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Operator: Good day, and welcome to the Blackstone Secured Lending's Third Quarter 2025 Investor Call. Today's call is being recorded. [Operator Instructions] At this time, I'd like to turn the conference over to Stacy Wang, Head of Stakeholder Relations. Please go ahead. Stacy Wang: Thank you, Katie. Good morning, and welcome to Blackstone Secured Lending Fund's Third Quarter Conference Call. Joining me today are Brad Marshall, Co-Chief Executive Officer; Jonathan Bock, Co-Chief Executive Officer, Carlos Whitaker, President; Teddy Desloge, Chief Financial Officer; and other members of the management team. Earlier today, we issued a press release with the presentation of our results and filed our 10-Q, both of which are available on the Shareholder Resources section of our website, www.bxsl.com. We will be referring to that presentation throughout today's call. I'd like to remind you that this call may include forward-looking statements, which are uncertain and outside of the firm's control and may differ materially from actual results. We do not undertake any duty to update these statements. For some of the risks that could affect results, please see the Risk Factors section of our Form 10-Q filed earlier today. This audio cast is copyright material backfill and may not be duplicated without consent. With that, I'll turn the call over to Brad Marshall. Brad Marshall: Great. Thank you, Stacy, and thanks for joining our third quarter earnings call. I will begin with some thoughts on the current environment and our views heading into year-end. Last quarter, we addressed the positive trends reemerging with markets opening back up, equities hitting all-time highs and inflation staying muted. Now we believe we can keep capitalizing on a few key themes that may continue to yield returns for our investors. Firstly, deal activity has continued to accelerate, which is consistent with what we have seen in past periods when cost of capital starts to come down and valuations improve. In part as a result of increased deal activity, leverage in BXSL ended at 1.22x after averaging close to 1.15x for the quarter. Secondly, despite falling base rates during the quarter, we saw new deals at an average spread of 544 basis points over the base rate, inclusive of amortization of OID to maturity. And total fundings during the quarter averaging 556 basis points above the base rate, the majority of each of which were first lien. Lastly, overall, we saw stable underlying fundamentals and growth in our portfolio, with the majority of the assets flat or marked higher in the quarter. Non-accruals dropped to 0.1% of costs remaining the lowest among our traded BDC peers. Despite all these positive trends, there have been external narratives around bubbles and rising default across the credit markets. What we are seeing on the ground and across over 300 credits we are invested in is in direct contrast. Firstly, as mentioned earlier, M&A activity is picking up. In fact, as of the third quarter, it is up 63% year-over-year, consistent with what we discussed with all of you regarding our expectations at the start of the year. And with more companies choosing to fund this M&A with private capital, this has helped our ongoing growth. Further, there was about 5x more dry powder in North America private equity vehicles than private credit origination dry powder, representing a healthy potential backlog of demand for private credit solutions. As it relates to defaults and in particular, First Brands and Tricolor, I think it is reasonably well established now that these were, in fact, not private credit transactions. They were bank originated, bank underwritten and bank distributed deals. However, it's worth noting two things: one, the falls are in fact declining in the leveraged loan and high-yield markets, down 37% year-to-date this year from 2023 and 24% in 2024, demonstrating that despite well-publicized, the default trends in the indices have improved. Second, defaults do occur from time to time across both the public and private markets. Knowing this is why we have continued to feel very confident in our approach to investing by focusing on first lien senior secured loans with large sponsor-backed companies across sectors we believe have good long-term tailwinds. In our view, these companies are better able to navigate market changes, inclusive of the fast pace of change driven by AI. These companies are generally more strategic because of their scale. These companies tend to attract and maintain high-quality management teams and ownership [indiscernible]. Our experience is supportive of this thesis. In direct lending, BXCI has experienced annualized realized losses of only 0.1%, including through the global financial crisis. Being part of Blackstone allows us to navigate and leverage the full bandwidth of the firm to maximize value in the event of default, which is something we are quite proud of. So as we put all of that together and what we view going forward, we expect to see deal activity staying active, asset turnover picking up, spreads remaining attractive when compared to traditional fixed income and credit quality remaining fairly steady across the portfolio. Turning to Slide 4 to highlight this. BXSL reported another strong quarter with our net investment income, or NII, of $0.82 per share, representing a 12% annualized return on equity, made up overwhelmingly of interest income rather than income from PIKor dividends or fees. We believe the quality of BXSL's income has historically created a robust income stream for our investors. NAV per share decreased by $0.18 quarter-over-quarter to $27.15 due to markdowns that Teddy will discuss shortly. Our distribution of $0.77 per share was 106% covered by our net investment income per share and represents an 11.3% annualized distribution yield, one of the highest among those of our traded BDC peers with similar levels of first lien senior secured assets. Finally, as mentioned earlier, we believe credit quality remains strong, 0.1% of investments on nonaccrual at both cost and fair market value. We had no new names added to the nonaccrual list this quarter. Moving to Slide 5. We've continued to prepare ourselves for what we believe may be a period of heightened deal activity, focusing both on our existing portfolio companies and new assets. And despite lower base rates, private credit premium relative to leveraged loans in the liquid market has endured. We collaborate with teams across the firm to identify new opportunities and key investment trends. And right now, we believe we are in a reindustrialization with AI that will require significant ongoing insights and capital solutions. You will hear from Carlos on this later, but we integrate AI considerations into our disciplined investment process, searching for larger businesses, mission-critical products, high recurring revenue and senior secured positions. We believe we are well resourced to understand and underwrite the fast paced change that AI is driving and the impact this will have on companies and investments. We saw a 20% increase in new BXCI global private deal screenings this past quarter versus the third quarter of last year. And while not every BXCI deal that comes through BXCI's screening is suitable for investments by BXSL, this is consistent with our general view from last year that deal activity would pick up meaningfully throughout 2021. Deployment for the quarter surpassed $1 billion and was up 90% compared to the second quarter. We believe the drivers of this growth are both more macro clarity for the U.S. economy and lower base rates. We seek to continue our disciplined approach and use our cost advantage to focus on quality borrowers, not reach for risk and deliver returns for our shareholders. With that, I will pass it over to my colleague, Jonathan. Jonathan Bock: Thank you, Brad. Let's turn to Slide 6. We ended the quarter with $13.8 billion of investments at fair value, over a 15% increase year-over-year from $12 billion. In 3Q alone, BXSL also added 22 new borrowers to our portfolio by exiting 6 positions, netting a total of 311 companies. Ending leverage and average leverage kicked up compared to prior quarter at 1.22x and 1.15x, respectively, remaining in our target range between 1 to 1.25x. Our weighted average yield on performing debt investments at fair value was 10% this quarter, down from 10.2% last quarter. The yields on new debt investment fundings and assets sold and repaid during the quarter averaged 9.3% and 9.9%, respectively. Now turn to Slide 7. Nearly 98% of BXSL investments are in first lien senior secured loans and nearly 99% of those are the companies owned by financial sponsors that generally have significant equity value in these capital structures, demonstrated by an average loan-to-value of 49.7%. Our portfolio also has LTM EBITDA base averaging nearly $221 million, with year-over-year EBITDA growth of nearly 9%. This growth percentage is well above that of companies in the Lincoln International Private Markets database for last quarter. Although we've evaluated opportunities across the size spectrum as evidenced by our investment this year, we've seen continued strength of performance from larger companies relative to their smaller EBITDA counterparts in terms of higher growth and lower defaults, and we believe this trend may continue, given the Fed's latest rate cut announcement. We can see how investing in larger companies affects interest coverage. BXSL's portfolio companies average interest coverage based on LTM EBITDA was 2x in 3Q. And looking at the share of private portfolio assets below 1x interest coverage when you exclude recurring revenue loans, BXSL was at 7% of fair value, which compares favorably to the Lincoln data based for the broader private credit market at 10%. Now turn to Slide 8, which focuses on our industry exposure. Recall, we focused on domestic businesses in less capital-intensive sectors with our highest exposures in the software, healthcare providers and services and professional services industries. This quarter, 99% of the private debt investments into new portfolio companies were first lien senior secured positions with average LTVs below 45%, meaning there's significant amount of capital beneath our loans. And our relentless focus on first lien senior secured debt and historically low default rate industries, is what we view as a defensive position for investors to be in. But how does that translate into returns? Over the last 12 months, we generated a 12% net investment income return. This was well above our 11.3% dividend yield on NAV during the same time period and above the weighted average NII return of 10.7% for traded BDC peers for the 12 months ended June 30, 2025. And importantly, we've continued over earning our distribution even in a more competitive tighter spread environment. Further, we believe dispersion among managers continues to be evident. And you can see this by looking at various portfolio metrics compared to the weighted average of our traded BDC peers in 2Q. Our nonaccrual rates 0.1% at cost compares favorably to 2.9% for peers. Our PIKas a percentage of total investment income at 8.2% compares favorably to 11.3% for peers and our stressed debt investments marked below 80 at cost is approximately 0.9% compared to 4.1% for the peer average. Now to conclude this with some points on our documents and recent amendment activity. And as a reminder, when we negotiate our credit agreements, especially as a leading lender, we place a significant focus on control and important document protections and we've remained consistent in this approach. And if you take a look at our recent amendments, Q3 was largely similar to Q2 activity, with the majority of amendments associated with add-ons, M&A, DDTL extensions and immaterial technical matters or slight changes to terms. And with that, I'll turn it over to my colleague, Carlos. Carlos Whitaker: Thanks, Jon. Turning to Slide 9. BXSL maintained its dividend distribution of $0.77 per share as we remain focused on delivering high-quality yield to shareholders. We continue to believe BXSL's portfolio strength is owed to the scale and platform of Blackstone and BXCI, and we have used this to our advantage as we have expanded our book. Take, for instance, our view on AI. Blackstone made an early call on the importance of AI, and we believe BXCI has been at the forefront of adapting this into our portfolio. We consider AI as we evaluate investments and use Blackstone resources, including BX technology investments, the BX operating team and BX data science to help evaluate AI-related opportunities and support portfolio companies in adapting to change. And while BXSL has a larger concentration in software than other industries, our AI lens expands to our investments in healthcare technology, healthcare services, professional services, business services and insurance. In the current landscape, there are AI verticals that we believe have definitive headwinds that investors should be mindful of. We believe that in most instances, larger companies may be better positioned to defend and leverage AI. We also believe that there are tailwinds that may impact secondary beneficiaries of AI technology expansion, such as cybersecurity and data infrastructure and management. But it is worth noting, we aim to avoid verticals that we believe may be at higher risk of disruption, such as low-skill outsourced services or businesses centered around content creation, such as ad tech or Ed tech, of which BXSL has mid-single-digit percentage exposure in its portfolio. In addition, we try to avoid industries that are more cyclical in nature. If we just look at BXSL's software portfolio, our investments averaged over $4 billion in enterprise value and are well capitalized with significant equity cushion. These companies are growing EBITDA annually at what we believe are healthy levels with weighted average interest coverage ratios near 2 turns. These numbers do not come by accident. Blackstone aims to identify trends and related downstream investments early before they become mainstream. While we work to expand the portfolio through new borrowers, we have remained active with existing companies that we believe are quality assets. We saw deal activity pick up across the private credit landscape. And to Brad's point, we were active on the deployment front. Q3 marked our most active quarter in 2025 from a funding perspective with net deployment up 65% and gross deployment up 90% quarter-over-quarter. We believe much of this was driven by BXSL's access to incumbent borrowers across our 5,100 BXCI issuers globally. Just this quarter, nearly 2/3 of BXSL's fundings were to repeat borrowers of BXCI. In fact, we have sole or lead roles in nearly 3/4 of our debt investment fundings for the quarter, and the majority of those were sourced from our liquids business, advisor networks and our long-standing relationships. Certain sponsors prefer to work with BXCI when their portfolio companies need capital due to what we believe is a largely differentiated credit franchise in a market. BXSL's largest third quarter investment into a new portfolio company was a large debt financing for a global specialty consulting firm. We were the sole lender in the financing and provided the company committed capital to execute on future growth plans. We believe that owners like to partner with BXCI not just because of the scale solutions we can provide, but also because of the services we can offer after the investment. Our value creation team was extremely active during the third quarter and had some impactful wins with improving earnings for our portfolio companies. Just looking at the data available through the second quarter, the BXCI value creation program, offered at no charge to participants or expense to BXSL, has created $5 billion in illustrative value and reduced cost by over $440 million for BXCI portfolio companies since its inception. We can differentiate ourselves as not just a lender but as a value-added partner, helping credits grow equity value through our BXCI value creation program. We believe we have developed a reputation for being a valued partner with the ability to provide speed, creativity, flexibility and certainty of execution. And with that, I'll turn it over to Teddy. Teddy Desloge: Thank you, Carlos. I'll start with our operating results on Slide 10. In the third quarter, BXSL's net investment income was $189 million or $0.82 per share, representing a 106% coverage to our dividend on a per share basis. Total investment income for the quarter was up $14 million or 4.7% year-over-year, driven by increased interest income. We experienced increased repayment activity in the third quarter compared to the second quarter and with accelerating M&A and deal activity, Brad outlined earlier, we expect continued turnover activity in our portfolio throughout the upcoming quarters. Interest income, excluding PIC, fees and dividends, represented 91% of our total investment income in the quarter. Moving to our balance sheet. On Slide 11, we ended the quarter with over $13.8 billion total portfolio investments at fair value, nearly $7.7 billion of outstanding debt and nearly $6.3 billion of total net assets. NAV per share at quarter end was $27.15, down from $27.33 at the second quarter. NAV per share was supported by $0.02 from share issuance from our ATM program at a premium to NAV, offset by $0.09 of realized losses and $0.16 of unrealized losses in the portfolio, primarily concentrated to a small number of larger positions. As we look at the portfolio overall, the majority of the portfolio was flat or marked higher during the third quarter with nearly an equal number of markups versus markdowns. NAV per share was down $0.18 predominantly related to names previously highlighted. Taking a step back, as Brad and Jon highlighted, we saw healthy fundamentals across our portfolio with 9% EBITDA growth and increasing interest coverage ratios back to 2x as rate resets are improving cash flow profiles of our borrowers. Our nonaccruals of just 0.1% coupled with less than 1% of exposure valued below 80 are reflective of that. Further, we have over 120 individuals in our CIO office comprises of operational expertise, financial and legal restructuring expertise, data science expertise, capital formation and more, all dedicated to driving positive outcomes through our investment process and mitigating losses in the portfolio. We are relentless in finding ways to add value to our companies and deploying unique resources that Blackstone can bring to bear. Moving to Slide 12. BXSL funded over $1 billion in the quarter and committed nearly $1.3 billion. Net funded investment activity was up for the quarter at over $500 million with $433 million of repayments, up nearly 150% quarter-over-quarter. This represented an annualized repayment rate of 13% of the portfolio at fair value, up from nearly 5% for the prior quarter. Next, Slide 13 outlines our attractive and diverse liability profile, which includes 37% of drawn debt in unsecured bonds that are not swapped. These unsecured bonds have a weighted average fixed coupon of less than 3%, which contributed to an overall weighted average all-in cost of debt of 5.0%, down from 5.1% last quarter. This also compares to a weighted average yield at fair value on our performing debt investments of 10%, down from Q2 at 10.2%. The overall weighted average maturity on our funding facilities is 3.3 years. Further, we have continued to optimize our cost of capital. In August, we closed an amend and extend of our BXSL revolving credit facility, which eliminated the 10 basis point credit spread adjustment for extending loans and gave us the tightest price revolver among traded BDC peers based on our market research. Further, BXSL's overall cost of debt of 5.04% is one of the lowest compared to our traded BDC peers last quarter. We continue to be prudent in taking advantage of historically tight spreads for BDC bonds. In mid-October, we closed a $500 million bond priced at 155 basis points over the benchmark treasury rate or at a 5.125% coupon with a 5.3-year tenor. This represented the tightest spread issue among our traded BDC peers since February. Our balance sheet strength and portfolio performance have supported us in achieving among the highest ratings for BDCs with a Baa2 and stable outlook by Moody's, BBB- and positive outlook by S&P and BBB flat and stable by Fitch. In fact, Moody's completed its annual review of BXSL at the end of the quarter, maintaining the Baa2 stable rating citing BXSL's first lien senior secured focus, strong asset quality since inception and sound underwriting. Total liquidity was $2.5 billion of unrestricted cash and undrawn debt available to borrow, while ending leverage as of September 30 was 1.22 turns on the higher end of our target range of 1 to 1.25 turns. Moving forward, we expect to operate near the higher end of our range given what we believe is a period of heightened deal activity. With that, I'll ask the operator to open it up for questions. Thank you. Operator: [Operator Instructions] We will take our first question from Finian O'Shea with Wells Fargo Securities. Finian O'Shea: First question on Square space. I guess, can you hit on why hang on to that? There was a pretty small junior allocation, it looks like in the main tranches plus 225 pretty -- is that indicative of how low you'll go? And otherwise should maybe more junior follow and a delayed draw or something like that? Teddy Desloge: Yes, Finn, thanks for the question. I'm happy to take that. I won't speak to specific situations, but from time to time for a high-quality company that has delevered, we do have multiple options to retain exposure versus losing it to what could otherwise be a significantly tighter price syndicated option. That can include potentially using a first out in some cases, where we view it's appropriate. From a spread perspective, overall, which I think is where you're going with the question, we actually saw spreads on new deals marginally increase quarter-over-quarter. I think we would characterize the environment over the last 3 to 4 quarters as relatively stable. As Brad mentioned, spreads on new deals overall, we're in the 5.25 contact with 3-year OID amortized. So relatively stable. We do have multiple tools in our toolbox. Brad Marshall: And maybe said differently, Then, we look at spreads on a portfolio basis, and there may be specific reasons why individual assets may be structured a certain way. But as Teddy highlighted, spreads for the quarter, if you include the add-ons and delayed draw fundings were in the mid-500s. Finian O'Shea: Well, I guess a follow-up is what is -- does it really matter if new spreads are in the mid-500s if they're going to be repriced to 2.25 because that -- it's pretty tough math, that's inside of a lot of BXSL. So are we going to -- is this -- is the answer indicative of a lot more of this to come? Brad Marshall: The answer is no. Finian O'Shea: Okay. Teddy Desloge: I also think from time to time, you might see a first out in a portfolio that thing gets sold over time. So I think to Brad's point, you can't really take one situation to draw broad portfolio conclusions. Overall, spreads have been pretty flat over the last 3 to 4 quarters. Finian O'Shea: Okay. Got it. And I guess the follow-up, just market-wide, I think you hit on some of this in the remarks, there's a lot of headlines out there that are hard hitting on private credit. Are you seeing any impact on the nontraded space, given your major, if not dominant, presence there on the nontraded BDC? Any impact do you think to the trajectory of flows on that part of the market? Brad Marshall: So I'd say a couple of things, Finn. As you know, performance across the BDC market generally and more specifically Blackstone's BDCs has actually been exceptionally good. What you ultimately see in the BDC market is returns that are delivering a premium to what investors can get in the public markets. That's the real driving kind of value of the asset class and what's interesting is that when rates fall, the return premium that private credit delivers is actually more impactful. And think about 2021, we saw this when rates were near 0, you saw inflows from both institutional and individual investors actually grow despite the base rate environment we are living through. So the answer is there continues to be strong demand across all different types of investor bases for private credit. Operator: We'll take our next question from Casey Alexander, Compass Point Research and Trading. Casey Alexander: My first question is, obviously, there was a modest quarter-over-quarter markdown on Medallia. And just simply because of the size of the investment, I think investors would like to hear where that company stands. And we also noticed that their principal competitor is doing a large acquisition. So we wonder if in your view, that is changing any of the competitive dynamic between the two companies? Brad Marshall: Thanks, Casey. Yes, there's no real update from last quarter on Medallia, and we believe it's marked appropriately. I think as the acquisition by Valtrex will take some time to integrate, but does not change the market backdrop. And so no real change there. Casey Alexander: Well, I also noticed in your deck that your company revenues year-over-year up, your company EBITDA year-over-year is up, but also the loan-to-value has skipped up a little bit higher. And normally, I would think that if revenues and EBITDA were up that might be actually coming down a little bit. Can you speak to that dynamic? Does it have something to do with loan-to-value on newly originated loans? Or what's the principal reason for that? Brad Marshall: Yes, sure. So loan to values on new deals for the quarter averaged about 45%, as we noted, is probably one of our busiest quarters in a long time. Across the portfolio, you're right, loan-to-value went from 47% to just under 50%. It's a fairly marginal move. And I think that's largely a product of enterprise values getting adjusted marginally lower on existing names which we think is largely an equity consideration. It's like saying the average enterprise of our companies was something like $3.2 billion, and now it's $3 billion. But most importantly, there's still $1.5 billion of equity subordinate to us. And so as we think about it from a credit standpoint, you're focused on the right things. The companies are growing, interest coverage is getting better, 98% of the portfolio is at the top of the capital structure. So nothing to read into anything there, just marginal changes. Operator: We'll take our next question from Doug Harter with UBS. Douglas Harter: Can you talk about the -- how you're viewing the outlook for the dividend as base rates come down and you have to refinance some more of your fixed rate debt? Jonathan Bock: Sure, Doug. So maybe we'll just start with the quarter, right, paid $0.77 dividend and earn approximately $0.82. So the payouts covered with room to spare, but the portfolio is in great shape, as Brad outlined, you've got low nonaccruals and levered equity base, which Teddy referenced, and importantly, an income, right, investment income that's high quality and most of all, predictable, approximately 90% come from cash interest. So it's not PIC or not fee related. Now right now, about 99% of the portfolio is floating rate, which has been a big win with rates being high, but when rates start to come down and the Fed is expected to take so far around 3% over the next year, we'll see some impact on earnings. Now some peers have already adjusted their dividends. And for us, the plan is to keep looking at the base dividend in light of where rates and earnings are headed and still make sure it stays competitive and sustainable. Now the good news is we have a cost and expense advantage over peers, and our latest bond deal swapped at around 155 over outlined that. And with more M&A activity expected, we see some opportunities, as Brad outlined, to put some capital to work. So it's -- we're in a good spot to be thoughtful about any changes to the base dividend rather than just rush into them. That's how we're looking at it this quarter and the quarters going forward. Douglas Harter: Appreciate that. And just as you mentioned, if there is increased M&A and turnover in the portfolio, how do you think about that impact on the realized yields you have if portfolio turnover picks up? Teddy Desloge: Yes, I'm happy to take that. I think we've been messaging for some time that, number one, we expect activity to pick up. You clearly saw that. Number two, in line with that, you would expect repayment activity to pick up as well. You saw that to this quarter. So if those trends persist, we'd expect a continued trend that does represent a potential upside driver to returns versus what you saw in certainly the second quarter and previous quarters and lower repayment activity. Brad Marshall: Yes, it probably has more of an immediate impact on earnings just given the acceleration of OID, the fees that we get from those refinancings. And then if the rate environment or the yield environment is a little bit lower, longer-term yields will be a tad lower on those new deals. Operator: We'll take our next question from Kenneth Lee with RBC Capital Markets. Kenneth Lee: First one is just about the AI opportunities, and you highlighted a couple of different things here. Over the near term, what sorts of opportunities do you see potentially over the next coming quarters? Could this include, for example, debt financing and some of the infrastructure, what's appropriate for the vehicle here? Brad Marshall: Yes. So obviously, AI is both a risk and an opportunity. We're spending a lot of time on the risk side, understanding what sectors could be impacted. We have -- I think we've talked about this before, 1,000 technologists across Blackstone. So our insights into areas of concern and risk are probably better positioned than most anyone in the industry. Your question was more on the opportunity side, and we think everything in and around the AI ecosystem is looking attractive, not from an application or technology standpoint. There's some -- we need to be cautious as a debt investor on where we want to invest, but more in the infrastructure and that includes equipment providers into data centers. So we just did a big deal for BXSL during the quarter called Layer Zero which Advent purchased. We just announced a deal last week, Sabre Power, which powers another attractive infrastructure play on the AI -- in the AI ecosystem. So you'll continue to see us play in the picks and shovels around AI and drive more secured type investments in that space. Kenneth Lee: Great. Very helpful there. And then one follow-up, if I may more broadly. How are you seeing in terms of the quality of deals that you're seeing? You've certainly seen a pickup in activity, but wondering how would you assess the quality of the deals that you're seeing so far? Brad Marshall: Yes. I would say it's actually fairly good. We're seeing -- what's driving a little bit of the pickup in M&A activity, as I said in my opening remarks, you have a little bit more macro clarity. You have a lower cost of capital and those two things are driving improved valuations. And so buyers and sellers are coming a little bit closer together. And typically, when an M&A machine starts to pick up, it leads with the higher-quality assets. And those are the types of deals that we're seeing. As I just mentioned on the previous question, average loan-to-value of about 45%, so still sub-50%. When we started 15, 20 years ago, average loan-to-values were around 65%. So very good backdrop from a capital structure standpoint if you're investing at the top of the capital structure, which we continue to do. And then I would say there are certain sectors that we think will be better performers going forward, and those are the ones that we've invested in the past year and will continue on a go-forward basis for our investors. Operator: We'll take our next question from Ethan Kaye with Lucid Capital Markets. Ethan Kaye: So you guys had strong commitment in net funding activity this quarter, which is great to see. I guess first question is how much of this was kind of incumbent versus new borrowers? And are you kind of seeing a shift in these proportions in the last quarter, recent months here? Teddy Desloge: Yes. Good question. Thanks, Ethan. So as we look at total activity in the quarter, which includes existing portfolio companies that are accessing DDTLs or doing add-ons in addition to new deals, over 80% of activity was to incumbent borrowers and over 70% or actually close to 75%, as Carlos mentioned, were sole leads. So I don't -- I wouldn't say that's in a different quarter than previous. That's kind of been consistent for a while. It goes back to our broad coverage across the sub-investment grade universe, cover or invested as a platform over 5,000 companies, that's somewhat of a fertile hunting ground for us for new deals. You saw that in the quarter. Brad Marshall: And I would say just as a market backdrop, we're seeing about a 25% uptick in new LBOs. So going forward, I think you'll see a decent percentage of new deals come through the portfolio and into next year. Ethan Kaye: Got it. That's helpful. And then, I guess, somewhat of a follow-up. So given that leverage ticked up a bit, at the high end of your range, as you mentioned. And given that kind of share issuance ability is a little bit more constrained these days, should we anticipate kind of the level of deployment to be largely driven by portfolio turnover? Do you think there's capacity to kind of maintain these elevated net funding levels? Teddy Desloge: Yes, good question. Thank you. So well, first off, going into a period of heightened activity, very well capitalized, right, over $2.5 billion of liquidity, among lowest cost of financing, debt markets wide open, we issued a $500 million bond at 155 basis points spread over treasury. And to put that in context, that's about 50 basis points inside of where spreads were on bonds in 2021. So to your point, also seeing a pickup in repayment activity as the M&A market does pick up, we expect to continue to see that. And we'll watch the equity markets closely, an only issue if we see that it's accretive to both NAV and earnings based on the opportunity set in front of us. So in the meantime, we feel we're in a very good position and do have some visibility to increasing repayments as previously mentioned. Brad Marshall: The pickup in M&A activity and turnover are directly linked, not surprisingly. So you'll see both those happen at the same time. Operator: [Operator Instructions] We'll go next to Robert Dodd with Raymond James. Robert Dodd: If I can go back to the LTV question quickly. I mean almost 50%, I think that's probably an all-time high in this portfolio, and it's up almost 300 basis points since last quarter. And there's also -- there seems to be a bit of tension. Brad, in your prepared remarks, you're talking to Ken, you said valuations in the market are improving, and that's one of the factors driving activity. But then explanation for LTVs going down as you're marking down the enterprise value for some of your portfolio companies. So can you give us a little bit more granularity on that? Is it trimming multiples modestly broadly across the portfolio for your enterprise value assessments or more concentrated in some larger assets where there are bigger negative adjustments? Brad Marshall: Yes. I don't want to get into too technical of an answer on this point. But I'll give you an example, and hopefully that is helpful. If a company does an add-on financing where they had previously an equity position, let's just say that was $1.5 billion, that company may have improved in value and we may have financed it with the acquisition with debt. So it may look like the LTV has gone up, but it, in fact, is reflecting the original purchase price of the sponsor. So there's a lot of puts and takes on the LTV, Robert. I would tell you it's not -- it's -- as we look at it, it's not a story. It's not an event that concerns us just given the subordination that remains below our debt positions. Robert Dodd: Got it. Got it. Sort of a follow-up, a little early. On spreads, I mean, in your opening remarks, Brad, you did say spreads are still attractive relative to other fixed income markets. We agree with that, right? I mean spreads are down everywhere. And private credit has persistently maintained the premium over the syndicated low market, call it, 150 plus basis points. Do you think there's risk to that 150 as we go forward given the amount of capital and the amount of competition? Brad Marshall: I definitely do not think there's risk to that premium. If you take a step back and think about what private credit is delivering for companies, in the bank model, you approach a bank, bank underwrites a loan, goes to rating agencies, goes through a long distribution process and eventually prices that debt in the public markets. They charge a fee for that. Usually, that fee is somewhere between 2.5 basis -- 250 basis points to 300 basis points, depending on the -- all the other ancillary expenses. And you compare that to private credit, where I'm going to the same company and saying, work with Blackstone directly. We can give you $1 billion loan, you don't need to go through that distribution process. By the way, we can give you a little bit more of a tailored solution for you. And that is the value of what private credit brings to the market. It's the disintermediation of the bank distributed model and there's value for that. There's value for the company and there's value for investors. And so I strongly believe that, that premium will be maintained and at some point, will actually even be wider. Robert Dodd: Got it. I hate to ask one more. Can you give us the estimated spillover currently to support the dividend? Brad Marshall: Yes, $1.89. Operator: We'll take our next question from Melissa Wedel with JPMorgan. Melissa Wedel: Definitely noticed the resilience in interest income this quarter, especially given the pickup quarter-over-quarter, and I was wondering if there was anything onetime or outsized showing up and impacting the 3Q revenue number? Teddy Desloge: Yes. Thanks, Melissa, I think as you look at our interest income profile overall, what you see is quite a bit of recurring nature, right? We have, as I mentioned, 91% excluding -- 91% of interest income excludes PIK and onetime fees. We did have a little bit of repayment activity. The impact of that was maybe $0.03 a -- so I think overall, as you go back to our policy from an accounting perspective, right, all OID and upfront fees are amortized over the life. And so that leads to more stability or we believe leads to more stability over a long period of time. Melissa Wedel: Okay. That helps. And it sounds like with the pickup in M&A activity and deal volumes, you're seeing some attractive opportunities. I'm curious how the opportunity set here in the U.S. now that it is sort of reaccelerating, how does that compare to what you're seeing outside of the U.S., which I know has a small exposure in the portfolio? Brad Marshall: Yes. I would say Europe as being the primary market that's most developed outside of the U.S., probably sees terms that are a little bit wider to what you're seeing in the U.S. The market is just not as developed. The capital markets aren't as deep. There's not as many competitors and so as that market starts to reaccelerate as well, there's a slightly better backdrop in Europe than the U.S. Both are attractive clearly, but you see about a 25, 50 basis point spread premium in Europe. And in Asia, it's a little bit of a market that's still developing for the most part and probably not a great comp. Operator: We'll take our last question from Arren Cyganovich with Truist Securities. Arren Cyganovich: I just wanted to talk a little bit about the commentary of investment activity picking up because the cost of capital coming down and macro getting better. The macro still seems kind of squishy and part of the reason that rates may be coming down is that there is a little bit of macro uncertainty along with the slowing inflation. What -- I guess what are your -- what's your experience in the past in areas like this where you have the cost of capital coming down, but macro still has some uncertainty in it? Brad Marshall: Yes. Let me just comment broadly on the economy because you are correct, we did highlight that it feels like the economy, the backdrop is good. Corporate balance sheets are good. Earnings, as we see them reported publicly, are strong. We're seeing that in our portfolio as well. I think we mentioned 9% earnings growth. There are pockets of weakness most certainly. And you see that in the cyclicals. You see that in smaller companies. You see that in companies that are exposed to the lower end of the consumer. Tricolor is a good example of that. And then you see some businesses that are more impacted by AI. So it's not without challenges, but -- so it really depends on where you're invested. But importantly, as you think about rates, rates are primarily looking at inflation. And inflation is coming down. The labor markets are cooling, shelter, costs are lower, and that's really what the Fed is focused on when they're setting their interest rate policy. Operator: With no additional questions in queue, I'd like to turn the call back over to Stacy Wang for any additional or closing remarks. Stacy Wang: Thank you, and thanks, everyone, for your participation in our call this morning. We look forward to speaking to you next quarter. Thanks again.
Operator: Good morning, and welcome to Townsquare Media's Third Quarter 2025 Conference Call. As a reminder, today's call is being recorded, and your participation implies consent to the recording. [Operator Instructions] With that, I would like to introduce the first speaker for today's call, Claire Yenicay, Executive Vice President. Please go ahead. Claire Messner: Thank you, operator, and good morning to everyone. Thank you for joining us today for Townsquare's third quarter financial update. With me on the call today are Bill Wilson, our CEO, and Stuart Rosenstein, our CFO and Executive Vice President. Please note that during this call, we may make statements that provide information other than historical information, including statements relating to the company's future expectations, plans and prospects. These statements are considered forward-looking statements under the safe harbor provision of the Private Securities Litigation Reform Act of 1995 and are subject to risks and uncertainties that could cause actual results to differ materially from these statements. These statements reflect the company's beliefs based on current conditions, but are subject to certain risks and uncertainties, including those that are detailed in the company's annual report on Form 10-K filed with the SEC. During this call, we may discuss certain non-GAAP financial measures, including adjusted EBITDA. Such non-GAAP financial measures should be used in conjunction with all the information contained in the quarterly, year-end and current reports available on our website. I would also encourage all participants to go to our corporate website and download our investor presentation, as Bill will reference some of those slides during our discussion this morning. At this time, I would like to turn the call over to Bill Wilson. Bill Wilson: Thank you, Claire, and thank you all for joining us today. It's great to reconnect with everyone. We are pleased to share with you this morning that Townsquare's third quarter results met the total net revenue and adjusted EBITDA guidance that we provided on our last call, reflecting our team's hard work in the current macroeconomic environment. Despite numerous headwinds that we have encountered, we are proud that the execution of our digital-first local media strategy has allowed us to deliver excellent results for our clients while also producing strong cash flow from operations due to the thoughtful and deliberate management of our expense base. In the third quarter, our guidance was that total net revenue would be $106.5 million to $108.5 million, and it finished right in line with $106.8 million. We also provided guidance that third quarter adjusted EBITDA would be between $22 million and $23 million, and it came in right at $22 million. Importantly, due to our strong expense management, adjusted EBITDA margins, excluding political, actually improved year-over-year despite ex political revenue declines. By now, it should be very clear that Townsquare has transformed from a legacy broadcast company into a digital-first local media company and that our digital platform and digital execution sets us apart from others in local media. In 2024, approximately 52% of our company's total net revenue and 50% of our total segment profit was generated from our digital solutions. In the first 9 months of 2025, our digital revenue grew plus 2% year-over-year. And as a result, our digital revenue expanded to a very significant 55% of our total net revenue, which as highlighted on Slide 11, is industry-leading at more than 2x the industry average. Total digital segment profit increased plus 4% year-over-year in the first 9 months of the year with a strong profit margin of 26%, up slightly year-over-year, and digital's year-to-date contribution grew to the 55% of our total segment profits. As we have consistently stated for many years, digital is and will continue to be Townsquare's growth engine and the area we focus the bulk of our investment capital going forward, consistent with our strategy of being a digital-first local media company, focusing on markets outside the top 50 in the United States and further differentiating us from others in local media. Let's first dive into the results of our 2 digital divisions, starting with Townsquare Ignite, our digital advertising business. In Q3, we're seeing 2 very different trends play out in our digital advertising business. Digital advertising related to our direct-to-client sales remains very healthy, including strong revenue growth. However, these gains are offset in the short-term by significant deterioration in online audience trends that have significantly impacted our indirect or also known as remnant revenue on both our local and national websites, which we discussed on our last call. In the third quarter, the negative indirect trends were enough to offset growth, leading to a slight overall digital advertising revenue decline of less than 2% year-over-year. Let's start with the positives before diving into and detailing the headwinds. First, our digital programmatic business, which makes up approximately 60% of our digital advertising segment revenue, continues to deliver strong results with high single-digit revenue growth in the third quarter. We believe that this part of our business has very strong organic growth opportunities, and we expect it will continue to be our primary growth driver going forward. As a reminder, our programmatic platform provides our customers with precise targeted solutions, giving them the ability to reach a high percentage of their potential customers across desktop, mobile, connected TV, e-mail, paid search and social media platforms, utilizing display, video and native executions. We essentially act as a full-service digital agency for our clients. From providing campaign strategies, creative services to buying inventory, optimizing campaigns and providing real-time reporting and analytics and insights, providing a level of service that is often not available in the markets we operate. In addition, we are simply able to offer a more cost-effective campaign to our clients than most of our competitors, given our scale across our 74 market footprint, our first-party data and our in-house proprietary demand-side trading desk that is integrated with more than 15 advertising buying platforms with access to all major digital advertising exchanges and therefore, more than 250 billion impressions per day. Second, our third-party media partnership model, which is a component of this programmatic business has been progressing quite well since its beta launch in early 2024. This strategy will be a meaningful component of our digital advertising growth in future years -- although in 2025, it's still small, adding approximately $6 million of revenue this year at approximately 20% profit margin. As a reminder, and as we've shared on previous calls, through this capital-light model, we partner with others in local media and handle all the major components of the digital advertising solution, including managing the creative, buying the inventory, optimizing the inventory and customer support of the digital campaigns, and importantly, effectively training our partner sales team to sell our solutions. Therefore, we can enter new markets to offer programmatic digital advertising solutions without having to acquire radio broadcast assets to do so, freeing up our capital for other purposes. I expect that in approximately 5 years, this division can grow to be at least $50 million in revenue for Townsquare and approximately 20% profit margin. Ultimately, our goal with this division is to become the chosen provider of digital programmatic advertising to broadcasters and digital agencies in local markets outside of major cities. We are proud and honored to currently have 6 strong partners in this division, and we expect that number to grow in 2026 and beyond. And third, direct sales of our local owned and operated digital properties, which includes locally sold advertising, aka traditional feet on the street selling our own inventory on our own 400 local websites and mobile apps was quite strong in both the third quarter and year-to-date periods, up approximately 10% year-over-year. Given the overall weak advertising environment, we're especially proud of the success of our local sales team and what they've been doing in driving direct sales growth, and we believe that they will continue to drive this growth going forward. Now to address the digital advertising headwinds that have been created from the emergence of AI and its subsequent impact on content creators and their corresponding online audience. As I'm sure you're aware, this is an industry-wide issue among web publishers of scale. For example, publishers including well-known names like Forbes, Daily Mail, Washington Post and CNN are seeing major drops in traffic to their websites. In fact, in August, 45 of the top 50 U.S. news websites experienced year-over-year declines in search traffic with the 4 publishers I just mentioned averaging declines in search traffic of over 40% year-over-year in July. As we detail on Slide 13, both our local and national websites are also experiencing meaningful declines in our search engine traffic, leading to declines in our overall digital inventory. This impacts our ability to monetize any remnant inventory unsold by our direct sales team, digital inventory that we have historically sold via programmatic bidding engines. Although a much smaller part of our digital advertising segment, the declines have been significant. For context, revenue from remnant inventory on our websites was approximately $20 million in 2024 and accounted for 13% of our digital advertising revenue. In the third quarter of this year, this revenue stream declined 50% year-over-year, going from $5 million in Q3 2024 to only $2.5 million in Q3 2025 and thus a decline of $2.5 million, which is very high-margin revenue and an acceleration from Q2's decline of approximately 25% thus creating a drag on our performance and causing our digital advertising revenue to decline negative 2% year-over-year in the third quarter as opposed to the slight growth we originally expected when we last spoke. Important to highlight that excluding revenue from remnant inventory sold programmatically, Q3 digital advertising revenue would have increased plus 5% year-over-year. Unfortunately, we continue to see these search referral trends in Q4 and believe this headwind will exist through at least the first half of 2026 before remnant revenue stabilizes at a lower run rate. As a result, we expect Q4's digital advertising revenue to be again be muted. And again, I'd like to emphasize that while it's a meaningful drag in the short-term, it represents only a small portion of our business and the majority of our segment, including our programmatic business, which represents 60% of our digital advertising revenue, continues to deliver very healthy revenue growth. Let's now turn to our second digital business, which is our subscription-based digital marketing solutions SaaS business, Townsquare Interactive. We are pleased to share that our fantastic profit performance has continued in the third quarter, and we again expect strong profit growth in the fourth quarter. In the first 9 months of 2025, segment profit has increased plus 19% year-over-year, an increase of $3 million. This is an excellent result as year-to-date profit margins expanded to 33% as opposed to the customary 28% profit margin we've delivered over the past few years. As we detailed on our last call, the increase in Townsquare Interactive's profit margin is largely due to 3 causes: number one, the restructuring of our customer service model in 2023 that allows us to grow more efficiently. Number two, changes to our sales structure late last year and early this year have led to both a smaller sales team, which is temporary, but very importantly, a more productive sales team. And finally, number 3, the deployment of AI solutions to improve efficiency. Thus, we remain very confident that the changes we have made to both our customer service and sales models, along with the continued deployment of AI solutions are setting Townsquare Interactive up for the next decade of efficient and profitable growth and success. However, as I just mentioned and also highlighted on our last call, with a smaller sales team comes slower sales velocity and therefore, muted revenue performance in the short-term. In the third quarter, Townsquare Interactive's revenue decreased approximately negative 2% year-over-year and was just in line with Q2's total revenue as expected and shared on our last call. We expect Q4 revenue at Townsquare Interactive to be roughly in line with Q3's $18.6 million, and we are confident that we will return to revenue growth during calendar year 2026 once we have reached previous sales staffing levels. In the meantime, we expect that strong profit growth will continue in Q4 and 2026 as we expect profit margins to remain above 30% in Q4 and above our historical levels next year. We look forward to sharing our strong full year profit results next quarter as we expect our profit performance at TSI in 2025 to be one of the best in the division's 12-year history. As you have heard me consistently state, I am very confident that Townsquare Interactive is on track and set up for long-term profitable growth and success, and I believe that 2025 expected profit performance is a great proof point of that. Turning to our third and final business segment, broadcast local radio. As you're all aware, we view local radio as an extremely valuable asset with significant cash flow properties, unparalleled consumer reach and an important local connection to our audience and our clients. However, radio is not a growth driver for Townsquare. And in the third quarter, broadcast advertising net revenue, excluding political, performed exactly as we telegraphed on our last call and declined negative 8% ex-political year-over-year, in line with our performance through the first half of the year. Despite broadcast revenue declines and macro headwinds, we have consistently outperformed the industry in 2025, gaining local and national broadcast market share according to Miller Kaplan estimates. With our differentiated local content on our local radio broadcast, combined with being able to offer clients marketing solutions powered by the combination of digital and radio, we believe that we will continue to gain broadcast and total market share across our market footprint while also generating a solid profit as we carefully manage expenses to maintain a strong broadcast profit margin. In fact, in Q3, our broadcast profit margin expanded significantly year-over-year when excluding political from 25% in Q3 2024 to 28% in Q3 2025. As we close out 2025, we expect to see digital advertising trends consistent with our Q3 performance with continued strength in programmatic and direct sales of our owned and operated 400-plus websites and mobile apps, offset by ongoing headwinds tied to the decline in search referral traffic. As I already noted, I expect Q4 revenue at Townsquare Interactive to be in line with Q3's revenue. We anticipate a slight improvement in ex-political performance in our Broadcast segment in Q4. Although on a total basis, we will see a large decline due to the significant political comp we had in Q4 of last year, coupled with lighter than forecasted fourth quarter political revenue this year. As a result of that, and as Stuart will share shortly, our full year revenue and adjusted EBITDA guidance will be revised. Importantly, our business model continues to generate strong cash flow from operations, which we have been applying towards organic investment in our business and debt paydown as well as rewarding our shareholders with current returns in the form of a dividend, which we will continue to do. And now I'll hand it over to Stuart to discuss our financial results and guidance in more detail. Stuart, please take it away. Stuart Rosenstein: Thank you, Bill, and good morning, everyone. It's great to speak to you today. We're very pleased to report that our third quarter results met our revenue and EBITDA guidance. Third quarter net revenue, excluding political, declined 4.5% year-over-year and 7.4% in total to net revenue of $106.8 million, within our guidance range of $106.5 million to $108.5 million. Third quarter adjusted EBITDA, excluding political, declined 2.1% year-over-year and 13.6% in total to $22 million, which was also within our guidance range of $22 million to $23. I would like to highlight that when excluding the political impact in 2024 and 2025, adjusted EBITDA margins expanded slightly from 20% in the third quarter of 2024 to 20.5% in the third quarter of 2025 as we thoughtfully managed our expense base. Townsquare Ignite, our digital advertising segment, experienced slight revenue declines in the third quarter as accelerated weakness in remnant indirect digital advertising revenue offset continued growth in the direct sales of our programmatic offering and our owned and operated digital portfolio. In total, third quarter digital advertising revenue declined 1.6% year-over-year. Third quarter digital advertising segment profit margins were impacted by the same forces and as a result, margins contracted year-over-year to 21.5%. As expected and we previously projected, Townsquare Interactive, our subscription Digital Marketing Solutions segment's third quarter net revenue decreased 2.3% year-over-year. We are thrilled to share that as expected and consistent with performance all year, Townsquare Interactive delivered another quarter of very strong profit growth with Q3 segment profit increasing 21% year-over-year with segment profit growth of approximately $1.1 million. Segment profit margins were very strong at 33% in Q3 2025. And for the full year, we expect Townsquare Interactive's profit margin to remain above 30%. In 2025, we are very confident in our expectation that we will deliver strong profit growth for our Townsquare Interactive business, which is very beneficial after the profit losses in 2023 and 2024. Q3 broadcast advertising net revenue decreased in line with our expectations, which was similar to declines in the first half of the year on an ex-political basis. In the third quarter, broadcast revenue declined 8.1%, excluding political and 13.8% in total, each as compared to the prior year. Importantly, broadcast segment profit margins meaningfully increased year-over-year when excluding political from 25% in the third quarter of 2024 to 28% in the third quarter of this year. We're very proud of how our team is working diligently to manage our broadcast expense base in the face of revenue declines. Our third quarter net loss was $5.5 million or $0.36 per diluted share. In the first 9 months of the year, net loss improved $31 million year-over-year, primarily due to the reduction in noncash impairment charges in 2025. We'd like to remind you that any benefit or provision for income taxes included on the face of the income statement is for GAAP financial statement purposes only. We maintain significant tax attributes, including approximately $96 million of federal NOL carryforwards and other substantial tax shields related to the tax amortization of our intangible assets. We continue to believe that we will not be a material cash taxpayer until approximately the year 2028. As Bill highlighted, and I would again like to emphasize, we consistently have strong cash flow generation. We generated $18 million of cash flow from operations in the first 9 months of 2025. Cash flow from operations before cash interest payments was $59 million and was 5% or $3 million higher than the previous year. In the third quarter, we repaid $9 million of our term loan, including $6 million, which we purchased at a discount in the open market and our second amortization payment of $2.9 million. Since the February refinancing, we have reduced our outstanding debt by $17 million as of the end of the third quarter. In addition, our cash this year has been used to fund $41 million of interest payments, $10 million of dividend payments and $28 million of fees associated with our February refinancing. With $463 million of total debt outstanding and $3 million of cash on hand at September 30, our net leverage is 4.71x. And I'd like to highlight that since our term loan is a floating rate instrument, the 2 recent interest rate cuts totaling 50 basis points translates to roughly $2.3 million of annualized interest reduction based on the current debt balances. As always, our #1 priority is to invest in our local business through organic internal investments that support our revenue and profit growth, particularly our digital growth engine. We plan to continue to invest in our digital product technology, sales, content and support teams, specifically in our Townsquare Interactive and Townsquare Ignite businesses to main our strong competitive advantage in these markets outside the top 50 cities. In addition, we plan to use our excess cash flow to reduce our debt through both mandatory and voluntary debt repayments and, of course, support our high-yielding dividend. Our Board has approved our next quarterly dividend payable on February 2 to shareholders of record as of January 26. The dividend of $0.20 per share equates to $0.80 per share on an annualized basis and implies an annual payment of approximately $13 million based on our current share count and a dividend yield of approximately 13% based on our current share price. For our full year outlook, due to much steeper-than-expected declines in our search engine traffic and its related indirect revenue, coupled with much lower-than-forecasted political revenue, we expect that our net revenue will come in lighter than previously expected. As these are both very high-margin revenue streams, this also impacts our adjusted EBITDA guidance, but due to our strong expense management to a much lesser degree. Specifically, for the fourth quarter, we expect net revenue to be between $105 million and $109 million. We expect fourth quarter adjusted EBITDA to be between $21.5 million and $23.5 million. As a reminder, in the fourth quarter of 2024, we generated $7.2 million of political revenue versus our current forecast of less than $1 million of political revenue in the fourth quarter of 2025. This guidance implies that Townsquare's 2025 full year revenue will be between $426 million and $430 million, with political revenue of less than $2 million as compared to $3 million we generated in 2023, the last nonpolitical year. We expect full year adjusted EBITDA will be between $88 million and $90 million. And with that, I will now turn the call back over to Bill. Bill Wilson: Thank you, Stuart, and thanks to everyone for taking the time to be updated on Townsquare's Q3 results this morning. We greatly appreciate it. I'd like to close today's call by emphasizing our confidence in our digital-first local media strategy and the long-term profitable growth potential