan: Maybe 2 quick ones, if I could. In terms of skilling, can you talk through a little bit of what you see as the strategic product priorities to execute on the skilling side to capture the market opportunity? And across the legacy business and skilling, how should we think about the mix of resource allocation across those efforts looking forward? Daniel Rosensweig: I was on mute. So I apologize for that because I haven't been on the call for a while. So I appreciate the question. And very simply, all of our growth resources are going to go into the skilling business. So we -- when we made the decision to restructure the company, so this is not a layoff. This is a complete restructure. We essentially put the company into 2 businesses or 2 units. One is the legacy business, which historically had been the majority of the company, and that was Chegg Study. Given the realities of AI and given the realities of the Google traffic situation, we've turned our attention to the bigger and growing market and more sustainable market for us, which is the skilling market, which is made up of B2B now versus B2C. When we originally had the businesses, they were B2C. So we've made that transformation. And they're growing, as you saw, released as we said, about 14% year-over-year in Q4. That's our expectation. So we're excited about the fact that they're already growing. Those businesses are going to focus on frontline workers, which is the deal that we already have with Guild. They're going to focus on language learning, which is what Busuu traditionally has done. Believe it or not, even though AI is going to affect translation and instant translation and those things, corporations still want their people to learn how to actually speak the languages. And so we are seeing really great progress in our B2B side of the Busuu business. And then job-related skills mostly around AI today, which are extraordinarily popular. So our resources -- we have the necessary resources because we have the necessary cash now by removing almost 400 people from the company. And our expectation is that our capital investments will be used to grow the growth businesses and come at the expense of what traditionally was Chegg. Operator: Our next question comes from Devin Au with KeyBanc Capital. Devin Au: Just first one, just a follow-up from the last set of questions. On the legacy academic business, what kind of support or like services are you going to continue providing for that unit? And I have a follow-up. Daniel Rosensweig: Yes. So that business, it's very interesting because as we invested early in AI because of what we saw the situation was becoming and also because the technology allows us to do things more efficiently. We built an incredible service, which we believe is the #1 service. The issue for us is that our Google traffic dropped by 50%. And so we weren't seeing the necessary traffic to come in. And as you know, we've launched a lawsuit against them for that. But the quality of the product is unquestioned. So believe it or not, 90% of all the questions that we get are already in Chegg's database. So we're able to make this transition on the resources and still have the quality product that we had before. So we're actually fine in that context. So we expect that business to generate cash for hopefully several years. Most companies -- most businesses have tails longer than we expect. I mean I just -- I marveled at the fact that AOL just sold for $1.4 billion to Bending Spoons based on its historical model and no one's heard of it in 10 years. So our desire is to run that business as long as we can. We have the necessary resources on it. But the resources are mostly the database, the technology and the network that we built over the years. We still have over 130 million questions that are already in the database. So it's really in a good position to generate cash, but our expectation is of future growth, they just -- we cannot compete with the situation that Google has caused and the fact that OpenAI is what it is. So we put the business into a bigger $40 billion growing market and transition that business over the last 2 years from what was historically a B2C business or a D2C business, I should say, to now almost exclusively B2B, which is a better business, a more stable business, more secure business, less likely to be impacted negatively by the trends in the market. And already seeing some success on that by being able to acknowledge that we're going to grow more than double digits in the quarter and then expectedly for next year. So things -- this has been a long process. It's been a painful process. It's affected a lot of people negatively. It's obviously affected our shareholders. But we finally feel like we've hit the bottom because we have a business that's growing that is $70 million. Our expectation is for 2025, and we expect it to grow double digits next year, and we're rebuilding the company with those resources. Devin Au: Understood. I appreciate the context there, Dan. Maybe just a quick follow-up. I know you touched on this a little bit. It seems like the Busuu business, the B2B side is doing well. Maybe if you could just kind of give us a little bit more color on the initiatives you're looking to make, some of the near-term product road map or milestones you're looking to reach in that business and kind of what's giving you the confidence that you can grow that business sustainably double digit? Daniel Rosensweig: Yes. It's a great question. And part of the reason I was willing to come back is because I feel confident in that. So Busuu, for those who just haven't had a chance to know much about the business, is predominantly in Europe. And we'll also be moving into Latin America. So one of the initiatives will be Latin America as an example. The big initiative over the last 2 years was repackaging our learning mechanisms, not for the D2C, but for the B2B, what do businesses want. And then, of course, leveraging AI. But in our case, the #1 thing that people want is conversation. They want a conversational way to be able to learn the language and discuss it and be gated on it. AI actually, with voice, it's scary, but it gives us a heck of a chance to be able to do that. So