of our digital platform. Direct digital advertising sales remain strong, and Townsquare Interactive is driving incredible profit growth in 2025 with margins north of 30%. Our mature cash cow broadcast advertising platform continues to generate a solid profit, and Q3 ex-political broadcast profit margins are actually up year-over-year due to solid expense management. We continue to generate strong cash flow. And after refinancing our debt in February, which extended our maturity profile to 2030, we have already reduced our outstanding term loan by $17 million through September, all while maintaining our high-yielding dividend, delivering attractive current returns to our shareholders. Most importantly, we are confident in our ability to build shareholder value for our investors through long-term net revenue, profit and cash flow growth, net leverage reduction and future dividend payments. As always, we wouldn't have the confidence in our long-term success without the Townsquare team's effort, passion and commitment that is directly driving our growth and innovation each day. I could not be more appreciative of our team and their tremendous work. With that, operator, at this time, please open the line for any and all questions. Operator: [Operator Instructions] Our first question comes from the line of Michael Kupinski with NOBLE Capital Markets. Michael Kupinski: Just a couple of questions here. First, I want to start on the broadcasting side. I see that, obviously, we see core advertising kind of decline. And typically, in an off-election year, we would kind of get the core advertising up because of the displacement from political. And we should just see continued deterioration there, of course, secular headwinds. I get that. I was just wondering if and when do you think we'll see some stabilization on core advertising there? And I know it's not a main focus for you, but I was just wondering what do you think will take to see at least some stabilization on the core advertising front? Bill Wilson: Thank you, Michael. Always good to hear from you. Yes, obviously, as you just noted, there's a secular decline currently in broadcast radio similar to broadcast television. From what we've heard and what we've seen from publicly reported companies, but what we've also heard about year-to-date is down low double digits for the industry. As we just reported this morning, just exactly what we telegraphed on our last call that Q3 would be down negative 8% ex-political, which is exactly where we were for Q1 and Q2. So, it came in directly where we thought. We also just noted in the prepared remarks that Q4 is pacing slightly better ex-political by 1 point, 1.5 points. So, it's not dramatic, but it is slightly improving. And it's also important to note that our broadcast profit margin is up year-over-year. So, in Q3 this year, our broadcast profit margin is 28%, which is actually up from Q3 2024, which was 25%, so a 3-basis point improvement. So clearly, we've always taken the view that, obviously, digital is our growth engine and that our broadcast business, which we love, and we don't think we'd have the success in our 2 digital divisions without the power of broadcast radio and the connection it has with our communities, it is a traditional cash cow, and it is, in our view, not our growth driver. I would also highlight, and we're quite proud of this, is that our local sales team is increasing share. So, we -- if you look at Miller Kaplan, we're taking local spot share from our competitors in the 74 markets where we operate radio stations, and we're taking total spot share. So, in a declining market, we're in essence, doing better than the rest of the industry, which is evident in our negative 8% versus the industry's negative 11%. Going to the heart of your question, which was when do we expect "stabilization"? So again, we're seeing slight improvement in Q4. Obviously, the macro environment throughout 2025 has been incredibly challenging given the uncertainty. The uncertainty coming into the year, obviously, Liberation Day on April 2, we detailed quite specifically on our last call that the dramatic and instant impact that had on our advertising business in total and muted our digital advertising in Q2 and Q3 and obviously hurt our broadcast advertising. And then going into the longest government shutdown, uncertainty around interest rates, so forth and so on. So hopefully, with the developments last night in the government, hopefully reopening in short order, my expectation in 2026 is the current negative 8% moves to, call it, low to mid-single digits. I would probably guide to just be conservative mid-single digits in '26 in terms of broadcast. And then looking at '27 and beyond, and I'm talking about ex political because obviously, next year will be a great political year. We expect to be in low single digits. So that's what our expectation, Michael, is in terms of core radio -- so I'd call it, in '26, negative mid-single digits and then '27, '28 negative low single digits. And I'll turn it back to you for your other questions or any follow-ups on that. Michael Kupinski: You've been able to maintain some pretty impressive margins. Is there much to cut there? I mean, given that you have these pretty high margins, I mean, it's surprising that given the type of revenue declines that you had in core advertising, you still maintain some pretty healthy margins. Bill Wilson: We appreciate you noting that, and we agree. And Stuart and his team as well as many others have done a great job. Quite honestly, the short answer is yes, we have a lot of opportunity. We talked about this on a couple of calls, but we're currently continuing to deploy AI solutions throughout our company that are providing efficiency as well as increased productivity. So, we're very proud of the fact that if you look at our broadcast profit margins ex-political, they're up and quite healthy, as you noted. And we are quite confident we'll be able to maintain that. We're profit margins up, as I just noted, to 28%, 3 basis points up from 25% in Q3 '25 on a decline of negative 8% ex-political is quite great work that our team has done, and I'm quite proud of. We will be able to continue to do that and take out expenses in line with wherever the revenue comes in. And I think we've proven that over the last several years, and we'll do the same moving forward. I'll turn it back to you, Michael. Michael Kupinski: Indicated that they have had some government-related advertising in Q4, like Medicare enrollment, things like that. Did you have any type of government-related shutdown advertising impact? Bill Wilson: Are you saying you've heard from others that they've gotten incremental buys? Yes, we have not seen that. We have not seen incremental buys related to the government shutdown. We've seen softness as it relates to that talking to our local customers. National continues to be a significant headwind for us. It's a small part of our business, less than -- as we've talked about before, less than 10% of our broadcast business. But no, the short answer is we have not seen a positive impact or incremental buys based around the government shutdown or Medicare or anything around that. Michael Kupinski: Yes. No, I was actually -- it was the reverse that they were saying they had impact from advertisers. Bill Wilson: Yes. We have seen that. We've seen canceled orders and things like that. And we've seen that throughout the year with the Dodge cutbacks in health services. So yes, the short -- if you're asking if we've seen a negative impact, the answer. Sorry, I misunderstood the question. The answer is yes. Michael Kupinski: And then final question, I don't want to take up too much time. A part of the attraction of the new office in Phoenix was in your Interactive segment was to focus on the West Coast expansion. I was just wondering if you could talk a little bit about your Interactive business on the west of the Mississippi. What were your goals on milestones? Could you just talk a little bit about your thoughts on how that office is kind of progressing? Bill Wilson: Yes. So quite pleased with the progression of the Phoenix office as well as Townsquare Interactive SaaS-based subscription division of our company. I'll first speak about Phoenix and address that, and I'll just give a little color on Townsquare Interactive overall. So, the primary driver of opening the office was to be able to increase our talent pool, and that's why we picked Phoenix. It's been a great place to hire sales talent. And then after we hired sales talent, we started to add customer support focus as well as what we call subject matter expert, people who are great in design, people who are great in CRM and digital marketing for our Townsquare Interactive customers. So that office is doing exactly what we expected it to and are quite pleased with it. I'll just take a step back and just talk about Townsquare Interactive. So, we're quite pleased with the performance and really, really proud of the division. In Q3, we delivered 21% growth and profit. And year-to-date through September, we grew our profit 19%. So over $3 million in incremental profit in the first 9 months of the year. As I shared on our last call, I expect this to be our best profit growth year-over-year in the division's history. So, they've done a great job. The profit margin has increased, which customarily, you may remember, Michael, that our TSI Townsquare Interactive profit margin of about 28%. Given our new service model, which we've outlined in detail on our earnings calls in the past, given the new sales paradigm where we put a higher level of revenue per salesperson in place as well as deployment of AI solutions, the customary 28% profit margin has improved to 33% year-to-date, and we expect that to hold in Q4. So, they're doing a tremendous job. The revenue in is essence stagnant, and we detailed why on the last call, but we really reduced our sales force quite substantially. I think on the last call, we talked about over 40%. But the profitability of each sales rep that remains as well as we add to the team moving forward is much, much higher. And therefore, that you've got this tremendous profit growth even though the revenue is stagnant. As we go into '26, the revenue growth will come back as we add more and more sellers and get back closer to our sales level in terms of number of sellers. And we believe we'll still be able to operate at a 30-plus percent profit margin even as we aggressively hire our sales team. So just want to provide that color, after losing -- I think it was about $5 million in profit between 2023 and 2024 to now add back, call it, over $3 million, probably $3.5 million in '25 in incremental profit year-over-year. I think just speaks to the underlying strength of the division and how confident we are moving forward in Townsquare Interactive. And going back to your original question, that includes our operations in Phoenix. So, I'll turn it back to you, Michael, unless you don't have any other questions, we'll open it up to others, but I want to give you the opportunity for any follow-ups. Operator: And the next question comes from the line of Patrick Sholl with Barrington Research. Patrick Sholl: Yes, you actually kind of answered, I think, most of the question I was going to ask about maybe longer-term expectations on profitability on Interactive. But is that sort of like in the low to mid-30s range kind of something you would expect to keep at going forward? Or do you think there'd be room for expansion from there? I guess, maybe like a time frame for getting to more -- yes, time frame for potential margin expansion at Interactive? Bill Wilson: Yes. Great to hear from you, Patrick. Thank you for the questions, as always. I expect us to continue to be in the low 30% margins over the next couple of years, particularly with the aggressive investment. We want to build back the sales team. As I noted on our last call, we lost over 40%. And it was definitely the right thing, clearly by the profit growth. And so, in the short-term, I expect us to still live in that 32%, 33% profit margin area. But I believe there is room for margin expansion as we look out in '27 -- back half of '27, '28, '29. That's clearly an opportunity as we really rebuilt our service model and now our sales team with scale and efficiency in mind as well as obviously great customer service. So yes, I believe we'll be in this profit margin, call it, for the next 18 to 24 months, which is a huge improvement from the last several years, but that there is opportunity for margin expansion after that. And I'll turn it back to you, Patrick. Patrick Sholl: And then on Ignite, I think I heard you say that excluding the programmatic headwinds that it was up, I think, mid-single digits in Q3. If I have that wrong, please correct me. But just could you maybe talk about like the maybe different trends in that between the -- your own markets and the third-party selling or the third-party markets? And just maybe some of like the different macro trends in there versus any specific category issues. Bill Wilson: No, great question. I'm glad you asked because if nobody did ask on the call, I was going to provide some color in the closing remarks. So, a very timely question, and I'm glad you asked it. So, you're exactly right. Without the remnant drag, so that's indirect sales. So, any unsold inventory that we've been customarily doing, if you remove that, and I'll talk about that specifically as well. Our Q3 digital advertising increased plus 5% versus the reported negative 1.7%. That 5% also includes online radio, streaming radio, which for us is not a high-growth area. It's a modest growth area. So then if you break it down, I know you know this, but for the benefit of everybody else on the call, our Ignite division, which is our digital advertising business is made up of programmatic, which is 60% of our digital advertising revenue. And then the remaining 40% is what we call owned and operated platforms. So digital advertising on our own properties that we own, like our mobile apps, our websites, our social platforms and so forth. So specifically on our owned and operated, I couldn't be more proud of the Townsquare team. I mean they are just killing it. So, in Q3, it was up 10%. So digital advertising on our own properties which makes up 40% of our total digital advertising was up 10% in Q3 as well as up 10% year-to-date, which we're quite proud of. So, the remaining programmatic of 60%, which is really -- we're a full digital agency, which we talked about on the call, everything from creative, media buying, optimization, insights, leveraging our first-party data from our owned and operated, all the things we're doing there was up high-single digits in Q3. So again, great performance in programmatic at high-single digits and then up 10% on our owned and operated. So then obviously, the question is what's happening in the indirect. So indirect, so this is unsold inventory that we would then make available to real-time bidding exchanges was quite healthy for us because we had such a large digital audience. As we noted on the call, this is not a phenomenon unique to Townsquare. This is happening to any web publisher at scale. So, in the prepared remarks, we said that audience trends based on AI, so if that's AI results at the top of Google, if that's people switching from Google to Perplexity or Cloud or whatever their -- ChatGPT, whatever their favorite or their -- whatever AI they're using. So, audience trends were down 40% on average to web publishers at scale based on search traffic. So that is quite, quite substantial. So, for Townsquare, our remnant revenue in 2024 was $20 million, and that was very, very high margin, over 90%. Could be over 95% profit margin. So that's a substantial number. That $20 million in 2025, we believe it will decrease $7.5 million. So go to about $12.5 million in 2025. So that's obviously down $7.5 million. In the first half of the year, 2025, it was only down -- a little over $2 million. So, in the second half, we just said on the call, Q3 was down $2.5 million, which was a decline of 50% year-over-year. In Q4, we expect that to get slightly worse. So, the second half, we expect a decline in remnant of $5.5 million. So again, for a full year basis, that's down $7.5 million. So, this is the #1 reason by far that we had to adjust our revenue guide and our profit guide because our profit guide really declined 2% on the low end, 4% altogether. So, a range of 2% to 4%. We were not expecting a $5.5 million decline in remnant revenue, which again is over 95% profit margin. So, you're talking about over $5 million profit decline. We expected it to continue along the lines of the first half, and that accelerated from being down a little over $2 million in the first half to being down -- we expect $5.5 million in the second half. So that was the main driver of our change in guidance on the revenue line and the profit line. To a small effect, as Stuart said in the prepared remarks, our political, we expected over $3 million and coming in under $2 million. Although it was a competitive race. New Jersey just didn't see the money that we expected. The good news is our partners at Cats, who drive a lot of our political along with our own team said overall in 2025, political was very healthy for broadcast radio. It just didn't line up with our market. So, we're quite bullish on 2026 political, but it just didn't come in. So, I digress to your original question, but I wanted to give a lot of color. So digital advertising Ignite, we couldn't be more proud of this division. It is the fastest-growing part of our company for the last several years. It will continue to be. Our media partnerships now have over 6 signed with many more in the pipeline. As I said in the prepared remarks, we expect $6 million of top line revenue from our media partnerships at a 20% margin. We're quite bullish on this division. As I noted, I think that could be $50 million over the next 5 years, top line at a 20% margin. So going back to recap, without remnant, Q3 digital advertising would have been up plus 5% -- our owned and operated was up 10% direct sold in Q3 as well as year-to-date. And our programmatic division, which is 60% of our digital advertising was up high single digits and doing quite well. So, I gave a lot of detail. I thought it was important given the dynamics in indirect. We think that indirect remnant will stabilize in the back half of '26. So, we'll have a little bit of a comp issue in the first 6 months of '26, but stabilize in the back half of '26 and sets us up quite nicely for great growth in Interactive in '26 and great growth in Ignite in '26. Obviously, as I shared with Michael's questions about our broadcast and what we expect from a core perspective, we expect our broadcast business ex-political to improve in '26. And then obviously, we have the benefit of going from this year under $2 million in political revenue. We expect over $10 million next year. So, I think it sets us up quite nicely for a rebound into 2026. So long answer to your question, but I hope -- thank you for indulging me. I wanted to provide that color for everybody on the call, and I'll turn it back to you for any follow-ups or additional questions, Patrick. Patrick Sholl: So, I guess just the digital media partnerships, I think you said $6 million from that in the -- for the year is the expectation. I guess I was just kind of curious like how much of that came in Q3? And what that kind of implies for just your own market digital selling efforts? Bill Wilson: Yes. And again, so our own market digital selling efforts, again, our owned and operated is up 10%. So that has nothing to do with media partners, up 10% Q3. So programmatic was up high-single digits. So, if you remove media partnerships, it would still be high-single digits, but down about 1.5 points less than if you removed it. And again, we have a strong pipeline. We're quite pleased with the 6 partners we have now. They're quite pleased with us. And as we detailed on our last few calls, we're taking this slowly because we're treating it like -- we treat as if we were acquiring a market and part of our own team. So, we want to make sure we put in all of the training, all of the sales training we detailed on our last calls. We're actually going in with our sales team and training the sales team of our partners there. And it's going quite well for them. We know that because we see the lift of where they were prior to being with us, and they were with other companies in the programmatic space, and they switched to us because of our robust capabilities and they're quite pleased with their own revenue and profit growth, and we're quite pleased in what we've done for them. And probably more importantly, what I just detailed is the future for this division growing from this year being $6 million in total to what we believe can be $50 million over 5 years, and we'll see nice, nice growth in '26 in that division as well. So, a little bit of -- the high single digits would we maintain in programmatic, but be about 1.5 points less without -- maybe even less than 1.5 points, maybe just over 1 point less with the media partnerships. Operator: And we have no further questions at this time. I would like to turn it back to Bill Wilson for closing remarks. Bill Wilson: Thank you, operator, and thank you all for joining us this morning to hear about not only our Q3 results, but probably more importantly, what we expect for the rest of year and even more telling is what we expect in 2026 to be a great year for Townsquare. So, we look forward to updating you again. It's going to be a little bit of time for our year-end report. But if anybody has any questions, as always, please reach out at any time we're available to you, and I hope you have a great day. Operator: And that concludes today's conference call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the ProFrac Third Quarter 2025 Earnings Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Michael Messina, Vice President of Finance. Please go ahead. Michael Messina: Thank you, operator. Good morning, everyone. Thank you for joining us for ProFrac Holding Corp.'s conference call and webcast to review our results for the third quarter ended September 30, 2025. With me today are Matt Wilks, Executive Chairman; Ladd Wilks, Chief Executive Officer; and Austin Harbour, Chief Financial Officer. Following my remarks, management will provide a high-level commentary on the operational and financial highlights of the quarter before opening up the call to your questions. A replay of today's call will be made available by webcast on the company's website at pfholdingscorp.com. More information on how to access the replay is included in the company's earnings release. Please note that information reported on this call speaks only as of today, November 10, 2025, and therefore, you are advised that any time-sensitive information may no longer be accurate at the time of any subsequent replay listening or transcript reading. Also, comments on this call may contain forward-looking statements within the meaning of the United States federal securities laws, including management's expectations of future financial and business performance. These forward-looking statements reflect the current views of ProFrac's management and are not guarantees of future performance. Various risks, uncertainties and contingencies could cause actual results, performance or achievements to differ materially from those expressed in management's forward-looking statements. The listener or reader is encouraged to read ProFrac's Form 10-K and other filings with the Securities and Exchange Commission, which can be found at sec.gov or on the company's Investor Relations website section under the SEC Filings tab to understand those risks, uncertainties and contingencies. The comments today also include certain non-GAAP financial measures as well as other adjusted figures to exclude the contribution of Flotek. Additional details and reconciliations to the most directly comparable consolidated and GAAP financial measures are included in the quarterly earnings press release, which can be found at sec.gov and on the company's website. And now I would like to turn the call over to ProFrac's Executive Chairman, Mr. Matt Wilks. Matthew Wilks: Thanks, Michael, and good morning, everyone. I'll kick things off with some brief comments, then hand it to Lad to dive into segment performance and Austin will follow with our third quarter financials. Q3 began with the modest market improvements we highlighted during our August earnings call, where we noted that conditions had stabilized compared to our Q2 exit levels, with some crews returning to work mid-quarter. During August, we experienced a sequential improvement in both activity levels and pump hours as customer programs continue to materialize. However, September witnessed a sharp deterioration as customers implemented program deferrals resulting in increased calendar white space. This volatility reflects the broader challenges facing the U.S. onshore completions market where operators continue to exhibit cautious capital deployment. In response to market conditions, we have recently taken meaningful steps to adjust our strategy to build a sustainable, resilient business model poised to perform through the cycle. We are prioritizing dedicated fleets paired with operators conducting more robust, less volatile programs. Moreover, we are optimizing our cost structure with a focus on operational and capital efficiency. In addition to a renewed focus on efficiency, the company has identified initial COGS, SG&A and capital expenditure savings of $100 million at the midpoint on an annualized basis by the end of the second quarter 2026. The savings are comprised of $35 million to $45 million, driven by both COGS and SG&A labor reductions that have already been implemented an additional $30 million to $40 million identified across nonlabor items. In addition to $20 million to $30 million of reduced CapEx primarily driven by optimizing the utilization of active assets. The company believes that this is the first step in its business optimization plan. and that additional savings are possible. Turning briefly to Q4. We have not experienced further calendar deterioration with improved activity in October versus our Q3 exit, in fact, we saw certain programs that had been deferred from September, returned to the calendar in addition to deploying assets under a new contract with a large operator. Although we typically witnessed Q4 seasonality we are proactively implementing measures to mitigate the impact. Zooming out, we believe maintenance drilling and completion activity is below necessary levels to sustain flat shale production in U.S. land. Consequently, assuming the macroeconomic backdrop is supportive, we expect global supply imbalances to normalize in 2026 as operators will need to gradually accelerate completion activity to overcome natural production decline. The natural gas sector's outlook remains favorable, driven by expanding LNG export capacity and rising power demand. Both factors that should support improved completion fundamentals in 2026. As such, we continue to believe that hydraulic fracturing market dynamics create a compelling setup for the future with industry-wide sustained capital discipline, increased equipment attrition and more disciplined new equipment additions, we see the potential for meaningful supply-demand tightening should drilling and completion activity accelerate. I'd like to thank our employees for their continued hard work and focus as we position the company for success through the cycle. Against current market conditions, we are controlling what we can control by executing a comprehensive cost management strategy that positions ProFrac for both near-term operational flexibility and long-term value creation. In October, we completed a thorough review of our labor costs across COGS and SG&A and executed a headcount reduction. We believe this initiative rightsizes our business for near- and medium-term demand and estimate $35 million to $45 million of annualized savings. Additionally, we have identified $30 million to $40 million of nonlabor expenses with a streamlined focus on nonlabor operating expenses. We're improving the cost profile of our fleet with stricter enforcement of our centralized control of equipment through our asset management program, which will reduce maintenance performed at districts. Additionally, we are optimizing the mix of equipment assigned to each fleet to further limit nonproductive time, mitigating interruptions to field operations. We are confident that these actions will also improve the efficiency and effectiveness of our maintenance capital expenditures where we have identified $20 million to $30 million of additional cash savings. In August, we completed an equity offering that netted us nearly $80 million in proceeds. We deployed a portion of these funds to pay down the ABL and for general corporate purposes, including working capital. We are also being thoughtful and deliberate in how we use the levers at our disposal from the innovative transaction we entered into with Flotek in April. As a reminder, this strategic partnership involves the sale leaseback of our mobile power generation solutions for $105 million in total consideration, structured to provide both immediate liquidity and long-term value participation. The transaction gave us approximately 60% of the pro forma fully diluted equity ownership of Flotek Industries, positioning us to benefit from what we estimate to be a $3 billion to $6 billion market opportunity for gas conditioning solutions across diverse end markets, including data infrastructure, petrochemical facilities, upstream energy and broader natural gas utilization sectors. Now we're strategically utilizing the financial flexibility this partnership provides. Specifically, on Friday, November 7, we completed the sale of the $40 million seller note that forms part of the original consideration structure. As we noted when announcing the original transaction, the deal represented an evolutionary step forward in our business relationship with Flotek. And these current actions allow us to realize value from the strategic partnership while maintaining our collaborative relationship and ongoing lease arrangements. We remain very excited about our continued exposure to the gas conditioning and power generation markets through our Flotek ownership. Beyond Flotek, we are also planning to proceed with our previously announced senior secured notes program, which we established in the second quarter as part of our strategic liquidity enhancement initiative. As a reminder, in June, we successfully executed a series of transactions expected to provide approximately $60 million in incremental liquidity through 2025, including an initial $20 million issuance of additional 2029 senior notes completed in Q2 and commitments for two additional $20 million tranches at our discretion. We deferred the September tranche to December and now anticipate closing the remaining $40 million in December. Lastly, we are currently pursuing up to an additional $40 million of capital in the form of new notes. In total, the completed and planned capital raises could provide as much as $200 million in cash. While market conditions remain volatile, we believe these proactive measures, coupled with our cost savings initiatives demonstrate our commitment to maintaining financial flexibility and building a resilient platform. Looking ahead, we maintain incremental flexibility to access additional sources of capital in response to evolving market conditions. However, I want to be clear that as we execute our business optimization and cost management initiatives, I believe that the potential need for additional capital will diminish or become unnecessary. Beyond these financial initiatives, it's important to highlight that our vertically integrated platform and technology leadership continue setting ProFrac apart, controllable factors that strengthen our competitive position regardless of market conditions. Our vertically integrated platform remains a fundamental advantage, combining sophisticated asset management with in-house manufacturing capabilities that deliver both strategic flexibility and cost benefits. These unique attributes position us to capitalize on market recovery, while maintaining our strong position in dual fuel and electric fracturing capabilities, technologies that garner the highest demand. Our technology leadership through ProPilot 2.0 and our strategic partnership with Seismos, announced during the quarter continues to deliver measurable outcomes during this challenging environment. ProPilot 2.0 is providing its value as a cost optimization tool. For example, realizing fuel economy improvements as high as 26%. Our Seismos collaboration introduces closed loop fracturing capabilities that represent the next evolution in completion solutions. Ladd will provide more detail on how these technological differentiators are driving improvements across our operations. In Q3, we generated revenues of $403 million adjusted EBITDA of $41 million and free cash flow of negative $29 million. This compares with revenues of $502 million, adjusted EBITDA of $79 million and free cash flow of $54 million in Q2. These results reflects the volatile market we experienced during the quarter. In summary, we are adjusting our strategy to build a sustainable, resilient business model poised to perform through the cycle. We are prioritizing dedicated fleets paired with operators conducting more robust, less volatile programs, resulting in higher efficiency and improved control over our operations. Our proactive execution of a comprehensive cost and capital management strategy positions ProFrac for both near-term operational flexibility and long-term value creation with $100 million of structural cash savings identified across operating and capital expenditures. We have raised or plan to raise up to approximately $200 million of incremental capital. Raised nearly $80 million of net proceeds related to the equity offering in August, executed on the sale of the $40 million Flotek seller note sale at par to a Wilks affiliate. Plan to issue the remaining $40 million balance of the $60 million total commitment of senior secured notes to CSG and Wilks affiliates, pursuing capital in the form of incremental debt targeting up to $40 million. Upon full realization of our cost management initiatives, we believe we have built a full cycle model, reducing or eliminating the need for further capital raises. We maintain selective fleet utilization and customer focus driving higher efficiency and improved asset allocation. And finally, we remain confident that market dynamics may create a compelling setup for the future, including maintenance drilling and completion activity is below necessary levels to sustain flat shale production in U.S. land. Natural gas sectors outlook remains favorable, driven by expanding LNG export capacity and rising power demand. In hydraulic fracturing, sustained capital discipline, natural attrition and limited new equipment additions could result in supply-demand tightening. When fully realized, our cost and capital management measures should deliver much of what we would hope for from a market recovery. Now I'll hand the call over to Ladd. Ladd Wilks: Thank you, Matt, and good morning, everyone. I'll provide more granular detail on several things Matt touched on, starting with our operational performance during the quarter. But first, I'd like to join Matt in thanking our employees, their dedication and teamwork are what keep us moving forward. In Stim Services, we experienced the market dynamics Matt described with Q3 presenting a tale of very different periods that drove operational challenges. As Matt noted, we entered Q3 with the modest market improvements we highlighted during our August earnings call. July has represented what we believe to be the trough period. August built on this foundation, delivering solid sequential improvement in both activity levels that some operators resume executing on their completion schedules. We saw increases in activities that reinforce our view that market conditions were stabilizing. However, September presented us with some surprising headwinds. What has appeared to be strengthening calendar coming into the month deteriorated as customers implemented project delays and deferrals. What made September acutely difficult was the nature of the activity disruption. Unlike a gradual decline that allows for systematic cost adjustments, we experienced several head fakes, programs that were delayed with minimal notice, this created substantial operational inefficiencies as we carried semi-variable costs. The pricing environment during the quarter reflected more customer and geographic mix and broader market pressures with revenue per pump hour declining temporarily into the end of Q3. Combined with activity volatility, this created a meaningful margin compression in the quarter. From a fleet deployment perspective, we maintained our selective approach with an average fleet count in the 20s, though effective utilization was impacted by white space issues just mentioned, especially in September. Looking ahead to Q4, we're encouraged by signs of stabilization we observed in October with some of the activity that was deferred in September returning to the calendar. Additionally, we executed on a contract for multiple fleets with a large operator that kicked off in early October. In parallel, we have continued to evaluate and implement operational adjustments across certain fields and administrative functions to optimize our cost structure. Turning to our profit production segment. Alpine Silica delivered somewhat resilient performance despite the market conditions affecting our Stimulation Services business. Q3 revenues for Alpine remained essentially flat compared to Q2, with volumes relatively stable during the quarter. This demonstrates the value of our diversified customer base and our ability to serve third-party customers beyond our internal operations. However, we did experience margin compression during the quarter. primarily a result of a shift in volumes from South Texas to the highly competitive West Texas market. Looking ahead, we maintained a strong market position in the Haynesville region, where we anticipate eventual increased natural gas activity will drive improved performance. Further, our throughput improvement initiatives in South Texas continued progressing establishing us well to capitalize on Eagle Ford demand. West Texas has seen improved volumes and demand, although pricing remains competitive. In Q4, we anticipate an improvement in results, though we remain cautious given current market conditions. Turning now to capital allocation. Based on the deterioration in market conditions we experienced in late Q3, we're again demonstrating the flexibility provided by our comprehensive asset management program. We now expect capital expenditures to be $160 million to $190 million for 2025, representing an approximately $25 million reduction at the midpoint from our previous guidance of $175 million to $225 million. This reduction reflects both the reality of current activity levels and our commitment to maintaining financial discipline. Our asset management platform enables these reductions while ensuring we maintain our competitive positioning and equipment reliability standards. This flexible approach to capital deployment. Our ability to scale spending up or down based on market conditions while preserving our technological advantages continues being a key differentiator in managing through volatile market cycles. Now I want to expand on the operational and technological differentiators that Matt mentioned. These are the detailed execution elements that truly set us apart. Our asset management program continues generating strong results with our integrated approach to fleet deployment and maintenance optimization proving incredibly valuable. Equipment reliability and performance metrics remain at elevated levels despite increased operational demand directly attributable to the quality of our people, coupled with proprietary automation systems. Our manufacturing platform provides substantial cost advantages across fleet construction, legacy equipment upgrades and asset standardization, all at cost below the third-party alternative. This internal capability ensures quality control and deployment flexibility while maintaining our competitive moat. Technology leadership drives sustainable competitive advantages through assets such as our ProPilot automation platform. ProPilot 2.0 is proving its value as a cost us optimization tools, delivering reductions in labor requirements and maintenance expenses through intelligent automation. The platform's predicted taxability optimize maintenance intervals and enable more efficient preventative maintenance. We're also excited about our strategic partnership with Seismos, announced in August. Which introduces closed-loop fracturing capabilities across all major U.S. basins. This collaboration represents the next evolution of our technology leadership, combining Pro Pilot's proven surface automation with Seismos, advanced subsurface intelligence to deliver unprecedented operational control and performance optimization. The partnership offers two deployment models supervised mode enables real-time decision-making through continuous subsurface data streams, allowing engineers to optimize stage design and fluid placement while operations are active. While unsupervised mode provides fully automated execution based on predefined parameters, reducing overhead and increasing operational consistency. This technology stay integration is designed to scale across our entire fleet, preparing us to serve super majors and leading independents with measurable performance improvement. Importantly, Seismos acts as an independent auditor for downhole performance, allowing for dynamic completion design and predefined intervention measures to improve well performance. This partnership reinforces our dedication to bring customers the most advanced fracturing technology available while maintaining our competitive edge through innovation. I will now hand the call over to Austin to cover our financial results in more detail. Austin Harbour: Thank you, Ladd. In the third quarter, revenues were $403 million compared to $502 million in the second quarter. We generated $41 million of adjusted EBITDA with an adjusted EBITDA margin of 10% compared to $79 million in the second quarter or 16% of revenue. Free cash flow was negative $29 million in the third quarter versus $54 million in the second quarter. The volatility in activity throughout the quarter created inefficiencies and negatively impacted results. While the third quarter presented challenges, we've taken decisive actions to build a resilient platform poised to perform through the cycle. As Matt outlined, we have adjusted our strategy to prioritize dedicated fleets paired with customers that provide the more stable programs. In concert, we are implementing comprehensive cost and capital saving initiatives, which we believe will result in $100 million of annualized cash savings by the end of the second quarter of 2026. In October, we completed a thorough review of our labor costs across COGS and SG&A and executed a headcount reduction. We believe this initiative rightsizes our business to align with our revised commercial and operating strategy. Ultimately, we estimate $35 million to $45 million of annualized savings. Additionally, we have identified $30 million to $40 million of COGS and SG&A nonlabor expenses with a streamlined focus on nonlabor operating expenses. We are improving the cost profile of our fleet with stricter enforcement of our centralized streamlined control of equipment through our asset management program which will reduce maintenance performed at districts. Lastly, we are optimizing the mix of equipment assigned to each fleet to further limit nonproductive time, mitigating interruptions to field operations. We are confident that these actions will also improve the efficiency and effectiveness of our maintenance capital expenditures where we have identified $20 million to $30 million of additional cash savings. Of note, the company believes that this is the first step in its business optimization and that additional savings are possible. We look forward to providing updates on our progress in the future. In addition to cash savings initiatives we have executed on or are targeting capital raises that could generate up to $200 million. Key components include the sale of our $40 million Flotek seller note, which closed last week. Our plan to issue the remaining $40 million of incremental senior secured notes in mid-December. Our active process targeting up to an additional $40 million in incremental debt, $79 million of proceeds from the equity offering in mid-Q3. Additionally, we are actively pursuing other sources of capital in the form of noncollateralized asset sales. Importantly, upon full realization of our cost management initiatives, we believe we will have built a full cycle model, reducing or eliminating the need for further capital raises. Turning back to our Q3 performance in our segments. Simulation Services revenues declined to $343 million in the third quarter from $432 million in the second quarter, primarily due to a reduced fleet count and increased white space. Adjusted EBITDA fell to $20 million from $51 million in Q2 with margins of 6% versus 12% in the prior quarter. Operational disruptions created by frequent or sudden changes in customer scheduling resulted in unabsorbed costs and compressed our margins. Additionally, this segment incurred shortfall expenses of $9 million related to our supply agreement with Flotek up from the previous quarter. Our Proppant Production segment generated $76 million of revenues in the third quarter, effectively flat from $78 million in Q2. Approximately 44% of volumes were sold to third-party customers during the third quarter versus 48% in Q2. Adjusted EBITDA for the Proppant Production segment was $8 million for the third quarter versus $15 million in Q2. and EBITDA margins were 10% in the third quarter versus 19% in Q2. The decline in margins during the quarter reflected customer and geographic mix shifts as well as a slow start to the quarter, resulting in lower operating leverage. Our focus on operational excellence at Alpine, including throughput improvements and quality enhancements as well as our exposure to natural gas regions, including the Haynesville and South Texas, set us up nicely to capture margin expansion when market activity increases. Our Manufacturing segment generated third quarter revenues of $48 million versus $56 million in Q2. Approximately 82% of segment revenues were generated via intercompany sales compared with 78% in Q2. Segment adjusted EBITDA of $4 million compared with $7 million in Q2. The decline in segment results reflects decreased volumes of products sold to intercompany customers. Selling, general and administrative expenses were $43 million in the third quarter, improved by 17% from $51 million in Q2. This reduction demonstrates our commitment to managing our overhead structure in line with business activity levels without sacrificing our ability to invest in strategic initiatives. Cash capital expenditures decreased to $38 million in the third quarter from $43 million in the second quarter. We now expect capital expenditures to be $160 million to $190 million for 2025, representing a further reduction from our previous guidance of $175 million to $225 million. This adjustment reflects both activity levels and our commitment to maintaining financial discipline. Our asset management platform enables these reductions while ensuring we maintain our competitive positioning and equipment reliability standards. Total cash and cash equivalents as of September 30, 2025, were approximately $58 million, including approximately $5 million attributable to Flotek. Total liquidity at quarter end was approximately $95 million, including $41 million available under the ABL. Borrowings under the ABL credit facility ended the quarter at $160 million, modestly down from $164 million on June 30, demonstrating our continued focus on balance sheet optimization. As mentioned earlier, we completed an equity raise in August totaling approximately $79 million that enabled us to pay down the ABL line for general corporate purposes, including working capital management. As of September 30, we had approximately $1.1 billion of debt outstanding with the majority not due until 2029. We repaid approximately $32 million of long-term debt in the quarter. As touched on earlier, we deferred issuance of the second $20 million tranche of 2029 senior notes structured in Q2 from September to December. We expect the remaining $40 million to be issued in December. Wrapping up my section, while the third quarter presented challenges stemming from customer activity adjustments, we've taken decisive actions to position ProFrac to weather the storm. We are optimizing our strategy implementing material cost and capital savings initiatives and building a resilient model that is poised to generate free cash flow through the cycle. That concludes our prepared comments. Operator, please open the line for questions. Thank you. Operator: [Operator Instructions] Our first question is from Stephen Gengaro with Stifel. Stephen Gengaro: Thanks. Good morning, everybody. I think the first question and one of the things we hear a lot about is just the various pressure pumpers and their pricing strategy in the market. And when we hear from some of the bigger players, they complain about some others who are more aggressive on the spot pricing side. How do you approach? And I know you talked a little bit about this in your business optimization discussion, but how do you approach the pricing side? And what do you see in the overall market as far as the way the market is behaving right now? Matthew Wilks: So it's been relatively consistent. But whenever you look at spot pricing compared to longer programs, they've been pretty in line relative to each other for about the last year. But I think with the availability of equipment and as we look out into 2026, our approach has been to focus more on reliable, consistent programs. And as we continue to fill out our entire schedule and our outlook on 2026, we would expect to see spot work and its pricing to start returning to where it was historically where typically you would see spot pricing higher than committed dedicated work. Stephen Gengaro: Okay. And when you talk about the outlook for the segments and you talk about profitability maybe picking up despite kind of a lower fleet count and softer pricing, how do we reconcile those? Matthew Wilks: Yes. So we're looking at holding in at the mid-20s and focusing on our cost controls, our processes to make sure that what we've run into in the past is going and adding a bunch of fleets for Q1 and then by April, it rolls over. And so we owe more to our workforce to maintain consistent fleet count. And so given the opportunity to ramp up and increase fleet count, we would rather focus on using the increase in activity to build out a better book and focus on reliable consistent work so that we can maintain our headcount, also maintain our equipment and better condition more reliably for the dedicated customers that we're focusing on. All of this delivers better revenue, higher revenues per fleet and an overall lower cost structure per fleet. Stephen Gengaro: Okay. So that's sort of the step-up because when you say in Stimulation Services, that activity flattish fleet count, pricing lower, but profitability higher. That's what I was trying to reconcile. Matthew Wilks: I mean, really. Pricing is relatively flat, but we're seeing some green shoots here and there related to ancillary items and not specifically horsepower rates. But when you look at the additional services that are built around your base horsepower, we're seeing some really positive signs there. And really, it's -- this is utilization game, getting consistent customers with a reliable schedule and being able to benefit from the operating leverage is tremendous. Operator: Our next question is from John Daniel of Daniel Energy Partners. John Daniel: I might violate protocol and ask a bunch of questions, so I apologize in advance, you can always kick me off. But the dedicated versus spot math, that's interesting. You mentioned mid-20s today active. Would you be willing to share what portion of those are dedicated right now? Matthew Wilks: Let's see, about 80%. And it's quickly shifting to where we think we'll be in the high 90s as we roll into 2026. John Daniel: When you referenced or maybe this lot referenced the head fake, was that on spot work? And is that kind of what prompted this sort of reassessment? Matthew Wilks: It's mostly on spot, but there were some well issues and things like that, that pushed the schedule back a little bit. But these weren't changes to programs, but it was just a delay to existing programs. So we saw the stuff that pushed in September started up in October. John Daniel: Okay. And then eventually, spot pricing should, in theory, come back. Would you hazard a guess as to what type of recovery and spot pricing would you want to see where you might sort of revisit the incremental spot mix in your business? Matthew Wilks: Well, the main thing is that we're just not as interested in chasing. And so I think it would have to be pretty material for us to want to go in and look at activating fleets, as well as taking on more employees to cover temporary work. It's -- a lot of it comes down to how reliable is the spot work and do we have the ability to fill in any white space that comes with it by finding other customers that can fill in those gaps. As far as like exactly what that pricing is, the assumptions you have to make on utilization, it's it would have to be much higher than it is today and we think that we'll see that at some point in 2026. And so we'll revisit this at the appropriate time to see if this is something that makes sense for us to take on the additional operational burden the complexity that it creates for the business and as well as the challenges it creates for your workforce. John Daniel: Okay. Two more, and I promise to hang up. the cost savings are significant. If we have a steady state environment over the next several quarters, would you then characterize all these cost cuts is permanent, if you will. I mean I know how costs can creep back if the business is ramping, but how would you characterize that? Matthew Wilks: Now these -- every one of these cuts are sustainable. So we went in and we looked at historical levels where we had Q1 of each year and then also going back in and looking at 2022, what was our headcount, what was our utilization on assets, and how tightly did we manage that? So we went back in and looked at what are the sustainable levels where we know that where our cost structure should be, where should our head count be and making sure that we don't come in and bring these to a level that's unsustainable. We wanted to make sure that we had the right number of people on location that we didn't have extras, but we didn't have too few. Also, going in and looking at the cycle counts and the efficiency of our maintenance programs on how quickly we turn assets when they do go down, so that we can get them back in line and getting higher utilization rates. And so it's going to a fixed number of fleets and maintaining that level improves our ability to go through and look at every single discipline, every vertical in our business to really refine our cost structure and our processes so that the equipment on location is more reliable. It's in better condition. And if you take care of it on the back side, then when it's at the wellhead, it performs much, much better. And because of the utilization, you get to dilute any associated costs in a much more reliable way. John Daniel: Okay. And the final one, and I apologize if I'm sitting here to guess it. I don't have on my data, but I want to say it's -- the question is around continuous pumping, Diamondback referenced that on its earnings calls. And I want to say they talked about 30% efficiency gain or something to that end. Can you talk to us about what you're seeing in terms of customer interest and continuous pumping and just elaborate on that trend and what it entails? Matthew Wilks: It requires a lot more horsepower as you go in and look at how -- you still have to maintain this equipment. You still have to build in maintenance windows. And so you can do that with additional equipment so that you can cycle through banks where at any one time, one of your banks will be in a maintenance period while the other banks continue pumping. So it's -- we've seen some situations where the benefits outweigh the costs. But I think each operator is different, how they lay out their they're well inventory, how they line up the schedules, there's a different solution for each operator. So we've we constructively work with every one of our customers to give them the most efficient program. And it really comes down to making sure we have those appropriate maintenance windows. Operator: Our next question is from Dan Kutz with Morgan Stanley. Daniel Kutz: I was hoping maybe somewhat similar line of questions to the last two, but just focusing on the Pro Production segment. Just thinking about your outlook, I was hoping maybe we could kind of unpack the comments. So higher volumes and throughput but still some pricing pressure. Is -- are you guys kind of thinking about flat revenues in the fourth quarter for Proppant production? And I guess, specifically on the higher volumes comment, could you kind of unpack where that's coming from? Is it internal or external? Or is it? It would be great if you could just give us figure out a little bit deeper on those comments. Matthew Wilks: Yes. So on the Proppant Segment, we've been more exposed to the spot environment, more so than what some of our peers have experienced. I think when you look at the spot environment, it's been relatively consistent. Haven't really seen pricing pressures as much within individual markets. Where we saw a reduction in ASP was more so from a mix shift as we had an increase of volumes in West Texas and a dip in volumes in South Texas. When we look at the South Texas and the Haynesville and then also the Haynesville market, pricing is much stronger than what we see in West Texas. And so as we look into Q4, we're seeing an increase in volumes in those areas where we see better pricing. But we also see an improvement going into 2026, where increase in volumes in South Texas as well as in the Haynesville will have a material impact to our ASP and the revenue for our Proppant Segment. Daniel Kutz: Great. That's helpful. And then just staying with Proppant. So the improved sequential profitability results could you kind of quantify in the fourth quarter, could you help us think through how much of that is the early benefits of this cost-out program? Or I guess, even taking a step back, we appreciate all the color in terms of where the components of the cost out program will kind of hit the P&L and color statement. But maybe could you talk through any kind of breakout of the cost-out initiatives by segment. Yes. So just how much of cost out is driving the 4Q outlook for improved profitability and Proppant Production? And then maybe a little color on the segment breakdown of the cost-out initiatives. Matthew Wilks: No, it's a great question. We typically don't break out the split between the two, but the majority of it is on the Stimulation Services business. When we look at the Proppant Segment, we've had it running pretty lean for quite a while. But most of the improvement there will come from operating leverage and a substantial increase in utilization, which we're already seeing. Daniel Kutz: Great. Understood. And maybe if I could just sneak one more in. Could you just talk about where fracs kind of nameplate capacity is on the frac side right now, any kind of attrition you're expecting? And I think that you guys said that the e-frac new build has kind of come to has stopped or paused. But I know that you guys were still doing some Tier 4 DGB upgrades. And yes, just wondering if you could give us a lay on where you're capacity is at now by technology and where you kind of see it trending over the next couple of quarters? Matthew Wilks: Certainly. So when we look at the premium fleets and essentially fleets that can give the best fuel economy the e-fleets as well as the dual fuel fleets have shown to have the highest demand and have the best opportunities to see the highest utilization. That continues to be the -- it continues to be the case. However, diesel pricing is the cost of diesel is pretty low right now. So the degree of the savings isn't quite what it has been in the past. But -- it's still a huge driver for operators as they look at how much it cost to run a program and what configuration they need on locations. So we continue to see that. We've got very high utilization on our e fleets as well as our dual fuel program and especially as we roll into '26, we're we expect to -- we're already seeing it. We're seeing full uptake of those platforms. Operator: Our next question is from Don Crist with Johnson Rice. Donald Crist: Thanks for letting me Matt, I wanted to get your thoughts on the Haynesville kind of as we go into '26. I mean, obviously, there's a lot of industry chatter on LNG and all the things. And given your position, surrounding that basin. Kind of what are customer conversations from your standpoint around the Haynesville as we kind of move through '26? Matthew Wilks: There's a great deal of excitement. We're seeing activity increase. We're seeing the number of players, the number of operators starting to round out operators that have been have had slower programs or no program have started bringing activity back and putting plans together. The overall chatter around the gas market is very encouraging as well as. We're just seeing a lot more conversations and a lot more certainty to the programs. And it's good to see, it's good to see. We're pretty encouraged by what we're hearing from operators and how much more sticky their programs look? Donald Crist: And do you think that the timing is kind of earlier or later in the year or kind of a steady ramp-up through the year? Matthew Wilks: A great start to 2026. Some of that stuff is getting pulled into December. And then as we roll through the year, it's I think what we start the year with will carry on throughout the year with potential option to increase activity. Everybody is watching it real closely to see really how it plays out. But nobody wants to ramp up and grow into a head fake. And so, so far, what everybody is seeing they love it, they want to see more of it. But I think, yes, it's been a tricky commodity in previous years. So everybody is cautiously optimistic. Donald Crist: I appreciate that. And my last question and obviously, through my coverage list, I cover Flotek, I fully appreciate the opportunity set there. But have you considered peeling off a few shares there? Because overall, it may help with the liquidity of Flotek in the end and actually boost the share price. Just any curiosity if you've explored selling any shares just to kind of help both companies out? Matthew Wilks: Look, we evaluate all of our assets, and we think that Flotek is an incredible company with huge prospects, very excited about their data services business. And look, we a healthy ProFrac is a healthy Flotek. And so we watch that real close. Our caution is if you did look at that, how do you do it in a way where it provides a book in so that we're not perceived as a continued seller. Operator: Thank you. There are no further questions at this time. I'd like to hand the floor back over to Matt Wills for any closing comments. Matthew Wilks: Thank you, everyone. We appreciate your time today. Our vertically integrated platform, advanced asset management capabilities and technology leadership to continue differentiating us competitively. Our recent strategic initiatives and transactions demonstrate our focus on operational discipline, efficiency and building a resilient platform poised for success through the cycle. We look forward to speaking with you again when we report our fourth quarter 2025 results. Operator: This concludes today's conference. We thank you for your participation. You may disconnect your lines at this time.
Operator: Good afternoon. Welcome to Identiv's presentation of its Third Quarter 2025 Earnings Call. My name is John, and I will be your operator this afternoon. Joining us for today's presentation are the company's CEO, Kirsten Newquist; and CFO, Ed Kirnbauer. Following management's remarks, we will open the call for questions. Before we begin, please note that during this call, management may be making references to non-GAAP financial measures or guidance, including non-GAAP adjusted EBITDA, non-GAAP gross profit, non-GAAP gross margin and non-GAAP operating expenses. In addition, during the call, management will be making forward-looking statements. Any statement that refers to expectations, projections or other characteristics of future events, including future financial results, future business and market conditions and opportunities, strategic partnerships and collaborations and any related benefits and attributes and future plans, strategies, opportunities and goals is a forward-looking statement. Actual results may differ materially from those expressed in these forward-looking statements. For more information, please refer to the risk factors discussed in documents filed from time to time with SEC including the company's latest annual report on Form 10-K as well as our third quarter 10-Q once filed. Identiv assumes no obligation to update these forward-looking statements. I will now turn the call over to CEO, Kirsten Newquist, for her comments. Ms. Newquist, please proceed. Kirsten Newquist: Thanks, operator, and thank you all for joining our Quarter 3 2025 Earnings Call. As we review this quarter's results, I want to highlight that our Perform, Accelerate and Transform strategy continues to guide everything we do, from serving our customers and building our pipeline to driving innovation and commercial momentum in our high-value segments and delivering on our financial commitments. This strategy remains central to transforming the organization and creating lasting value for our shareholders. I'm pleased to report that in quarter 3, sales were in line with guidance with all other key financial metrics exceeding expectations. This quarter is particularly notable for our improved gross profit margin, which reflects the initial benefits of completing our 2-year transition of production from Singapore to our new state-of-the-art manufacturing facility in Thailand. This is the first quarter in which all of our productions have been done in Thailand. A significant milestone that has meaningfully lowered our cost structure, enhanced efficiency and scalability and positions us well for continued margin growth. We expect further margin expansion over the next few quarters as we complete the Singapore site shutdown by year-end, and the Thailand team reaches full productivity. Our CFO, Ed Kirnbauer, will now provide a detailed review of our quarter 3 financial performance, and I'll return afterwards to share more on how we're dressing across our strategic initiatives. Edward Kirnbauer: Thanks, Kirsten. In the third quarter of 2025, we delivered $5.0 million in revenue, which was within our previously announced guidance range compared to $6.5 million in Q3 2024. This year-over-year decrease was as expected and due to lower sales as 2we exited lower-margin business earlier in the year. Third quarter GAAP and non-GAAP gross margins were 10.7% and 19.1%, respectively, compared to GAAP and non-GAAP gross margins of 3.6% and 9.3%, respectively, in Q3 2024. Factors impacting the increase in gross margin included the reduction in fixed manufacturing overhead costs and direct labor costs at our discontinued Singapore operation, improved utilization of our manufacturing production facility in Thailand and sales of fully reserved inventory of $0.2 million. As we mentioned in our August call, we completed production of RFID inlays and labels in Singapore and the requalification of our customers at our Thailand production facility at the end of Q2 2025. Facility shutdown activities in Singapore continued to progress as planned and are expected to be substantially completed by year-end. GAAP and non-GAAP operating expenses for the third quarter of 2025, including research and development, sales and marketing and general and administrative expenses totaled $6.1 million and $4.5 million, respectively, compared to $9.8 million and $5.1 million, respectively, in Q3 2024. The year-over-year decrease in GAAP operating expenses was driven primarily by a reduction in strategic review related costs incurred in 2024. The decrease in non-GAAP operating expenses reflects management's targeted resource allocation to support the company's organic growth initiatives as outlined in our P-A-T strategic framework. Third quarter GAAP net loss from continuing operations was $3.5 million or $0.15 per basic and diluted share compared to GAAP net loss from continuing operations of $9.3 million or $0.40 per basic and diluted share in the third quarter of 2024. This decrease in net loss was primarily due to strategic review-related costs of $3.6 million incurred in the third quarter of 2024 compared to $0.4 million in the third quarter of 2025, higher year-over-year interest income of $1.1 million and an income tax benefit of $0.8 million in the third quarter of 2025 compared to an income tax provision of $0.4 million in the comparable quarter of 2024. Non-GAAP adjusted EBITDA loss for Q3 2025 was $3.6 million compared to $4.5 million in the third quarter of 2024. The decrease in the loss was primarily due to the reduction in fixed manufacturing costs at our Singapore facility, improved utilization of our manufacturing production facility in Thailand, as well as management's continued careful allocation of operating expenses as we execute on our P-A-T strategic initiatives. In the appendix of today's presentation, we have provided a full reconciliation of GAAP to non-GAAP financial information, which is also included in our earnings release. Moving now to the balance sheet. We exited Q3 2025 with $126.6 million in cash, cash equivalents and restricted cash. In the third quarter of 2025, we used $3.1 million in cash. This brings our total net operating cash use for the 12 months following September 30, 2024, the end of Q3 2024 to $13.4 million, well within our previously announced guidance range of $13 million to $15 million. Our working capital exited Q3 was $135.4 million. Our balance sheet position remains strong. In our 10-Q filing, we will be providing a full reconciliation of year-to-date cash flows. For completeness, we have included the full balance sheet in the appendix of today's earnings release. Lastly, our financial outlook, which is based on current market conditions and expectations, including macroeconomic conditions and customer demand. As of today's call, for Q4 2025, we currently expect net revenue in the range of $5.4 million to $5.9 million. This concludes the financial discussion. I'll now pass the call back to Kirsten. Kirsten Newquist: Thanks, Ed. As you just heard, we delivered results that met or exceeded our guidance, a solid step forward as we continue executing against our Perform, Accelerate and Transform strategy. While we know there is more work ahead to reach our overall financial goals, we're encouraged by the tangible progress we're making across each pillar, performing with focus accelerating across our high-value segments and ultimately transforming our business, we're building a stronger foundation for sustained and profitable growth. Let me now share how this progress is unfolding across our organization. Perform, deliver exceptional results for customers and drive operational excellence. Our first pillar, Perform, is focused on strengthening and growing our core channel business. To achieve this, we are prioritizing higher margin opportunities, expanding gross margins through our Thailand transition and executing our new product development, NPD pipeline with greater discipline. Our goal is to consistently exceed customer expectations through exceptional support, reliable performance, and on-time delivery. As I mentioned in my opening comments, we reached a major milestone in our manufacturing transformation this quarter. 100% of our RFID tags inlays and labels are now produced at our new state-of-the-art Thailand facility. The Singapore site shutdown is on track for completion by year-end marking the end of a successful 2-year transition. The Thailand facility has lowered manufacturing costs, improved efficiency and enhanced scalability, laying a stronger foundation for continued margin growth. To further advance operational excellence, we launched CRM and MRP automation initiatives earlier this year to streamline key sales and operations planning processes. We've made steady progress and expect to have these systems largely implemented by year-end, strengthening our operational foundation and ensuring availability as we grow. On the commercial front, our new opportunity pipeline continues to expand, driven by new sales team members ramping up across their territories and channel partners. So far this year, we've converted 18% of our new opportunity pipeline, representing almost 10% of quarter 3 sales, with additional growth expected as this new business scale. In marketing, following the completion of the transition services agreement, TSA, with Vitaprotech, we are rebuilding keycapabilities, implementing Hubspot to enhance lead generation and visibility and preparing to launch our new corporate website by year-end. We also maintained a strong presence at major industry events, including WIoT Tomorrow in Wiesbaden in Germany and Labelexpo in Barcelona, Spain. Both generating meaningful customer engagement and reinforcing strategic partnerships. At Labelexpo, our own VP of Business Development, Klaus Simonmeyer; and Narravero CEO, Thomas Rödding, shared insights on DPP compliance during a dynamic NFC RFID panel at the smart labeling seminar 2025, further strengthening Identiv's position as an innovation leader. Finally, the TSA transition with Vitaprotech is now substantially complete, and we are fully separated from the physical security business we sold 1 year ago. A key milestone marking our strategic focus and transition to being a pure play in IoT and RFID technology. Accelerate. Accelerate growth in high-value segments and through technology innovation, moving to the second pillar of our P-A-T framework, accelerate, we are advancing 3 specific growth initiatives to build our pipeline and drive long-term revenue and margin expansion. One, expanding our BLE technology platform and multi-component manufacturing capabilities. Two, targeting growth in 3 health care high-value applications. And three, further driving growth in 3 consumer and logistics high-value applications. This quarter, we made notable progress in R&D and new product development, particularly in our Bluetooth Low Energy, BLE programs. BLE represents the next generation of IoT technology offering real-time traceability and condition monitoring capabilities that are difficult to achieve with traditional RFID. We believe the technical complexity of BLE's smart label design and manufacturability aligns well with our engineering expertise and gives us a clear competitive advantage. We successfully completed the first production runs of the IFCO BLE prototypes and Wiliot's next-generation pixels. Key milestones in the development and commercialization of 2 important customer-driven BLE program. These achievements, along with the internal development of our BLE shipping label, expand our product portfolio and further strengthen our expertise in next-generation RFID technology and multi-component manufacturing. We also formalized a partnership agreement and a manufacturing agreement with Wiliot to scale up and commercialize next-generation pixels. Wiliot IoT pixels are small battery-free Bluetooth sensors powered by harvesting ambient radio frequency energy. Enabling continuous transmission of data like temperature, motion and location for smart supply chain and IoT application. In health care innovation, our R&D work with Lilly was recently highlighted in a new white paper that we published in September, demonstrating our leadership in RFID innovation for drug adherence and delivery. This is a compelling example of how our technology is enabling smarter, safer patient experiences. We're also advancing collaborations launched earlier this year including our strategic partnerships with Novanta for medical device applications and Tag-N-Trac for pharmaceutical cold chain management. Additionally, we announced a new commercial partnership with TUK, bringing our secure NFC technology to children's books. Each book integrates seamlessly with TUK's speakers through customizable NFC tags. Activating guided audio without screened, WiFi or extra devices. Designed for durability and security, this solution is built to scale across classrooms, libraries and home. Empowering the next generation of young readers. These new interactive books are available for purchase now in Scandinavia with expansion plans into the rest of Europe. We were also honored as a winner of the World Beverage Innovation Awards in 2025, together with our partners, ZATAP by collectID and Genuine Analytics AG for our NFC-powered smart packaging solution that safeguards luxury wine producers and collectors from counterfeiting. This recognition in the best technology innovation category, underscores our engineering excellence and collaborative approach to smart packaging. Finally, within our accelerate initiatives, we completed detailed product road maps aligned with our high-value market segments, which is intended to ensure that our innovation and go-to-market efforts are tightly connected to customer needs and strategic priorities. Several of these NPD programs will begin in the next quarter. Transform create significant business expansion and capability growth through M&A for long-term success. Our third pillar, transform, focuses on expanding the business through strategic M&A that accelerates EBITDA breakeven and broadens our product portfolio and enhances our technical capabilities. We continue to work with our financial adviser, Raymond James, to assess our strategic alternatives. Metrics. This year, we began reporting several new metrics to monitor our progress against strategic objectives. We're continuing to refine these metrics and plan to establish formal targets in 2026. The quarter 3 results, are for the first metric, new sales pipeline and conversion rate. This metric tracks the number of opportunities with new customers or customers we haven't sold to in over 2 years. At the end of quarter 3, we had 118 new opportunities in our pipeline. We added 46 closed 28 and converted 7 to sales, leading to a net increase of 18% over quarter 2. We had 100 new opportunities in our pipeline at the end of the quarter 2 and 75 in quarter 1, showing a steady increase over time. So far this year, we have converted 18% of our new opportunities to sales. Second, NPD projects, this metric tracks a number of active NPD initiatives. These projects involve the development of entirely new RFID or BLE tags inlays or labels. As of the end of quarter 3, there were 17 active NPD projects, 11 customer-driven and 6 internally driven. 4 of the customer-driven projects target health care applications and 4 utilized BLE technology, which represents the largest share of potential volume and steady state revenue. Our third metric, NPD project completion. This metric captures the number of NPD projects completed within the quarter. In quarter 3, we completed 3 customer-driven projects, 2 of which are moving into commercialization. Both projects were for anti-counterfeiting initiatives in the high-end spirits and wine market, which will be scaling up in 2026. In closing, this was a quarter of steady financial performance and meaningful operational milestones. We met or exceeded guidance, achieved 100% production of tags inlays and labels in Thailand. Advanced key R&D and commercialization initiatives and made continued progress across our Perform, Accelerate and Transform strategy. We reaffirm Identiv's commitment to advancing specialized IoT solutions, expanding our BLE capabilities and fully leveraging the strategic advantages of our Thailand-based production. By continuing to execute against our Perform, Accelerate and Transform strategy, we believe we are well positioned to capture future growth opportunities within the rapidly evolving global IoT market. As we look ahead, our priorities are clear. Complete the Singapore site shutdown by year-end, ensure excellent service to our customers while driving productivity and efficiency in Thailand, execute our key new product development initiatives with excellence, expand our commercial and business development pipeline across high-value segments and position the company for sustained growth and stronger financial performance in 2026 and beyond. I want to take a moment to thank our employees, customers, partners and shareholders for their continued trust and support. We're encouraged by our progress, confident in our strategy, and excited about the opportunities ahead as we continue to lead in the fast-growing RFID and BLE markets. With that, I'd like to open the call for your questions. Operator, please open the question queue. Operator: [Operator Instructions] Our first question comes from Craig Ellis with B. Riley. Craig Ellis: Nice job on the gross margins in the quarter. I wanted to start, though, on the top line. So for the fourth quarter, it looks like we're expecting sales up about 11%. So the question is, as we look across the different vectors of the business, whether it's channel or NPD conversion. What's driving the growth sequentially? And what are some of the gives and takes as we think about tailwinds and headwinds as we exit the year? Kirsten Newquist: Yes. No, thank you. Let's see. So definitely, we are seeing some growth from our existing channel customers. But I do think we're also seeing some uptick that's related to some of our BLE projects that we're seeing some additional traction for in the fourth quarter. So it's a nice combination of both kind of our perform customers as well as some of the accelerate initiatives that we're starting to see some traction quarter-over-quarter. Craig Ellis: And just speaking of BLE, in the prepared remarks, you talked about progress with IFCO and Wiliot. Can we conclude that IFCO is on track for volume shipments in the second half of next year? And Wiliot had previously been talked about as a potential high-volume customer, certainly not the size of IFCO, but high volume, how do we think about what's possible with Wiliot next year? Kirsten Newquist: Yes. Well, to start with the IFCO question. Yes, we are making progress. So product development is well underway. As we mentioned, we shipped out production made prototypes that are now being used in proof of concept in the field. And so that, of course, a lot of learnings will come from that, and we'll take those learnings and use that to continue to optimize the design. So that's progressing well. And in terms of Wiliot, we've been working very hard over the last 6 months to qualify their next-generation product. So that's underway. And this quarter -- and even last quarter, last quarter was beginning in this quarter, we will be shipping those next-generation products to the field. So both of them are nice opportunities. We're excited about both of them, and working really hard to make sure that we can complete the development of the IFCO product and then really helps to support all the different Wiliot customers as they look commercialize the Wiliot solution. Craig Ellis: Great. And if I could sneak one in for Ed. Ed, real nice job by the team with gross margin in the third quarter. With the business getting the benefit of the full Singapore shutdown in the fourth quarter and with higher revenues and with some of that coming from that higher-quality revenue basket that the company has been prioritizing. Can you talk a little bit about what we could expect for gross margins in the fourth quarter? And if there are any headwinds we need to comprehend. Edward Kirnbauer: Thanks, Craig. Yes, our Q3 numbers, we saw significant benefits from the reduction in fixed costs with the discontinuance of our Singapore operations from both an overhead cost perspective and direct labor. Now we expect that to continue. We are -- we will be substantially complete with all shutdown activities in Q4. So we're still working through the remainder there. I don't really expect a full impact on gross margin until we enter Q1 of next year. Craig Ellis: Okay. And then what about other potential benefits such as sales mix and the move to higher margin products as mix goes more towards NPD? Edward Kirnbauer: I'll let Kirsten talk about that. But I do want to say, in addition, to that we have the -- we will continue to improve margins with improving the utilization of our Thailand facility. But as far as mix? Kirsten Newquist: Yes, yes. So I think what we'll see in quarter 4, there's certainly some slight increase in utilization in the Thailand plant that will help. As Ed mentioned, we aren't completely shut down -- have shut down Singapore yet. So we still have some labor that's getting that whole plant now back to its original state and shut down, et cetera. So we have still a little bit of cost of Singapore related costs in quarter 4. In terms of the mix, we definitely have some of our kind of NPV projects starting to ramp. Those are still a little bit in the ramp-up phase. So we still have a little bit of ramp-up costs until we get the full productivity of those projects but we do see kind of a slight increase in mix overall going into quarter 4. Operator: The next question comes from Anthony Stoss with Craig-Hallum. Anthony Stoss: Congrats on the move to Thailand, getting it complete. Kirsten, I'll leave roughly 21 opportunities that converted to customers, when will they show up in the P&L? And if you could just ballpark guess what percentage of those are above your 28% gross margin goal? Kirsten Newquist: Yes. So I think -- I'm not sure where you're getting the 21 conversion, but we did convert -- we have roughly converted 18% year-to-date of our new opportunity pipeline and that represented in the third quarter roughly 10% of our sales. So those will definitely continue to scale and grow as we go into 2026. But yes, no, we were happy to -- year-to-date, we've converted roughly 18% of our total new opportunity pipeline. Anthony Stoss: Roughly what percentage are at your 28% gross margin goal? Kirsten Newquist: Yes. So of the new opportunity of the new opportunities that converted, I think roughly 2/3 of them were on the higher value side, so higher than 30% gross margin and probably 1/3 of them were slightly lower than that. But 2/3 of them were what we would consider on the high-value side. Anthony Stoss: Got it. Good to hear. And then if you could frame the size the new opportunity with Wiliot and also a similar question, what kind of gross margins would you expect to generate? Kirsten Newquist: Yes. So I mean we're not talking about kind of ultimate sales volume potential with the Wiliot, and that's still progressing. Margins, the opportunity is large. We're scaling up the next generation, we definitely anticipate margins to be quite a bit significantly higher than where they were 2 years ago, but we're still working to increase those over the next probably 3 to 4 quarters and definitely higher -- much higher than where they were back in 2023 and early 2024. Anthony Stoss: Got it. And the last question for me, Kirsten, with your background in this industry in the health care side. I know in quarters past, you spoke a lot about your health care opportunities. I didn't hear a lot on this call. Maybe you can just refresh us where you stand and what you think the opportunity set is on the health care side? Kirsten Newquist: Yes. We certainly still see a nice opportunity in health care, and we see kind of the interest from some of the medical device and the pharmaceutical companies and really engaging in evaluating these types of solutions, but these are also longer-term opportunities. So of our current NPD, new product development pipeline, I think roughly 1/3 of them are health care related, they just take longer to get to the commercialization side. So we remain positive about the opportunity space. We remain positive about the projects that we have, but we definitely see some of the ones that are on the logistics side, the consumer product side, getting to market faster than we do with some of the health care projects that we're working on. Operator: We have reached the end of the question-and-answer session, and I will now turn the call over to Kirsten for closing remarks. Kirsten Newquist: Thanks, operator, and thank you all again for joining us today, and we look forward to speaking with you next quarter. Have a good afternoon. Bye-bye. Operator: This concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.
Operator: Good day, and thank you for standing by. Welcome to the Outset Medical Q3 2025 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, Jim Mazzola, Head of Investor Relations. Please go ahead, sir. James Mazzola: Good afternoon, everyone, and welcome to our third quarter 2025 earnings call. Here with me today, as always, are Leslie Trigg, Chair and Chief Executive Officer; and Renee Gaeta, Chief Financial Officer. We issued a news release after the close of market today, which can be found on the Investor pages of outsetmedical.com. This call is being recorded and will be archived on the Investors section of our website. It is our intent that all forward-looking statements made during today's call be protected under the Private Securities Litigation Reform Act of 1995. These statements relate to expectations or predictions of future events are based on our current estimates and various assumptions and involve material risks and uncertainties that could cause actual results or events to materially differ from those anticipated or implied. Outset assumes no obligation to update these statements. For a list and description of the risks and uncertainties associated with our business, please refer to the Risk Factors section of Outset's public filings with the Securities and Exchange Commission, including our latest annual and quarterly reports. Leslie? Thanks, Jim. Good afternoon, everyone, and thank you for joining us. Before we get into the details of the quarter and our revised revenue guidance, I'd like to begin with a few key takeaways. First, while we've made significant progress transforming our sales process and strengthening our team, our third quarter results show that there's still work ahead. Several large opportunities that remain in the final stages of our sales process were forecasted for the third and fourth quarters, and we now expect them to close over the fourth quarter and into 2026. This is a shift in timing. [Technical Difficulty] Can you hear... Operator: We can, sir. If you want to just ask Leslie start with her section, sir, we heard your portion and the line cut out when Leslie started. [Technical Difficulty] Ladies and gentlemen, sorry for the inconvenience and the technical difficulties, but I would now like to let you know that our conference will be resuming. Leslie, please go ahead, ma'am. Leslie Trigg: Thank you. As I say third time is the charm or I hope the third time is the charm. We'll see. Thanks for your patience, everybody, and thanks again for joining us. Before I get into the details of the quarter and our revised revenue guidance, I'd like to begin with a few key takeaways. First, while we've made significant progress transforming our sales process and strengthening our team, our third quarter results show that there's still work ahead. Several large opportunities that remain in the final stages of our sales process were forecasted for the third and fourth quarters, and we now expect them to close over the fourth quarter and into 2026. This is a shift in timing, not in our expectations for closing these significant in-sourcing opportunities with large nationally recognized health systems. As we've shifted towards selling enterprise-wide in-sourcing, we are managing very large opportunities that often span dozens of hospitals within a large health system. For example, an opportunity we had forecasted to close in the third quarter required approvals from the executive leadership of more than a dozen different hospitals after approval at the corporate level. We need to, and I fully expect we will better anticipate these deal dynamics going forward. We continue to make good progress on this particular opportunity, which we expect to realize via multiple orders spanning the remainder of the fourth quarter and into next year. Second, hospital demand continues to grow as a result of the clinical, operational and financial benefits that can be achieved by in-sourcing dialysis with Outset's proven technology, expert know-how and exceptional service. We continue to see clear evidence that acute customer demand for in-sourcing with Tablo is growing, and we expect this will support growth for many years to come. Tablo console sales increased 8% in the third quarter. Our pipeline grew meaningfully over last year, and the average size of our sales opportunities increased more than 20%. The markets we serve are large, and we are changing practice within them. Third, our ability to expand gross margin to our next milestone of 50% comes into clear focus with each subsequent quarter of progress, reaching nearly 40% non-GAAP gross margin in the third quarter and remaining disciplined in expense management provides fuel on our path to profitability. Turning to commercial execution. Our third quarter results fell short of our expectations. Last week, I accepted the resignation of our Head of Sales, who has made the decision to retire. We have a strong sales leadership team in place that will now report to me directly as we conduct a search process, which is already underway. This leadership change may result in some internal disruption in the fourth quarter, which is a factor we felt was prudent to take into account as we considered our approach to guidance for the remainder of the year. What I can assure you is that our team has an unwavering commitment to our customers and the patients they serve, and I expect we will demonstrate that commitment as we move through the fourth quarter and into next year. Taking a closer look at the third quarter, revenue was $29.4 million, which represents 3% growth over the third quarter of last year. Treatment utilization was strong, and we remain disciplined in our pricing across consoles and consumables. We believe ASP strength indicates that customers see Tablo appropriately priced for the value delivered and consistent utilization reinforces that once a unit is installed, it's used and provides a long tail of recurring revenue. We also were pleased with our progress executing against a clear path to cash flow breakeven and then profitability. This path begins with top line growth and gross margin expansion. It includes disciplined spend management, and it shows up in the both significant reduction in cash use we project for 2025 and in the leverage we see to the bottom line. Additionally, our base of clinical, financial and operational evidence supporting the advantages of in-sourcing continues to grow. Last week, there were 3 new data sets presented at the Annual Kidney Week Conference. Among the findings, we presented data from more than 1 million Tablo treatments across approximately 750 facilities that show the clinical effectiveness of in-sourced dialysis in achieving rigorous treatment goals, including up to 24-hour treatments that typically involve the most critically ill patients. One of our customers, AdventHealth, also presented data from the conversion of their Ocala, Florida site to an in-sourced dialysis service line with Tablo. Their results over 5 years showed a 94% reduction in serious cardiac or respiratory events, a sustained reduction in central line bloodstream infections, a very high nurse retention rate with greater than 95% dialysis staff satisfaction and a strong return on investment in the first 2 years of operations. These results support the sentiment we hear from many nurse leaders who believe that in-sourcing with Tablo should be the standard of care at any hospital that provides inpatient dialysis. With that, I'll turn it over to Renee for more detail on the quarter before I provide closing comments. Renee Gaeta: Thank you, Leslie, and good afternoon, everyone. Revenue for the third quarter of $29.4 million consisted of $20.6 million in product revenue, which was slightly ahead of $20.3 million in the prior year period. Product revenue included console sales of $8.3 million and consumable sales of $12.2 million. Service and other revenue of $8.9 million grew 6% from $8.4 million in the prior year period. Recurring revenue from the sale of Tablo consumables and service was $21.1 million, slightly ahead of the third quarter of 2024. Third quarter recurring revenue was dampened by ordering patterns for treatments across our large volume acute care customers that don't always perfectly mirror underlying utilization. For example, during the quarter, data from connected Tablo consoles showed that several of our large acute care customers performed twice as many treatments as they ordered. Thus far, in the fourth quarter, we have seen treatment orders accelerate to better match actual utilization. We expect treatment revenue to normalize next year as we lap the comparison to an unusually strong fourth quarter in 2024, and we see orders from our larger acute care customers catch up with our usage data. We also believe there are steps we can take to help the ordering patterns of our customers more closely align with actual utilization to assist us with better visibility and forecasting. We will be working to make these improvements during 2026. Next, I will walk through our gross margin and operating expenses for the quarter. Please refer to the table in today's earnings release for a reconciliation of GAAP to non-GAAP measures. Non-GAAP gross margin expanded another 350 basis points from last year, reaching 39.9% for the quarter, even with a 130 basis point headwind from the under-absorption of manufacturing overhead. Excluding the manufacturing headwind, we would have seen non-GAAP gross margin above 41% for the first time. Product gross margin increased 250 basis points year-over-year to 45.7% from 43.2% in the third quarter of 2024. Service and other gross margin was 24.8%, more than doubling from the 12.5% we reported in the third quarter of 2024. This progress keeps us right on our path to the next milestone of 50%. We are making progress against our plan to optimize inventory levels and gradually increase production, which further mitigates the gross margin impact of the manufacturing under absorption we have discussed all year. For the full year, I continue to expect a headwind of approximately 150 basis points, which will have a diminishing effect in 2026. Moving to operating expenses. We continue to see the positive impact of actions taken primarily during the second half of 2024 to remove $80 million of annualized spend. For the quarter, non-GAAP operating expenses declined 17% to $22.1 million compared to $26.5 million in the third quarter of 2024. Non-GAAP operating loss was $10.4 million, over 35% below the operating loss of $16.1 million in the prior year period. Non-GAAP net loss was $12.4 million, was 39% lower than $20.2 million in the third quarter of 2024. These measures reflect the positive results of our drive to profitability. Moving to our balance sheet. We ended the quarter with $182 million in cash, cash equivalents, short-term investments and restricted cash. We used approximately $6 million in cash during the quarter, driven by expanding gross margin, lower operating expenses and the optimization of inventory levels. Turning to our guidance for 2025. Considering the factors Leslie and I have covered, we revised our 2025 revenue guidance to a range of $115 million to $120 million from our prior guidance of $122 million to $126 million. We continue to expect gross margin for the full year to be in the high 30% range. With regards to operating expenses, we remain on track in the low $90 million range for 2025. The combination of revenue growth, gross margin expansion and expense discipline means that we continue to expect to use less than $50 of cash in 2025. As a reminder, we used more than $100 million in 2024. So we are trending towards more than a 50% reduction in operating cash use. We continue to believe our cash balances are sufficient through cash flow breakeven and beyond. With that, I'll turn the call back over to Leslie for closing comments. Leslie Trigg: Thanks, Renee. I want to close this and that we operate in 2 large end markets where we remain the clear technology leader. We are now approaching 1,000 acute sites using Tablo on a run rate of 1 million treatments per year, and we expect to close the year having performed more than 3 million cumulative treatments on Tablo systems. We are gaining scale with significant growth runway ahead as our installed base matures. With hundreds of customer master sales and service agreements already in place, our expansion opportunity within our current customer base alone is significant. And on top of that, we continue to convert new customers in this multibillion-dollar acute care market. Gross margin has reached a new high. Our operating expenses have been rightsized, and we are well capitalized with cash that puts us in a strong position to deliver on our long-term mission. And importantly, our technology, in-sourcing expertise and customer experience moat is getting wider and deeper. All of this progress sets a powerful foundation for value creation over the long term. Customer demand for what only Outset can offer continues to grow. Providers, including some of the largest health systems in the country, are realizing the enormous clinical, financial and operational advantages that in-sourcing with Tablo can deliver. The market opportunity remains wide open for us as we continue to improve our execution, which I believe will enable us to make significant progress in 2026 and beyond. And with that, I think we are ready for Q&A. Operator, please open the lines, if you will. Operator: [Operator Instructions] Our first question is going to come from the line of Rick Wise with Stifel. Frederick Wise: A lot of questions. Just maybe -- and I think you make a persuasive case for -- and for the factors behind the quarter performance and the change in guidance and the positive outlook. But maybe come at this from a couple of directions. The guidance, Tim, the $6 million or $7 million at each end of the range, is that 1 order, 3 orders? Is it -- I mean, is that all reflective of that? Or is there extra insurance baked in? And it must be incredibly frustrating. How conservative are you being about this since you have, as you cited, the one, headquarters approval and you're just getting the signatures on the other 12 hospitals. Just -- maybe just talk us through all that, if you would, for starters. Renee Gaeta: So Rick, this is Renee. I'll start sort of on the numbers commentary, and then I'll let Leslie sort of comment on our overall thinking beyond that. But certainly, the shortfall -- the way we look about it is, first of all, just what happened in the quarter, right? And so if you just look at Q3, the primary driver for the shortfall is a large console opportunity slipping from the third quarter into the fourth. And so then we then took a step back. And of course, when we're trying to think about guidance for the remainder of the year, we're looking at all of those deals that were slated for the back half of the year that didn't close in Q3 and then anticipated to close in Q4 and where are we at with those deals. And I would say there are, again, sort of a couple of these larger enterprise deals where we are trying to change the standard of care and therefore, identifying that, just being realistic about where we think that those are at. And I would say factoring in the departure of our Head of Sales that this is a disruptive -- could be a disruptive situation, and we're just being mindful of that when we forecast the remainder of our guidance for the year. Frederick Wise: Got you. No, that's clear. I don't know whether you wanted to say something, Leslie, or shall I go ahead? Leslie Trigg: Yes, please go ahead, Rick, that was well said by Renee. Frederick Wise: Yes, very clear. And I'm going to ask a couple of questions, if I could. But console revenues were better than we were thinking this quarter. Again, I'm not sure how to balance the third quarter performance with the order timing commentary. I mean that was encouraging as was the service. Can you talk more about what you're seeing and just help us better understand the individual moving numbers and what we're looking at and how that fits into this larger narrative you're sharing today. Leslie Trigg: Sure. We -- yes, we did see an increased growth in console revenue over the third quarter of last year, which felt very positive. And at the same time, as you noted, we were very frustrated and not pleased with our own execution in terms of our ability to consistently predict the timing of deal close. We have more work to do there. We can be better, and we will be better. I think it is important to recognize as we look forward that -- and I noted in the prepared remarks that the order size -- the order sizes of our -- the individual deals in our pipeline, it has grown substantially. The average deal size has grown by about 20%. And that has some implications, both sort of both good and challenging. I think great in the sense that we are seeing demand and very high interest, as we noted, from the largest health systems in the country. And we also have to be ready for the challenges of being able to predictably and consistently call the timing of when those deals are going to close. And so while I think we have made a, a really meaningful amount of progress, foundational progress on -- over the last year, implementing a new sales process, new sales tools, hiring to a different sales profile, getting our organization really proficient at selling at the enterprise level. All those changes have taken root, and they really have helped to transform the organization. Our work is not done. And now it's time to refine and continue to improve our ability to control the deal timing and predict time to close. And that's our next step here. Frederick Wise: Got you. And maybe just last for me for now. In looking for a new sales leader, Leslie, what kind of individual are you looking for? What kind of experience? What do you need them to bring? And sort of the unfair part of the question is -- how quickly do you think you can make this happen? And what are the implications of this sales leader transition for '26? Are we more anxious now? Should we be more anxious about either the outlook for '26 or the magnitude of '26 or the way the '26 year could unfold because of this particular issue? Leslie Trigg: Of course. Sure. I'm happy to address all of that. Maybe I'll take it from the top. In terms of the criteria for our search, and I'll emphasize that the search is already underway, and I'll address your question there in a second, Rick, around timing. But the search is underway. I don't think any of the criteria will surprise you, but I'll take you through it. First and foremost is a background in capital equipment. Number two, a background and strong track record in enterprise sales, total conversion of health systems, total standardization of health systems, the ability to convert many hospitals inside a health system to standardization around 1, technology and 1, care delivery model. And someone, I would say, maybe 3 who has the capacity to act very strategically, but at the same time, is extremely immersed in the details, sort of obsessed with the details and involved with the customer and with our sales team every step of the way. And last, I'll say somebody who is an exceptional coach, somebody who is an exceptional leader developer and will ensure that we continue to preserve what's great about Outset and our sales team right now, which is who they are as individuals and in the collective from a culture standpoint. So that's what we're going to have our eye on there, Rick, as we move forward in our search. I will say in terms of impact, let me start by several of our sales VPs were hired prior to Laura joining. So I think it's important to note that we have really good tenure and importantly, experience, both in acute and home in these top roles. So I want to emphasize that. At the same time, we have many other very valuable team members who are serving in important roles and making meaningful contributions that remain very committed to Outset and our mission and the opportunity here. I am very much looking forward to, as I know Renee is as well, is getting even more directly engaged with the team with the sales team now reporting to me and sales operations reporting to Renee and getting even deeper engagement with our customers. That said, as Renee noted, whenever you make a change in sales leadership, you do see the potential for some distraction. What does that all mean at a practical level? It can mean fewer selling hours, right, as everybody sort of digests the change and gets ready for new leadership. So we did feel it was prudent to account for this in our revised guidance. But I am very confident that hiring a new sales leader will take us to the next level and help us get to the state of predictability and consistency around deal close timing that we're looking for. Operator: Our next question comes from the line of Shagun Singh with RBC. Shagun Singh Chadha: Leslie, I just wanted to kind of touch on the visibility and the growth outlook for your business here. In '25, you're delivering about 3% growth off of pretty easy comps last year. You're exiting the year with a 9% year-over-year decline. So firstly, what does that imply for '26? I think consensus is at 10.5% year-over-year growth. And then also, how do you think about the long-term growth of this business? Is this mid-single digit, high single-digit, low double-digit growth business? How should we think about it? It's definitely a large market opportunity, but how do you give investors conviction in the execution? Leslie Trigg: Yes, sure. Well, I'll start by reiterating something that you won't be surprised to hear me say. We haven't obviously provided guidance for any period past 2025. And obviously, we look forward to doing that in the future. I'm glad you touched on what hasn't changed, which is -- demand is growing despite the setback this quarter with deal timing, the deals in the pipeline are progressing and the size of those deals continues to get larger. Our competitive differentiation, our in-sourcing ecosystem and moat is getting wide -- wider and wider and deeper. And the console utilization remains very high and really consistent, which we've always felt is extremely important because utilization is the most direct reflection of the customer experience. It's something we're really proud of, and it continues to feed that foundation of recurring revenue. Obviously, what we saw this quarter is we still have work to do on this final piece of the commercial transformation, but we believe that work can be accelerated under new leadership. And so we do remain as optimistic and confident as ever about our future as we look forward because what we saw in the quarter, I don't want to trivialize it. We're not happy with it. We're not pleased with the execution. But what we saw in the quarter was a shift in timing. We do know we have more work to do on capital sales execution to better anticipate these deal dynamics with these larger and larger deals. But that said, nothing has changed in our market opportunity or technology or know-how and the core customer demand from larger and larger health systems really gives us even more confidence in our ability to grow revenue at differentiated rates in the future. But that being said, I'll maybe transition from my -- sort of my color over to Renee for any other comments. Renee Gaeta: Yes, sure. I think as you think about just reflecting on the update that we've provided with our 2025 guidance and the trim on that number, it's a good starting point for how we should be thinking about 2026. Of course, highlighting all of the factors that we talked about today. So a change in sales leadership is something that you should probably also factor in, in the near term. And I would just sort of reiterate around we aspire to be a higher growth a company that have a higher growth than 5% or 10%, and we believe that we've got the marketplace to do that. We just need to have some execution here on deal timing. The market has not changed and the product has not changed. Shagun Singh Chadha: Got it. And just a clarification question. With respect to your comment on there is work remaining to be done, have the forecasting changes or anything that you're doing in the background, is that completed? Is that behind you? And then you did talk about some ordering patterns and that you would work through that in 2026. So does that mean we should expect '26 to be a transition year in any way, maybe first half, second half? Any color there would be great. Renee Gaeta: Yes, sure. I think it really sort of depends on which revenue stream you're speaking to. I think on the console side, it's clear that deal close and transition of close to shipment is of most importance. That is something that we need to continue to refine. And I would say it's probably the heaviest lift here in front of us. On the treatment side or the consumables, we get a ton of data from our connected Tablo devices and watch that on a monthly, if not a daily basis at this point and notice that utilization remains strong. And so really, it is just a timing issue with regards to the ordering pattern of a few large customers that didn't materialize in Q3. And we have seen that those orders -- Q4 orders are beginning to more closely match utilization. So specific to that order or that area where we absolutely do need to do a bit more refinement. We need to get closer to our customers, more visibility. And we believe that we're going to be able to take those steps to help understand their ordering patterns, their supply chain management, et cetera, so that we can fully have better forecasting on the treatment side. But the consoles are being used. They are high utilization, that's remained consistent, and that's what's given us the strength for the opportunity ahead. Leslie Trigg: I'll just maybe chime in one other thought, Shagun, on the console side because you had asked about, hey, is there sort of more new kind of more foundational changes that are needed in this commercial transformation journey. And I would say no. I mean we have work to do to further cement the impact of all the changes. But look, I mean, a lot of really great foundational work has taken place and taken root from sales process to enterprise selling, the sales rep profile, the sales rep structure. I mean we would not have been able to get this far over the last year without all of it. And now we need to kind of fine-tune focus on predictability and the ability to better forecast the timing of deal close. And there are certainly, suffice it to say, some lessons here from Q3 that we can and will apply to the predictability of deal close going forward, and we are going to get better as a result. But there are no profound or foundational changes incremental to what we've already implemented here over the last year, Shagun. So I just wanted to clarify that as well. Operator: Our next question will come from the line of Marie Thibault with BTIG. Marie Thibault: Just wanted to follow up to understand the consumables sales order timing issue a little bit more closely. Is that just sort of an issue of the hospitals maybe overordered, weren't as good on their own forecasting? I don't recall really hearing of this sort of difference between the treatment patterns and the order pattern happening in the recent past. So I just want to understand that, what's being done to prevent it? And then sort of the timing of that coming back, right? Should we think of Q4 being order and revenue very similar to what we're used to seeing on utilization? Is there some pull forward or making up for some of the missed revenue in Q3? Does that extend into 2026? Just a little more clarity on that. Renee Gaeta: Sure. Marie, happy to help give some more information and highlights here. I think ultimately, this is a limited group of higher volume customers that we saw for Q3, where we ultimately expected in that third month of the quarter for an additional order to be materialized, and that just didn't happen. Each customer is unique, right? They've got their own supply chain policies and practices and managing of their own balance sheets. And so we're going to get closer to that information. We're going to work on that incrementally to providing our customers with all of the information that we have on our side that we're seeing from a forecasting perspective and just having closer collaboration. This is, I would say, a defined set of customers that we need to go after and tackle this work, and we are absolutely committed to doing that for 2026. I think what we're predicting for the back half of this year within our guidance range is more of a normalized what we saw for Q1 and Q2 of this year. We -- to date, for the quarter, we have not seen any significant orders that we were in absence of what happened in Q3. We've seen, again, just very consistent ordering coming through in Q4 matching utilization incrementally to, I think, how customers think about their balance sheets and their policies, right? They're also trying to predict the amount of activity that they're going to have in their hospitals, what does flu season look like? What does -- what do they expect just coming through the door. And so we just need to get closer to that information. I think our sales group has done a great start, and we just need to continue to get closer to customers specific to treatment utilization and treatment buying. Marie Thibault: Okay. Understood. And a follow-up here on the console side and the Head of Sales resignation. When exactly in the quarter did that happen? And is there a way to sort of size up some of the guidance cut? How much of that is coming from sort of the timing issues around console orders closing versus some uncertainty about sales force disruption? Is there a way to kind of parse out what you're assuming in that $6 million guidance cut? Leslie Trigg: Of course, yes. Why don't I can start by addressing your first question. And then, Renee, if you have thoughts on guidance, I'll transition over to you. So Marie, to answer your question, the change in our sales leader occurred after the close of the quarter recently here. And it was actually last week. So it was very recent. And I think look, I'm only reflecting back historically as I've seen these sorts of changes and evolutions in the past that there can be some time in the follow-on quarter where members of the commercial team naturally need time to kind of digest and absorb and that can, not always, but can lead to some distraction and less time available for selling forward. And so we were just trying to be cognizant of that and consider it as a factor, potential factor for the remainder of this year. I don't know if you want to pick up on anything further on the guidance. Renee Gaeta: I would say, Marie, specific to the console activity for third quarter, you might not be surprised in that console activity because it's a capital sale is generally in the third month of the quarter, where we start to see visibility and what orders are going to be coming in. So late in September was that sort of where that activity fell through, similarly on the consumables treatment ordering as well, sort of all late in the third month of the quarter. And as we then look towards what should we update guidance for, for the year, what is our full year forecast, we took that into consideration as well as, as I mentioned, our full set of deal review for what was anticipated now for Q4, where are those at current conversations, getting really close to the sales organization as to the timing of that event. And that plus the resignation of our sales leader, we factored all of those in, and that's how we've come up with the guidance range of $115 million to $120... Operator: Our next question comes from the line of Josh Jennings with TD Cowen. Joshua Jennings: I was hoping to just follow up on the update on the guidance and just make sure that you're not seeing any orders fall out of the pipeline, not seeing any order cancellation. I believe you may have commented on that, but just to circle back on that if you haven't. And then also just on the sales force, have you seen much transition through the quarter? Or is it really just the head of the sales organization that's departed? Is there any other transitions that you guys are considering in the guidance? Sorry that's 2 questions in one, but I have one more. Leslie Trigg: You're efficient, Josh. Thank you. Thanks for asking about the deal flow and sort of the deal progress. Short story long, no. None of the deals that were projected to close in Q3 and in Q4 have dropped out of the pipeline. The deal that we saw as a timing shift around out of Q3 forward specifically remains in the final stages of our sales process. And I think we had given some color to that in the script just to hopefully provide some context about as we get up into these enterprise-wide deals with a dozen or dozens of hospitals, there are more and more stakeholders and a much greater number of approvals as appropriate, it's a big decision on the part of the health system to down-select to one technology and in-source. And so we continue to work through all of those steps. I think our sales team is taking all the right steps to close them. None of these opportunities have fallen out of the pipeline, which is -- which we feel very good about. And then in terms of the change in sales leadership, this is our primary change. As I mentioned, we have several of our sales vice presidents who were hired prior to Laura joining. And so we do have really good tenure experience and commitment at that level. We don't have any other significant changes at this time at the VP level. And we know we have a very, very committed team who believes in the change that this is hard work. We are changing a space that hasn't changed in 40 years and that's never easy to do. But this is a resilient team, and this is a team who has never been more motivated to kind of make a permanent and profound change in this industry, both acute and home for the benefit of -- ultimately the benefit of patients. So we have a team that is ready to execute and ultimately to deliver on our long-term mission and achieve the differentiated growth rates we know are capable in such a large market with a technology leader. Joshua Jennings: And maybe just lastly to circle up on just the home channel and your success there in 3Q and outlook for 4Q. It sounds like the turbulence was in the acute channel. You have these MDO contracts in place with the 5 largest organizations. Anything of note to provide more detail there and then also in the SNF channel? Leslie Trigg: Yes. Sure. Yes. Thanks for the question. On the home side, we always start by talking about the retention rate, which is foundational to growth. And we have seen, again, this past quarter, very stable and high retention rates in the home population even as that home population continues to grow, which is great to see. We have continued to see growth in the home programs of our largest MDO customers, which, again, we see as a direct reflection of their experience and the experience of their patients. We continue to hear from the MDOs that their patients talk about a materially easier training time, materially easier use, day-to-day use and this feeling better effect, which we don't talk about quarter-over-quarter on earnings calls. But this feeling better effect has stayed with us really literally from patient 1, talking about feeling physiologically better on Tablo at home and in the acute setting. And so we feel really good actually about the progress across the home and across these MDO customers and into the SNF opportunity, which we continue to look at as a whole future vector of additional growth in the home channel. Operator: We have a follow-up question from the line of Shagun Singh with RBC. Shagun Singh Chadha: Just a quick follow-up on '26. I think you said 2025 is a good proxy for '26 as of now. I just wanted to make sure I heard that correctly. And then also just anything you can share on Q1? Would you expect some of the orders that didn't come in 2025 or Q4 to come in Q1 '26, so we should expect a stronger Q1 versus the balance of the year? And then I know that this year in '25, you started with a pretty broad range of 1% to 10%. Should we expect a wide range in 2026? Just any directional color on guidance philosophy would be helpful. Renee Gaeta: Sure. I think to clarify on my statement specific to 2025 and the good place to start is I specifically said we reduced 2025 guidance by, let's just calculate it, roughly $7 million. And so that's a good place for you to start when you're thinking about 2026 forward. And I would say, at this point, as we updated, the orders from Q3 and Q4 have now slipped into Q4 and into 2026. At this point, sort of forecasting forward into Q1 and specifically what our guidance range is going to be at that point, I'm just going to reserve the right to talk about that when we've got a full update on 2026 guidance. Operator: And we have a follow-up question from the line of Rick Wise with Stifel. Frederick Wise: Sorry to put you on the spot, folks. But just listening to Shagun's question, I'm sort of thinking, is it impossible? Is it highly improbable that the $7 million or whatever the number is, is it impossible that it falls into the fourth quarter? I mean -- or does it seem highly likely it won't? I mean you see where I'm getting at. Sorry to put you on the spot. Leslie Trigg: No, that's fine, Rick. As we were thinking about how to guide for the remainder of the year and for '25, our philosophy took into account, again, the fact that we are changing the sales leadership and that some of these deals will close in Q4 and some will close in Q1. And so that new range of $115 million to $120 million does not assume that all of the deals, again, if you think about a $7 million reduction, it does not assume that all those come into Q4. It's not to say that it's impossible or it could never happen. But again, given all the factors at play here for the remainder of the year, we felt it was prudent to take this approach. Operator: And I am now showing no further questions, and I would like to hand the conference back over to Leslie Trigg for closing remarks. Leslie Trigg: Okay. Thank you, and thank you again for your patience and bearing with our top technical start there. I do appreciate everybody joining today. And I'd like to close by thanking our customers and our team for the meaningful difference they make every day in the lives of dialysis patients. Thank you all, and have a great evening. Operator: This concludes today's conference call. Thank you for participating, and you may now disconnect. Everyone, have a great evening.