what we'll be looking at is a number of businesses that sign up, number of seats that we have, but engagement with those that choose to use it inside the companies because the more they engage, the more seats we'll have at those companies. So it won't be -- the things we'll be looking at over the next year, 2 years, 3 years will not be surprising. It will be the number of businesses that we sign up, the number of seats in those businesses, the retention that we have within those businesses, and that gives us the confidence to keep moving forward. So Busuu has been around for 15 years. This is a very significant change for it. It started originally trying to compete in a world of Duolingo. And we made the decision that, that was not a market that we should compete in, and we went B2B, and it's actually now working in our favor. It's exciting. But the milestones on the product will be how does AI help you develop the language skills better your pronunciation better, feel like that you're actually working with a human being on the other side. Those are the things that people seem to use when they learn best when they need to learn the language as opposed to just want to get a couple of phrases. Operator: Our next question comes from the line of Ryan MacDonald with Needham & Company. Ryan MacDonald: Dan, welcome back. Maybe on the skilling business, can you talk about -- you mentioned Guild already is obviously that's been a good channel for that business as you look to grow it. Can you talk about other sort of investments or other potential channels you're kind of looking at or evaluating as you sort of build the go-to-market motion here? And how much do you think is going to be sort of direct sales versus sort of additional channels? And where does sort of internal sales capacity stand at right now for those initiatives? Daniel Rosensweig: Yes, a great question, and it's early on in that question. So here's where we are in our current thinking, which is we launched through Guild, and that has been incredibly successful, and we're grateful for that partnership. But obviously, nobody wants to be dependent on a singular channel. And so we are working very hard to be able to offer noncompetitive products to Guild in other channels. And I think as you track that part of the business, you'll probably hear over the course of the year, new partnerships. So think of it as all new distribution channels where they have the customer, we have the content and there are marketplaces for that and there are channels for that. And those channels are in the U.S. and they're in Europe. So we think that's where we're starting, which is what we know, which is how to put great content in places where people want that content. The second thing is we are building slowly a B2B sales force. And that B2B sales force is focusing on opening more of those channels. But also one of the unfortunate realities of Chegg's existence was universities did not historically want to work with Chegg because of Chegg. Now that, that part of the business is going away, there's a lot of people who understand the quality of our content, the quality of the way we execute, the value that it has for the students. And so we will be building new channels eventually direct to institutions. It's just going to start slow. So I don't want you to think in '26, we're going to announce a lot of universities because we're not. We are going to start with the other distribution channels similar to Guild that already have built-in audiences inside of corporations. But we have been contacted by a number of universities who now -- who know the quality of our work. If you actually look at the success that we've had inside of Guild, I think we have amongst the highest retention rate and completion rate. And those things are examples of just how good our quality is. So those are the things that we are working on, but we're going to take it slow because we want to grow the business at double-digit growth. We want the businesses to become profitable. We want them to have sustainable growth. And we have a road map over the course of '26 that we're really excited about by adding more content, adding more channels and starting with new partnerships. Ryan MacDonald: Helpful there. And then maybe just as a follow-up. So I think you mentioned -- I think it was in David's sort of prepared remarks that you saw a little bit slower than -- or lower-than-expected advertising revenue within the sort of Skills and Other segment as a result of the reduced traffic. I guess, how should we think about how much of a headwind traffic can be in the skilling business moving forward? And maybe some of the initiatives you're undertaking to whether it's investing in new marketing channels to sort of drive that top of the funnel in the business to sort of offset some of the declines from just core Google, if you will? Daniel Rosensweig: Yes. So actually, it's a really great question, and I'm glad you asked it because we should clarify this absolutely, which is Skilling and other, it's not that we're removing the other from Skilling. So the other were things like advertising. And those ads didn't appear in the Skills. Those ads appeared in Chegg Study, they appeared in Chegg Math and Chegg Writing. And that's where the traffic has declined, and that's where the ad sessions have gone away. You will see no headwinds in skilling other than things that we don't expect or might pop up. But those businesses are about growth now. So -- and those businesses -- the headwind that they have faced is over the last couple of years is a lack of investment because of what we were dealing with on the core side of the business. And it's not easy to reposition a business at all ever, but in the public markets, it's even more difficult. And so we've had to balance our debt, our cash, our initiatives and reposition those businesses to B2B, and we now feel like they're in a position to do that, and we're actually pretty excited about it. Operator: Ladies and gentlemen, at this time, there are no further questions. The conference of Chegg, Inc. has now concluded. Thank you for your participation. You may now disconnect your lines. Thank you. Daniel Rosensweig: Thanks, everybody.