Operator: Good afternoon and thank you for standing by. Welcome to the Ascend Wellness Holdings Third Quarter 2025 Earnings Call. Before proceeding, AWH would like to remind you that the following discussion and presentation contains various forward-looking statements or information. These forward-looking statements or information are subject to risks and uncertainties that may cause actual results to differ from historical or anticipated results. For more information on the risks and uncertainties, please refer to today's earnings release and AWH's SEC and SEDAR filings, including the most recent report on Form 10-K. During today's call, the company will be referring to non-GAAP financial measures such as adjusted EBITDA. Reconciliations to the most directly comparable GAAP measures are in an appendix to the presentation and in the company's earnings release. I'm pleased to introduce the Ascend management team joining us on today's call. We will begin with Sam Brill, Chief Executive Officer and Director, who will discuss the company's strategic priorities and provide an overview of key operational developments from the quarter. After that, Roman Nemchenko, Chief Financial Officer, will review the company's financial results for the period. With that, I'd like to turn the call over to our first speaker, Sam Brill. Sam, please go ahead. Samuel Brill: Thank you, operator. Good afternoon, everyone, and thank you for joining our third quarter 2025 earnings call. As we approach year-end, the industry landscape remains consistent with last quarter. Federal regulatory reform continues to attract attention and speculation, though material progress has been limited. Meanwhile, intensified competition and ongoing sector-wide price compression continue to create challenging market conditions for established operators. However, as we continue to navigate the challenges inherent in our nascent industry, a monumental shift in consumer preferences towards cannabis is reshaping the sector's long-term outlook. Recent research from the 2025 National Cannabis Study by MRI Simmons found that 61% of U.S. adults consider cannabis a healthier choice than alcohol with this number rising to 87% among recent users. Similarly, the 2024 national survey on drug use and health revealed a decade-long decline in rates of recent adult alcohol consumption alongside steady growth in cannabis use within the same period, particularly among 21- to 25-year-olds. These trends signal that cannabis is moving into the mainstream and is being embraced as a preferred consumer product. The gap between the pace of regulatory reform and the strength of consumer demand underscores cannabis' position as one of the fastest-growing categories in the CPG sector, steadily catching up to alcohol and established consumer staple. These evolving consumer trends highlight the industry's resilience even amid ongoing regulatory uncertainty. While we are cautiously optimistic about the prospect of federal reform, we remain focused on the factors within our control, such as delivering high-quality products through our leading brands and offering the best possible experiences for our customers. Our strategic priorities continue to guide our decisions and drive meaningful progress in a complex operating environment. As a reminder, our approach is grounded in 3 core pillars: profitability, sustainability and densification. Our ongoing sustainability initiative has strengthened our balance sheet and delivered measurable cost savings with well over $30 million in annual expenses eliminated ahead of schedule. These savings support margin expansion and improved profitability, contributing to our long-term resilience and operational efficiency, which lay the foundation for sustainable growth. Simultaneously, targeted market densification should help reignite our top line as we strategically expand our footprint in high-profile states and deepen our presence in key markets. These priorities provide the structure and discipline needed to maintain stability and thrive amid evolving macroeconomic and industry-specific headwinds. Turning to our performance. Net revenue for the third quarter was $124.7 million, representing a modest 2% decline from the prior quarter. Ongoing pricing pressures in several states, coupled with heightened discounting and promotional activities from new and existing competitors through the end of the summer, weighed on same-store sales. These trends are consistent with broader industry performance as total U.S. cannabis sales remained relatively flat in Q3 despite numerous new store openings, according to Hoodie Analytics. Notably, Ohio continues to outperform, maintaining its position as the strongest retail market in our portfolio. This strength underscores Ohio's importance as a key growth driver for our business, particularly as other markets face headwinds. We continue to add new stores, although recent regulatory delays have slowed the anticipated pace of openings and expected revenue contribution from new locations. That said, we remain confident in the depth and quality of our store pipeline, which will drive our strategy of premium consumer experiences in prime, high-value retail locations. We believe this will position us for future top-line growth while driving higher-margin vertical sales of our leading brand. Although revenue was softer this quarter, we delivered profitability improvements through effective operational enhancements. Our focused approach mitigated the impact of negative operating leverage supported by ongoing optimization in third-party retail buying and stronger retail margins and disciplined wholesale execution. We remain committed to building high-quality, sustainable revenue streams and expanding margin performance driven by a strengthened product mix in step with consumer demand. As part of our strategic focus to strengthen our position as a leading brand house, we are intentionally reallocating resources towards higher-value branded products -- by channeling wholesale biomass into finished goods with greater margin potential, we are enhancing our overall profitability across our product mix. This purposeful shift positions us to deliver products that resonate with consumers through our expanding portfolio of differentiated brands. In turn, this should enable us to broaden retail distribution through our wholesale channel with higher-margin branded products. These strategic initiatives are already driving results with adjusted gross profit for Q3 reaching $57.8 million, reflecting a 4.6% increase quarter-over-quarter and adjusted gross margin improved by 300 basis points to 46.4%. I'm also pleased to report that adjusted EBITDA grew 8.9% to $31.1 million, and adjusted EBITDA margin expanded to 24.9%, reflecting a 250-basis point improvement quarter-over-quarter. These improvements are a direct result of our disciplined cost management and our commitment to operational excellence, both of which remain core to the business. Turning to liquidity. Operating cash flow was slightly negative this quarter due to the transition to biannual interest payments of $19.1 million. As a result, we anticipate operating cash flow to be lumpy with larger outflows in quarters with interest payments on the indenture, followed by notably positive operating cash flow in the interim quarters. We ended the third quarter with cash of $87.3 million and strengthened our financial foundation by securing a $9.3 million mortgage on our Ohio real estate at a very competitive 8.5% interest rate. It is important to note that we have no major debt maturing until 2029, and we feel good about our financial position and flexibility. This strong foundation enables us to confidently advance our strategic priorities, enhance our operating platform and take advantage of potential acquisition opportunities. Year-to-date, we advanced our densification strategy by adding 7 new stores across our footprint, which will help drive vertical sales and increase fixed asset utilization. Through our hub-and-spoke model, each new location strengthens our operational efficiency and margin profile. Most recently, we received approval from the New Jersey Cannabis Regulatory Commission for our partner store in Little Falls, New Jersey. This location is expected to open by the end of November and marks our inaugural partnership under the state's social equity program. We are 1 of only 6 operators that are eligible for this program, and we look forward to building on this momentum in New Jersey, where we have 5 more social equity partnerships under development. Our national footprint now encompasses 46 locations, including partner stores. We remain on track to reach our goal of 60 total Ascend and partner locations, which was announced at the end of 2024. With 13 additional stores currently active in our pipeline, we expect to achieve this target within the next 12 months. While regulatory approvals and timing remain important variables, our disciplined expansion strategy is centered on strengthening our market presence with New Jersey as a core pillar of our growth plans. By aligning our retail network and CPG platforms under a unified customer-first approach, we are delivering a more consistent brand experience, better meeting evolving consumer expectations and creating long-term value. As announced last quarter, we officially launched our fully integrated digital e-commerce platform in Q3, a major milestone in our CPG and retail optimization efforts. Since launching, customers have embraced the redesigned mobile app and Ascend Pay, our secure cashless payment solution that allows one-click checkout after a single setup. Since Ascend Pay's July launch, transactions through the feature have increased from 2.7% to 6.7% of total sales as of the end of October. The platform delivers a seamless shopping experience powered by AI-driven personalization, deepening engagement and driving both retention and overall spending. Our stores are achieving strong transactional throughput relative to labor hours, a key indicator of operating efficiency. These improvements reinforce our store-level productivity and the effectiveness of our digital shopping platform. Central to this rollout, our reimagined Ascenders Club loyalty program now features 4 tiers, that each offer compelling value. As consumers move up tiers, they can earn exclusive perks such as gifts, launch discounts and early access to new products. The invite-only Legends Club recognizes high-value customers with highly personalized experiences and elevated benefits, further strengthening loyalty within our growing customer base. To date, over 64,000 new Ascenders Club accounts have been created by customers. Looking ahead, we are exploring tier-exclusive menus and continuing to align pricing and assortment strategies with evolving customer behavior to deliver a more relevant and differentiated consumer experience. Our customer-focused digital ecosystem remains at the heart of how we scale. It is designed to deliver seamless and repeatable experiences that feel uniquely personal. As we continue to enhance the platform, we are creating premium interactions at every customer touch point, deepening brand loyalty and driving lasting value across the markets we serve. Our CPG initiatives delivered strong momentum in the third quarter. Our flagship brands-maintained category leadership, and we continue to grow our emerging portfolio. We expanded our Effin' brand across multiple categories in the third quarter. The brand entered the vape category with effects-based 1-gram cartridges now available in Illinois, Massachusetts and New Jersey. This line features 5 SKUs with curated blends of THC and minor cannabinoids designed to address distinct consumer needs. Effin's popular gummy line also grew with 5 new effects-based SKUs formulated to support creativity, relaxation social energy, relief and deep sleep. These new edibles are now available in select markets and have been well-received for their innovative formulas. Meanwhile, our High Wired infused flower brand is gaining strong traction across multiple categories. Following a successful Q2 debut in Illinois and Massachusetts, the brand expanded in New Jersey in Q3. In the quarter, High Wired drove an 82% market share increase in infused products and was a key contributor to our roughly 4% market share gain in the pre-roll category across all 3 states, according to BDSA. In Illinois, infused flower remains a fast-growing segment. High Wired is helping lead that growth with market-leading potencies reaching up to 60% THC. As of the end of Q3, High Wired is the #2 infused brand by sales and units across Illinois, Massachusetts and New Jersey combined. It ranked #3 in Illinois and jumped to #2 in New Jersey despite just launching in September. We recently introduced infused pre-roll 5-pack clips in Illinois, Massachusetts and New Jersey and a bigger 10-pack format is now available in Massachusetts and will roll out in Illinois and New Jersey in the coming weeks. Simply Herb continues to hold the position of the #1 flower brand by both by both sales and units in Massachusetts, supported by strong customer loyalty and accessible pricing. Additionally, the brand achieved an 8.4% increase in market share in New Jersey, driven by continued demand for its flower and vape cartridge offerings. Building on the success of its existing offerings, we introduced a new 1-gram all-in-one disposable in early Q4 across Illinois, Massachusetts and New Jersey. The all-in ones feature distinctive flavors such as Mango Sticky Rice and Fruit Lagoon, generating a strong reception and leveraging the brand equity of Simply Herb. Ozone remains the #1 overall brand in units sold across Illinois, Massachusetts and New Jersey combined. In New Jersey specifically, Ozone leads in both flower and pre-roll unit sales. In Q3, we launched new flavor extensions across cartridges, Pixi disposables and edibles. Ozone Reserve is fueling growth in the concentrates category, gaining over 4% market share during the quarter. Reinforcing its high-quality positioning, Ozone Reserve will soon debut an exclusive King of Queens cola SKU. Additionally, as mentioned on our last call, Ozone is undergoing a comprehensive brand evolution to sharpen its identity and enhance shelf presence, aligning with the visual experience to match the superb quality of the product. In total, we've launched over 420 SKUs year-to-date and are on pace to reach nearly 550 by year-end, a record for our portfolio. In Ohio, we reached a major milestone with the long-awaited introduction of pre-rolls. Early results from the launch of Ozone Reserve and Simply Herb pre-rolls indicate strong demand. With a proven track record in this category, we are preparing to bring more brands and differentiated formats to market as regulations permit. These results highlight the strength of our multi-brand portfolio and our agility in responding to shifting consumer preferences and regulatory developments with speed and precision. Lastly, we are looking forward to debuting our newest brand, Honor Roll, a premium pre-roll collection using proprietary flower blends designed for discerning consumers seeking elevated quality and experience. The brand will launch in Illinois in December, followed by Massachusetts and New Jersey early next year. As competitive pressures continue across the industry, we are actively addressing them through refined pricing strategies, product differentiation and category expansion, which are all designed to protect and grow our leadership position. On the operations side, we continue to invest in targeted technologies that support both product innovation and operational performance to maximize yields and quality. Our network-wide automation rollout remains on track for completion by year-end. This includes automation across flower packing, vape filling, edibles and pre-roll production. This initiative is already delivering measurable results, optimizing labor, boosting throughput and improving efficiency across our production facilities. Our ongoing automation and technology investments are foundational to our profitability and sustainability strategies. They enable us to scale production of our leading high-demand branded products and reduce the cost of goods sold. Together, these improvements support brand innovation and long-term value. With that, I'd like to hand the call over to Roman to discuss our financial performance for the quarter. Roman Nemchenko: Thank you, Sam, and good afternoon, everyone. We're pleased to report that the company generated $124.7 million of revenue and $31.1 million of adjusted EBITDA for the third quarter of 2025. Compared to the prior quarter, total revenue decreased by $2.6 million or 2%, while adjusted EBITDA increased by $2.5 million or 8.7%. Retail sales for the quarter were $83.8 million, which is a $2.7 million or 3% net decline from Q2. The sequential decrease is almost equally driven by declines in the average basket size as well as the transaction volume, mainly in our Illinois and New Jersey markets. The impact of these declines was partially offset by the gradual ramp-up of 5 new stores that were added in the first half of the year. During the quarter, we have seen a variety of competitors offer aggressive discounts aimed at taking share. We value those actions and only respond where appropriate, prioritizing profitability over sales growth. We believe that a disciplined approach to pricing and promotions leads to a more sustainable business model as reflected in our improved adjusted gross profit and adjusted gross profit margins. Wholesale sales for the quarter totaled $41 million. Although flat to Q2, our sales mix improved with finished goods making up a larger portion of the B2B sales channel. Despite the sequential decrease in top line, adjusted EBITDA improved by $2.5 million and adjusted EBITDA margin improved by 250 basis points, finishing the quarter at 25%. We realized margin expansion across both sales channels, leading to an overall 300 basis point improvement in adjusted gross profit margin, while SG&A remained flat. In retail, the largest driver was improvement in vertical sales mix with a larger percentage of total retail sales coming from our own brands. Margin on third-party finished goods also improved as a result of purchasing efficiencies executed over the course of the year and a better product mix offered on our retail menus. In wholesale, improvements in operating cost basis and product mix also drove the margin expansion for the quarter. Moving on to our balance sheet. We closed the third quarter with $87.3 million of cash, representing a sequential decrease of $8 million. This net reduction in cash reflects $2 million of negative operating cash flows, $12.5 million of using investing, partially offset by $6.5 million provided by financing inflows. The negative $2 million of operating cash flows was heavily impacted by the $19.1 million semiannual interest payment in July. As noted earlier, transition from quarterly to biannual interest payments under our 2024 indenture will continue to create variability in our quarterly operating and free cash flows moving forward. $12.5 million of investing outflows include $6.4 million of CapEx and $5.5 million of M&A-related payments. CapEx includes approximately $1.4 million of new store build-out costs and the rest was used to improve our cultivation and manufacturing facilities. We're still expecting our full-year CapEx to finish in the $30 million to $35 million range as planned early in the year. $6.5 million of financing inflows reflects proceeds from the $9.3 million mortgage, offset by the $1.6 million related to debt repayments, $0.6 million in share repurchases and $0.5 million of payments associated with finance leases. As Sam mentioned earlier, our capital position was strengthened with a $9.3 million mortgage financing from a traditional banking partner. This loan is secured against some of our retail real estate assets in Ohio and carries a competitive annual interest rate of 8.5% with maturity in September of 2030. Elsewhere in the balance sheet, finished goods and packaging inventory levels are beginning to reach optimal levels. Receivables have been in a steady state as we continue to actively monitor our credit exposure and collection cycles. The business is current on all payables, and we do not have any large debt maturities coming up for a number of years. We're happy with our overall balance sheet position, and we continue to believe that our current market value does not fully reflect the quality of our assets and strength of our operations. Initiatives such as our buyback program are aimed at addressing this misalignment and returning value to our shareholders. During the quarter, we repurchased and canceled approximately 1 million shares. Since the launch of the buyback initiative last year, we have repurchased and retired approximately 5 million shares at an average price of $0.30 per share. This represents a 7% reduction in the trailing 12-month average shares outstanding as of Q3 and a 9% reduction if you exclude approximately 45 million shares held by directors and officers as disclosed in our most recent proxy. As we look towards the fourth quarter, we expect the top-line performance to remain relatively stable with projected revenue slightly down from Q3. This guidance reflects the promotion-heavy holiday period ahead and continued industry headwinds. However, adjusted EBITDA margin is expected to exceed 23%, along with a much stronger cash flow generation given the timing of the next interest payment in Q1 of next year. Although we're disappointed with delays in new store openings as well as declining transactions and basket size trends, we believe that our new e-commerce platform will provide a strong foundation for customer acquisition and retention in the near future. Our strong cash position should also enable us to execute on a densification strategy and highly accretive acquisitions as we continue to pursue greater scale and sustainability in our core markets. Additionally, our refreshed portfolio of flagship and emerging brands and products should help offset the negative pricing trends. Rebalancing our portfolio towards the higher end of the value spectrum is also expected to present additional opportunities for margin expansion moving into next year. I will now turn the call back to Sam for closing remarks. Samuel Brill: Thank you, Roman. While the market environment remains challenging, our performance this quarter reflects encouraging progress as we execute on our strategic priorities. Our leading brands, strong retail locations and excellent customer service paired with our disciplined execution, continue to drive results. Margin optimization efforts are taking hold, supporting improved profitability despite top-line pressure. With a strengthened product and brand portfolio, expanding retail footprint and growing customer loyalty, we believe that we are well-positioned to build on this momentum. As we head into 2026, our focus remains on driving profitability and sustainable growth, all while delivering exceptional products experiences and long-term value for our customers and shareholders. None of this would be possible without the dedication and hard work of our talented AWH team. They are the key to our ongoing success, and I appreciate all that they do. With that, I'll turn it over to the operator for questions. Operator: [Operator Instructions] Your first question is from Frederico Gomes from ATB Capital Markets. Frederico Yokota Gomes: First question on the decline in retail revenue. I think you mentioned that not only due to price compression, but also lower transaction volumes. Can you talk a little bit more about these lower transaction volumes? Samuel Brill: Sure. It's probably a 50-50 mix between the 2. And it's -- you have additional competition in our key markets. When I look at New Jersey, they added 52 stores this year. And New Jersey now has almost as many stores as Illinois, which also added about 20. So as more stores open up around us, you're going to compete more heavily. And we're not going to stoop to the point where some of these competitors, when they come in, they do 50% of their entire menus. We're not going to play in that game and give product away for free. But we do have to weather that storm of when the competition comes in with prices that cheap. But ultimately, long-term, we believe that we have the right experience and product assortment to win. And I think that speaks more to what we're doing on the e-commerce side to make sure that we tie loyalty to every transaction, understand who our customers are and be able to give them the best experience possible because that's what's going to win in the long term. Frederico Yokota Gomes: Appreciate that. And then second question, just on the regulatory delays that you mentioned to open more stores. Is that specific to any market? I know that probably New Jersey is one of them, but any other markets that you're seeing that, that could maybe get in the way of you opening those stores next year? Samuel Brill: Yes. Well, it's -- New Jersey was specific because it was a new program enacted by -- recently by the legislature there. And the CRC, this was new for them. So we worked with them very carefully to construct a the right terms to be able to move forward. They just approved it, and that opens up the opportunity to really push forward the 5 additional stores that we have in that state. And it's extremely important for us because with the size of cultivation facility in New Jersey and only having 3 stores, we don't have as much going through our stores and having 7 additional stores will shift more product through our stores and create better vertical margins and put us with less exposure to wholesale, which is lower margin by nature. But other states would be just, I would say, is more typical. There's always delays. It's usually on the local level and it's natural for across the board. So I wouldn't say that there's -- it was a CRC specifically that took like significantly more time. We expected to get that store open in Q2, and we'll hopefully get that first store open by the end of this month. Operator: Your next question is from Neal Gilmer from Haywood Securities. Neal Gilmer: I just want to start on the gross margins. Congrats on the strong improvement quarter-over-quarter, and I believe highest level it's been in a few years. I'm also aware that it can fluctuate from quarter-to-quarter. So is there anything sort of onetime in nature that helped improve it to those kinds of levels? And sort of how do you want to sort of set expectations with investors going forward as far as what sort of the -- on an annual basis, not looking at it on a quarterly basis, sort of a range that may be sort of a reasonable target to work for? Samuel Brill: No, I think this is the fruit of all of our hard work to try to get to this point. I mean this was a weakness that we've had and the strategy, I think, is working. There's no single call out that I would say was onetime for this quarter. I think it's more about better discipline with third-party purchases having a better product assortment and the product development that we've done internally. Commercializing 420 new SKUs is a very, very hard thing to do in less than a year. We've done that. And it's very important to always have what the consumers want. And the customer, when they come in, they tell us they always want new. They want new and interesting products, and that's what we're bringing to market. We're bringing -- we're trying to be at the forefront of innovation to bring those new -- we see it in other markets, right? And so we want to hit -- meet the customer where they are and always bring that innovation to our stores. And I think that product mix certainly helps, and it certainly helps with vertical penetration. You're not going to get vertical penetration unless you have products that customers want. And I think we brought that to the table, and it's showing this quarter. Neal Gilmer: Okay. Great. In your prepared remarks, you sort of commented about you noticed more sort of promotional activity and discounting in the summer months. Wondering whether that sort of implies that you're seeing a little bit less of that as you moved into October here at the start of Q4. I'm aware at the end of this month, obviously, that kicks back in with Black Friday and holiday. But how have you sort of seen sort of October play out in some of your markets with respect to that promotional activity? Or has that sort of continued on from the summer? Samuel Brill: Yes. It's -- I would say that it's continued. I haven't seen it slowdown in any material way. It's -- I think, unfortunately, many other players in the market, the only way they understand how to win a customer is through price. And so that's the lever that's pulled most often. It's frustrating because in some cases, it's just -- some of it's irrational. But when it comes to price compression, I mean, if there's an opportunity going forward, the recent talk about actually closing the hemp loophole could be quite meaningful for the entire industry. I mean you have an unregulated market that is somewhere in the neighborhood of $20 billion to $30 billion, which I believe is the same size as the adult-use regulated market. And if that loophole actually gets closed, then that's a whole lot of market share for us to be able to pick up as regulated players. So that could be very interesting if that actually happens. And that might alleviate price compression as new customers come into market wanting products. Operator: Your next question is from Luke Hannan from Canaccord Genuity. Luke Hannan: I want to follow up on Ohio. Sam, you touched on that as being a market that continues to outperform and mentioning it as the strongest retail market in the portfolio. I imagine that's because of the nascency of the adult-use program, but is there anything else to call out there? And can you give us a sense of what maybe same-store sales would look like in that market in particular? Samuel Brill: That market is, as you said, relatively new. It's about -- it's a little over -- I think it's the 1-year anniversary or a little past that. So now you're kind of seeing same-store like on AU level. But it continues to gain traction. It's been pretty like linear growth so far. We do expect 10Bs eventually to get approved and more stores to enter the market, but hopefully at a slower pace as more customers come to the store and it becomes a more mainstream industry for that region. I would say we've had the past -- like we're now able to sell pre-rolls, which is new form factors, and that's gone extremely well. We have 3 different pre-rolls in the market. It's been extremely well received. And so I think that, that's going to help drive some additional growth. And then eventually, I hope that we'll be able to advertise and they'll allow more -- there are still some form factors that are not allowed in that market. So I think as you allow advertisements and more form factors to come into Ohio, that will hopefully create an opportunity for additional growth. Luke Hannan: Okay. And then I want to follow up also. You had some commentary on one of the reasons why you are having better gross margin is there's more discipline when it comes to buying third-party brands. I mean what exactly is it that's underpinning that? What are you doing differently there now versus what you were doing before? Samuel Brill: It's just having a process that is focused on what it is that we're buying, how we're populating our menu in a more disciplined way. So I think it's more about buying those top products in each market and understanding the profitability metrics of those items. I mean, honestly, we didn't have something that was like really set in place to have that discipline. And we have put that in place, and we follow it very carefully. So it's just something that wasn't there. And so putting that -- like that was a key factor in making sure that we're actually aware of the margin profile of the things we put on our menu and focus on the ones that have the highest margins, but also make sure that we have the key leaders in every single market in every single category because we always want to have a menu that's going to have something that the customer wants. Roman Nemchenko: Yes. And just to add to that as well, I mean, it's really assortment. There's a big piece of it, focusing on items that complement our menu buying efficiencies, buying at scale, watching kind of how we run our promotion pricing cycle. So I think a mix -- a combination of efforts when you look at sequential and even year-over-year margin profile on that third-party product, it's a pretty massive improvement. Operator: Your next question is from Andrew Semple from Ventum Financial. Andrew Semple: Congrats on the Q3 results here. I'm going to return back to the retail segment, at least relative to our forecast, that's probably where the biggest surprise was on the sales pressure, but also on the margin outperformance. You've seem to indicate that most of the -- maybe the delta there was mostly related to kind of market pressures, including competition from third-party stores. Just want to unpack if there's anything maybe internally that -- or operationally that happened as well. Was there any shift in the outlet retail strategy that happened during the quarter? And were you seeing any -- maybe some impact at the stores from increasing vertical integration and putting more of your own products on the shelves? Any color on that would be helpful. Samuel Brill: No, I think actually, the vertical, I think penetration has really been driven by the refreshed product portfolio. The products speak for themselves. We're seeing people actually pay higher prices for some of these things because they're new and fresh. I would say that the price compression and competition are sort of -- like you look at the state of Ohio that was essentially flat despite adding 20 new stores, I mean, that means that the pie is getting split up across more units essentially. And so that's what we're facing. And at the same time, you do have irrational players that are willing to give away product essentially for free in some cases in order to steal traffic. And if we went down that route, then we wouldn't have the margins that we have. And we need to stay disciplined and rational and not chase basically very low-value sales. So I think it's just the mindset. We're just not going to play in that sandbox. And that discipline, yes, are we losing some sales as a result? We are, but like we don't have any margin on those sales. So you could see a higher sales number. You'll probably get the same result in terms of EBITDA, maybe even lower. And then you end up lowering the value of everything else that you have on the menu. So it's a losing strategy long term. And so we need to stay disciplined and focus on where we see success and lean into that. Andrew Semple: Great. That's helpful. And then maybe my follow-up would be on the margins. Given the EBITDA margin guidance next quarter, it sounds like you're hoping to sustain at least a decent portion of the quarter-on-quarter margin improvement we saw. Maybe just thinking into like 2026, do you think you can continue to hold on to kind of the higher margin level we saw in the third quarter? Or do you think competitive pressures and pricing pressures can continue to weigh? Samuel Brill: Well, we'll see what happens with the price compression. Again, if the same thing happens, that's a $30 billion opportunity for this industry. So we'll see where that goes. We're going to continue to stay disciplined with our strategy. And look, in Q4, you do have the seasonality. You do have the holiday season. We're cognizant of that. We have to be competitive for the holiday menu. And look, we're anticipating a slightly down quarter-over-quarter revenue. So we're not going to get the same operating leverage because SG&A is going to remain like flattish with lower revenue. So I think that has the bigger impact than the gross margin in terms of where you'll see results next quarter. And then as we look into next year, as our densification strategy continues to take hold, we should be able to grow revenue as we add more stores. And that's the key is to add more stores and then grow revenue and then see what this looks like when we actually have operating leverage. That's the key, get to a place where we have operating leverage. And so hopefully, in 2026, as the densification strategy takes hold, we can actually demonstrate that and see where we go. Operator: There are no further questions at this time. Ladies and gentlemen, this concludes your conference call for today. We thank you for participating and ask that you please disconnect your lines.
Operator: Hello, and thank you for standing by. My name is Tiffany, and I will be your conference operator today. At this time, I would like to welcome everyone to the Quanterix Corporation Q3 2025 Earnings Call. [Operator Instructions] I would now like to turn the call over to Joshua Young, Head of Investor Relations. Joshua, please go ahead. Joshua Young: Thank you, Tiffany. And good afternoon, everybody. With me on today's call are Masoud Toloue, Quanterix's President and CEO; and Vandana Sriram, Quanterix's Chief Financial Officer. Today's call is being recorded, and a replay of the call will be available on the Investors section of our website. During the course of today's presentation, we will make forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act. These forward-looking statements are based on management's beliefs and assumptions as of today, November 10, 2025. We may not actually achieve the plans, intentions or expectations disclosed in our forward-looking statements. Forward-looking statements involve known and unknown risks, uncertainties, assumptions and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. To supplement our financial statements presented on a GAAP basis, we have provided certain non-GAAP financial measures. These non-GAAP measures are used to evaluate our operating performance in a manner that allows for meaningful period-to-period comparison and analysis of trends in our business and our competitors. We believe that such measures are important in comparing current results with other periods results and assessing our operating performance within our industry. Non-GAAP financial information presented herein should be considered in conjunction with and not as a substitute for the financial information presented in accordance with GAAP. Investors are encouraged to review the reconciliation of these non-GAAP measures to the most directly comparable GAAP financial measures set forth in the presentation posted to our website and in the earnings release issued today. Finally, any percentage changes we discuss will be on a year-over-year basis unless otherwise noted. Now I'd like to turn the call over to Masoud Toloue. Masoud? Masoud Toloue: Thank you, Joshua. We're pleased with how we executed in the third quarter, especially given the significant integration work underway and the challenging industry conditions we continue to navigate. This quarter reflects the strong execution, focus and resiliency of the Quanterix team who've continued to deliver results while driving major integration milestones and advancing key strategic initiatives. I'd characterize the third quarter around a few key themes. First, we delivered on our revenue expectations in a demanding environment. Second, we're moving fast and hitting key integration milestones following our acquisition of Akoya. In just over 3 months since the closing of the transaction, we're operating as one company under one common infrastructure and leadership team. We've created meaningful scale, built a stronger foundation for growth and already realized $67 million of the $85 million in synergies we're targeting. Third, we continue to invest for growth. We're making significant investments in Alzheimer's diagnostics and in new assays across our Simoa and Spatial franchises. Year-to-date, we've invested roughly $27 million in R&D, just under 30% of our revenue, which underscores our conviction in the opportunities ahead and the innovation pipeline we're building. And finally, we remain disciplined in managing our cash. We're on track to finish the year with around $120 million in cash and no debt and will be cash flow breakeven in 2026. We generated $40 million in revenue in Q3, a solid start to our first quarter operating the Simoa and Spatial portfolios under one umbrella. While demand across the broader industry remains uneven, we're seeing signs of stabilization, particularly in academic, government and pharma markets. Instrumentation and accelerator revenues were both up sequentially, signaling a gradual recovery that we expect to continue over the next few quarters. Since bringing Simoa and Spatial together, we're already seeing early commercial momentum. Customers are increasingly interested in combining tissue and blood insights, and we're starting to see real cross-selling opportunities between both portfolios. This is expanding our presence across leading pharma and academic customers where multimodal biomarker strategies are becoming an important focus. We're also seeing early activity in oncology where both platform sensitivity and reproducibility are proving valuable in emerging liquid biopsy and tumor profiling applications. These are still early days, but the traction we're seeing reinforces the strategic power of bringing these two technology platforms together and the potential to unlock entirely new growth avenues for Quanterix. The integration itself is progressing very well. We had three clear goals when we started. First, build one Quanterix organization under a unified leadership team; second, continue delivering on our core revenue expectations while positioning to capture tissue to blood-based opportunities; and third, capture meaningful cost synergies from the transaction. We've made substantial progress on all three fronts. We've consolidated four manufacturing and lab service operations into two Quanterix sites. We're fully aligned under one structure. And as I said, we've already implemented $67 million of the $85 million in targeted cost synergies. That's a strong start, and it gives us the flexibility to keep investing in growth while improving profitability. We're also making some of the most significant R&D investments in our history. We're developing our next-gen platform, advancing our Alzheimer's diagnostics programs and expanding our assay portfolio across Simoa and Spatial. We'll soon launch an early access program for Simoa One to give key partners hands-on experience with the technology and gather feedback ahead of a broader launch. We believe this will be an important catalyst for future instrument growth. In Alzheimer's diagnostics, we received a positive pricing recommendation to crosswalk our LucentAD test at $897 with a final approval decision expected later this quarter. We also added 4 diagnostics partners in Asia, extending our reach and making high sensitivity, clinically relevant biomarker testing available to more patients worldwide. Diagnostics-related revenue was $2.4 million in the quarter, another step in the right direction. On the balance sheet, we remain in a strong position. The cost reductions from our integration activities are driving real improvements in cash performance. We expect to exit the year with about $120 million in cash and no debt, supported by improved working capital and a full quarter benefit from the synergies in place. We're building a stronger, more agile and more scalable company. With integration advancing ahead of plan, early commercial synergies taking hold and continued leadership in neurology and diagnostics innovation, we're laying the foundation for sustained growth, profitability and impact. Our progress this quarter is a testament to the dedication and talent of the Quanterix team and the momentum we're building together positions us well for long-term success. Now I'll turn over the call to Vandana. Vandana Sriram: Thank you, Masoud, and good afternoon. As a reminder, we closed Akoya on July 8, so the following results represent a partial quarter of Akoya's operating performance and excludes $600,000 of revenue recognized by Akoya in the first week of July. Total revenue for Q3 was $40.2 million, an increase of 12% year-over-year. From a product perspective, Simoa contributed $23 million, a 36% organic revenue decline and Spatial reported $17.2 million, down 9% year-over-year. Spatial revenues include $1.2 million of noncash revenue from an off-market contract. Instrument revenue was $7.2 million, $2.5 million in Simoa and $4.7 million in Spatial instruments. We placed 16 Simoa and 27 Spatial instruments in the quarter as compared to 13 Simoa instruments in the third quarter of '24. Consumable revenue was $18.8 million, which consisted of $12.3 million in Simoa and $6.5 million in Spatial consumables. Accelerator lab revenue was $8 million, $5 million in Simoa and $3 million in Spatial. Simoa Accelerator lab revenue of $5 million increased sequentially by $1 million in the quarter. Our organic revenue decline was driven by weakness in the U.S. academic and pharmaceutical end markets. For consumables, the number of orders this quarter were consistent year-over-year, and we had a net increase in the number of accelerator projects. But in both cases, the dollars per order or project were lower than last year, driving the decline in revenue. Our customer mix was evenly split between pharma and academia in the quarter. On a pro forma basis, including Spatial revenues, U.S. academic revenue declined approximately 30%, which is tracking to the decline in academic grants. Pharma revenue declined 23% year-over-year. Gross profit and margin were $17.2 million and 42.8%, respectively. Non-GAAP gross profit was $18.5 million and non-GAAP gross margin was 45.9%. The alignment of Akoya's accounting policies to Quanterix resulted in the reallocation of certain Akoya expenses into cost of sales, causing a reduction of approximately 900 basis points to the combined company's gross margins, which was then offset by the favorable impact of synergies. Operating expenses for the quarter were $54.5 million. Included in operating expenses are approximately $15 million of costs related to acquisition, integration, restructuring and purchase accounting and $1.3 million of shipping and handling costs. Non-GAAP operating expenses were $38.2 million, an increase of $7.1 million sequentially. I'd like to comment here on the synergy realization from the Akoya transaction. These synergies are in three areas: firstly, the alignment of the commercial organizations into one; secondly, the integration of the supply chain into one manufacturing operation and one lab; and thirdly, the elimination of duplicate public company costs. Prior to the acquisition, Akoya had a run rate of nearly $20 million of quarterly operating expenses. So the $7.1 million sequential increase in spending for the combined company really highlights the impact of the swift action we've taken to capture cost synergies. Our adjusted EBITDA was a loss of $11.9 million as compares to a loss of $5.5 million in the third quarter of the prior year. We ended the quarter with $138 million of cash, cash equivalents, marketable securities and restricted cash. During the quarter, we paid approximately $126 million in deal-related costs, which includes the debt pay down, shareholder payments, severance and other expenses. We acquired $16.8 million in cash from Akoya. Adjusted cash usage during the quarter was $16.1 million. I will now turn to our updated guidance for the year. We continue to expect to report $130 million to $135 million of revenue for 2025. This assumes approximately $100 million to $105 million of Simoa revenue and implies pro forma revenue of $165 million to $170 million for '25, assuming the 2 companies were combined for the full year. We expect GAAP gross margin to range between 45% and 47% and non-GAAP gross margin to be in the same range. We've tightened the gross margin ranges versus our prior guide as we know more about the effects of integrating Akoya, and these account for the allocation changes I touched upon earlier. None of the allocation changes impact our cash construct. And finally, on to cash. We continue to expect adjusted cash usage of $34 million to $38 million for the full year. We ended the third quarter with $138 million in cash. For the fourth quarter, we expect to pay $10 million for the Emission acquisition, which was completed earlier this year and to use approximately $8 million cash in operations. The sequential cash improvements from $16 million of adjusted cash usage in Q3 is expected to come from incremental synergy realization in the quarter as well as working capital improvements. This keeps us on track to end 2025 with approximately $120 million in cash and with no debt. With that, I will now turn it back over to Masoud. Masoud Toloue: Thank you, Vandana. Operator, let's take some questions. Operator: [Operator Instructions] Your first question comes from the line of Kyle Mikson with Canaccord. Kyle Mikson: So just looking at the core, the Quanterix business, Simoa, consumables were down, I think, 30% or so year-over-year. I know there were a similar number of orders, but there were lower dollars per order. But could you just really kind of dive into that and elaborate on what's happening there competitively and macro-wise and if you're confident that can rebound maybe next year? Masoud Toloue: Kyle, so I'll take that first question. So yes, on the consumable side for Simoa, as you articulated, the order volume was consistent with last year, but the order size was smaller, which explained the entire decline. So what we're seeing on the academic side are project sizes that weren't the same size as they were last year. And so from a customer perspective, we're getting the same number of customers ordering the products, just project sizes is smaller than it was in the prior year. And we're really attributing that to the basic academic grant environment that we're in, which we saw less of in the prior year. And I think we're seeing also the same thing on the Accelerator side. We saw an actual double-digit increase in total number of accelerator projects this quarter how -- but those projects are smaller in scope versus '24. So it's still a sticky business, and we expect those smaller projects to scale in '26. Kyle Mikson: All right. Got it. And then as I look to the 4Q '25 kind of plans to implement more synergies, I think one aspect is building out this one manufacturing team and other is the combining of the lab services. And I feel like that's probably an Accelerator illusion. So [indiscernible] Spatial has already done $3 million in the quarter, which was good to hear. Could you just again kind of walk through what the plan holds for 4Q just because it seems like the last leg of the stretch here, and it seems like it could be more challenging than it seems on the surface. Masoud Toloue: Kyle, I think you're referring to the integration chart that we put together with Simoa and Spatial. And so in Q4, we've already implemented the single manufacturing team and we're now combining lab services. And when we say combining lab services, we're already in under one footprint, and we've combined both labs. We're operating out of a single building. And what we're looking for is some additional synergy opportunities as we get down the final stretch. Those include synergies that we see -- opportunities we see in the lab side. But then also as we enter at the beginning of next year, we'll have the company running on a single ERP with all systems and financials integrated into one organization. So we expect to pick up the remaining part of our synergies as we round out the first quarter. So you mentioned it could be difficult. I think we're ahead of schedule with what we've done so far. I would call the implementation of the operating lines, probably some of the most challenging parts of the integration. And now we're actually see good line of sight towards the end and the full $85 million of synergy. Kyle Mikson: All right. Great. And then finally, just on diagnostics, $2.4 million in revenue in the quarter. As we think about the CLFS later this month or this quarter, how should we think about kind of durable Medicare coverage and the payment rate being close to the $897 and then maybe next year, again, is this like an inflection year for that business for Lucent? Masoud Toloue: Yes, that's a great point. We got the preliminary reimbursement recommendation. We expect to hear back by the end of this quarter on something definitive. And you make a good point. We're now, I think, for the first time, basically sending up providers, taking orders and we didn't have that in the beginning of the year. So we do expect to gain some traction based on this pricing. And this is the beginning part of our diagnostic journey. What we need to do is continue to deliver on our clinical utility studies, which show that a five-marker algorithmic test outperforms single marker tests and gets the value that we've initially been assigned. So we think it's a beginning part of the journey, but a lot more traction in '26 versus '25. Operator: Your next question comes from the line of Dan Brennan with TD Cowen. Daniel Brennan: Congrats on the quarter. Maybe just on the Akoya business, can you just walk through kind of the assumptions kind of in the fourth quarter, I guess, so what you did $17 million this quarter. And it's $30 million for the back half. Is that right? So it's $13 million in the fourth quarter. Is that right? Just kind of -- I know it's simple math, but just walk through what you're assuming in the fourth quarter for Akoya? Vandana Sriram: Yes. So we got off to a really good start on the Akoya transaction and $17 million of revenue in the third quarter. For the fourth quarter, we've modeled a slight step down simply because there's a level of uncertainty in the market still. There's still questions on when funding will really start to flow down. So we've derisked Q4 just given the uncertainty in the market. Now of course, if that were to change, then Spatial would be in a position to take advantage of that. Daniel Brennan: Got it. I mean were there any like one-off issues in the quarter where you had more success maybe getting some orders in, like any pull forwards? Or you just executed really well and kind of got that $17 million in the door? Masoud Toloue: Yes. Again, it was just solid execution from the team. There wasn't anything material or anything pull forward. So it was good traction. And this is the first quarter we had both teams, everything -- all product lines were under the same umbrella. So even in that circumstance, when you combine two organizations, I'd say that our commercial team did a fantastic job. Daniel Brennan: Got it. And then just on the kind of high-level core Quanterix, I mean, I guess the fourth quarter guide assumes kind of flat to down, but -- or at the higher end up, a decent step up. Just kind of you commented in the prepared remarks, you're seeing improvement and improving signs in pharma and academia. Maybe can you just speak to a little bit of like what you're specifically seeing and kind of how you've tried to characterize that in kind of the core Quanterix fourth quarter guide? Masoud Toloue: Yes. So when we look at the full year, you'll notice we haven't changed the full year guide. And I think that's what you see is us being prudent, and we're still under a government shutdown, and there's just some uncertainty. So we want to be realistic and conservative on the fourth quarter. The -- on your commentary along the lines of performance, I think we were very happy with the outcome of Q3 and going into Q4, we saw sequential -- actually, going into Q3, we saw sequential improvement in both Accelerator and Instruments. We saw a greater number of projects coming in through our pharma customers in Accelerator. We hope that, that basically continues going into the fourth quarter and going into 2026. So we can keep that momentum going up. We're excited about '26 even in the pressured environment. Daniel Brennan: Got it. And then maybe one other just in terms of the cross-selling opportunity, which I don't think you guys formally baked in anything, but you made a bunch of comments early in on the prepared remarks about early success there. Just maybe a little bit more on that. And you kind of look ahead, like are you already starting to see some incremental wins? Or how do we think about the cross-selling opportunity? Masoud Toloue: Yes. Early days, it's been positive, Dan. If you take a look at both consumables portfolio, Simoa, it has the #1 liquid biomarker franchise everywhere. And then Spatial, we have the #1 protein tissue biomarker panels versus anything else out there. So -- what we did immediately was that we talked to our neurology customers, and they're interested in understanding where these proteins are moving along the brain and the early signs of Alzheimer's and how this grows from tau tangles to plaque to conditions for a patient. So we're seeing some of our Simoa customers interested in -- and actually making purchases for the Spatial product line. And then on the other side, we're seeing on the oncology or immuno-oncology side, formerly Akoya customers wanting to measure and track these biomarkers in blood. So I'd say we have probably a double-digit list of opportunities that we're tracking and early days have been positive. Daniel Brennan: And sorry, truly final one, like 2026, will we get the first update at JPMorgan? Will it be on the fourth quarter call? Most companies are kind of saying something at this point. Any early read? I don't know if you were -- if you were consensus has landed. Just wondering kind of how we might think about an early look at next year? Masoud Toloue: Yes. We're not going to provide sort of the '26 guidance on this call. We typically do it on our last quarter call for the year. So I think we'd continue to wait there. But I just want to reiterate, we've made -- '25 was a big investment year for the company. We've made a lot of investments in the product and service portfolio. And so we expect to enter '26 with real momentum. Operator: Your next question comes from the line of Puneet Souda with Leerink Partners. Puneet Souda: Just wondering what you're accounting for the government shutdown, if there was any impact that you're thinking about in the fourth quarter? And then just how should we think about -- if the shutdown is over now, how should we think about the recovery or potential for maybe slight upside if the government shutdown was to end and normalcy was to reverse in the academic accounts? Vandana Sriram: Yes. Thanks for the question, Puneet. We did take the government shutdown into account as we set our Q4 guide, and that was the primary reason for the slight deceleration on a quarter-over-quarter basis. Q4 tends to be a tough quarter with all of the holidays, et cetera, and we are about halfway through the quarter already. So we thought it prudent to hold the guide and reflect that impact. We don't think it gets worse than that. If there is any kind of year-end flush or if the government opens up sooner than expected, that would be favorable to us from a revenue perspective. But we do think we've bottomed out the risk here. Puneet Souda: Okay. And then Masoud, a bigger high-level question for you around competition. I mean I hear your comments on academic weakness backdrop is tough. We all know that. But how do you plan to address the significant market competition that is emerging from high sensitivity, high multiplex platform on the discovery side and academic discovery side as well, especially in neurology and pharma and biotech as well, at least on the discovery side, I could say we can -- we're seeing more of that. So just wondering how do you think about that? I appreciate your clinical trial business is not impacted, but how do you compete more aggressively on the discovery side of the business? Masoud Toloue: Yes. Puneet, thanks for the question. So just for clarity, we really compete in the 4 or 5 marker space, which is a lot more of a translational segment. So if a customer is interested in looking at something that's a 20 to 1,000 Plex, we really don't play in that part of the market. Now we acknowledge that, that's a fast-growing segment, and that's great for Quanterix because as discovery accelerates as new markers are identified by customers doing 1,000 or 100 Plex, that really translates, usually 4 or 5 markers come out of those studies, and that translates to more business for Quanterix. So we're very happy with that discovery progress and expect new markers to come into our pipeline. Overall, from a competitive standpoint, I think basically, orders were on the consumable side, flat, which is good -- of good performance given sort of some of this academic shutdown and grant instability. So overall, we're not losing any share. In fact, we're gaining share in some of the diagnostics segments and clinical trial studies as we are able to do 4 markers, 5 markers with our algorithm, we provide unique insights that you just can't get with a single marker. So high plex discovery, good for Quanterix, translational single marker, we've been able to identify a great solution on the clinical side. Puneet Souda: Okay. And then last one for me. Could you remind us what was the volume for you in LucentAD in the quarter? And how should we think about the volume ramp in '26? Wondering if you can provide an update on the commercial end of that? And just related, out of that volume, how should we think about the new pricing applying to what portion of that volume? Masoud Toloue: Yes. So I'll let Vandana answer the question on the revenue. But for diagnostics, we're going to be entering '26 with an established pricing recommendation. It's just something we didn't have this year. And so that positions us really for stronger traction and growth in the segment. And so when you look at current revenue, it's mainly through partner enablement where this is basically customers buying a platform, buying consumables, buying tests and running it through their own LDT laboratories or reference hospitals and reference laboratories. And that really makes up the majority of our diagnostics revenues. We are, as I said on the call, running patient samples and through our own CLIA, LDT lab and that continues to increase, and we expect with established pricing that to, as I said, give us more traction and growth next year. Vandana Sriram: Yes. Maybe just to add to that. We don't disclose our direct testing revenues and volumes just yet. But as they start to get meaningful and material, most likely next year, we'll start to talk about that. The one point I'd make on the enablement side is this is an area where we are starting to see a really steady business now. Over the last several quarters, it's been a little bit lumpy depending on one deal or the other. But we're now reaching a point where our enablement partners are regularly starting to buy consumables, and that is helping to hold the revenue at a fairly steady level each quarter. Year-to-date, we've done about slightly north of $6 million of revenue already versus $6 million for the whole of last year. So we are definitely seeing an uptick in our partners using our single marker test for testing as well. Operator: Your next question comes from the line of Thomas DeBourcy with Nephron Research. Tom DeBourcy: Just first, I was just wondering if you could clarify the difference between, I guess, your cost reductions implemented versus, I guess, cost reductions realized because even if I annualize those, there's a little bit of a gaps. So just can you help me reconcile the two? Vandana Sriram: Yes, sure. I can take that. So the cost reductions annualized is the full year impact of an action that you'll see in the 2026 time frame. What's realized in the quarter is true dollar savings that fell through within the quarter. So for example, if you take some of the leadership changes that happened, 2 months' worth of impact is captured in that $12 million number. But when you look to next year, that would really be a full 12 months' worth of impact. Tom DeBourcy: Understood. And then just, I guess, on the instrument side, obviously, that's been difficult for pretty much everyone in the market. Just in terms of kind of as you look at improvement in the end market, hopefully, in the near future, would you expect to see, I guess, more of a rebound in lab services ahead of potential instrument placements? Or just how are you thinking about how that might materialize? Masoud Toloue: Yes, Tom, we're already seeing increase in numbers of projects through the Accelerator program. Now there's certainly some quarterly ups and downs on services. And as those smaller projects become larger, we expect some smoothing out of that volume. So we're already seeing an uptick on the Accelerator side. It's just a matter of time on -- as these projects become larger or more spending happens, that will improve. And I do expect it to perform that way to see services outperform sort of consumable instrument uptick in the following quarters. Instruments performed well. We obviously want to place those, as you know, across the franchise now both our HD-X, our [ HT ] and the PhenoCycler, they're all high-volume instruments with the capacity to run high volumes of consumables, and we're going to continue our work in making sure we get these placed globally. Operator: Your next question is a follow-up from Kyle Mikson with Canaccord. Kyle Mikson: On the point there about instruments on Simoa One, I just wanted to ask about the time line there because I thought it was supposed to be launched by the end of '25, but it sounds like now there's an early access program for that. So again, how should we think about this product as being like an incremental inorganic source of revenue growth like next year? It sounds like it could be big, but I mean, what's the funnel kind of look like? Like what do you expect for that, Masoud? Masoud Toloue: Yes. We've been working with a handful of customers, and they're certainly excited to get access to higher sensitivity compared to where we are today and the ability to plex even further. And so we're going to be kicking off an early access program before the end of the year, where we're going to give early access, get feedback from our customers before we go and move forward with a full launch. Revenue contribution, we haven't talked about that in '26. We'll provide an update on our next quarter call. Kyle Mikson: All right. Great. And then finally, on the Asia kind of updates for LucentAD, I mean, when does that become material? Like what are the steps of sort of unlocking revenue in overseas internationally for that test, given it's not -- it's obviously unprecedented? Masoud Toloue: Yes. I think what you see in some of the collaborations we've done right now in Southeast Asia, we're basically kind of early stages, but we're already seeing the opportunity in China. We have a couple of partners there. Partners have already received IVD approval for the platform, and they're moving ahead with testing patients and getting the system out to laboratories across the country. So good signs there. The drug is available. Patients want access, and they're using our test. So that's been a decent contributor to our diagnostics revenue. Kyle Mikson: Got it. And finally, you've reduced R&D spending quite a bit. I'm just kind of curious if you aim to sort of increase that next year as you think about, again, the small one, you have other products coming out just to maintain a competitive stance and sort of drive growth as well over time because you have a lot of synergies to be taken out -- or sorry, investments to be taken out the business so you need kind of investment to drive more growth. How do you -- what do you think about that kind of a concept? Vandana Sriram: Yes. So we've been pretty disciplined about the synergies, and we've been careful to make sure that we maintain all of our investment in our growth areas. So R&D is down a hair, but that's mainly because there's some reallocation of some of Akoya's R&D cost into cost of sales. And on the Simoa side, there's been a little bit of pruning and a little bit of housekeeping, but all of our strategic investments are very much intact. So we're still allocating capital to Simoa One as well as diagnostics as well as on assay development, both for Simoa and Spatial. As we go into 2026, some of these programs will come to a natural end. Other programs will start off. But our intention is that we'll continue to balance R&D as a priority item even going into '26. Operator: We have reached the end of our question-and-answer session. Ladies and gentlemen, this concludes today's call. Thank you all for joining. You may now disconnect.
Operator: Greetings, and welcome to the TransAct Technologies Third Quarter 2025 Earnings Call. [Operator Instructions] And as a reminder, this conference is being recorded. It is now my pleasure to introduce Ryan Gardella of Investor Relations. Please go ahead. Ryan Gardella: Thank you. Good afternoon, and welcome to the TransAct Technologies Third Quarter 2025 Earnings Call. Today, we'll be discussing the results announced in our press release issued after market close. Present from the company is CEO, John Dillon and President and CFO, Steve DeMartino. Today's call will include a discussion of the company's key operating strategies, the progress on those initiatives and details on the third quarter financial results. We'll then open the call to participants for questions. As a reminder, this conference call contains statements about future events and expectations, which are forward-looking in nature. Statements on this call may be deemed as forward-looking and actual results may differ materially. For a full list of risks inherent to the business and the company, please refer to the company's SEC filings, including its reports on Form 10-Q and 10-K. TransAct undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances that occur after the call. Today's call and webcast will include non-GAAP financial measures within the meaning of SEC Regulation G. When required, a reconciliation of all non-GAAP financial measures to the most directly comparable financial measures calculated and presented in accordance with GAAP can be found in today's press release as well as on the company website. And with that, I'd like to turn the call over to John. John Dillon: Thanks, Ryan, and good afternoon, everyone, and thank you for joining us today. I'm delighted to report that TransAct delivered another solid quarter in Q3 and continuing momentum we've built throughout 2025. For the quarter, we sold 1,591 BOHA! Terminals urging the year-to-date total of 5,883 units, and that's up 58% from the 3,732 units sold through the first 9 months of 2024. I'm pleased with this increase and believe it shows clear progress against the initiatives. As I mentioned in the past, units sold remain the best indicator of successful sales organization. And when I first joined as CEO, I laid out a clear land and expand strategy, and clearly, that expand motion is working well. The improving results for foodservice technology, we call it FST. That business highlights the effectiveness of the go-to-market improvements, and we believe this trajectory sets us up for ongoing progress and continuing improvement as we move into 2026. Our goal is to build the business with repeatable execution while leaning into the competitive advantages that make TransAct unique and allow us to win in the market. And before diving into the results, let me provide an update on our acquisition of the perpetual license to the BOHA! source code, which we announced back in August. As a reminder, we acquired this royalty-free license for $2.55 million, and it gives us full control to use, host market, sublicense, distribute, copy and modify the code. The implementation and stand-up process have gotten off to a good start and we're encouraged by this by what we will mean to transact in our BOHA! business, greater operational freedom, the ability to enhance the software without constraint and long-term value creation for shareholders and employees. We expect the fully operational and supported version to launch in early 2027 and already see tangible progress towards that goal. Now let me dive into our FST highlights for the quarter. Total FST net sales rose to $4.8 million, up 13% year-over-year, driven by hardware sales and growing recurring revenue, including a partially strong quarter for Labels. Recurring FST revenue climbed to $3.3 million, generating a modest uptick in ARPU to $792 per unit from $700 in the prior year quarter. The main takeaway on the FST side of the business is that we're executing against our priorities and moving the needle meaningfully. We see good momentum, and our GTM changes are yielding positive results. The rollout from prior quarters are progressing as planned and our existing base of approximately 40,000 AccuDate 9700 units plus first-generation BOHA! Terminals remains a ripe opportunity for upgrades and expansion. We're focusing on that opportunity alongside new clients and customer growth. We continue driving conversions and expansions with key customers in the third quarter, including further upgrades across multiple Tier 1 accounts. This includes additional rollouts with our major QSR customer and multiple C-store chains where the Terminal 2 is delivering real value to customers in the form of increased efficiency, reduced weight and ultimately higher margins for them. We added 2 new logos in the quarter, which while lower than we expected, was more than offset by expansion with our existing customer base. In line with this, we're excited about 2 recent customer wins that demonstrate the appeal of our BOHA! platform. First, in September, we secured a rollout with one of the nation's largest sushi franchise operators which has over 2,100 locations. They placed initial orders for 596 units with either Terminal 2 LTE, which means they work with cellular phone lines, in other words, the wireless part. And these units are part of a broader initiative to modernize their network with plans to eventually equip all their locations. The LTE version solves connectivity challenges for franchises in supermarkets or off network environments, eliminating the need for MiFi devices while enabling reliable cloud access and remote updates. This enhances food quality, operational consistency and efficiency, leading to better customer experiences and improved financial margins. As I said in the announcement, this deployment reinforces the real-world value of our BOHA! platform, reflecting its strong ROI, reliability and scalability. Additionally, in October, we added another convenience store chain with 81 locations, our growing BOHA! customer base. They've deployed 73 BOHA! Terminal 2 devices for labeling workstations and adopted BOHA! Temp at 47 food service locations to digitize back-of-the-house operations. This integration streamlines workflows reduces manual processes and support passive compliance while driving higher margins and operational efficiency. Before moving on, I wanted to mention that we're looking at 2 unique revenue opportunities in the boat space. One near-term focus and a second -- on a longer-term visionary path. The first looking at near term, our labels are not only an important contributor to recurring revenue, but a fundamental strength of the business. We have some prospective customers who may be interested in labels only as we are recognized as the best-in-class provider and importantly, cost-effective versus our competitors. Second, from a longer-term visionary perspective, we're evaluating the development and launch of an app store for our BOHA! Terminals to allow existing users to opt into new software purchases right over the hardware. This is a future project. It's on our map to consider now that we own the software. I wanted to point that out, but it is a future project, but I think it's a great idea, and I'm looking forward to making progress on it. For developments that are currently hardware only, this could be a key driver of future software revenue, and we'll update you on these initiatives as we develop in coming quarters. Shifting to casino and gaming, we recorded net sales of $7.1 million in the quarter, which was up 58% from the year prior. However, as everyone has seen in the headlines, domestically, we are seeing some challenges in the demand side of the environment with Las Vegas and broader casino performance facing headwinds. Our domestic OEM partners have indicated slowing demand and 1 large buyer from the first 9 months of 2025 is now in an overstock position while awaiting jurisdictional approvals on new machines. We currently believe this is a macroeconomic situation that we expect will flatten out in coming quarters. While we do expect this to impact our fourth quarter sales, we are hopeful that an improving set of dynamics will emerge as we enter and move through 2026. I'd note that these factors are not being seen internationally, where we had a strong quarter, both sequentially and year-over-year. That said, we are also seeing traction with our Epic TR80 thermal roll printer, which is used in sports betting kiosks, video lottery terminals and other applications. Sales for the first 9 months of 2025 have been modest but we anticipate it being -- becoming a larger contributor in 2026. Before handing the call over to Steve, let me update our financial outlook for 2025. based on third quarter and year-to-date performance, we're maintaining our full year revenue guidance of $50 million to $53 million, reflecting continued FST expansion and casino stability amid the anticipated fourth quarter deceleration. Adjusted EBITDA is expected to range from breakeven to positive $1.5 million for the full year, assuming no major disruptions in supplier or demand. I'd also like to call out that our balance sheet remains strong. We have $20 million in cash on the balance sheet at the end of '23, thanks to inventory sell down and disciplined management, this provides us ample working capital and flexibility to navigate any headwinds while positioning us for enhanced profitability and progress in 2026. To close out, I'm pleased with our third quarter results and the process across the business. We drove significant BOHA! Terminal sales growth year-to-date, achieved higher FST sales with strong recurring contributions while maintaining positive adjusted EBITDA for the third straight quarter. The BOHA! platform is expanding successfully across our core subverticals, including convenience stores, health care, and sushi operators with 2 solid wins in the recent months, and we believe that our casino and gaming business remains solid despite some macro-driven economic softness that we're currently experiencing and expect to continue during the fourth quarter. We continue our focus on execution, operational improvements and fiscal discipline to drive shareholder value. And with that, I'll turn the call over to Steve for a detailed review of the financials. Steve? Steve DeMartino: Thank you, John, and thanks, everyone, for joining us this afternoon. Let's turn to our third quarter results in more detail. Total net sales for the third quarter were $13.2 million, which was down 5% sequentially but up 21% compared to $10.9 million in the prior year period. Sales from our foodservice technology market or FST, for the third quarter were $4.8 million. That was up slightly by 2% sequentially and also up 12% compared to $4.3 million in the prior year period. Our recurring FST revenue, which includes software and service subscriptions as well as consumable label sales for the third quarter were $3.3 million. That was up 10% sequentially and up 13% compared to $2.9 million in the prior year period. Our ARPU for the third quarter of '25 was $792, which was consistent sequentially with Q2, but up 13% year-over-year. Our ARPU for Q3 improved versus prior year as a result of strong growth in label sales. Our casino and gaming sales were $7.1 million, which was down 7% sequentially, but up 58% year-over-year, reflecting the market rebound John discussed. Results were further driven by a new OEM win for use in non-casino charitable gaming applications, combined with normalized buying from just about all our major OEMs. As John mentioned, we expect our fourth quarter casino gaming sales to be sequentially lower due to dynamics in the domestic casino market. POS Automation sales for the third quarter declined sequentially by 32% and also declined 65% from the comparable prior year period to $399,000. As we discussed in the past, we believe that Ithaca 9000 printer sales have now reached a new normalized level based on competitive dynamics. As a result, we expect sales for POS automation to remain in about the $400,000 to $500,000 range per quarter for the foreseeable future. Moving to TransAct Services Group, or TSG. For the third quarter, TSG sales were down 8% year-over-year to $792,000. This decrease was due to lower demand for legacy spare parts on a year-over-year basis, somewhat offset by higher shipping revenue. We expect TSG sales to remain at about this quarterly run rate going forward, consistent with normalized demand. Moving down the income statement now. Our third quarter gross margin was 49.8%, which was up from 48.1% in the prior year period and up 160 basis points sequentially. Our margin performance reflects higher sales as well as a higher mix of casino and gaming sales compared to the prior year, somewhat tempered by modest cost headwinds from overhead inflation and tariffs. We expect gross margin to remain in the mid- to high 40% range for the remainder of '25. I also wanted to give a brief update on our tariff situation. During the third quarter, we implemented a second small price increase to the original tariff surcharge we implemented earlier in '25 on applicable imported items. We did this to cover incrementally higher tariff and air freight charges we're incurring. To date, we haven't experienced any significant pushback from customers and don't believe this has had any negative impact on our sales performance for the quarter. While we don't have any further price increases planned at this time, this is a fluid situation that we'll continue to closely monitor and update you all as needed. Our total operating expenses for the third quarter increased by 8% from the prior year third quarter to $6.5 million. Our engineering and R&D expenses for the third quarter were essentially flat at $1.65 million. Our selling and marketing expenses were up 11% to $2.1 million, and our G&A expenses were up 10% to $2.8 million. The increase in G&A was due largely to higher incentive and share-based compensation expense from our improved financial results. For the third quarter, we had positive operating income of $14,000 or 0.1% of net sales compared to an operating loss of $837,000 or negative 7.7% of net sales in the prior year period. On the bottom line, we recorded net income of $15,000 or 0 or breakeven EPS compared to a net loss of $551,000 or negative $0.06 per share in the year ago period. Our adjusted EBITDA for the quarter remained positive at $669,000, which was up from an adjusted EBITDA loss of $204,000 in the prior year period. Lastly, turning to our balance sheet. As John mentioned, we crossed $20 million in cash and cash equivalents on our balance sheet at the end of the third quarter. This was mostly the result of success from a proactive inventory reduction program we put in place at the beginning of '25. Since the start of the year, through a combination of selling off remaining stock of older products, and more tightly controlling stock of other products, we have been able to reduce our inventory levels by over $4 million. However, we expect inventories to tick up some beginning in the fourth quarter and into '26 as we restock new products in anticipation of growing future demand. In terms of our debt, we continue to maintain $3 million of required minimum borrowings under our $10 million credit facility at the end of the third quarter. And before we close -- before I close, as we discussed last quarter, we believe the purchase of a copy of our source code will largely be a balance sheet event until we go live with our hosted version which we anticipate to occur in early '27. To that end, we expect to capitalize the $3.55 million of consideration to be paid plus any additional costs we incur related to in-housing the source code through the go-live date in early '27. These costs will appear as an intangible asset on our balance sheet. At the go live point, we'll begin to amortize the total amount of those capitalized costs to cost of sales on our income statement over a 5- to 7-year period. As of the end of Q3, we have made the first 2 installment payments totaling $1.35 million and capitalize these costs which appear as an intangible asset on our balance sheet at the end of September. From a cash perspective, we expect to fund the remaining $2.2 million of the $3.55 million purchase price plus any other related costs from the current $20 million of cash on our balance sheet. The remaining $2.2 million is expected to be paid in installments with approximately $200,000 to be paid in the fourth quarter of '25 and the remaining approximately $2 million to be paid during 2026. And with that, I'd like to turn the call over to the operator for questions. Operator? Operator: The first question comes from the line of Jeff Martin with ROTH Capital Partners. Jeff Martin: John, could you give us an update? You mentioned on the last quarter earnings call that in casino gaming you're getting more aggressive and you're incentivizing winning competitive deals. Just curious how that initiative is going? And can you give us an update on the competitive landscape in that market. Maybe he's on mute. Steve DeMartino: Are you on mute? John Dillon: I was on mute. Thanks for the question, Jeff. Let me just say that when you build a sales compensation plan for our sales team, you should assume that they're entirely coin operated. In other words, they're going to do exactly what makes them the most money. And so what we did is we gave them the plan so that if you close a net new customer or if you take a customer away and a competitive win, we're going to get paid more. And without being more specific, let's just say it turned up the heat and it turned up the zeal to go after and win business. All of that said, though, we're very mindful that we have a bit of a duopoly in the marketplace in the sense that we have 1 major competitor and we treat that competitor with respect, but we're not having a race to the bottom. They have their share of the market. We have ours. But when a new casino is going to come online, we're right there, and we like to think that our product is sufficiently better and that our services support and our field team is a better team and they can win head-to-head. So we're focused on that, but the sales team knows for sure that if they're winning new deals, they're going to make more money than if they just sell more product to existing customers. Jeff Martin: Great. And then, Steve, I don't know if you can give us a sense of the magnitude of the fourth quarter impact on casino gaming? Steve DeMartino: Not yet, Jeff. I mean, we're not going to publicly disclose that. But it's -- the demand is -- we're already seeing it, right? So we're into mid-November. So we have 1.5 months past. So we've already seen the weakness in the demand, and we expect it to continue for at least the remainder of the fourth quarter. I think it's temporary. But we don't know when -- I think when we get into '26, I think we should see ourselves start to come out of it. But for right now, it looks like the fourth quarter is going to be weaker than the third quarter. Jeff Martin: Right, right. Okay. And then with respect to the non-charitable gaming markets, are you seeing much on the regulatory front that we can see more states open up as we head into 2026 here? Steve DeMartino: John, do you want to take that or you want me to take it? John Dillon: Yes. No, it's very true. I mean it's an opportunity for state governments to make money without having to raise taxes. It's kind of an interesting thing. It's sort of like reinstate lotteries where some of the money goes to, say, education, some of the money goes to the state that they can pool and use for whatever they want. Some of it goes to the player and some of it goes to either the operator or the venue. And what's interesting about that market is that it's sort of a winner take all. If you are in that business, you would go to a state and you just pick a state and you say to the state government, I think I can do this for you. And I will give -- you give me a contract for the entire state and I'll roll these machines out into places like BFW centers and other places where people like to play these games of chance. And it kind of feels good for the player because the player knows that they're somewhat funding a charitable event. It's very much like selling lottery tickets at the state level. And so when a vendor that resells our machines wins, the state, a particular state, we will get 100% of the business. it's looking pretty interesting in a lot of states, as you know, that they tend to follow suit. If 1 state does it and it works well, they tend to do the same thing. And I think this is an area that we think is going to be a very successful area for TransAct. Jeff Martin: Great. And then my last question is on the new logo side in FST. I think you had 2 new logos last quarter to this quarter. You had commented that, that was below your expectations? Maybe just could you help us frame how the pipeline is and how the new logo sales are developing from a pipeline perspective? Steve DeMartino: Sure. The sales cycles are long and kind of lumpy, especially since we're targeting the largest organizations that are in the food service industry. So it's a little bit like selling enterprise software. However, the 2 new accounts that we landed have potential to deliver a considerable amount of volume over time, and that's part of the land and expand strategy. Pipeline remains basically the same. We have enough coverage to make the numbers that we forecast internally. So I'm okay with that. But we are focused -- continuing to focus on the GTM, the go-to-market and lead generation and those other things that basically speed the top of the funnel and then we're paying a lot of attention to the metrics as that opportunities go through the funnel, what's a yield at each step and where -- what can we do in each 1 of those steps to improve it. So I'm comfortable with the performance. Obviously, more new accounts is better. But the accounts that we landed in this quarter will be accounts that sustain us in the future. And I do focus on that pretty extensively, and we're not taking our eye off that ball. Operator: [Operator Instructions] There are no further questions at this time. I'd like to turn the call back to John Dillon for closing remarks. John Dillon: Thank you very much, all of you for your time and attention. We're happy to talk about the quarterly performance with any of you who feel inclined to schedule a meeting with us. You can get to us through Ryan Gardella who's our IR representative. And again, thank you, and good wishes. Operator: This concludes today's conference. You may disconnect your lines at this time. And thank you for your participation.
Operator: Good afternoon, and welcome to DoubleDown Interactive's Earnings Conference Call for the Third Quarter Ended September 30. My name is Daniel, and I will be your operator this afternoon. Prior to this call, DoubleDown issued its financial results for the third quarter of 2025 in a press release, a copy of which is available in the Investor Relations section of the company's website at www.doubledowninteractive.com. You can find the link to the Investor Relations section at the top of the homepage. Joining us on today's call are DoubleDown's CEO, Mr. In Keuk Kim; and its CFO, Mr. Joe Sigrist. Following their remarks, we will open the call for questions. Before we begin, Joe Jaffoni, the company's Investor Relations adviser, will make a brief introductory statement. Joseph Jaffoni: Thank you, Daniel. Before management begins their formal remarks, we need to remind everyone that some of management's comments today will be forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 as amended and Section 21E of the Securities Act of 1934 as amended, and we hereby claim the protection of the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are statements about future events and include expectations and projections not present or historical facts and can be identified by the use of words such as may, might, will, expect, assume, believe, intend, estimate, continue, should, anticipate or other similar terms. Forward-looking statements include, and are not limited to, those regarding the company's future plans, merger and acquisition strategy, strategic and financial objectives, expected performance and financial outlook. Forward-looking statements are subject to numerous risks and uncertainties that could cause actual results to differ materially and adversely from what the company expects. Therefore, you should exercise caution in interpreting and relying on them. We refer you to DoubleDown's annual report on Form 20-F filed with the SEC on April 21, 2025, and other SEC filings for a more detailed discussion of the risks that could impact future operating results and financial condition. These forward-looking statements are made only as of the date of today's call. The company does not undertake and expressly disclaims any obligation to update or alter the forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. As noted in this afternoon's press release, beginning with the 2024 fourth quarter, DoubleDown is reporting its financial results in accordance with IFRS. As such, the financial results for the 2025 third quarter reflect IFRS as do the comparable period for 2024. Previously, the company reported its financial results in accordance with GAAP accounting standards. The change to IFRS aligns DoubleDown's financial reporting with the financial reporting standards of its controlling shareholder in Korea. During today's call, management will discuss non-IFRS financial measures, which are believed by management to be useful in evaluating the company's operating performance. These measures should not be considered superior to, in isolation or as a substitute for the financial results prepared in accordance with IFRS. A full reconciliation of these measures to the most directly comparable IFRS measure is available in the earnings release issued this afternoon. I'd like to remind everyone that today's call is being recorded and will be made available for replay via a link in the Investor Relations section of DoubleDown's website. It's now my pleasure to turn the call over to DoubleDown's CEO, In Keuk Kim. Please go ahead. In Keuk Kim: Thank you, Joe. Good afternoon, everyone. We are delighted to be with you today to discuss our strong 2025 third quarter results, the continued growth of SuprNation, initial results from our newest acquisition, WOW Games and other recent initiatives intended to enhance shareholder value. Let's start with the quarterly results. This afternoon, we reported third quarter consolidated revenue of $95.8 million and adjusted EBITDA of $37.5 million. Q3 revenue was comprised of $79.6 million generated by Social Casino operations and $16.2 million generated by SuprNation, our iGaming business. In Q3, we again delivered on our key operating priority of driving a high conversion of revenue to profit and cash flow. Cash flow from operations was $33.4 million, bringing our total for the first 9 months of 2025 to $94.1 million, and we are delivering the profit and cash flow results even as we continue to invest in the business and prudently increased marketing spending to acquire new players at SuprNation. Our flagship DoubleDown Casino app continues to be the engine of profit and cash flow generation for the company. Monetization metrics for the third quarter reflected this performance with ARPUDAU at $1.39, up from $1.30 in Q3 of 2024 and from $1.33 in Q2 of 2025. The payer conversion rate also rose during the quarter to 7.8%, up from both Q3 2024 and Q2 2025 levels. We continue to develop innovative enhancements to double-down casino, including with upcoming releases of new slot lobby for our mobile app and a new link Java system. We also remain very focused on the direct-to-consumer Social Casino opportunity, and DTC remains an important part of our growth strategy. In Q3, we increased the percentage of Social Casino revenue generated by DTC purchases as DTC revenue per DoubleDown Casino is now running at over 15%. We are also launching additional product changes within app purchase messaging to drive further growth of DTC revenue as a percentage of our overall Social Casino revenue. This not only helps to improve margins. It also enhances player engagement and retention. Our goal is to execute for with a DTC percentage of Social Casino revenue of over 20%. As I mentioned a moment ago, we are complementing our strong free cash flow profile and financial position through other initiatives intended to build new value per shareholders. Our commitment to building our Social Casino business is highlighted by the July appreciation of WHOW Games a Social Casino operator based in orange in Q3 of we believe the growth potential in international social market is currently greater than in the United States and we are working to leverage this investment for our shareholders. Turning to SuprNation. Q3 revenue of $16.2 million yet again represented the highest quarterly performance of the business since our acquisition in late 2023 and grew $700,000 on a quarterly concert basis. For perspective, SuprNation's quarterly revenue run rate has more than doubled since DoubleDown closed this acquisition as we continue to make steady positive progress on acquiring new players. Our investment in new player acquisition continues to generate strong returns even as the number of new players increased. At this time, we believe that investment in player acquisition could drive further success and growth for SuprNation into 2026. We are also excited to share with you that our team has been working on a new first iGaming casino with a new name to be launched only next year. Our experience in owning and operating SuprNation over the last few quarters and our success with integrating its operations and driving very healthy levels of top line growth reinforce our confidence that we can leverage our core strengths, financial discipline and strong balance sheet to further diversify our company by focusing on new gaming categories and underserved geographies. This priority is reflected in our acquisition of our games and our ongoing search for other acquisition targets that meet our criteria for expanding our operations into new markets while further diversifying our revenue and cash flow sources to create value for shareholders. Now I will turn it over to our CFO, Joe Sigrist, to walk us through our financials before providing my closing remarks. Joe? Joseph A. Sigrist: Thank you, IK, and good afternoon, everyone. As was mentioned earlier, beginning with the fourth quarter of 2024, we are now reporting our financial results in accordance with IFRS. And the comparisons of our 2025 third quarter results to 2024 third quarter results reflect that change for the prior year period under IFRS. The financial statement implications and switching to IFRS from GAAP are generally insignificant with the biggest change being how our leases are treated as some amounts are now included in depreciation and amortization under IFRS. This generally makes our reported adjusted EBITDA slightly higher. To review, revenues for the third quarter of 2025 were $95.8 million, and were comprised of $79.6 million in revenues from our Social Casino business and $16.2 million of revenues from SuprNation. This compares to total company revenues of $83.0 million in the third quarter of 2024. Our Social Casino segment grew nearly 6% from the third quarter of 2024 and nearly 15% sequentially and as we realized initial contributions from the WHOW Games transaction, which further increased our revenue in Europe, specifically in Germany. The initial results from WHOW Games are encouraging, and we are assessing their operations and will include the impact on our Social Casino KPIs when we report our Q4 2025 results. iGaming revenues more than doubled, increasing 108% from the third quarter of 2024. And as IK stated, we're up $700,000 on a quarterly sequential basis. With our focus on leveraging our platform and driving free cash flow, we continue to generate strong monetization in the Social Casino business in Q3. We average revenue per daily active user or ARPDAU at $1.39 in Q3 2025 was up from $1.30 in Q3 2024. Payer conversion rate, which is the percentage of players who pay within the Social Casino apps increased to 7.8% in Q3 2025 compared to 6.8% in Q3 2024. And average monthly revenue per payer continued to be strong at $272 in Q3 2025, which is down just slightly from $281 in the prior year period. Again, this last quarter's results are KPIs that exclude WHOW Games. In the third quarter of 2025, operating expenses were $60.9 million compared to $47.6 million in the third quarter of 2024. The increase is primarily due to increased operating expenses related to SuprNation driven by revenue growth and the inclusion of operating expenses related to the addition of operations from WHOW Games. Sales and marketing expenses for the third quarter of 20 were $15.7 million compared to $9.2 million in the third quarter of 2024. In Q3, we continued to optimize spending to acquire new players for DoubleDown Casino while increasing sales and marketing spending for SuprNation focused on new player acquisition and marketing expenses at WHOW Games were included in our financial results for the first time. Profit, excluding noncontrolling interest for the third quarter of 2025 was $32.8 million or $3.21 per diluted share and $0.66 per ADS compared to profit, excluding noncontrolling interest of $25.0 million or $10.10 per diluted share and $0.51 per ADS in the third quarter of 2024. Adjusted EBITDA for the third quarter of 2025 was $37.5 million compared to $36.5 million for the third quarter of 2024 and $33.3 million for Q2 and 2025. Adjusted EBITDA margin was 39.1% for Q3 2025 as compared to 44.0% in Q3 2024 and 39.5% and in Q2 2025. Net cash flows provided by operating activities in Q3 2025 were $33.4 million compared to $32.1 million in Q3 2024 and $19.7 million in Q2 2025. For the first 9 months of 2025, net cash flows provided by operating activities were $94.1 million. We are on track to yet again generate over $100 million in free cash flow for the full year. And finally, turning to our balance sheet. As of September 30, 2025, and we add $439.2 million in cash, cash equivalents and short-term investments with a net cash position at quarter end of approximately $404 million or approximately $8.14 per ADS. Our current cash position reflects the approximate $65 million payment made in July for the WHOW Games acquisition. Now I will turn the call back to IK for closing remarks. In Keuk Kim: Thank you, Joe. In summary, DoubleDown Interactive is delivering strong cash flow from its 2 meaningful and exciting businesses: Social Casino and iGaming. Our strong balance sheet and cash position allow us to continue to make disciplined investments in each of our businesses while continually evaluating new opportunities to enhance the growth of each. This includes investments through both organic means as we leverage the strength of our talented teams and through our evaluation of potential future acquisitions. We are now happy to take your questions. Daniel? Operator: Our first question comes from Aaron Lee with Macquarie. Aaron Lee: Maybe to start with SuprNation. So you've driven really nice growth out of that asset over the last couple of quarters, another over 100% growth in 3Q. Maybe share your thoughts on how you're thinking about the balance between investing for growth versus profitability from here? Joseph A. Sigrist: Yes. Thanks, Aaron. The reality is that we really believe that -- have believed that there was capacity in SuprNation's business to add users profitably. And as you know, we measure not only in our iGaming business, but in the Social Casino business as well, the ROI of all the cohorts that we acquired when we market to acquire new players. And the good news is adding new players to the SuprNation business continues to meet our targets for return on ad spend. As we go forward, we'll just continue to monitor that. And when -- and I think we've talked before that essentially our payback period for acquiring new users about 6 months. And as long as we're achieving or hopefully even beating that threshold, we'll continue to add players. But if not, we'll dial it back and spend less to acquire new players. Aaron Lee: Got you. Okay. That's helpful. And then on WOW Games, now that you've had some more time with that business and the team there, has anything changed in terms of how you think about the drivers of growth or the ramp time line for that acquisition? Joseph A. Sigrist: Yes. It seems like it's been a long time, but it was just July when we closed the deal, and there's still work for us to do to really dig in. But so far, so good. We are, as I think I can mentioned excited about the growth in the European Social Casino sector, and we want to lean into that as much as we can. Again, just as I mentioned with the SuprNation, it's all about the road, the return on ad spend as we acquire new players, and so that's first and foremost on our mind. And then secondly, it's about product, product development. So slot games, how we could help them relative to potentially even bringing some of the slot games that we have in the other parts of our Social Casino business into their apps and how we could help on the technology side and meta features. And so that's kind of a next level evaluation that we're making as we're always looking to improve the product as well. Operator: Our next question comes from Eric Handler with ROTH Capital. Eric Handler: Just want to follow up that last question with WHOW. I mean, now that you've had up for 2.5 months, I'm sort of wondering if you could maybe lay out the road map over the next 6 months of what you hope to achieve? Joseph A. Sigrist: Yes. I think as I mentioned to Aaron, we're looking really in the short term to determine how acquiring players can support the business. with the product that they have because that's the quickest and perhaps simplest way to affect the business in the short term. And then secondarily, we want to look at the product and some of the features and technology that we are interested in potentially leveraging from our traditional Social Casino business. And then I think, thirdly, one of the things that they've done a really good job on is kind of a build for third-party casino apps. So I think as we've discussed, they have a casino that they operate that is 100% supported with mature box, and they work with mature directly the care being a German slot machine manufacturer in that app. And so being able to lean into that and in fact, perhaps more with that with others is something that we're also looking at leveraging. Eric Handler: That's helpful. And then as a follow-up, fully recognizing that there's a big difference between being shown acquisitions and being some quality acquisitions. I wonder if you could talk a little bit about your M&A pipeline at this point on what you're seeing? Joseph A. Sigrist: Yes. I think the M&A pipeline continues to be busy. I mean it's interesting, obviously, that there are there are gaming assets that are ones that we all know about or that have been around for a while that are potential opportunities for us to integrate into our business. So that's on one end of the spectrum, and we continue to look at some of those. And then there are those that are newcomers, if you will. And that's across the board in all kinds of different genres of games, and we look at those. And so we're open for both ends of the spectrum, and we're looking at opportunities, again, both for games that we all know about and are familiar with that could be for sale as well as those that are, as I said, up in comes. Operator: Our next question comes from Josh Nichols with B. Riley. Josh Nichols: Good to see the progress. Just real quick, it looks like we're seeing potentially some stabilization in the Social Casino business. I didn't hear if you broke it out. What was the revenue contribution from WHOW for the quarter? Joseph A. Sigrist: Yes. We haven't broken it out, and we're not going to separate it since it's all integrated with our segment reporting for Social Casino, but it was consistent with what we had previously said was essentially the run rate of their business. So there was no real surprise there from Laos operations in the summer. Josh Nichols: Understood. And then there's been a lot of action that's being taken again like stat comps. You've seen things in California, there's a ban that's going into effect for overall. I'm curious historically, that had been pushing user acquisition costs higher. You're also seeing some potential action from Google on advertising. Has that started to alleviate some of the player acquisition costs? And is there an opportunity for you guys to deploy some additional capital to start growing that user base? Or are you not seeing much of an effect yet? Joseph A. Sigrist: Yes. No, I appreciate you mentioning what's going on in Sweepstakes category. It's obviously very interesting. I think it's a little early for it to have. And you're right, by the way, we've said it's probably the biggest impact on us that we can have perceived with the sweepstakes business is upward pressure on CPIs on advertising costs. I think it's a little early given that California's ban just kicked in and some of the other states actions are early. But it's a little too soon to determine if that's going to have an impact on lowering cost. But I think all in all, none of this can hurt and we're obviously glad to see it. Operator: Our next question comes from David Bain with Texas Capital. David Bain: I guess I would first ask about direct-to-consumer. I know you're at 5% in 2Q and you're over that in 3Q. And I, you mentioned 20% is the goal. And if that's the case, I was wondering if you could put a time frame on that? And then also, is that sort of like an interim goal? I'm just looking at the industry leader. Was it 31% in 3Q and they want to get to 40% over 2 years? So I'm just kind of wondering what your overall thought process is with D2C. Joseph A. Sigrist: Well, let me answer the target question. And if IK, if you want to talk a little bit about what we're doing to even accelerate our results in D2C, I'll let you do that. But yes, our -- and I think IK mentioned that our goal is to exit Q4, exit this quarter with a run rate of over 20% D2C. So we really think that it's possible to achieve something considerably higher than what we did over the last 6 months. And we've been doing some product work and we've been afforded. I think, based on what's happening in the industry as a whole, the ability to be more aggressive in messaging and in product and that kind of thing. IK, do you want to talk a little bit about what we're doing... In Keuk Kim: Yes, for the broader D2C co-system especially in terms of providing more flexibility in how developers can communicate with transact direct with users, the recent direction of this platform is very helpful. At DDI, we've already been investing in our own D2C capabilities particularly through our own channels and direct CRM strategy. We engage players more freely and cost effectively outside of traditional platform constraints which opens up potential for margin expansion and improved lifetime value. We view this as a long-term tailwind for our business and for the industry at large. David Bain: Okay. No, that's helpful. So it sounds like there's no cap on that 20% either. This is by the end of the year, and you'll reassess from there. was my take anyway. Well, maybe switching gears to SuprNation unless you had something to add on that. I'll go to SuprNation. So I believe on the last call, you cited the potential entry into new regions within Europe and into Canada. Maybe if you could provide us any sort of time frames or ideas or kind of updates with that? And then IT, you also mentioned a new brand, I believe, by the end of the year, if you could expand on that as well would be helpful. In Keuk Kim: Yes. Let me start first about the first front. From a marketing payback perspective, as Joe mentioned, our current operation consistently with ROI targets, making these investments accretive rather than dilutive to profitability for the future. based on our experience, new brands help drive scalability and better ROI and scaling remains the priority in the iGaming business looking at larger market peers, we believe that once we ship a sufficient scale, then portion, we can start to deliver a profit margin of over to it. to drive further revenue growth, we are about to launch our first brand Las Vegas sites in addition to our existing 3 long-rate apps. This initiative are expected to enhance retention and bring additional efficiencies within the SuprNation ecosystem. Hope this helps. David Bain: Definitely helpful. And any update on geographic expansion? Joseph A. Sigrist: Dave, I'd say that we still feel like there's low-hanging fruit relative to the markets we're already serving, given how low our book share is. And so we're continuing to evaluate new markets. It's a more long-term thing. And we have room to run with our existing markets. So I wouldn't put a time frame on expansion, but we're always continue to evaluate that. Operator: Thank you. This concludes our question-and-answer session and today's conference call. Thank you for participating. You may now disconnect.
Operator: Welcome to Comtech Telecommunications Corp.'s Conference Call for the Fourth Quarter and Full Year of Fiscal 2025. As a reminder, this conference call is being recorded. I would now like to turn the call over to Maria Ceriello, Senior Director of FP&I of Comtech. Please go ahead, Maria. Maria Ceriello: Thank you, operator, and thanks, everyone, for joining us today. I'm here with Ken Traub, Comtech's Chairman, President and CEO; and Mike Bondi, our CFO. After Ken and Mike's remarks, they will be available for questions together with Daniel Gizinski, President of our Satellite and Space Communications segment; and Jeff Robertson, President of Allerium, formerly known as the Terrestrial and Wireless segment. Before we get started, please note we have a detailed discussion of the quarter and year in the press release and 10-K we issued this afternoon, which is available on our website as well as the SEC's website. Certain information presented in this call will include, but not be limited to, information relating to the future performance and financial condition of the company, the company's plans, objectives and business outlook and the planned objectives and business outlook of the company's management. The company's assumptions regarding such performance, business outlook and plans are forward-looking in nature and always involve significant risks and uncertainties. Actual results could differ materially from such forward-looking information. Any forward-looking statements are qualified in their entirety by cautionary statements contained in the company's SEC filings. With that, I will turn it over to Ken. Ken? Kenneth Traub: Thank you, Maria, and good afternoon, everyone. I appreciate you joining us today. I am proud to report how much stronger Comtech is today, financially, operationally and strategically. This is the result of the ongoing successful execution of the transformation initiatives that we announced when I started as CEO in January 2025. As a testament to our improving financial health, the company no longer has uncertainties regarding its ability to continue as a going concern, and this disclosure has been removed from our financial statements. We have executed a successful turnaround of our Satellite and Space business, which is now revitalized and our Allerium business, formerly known as terrestrial and wireless has continued to deepen our presence in the public safety market while securing long-term customer partnerships. We expect the company's significantly improved operational and financial health to be reassuring to our current and prospective customers, vendors, employees, investors and partners. The early success of our transformation initiatives and the positive trajectory of the business are evident across numerous key metrics. Let me provide some examples. First, operating cash flow. We reported $11.4 million of positive operating cash flow in the fourth quarter, which follows the $2.3 million of positive operating cash flow in the third quarter. These are the first quarters of positive operating cash flow for Comtech since fiscal 2023. These operating cash flow numbers are after taking into account the payment of cash interest expense and fees on our debt as well as restructuring activities, including payments to resolve legacy issues we inherited from former management. The significant improvement in operating cash flow is the result of a cultural shift, emphasizing optimizing cash flow, improved process disciplines, better working capital management as well as the timing of and progress of completion on contracts that enabled us to bill customers and collect accounts receivable. Second, liquidity. We concluded the fiscal year with $47 million of liquidity. That includes qualified cash as well as undrawn availability under our revolving credit facility. This is the highest level of liquidity that Comtech has had in recent history compares to $27 million disclosed as recently as March 2025. This is the result of the generation of operating cash flow that I just described as well as improved terms with our lenders. The increased liquidity gives us comfort to continue executing on our improvement initiatives as well as the ammunition to prudently invest in building sustainable long-term value. Third, accounts payable to vendors. The cash flow and liquidity improvements that I just discussed were achieved while we also paid accounts payable down to the lowest level Comtech has had in years. We finished the fiscal year with accounts payable of just $26 million, which is down from $43 million as of January 31. We are now building stronger and healthier relationships with key vendors and partners. Fourth, revenue increase and improved mix. Quarterly revenue increased 13% from the first quarter to the fourth quarter of fiscal 2025 despite the anticipated wind down of certain legacy contracts, a deliberate shift away from a number of low-margin contracts and the elimination of other revenue contracts that had unsatisfactory operating margins or excessive demands on working capital. This increase in quarterly net sales reflects improvements in both of our operating segments, including a shift back to higher rate production orders in our satellite ground infrastructure solutions product line, which is expected to produce a more favorable revenue mix going forward. Fifth, improved gross margins. Gross margins improved from 12.5% in the first quarter to 31.2% in the fourth quarter of fiscal 2025. Gross margins are improving as a result of the revenue discipline I just described, resulting in a more favorable revenue mix as well as the implementation of operational efficiencies and cost savings measures. Sixth, we've improved the bottom line. Our adjusted EBITDA, a non-GAAP measure, improved sequentially in each quarter of the year. We went from a negative $30.8 million in the first quarter to positive $2.9 million in the second quarter to $12.6 million in the third quarter and $13.3 million in the fourth quarter. Our adjusted EBITDA gains stem from our improved gross margins as well as further savings in corporate overhead and operating expenses. Adjusted EBITDA is now more closely correlated with operating cash flows than it has been in the past. Seventh, improved credit facility terms. As previously reported, we succeeded in negotiating significantly improved terms with Comtech's creditors. These negotiations were facilitated by both the operational and financial improvements I just discussed as well as a relationship of trust and a spirit of cooperation that we've developed with our lenders. As a result, Comtech now has significantly enhanced financial flexibility. Eighth, progress in repeating -- in remediating our material weaknesses. We have been implementing improved control systems and working with external experts to remediate the previously disclosed material weaknesses in the company's internal controls. While we have more to do in this regard, we have made significant progress. The revised engineering estimates that we made recently on a development project with an international customer are manifestations of this progress. While I was disappointed that the revisions delayed our report on all of the accomplishments that we are discussing today, I am also encouraged that our enhanced bottoms-up analysis have led to an overall improvement in our processes and quality of our reports. The metrics that I just described highlight the significant improvements and achievements in the second half of fiscal 2025. However, we recognize that we still have legacy challenges to address and fluctuations in our quarterly results are inevitable. Now I would like to share with you just some of the initiatives that made these achievements possible. First, improved corporate governance. I have always believed that strong corporate governance and a healthy dynamic both within the Board of Directors and between the Board and executive management is fundamental to corporate success. The corporate Board of Comtech is well informed and is working diligently, collaboratively and constructively in their evaluation and support of corporate priorities. This strong governance and alignment between the Board and management has enabled a focused execution of the transformation initiatives that I will describe in more detail. Secondly, strengthened executive leadership. The Comtech leadership team is now strong and capable, both at the corporate level and the operating segment level. Our executives are rising to the occasion and performing at a high level as they are aligned around key priorities and core values. We have also recruited additional key members of the team that are helping to drive continuous improvement. I will discuss this in more detail when I move into the discussion of developments at the segment level later in this call. The strengthened executive leadership team has fostered an improved dynamic and is energized by the positive momentum resulting from the successful execution of our transformation initiatives. Third is accountability. We've empowered key contributors throughout this organization while implementing new disciplines to foster accountability. For example, we've initiated a revised delegations of authority program that clearly defines lines of responsibility, authority and accountability. We've also improved the systems we use to manage, approve and monitor critical activities, including capital expenditures, research and development initiatives, purchasing, contract execution, employee hiring and incentives. Fourth, cash flow optimization. I've seen companies in my career use various metrics as their primary focus. such as revenue growth, revenue per employee, adjusted EBITDA and others. These metrics can get companies into trouble, particularly if they are misaligned with cash flow or inconsistent with either short- or long-term shareholder equity value maximization. The principle that we're currently focusing on here at Comtech is optimizing for cash flow, not revenue. Our return to positive cash flow enables us to strengthen our short- and long-term financial, operational and strategic positions. Fifth, improving working capital management. A key component of cash optimization is alignment of the organization around understanding and managing the balance sheet and particularly working capital. Our strengthened financial position, coupled with enhanced disciplines will anchor further initiatives to optimize working capital management as a source of cash for further improvements in our capital structure as well as investments in value-accretive opportunities. Sixth, strong customer focus and support. We are dedicated to meeting and exceeding our customers' current and future needs and expectations. We've already seen how our efforts are enhancing customer satisfaction. Our team is focused, not only providing excellent customer service and support today, but we're also developing innovative next-generation solutions to address the growing needs of our customers in each segment of our business. Seventh, enhanced operational efficiency. We have been implementing new processes to improve reliability, quality, on-time delivery and capacity utilization as well as streamlining product lines and operations to reduce complexity and cost. And the eighth initiative is a reduced cost structure. In addition to savings from operational efficiencies, we are identifying opportunities to lower the cost structure with less internal labor and reduce use of external consultants and expensive professional service firms. And finally, is a revitalized corporate culture. The final major initiative I would like to mention is centered around corporate culture. I say this for last because it is the most important. We've been reinvigorating the corporate culture here at Comtech by emphasizing transparency, empowerment and accountability. On a personal note, it is particularly gratifying for me to see how our employees are increasingly taking pride in contributing to our success, which has also enhanced morale, retention and performance. The initiatives I just described not only helped to drive Comtech's significantly improved financial performance, but also enabled us to improve relationships with current and prospective employees, customers, vendors and creditors. This leads to a flywheel effect, in my opinion, in which improved relationships create a healthier dynamic for the business going forward and ultimately, further improvements in operational and financial performance. Now I will provide some commentary on our business units. Under Daniel Gizinski's leadership, our Satellite and Space Communications business has been executing a successful turnaround. In fiscal 2024 and early in fiscal 2025, Comtech's Satellite and Space business performed poorly and was a drain on the company's financial results and liquidity. Daniel was promoted to President of the business in the second quarter of fiscal 2025 has done a very impressive job of identifying the issues that gave rise to the previous underperformance, executing a remediation plan to address those issues and positioning the Satellite and Space segment for margin improvement, cash flow generation and long-term growth. As Daniel took the reins of the Satellite and Space business, he and the team identified several factors that contributed to the prior underperformance of that segment. Let me explain 6 of those factors. First, the company suffered from a failure to respond effectively to industry trends. Secondly, the company had a product portfolio that included some aging and obsolete products. Third, we had poor cost management. Fourth, the company had poor procurement approval disciplines and related excessive inventory buildup. Fifth, the company had poorly negotiated contractual terms. And sixth, we had a lack of skilled program managers, resulting in poor change control management. Over the course of the past year, Daniel and our leadership team addressed these issues with decisive actions, which yielded immediate improvements and have positioned the business for long-term success. Let me explain some of these actions. First, we recruited a strong segment leadership team, specifically Steve Black as Chief Operating Officer; Brent Norman as Chief Financial Officer; Mark Dale as Chief Technology Officer; Bob Pescatore as General Manager as well as other key contributors under Daniel's direction. Second, we developed a new product road map, featuring differentiated technologies aligned with customer needs. Third, we've eliminated over 50% of slow-moving products, which enabled us to have a tighter focus on a differentiated value-driven product line. Fourth, we restored operational discipline. Fifth, we implemented productivity enhancements and cost reduction initiatives. Sixth, we implemented a disciplined approach to procurement and inventory management. Seventh, we improved customer relations and contractual terms. And finally, we established best practices in program management, showing improved reliability and performance. These initiatives are already having a significant impact. For instance, in the fourth quarter of fiscal 2025, Satellite and Space generated over $20 million of operating cash flow. This compares to a negative cash flow of $1 million in the first quarter of fiscal 2025 and approximately $23 million of negative cash flow in fiscal 2024. The significant improvement in Satellite and Space cash flow in the fourth quarter reflects the early impact of the operational improvements I just described. Additionally, in the fourth quarter, Satellite and Space benefited from earlier-than-anticipated orders and related cash collections. Now that these improvements have been implemented, the Satellite and Space business is better positioned to pursue growth opportunities in our markets. We are prepared to meet increasing demand for technology to support 5G nonterrestrial networks and sovereign defense networks with the launch of our next-generation platforms. We are already seeing traction from the launch of our digital common ground platform, including additional early production prototype order agreements. In the fourth quarter, the Satellite and Space business completed initial deliveries of our small form factor troposcatter system, referred to as our Multipath Radio or MPR, to an international Air Force customer. We believe the small form factor troposcatter capabilities align closely with the modern defense demands, and we believe there will be increasing demand for the unique features and capabilities we offer. When you hear me discuss shifting our focus toward opportunities in which we can provide a more differentiated solution at higher margins, MPR is one such type of opportunity. During fiscal 2025, we began delivery of initial production units to our prime contractor support of a next-generation satellite modem contract and we'll be transitioning into full production during fiscal 2026 as the program transitions from a multiyear development period into a production-oriented stage. A second next-generation product with the same prime contractor has also significantly progressed in development and is also expected to begin production deliveries in fiscal 2026. This is an important milestone as it signifies the long-awaited migration from low-margin nonrecurring engineering efforts to higher volume production with improved operating margins and faster cash conversion cycles. We continue to support key space initiatives, including NASA's Artemis project with bookings in support of this project of approximately $10 million during the fourth quarter. Additionally, satellite and space was awarded over $7 million for its work supporting a U.S. government cybersecurity training program. All of the initiatives that we have been executing under Daniel's leadership in our Satellite and Space business have resulted in a comprehensive turnaround with significantly improved operating performance. This has helped to reinvigorate employee morale, partner commitments and customer trust. The durable differentiation in our product portfolio as well as the new products that we have been developing position Satellite and space to capitalize on the growing demand for the innovative, secure communication solutions we provide to our target markets. Now I will provide commentary on our Allerium segment, formerly known as our Terrestrial and Wireless Networks segment. Our Allerium segment led by Jeff Robertson, delivered a strong fourth quarter with adjusted EBITDA growing 37% to $13.7 million from $10 million in the same period last year. This performance was driven by higher net sales and gross profit related to our location-based and next-generation 911 call handling solutions, offset in part by increased research and development activities geared toward further solidifying our role as a trusted provider of innovative emergency communication and location-based technologies. During the fourth quarter, Allerium was awarded multiple orders across each of its 3 product areas, reflecting confidence in Allerium's performance and the strong collaboration with customers that defines these relationships. In total, bookings for the fourth quarter aggregated about $50 million. Taken together, we believe these awards validate Allerium's role as a market leader in emergency communication and location-based solutions. This momentum is underscored by a significant achievement that we reported today. After year-end, we have secured a multiyear contract extension from Allerium's largest customer, a leading telecommunications company in the U.S. known for its network reliability and security. This contract award is valued in excess of $130 million and is for a scalable service. The agreement reinforces Allerium's commitment to helping carriers and public safety organizations modernize critical infrastructure and optimize service reliability with confidence. This also highlights a core strength of this business. Regardless of broader economic conditions, emergency response has a history of consistent funding. As the world becomes more complex and riskier, governments as well as commercial entities are increasing their investment in public safety and precise location-based technologies, which provides Allerium with a durable tailwind and enhances our long-term revenue opportunities. The Allerium rebrand reflects a new unified go-to-market strategy that consolidates this segment's product lines under the single Allerium name. It marks a fresh new chapter, elevating our name in the markets we serve. Internally, it has served as a rallying cry for our teams, renewing focus on innovation and strengthening both employee engagement and recruitment as we drive the next generation of public safety technology. To support and accelerate this strategy, we have opened a new Allerium Innovation Lab in Broomfield, Colorado. This facility will be a center of excellence, focusing on next-generation R&D and attracting the best talent in public safety technology. A cornerstone of this strategy is Allerium Mira, our next-generation public safety-grade cloud-native call handling solution. Mira simplifies complex emergency call handling operations by allowing public safety answering points to manage voice, text, video and alerts through a single interface, unlocking smarter routing and deeper integration. Allerium Mira is also the engine for our broader service expansion. We are moving beyond traditional 911 calls to handle many other forms of information for a wide array of originating service providers. This includes data from wearables, connected cameras, fire panels, vehicles and traffic cameras. By integrating these inputs with next-generation software tools, we provide critical situation awareness to ensure first responders are prepared to deliver the emergency services the public needs. This strategy is proving successful, both domestically and abroad. As I stated last quarter, some of our key growth drivers include cloud-based products like Allerium Mira, next-generation call handling solutions and 5G location-based technologies for international customers. We are already executing on this global strategy and expanding our international footprint as I can confirm that during the fourth quarter, Allerium secured over $6.5 million in new contracts for work in South Australia and Canada. This entire vision is underpinned by Allerium's competitive advantage, the combination of our industry-leading statewide, innovative next-generation 911 networks with decades of experience in dispatch centers around the world. As agency expand beyond voice to multimodal data-rich request for help, this integration of network and dispatch technology gives us a distinct ability to help them manage complex emergencies. As previously disclosed, the company has been reviewing strategic alternatives with the assistance of nationally recognized investment bankers. We will only be providing updates on these processes if and when we have something specific to share. At this point, there is nothing to share. With that, I'll turn the call over to Mike to walk through the financials. Mike? Michael Bondi: Thank you, Ken, and good afternoon, everyone. Before getting into the detailed results, I would like to first summarize this past quarter. Sequentially, our consolidated GAAP operating results were better than our third quarter of fiscal 2025. We continue to grow net sales and improve gross margins, further reduced our operating expenses, generated positive GAAP operating income for the first time in over 5 quarters, further increased our adjusted EBITDA and achieved our second consecutive quarter of positive cash flows from operations. The Allerium segment continues to perform well, securing several large multiyear contract extensions from key customers. Our Satellite and Space Communications segment has been rejuvenated and improvements are evident with sequential growth in net sales, gross profit, operating income, adjusted EBITDA and operating cash flows. We were also successful in reducing corporate unallocated operating expenses during the more recent fiscal year quarter. While there are always opportunities for greater efficiency, the transformation plans that Ken described earlier have not only stabilized our business, but have also strengthened our financial condition and opportunities for further growth. I'm going to review our financial results for fiscal 2025 first, then discuss results for the fourth quarter. In fiscal 2025, Comtech had consolidated net sales of $499.5 million compared to $540.4 million in fiscal '24. The change in sales reflects the anticipated wind down of certain legacy troposcatter contracts, lower sales of EEE space components and antennas, including those related to the CGC divestiture that we initiated in our fourth quarter of fiscal '24 and the divestiture of our high-powered solid-state amplifiers product line in November of 2023. These items were offset in part by higher sales of our Allerium's NG911 emergency communication, call handling and location-based solutions and SATCOM solutions in our Satellite and Space segment, primarily satellite ground infrastructure solutions and VSAT and similar equipment sales to the U.S. Army. Gross margin as a percentage of net sales was 25.6% for fiscal 2025 compared to 29.1% in fiscal 2024. Fiscal 2025 margins reflect an $11.4 million noncash charge in our first quarter from inventory write-downs related to restructuring within our Satellite and Space segment. Our quarterly gross profit, both in dollars and as a percentage of consolidated net sales improved sequentially throughout fiscal 2025. Over the course of the fiscal year, we improved our quarterly consolidated GAAP operating income from a loss of $129.2 million in the first quarter to income of $1.9 million in the fourth quarter. Reductions in quarterly expenditures for SG&A expenses contributed to this improvement. As outlined in the company's annual report on Form 10-K for fiscal 2025, Net loss attributable to common shareholders was $204.3 million compared to $135.4 million in fiscal 2024. In aggregate, fiscal 2025 results were impacted by $187.5 million of net charges, of which $167.1 million were noncash. Our net loss attributable to common shareholders improved sequentially throughout fiscal 2025 due primarily to improved operational and financial performance, as Ken just explained. Adjusted EBITDA loss for Comtech in fiscal 2025 was $2 million compared to adjusted EBITDA income of $45.7 million in fiscal 2024. This change primarily reflects the anticipated lower consolidated net sales and gross profit in fiscal 2025, both in dollars and as a percentage of consolidated net sales and including an $11.4 million noncash charge in our first quarter related to the write-down of inventory and higher selling, general and administrative expenses driven by a $16.1 million noncash charge in our first quarter related to the allowance for doubtful accounts, offset in part by lower company-funded research and development expenses in light of increased levels of customer-funded initiatives. Overall, we experienced sequential quarterly improvements in adjusted EBITDA throughout fiscal 2025 with improvements ranging from negative $30.8 million in our first quarter to positive $13.3 million in our fourth quarter. Net bookings in fiscal 2025 were $372.7 million compared to $700.6 million in fiscal 2024. Bookings in fiscal 2025 were impacted by a $36.4 million debooking in the third quarter following the award of a protested low-margin U.S. Army field services contract to the incumbent provider. Also, bookings in the prior year included a large multiyear contract awarded to us from an NG 911 customer in the Northeastern region of the U.S. Comtech's funded backlog as of July 31, 2025, was $672.1 million compared to $798.9 million as of July 31, 2024, and $708.1 million as of April 30, 2025. For clarity, such backlog does not yet include the $130 million-plus multiyear contract extension just recently awarded to Allerium. Fiscal 2025 GAAP cash flows used in operations were $8.3 million, a significant improvement from the $54.5 million of cash flows used in operations last year. Fiscal 2025 cash flows include $23 million in aggregate payments for restructuring costs, including severance, proxy solicitation costs and CEO transition costs. This compares to $16 million in fiscal 2024. Fiscal 2025 also includes cash payments for interest and taxes of $29.6 million as compared to $23 million in fiscal '24. Throughout fiscal 2025, Comtech had sequential quarterly improvements in operating cash flows, improving from negative $21.8 million of operating cash flow in our first quarter to positive $11.4 million in our fourth quarter. Pivoting now to our results for the fourth quarter of fiscal 2025, consolidated net sales were $130.4 million compared to $126.2 million in the fourth quarter a year ago and $126.8 million in the third quarter of fiscal 2025. The fourth quarter benefited from earlier-than-anticipated orders in both segments, offset in part by a $3.5 million charge in our fourth quarter due to higher-than-expected cost completion on a nonrecurring development project within our Satellite and Space segment. Gross profit in the fourth quarter of fiscal 2025 was $40.7 million or 31.2% of net sales, representing a substantial 50.2% increase from the $27.1 million or 21.5% of net sales in the fourth quarter last year. Gross profit in the more recent quarter also represents a 4.6% sequential increase from the $38.9 million or 30.7% of net sales in our third quarter of fiscal 2025. We continue to make progress in improving our product mix, including our ongoing shift back to higher volume production orders in our satellite ground infrastructure Solutions product line as certain legacy low or no-margin nonrecurring engineering contracts draw near to completion. In our fourth quarter of fiscal 2025, we continued our trend of lowering GAAP operating expense, in particular, SG&A. Such reduction resulted in our ability to report positive operating income in our fourth quarter of $1.9 million, which compares to an operating loss of $1.5 million in the prior quarter and an operating loss of $81.5 million in the fourth quarter of fiscal 2024. These improvements in our financial performance also resulted in consolidated adjusted EBITDA for the fourth quarter to increase to $13.3 million compared to $0.3 million in the fourth quarter of last year and $12.6 million in the third quarter of this year. As mentioned, fourth quarter of fiscal 2025 cash flows provided by operations were $11.4 million, a substantial improvement from the $9.5 million of cash flows used in operations in the fourth quarter of 2024 and the $2.3 million of cash flows provided by operations in the third quarter of this year. The improvement in this metric is due to operational enhancements and our revitalized culture with aligned focus on optimizing cash flow, which in part contributed to earlier-than-anticipated collections in our fourth quarter of fiscal 2025. Now turning to the balance sheet and as discussed in more detail in our SEC filings, we recently amended our credit facilities. These amendments, among other things, provided for the incurrence of a $35 million incremental subordinated priority term loan, the net proceeds of which were used to prepay without premium $28.5 million of outstanding term loans and $5.8 million of the outstanding revolver loan under the credit facility. Importantly, it suspends until the 4-quarter period ending January 31, 2027, testing of the net leverage ratio, the fixed charge coverage ratio and the minimum EBITDA covenants. They altered the interest rates applicable to term loans under the credit facilities. It delayed the scheduled repayment of a portion of the principal on the term loans and fees due pursuant to the second amendment to the credit facility. The amendments reduced the minimum EBITDA requirements, reduced the minimum quarterly average liquidity requirements from $17.5 million to $15 million, permanently reduced commitments under the credit facility revolver loan by $2.1 million and obligated the company to enter into management incentive and retention arrangements for its key personnel. Such amendments also permit us to engage in the sale or disposition of certain properties and assets approved by the administrative agents subject to the conditions to use net cash proceeds from such sale to repay outstanding principal amounts of the obligations under our credit facilities. Collectively, these amendments provide Comtech with enhanced financial flexibility. In terms of our liquidity and outstanding debt obligations, at July 31, 2025, our available sources of liquidity totaled $47 million. Total outstanding borrowings under our credit facility were $133.9 million, of which $17.6 million was drawn on the revolver. Total outstanding borrowings under our subordinated credit facility were $100.1 million, excluding the $25.7 million make-whole amount associated with the $65 million portion of such facility through July 31, 2025 and the liquidation preference of our outstanding convertible preferred stock was $204.2 million, excluding potential increases that could be triggered by, among other things, asset sales and/or changes in control of the company. Before turning it back over to Ken, I will now provide a brief update on our consolidated performance for the first quarter of fiscal 2026. While we currently have a policy of not providing guidance or full year targets, given the unique situation of having our fiscal 2025 earnings call after the end of our first quarter of fiscal 2026, we felt an update in this instance, albeit preliminary, would be appropriate. For the fiscal quarter ended October 31, 2025, we are currently estimating the following consolidated results: net sales to approximate a range of $107 million to $113 million compared to $115.8 million in the first quarter of fiscal '25. Cash flow provided by operating activities to approximate a range of $6 million to $7 million compared to cash flow used in operating activities of $21.8 million in the first quarter of fiscal '25 and liquidity, defined as our qualified cash and cash equivalents and available portion of our revolver loan under our credit facility as of October 31, 2025, was $51 million. Performance in the first quarter of fiscal 2026 is expected to reflect, among other things, the impacts of earlier-than-anticipated orders, net sales and cash collections that we just discussed as well as certain contracts nearing completion in the fourth quarter of fiscal 2025. Additionally, performance in the first quarter of fiscal 2026, particularly in our S&S segment, is expected to reflect the impacts of timing, delays in orders, net sales and cash collections as a result of the U.S. government shutdown as well as the decision to phase out and eliminate certain low-margin revenue. While not providing full year guidance or specific targets, we do expect performance to improve in subsequent quarters of fiscal 2026. Additional details will be provided when we file our Form 10-Q for the first quarter of fiscal 2026, Also, as a reminder, statements about our anticipated results are subject to the cautionary language on forward-looking statements included at the start of this call as well as in our various SEC filings. Now let me turn the call back over to Ken. Ken? Kenneth Traub: Thank you, Mike. To sum up briefly, Comtech has been successfully executing the transformation plan that I announced in January, which has not only helped to drive Comtech's significantly improved operating and financial performance, but also has enabled us to improve relationships with current and prospective employees, customers, vendors and creditors. I believe this leads to a flywheel effect in which improved relationships create a healthier dynamic for the business going forward and ultimately, further improvements in operating and financial performance. As a reminder, Jeff and Daniel will be joining us for the Q&A. With that, operator, please open the call to any questions. Operator: [Operator Instructions] And we'll take our first question from Matthew Maus with B. Riley. Matthew Maus: Matthew on for Mike Crawford. I guess to start off, regarding the $130 million carrier contract, I'm assuming it hits 2Q '26 bookings. Can you help us model some of the economics in terms of the contract duration, how it's -- how the revenue is expected to ramp and whether you think it kind of represents a meaningful step-up in Allerium's growth trajectory? Kenneth Traub: Thanks for the question, Matthew. So it's -- we're not going to give a lot more specifics for commercial and competitive reasons. We'll say that it's at least $130 million contract. It is a long-term commitment with a major customer, and we believe it gives us an opportunity to build significantly around that. Jeff Robertson is on the call. Jeff, do you want to add anything? Jeff Robertson: No, Ken. I think you covered it well. We're just encouraged by this customer, and it's the long-term backlog that it represents gives us some confidence in the future. That's all I would add to that. Kenneth Traub: So I do want to clarify, Matthew, that this is an existing customer that is making a going-forward long-term commitment. And -- but it is -- it's a very significant milestone for us, right? This locks in a long -- one of our most important customers in the Allerium business, and it's an anchor of stability that we will be building around. Matthew Maus: Got it. And you provided some preliminary first quarter '26 guidance. I guess, given the government shutdown impact and the pull forward you mentioned, how should we think about the quarterly cadence through fiscal '26? Kenneth Traub: Okay. So we're a company that doesn't give guidance. We did for Q1 because Q1 is already complete. So what we can tell you is we do believe that business will continue to improve throughout fiscal 2026 and beyond. We've now -- we've achieved a lot of improvements that I've detailed in my remarks, and we do anticipate improvements in the quarters following Q1. Matthew Maus: Got it. All right. And so bookings and the book-to-bill ratio both improved sequentially. I'm just wondering if you can lay that out one more time. What's kind of driving that improvement towards getting that above 1 in fiscal '26? And like where -- which segment specifically do you see the most strength of that? Kenneth Traub: Mike, do you want to handle that question? Michael Bondi: Sure, Ken. In terms of our book-to-bill ratio, just always keep in mind that as you just heard us announce today, we had a very large contract, a multiyear contract award that was booked in November. So that's something that we would not expect to repeat. But overall, I think we're very excited about our progress in Allerium's success in international markets. That's been a focus of ours, and it's nice to see that we're getting some bookings there as well. And I think working through the government shutdown, we don't think it's going to be permanent. And I would think that the cadence will pick up once we get past this shutdown period. Matthew Maus: And last one for me, just quickly on -- I think previously, you mentioned the EDIM certification was expected prior to calendar year-end. I'm just wondering where things stand now. Are you through the certification and what would the ramp look like? Michael Bondi: Matthew, could you clarify your question? What was it that you were asking about a certification? Matthew Maus: Yes, the EDIM certification in terms of it being -- it was previously expected prior to year-end. I'm wondering if there's an update on that. Michael Bondi: Okay. I think you're referencing the EDIM program, we referenced it as EDM. Matthew Maus: Right, EDIM. Michael Bondi: Yes. Maybe that's a question best answered by Dan Gizinski. But yes, I'll start off by saying that, that program has been progressing. We definitely are excited that we're getting towards the tail end of our nonrecurring engineering phase and moving to production, which is in our wheelhouse, but I'll turn it over to Daniel. Daniel Gizinski: Yes. Thanks for the question. So high level on the EDIM program, I think the expectation that we had communicated is that we would be delivering initial prototype equivalent products to begin the certification process prior to calendar year-end. We are still expecting to see that final certification phase that we're going to work through collaboratively with the U.S. government certainly will be dependent on the delivery of those units as well as coordination with various different government entities to conduct that final certification, and that will take place over the earlier parts of calendar '26 with, I think, some flexibility in the schedule. We are continuing to make good progress and are still expecting to have those units delivered in place to begin the certification process prior to our calendar year-end. Operator: [Operator Instructions] We show no further questions at this time. I will now turn the call over to Ken Traub for closing remarks. Kenneth Traub: Well, I'd like to thank you all for joining us today. And as a final message, in anticipation of Veterans Day tomorrow, I would like to express our gratitude to all those who have served our country. Thank you all very much. Operator: Thank you. And this does conclude today's program. Thank you for your participation. You may disconnect at any time. Thank you.
Operator: Good afternoon, and welcome to the Beyond Air financial results call for the fiscal quarter ended September 30, 2025. [Operator Instructions] And now I would like to turn the call over to Garth Russell, Lifesci Advisors. Please go ahead. Garth Russell: Thank you, operator. Good afternoon, everyone, and thank you for joining us. Today, after market close, we issued a press release announcing the operational highlights and financial results for Beyond Air's second quarter of fiscal year 2026 ended September 30, 2025. A copy of this press release can be found on our website, www.beyondair.net under the News and Events section. Before we begin, I would like to remind everyone that we will be making comments and various remarks about future expectations, plans and prospects which constitute forward-looking statements for purposes of the safe harbor provisions under the Private Securities Litigation Reform Act of 1995. Beyond Air cautions that these forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those indicated. We encourage everyone to review the company's filings with the Securities and Exchange Commission, including, without limitation, the company's most recent Form 10-K and Form 10-Q, which identify specific factors that may cause actual results or events to differ materially from those described in the forward-looking statements. Additionally, this conference call is being recorded and will be available for audio rebroadcast on our website, www.beyondair.net. Furthermore, the content of this conference call contains time-sensitive information that is accurate only as of the date of the live broadcast, November 10, 2025. Beyond Air undertakes no obligation to revise or update any statements to reflect events or circumstances after the date of this call. With that, I'll turn the call over to Steve Lisi, Chairman and Chief Executive Officer of Beyond Air. Steve? Steven Lisi: Thanks, Garth, and good afternoon to everyone. With me here today is Doug Larson, our Chief Financial Officer. We continue to receive highly encouraging feedback from hospitals using LungFit PH, reinforcing the clinical value and operations efficiency our technology delivers. Adoption is accelerating meaningfully over the past year, contributing to a 128% year-over-year revenue increase in the fiscal second quarter, reaching $1.8 million, up from $0.8 million for the same period last year. While we are pleased by the strong year-over-year growth, sequential growth was essentially flat compared to the prior quarter, reflecting the timing of hospital purchasing cycles and the natural variability in international shipments. We view this stability as an encouraging baseline from which we expect sequential growth to resume over the coming quarters. We continue to navigate the inherent complexity of hospital sales cycles in the U.S. and internationally. These extended lead times and institutional decision-making processes have led to peaks and valleys in our quarterly sales performance as seen in the September quarter. Importantly, our sales pipeline remains robust, and we see substantial greenfield opportunities across the U.S. as awareness and interest in LungFit PH continue to build. Before getting into further details, let me highlight the changes that have occurred since our last update in August. We have raised $12 million in debt, and we'll file a registration statement for an additional $20 million through an equity line of credit, both with Streeterville Capital, which solidifies our balance sheet. We believe these additional funds will give us the ability to properly address the pace of sales growth with our first-generation system and prepare for the launch of our second generation system. LungFit PH has been placed in the first hospital outside the United States for commercial use. We have named our Board member, Bob Goodman as Interim Chief Commercial Officer, given the departure of David Webster. We are updating our fiscal year '26 guidance to $8 million to $10 million. We introduced our capital purchase sales model in the United States and had our first hospital purchase of LungFit PH. We collected data from Beyond Cancer's Phase Ia trial with 10 subjects with ultra-high concentration nitric oxide or UNO. That shows median survival has not yet been achieved and currently sits at 22 months. These updates have put us in a very strong position and provide us the financial runway we need to optimize the Gen II launch in late calendar 2026 and drive our international business from the strong foundation we have already built. As you all know, we were awarded a national group purchasing agreement for therapeutic gases with Premier. Coupled with our agreement with Vizient, we now have access to nearly 3,000 hospitals. We are confident that our targeted commercial strategy, supported by the right people now in place and strengthened by our Premier and Vizient GPO contracts will begin to have a meaningful impact on revenue over the coming quarters. Our disciplined approach is allowing us to prioritize the highest value hospital opportunities while deepening relationships across our existing accounts. This focused execution is already translating into broader market engagement and increased visibility of LungFit PH within key hospital systems. At the same time, we are preparing for the next major inflection point with our second-generation LungFit system, which is smaller, lighter and designed for both air and ground transportation, while maintaining all the revolutionary features of the first generation LungFit PH. We believe this next-generation platform will enable us to expand into larger hospitals and health systems, further accelerating adoption and cementing LungFit's position as the standard for nitric oxide delivery. We anticipate commercial launch of the second-generation system in the U.S. market in late calendar year 2026, pending FDA approval. As a significant aside, several of our existing customers have extended their annual contracts with multiyear agreements, while increasing anticipated annual volumes. We see this as a confirmation of the ease of use and the value proposition of LungFit PH, and we expect this trend to continue. During the quarter, we finalized and have since launched a new sales model that complements the traditional industry leasing model. Under this new approach, hospitals may now purchase LungFit PH systems outright while continuing to generate recurring revenue for Beyond Air through disposables and service agreements. Initial system sales occurred subsequent to quarter end, and the early reception has been extremely positive. We are very excited by the flexibility this dual model approach offers and the opportunity it creates to accelerate adoption of LungFit PH. Today, we announced the appointment of Bob Goodman as Interim Chief Commercial Officer, following the departure of David Webster. Bob joined the Beyond Air Board earlier this year and brings deep commercial and operational expertise from leadership roles at BioTelemetry, Philips Healthcare, Cardiocore, Thermo Fisher Scientific and Pfizer. His experience spans public companies, private equity-backed businesses and early-stage ventures, where he has consistently driven innovation, operational scale and commercial success. We have greatly valued its contributions to the Board and look forward to the fresh perspective and leadership he brings as we ramp up commercial activities and, as I just mentioned, prepare for the highly anticipated launch of our second-generation LungFit PH. A key driver of our long-term growth strategy over the past year has focused on the expansion of our global distribution network. During the September quarter, we added new distribution partnerships in Japan, South Korea, Mexico, Costa Rica, Guatemala, Panama and El Salvador. These new agreements significantly broaden our geographic reach and demonstrate growing demand from both mature and emerging health care markets seeking modern, cylinder-free nitric oxide delivery solutions. Importantly, we achieved our first international commercial placement of LungFit PH into hospitals outside the United States this quarter. These initial system sales marked a key validation of our technology's global applicability and confirm that our value proposition, improve safety, reduce logistical burden and long-term cost savings is resonating strongly with hospital administrators and clinicians. We continue to see excellent engagement from our distribution partners who are now actively seeking regulatory approvals or demonstrating LungFit PH in hospitals in their local markets. These latest agreements bring our total international coverage to 35 countries, representing a combined population of approximately 2.8 billion people, and we expect to reach our goal of 60 countries under partnership in calendar 2026. As local distributors begin converting opportunities into active installations and sales, we anticipate international revenue contribution to build steadily through fiscal 2026 with momentum accelerating into fiscal 2027. This growing global footprint positions Beyond Air to capitalize on significant untapped demand for LungFit PH and lays the foundation for broader global adoption following additional regional approvals. To wrap up our remarks around LungFit PH, I have two more positive updates to share. We had a patent allowance for a design patent that covers our second-generation LungFit PH through 2040. And we had data shown by a physician at the Extracorporeal Life Support Organization Conference in September, which show positive results when LungFit was used in the ECMO sweet gas circuit on neonates. I would like to provide an update on the data from Beyond Cancer's Phase Ia study. As a reminder, study enrolled 10 subjects at doses of 25,000 and 50,000 parts per million nitric oxide gas delivered over 5 minutes intratumorally. These patients all had metastatic disease and were heavily pretreated. The mean number of total prior surgeries, radiation and medications was 10.3 with a minimum of 4 maximum of 18. The mean number of all prior medications only was 5.5 with a minimum of 2 and a maximum of 14. All subjects had a life expectancy of less than 12 months when we treated with UNO therapy. The only adverse event which occurred in one patient that was possibly attributable to nitric oxide was a Grade 3 vasovagal response. Otherwise, the safety profile is very clean for this patient population. With respect to overall survival, the median and mean are 22 months and 21.2 months, respectively. These survival numbers will continue to increase, but we have not yet reached the final median survival. Given these impressive data, we are assessing the best path forward for the program at this time. We remain dedicated to pursuing the Phase Ib combination study with anti-PD-1 therapy, and we will communicate more details as we progress. With respect to NeuroNOS, we recently announced that the U.S. FDA granted Orphan Drug Designation to its investigational therapy, BA-101 for the treatment of glioblastoma. The NeuroNOS team is working closely with regulators, investigators, patient groups and the foundations to accelerate development of BA-101 towards a first-in-human study. This program is in addition to the development for BA-102, an investigational therapy for the treatment of Phelan-McDermid syndrome, or PMS, syndrome associated with autism. We expect the IND submission for the first-in-human study by the end of calendar 2026. As a reminder, the FDA has also granted orphan drug designation to BA-102 for PMS. I will wrap up by stating how energized we are following the financing, which will support the continued progress of our global commercial activities and help us prepare for the potential launch of the second-generation LungFit PH. Promise of LungFit is apparent, and we are thankful to the team at Streeterville, taking the time to appreciate our vision to provide clinicians and patients around the world with the optimal NO system. Now I will turn it over to our CFO, Doug Larson. Douglas Larson: Thanks, Steve, and good afternoon, everyone. Our financial results for the second quarter of fiscal year 2026, which ended September 30, 2025, are as follows: Revenue for the fiscal quarter ended September 30, 2025, increased 128%, $1.8 million compared with $0.8 million for the fiscal year ended September 30, 2024. We showed 3% growth versus last quarter. Steve mentioned how our revenue is a little chunkier now given an international ramp is never straight up. We are showing a gross loss of $0.3 million for the fiscal second quarter 2026 compared to a loss of $1.1 million for the same period last year. The improvement was primarily attributed to sales growth. Our margin slipped back negative this quarter due to costs required to upgrade our existing fleet of devices and provisions for excess inventory. Turning to operating expenses. We continue to see cost reduction across the board, in SG&A, R&D and in our supply chain due to cost reduction initiatives we took in the last 12 months. For the second quarter of fiscal 2026, we reduced total operating expenses to just above $7.4 million from $11.7 million for the same period last year. This translates to a 37% reduction year-over-year, and greater than 56% reduction from a high of $17 million at its peak. Going forward, we anticipate R&D expenses will decrease slightly next quarter as the cost related to our Gen II device are mostly behind us. SG&A expenses will only move up in line with our commercial performance to maintain our excellence in service and take advantage of coming opportunities. Research and development expenses were $2.5 million for fiscal quarter 2026 compared to $4.6 million for the same period last year. Half of the decrease of $2.1 million was due to a reduction in development costs for our Gen II device while the other half was mostly attributed to a decrease in salaries and stock-based compensation costs. SG&A expenses for the quarters ended September 30, 2025 and September 30, 2024, were $4.9 million and $7.2 million, respectively. Almost all of the decrease of $2.3 million was from a reduction in salaries and stock-based compensation costs. Only part of the business that saw an increase in SG&A was a NeuroNOS as they start to build a little bit of infrastructure to support the groundbreaking work being done there. Other expense was $0.6 million compared to a $1.2 million expense for the same period a year ago. The decrease in expense of $0.6 million was primarily attributed to the prior period loss associated with the partial extinguishment of debt. Net loss attributed to common stockholders of Beyond Air, Inc. was $7.9 million or a loss of $1.25 per share, basic and diluted. Our net loss for the fiscal quarter ended September 30, 2024, was $13.4 million or a loss of $5.67 per share, basic and diluted. Please note that the per share results for both periods were calculated to reflect the company's 1-for-20 reverse stock split, which became effective on July 14, 2025. Net cash burn for the quarter was $4.7 million, which is a 66% reduction versus a year ago. We believe our overall cash burn will continue to reduce as revenue grows and will only get better until we get approval and start building inventory in preparation for the launch of Gen II. As of September 30, 2025, we reported cash, cash equivalents and marketable securities of $10.7 million. As Steve mentioned earlier, subsequent to the end of the second quarter, we announced closing a strategic financial agreement with Streeterville Capital, LLC. Under the terms of the agreement, we issued $12 million promissory note bearing a 15% annual interest rate. This note matures in 24 months from the issue date with no payments due for the first 12 months. In addition, we entered into a $20 million equity line of credit agreement with Streeterville Capital dependent on our filing an S-1 resale registration covering resale of the shares Streeterville Capital may receive under the e-lock. This e-lock provides us with the right but not the obligation to sell up to $20 million of newly issued shares of our common stock over a 24-month period, subject to certain limitations. Following these recent financing agreements, we believe that our cash and existing financial vehicles will be sufficient to allow us to support our current operating plans well into calendar 2027 and potentially to profitability, providing we continue to hit our current revenue estimates continue to control costs at Beyond Air. With that, I'll hand the call back to Steve. Steven Lisi: Thanks, Doug. Operator, we'll take questions. Operator: [Operator Instructions] The first question is from Justin Walsh from Jones Trading. Justin Walsh: Without going into specific fiscal 2027 guidance, can you comment on the expected growth drivers leading into the potential approval of the second-generation LungFit PH? And then how you're thinking about that trajectory after that second gen product is out? Steven Lisi: Thanks, Justin. Appreciate that. So obviously, the trajectory once the second generation is out should be significantly steeper than what we're seeing now. That's our belief. And I think people know the attributes of that system versus the current system and the competition. So we're confident in that. As for the growth drivers prior to that, I assume you're asking for. Justin Walsh: Yes. Steven Lisi: Yes. We're setting up internationally. We're in 35 countries now with partners. We did just place systems in our first commercial hospital outside the United States. So it takes time to build that. We all wish we'd go a little faster, but it is being built, and our international team is doing a great job. So we've got a lot of seeds planted out there, I guess, you could say. And we anticipate that with fiscal '27 coming up, we should be winning a lot of hospitals outside the United States where the competition is a little bit different than it is in the United States. So that's one of the drivers for '27. The other thing inside the United States, we did introduce a capital purchase model. Our system is now -- and to a point where it's extremely reliable, we've had interest, and we've actually had our first hospital purchase from us. So that will be a capital equipment purchase. And then the filter and the other accessories would be the ongoing purchase. And those prices, I guess it depends on how much nitric oxide use in your hospital per year per system, but this is certainly very competitive from a per hour cost basis for nitric oxide. So I think this new offering in terms of how hospitals can pay in the United States, we've gotten some interest there and the ex U.S. will be the driver prior to Gen II being approved. Justin Walsh: Got it. And one more question. You mentioned here that you're hoping to commercialize the second-gen LungFit PH around end of calendar 2026, if I heard correctly. I'm just wondering if you can comment on kind of the thinking around this time and whether or not you've noticed any delays in your dealings with the FDA recently. Steven Lisi: Yes, I think FDA is doing a great job. I don't think the timing that we're providing is FDA being a limiting factor. It's more supply chain on our side. I think the environment is difficult to get the parts that we need, certainly doesn't help with all the disagreements, I would say that are happening around the world with trade, government shutdown doesn't help either. So I think just getting things in place for our ability to get our contract manufacturing in shape for inspection is what we're doing. So it's just a matter of time before that occurs. And I did mention -- I mean you did mention we'd be launching before the end of the year. I think approval has to be a little bit earlier than December, obviously, for us to be able to launch by then. We're not going to launch the next day. It's going to take a little bit of time. So -- that's kind of where we are right now, things can change, things can be better or worse in terms of timing. But as we sit here today, that's the feeling that we have. Operator: The next question is from I-Eh Jen from Laidlaw & Company. Yale Jen: Steve, could you just do some comparison between the new model versus the prior ones? So give us a little bit more deep dive in terms of the benefits to the company or maybe for the market penetration? Then I have a follow-up. Steven Lisi: Yes. Thanks, I-Eh. I mean the biggest difference -- will, there's a few, but the biggest differences are the size. So this second generation machine will be about 60% the size of the original. It will be what we've applied for. And I believe -- we believe that upon approval, with approval from FDA, it would be approved for use in ground and air transportation. That's critical. I think that's probably the biggest difference maker for us. And the user interface has been upgraded based on feedback from our current customers and some future customers, I guess, who weren't using our Gen I system, but did give us advice on Gen II. So we listen to them and we built this device based on their input. So we think that all of the functions of the device will be a little bit easier and a little bit better for the user. One other thing that we have is that the maintenance interval will be longer, so that the disruption of swapping machines out for those high-volume users will be a thing of the past, let's say. So when you have hospitals that are using an exceptional amount of hours per system per year, let's say, way above what the average is, we're bringing them in for maintenance fairly regularly. So -- that's a little bit of a disruption of the hospital, and we're working to get Gen II out there. So that disappears. Yale Jen: So actually, I try to get - I'm sorry, try to get a little bit about the new business -- new business model can achieve that wasn't really fully appreciated -- can be appreciated by the existing one? Steven Lisi: You mean Gen II versus Gen I, I-Eh? Yale Jen: So -- I mean you mentioned that the new business model, which is to purchase -- machine. So I just want to get a sense of what does that -- what the benefits of that versus the business operation you have done before this and what some additional benefits you can generate from that? Steven Lisi: Yes. So look, the market was set up as essentially a leasing market before we enter the market. So we're -- we came in and we worked with hospitals based on what they were used to, and we get requests from hospitals, can we purchase the machine, can we purchase the machine. And we weren't doing a purchase of the machine in the first 2 years because we were still making upgrades and tweaking the machine and it would have been difficult to sell something where you were still upgrading it and improving it. We're at the point now where there really aren't any more improvements to the Gen I machine a little tweak here or there is standard, maybe a software update or something. Those things are not major changes. So for hospitals that have been asking us if we take a purchase again, I don't know on their side, they prefer to purchase and to buy the disposables at a much lower rate than the leasing model would have. Again, that's just their preference. So we are offering different models for using our system to the hospitals based on their needs. That's all it is, yes. We're not abandoning the leasing model in any way. So we have multiple different types of leases. So we're really just trying to offer the hospitals what they're asking for. So the latest one is the capital purchase model. So we introduced it a few months ago, and we've got hospitals that are taking advantage of it. Yale Jen: Okay. Great. Maybe just a follow-up on the question. Next question is that you've got a lot of international deals signed, which is a great thing to happen. And because of the massive market over there, I assume most of these are distributor -- distributors. So how should we think about modeling over the long term in terms of what sort of pricing that may generate versus the one in the United States, which is slightly different? And how was the filter -- renewing filter fit into that model as well? Steven Lisi: Yes. I mean the ex U.S. model for us, where we're selling things to the distributors and then they're using it in whatever model they like in their markets, whether it be a leasing model or a capital equipment purchase model or something else or some combination of that, that's their business. So for us, though, they're purchasing the machines like a capital equipment purchase. And then we're also selling them the disposables, including the filter, which is obviously the most important disposable. So -- that's how you should think about it in terms of modeling. It's more of a -- just a repetitive revenue line, and I think that, that's probably going to happen more in fiscal '27 than now because we're just getting the systems out there. Once they're placed in hospitals, you see that repeat business, but that's not happening in fiscal '26. It will be a fiscal '27 phenomenon and picking up speed more in fiscal '28 because we're still awaiting regulatory approvals in many countries, and it takes time to get into these hospitals. So it is a long process, but that's the way it goes. Yale Jen: Okay. Great. That's very helpful. And congrats on the fortify the balance sheet, which you can do a lot of good things. And congrats. Operator: The next question is from Marie Thibault from BTIG. Sam Eiber: This is Sam on for Marie. Maybe I can start on the updated guide, the $8 million to $10 million. Steve, would just love your thoughts on the visibility. You have given maybe some of the fluctuations in the hospital sales cycle? And then any thoughts on cadence for the back half of the year? Steven Lisi: Thanks, Sam. Appreciate it. Well, look, we've got $3.6 million in the first half. So it's not a large leap to get to the 8% plus range. But we have a transition at Chief Commercial Officer. So I'm sure everyone on the call wouldn't expect Bob Goodman to hit the ground running on in week 1 or 2 and start ripping sales straight up. I think it will take a little bit of time for Bob to implement his processes here and get things moving in the right direction. So I think that when there's a change like this, there's going to be a little bit of disruption. So that's part of the reason why the $8 million to $10 million is the new guidance. Sam Eiber: Okay. Okay. That's helpful. And then maybe I can just follow up here on the pace of contract renewals that are coming up. Are you seeing pretty strong renewal rates? Are customers exiting contracts at all would just love an update there as well? Steven Lisi: Yes, the renewals are going well. We've had a bunch of renewals go from 1 year, they renewed for 3 years. We see that happening not with every contract, but a good number of them. And I think that getting on Premier is very helpful. We had a few hospitals that were premier hospitals that we had contracts with weren't yet on Premier, so now being on Premier solidifies that. That's very helpful. We look forward to hopefully getting on HealthTrust as well at some point, and that would give us the big 3 GPOs. That's very helpful for being able to not only get hospitals, but maintain them. Sometimes they can contract out of their -- outside of their GPO, which is rare. But when we do, when we get on the GPO, it's obviously important. So we haven't really seen hospitals leaving us. It's a very sticky business, I think. And I think it's due to the team in the field, the machine's performance, and my -- the clinical team here at Beyond Air do an excellent job of supporting the hospitals when they need support. Operator: At this time, we are showing no further questions in the queue. And this concludes our question-and-answer session. I would now like to turn the call back over to Steve Lisi for any closing remarks. Steven Lisi: Thanks, operator. Thanks, everyone, for joining. Look forward to speaking to you in the near future. Thank you. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Greetings. Welcome to Energy Vault's Third Quarter 2025 Earnings Call. [Operator Instructions] Please note, this conference is being recorded. I will now turn the conference over to Michael Beer, Chief Financial Officer. Thank you, sir, you may begin. Michael Beer: Thank you. Hello, and welcome to Energy Vault's Third Quarter 2025 Financial Results Conference Call. As a reminder, Energy Vault's earnings press release and presentation are available now on our investor website, which we'll be referring to during this call. This call is now being recorded. If you object in any way, please disconnect. A replay of this call will be available later today on the Investor Relations portion of our website. Please note that Energy Vault's earnings release and this call contain forward-looking statements that are subject to risks and uncertainties. These forward-looking statements are only estimates and may differ materially from the actual future events or results due to a variety of factors. Please refer to our most recent 10-K or 10-Q filing for a list of factors that cause our results to differ from those anticipated in any forward-looking statement. We undertake no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, please note that we will be presenting and discussing certain non-GAAP information. Please refer to the safe harbor disclaimer and non-GAAP financial measures presented in our earnings release for more details, including a reconciliation to comparable GAAP measures. Joining me on this call today is Robert Piconi, our Chairman and Chief Executive Officer. At this time, I'd like to hand the call over to Robert. Robert Piconi: Great. Thank you, Michael, and good morning and evening and afternoon to everybody that's joining this call. Our third quarter of 2025 was one of the most pivotal in Energy Vault's history. The quarter marked the formal launch of our Asset Vault platform, solid execution across our global project base and the establishment of the financial foundation that will fuel our next phase of profitable growth. It was less than 18 months ago, we outlined a bold strategy to execute a plan involving developing, building, owning and operating energy storage assets over time, constructed at financially privileged or attractive points of grid interconnection to achieve top quartile investment returns. In that time, we have also built, commissioned and now are operating for the first time the 2 initial projects in Texas and California, with the revenue included in all the Q3 results also for the first time. And while initially built using our balance sheet cash, we followed with 2 consecutive project financings closed in the last 6 months as we continue to put cash back on our balance sheet with now 3 consecutive quarters of growing cash. And as you will hear from Michael and saw in our investor presentation, a large increase in cash also expected for our fourth and final quarter this year. You'll recall at our last earnings, we announced the framework of the new non-dilutive preferred equity platform to fund and put into operation an initial 1.5 gigawatt of energy storage IPP projects, unleashing over $1.1 billion in capital that we formally announced the close of the $300 million transactions just last month with Orion Infrastructure. In the spirit of moving with speed and velocity, which are becoming table stakes now for success in this industry, we immediately put that capital to work last month with the purchase of a 150-megawatt interconnect site outside of Houston, Texas from Savion, a U.S. division of Shell. Coupled with the 125-megawatt site at Stoney Creek in Australia already closed earlier this year with the long-term energy service 14-year contract with the New South Wales government, that now brings our project total to 4 and 340 megawatts operating or in construction, which will be delivering a little over $40 million in recurring annual EBITDA for these initial projects as all come online in the next 12 to 24 months. When I was in Australia last week, I shared for the first time as well at our Investor and Analyst Day, our deepening collaboration with the team at Crusoe. Crusoe, the AI factory company. Chase, Cully and the team there with their focus on energy first are innovating and redefining what it means to move with the speed and velocity that I referenced earlier in vertically integrating to deliver the largest AI data centers in the world in time frames previously thought impossible, as the initial Stargate project in Abilene shows alone. I think an example for all of us for what is now becoming a requirement to be successful in this industry. In a similar fashion, Energy Vault is vertically integrating and originating now, designing, building and now owning and operating energy storage assets over longer time frames, a synergistic endeavor with the same relentless focus on execution and now with greater speed and efficiency of getting capital deployed with the new Asset Vault platform. While these larger projects will take some time to be built and come online in the next 12 to 24 months and then with the subsequent 10- to 15-year plus revenue streams, a reminder that it is Energy Vault that will be building these projects. So when we talk about the $1.1 billion in CapEx that the $300 million preferred enables, that CapEx will be funding into Energy Vault to build and commission these projects, which results in another $100 million to $150 million in cash flow back to the parent company in the form of project margins, long-term service agreements, among other cost and profit recoveries. I realize it's been a little longer time given how busy it's been the last 60 days since we last spoke at the quarterly earnings. I do want to jump right in here to our quarterly results. But as you get a sense, there's been just a lot going on that we've been executing as a company on a series of fronts, and really proud of the team at Energy Vault and all of our partners, as well as the support of our Board of Directors that all supported in making this happen. Michael has been be covering the results in more detail, I would like to cover some of the top of the waves here on the results as we entered into the second half of our year and began to deliver the expected revenue ramp and what was a strong and expected performance for the quarter. Also a reminder for everyone, there is a publicly available investor presentation that's on the website that you can download, and we would be referring to some of the charts that are in that presentation. As you saw, the contract backlog remains near $1 billion for us to execute upon in the years to come, which has more than doubled this year and about 4x what it was from this time last year in 2024. The ramp started as expected with $33 million, a substantial increase on both a year-over-year and sequential quarter basis and expecting an even larger jump of about $150 million or thereabouts in Q4 with the deliveries in Australia and the U.S. That $33 million also includes some of the first recurring contributions now from our 2 energy storage IPP projects in Texas and California. We also delivered strong unit economics with gross margins of 27% in the quarter, bringing our year-to-date gross margins to almost 33%. This reflects strong management of our project deliveries of our supply chain and just general execution competencies, which is one of the most critical core strengths of the company. We saw the EBITDA loss narrow to only $6 million for the quarter, noteworthy on only $33 million of revenue. We continue to find ways to optimize our OpEx and be as efficient as we can as we push to a full year profitability. And another good story on our cash creation. As we have every quarter this year, we continue to grow our cash balance and return cash to the balance sheet through the project financings completed and with the first phase of the Asset Vault platform just coming online. Noteworthy here that we are still expecting now another $30 million to $40 million in investment tax credits as well to return to our balance sheet this quarter in Q4, hence, the expected jump in our cash to $75 million to $100 million range as we close the year, setting ourselves up well for 2026. And for us at Energy Vault, our results, of course, encompass more than just the financial side, but also the results and the impact we strive to make as a company, reflecting how we do our business and the sustainability of our solutions to enable prosperity for all humankind in a resilient way. I'm very proud to share today that we have continued to advance our leadership in sustainability with S&P Global's latest release of their ESG scores. Energy Vault continued along its improvement path year-over-year, placing again in the top 98th percentile of all companies reviewed by S&P Global, while critically maintaining its leadership as the #1 company in the energy storage segment. This speaks to the culture and the execution philosophy that we have as a company that really comes down to our purpose of what we seek to fulfill and the impact we are making and will continue to make in our global communities. I want to send out a special thanks to Edward Johnson and Michael Van Parys as well for their specific leadership within Energy Vault to make this happen, but also their humility, which reflects our humility as an organization to realize that we have much more work to do here. The insatiable demand for power we see now will make this focus even more critical if we want to have a shot at improving the quality of life on earth for decades to come. With that, I'd like to turn it over to Michael Beer, our CFO. Michael Beer: Thanks, Rob. Turning to Q3 2025 results on Slides 3 and 4 in the attached presentation. We delivered Q3 revenue of $33.3 million compared to $1.2 million a year ago, representing a 27x increase year-over-year, driven by strong execution on Australia projects and the initial contribution from the Asset Vault assets. Q3 ' 25 GAAP gross profit of $9 million improved nearly 18x versus the prior year, driven by increased revenue and favorable business mix, resulting in a Q3 2025 gross margin of 27% and 32.6% year-to-date. Q3 adjusted operating expenses were $16.2 million, flat quarter-over-quarter, but up modestly versus last quarter as ongoing cost reduction initiatives were generally offset by start-up costs and development expense related to Asset Vault and growth in Australia. Q3 adjusted EBITDA, excluding stock-based compensation and other onetime items outlined on Slide 11 of the earnings presentation, improved to a loss of $6 million from a loss of $14.7 million in the prior year ago quarter, driven by higher revenue and gross profit. Regarding cash and project financing, cash as of September 30, 2025, was $61.9 million, up 7% sequentially and in line with our previous guidance. The company completed a securities purchase agreement for up to $75 million, of which $30 million has been drawn to date. Following the quarter, we closed a $300 million preferred equity agreement with OIC for the launch of the own and operate business called Asset Vault, which we'll discuss in a moment. Along with the large sequential increase in revenue and customer receivables anticipated during the fourth quarter, we also expect to receive $40 million of investment tax credit proceeds, which we've committed to those projects now placed in service. As it relates to the latest backlog and developed pipeline, as reflected on Slide 5, the company currently maintains a revenue backlog of $920 million, up 112% year-to-date, offset in part by the $50 million in recognized revenue this year, including the initial contribution from Calistoga and Cross Trails projects now included in Asset Vault. The backlog increase reflects new projects with, Consumers Energy, a long-term service agreement with an existing customer and long-term offtake agreements in the U.S. and Australia. As highlighted in the press release, the company also recently acquired the 150-megawatt 300-megawatt hour SOSA project in Texas as part of the Asset Vault portfolio and entered into an agreement with EU Green for a 400-megawatt hour project in Albania, subject to final Albanian legislative approval, both of which we expect to be included in backlog once finalized and key milestones are completed. Our total development pipeline for advanced projects, third party and those within Asset Vault is around $2.1 billion or roughly 8.7 gigawatt hours. Turning to our business outlook. Reflecting the timing of U.S. battery deliveries associated with Consumers Energy projects and other project time lines in Australia, we are estimating full year 2025 revenue of $200 million to $250 million within the prior guidance range. We are estimating full year 2025 gross margin of between 14% and 16%, in line with our historical averages. From a cash and project financing perspective, we are estimating $75 million to $100 million in total cash at the end of this year, unchanged versus previous guidance. We are now scaling up development activity and support services for Asset Vault with both Calistoga Resiliency Center and Cross Trails now in service, we expect these assets to contribute annualized adjusted EBITDA on a stand-alone basis of $10 million. As Rob had mentioned, on October 29, management held its second Investor and Analyst Day to provide additional detail around the recently launched Asset Vault business, Energy Vault's wholly owned subsidiary focused on global development, construction, ownership and operation of energy storage assets. We also discussed strategic growth plans as the company leverages Asset Vault to build and manage an expanding portfolio of contracted and operational storage projects. That presentation and replay are available on our website. With the backing of the $300 million preferred equity investment from OIC, Asset Vault creates a vertically integrated ecosystem that captures value across the entire energy storage life cycle. That platform combines Energy Vault's proven operational expertise with long-term asset ownership to generate predictable recurring and high-margin cash flows. With the launch of Asset Vault, Energy Vault is positioned to accelerate deployment of 1.5 gigawatts in attractive priority markets and upper-tier IRR projects as part of Fund 1. And that Fund 1 is expected to contribute roughly $40 million in recurring adjusted EBITDA by year-end 2027 from the 4 maiden projects, including the recently announced SOSA project and the Stoney Creek project in Australia, both of which are in the process of commencing their respective project financing processes, and to achieve $100 million to $150 million in recurring adjusted EBITDA by year-end 2029 from attractive projects yet to be disclosed across high-growth markets in the U.S., Australia and Europe. The project portfolio is prioritized with a clear monetization strategy, supported by long-term offtake agreements with bankable partners and/or attractive merchant markets. We're currently expecting our merchant exposure to be around 25% Further, by leveraging Energy Vault's existing EPC integration capabilities as well as a host of other services we provide today to our third-party customers, we can unlock notable synergies across the business, including larger volume commitments with suppliers, et cetera, adding incremental cash flows and liquidity to the parent company. Case in point, as Rob had mentioned, assuming a mid-teens average historical gross margin on $1 billion plus of CapEx for internally developed projects, Energy Vault should generate additional cash flows that more than cover the associated equity investment. With that, I'll hand it back over to Rob. Robert Piconi: Thank you, Michael. I think we were going to open it up for some questions now. Operator: [Operator Instructions] Our first question is from Noel Parks with Tuohy Brothers. Noel Parks: Just one item I noticed in the P&L is it looks like R&D expense actually declined sequentially a bit. And I was just curious if you had any updated thoughts on with some of the structure changes, just what the -- how the expense lines might be affected as if there's more capitalization going on going forward or something. Michael Beer: Sure. Happy to take this one. I would say it's a confluence of a handful of things. As you know, we've been tightening the belt from a cost perspective really over the last year. So this is the reflection of some of those activities. Furthermore, the company was in a different phase following the IPO and around that time where we were investing heavily in R&D. And at this stage, we're looking to harvest the benefits of some of those earlier investments. And so a little less focus around R&D and more around certain activities such as Asset Vault and so forth. Noel Parks: Great. And I guess I'm thinking a little bit bigger picture. As we've had a fair amount of macro uncertainty in the quarter and the months before that. And things like the shutdown certainly haven't improved the clarity of where many things in the marketplace are heading. So I'm just wondering if sort of your pace of discussions on the customer acquisition, bus dev side, I just wondered if you've kind of characterized customers feeling a sense of urgency and sort of pressing on unabated or whether there's been some more hesitation introduced and thinking especially maybe as you're doing with utilities at times. So I just wondered what that pace has been like since the summer. Robert Piconi: Thanks, Noel. It's Rob here. I'll comment, and then I'm sure Michael may want to add a comment or 2 as well. Look, this year, for sure, if anything, has been quite volatile and dynamic between the tariff side of the equation, which obviously impacts a lot of the battery shipments that were coming from China and then up to and including the most recent shutdown and recent changes and ups and downs on tariffs. So we've had to manage through that as have our customers, and it's required a lot more terms with customers in terms of the deal structures and trying to deal with it. So I think that's definitely caused some delays. And interestingly, on the Asset Vault side, meaning on the origination of deals we're looking at attractive assets, it is a buyer's market from what we see. I mean we have opportunities getting thrown our way daily, looking at sites that have interconnects and projects. So I think from an Asset Vault perspective, we're seeing a pretty target-rich environment and just obviously being careful on the ones that do make our list. We have a fairly formal and in-depth way that we evaluate these projects. But generally, I'd say from a U.S. market perspective, we have had a lot of stop and starts across the board. And I think noteworthy, we're holding our guidance. I think we're one of the few companies in our space that are holding their guidance because of deliveries that we have underway and a lot to do next quarter, as you know. But that's what I'd share with you. Michael, do you have anything to add to that? Michael Beer: Yes. We pride ourselves in having a nice diverse footprint and also being very agile. So earlier this year during tariff gate, I think on the earnings call, we had commented that only about 10% of our backlog was really subject to some of the volatility around U.S. tariff rates. So starting to prepare and protect ourselves against some of these shocks. The other thing is just being agile over the last 5 years plus, we've seen a 90% decline in battery prices, right, at the cell level. And so being able to participate in the most attractive parts of the value stack and choosing to own and operate assets rather than simply being a third-party service provider has set us up exceptionally well. Operator: [Operator Instructions] Our next question is from Sid Rajeev with Fundamental Research Corp. Siddharth Rajeev: Just to confirm, the current backlog, it does not include the recently announced projects in Albania, right? And also, any plans to add these projects to asset in the future? Michael Beer: That's right. So the $920 million backlog today does not include either the SOSA project or the project that we had announced with EU Green. The SOSA project is part of Asset Vault and will contribute to a lot of those recurring EBITDA numbers that we had guided previously. I would expect those to be added to backlog, yes. Siddharth Rajeev: No, to Asset Vault? Michael Beer: They'll be added to the backlog for the broader company and it will also be part of Asset Vault. That's correct. Siddharth Rajeev: Okay. Just one more. The development pipeline showed a massive increase from 5.9 to 8.7 gigawatt hour, $300 million added. What -- which projects specifically were added to this? Michael Beer: We've not disclosed the specific projects. These are what we internally classify as Stage 4 or Stage 5 opportunities where we've either been shortlisted or awarded opportunities. And obviously, as we curate the pipeline around Asset Vault, there certainly are -- there's been some ins and outs, and that is likely reflected in that change. Siddharth Rajeev: Okay. And congrats on the Q3 results. Operator: [Operator Instructions] With no further questions, I would like to turn the conference back over to Robert for closing remarks. Robert Piconi: Thank you, operator. Look, I'm happy to be talking about this quarter now as -- and in the last 6 years, in particular, have been quite transformational for us in terms of executing on what we said we were going to do, in particular, with getting the Asset Vault platform in place, I think that was significant. But in addition, and not to lose sight of the execution capabilities of this company and keeping our eye on the ball despite all of the various transactions that are going on around us between the project financings, between what it takes to get all the investment tax credits all organized and administered. Just delivery of product around the world. I think what's going on in Australia right now is one of our larger projects, which Australia represented more than half of our revenue this quarter and will continue to play a large part, I think, into the next quarter, getting there and delivering product toward our first, what's called an R2, which in Australia is your first grid interconnected project. That for us is the ACEN project. They're a large customer, a large partner of ours. We're delivering a few projects for them right now, and Q4 and into next year will play an important role in that for our future and the growth in the Australian market. I just want to thank all of our employees first, our days start and end with all of you. And thank you, everybody, for your focus and dedication through what remains a pretty volatile time, a lot of things going on around us that we do not control. However, we do have to plan and continue to plan for that as a company and ensure we have all the levers available to us to ensure we can respond and react and adapt as needed in the market while just staying focused on our strategy, which really starts with serving our customers. We feel really good about that. We've announced a few new projects, new collaborations, some things focused on the new AI infrastructure that's getting built out and excited about how those developments are going to proceed and impact our company as well. I also want to thank our Board of Directors who, in the last quarter, all participated in buying stock in the company during the non-blackout period as well as some of the management and myself. Hopefully, it's not lost on you all, the investors who are listening in, but also the employees that you've got management buying into the future of the company because of our faith and confidence in the prospects. And again, that really starts with the people of Energy Vault. So thanks to all of you. And operator, thank you for your support today. Operator: Thank you. This will conclude today's conference. You may disconnect at this time, and thank you for your participation.
Operator: Ladies and gentlemen, thank you for standing by. My name is Abby, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Assertio Holdings Third Quarter 2025 Results Conference Call. [Operator Instructions]. And I would now like to turn the conference over to Daniel Santos with Longacre Square Partners. You may begin. Daniel Santos: Thank you. Good afternoon, and thank you all for joining us today to discuss Assertio's Third Quarter 2025 Financial Results and Business Update. The news release covering our results for this period is now available on the Investor page of our website at investor.assertiotx.com. I would encourage you to review the release and tables in conjunction with today's discussion. Please note that during this call, management will make projections and other forward-looking statements regarding our future performance. Such forward-looking statements are not guarantees of future performance and involve risks and uncertainties, including those noted in this afternoon's press release as well as the Assertio's filings with the SEC. These and other risks are more fully described in the Risk Factors section and other sections of our annual report on Form 10-K and in our Form 10-Q filings. Our actual results may differ materially from those projected in the forward-looking statements. Assertio specifically disclaims any intent or obligation to update these forward-looking statements, except as required by law. With that, I will now turn the call over to Mark Reisenauer, Chief Executive Officer. Mark L. Reisenauer: Thank you, Daniel, and thank you to everyone for taking the time to join today. This is my first earnings call as CEO of Assertio and I'm excited to be here today. I'm joined by Paul Schwichtenberg, our President and Chief Operating Officer; and A.J. Patel, our Chief Financial Officer. I'd like to give you some background on myself and touch on some high-level financial results from the quarter. Then Paul will talk about the Rolvedon pull-forward, and A.J. will go over the financial results in more detail. As you may know, I've served on the Board for the past several months, bringing 30-plus years experience commercializing and launching innovative products. Most recently at Astellas Pharmaceuticals, I led the commercializing of blockbuster therapies, XTANDI and PADCEV. I also built and successfully scaled the Astellas Oncology franchise from scratch. That included enhancing market access and distribution capabilities, attracting and growing talent and implementing successful product launches as well as growth and life cycle management strategies. I'm thrilled to step into the CEO role and apply my experience here because I truly believe Assertio has the potential to generate significant value for patients and shareholders. The team has made a lot of progress and set the company up for a promising future with core growth assets like Rolvedon and Sympazan and a solid balance sheet. Before I turn to our third quarter results, I want to take a moment to acknowledge the promotion of Paul Schwichtenberg to President and COO. Many of you know Paul from the numerous roles he's held during his time at Assertio, most recently as Chief Transformation Officer. Paul is a strategic and practical leader who has guided the company through several transformative initiatives. I look forward to working closely with him as we continue driving Assertio forward. Now onto this quarter's results. In the third quarter, we achieved financial results that position us to narrow our full year 2025 guidance, and we continue to support high quarterly unit demand for Rolvedon and maintained a leading market share position. As outlined in the release, Rolvedon net product sales were $38.6 million for the third quarter of 2025, up from $15 million in the prior year quarter due to the pull-forward of 2 quarters of Rolvedon sales through the wholesale distribution channel. Rolvedon net product sales also drove adjusted EBITDA of $20.9 million for the third quarter of 2025, up from $4.4 million in the prior year quarter. The pull-forward was done to ensure seamless availability to patients as we transition Rolvedon to our consolidated commercial labeler and we realign our corporate subsidiaries under a single operating entity. While this transaction will result in a temporary decrease in operating cash flow in the fourth quarter of this year and the first quarter of next year, we expect to maintain a leading market share and uninterrupted patient supply. Regular sales of the newly labeled Rolvedon will resume in the second quarter of 2026. Sympazan net product sales grew to $2.8 million for the third quarter of 2025, up from $2.6 million in the prior year quarter, driven by higher volume. We continued to strengthen our Sympazan oral film franchise with new data the team presented at the American Neurological Association Meeting, which underscored the value the drug offers patients with difficulty swallowing. This quarter's results allow us to narrow our full year 2025 guidance. Our updated 2025 guidance reflects the impact of the Rolvedon pull-forward and our greater visibility into the expected performance for the remainder of the year. This narrowing also reflects negative impacts from Indocin generic competition and decommercialization of Otrexup. I'll now pass the call over to Paul to introduce himself and provide more detail about the Rolvedon pull forward. Paul? Paul Schwichtenberg: Thanks, Mark. Over the last several years, I've had many roles at Assertio, including Chief Commercial Officer, Chief Financial Officer and most recently Chief Transformation Officer. So I've had a front-row seat to many of our recent initiatives including the consolidation of our operations and driving continued growth for Rolvedon. First off, reflecting on Rolvedon's performance to date in 2025, we have seen 42% third quarter year-to-date demand growth versus the same period in 2024. We have been able to provide continued price stability and predictability for our customers over the last several quarters and achieved a 43% market share in the clinic Medicare Part B segment of the market in the third quarter. Third quarter Rolvedon sales reflect both normal demand and large purchases by several national distributors to help ensure consistent supply of Rolvedon over the next 2 quarters as we complete the integration of Rolvedon into Assertio. This was done to ensure uninterrupted product availability to patients during the integration and allow sufficient time to manufacture the newly labeled product, establish Rolvedon with a new 3PL distributor and execute on many other integration-related activities. Specifically, the volumes sold in the third quarter of 2025 includes expected channel inventory sufficient to supply end-customer demand for the fourth quarter of 2025 and the first quarter of 2026. No further sales of the Spectrum-labeled Rolvedon will occur and the Assertio Specialty does not expect to record material product sales of Rolvedon until the second quarter of 2026. From a customer and patient perspective, this will be a seamless transition. Also related to Rolvedon, we executed a long-term supply agreement with Hanmi, our API manufacturer in the third quarter, which positions us for continued stable supply and pricing going forward. Additionally, our same-day dosing data was presented at 4 oncology conferences since December of 2024, and most recently at the Network for Collaborative Oncology Development and Advancement Conference in October of this year, and we anticipate publication in a major journal in the near future. Looking ahead to 2026 and beyond, our goal is to maintain our strategy of price stability and predictability for our customers as we continue to pursue further demand and market share growth for Rolvedon. With that, I'll now pass the call over to A.J., who will cover the financial results. A.J.? Ajay Patel: Thanks, Paul. Today, I'll walk through our financial results for the third quarter of 2025. As a reminder, starting this year, we have resumed the use of year-over-year comparisons. Total product sales in the third quarter were $49.5 million, compared to $28.7 million in the prior year, primarily driven by the Rolvedon 2-quarter pull-forward, as previously mentioned. As a result of this, we do not anticipate material Rolvedon sales to wholesalers in the fourth quarter of 2025 and first quarter of 2026 and expect sales of the newly labeled Rolvedon to begin in the second quarter of 2026. Sympazan sales were $2.8 million in the third quarter, up from $2.6 million in the prior year, driven by higher volume and partially offset by the impact of payer mix. Indocin sales were $4.8 million in the third quarter, down from $5.7 million in the prior year, reflecting expected impacts from previously announced generic competition. The higher proportion of Rolvedon sales relative to our other products drove a modest decrease in overall gross margin to 72% compared to 74% in the prior year. Turning to operating expenses. Reported SG&A expenses were $16.9 million, up slightly from $16.7 million in the prior year quarter, reflecting nonrecurring costs related to the decommercialization of Otrexup, partially offset by lower legal expense following the completion of related initiatives this year. Adjusted operating expenses which excludes stock compensation, D&A and other specified items were $14.9 million compared to $17.3 million in the prior year reflecting our efforts to streamline the business and drive cost efficiencies. GAAP net income for the third quarter was $11.4 million compared to a loss of $3 million in the prior year, and adjusted EBITDA for the third quarter was $20.9 million, up from $4.4 million in the prior year, both driven primarily by higher Rolvedon sales. Turning to our balance sheet. As of September 30, 2025, cash, cash equivalents and short-term investments totaled $93.4 million compared to $98.2 million at June 30, 2025. The timing of cash collections and payments associated with the Rolvedon sell-in is expected to result in a temporary decline in cash over the next 2 quarters before increasing in the second quarter of 2026. Total debt outstanding as of September 30, 2025, remains unchanged at $40 million comprised of the company's 6.5% convertible notes with no maturities until September 2027. Lastly, as Mark mentioned, we are tightening our 2025 guidance within the range previously provided. We anticipate full year product sales on the current operating portfolio to between $110 million and $112 million and adjusted EBITDA to be between $14 million and $16 million. Both the product sales and adjusted EBITDA guidance reflects the impacts of the pull-forward of the Rolvedon sales into the third quarter. With that, I will turn the call back to Mark. Mark L. Reisenauer: Thank you, A.J. I'm pleased with the strong financial position we are currently in. As I continue in my new role, my focus is on advancing strategic initiatives that will drive growth. I will provide updates on those initiatives as they materialize. Abby, we're ready to take questions now. Operator: [Operator Instructions] And our first question comes from the line of Thomas Flaten with Lake Street. Thomas Flaten: Paul, congrats on the promotion. Nice to have you back on the call. Let me start with you. Could you explain to us what if any linkage there is between labor code and ASP? Like do you inherit the spectrum labeled ASP? Or could you just walk us through the mechanics of that? Paul Schwichtenberg: Alex, we don't really comment on forward-looking reimbursement for Rolvedon. So basically, what I can tell you is that we expect to continue our strategy that I mentioned in my comments, our price stability and predictability. So the labor code change is not tied ASP. It's really about the integration of Rolvedon into Assertio. Thomas Flaten: And then there was a sequential uptick in Indocin sales, which was a bit surprising. Any comments on what's kind of going on out there in the market for industry? Paul Schwichtenberg: Yes. Two things related to Anderson. We've continued to maintain some good market share and volume in Indocin despite the competition, and we've seen a little bit of price favorability as well quarter-over-quarter. So we're continuing to compete as best we can in the generic space. Operator: And our next question comes from the line of Naz Rahman with Maxim Group. Nazibur Rahman: First of all, I just want to say nice to meet you Paul. I don't believe we you spoke before. But my question is geared mostly towards Mark. So Mark, you obviously have a background in oncology and Rolvedon obviously competes in that space. I understand you've only been at the COC for a few weeks now. But sort of based on everything you've seen and everything you know, do you have any thoughts on potentially optimizing Rolvedon's either promotional strategy or commercial strategy and also potentially adjusting the reimbursement strategy? Mark L. Reisenauer: Yes. Thank you for the question. And what I would say, yes, it's a couple of weeks in and currently reviewing with the team, all of the current strategies. And so as we come up with any refinements, we'll certainly let you know. But I think I'm certainly approaching this from the position of looking for any way that we can drive additional growth on our growth assets. Nazibur Rahman: And just one follow-up is just on the gross margins. So it looks like the gross margins somewhat stabilized this quarter. But with the Rolvedon pull-through, what do you sort of expect to happen to gross margins going forward for the next 2 quarters? Or do you think you just kind of stabilize around here? Ajay Patel: This is A.J. I can take that. So obviously, we haven't given full guidance for next year yet, and we'll plan to do that at our March conference call. But I would say the targeted gross margin we had this year, which aligns with the guidance range we just gave is in line with where kind of Q3 landed. Operator: [Operator Instructions] And our next question comes from the line of Ram Selvaraju with H.C. Wainwright. Raghuram Selvaraju: Firstly, a broad spectrum one for Mark. I was wondering if you could comment on the kind of differences in strategic priorities and core business objectives under the new direction as opposed to what historically was being prioritized, particularly with respect to business development. And then secondly, on a product front, I was just wondering if you could provide us with any color on emerging market trends that may be favorable towards Sympazan uptake and what you expect the generalized prospects for Sympazan sales acceleration in the coming quarters? Mark L. Reisenauer: Yes. Thank you for your questions. I'll take the first one, and I'll let Paul talk about the Sympazan question. So regarding future strategy, what I am doing, along with the management team as well as with the Board is currently reviewing and refining our strategies moving forward. When we have updates there, I will certainly provide that more broadly, but it's very early days in terms of that effort. Paul, do you want to handle the Sympazan question? Paul Schwichtenberg: Sure. As it stands right now, Sympazan is competing in a generic market. We're not seeing any significant changes to that market in the near future. But our differentiators are delivery mechanism being it oral film. And what we're doing right now is we're focused on raising awareness of our products and getting the message out there. We've got reps in the field concentrated in the high-prescribing areas. And we're also trying to raise awareness through our digital promotion as well. So that's our focus right now for Sympazan. Operator: And ladies and gentlemen, that concludes our question-and-answer session and today's call. We thank you for your participation, and you may now disconnect.
Operator: Good afternoon, everyone, and welcome to Red Robin Gourmet Burgers, Inc. Third Quarter 2025 Earnings Call. This conference is being recorded. During management's presentation and to your questions, we will be making forward-looking statements about the company's business outlook and expectations. These forward-looking statements and all other statements that are not historical facts reflect management's beliefs and predictions as of today, and therefore, are subject to risks and uncertainties as described in the company's SEC filings. Management will also discuss non-GAAP financial measures as part of today's conference call. These non-GAAP measures are not prepared in accordance with generally accepted accounting principles, but are intended to illustrate alternative measures of the company's operating performance that may be useful. Reconciliations of the non-GAAP financial measures to the most directly comparable GAAP measures can be found in the earnings release. The company has posted its third quarter 2025 earnings release on its website at ir.redrobin.com. Now I'd like to turn the call over to Red Robin's President and Chief Executive Officer, Dave Pace. David Pace: Good afternoon, everyone, and thank you for your interest in Red Robin. It was just 4 months ago that we unveiled our "First Choice" plan with a core imperative of establishing Red Robin as the first choice for guests, team members and investors. Today, I'm pleased to report that in the third quarter, we began to see the early fruit from our efforts. During the third quarter, our traffic trends improved sequentially through the quarter, supported by the launch of our Big Yummm promotion and growth in our off-premise business. Equally encouraging are the continued gains in our 4-wall operating efficiency and our team's ability to manage the middle of the P&L, allowing us to beat our expectations for both restaurant level and corporate profitability during the quarter. Going forward, sustaining and extending this improvement requires continued execution across all aspects of our "First Choice" plan. The momentum we're building reinforces my belief that we're on the right track to deliver on our goal to be the first choice for guests, team members and investors. With that, let me share more detail on our progress and how we're building momentum as we move forward with this "First Choice" Plan. First, let's start with hold serve. Our operators have continued to raise the bar on performance. During the quarter, our team once again delivered labor results that beat our internal expectations. It's important to point out that we're achieving this efficiency gain while maintaining guest satisfaction scores at the improved level we established last year. This demonstrates that efficiency and hospitality are not mutually exclusive, and our ops team is proving every day that we can deliver both. The numbers also tell the story. The increased efficiency we achieved in the third quarter drove a 90 basis point improvement year-over-year in restaurant level operating profit, almost entirely driven by improvements in labor. These efficiency gains are being accomplished through a healthy blend of process changes, analytics and technology, combined with the entrepreneurial spirit of our operators who are finding the ways to work smarter and more efficiently while refusing to compromise the guest experience. Our managing partner program also ensures that our partners see the benefits of their efforts in increased compensation as they share in the gains that they are achieving in their restaurants. As we turn to our drive traffic initiative, I want to reemphasize that we're committed to creating sustainable traffic growth that is rooted in improvements across all of the relevant consumer touch points, including compelling value for the guest, delivering on our commitment of food quality and great taste and a welcoming hospitable and fun environment. As I outlined on our last call, our plan is to build traffic-driving layers, and I'm pleased with our progress. In addressing these elements of our plan, our first priority was to address our competitive positioning in price point value offers. The Red Robin Big Yummm burger deal that we launched at the beginning of the third quarter has performed above our expectations, resulting in an approximately 250 basis point sequential traffic improvement from the second quarter to the third quarter. More specifically, we entered Q3 with a traffic run rate of approximately down 7%, and we exited the quarter with that run rate at approximately negative 1.4%, a result that we're extremely pleased with. Our Big Yummm deal resonated strongly with our midweek dining occasions, particularly the lunch daypart and delivers on our commitment to provide our guests the gift of time. On average, we're delivering a complete dining experience in under 45 minutes. This promotion delivers exactly what we were looking for, immediate market relevance and trial generation. To build on this momentum, our team remains hard at work on new menu innovations to accelerate our competitive positioning and price point value offers, and we look forward to sharing updates on our future calls. That brings us to our second traffic-driving layer. During the third quarter, we launched our data-driven marketing initiative, incorporating microtargeting capabilities that will allow us to engage guests more personally, precisely and efficiently than traditional broad-based messaging. This approach to marketing is intended to more efficiently and effectively reach guests, allowing us to level the playing field against larger, more resourced competitors. These unique and internally developed algorithms help us understand guest decision-making behaviors and as a result, allow us to specifically target messaging and promotion in ways that resonate more directly with each guest. During our initial rollout of this approach, we saw outsized improvements in traffic and sales for the initial cohort of prioritized restaurants, and we plan to expand our reach to more of our restaurants each period. In addition to the progress we've seen within the 4 walls of the restaurant, we've also seen a dramatic increase in our off-premise business, driven largely through a significantly expanded approach to catering. The off-premise portion of our business represents approximately 25% of sales in the third quarter and delivered traffic growth of 2.9%, a signal that our guests love our food and want to enjoy it in more places than just the dining room. We expect to continue to aggressively grow this segment of our business as we move forward. Next is our Find Money initiative. I'm pleased to report another quarter where adjusted EBITDA beat our expectations, which continues to reinforce our confidence in the operational improvements we've implemented. In addition, thanks to our corporate efficiency initiatives, we continue to expect between $3 million to $4 million benefit in G&A in 2025 with a $10 million run rate expected to be achieved in 2026. These savings are critical as we balance our investment priorities with delivering profitability. Regarding our capital structure, we're exploring all elements that I discussed when I introduced our "First Choice" Plan. This includes taking a comprehensive and proactive approach through multiple initiatives to give us optionality as we work to strengthen our balance sheet and position the company for long-term success. We've launched 4 primary tactics to accomplish this. First, as part of this process, we announced today a 6-month extension to the term of our current credit agreement, with the loan now maturing in September of 2027 as compared to March of 2027 previously. This extension provides helpful time to optimize the value of the other efforts. Second, we've engaged Jefferies to assist us in refinancing our debt to further optimize our capital structure. Jefferies is an industry leader in this space, and we expect to work quickly and effectively with them to deliver a successful outcome on this effort as soon as practicable. Third, today, we announced the establishment of an at-the-market or ATM program, which allows us to sell up to $40 million in equity open market transactions. While we may or may not execute against this option, we put this in place so that we have the option to generate funds if needed and to be in a position to move quickly where we may see compelling opportunities. Fourth is our refranchising effort. We continue to have great interest and engagement from both existing and potential new franchisees developed through our partnership with Brookwood Associates. We're encouraged by the level of interest in our brand, and we remain committed to a thoughtful process that maximizes value for our shareholders in both the short and long term. Refranchising is yet another important option to have in our tool belt as we optimize our overall financing structure and work to strengthen our balance sheet. We'll continue to share updates as these projects progress. Supported by the gains we've seen in our operating results through the first 3 quarters of the year, we believe these actions will provide us with the options and flexibility to create the best long-term financing structure for Red Robin while also assisting us with resources to reinvest in the business. Next, let me provide you with an update to our fixed restaurants efforts. As I mentioned on our last call, we identified the need to invest in critical deferred maintenance to better align our restaurant atmosphere with competitive standards. I'm pleased to report that we successfully completed refreshes in 20 restaurants across 4 markets during the third quarter. As a reminder, these are relatively light touch refreshes from a capital perspective and not full reimaging projects, averaging approximately $40,000 per refresh in the third quarter. We've prioritized these investments by targeting areas that we believe will directly benefit the guest experience. This includes flooring updates, internal finishings, furniture repairs and lighting, coupled with exterior improvements, including signage, paint, lighting and landscaping, all of which will directly benefit guest perceptions and experience. While results are still early, we're already seeing measurable improvements in both sales and traffic performance at these 20 locations. These results further support our thesis that well-executed improvements that enhance the guests first impression and overall dining atmosphere can deliver measurable results relatively quickly. The success of these actions has helped us fine-tune our investment priorities as we look to expand the number of restaurants that we can touch. Our goal is to offer an environment that matches the quality of food and hospitality that our teams deliver every day, and we'll continue to take a disciplined approach as we expand this initiative further across our system. Lastly, let me briefly touch on our Win Together plan. As I've continued to travel the country, visiting our restaurants and meeting with restaurant teams, I'm hearing increasingly positive feedback from our team members who see that we're delivering on the promises we made earlier this year. They wanted a value offering, and we delivered the Big Yummm deal. They asked for help addressing long-standing maintenance and repair issues, and we successfully refreshed 20 restaurants during the quarter with more to come. They ask for better technology and tools to execute more efficiently, and we're continuing to roll out additional technology with more planned ahead. It's encouraging to see that our team is embracing our guest-centric culture. And when combined with the strength of our operating results, we believe it's prudent to modestly raise our CapEx guidance for the year as we further accelerate some of these key initiatives that directly support our team members and their ability to deliver a great guest experience. Encouragingly, we've continued to see our team member turnover rates come down each period to a point where we're now at levels below industry benchmarks. As we look ahead, we believe this collaborative team approach will further strengthen our culture and position us favorably to attract and retain the best talent in the industry. To the almost 20,000 Red Robin team members across the country, I want to extend a heartfelt thank you for your dedication and hard work. I'm proud of what we've accomplished so far and excited about what's still to come. With that, Todd will now review our third quarter results. Todd Wilson: Thank you, Dave, and good afternoon, everyone. In the third quarter, total revenues were $265.1 million versus $274.6 million in the third quarter of fiscal 2024. Comparable restaurant revenue beat our expectations for the quarter and are in line with last week's announcement at a decline of 1.2%. This result includes a 1.7% increase in net menu price, offset by a 3% decline in guest traffic. Guest traffic trends improved sequentially through the quarter and delivered a 250 basis point trend improvement as compared to the second quarter. We attribute this improvement to the success of our Big Yummm Burger deal that launched in July and continued traffic strength in our off-premise business. Restaurant level operating profit as a percentage of restaurant revenue was 9.9%, an increase of 90 basis points compared to the third quarter of 2024. This was driven by the continued success of our operations team, delivering significant gains in labor efficiency. I would also note, while cost of goods increased due in part to beef inflation that we anticipated, our commitment to deliver value for the guest is also reflected with this increase with the goal that this value ultimately contributes to delivering increasing guest traffic. General and administrative costs were $16.9 million as compared to $20.8 million in the third quarter of 2024. The reduction is primarily due to not holding a partner conference event in 2025 as we did in 2024. In 2024, this cost was mostly offset with vendor contributions credited to other parts of the income statement. Selling expenses were $6.8 million, an increase as compared to $5.5 million in the third quarter of 2024. The increase is primarily due to additional investment in third-party delivery platforms and other channels. Adjusted EBITDA was $7.6 million in the third quarter of 2025, an increase of $3.4 million versus the third quarter of 2024. Adjusted EBITDA increased due to cost efficiency gains, particularly in labor and the benefit of menu price increases. We ended the third quarter with $21.7 million of cash and cash equivalents, $9.2 million of restricted cash and $29 million of available borrowing capacity under our revolving line of credit. Turning to our outlook. We will now provide the following guidance for 2025. First, total revenue of approximately $1.2 billion is unchanged from our prior guidance. This incorporates expectations that comparable restaurant sales will decline approximately 3% in the fourth quarter, and we will end 2025 with 386 company-owned restaurants in operation. Second, restaurant-level operating profit of at least 12.5% as compared to our prior guidance of 12% to 13%. Third, we now expect adjusted EBITDA of at least $65 million as compared to $60 million to $65 million previously. Finally, we now expect capital expenditures of approximately $33 million as compared to approximately $30 million previously as we continue to execute against the "First Choice" Plan and make investments back into our restaurants and technology. As added commentary on our guidance, I would note the following points. In recent weeks, we have seen guest traffic trends slow from where we exited the third quarter. We attribute this to intentional timing shifts in our marketing spend and the consumer impact of the government shutdown. While our guidance is grounded in expectation for both traffic and comparable restaurant sales to decline approximately 3% in the fourth quarter, we are optimistic traffic trends will regain traction as our marketing spend levels increase in the remainder of the quarter. On the margin side, we expect cost of goods in the fourth quarter to be similar to the third quarter. For the other operating cost categories, we expect marginal improvement in the fourth quarter as compared to the third as we leverage fixed costs with higher seasonal sales in the fourth quarter. Overall, we are very pleased with our progress, capturing cost efficiencies while delivering a great guest experience. We have made significant gains, increasing restaurant level profitability, reducing debt and growing EBITDA. Initial results from the launch of the Big Yummm are encouraging, and we look forward to the great value at Red Robin delivering growing guest counts. In closing, I'd like to offer a tremendous thank you to our operators, our restaurant teams and the team at the restaurant support center. This great progress in the business is a result of your hard work, and I'm excited for what's next. Dave, I will now turn the call back to you. David Pace: Thanks, Todd. The progress we've made across all pillars of our "First Choice" Plan gives me confidence that we have the right strategy in place. Our operators are proving every day that efficiency and hospitality can coexist. Our strategic value offering is delivering the expected change in our traffic trends, and we have additional innovations under development for next year. Our data-driven marketing capabilities are being strengthened to position us to compete more effectively, and our restaurant refresh initiatives are being well received by both our team members and our guests. We're not declaring victory, but delivering a sustainable recovery requires a clear strategy, coordinated tactics and engaged team and disciplined execution. I've seen personally that our Red Robin team members are up to the challenge. Let me close with this. We have more work ahead of us, but we're building momentum with each period and each quarter, positioning us to create a Red Robin that our guests will choose first. Our team members are proud to work for and our shareholders can rely on for predictable and reliable returns. Before I hand it over to the operator for questions, I want to call out 2 organizational announcements that we made last week. First, I want to recognize the appointment of Jesse Griffith to Chief Operations Officer. As you heard today, our operations team under Jesse's leadership has been a major contributor to the progress we've seen both financially and with our guests. This is a well-deserved move that is reflective of those contributions. I'd also like to acknowledge Todd's plan to move on to another opportunity in our industry. During his time with Red Robin, Todd has been an integral part and member of our executive team and has provided great leadership to the finance team and well beyond. His many contributions were greatly appreciated by all of us, and I want to thank him for all that he did and wish him well in his next role. With that, we're now happy to take your questions. Operator, please open the lines. Operator: [Operator Instructions] The first question comes from Jeremy Hamblin from Craig-Hallum. Jeremy Hamblin: Congrats on the strong results. I wanted to start with just some of the commentary around the Big Yummm initiative and where it's mixing. Just to get a sense for where that's mixing as a portion of sales. And then as you talked about a little bit of an uptick here in food and beverage costs to get a sense if you expect that to kind of stabilize in this current range or given a little bit of pressure on beef prices as well, we should be expecting that to click up a little bit here going forward? David Pace: Yes. Thanks, Jeremy. Two parts. I'll let Todd answer the second part. The first point about mix, the big Yummm deal is mixing at about 8% of our total sales. So we feel pretty good about that. That's kind of where we expected it to come in from a mix standpoint, but it's definitely having the impact that we had hoped it would. Todd Wilson: Yes. Jeremy, on the second part of your question, just overall cost of goods, beef is certainly the most inflationary part of our basket right now. We do think the 25% that we saw in Q3, we think that's the right guide for Q4 as well. The team -- we've got different measures that we're putting in place to mitigate that beef inflation. So we think we can hold that 25% through the fourth quarter. Jeremy Hamblin: Great. And then just switching gears a bit here. I wanted to understand the cost of getting the amendment to your current debt agreement, getting that extension to September 2027. What was the financial cost of that getting the extra 6 months? And then secondly, related to the refranchising efforts to get a sense for how that initiative is progressing and what valuations are looking like if you have maybe a better sense, I think you called out initially 25 to 75 potential locations. If you have winnowed that down a bit more or what other color you might be able to share with us? David Pace: Yes. So let me take that, and I'll let Todd kind of pile on here in a second. In terms of the extension, it was a 50 basis point cost to us to extend for that period of time. So we thought that was reasonable given what we were looking to do and why we wanted to do it. Regarding the second point about refranchising, I would -- I guess what I'd say to you, Jeremy, is everything is going as we had expected and hoped on refranchising. So the available number of restaurants that there's interest in is in the range that we communicated originally. We have indications of interest, specific proposals put forward that we haven't really negotiated against yet. We're still in the middle of kind of vetting and kind of getting to know who's who. And so it's moving ahead. It's -- as I said in the remarks, it's an option for us. I mean we're going to kind of toggle all of these options to figure out the best combination as we move forward on the refinancing and the whole strengthening of the balance sheet. and refranchising is still one of those options. I'd say we're where we had thought we would be. And -- but nothing firm to announce beyond right now. Todd, do you want to add anything? Todd Wilson: No, I think that I'd just reiterate those points. Refranchising an option. It was, I think, a good thing for the business to get the Fortress amendment or the amendment with our lender across the finish line. It gives us the time to really vet through those other options and make sure we maximize value, as Dave said on the call. So a good progress for us. Jeremy Hamblin: Great. Congratulations, Todd. Best wishes on your -- the next part of your journey. Todd Wilson: Thank you, Jeremy. Really appreciate it. Operator: The next question comes from Todd Brooks from Benchmark Stern. Todd Brooks: I'll echo Jeremy's congratulations, Todd. And also, Jesse, I assume you might be in the room, congrats on the promotion to COO, well deserved. Todd Wilson: Thanks, Todd. Todd Brooks: I wanted to lead off and kind of take -- thanks for dimensionalizing kind of that entry and exit traffic run rate for the business. Dave, I think Big Yummm was launched third week of July, so not even a full quarter's worth of impact. And I know you had spoken about working against things like upsell and kind of coaching up the front-of-house teams, how to sell the product. And the mix looked pretty benign and only down 10 basis points. So I guess kind of coming out of Q3, and I know you talked about a wiggle down here to start the quarter, but unlocking the big Yummm and the traffic benefit from it, my sense is, is there still some fruit in front of us to drive further improvement from it? David Pace: Yes, we think there is. And we think there are ways to even expand the impact of Big Yummm even further, which we're working on. I think you're right. It wasn't a full quarter. It wasn't day 1. It was probably 3 weeks in. That's probably about right, what you said. So we feel good about it. It came -- it did what we had hoped it would do. It got traffic. It gave people a reason to come in. It got trial again. So from a tactical standpoint, it did what we had hoped to do. Beyond that, I would tell you we're taking a much more strategic look at the entire menu and how we package it together. And so that's some of the pretty substantial work that's going on, which includes Big Yummm and beyond. So I think you'll see more. I do think there's more there. There was a little wobble coming into the quarter. But for us, and I'm sure you know this, the way the fourth quarter plays out for us, October is the softest month. November picks up a little bit, starts to pick up momentum and then December is when we really make hay. So for us, we've consciously shifted marketing spend from October to the back end. And so a little bit of it was a pullback in marketing spend purposely to backload fish when the fish are or the fish are. Todd Brooks: Great. And just one follow-up there. What do you feel or what are you hearing from customers about the importance of having an everyday value platform now instead of having a be appointment dining? How important has that been and what you're hearing and feedback? David Pace: I think we're seeing -- look, it resonates with the guest and it resonates in, as we said, in the kind of early week, midweek and lunch dayparts. The value offering, Todd, is, I think, is a slightly different occasion from the weekend offering in that weekends are date night, and that's when people go out early week lunch, they're kind of looking for a value opportunity to utilize us. So we -- it's part of the thing that we're working on is we think there's opportunity, but there's opportunity in the way we use it and when we use it. I don't think it's going to change. I do think it's going to be every day. I don't see us kind of limiting it back to certain days of the week. But the reality is it does have an impact on some parts of the week more than others. Todd Brooks: Great. Dave, you also mentioned the data-driven marketing efforts and the fact that you had kind of a cohort of stores that maybe are a little bit more challenged where you saw really outsized improvement, I think, was your actual words from these efforts. Can you talk about any way to dimensionalize the traffic improvement from the effort? And then you talked about a path to expand this further. Can you maybe walk us through what that looks like going into '26? David Pace: Yes. I mean because of the way this is set up, Todd, this is a very -- I've said this, and I've tried to kind of be as clear as I can on this, but it is a hyper micro targeted approach where we get into the individual restaurant and we get into the individual guests, we understand the trade area. We understand the makeup of it. We understand what pulls people in. Is it a value play? Or is it a premium burger play? What is the reason for people making the shift? And we can get that information down to a highly targeted level. So as we went into the first cohort, as I said, we started with some. We learned as we went into this that, oh, maybe value resonates with this group, but it doesn't resonate with that group. Let's focus on more of a premium burger or maybe a different set of messaging. geez, that seems to resonate more with this group. Let's kind of plus up that messaging in this cohort, plus up the value messaging in another cohort. And so we're kind of generating the knowledge base that we can then cluster and figure out how to deploy messaging and promotions on a highly micro-targeted basis. I mean I'm trying to explain this without kind of showing you, but it's -- that's where we're going with that. So anyway, we started with that. We saw performance, and I'll let Todd kind of pile on top of this above the performance of the rest of the system. And so as we've gone out, we started with, I think, 50 restaurants. We expanded beyond. We're probably -- we got to 130. We're looking at kind of walking that out further as we get the data. And so we're -- the intention is to expand that across the system. How quickly we get there, we're going as quick as we can. Todd Wilson: Todd, I'll just tag on quickly here to expand on the point of the over 100 restaurants that the team has been focused on. Sequentially, there's been a significant improvement in traffic trends in those restaurants to the point that in many weeks, obviously, we're looking daily, weekly, long term. But in many weeks and many periods, we're seeing that those restaurants are delivering positive traffic on a year-over-year basis. And that's ultimately where we want to be. And so now it's just a matter of, hey, we found a playbook that works in those 100 plus, and we'll work to expand that to the other restaurants, obviously. Todd Brooks: Okay. Great. And I'll wrap it up into one final question. If you take the traffic driving benefit of the Big Yummm and you take the early success with the data-driven marketing, Dave, as you're thinking out to '26, I think year-to-date, there's maybe been 17 restaurant closures. Thoughts on stability of the base and maybe improving kind of that bottom decile or bottom quartile of stores with the early success that you're seeing from these 2 initiatives? David Pace: Yes. Good question. No question, we're seeing it. No question, our ops team is focused on these target restaurants to try and see -- we're not in the business of closing restaurants. We're trying to keep them open and run them and make money, which we've moved a number of them kind of off the watch list back performing where we want them to be. There's still some, as there always is, that aren't quite there yet. We'll give it a shot with them. There's probably going to be a subset of additional closures, but the list is far, far shorter than what we had talked about previously. Operator: The next question comes from Mark Smith from Lake Street Capital. Mark Smith: I just want to dig in a little bit more on menu mix and kind of check dynamics and consumer behavior. Big seem to mix well. But can you talk about kind of other parts of the menu, beverages, desserts, people sharing meals. Curious to hear what you're seeing in consumer behavior kind of during the quarter and even post quarter. Todd Wilson: Mark, Todd here. I'll start. To -- you mentioned, I think others have as well. We were pleased with the mix outcome. Going into the quarter, we thought the impact of the Big Yummm deal may have resulted in more of a mix impact than we saw. Part of that is a credit to our operators. We've given the guests trade-up options. And in many cases, they have taken those, right? So many people are getting the value in the $9.99 deal, but others are trading up to ad toppings, ad beverages, those types of things. So that helps support the overall check. In terms of other dynamics, one of the areas we always look at add-on type trends in terms of appetizers, desserts, beverages. We've seen those hold steady. And so we think that's a good thing for us in this environment where we see the headlines that maybe consumers are managing their wallets a little bit more. We've seen those areas hold up. So the mix that we saw, we did report, obviously, a little bit of a negative mix. Some of that was the Big Yum. Some of that is a mathematical phenomenon, I'll say, of the growth in our catering business that Dave referenced. That comes at a lower PPA. And so there's just a natural dilutive effect there as that part of our business grows. But we're seeing stability in appetizers, desserts, beverages with some of the add-ons helping to mitigate the impact of the lower price point on Big Yummm. David Pace: Yes, Mark, I would just add, I think I agree with everything Todd said. I think the other thing I would offer is we learned a lot going through this big Yummm deal, and we learned a lot about mix in consumer behaviors. And what resonates on our menu and what we may want to look at further. And so we're doing a lot of menu work right now that I think you'll see in 2026 that is an output of the learnings that we've got through the Big Yummm deal. Big Yummm is a very narrow, very tactical execution. I think the approach that you'll see us evolve to is a much broader, more strategic approach, including the Big Yummm, but beyond that. Mark Smith: Okay. Then I also wanted to ask about G&A. I know you didn't have this partners conference, but it looks really pretty good. I'm curious just how sustainable G&A is at these levels? Is it further cuts or maybe some ramp back up with more investments. Todd Wilson: Yes, Mark, Todd here. I'll start. I'd frame it this way. When we look at our Q3 spend, we're expecting Q4 to be similar. So we think it is sustainable. It reflects some of the efficiencies that we have put in place and started to capture this year. And so we're certainly pleased with that. But as we look at just Q4 as an example, we expect Q4 to be similar to Q3. David Pace: Yes. Look, I think we expect it to hold, Mark. But I think there's -- we're looking at some other opportunities in the future. I mean I'm not worried about it. I don't have anything to signal yet, but I think there are some opportunities that we can not only hold but maybe expand a little further. Mark Smith: Excellent. And last one for me, Todd, I apologize, but I missed some of your comp guidance here for Q4. If you can walk through that and kind of the thought process behind where you're at for kind of comp expectation. Todd Wilson: Yes, Mark, happy to. So the commentary in the prepared remarks, I talked about both same-store sales and traffic expectation for Q4 down 3%. The traffic, I think, is straightforward. That's frankly, exactly what we ran in Q3 in total at least, and we think is achievable, especially to Dave's point with the backloaded marketing. The sales being equal to traffic is obviously a couple of puts and takes. We do have a little bit of what I'll call gross menu price increase in place, meaning we have some year-over-year benefit from menu price increases. That becomes a lesser level in Q4 than it was in Q3. And so we expect mix will basically negate those menu price changes. So no net check, just the benefit or the impact of traffic flowing through to the comp number, if you follow me through all that. Operator: Ladies and gentlemen, we have reached the end of the question-and-answer session. And I'd like to turn the call back to Mr. Dave Pace for closing remarks. Thank you. David Pace: Okay. Just quickly, thanks, everybody, for joining the call. We appreciate it, and we look forward to giving our next update after the fourth quarter. So thanks, everyone. Talk to you soon. Operator: Thank you. Ladies and gentlemen, that does conclude today's conference for today. Thank you very much for joining us. You may now disconnect your lines.
Operator: Ladies and gentlemen, thank you for joining us, and welcome to the Belite Bio Third Quarter 2025 Earnings Call. [Operator Instructions]. I will now hand the call over to Julie Fallon. Please go ahead. Julie Fallon: Good afternoon, everyone. Thank you for joining us. On the call today are Dr. Tom Lin, Chairman and CEO of Belite Bio; Dr. Hendrik Scholl, Chief Medical Officer; Dr. Nathan Mata, Chief Scientific Officer; and Hao-Yuan Chuang, Chief Financial Officer. Before we begin, let me point out that we will be making forward-looking statements that are based on our current expectations and beliefs. These statements are subject to certain risks and uncertainties, and actual results may differ materially. We encourage you to consult the risk factors discussed in our SEC filings for additional detail. And now I'll turn the call over to Dr. Lin. Dr. Lin? Yu-Hsin Lin: Thank you for joining today's call to discuss our third quarter 2025 financial results. I'd like to start immediately by highlighting our recent progress. For GA, we completed the enrollment of the Phase III PHOENIX trial with 530 subjects. For Stargardt's disease, we have completed the Phase III DRAGON trial, and we now look forward to reporting the final top line data by end of this month. The DRAGON II trial have enrolled approximately 35 subjects of our targeted enrollment of approximately 60 subjects, including 10 Japanese subjects. The data from Japanese subjects is intended to expedite a new drug application in Japan. We have been in close communications with Japan's PMDA and Sakigake-designated concierge to ensure that our JNDA is submitted as one of the first countries for market authorization. We also recently received positive feedback from regulatory authorities. Specifically, China's NMPA agreed to accept NDA for priority review based on the interim analysis results from the Phase III DRAGON trial. Additionally, the U.K.'s MHRA agreed to accept conditional marketing authorization application also based on DRAGON's interim analysis results. With the consistent feedback from major regulatory agencies across the world, we are encouraged that the DRAGON trial provides a strong foundation for global submissions and potential approvals. Lastly, we have completed a $50 million registered direct offering and an upsized $125 million private placement with leading health care investors with the potential for an additional $165 million upon full warrant exercise. This investment puts us in a very good position to advance and prepare for Tinlarebant's commercialization. I'll now turn over the presentation to Hao-Yuan. Hao-Yuan? Hao-Yuan Chuang: Thank you, Tom. For Q3 2025, we had R&D expenses of $10.3 million compared to $6.8 million for the same period last year. The increase was mainly due to expenses related to the DRAGON trial and the PHOENIX trial, partially offsetting by the Australian R&D tax incentive program. It was also due to an increase in share-based compensation expenses. Regarding G&A expenses, we had G&A expenses of $12.7 million compared to $2.9 million for the same period last year. The increase was primarily driven by an increase in share-based compensation expenses from the new grant of equity incentive plan this year, which has become higher as our share price and exercise price increased. Overall, we had a net loss of $21.7 million compared to a net loss of $8.7 million for the same period last year. It is important to note that, as I said, the majority of our expense increase came from the share-based compensation, which was about $12.9 million and was not cash related. Our total operating cash outflow for the third quarter was approximately $9.3 million, similar to $8.6 million in the second quarter. Moving to the balance sheet. As Tom shared, we were pleased to complete a registered direct offering and a significant pipe with gross proceeds of total $140 million with potential for up to additional $165 million of our full warrant exercise. With that, at the end of Q3, we had $275.6 million in cash, liquidity from time deposit and U.S. treasury bills. We have made significant progress toward our key milestone year-to-date. We sincerely appreciate the continued trust and support from our shareholders. Our balance sheet remains strong and is expected to provide sufficient funding to support our clinical trials and preparation for commercialization. We are well positioned to achieve our future objectives. With that, I'll turn the call back to the operator for Q&A. Operator? Operator: [Operator Instructions]. Your first question comes from the line of Yi Chen with H.C. Wainwright. Yi Chen: So can you tell us whether you have submitted the application to the regulatory agency in China and U.K.? And if not, when do you plan to do so? Yu-Hsin Lin: No, we have not. We plan to submit our first half next year. As you can see, there's a couple of regulatory agencies that has given us the green light to submit, whether it be based on interim analysis or waiting for the final report for the DRAGON study to come out. We want to maintain the consistent data package across all regulatory agencies. And therefore, the time line for that will be first half of 2026. Yi Chen: Got it. and can you also provide us with the current amount of shares outstanding after the most recent announcement. Yu-Hsin Lin: Hao-Yuan, this probably a question for you. Hao-Yuan Chuang: Yes, I think somewhere like the total outstanding shares, I think list on the recent S3. I think somewhere like $35 million. Operator: Your next question comes from the line of Bruce Jackson with Benchmark. Bruce Jackson: Following up on the last question about the international submissions. When do you think you might be submitting the application in Japan? Yu-Hsin Lin: Actually, we are still in discussion with Japan on how the -- basically the different modules that we need to submit with Japan. We're still going through this with Japan. So the expected time line will be first half. But given that we have several countries that we need to prioritize, we still haven't had a -- we still need to wait until the data comes out and then prioritize which countries will be submitted first. Certainly, Japan is up there. But having 3, 4 countries submitted at once, we definitely wouldn't have the bandwidth to handle all those submissions and getting questions from regulatory agencies across several regions. So we still haven't had the list of where to prioritize first, but certainly FDA is one of the first authorities that we need to submit first. So yes. So I don't know if that answers your question, but at this point, we've got several that we had a green light to submit, including Japan. Bruce Jackson: Yes. Okay. Then turning over to the PHOENIX trial. Are you going to have an interim analysis that is structured in a way that was similar to the DRAGON trial. So we're going to be testing for either futility or for adequacy of the sample size? Yu-Hsin Lin: Yes, we do. So at this point, we have an interim analysis planned for next year, probably around second half next year. But regarding the -- how we're going to go about that, I probably will refer to Nathan. Do you have a better idea on the structure of the interim analysis? Nathan L. Mata: Very likely, it will be a sample size reestimation as we did for DRAGON. Same sort of scenario where we set up a conditional window specifically refer to as a promising zone to look for efficacy trends within that window to determine whether or not we can supplement the sample size with additional subjects. Bruce Jackson: Okay. Super. Then last question for me. The SG&A levels have been moving around a little bit with all the milestone payments. What should we be assuming as kind of like the baseline level for SG&A expenses going forward? Yu-Hsin Lin: Hao? Hao-Yuan Chuang: Well, Bruce, that's a good one, but it's also a little bit hard to estimate at this point of time. As you can see, we are starting to prepare for commercialization. So we're expanding the team now. So we don't have a clear -- and also many of that will involve some ESOP as well. And ESOP has become a big moving factor based on the share price on the actual expenses being recognized on the income statement. So we have a better understanding about the cash flow. But for the income statement itself, the G&A, it's a little bit hard to estimate a correct number given it was so much related to the valuation of the ESOP. Operator: [Operator Instructions]. Your next question comes from the line of Michael Okunewitch with Maxim. Michael Okunewitch: I just wanted to ask a couple of questions on your commercial preparations. In particular, what steps are you taking right now to prepare for a potential approval and launch? And then how are you prioritizing different regions since the DRAGON trial should serve for several different geographies? Yu-Hsin Lin: Sure. Hao, do you want to give more details on this? Hao-Yuan Chuang: Sure, sure. Well, apparently U.S. is the focus given the potential size, but we are applying for NDA in all the regions. Probably U.S. or some smaller single market such as Japan will be relatively easy for us to focus on. And we remain open to seek cooperation and partnership for all the other regions. Yes. But for now, I think we're targeting on those markets that we think will be easier to take the handle by ourselves. Michael Okunewitch: And do you have a sense of how large of a sales force you would need for the U.S.? Yu-Hsin Lin: Sure. We probably will start with 20 people and then maybe up to 40 people. Michael Okunewitch: And then one last for me, and I'll hop back into the queue. Just given that you have raised this additional $125 million and you have a pretty strong cash position, are you anticipating that your current cash should be sufficient for the commercial preparation and launch of Tinlarebant? Yu-Hsin Lin: Well, that's a good question. So we estimate it could be probably about $200 million to commercialize Stargardt in the U.S. That's how we designed the recent transaction with additional cash coming from the warrant. So potentially, yes, we think we should have enough. But of course, that is just estimation. Operator: [Operator Instructions]. Your next question comes from the line of Marc Goodman with Leerink. Marc Goodman: Yes. Can you confirm the U.K. basically ask for the same interim information that you sent to the U.S. FDA that got you the breakthrough designation. I mean is all of this the same exact information and in China as well, did they get anything different? Everybody got the same information? Yu-Hsin Lin: Yes. So everyone will present the same information. I'll let Hendrik answer those questions since he presented to them. Hendrik.? Hendrik Scholl: Yes. Thank you, Tom. Yes, Marc, this was the same set of information. The type of presentation was different. It was an in-person presentation in Beijing to the NMPA, including a large panel of experts from China. While for the U.K., as an example, this was an online meeting with the agency. But the data set that was the basis for the presentation and the discussion was exactly the same. Operator: There are no further questions at this time. This concludes today's call. Thank you for attending. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to the Legacy Housing Corporation Third Quarter 2025 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, Curt Hodgson, Co-Founder and Executive Chairman of the Board. Please go ahead. Curtis Hodgson: Good morning. This is Curt Hodgson. I'm here with Kenny Shipley, my legacy Co-Founder and our interim CEO. Thanks for joining our third quarter 2025 conference call. Ron Arrington, our Interim Chief Financial Officer, will read the safe harbor disclosure before we get started. Ronald Arrington: Before we begin, I'm reminding our listeners that management's prepared remarks today will contain forward-looking statements, which are subject to risks and uncertainties and management may make additional forward-looking statements in response to your questions. Therefore, the company claims the protection of the safe harbor for forward-looking statements that is contained in the Private Securities Litigation Reform Act of 1995. Actual results may differ from management's current expectations. Therefore, we refer you to a more detailed discussion of the risks and uncertainties in the company's annual report filed with the Securities and Exchange Commission. In addition, any projections as to the company's future performance represents management's estimates as of today's call. Legacy Housing assumes no obligation to update these projections in the future unless it is required by applicable law. Curtis Hodgson: Thanks, Ron. As you can tell from the word interim, appearing in 2 of our titles, we've had some senior turnover recently. Our prior CEO, CFO and General Counsel departed last month. Fortunately, Kenny and I have remained active in the business through these years and are excited to reengage in the day-to-day operations of profitability -- of profitably manufacturing and selling mobile homes. Ron Arrington previously served as our CFO and has led our development team recently. So we haven't skipped a beat in that section. I'm going to turn the call over to Ron now for a review of our third quarter performance, after which, I will speak briefly with our thoughts and some additional corporate updates, and then we'll open the call up for questions. Ron? Ronald Arrington: Thanks, Curt. Let's get straight to the numbers. Home sales decreased by $1.4 million or 4.8% during the 3 months ended September 30, 2025, as compared to the same period last year. The decrease was primarily driven by a decline in sales to mobile home park customers utilizing Legacy's commercial loan program as well as a decline in sales to independent dealers participating in Legacy's inventory finance program. These drops were primarily offset by increase in direct sales to customers and revenues from Legacy's company-owned heritage outlets. Net revenue per unit increased approximately 8% to $68,500 and from $63,500 year-over-year. At the end of the second quarter of 2025, Legacy increased prices to mitigate the impact increases in raw material cost and tariffs on Chinese goods. Curt can speak later as to these other steps Legacy is taking to address these challenges. Product sales remained relatively flat in the year-to-date comparison for 2025 versus 2024, declining slightly by $1.2 million or 1.3%. The sales mix changed with declines in direct sales and mobile home park sales offset by increase in company-owned retail store sales and New York inventory finance program sales. The shift in mix along with price increase explains why Legacy's net revenue per unit increased 13% to $68,600. Consumer MHP and dealer loan interest income increased to $10.9 million, up 5.4% during the third quarter as compared to the prior year. This increase was primarily driven by increases in the consumer loan portfolio and higher interest rates from MHP loans converting to variable rates per their loan agreements. Consumer NPH and dealer loan interest increased to $32.4 million, up 5.3% for the 9 months ended September 2025 as compared to 2024. Over the prior 12 months, Legacy's consumer loan portfolio increased by $21.4 million, up to $188.1 million, up 12.8%. During the same period, Legacy's MHP note portfolio remained essentially unchanged at $201.5 million. Dealer inventory finance loans decreased $1.4 million to $30.3 million, down 4.4%. Other revenue consists primarily of contract deposit foreclosures -- forfeitures, dealer consignment sales, commercial lease rents, portfolio service revenue and land sales revenue decreased by $3 million or 79% for the third quarter of 2025 compared to the third quarter of 2024. This decrease was primarily due to a significant land sale, which occurred during the third quarter of 2024 as well as a decrease in portfolio service revenue between comparison periods. For the 9-month comparison period of third quarter '25 versus third quarter 2024, other revenues declined $4.1 million or 63.1% due to the aforementioned sale as well as a significant reduction of 2025 forfeiture income on MHP deposits for canceled contracts. The cost of product sales increased $1.6 million or 7.5% during the 3 months ended September 2025 as compared to the same period in 2024. During this same comparison period, product sales declined $1.4 million or 4.6%. This increase and cost of product sales is primarily related to a sizeable increase in raw material cost and tariffs offset by a decrease in delivery, shipping and setup costs as we ship fewer units. I know tariffs are a particular interest. So to put them in perspective, they had roughly $1,200 to the cost of a standard floor plan. Product gross margin was 20.28% for the third quarter of 2025, down from 29.2% for the third quarter of 2024. The cost of product sales increased $2.7 million or 4.3% for the 9 months ended September 2025 compared to 2024. During the same period, product revenue decreased by $1.2 million or 1.3%. The increase in cost of product sales is primarily related to increases in raw material costs, tariffs and delivery shipping and setup costs, offset by a decrease in labor and factory overhead cost. Product gross margin was 27.7% for the 9 months ended September '25 compared to 31.6% for 2024. Selling, general and administrative expenses increased $1.3 million or 20.6% for the 3 months ended September '25 compared to '24. The increase was a result of a $900,000 increase in legal expenses, a $500,000 increase in loan portfolio loss expenses and a $0.5 million increase in professional and consulting fees, partially offset by a $600,000 decrease in the company's self-insured health benefit fan. SG&A increased $2.7 million or 15.5% for the 9 months ended September 2025 compared to 2024. The increase was primarily a result of a $1.7 million increase in loan portfolio expenses, $800,000 increase in legal costs, a $700,000 increase in service and warranty expenses and a $400,000 increase in professional and consulting fees, offset by a $700,000 decrease in the company's self-insured health benefit expenses and a $400,000 decrease in corporate and general payroll expenses. Other nonoperating income decreased $6.9 million or 72.3% over the 9-month comparison period ending September '25 compared to September 2024. This was primarily due to a significant onetime transaction during the 2024 period. The 2 largest were a $4.9 million fair market value adjustment and loan restructuring gains and a $2 million of liability of accrual reverses related to various completed MHP contracts. So that's the bottom line for a tough quarter, net increase -- net income decreased $7.2 million or 45.3% to $8.6 million compared to $15.8 million in the third quarter of 2024. Net income margin was 21.4%, down from 35.7% for the third quarter of 2024. For the 9 months ended September '25 compared to '24, net income declined $13 million or 28.7% to $33.6 million from $47.1 million. Net income margin was 26.6% for the 9 months ended September 2025 compared to 36.3% in 2024. We ended the third quarter of 2025 with $13.6 million in cash. In July of 2023, we closed a new revolving credit facility with Prosperity Bank. The facility is for $15 million with a $25 million accordion feature. It is secured by our consumer loan portfolio and currently has a 0 balance. As of September '24, we had approximately $570,000 in cash and equivalents and a balance of [ $2.6 million ] on our line of credit. So you can see that despite the lower sales and net margin, we have continued to strengthen our balance sheet. Legacy has delivered a 9.5% return on shareholders' equity over the last 4 quarters ended September '25. And at the end of the third quarter, Legacy's book value per basic share outstanding was $21.85, an increase of $1.90 since the same period of 2024. I'll now turn things back over to Curt. Curtis Hodgson: Thanks, Ron. So let's quickly discuss the market, followed by our financial performance and updates on key issues and strategic initiatives. The latest data shows continued slowing in the industry as a whole with the Texas Manufactured Housing Association reporting a seasoning adjusted drop of 3.8% in August, and down 6.1% on the raw total from September of 2024. Despite the continued housing affordability problem in our markets, macroeconomic headwinds, such as falling consumer confidence, large tariff rises necessitating price increases are somewhat restraining growth. On the bright side, we held our big annual show in September in Fort Worth. The show was one of the most successful that the company has ever had. Orders booked there will ensure higher production rates for the fourth quarter over the third quarter and carrying on well into the first quarter of '26. Dealer and park customers ordered homes at our Fall show. I'd kind of like to dive into some macro topics for a minute. So I think we're not happy with these results, and I think that probably explains why the changing of the guard, sort of speak, happened last month. Our retail and dealer side of our business saw sales falling for the last year or more. Our community park side of the business saw sales falling for the last year or so. Heritage, our retail side actually had increased sales and our finance division continued to be profitable, very much so low, but somewhat increasing charge-offs due to more foreclosures and lower resale prices. As of September 30, I think 99% of our mobile home notes are better were performing as agreed and about 97.5% of our consumer loans were performing as agreed and by that, we mean are they within 30 days of being current. We monitor these numbers are monthly and are confident that our portfolios are very strong. We have begun to feel the effects of ICE enforcement on our labor force and on customer demand and on the performance of our retail portfolio. I don't think it's real significant but we definitely are feeling the effects of fewer Hispanic customers in our market, particularly in Texas, but I think it's also true in the Southeast. We began hiring at key positions. We had kind of a lull in hiring. I think our past management can't really be credited with hiring anybody of consequence. We've already hired a new General Manager for Fort Worth. We're -- as you know, Norman Newton is not with the company. He was released earlier. We are actively looking for a new CEO with industry experience. So our hiring is since in the last few weeks when Kenny and I got back about, we're focusing on filling the seats with some quality people. Our working capital is too high, and I've been noticing this in our financials for some time. We have too much raw material, probably double of what we should have and our finished inventory is also high. At any given time, we have as many as 200 houses in the yard, which is probably double of what it should be. Our finished good inventory was $24 million, including work in progress at the end of the quarter. I think that's probably double of what it should be. So if we can reduce our working capital or, let's say, our unproductive working capital, that will free up $10 million, $20 million to be reinvested into the business. We remain in a strong cash position. We'll be able to complete the AmeriCasa purchase without incurring any debt. On a positive, I don't know who all is on the call and what their knowledge of Texas is, but the data centers in Texas are all underway. There's going to be at least 5,000 housing units probably created in the next 24 months to tend to that -- to those housing needs, almost all of which will come from the 30-plus manufacturing facilities located in the state of Texas, ours being a couple of those. So our business in Texas anyway looks like it's going to be really good for the next year or 2. I'd like to discuss a little bit about the AmeriCasa acquisition. We've known this partnership between Jeff Gainsborough and Norman Newton for at least a decade. They've been a customer of ours. They've had a portfolio with us the whole way. We're basically buying them out of everything they have in the mobile home business and Norman Newton has agreed to come to work as a Director of Revenue for the company. He has particular expertise in passively or should I say, absency managing of dealerships, which has really -- been a real challenge for us. He has a vibrant dealership that we're acquiring in Houston and it doesn't have an owner on the premises and he's proven that his model works pretty good, and we hope to be able to use his model over our 12 other locations that we have at the retail level. We are acquiring some other things in this process. It's kind of a hodgepodge of things. The net result is about $9 million or $10 million will be allocated among the retailership that we're acquiring in Houston, the nearshoring that we're affiliating with in Colombia, which I visited myself and the what we call the home FX model. which is Norm's proprietary system, including software of managing retail locations remotely. So we're looking forward to that, integrating that with our system so that we can do more retailing at our company stores. I think that the likelihood of that is extremely high. We continue to deliver strong operating margins and consistent profitability. In fact, we've never had a quarterly loss in our entire history, not just from the 6 years plus that we've been public, but for the -- actually, the 40-plus years that Kenny and I have maintained our partnership. The loan portfolios are on track to deliver about $40 million straight to the bottom line this year. As far as valuation, Kenny and I started this company in '97 with about $700,000. We took in about $60 million of outside money when we went public and the combination of that has now grown to $522 million over the 20-plus years that we've done this, and we'll continue to grow that book value. That's pretty much after taxes. We make it. We say that we invested, and that's what we've always done, and that's the basic value that we'll be getting back to. I think we got a little distracted over the last couple of years, and we intend to get back to doing what we do, which is selling a good product for a fair price, financing and distributing it in a variety of ways. Our book bag consists mostly of finance notes realize that, that book value wasn't ever in place at any given time. It's what we evolve to. We basically finance notes to enhance our own yields, but we like to finance business from a return on investment point of view, too. The Norm portfolio that we're acquiring, which is a little over $10 million notes, carries interest at over 16%. And we have experience with his portfolios because we have 1 in common with them. It's always performed very well. And we expect that portfolio we're acquiring from Norm will perform well and make everybody money. We published our book value per share each quarter. As Ron mentioned, as of September 30, our book value is $21.85 per share. We've also bought back through time. Ron might be able to quantify this, I don't know, but I want to say it's somewhere in the neighborhood of $20 million or more of stock, which sits on our balance sheet as treasury stock. With our stock trading essentially the same price, we're looking at this changing the guard as an opportunity to maybe reinvigorate our growth and innovation, which should increase profit margins and create a stock premium. On the flip side, if the stock continues to trade somewhere around book value, we will use our own liquidity as usual to repurchase shares. So I think the bottom is fairly well protected subject to our limitations of how much we can buy back in any given day. And as you know, with the new buyback laws, every time we buy back shares, we do pay, I think it's a 1% tax to the federal government. I believe we can continue building shareholders' equity even in this high interest slowing growth economy and then our share price will begin to reflect this. I think when we get the uncertainty behind us, we'll get back to some reasonable PE ratio. Any strategic moves are icing on the cake in my opinion, this is a great time to be an owner of a legacy, particularly if you're in at today's price as you'll part of the company that's never lost money in any year since its founding. As for affordability is now front and center in the U.S. in housing. We are positioned to provide that affordable housing to thousands of family over the coming years. And for those of you that are not from Texas, Texas is a nice place to be right now. The economy is still doing great. And we haven't had any hiccups as far as the economy is concerned. I want to address a couple of questions on e-mail that was sent to me recently. We have a lot of real estate on our books. The Austin project is coming along nicely. It's a little slower than we like. We have 3 or 4 hurdles before we're up and running. The wastewater treatment plant needs to be installed, which will not happen until probably second quarter of 2026. We're also working on getting access from the state highways that adjoin our property. The infrastructure in the middle of the property is coming along really well and will be very far along by the time we solve those other 2 problems. We are trying to negotiate with the school assistant to put [indiscernible] in the middle of it, which will be the primary amenity of the parcel. As for other real estate we own, we are not -- we have no shovels in the dirt anywhere else. It is all entitled to be mobile home properties. It's a little bit challenging when the property is worth 2, 3, 4, 5x more than you paid for it. Just because we bought it for $10,000 an acre to make a mobile home park out of it doesn't mean we would come to the same conclusion now that it's valued at $40,000 or $50,000 per acre, which is the case in several of our properties, we are entertaining divesting ourselves of the properties. I would estimate of the 6 or 7 remaining properties on the books besides faster accounting, we probably have $4 million to $5 million of gains should we choose to liquidate those properties. And if anything, that's on the low side. I was asked about the long-term margin targets for the industry. I think a lot of companies have been absorbing the increase in costs caused by tariffs and other factors. I think when they start looking at their financial statements like we just did ours, we'll probably all be in likestep with each other to slowly increase prices for the products that we're marketing. Right now has been pretty cut throw from 1 manufacturer to the other. And I'm hoping that when people realize that the tariffs are not temporary, the labor increases that we've paid, labor wage increase that we're paying are not temporary. I think we probably need to reevaluate the operating margins in the industry as a whole. That's pretty much it. I can probably turn it over to question and answers or questions. Operator: [Operator Instructions] Our first question comes from the line of Daniel Moore with CJS Securities. Dan Moore: Appreciate the color and thanks for taking questions. Maybe start with the AmeriCasa, the AmeriCasa asset purchase. Just talk to their revenue model, what are the features of the FutureHomeX platform? And how is their software expected to enhance sales growth? Curtis Hodgson: Well, we weren't really looking at their financials on the purchase. We were intrigued by the HomeX product. We've experimented a little bit with it, several of our dealers are using it. They pay a royalty to use it. If we can find a way to manage these locations remotely, whether it be from Dallas or Houston or Bogota, then we will solve a lot of the mystery. Our manufacturing peer group all maintain their own retail locations, and they struggled with how to get volumes up as well. Industry-wide, I would guess that the average retail location that is affiliated with the manufacturer sells 2, 3, 4 mobile homes per month. 2 is maybe breakeven, 3 is profitable, 4 is highly profitable. So basically, we're just trying to get our sales up on a location basis, the primary reason we made a deal with Norm was to have access to that remote management technology. And I think that's it. As far as there's 1 lot in Houston, it shines, he sells roughly 10, 12 hours a month, every month, which is more than double what we sell at our locations and Kenny and I have both visited it, is pretty impressive in that front. I mean, are we paying a little bit of premium, it kind of depends on what the management system is worth. If it is worth say, $5 million, which is what I kind of put on, I would look at it as though we paid a fair market value for all the assets we're acquiring from -- on the AmeriCasa thing. Of course, we won't know until we integrate it with our own model to see what it is, but I'm very optimistic that, that acquisition is going to help us sell more direct to retail consumers. Dan Moore: Really helpful. And just making sure I heard correctly, the size of the chattel mortgage loan portfolio that you're acquiring, I heard the 16%. Was it $30 million? Or was that off, I'm sorry. Curtis Hodgson: The portfolio -- the deal is when we close we'll acquire all loans in that portfolio that are current defined by within 30 days of currency. And we think the face value of that part of the transaction will be $10.8 million, plus or minus a couple of hundred thousand. And the effective interest rate or the interest rate on that is just over 16%, pretty similar to our portfolios. It's almost exact and that piece is right up our rally. We can absorb it rather easily, and I have confidence that it will be accretive to our financials. Dan Moore: Got it. And then you mentioned in the press release you expect normal production out of the Texas manufacturing facilities through year-end. Obviously, great to hear the encouraging show that you had at the end of September in Fort Worth. What does kind of normal mean maybe relative to Q4 last year and just talk about what your expectations are from the Georgia plant as well over the next quarter or 2? Curtis Hodgson: I don't have Q4 in front of me from last year, but I think we'll be through most of the Q4, which now, of course, we're a month into, I think we'll average 6 to 7 in Texas per day and probably 2 to 3 in Georgia. So let's call it company-wide 8 to 10 and I don't really know I'd have to dig out to see how we did in Q4 last year. 8 to 10 is profitable, so 1 shareholder elegantly pointed out, it doesn't look like the production of sales of mobile home has made money in Q3, and that is correct. But in Q4, that part of the business should contribute pretty nicely to our earnings and the first quarter looks even better than that. Dan Moore: Perfect. And then lastly, you mentioned that the industry pricing have you taken or plan to take additional price increases? I know it's a tough environment, but to offset some of the increase in raw material costs and tariffs over the next 1, 2, 3 quarters? And I'll jump back in queue. Curtis Hodgson: Well, we went first. We had announced price increase in June, and I think we were first in the industry to do it. And it may have dissuaded some of our regular buyers from buying. But since then, our competitors have joined into slight price increases we're talking overall, probably 3%, 4% has been the price increases. But again, we're all trying to use up excess capacity, 34 plants operating in the State of Texas, probably only 3 or 4 of them operating at capacity. So we do get out on pricing and financing features and all sorts of things, I mean I heard recently have a manufacturer that was offering 1 year free flooring dealers if they buy a house, we're concerned about profitability. We were able to make hay while the sun shines during COVID, but we don't intend to give it back by building them all a home unless we can make a margin on it. It's tempting to say, okay, let's just keep the factory running or whatnot, but we're not going to be giving back this tangible book value we have. I don't see the market declining, especially in Texas with the data center workforce housing lift that we're going to be having in the next 24 months. I am a little more concerned about Georgia and where its -- where its unit sales are going to come from in the Southeast. Operator: Our next question comes from the line of Alex Rygiel with Texas Capital Securities. Alexander Rygiel: A couple of quick questions here. So are you looking at other acquisitions at this time? And can you talk a bit about expanding your company-owned retail stores? Curtis Hodgson: Well, I mean, I would say that if we do any acquisitions, it will dovetail well with the one we just did. And the one we just did is designed to increase our ability to profitably distribute through company stores. So I think you hit the nail on the head, Alex, that there is an acquisition that would probably be retail centers in our market areas. The independent dealers are getting difficult to make money on. And besides that, a lot of them are aging out. There are [indiscernible] ages, very few retail centers independent retailers are owned by anybody under 50 years old. So that [indiscernible] competitors and then may be more of a push to Internet sales, we may be emphasizing used out sales. But yes, we want to be more in the retail business than we have in the past, very small percentage of revenue has been from our own retail centers, and I would hope to grow that to maybe as much as 50% by the end of next year. Alexander Rygiel: Very helpful. And then secondly, can you talk a little bit more about your kind of consumer loan portfolio and how it's performed kind of more recently how the trends have been playing out over the last few months and if there's been any kind of notable change there? Curtis Hodgson: We don't have much notable change, but there is anecdotal evidence. We had the benefit of everything that was on our books pre-COVID, was at prices substantially below current prices. So every mobile home loan on our books that was pre-Covid, I had the benefit of being right side up, so to speak, from a consumer's perspective. So every time one did repo, we actually made money on it. I mean if the guy owed $30,000 on his mobile home and turned it back to us, we sold it for $40,000. So for years, when we did repo one, it was actually kind of a windfall but since COVID those notes that have been created in the last 4 years don't have a corresponding benefit from price increases. So now when we repo a note that was made, say, in 2022, when we go to sell it, if they owe us $40,000, maybe we can only sell it for $35,000 and we have a little bit of impairment to take on it. So -- so the recovery rate on the repos is not as good as it once was. But let's just say, my opinion is more realistic that if that onetime nearly doubling of prices that we had during COVID kept us from having any losses when we did repossess something. And now as far as the percentage that are in trouble, and this is kind of the good news is we just don't have more than a couple of percent at the retail level that are problematic, which is still historically a low amount. Anecdotally, we're in Texas, I live here. Kenny lives here. And we all know somebody now that's subject to deportation or a relative that is subject to deportation. And a lot of our notes and a lot of our basic demand comes from and for lack of a better word, an immigrant market. So we're kind of expecting some difficulty there, but it hasn't shown up in the numbers yet. Alexander Rygiel: That's good to hear. And then circling back to capital allocation. Through the years, like you mentioned, you have been a buyer of stock. Can you talk about that a little bit more? And also, have there been any insider repurchases? Or has there been an open period for insider purchases at all? Curtis Hodgson: I haven't bought any, and I don't think Kenny has bought any. Unfortunately, from an insider point of view, that's pretty much the only visibility that we do on our Form 4s. In our circle of influence, which is not an insider, I do know of at least 1 party that's bought pretty heavily in the last couple of months. And I don't know of any party in my own circle that has been a seller at these levels ever since, say, December '24. I don't know anybody that's even considered being a selling -- seller that I have much influence over. So I would say at what level will we protect it? Well, I don't make the decision. Kenny doesn't make the decision. We kind of make a decision when we talk to each other, we do have the authority to make the decision. And as you know, the company can't -- for instance, we can't buy today, we're in blackout. . We could buy later in the week. It's always a little bit discretionary when we could buy. But when we're not in a blackout, I think you can assume any time that we think it's a good investment, we'll be there with our cash resources. Not only do we have cash in the bank today, but we have an unused $50 million loan that I think it's still pretty solid with price parity. So between -- and we cash flow money. All the improvements to our land in Bastrop County have all been paid for with free cash flow. And I think we're now pressing about $30 million of money we put into Bastrop counting. And I would guess by the time it's all said and done, we'll put another $20 million to $30 million into Bastrop County and then we'll have room for 1,100 mobile homes, be a thing of beauty. We'll probably keep a couple of days a month or 3 days a month active in 1 of our factories by satisfying that one property's demand. Alexander Rygiel: Sorry. And 1 last question as it relates to Bastrop County. What's your best guess right now as to when you might start to sell homes? Curtis Hodgson: We have 110 lots that were designed to be 3 simple lots that we would begin marketing as soon as we solve just 1 piece of the puzzle, and that's connecting to state highways on 1 side or the other. They would go under market. The beauty part about that is when we did this, we thought we'd be selling those things for $70,000 or $80,000 a piece. And the current value of those lots is retail is probably more like $120,000 or maybe even $130,000. So in a way, not selling them for $80,000 has yielded us an above average rate of return just by not selling them. But anybody has a lot, 0.75-acre lot in this market is getting well over $100,000 for a place to put a mobile home, sometimes $130,000. We're kind of expecting now to get $115,000, $120,000 when we go to market on those. And we'd like to get that going if nothing else to fill it up with Legacy that we build at our 2 plants in Texas. Operator: Our next question comes from the line of Mark Smith with Lake Street. Mark Smith: First question for me. I just wanted to ask, you talked quite a bit about kind of demand and production in Texas. Curious if you can just give us your thoughts around kind of Georgia and the Southeast, how that market is doing and kind of how things are running at the plant? Curtis Hodgson: Like you probably got this Mark from my mood when you -- when I say just a minute ago or my tone of voice. I am not that confident in the Southeast and know that we can carry on at 2 or 3 a day, but that's a very large manufacturing facility and doesn't really make sense at 2 or 3 a day. So we've got to find a way to develop distribution in that market. The mobile home park model is not as good as it was. People now are paying a lot more for the house. They're paying a lot more for the home. They're paying a lot more to set it up. They're paying more hook it up the utilities. And unfortunately, the rents that they typically get when they put 1 of their mobile home parks haven't increased accordingly. So the model is not as solid as it was, say, 5 years ago, which was a big part of what we built in the market when everybody built filling up a bunch of mobile home parks in a model that did make sense. When all those prices were down and the rents were pretty much the same as they are today. So the underlying demand in the Southeast has got to be to the guy who's going to live in rural America or some sort of opportunistic disaster housing, which is oftentimes happen in that market that we participated in. If you assume that park sales is going to be much lower than historically -- than it has been historically, demand has to come from direct consumer sales for privately owned land or from some sort of disaster relief. So if you can tell me how many hurricanes there will be in the Southeast next year, I could probably give you a pretty good feel for how good the markets are going to be. But -- and that's really kind of the demand there. As you know, the Southeast doesn't have the tailwinds that Texas has but it has better tailwinds than many parts of the country. So the demographics in all those states that we serve in the Southeast are still positive. And we know it's not because of birth rate. it's positive because people are still moving to Georgia and there's still moving to North Carolina and they're still moving to Florida. So there's an immigration from 1 part of the United States to another that goes on in that market. So we get some positive demographics there. And we sell to operators that are taking advantage of that. I talk to them all the time. They're struggling to make the economics work. Now if interest rates come down a little bit and there are models instead of being, say, at a 6% cap rate or at a 5% cap rate, then they can make more sense out of it. And we've had a nice reduction in as it relates over the last month or so, they actually punished mobile home stocks because they thought that would make site-built housing more attractive and maybe it does. But it sure helps communities that are trying to make sense out of community-owned rentals and community-owned mobile homes. When their rate -- their borrow rate goes down a point, it really helps their model quite a bit. So I know this didn't address the answer that you want or a specific answer. But I think I made it clear that there's only 2 ways to really do well in the Southeast, the community model and disaster relief housing, as the likelihood that all those plants in the Southeast, which there's roughly 20 operating in that market that we compete against, there's not enough demand at the retail level to keep 20 factories working. So I can see the industry as a whole, making some difficult decisions in the Southeast absent getting some disasters next year that they give us more tailwinds. Mark Smith: Okay. And then I did want to ask about gross profit margin. I know you don't give guidance, but just kind of any insight you can give us on the outlook there, maybe where the pressures are coming? I know you discussed tariffs, but I guess maybe 2 things here. Do you think that you've seen kind of topped out the inflationary pressure, whether it's from tariffs or anything else? And then two, do you think that you've taken ample price to cover the pressure that you've seen or could see? Curtis Hodgson: Well, I think the price increase that we did are going to cover the effects of tariffs, in particular. And the world believes that tariffs are a one-time inflationary event. And if that's the case, then the price increases may be over. But we've also increased our line workers' wages by 10% this year. And we've -- obviously, the Chinese imports have gone from a 25% tariff to as of what time is it 10:00 -- no, 11:00. As of 11:00 a.m. today, the tariff rate currently is 45%, but that could change by 2:00 this afternoon. So I mean, it moves around. So the net result of our cost of goods sold on just what happened last week, decreasing the tariff from 55% to 45%. Our cost of goods sold will go down roughly $1 million with just that 1 happening just like they went up before when they went up that much. I don't really look at an inflation as something that either does happen or doesn't happen, it's 70 years old, I can remember $0.04 stamps, I can remember $0.29 gasoline. I think inflation is inevitable. At what pace, that's the only thing that we might disagree on. But I would guess that our average wholesale price now is about $60,000 per floor. And I think that if I was to give the same earnings call, say, 24 months from now or 2 years from now, I think that would be -- it's going to be closer to closer to $70,000 than $60,000. The margins are real simple. Financial statements sometimes make it seem more complicated. You got a selling price, you got materials, you've got labor, you've got allocable overhead. On the materials side, all factories are pretty similar. I would say 80% of the capacity buys their materials within a few percentage points of each other's. Labor, there's quite a disparate labor deal kind of depending on the complexity of the product you're building. If you're building a very simple product, you might get labor all the way down to $4 or $5 a square foot. And if you're very complex product, you're going to get labor in the $10 to $15 range per square foot. And the only thing that could help that, the more you build that's exactly the same, the more productive the assembly line gets. As far as allocable overhead, that's very specific about what we're allowed to do on a GAAP basis, purchasing agent can be allocated but a CEO can't. So while our gross margin may be suffering a little bit over the next 12 months, our net margin because now we're talking about eliminating SG&A or controlling SG&A. While the founders were gone, SG&A went up. I think Ron was very clear in his outline on that. With SG&A up 15%, 16% at a time when sales were down, I think you will see the immediate reversal of that trend and some relief in probably the fourth quarter followed by a significant release in the first quarter on SG&A as a percentage of sales. I hope that puts a little color on your question. Mark Smith: That's helpful. If I can squeeze in one more. Just I don't know if you're able to talk at all about kind of numbers behind the acquisition and potential impact on the balance sheet just as far as the size of this acquisition? Curtis Hodgson: It's simple. We're on a call that's available to the public. We didn't give much detail on Friday's announcement. But I don't mind telling you what it is. This is roughly a $22 million deal, all in, about half of which is retail paper and the other half are the assets that I've described. We wouldn't be doing this if we didn't think it was going to have a positive aspect on the company. I was just guessing I would guess that our retail selling as a company, which is currently about 250, 300 units a year, I would expect that to be 50% higher, maybe 60% higher in 2026 than it was in 2025. If that doesn't come to pass, then the acquisitions, the purpose of the acquisition, didn't get accomplished. It's really that -- that's the jewel. And then everything else we bought pretty much what we would be willing to pay on a one-off basis at any time. We have a 28% interest in the mobile home park. As part of the deal, we know that market really well, it's worth a little over $1 million or more to us. So a lot of what we acquired was hard asset value with the only uncertainty being how well can we integrate the Columbia presence and the HomeX model into our retail system. If that turns out to be what I think it is, I would think our retail sales will go up by at least 50%. And if we really perform well, it could even be double in 2026 relative to 2025. Let's face it, we make a lot more money whan we can retail one than we can make on selling it wholesale for $60,000. The margin in this industry is about 40%, 50% up. So if we build it for $60,000, we retail it for $90,000 and the more that we can retail the better. I think Ron mentioned that a good part of the reason why our average price per home went up is because we retailed a higher percentage of what we built in 2025 than we did in 2024. But it was just nominal compared to the leap that we're planning on taking with this acquisition. This acquisition is pretty much what can we do at the retail level to improve that part of our distribution filling the gap that is kind of leaving us because of the park problems that I referred to earlier on the call. Mark Smith: And just confirming within that kind of increase within retail stores that's including the site that you're buying in as your retail location as well as kind of improvements in retail stores at the existing heritage sites today? Curtis Hodgson: Correct. Yes. We probably retail -- and I'm just guessing because I know we do monthly, so I'm going to go ahead and multiply by 12, I guess do that in my head. I'm going to guess we're about 300 now. The Houston location itself could add 100 to that going forward and then the integration of the systems into our existing retails should add another 100 to it. And on a good day, maybe even another 200. So what I'm saying is we should be up 60% in '26 versus '25 in the number of units we retail and it could be as much as 100%. There's a little more guidance than what you asked for, but on the other hand, the press release on acquisition was a little bit gray, let's put it that way. So now you have color on it. And we haven't closed it yet, so you never know it could blow up, but it's a binding contract. The contingencies are being put together and we expect to close before Thanksgiving. Operator: This concludes the question-and-answer session. I would now like to hand the call back over to Curt Hodgson for closing remarks. . Curtis Hodgson: Well, it's a much longer call than I expected. I had to have a bunch of it, but I think I did a reasonable good job. I'd like to thank everybody who joined in today's earnings call. We appreciate your interest in our company and look forward to delivering you better results in the future than we did in this last quarter. Operator: This concludes today's conference. Thank you for your participation. You may now disconnect.
Operator: Good morning, everyone, and welcome to BKV's Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. [Operator Instructions] I would now like to turn the call over to your host, Mr. Michael Hall, Vice President of Investor Relations. Please go ahead. Michael Hall: Thank you, operator, and good morning, everyone. Thank you for joining BKV Corporation's third quarter 2025 earnings conference call. With me today are Chris Kalnin, Chief Executive Officer; Eric Jacobsen, President of Upstream; and David Tameron, Chief Financial Officer. Before we provide our prepared remarks, I'd like to remind all participants that our comments today will include forward-looking statements, which are subject to certain risks, uncertainties and assumptions. Actual results could differ materially from those in any forward-looking statements. In addition, we may refer to non-GAAP measures. For a more detailed discussion of the risks and uncertainties that could cause actual results to differ materially from any forward-looking statements, including those associated with the closing of our acquisition of a majority control position in the Power JV, which remains subject to customary closing conditions, including approval by at least 75% of the disinterested shareholders of Banpu Power and the integration of the upstream assets we recently acquired in our Bedrock acquisition into our existing portfolio as well as the reconciliations of non-GAAP financial measures, please see the company's public filings, including the Form 8-K filed today. I would also point listeners to the updated investor presentation posted this morning on our Investor Relations website. We encourage everyone listening to review those slides for further information on our business, operations and results from the quarter. I'd now like to turn the call over to our CEO, Chris Kalnin. Christopher Kalnin: Thank you, Michael, and thank you, everyone, for joining us to discuss our third quarter results. BKV delivered another strong quarter, reinforcing our said-did culture and disciplined execution of our strategy. The third quarter was marked by several notable achievements that reinforce the strength of our business model and accelerated momentum of our closed-loop strategy. I want to begin this quarter by highlighting significant progress in our Power business. At the end of October, we announced that we have entered into a definitive agreement to acquire 1/2 of Banpu Power's interest in our Power joint venture for an equivalent value of approximately $1,000 per kilowatt of generation capacity. At the close of the transaction, which is expected to occur in Q1 2026, BKV will increase our overall ownership in the JV to 75%, giving us over 1.1 gigawatts of low heat rate equity power generation in the ERCOT market. We are thrilled to have reached this agreement to acquire the majority and controlling stake in the Power JV as it's a critical step to advancing our closed-loop strategy and enhances our growth flexibility. I would like to thank the Banpu Power team for their strong partnership in our successful joint venture. We are excited about our ability to drive growth in our Power business. And we are confident that our differentiated business model has ideally positioned us to benefit from the macro energy tailwinds that are driving the U.S. markets. Controlling the Power JV transforms it into a strategic growth engine, allowing us to consolidate results, align strategy and accelerate our ability to create long-term value. Looking ahead to 2026 and beyond, ERCOT's long-term fundamentals remain exceptionally strong. Texas continues to experience unprecedented load growth from AI data centers, industrial expansion and steady residential demand. The state of Texas remains open for business and is proactively facilitating and in some cases, fast tracking interconnections to meet this surge in electricity demand. The passage of Senate Bill 6 is aimed at improving interconnection planning and grid reliability to support this growth. For BKV, this combination creates a durable expanding market for our existing Temple assets and a clearer pathway to secure premium PPAs. Our confidence in the Power business is grounded in the tangible progress we've made in discussions with hyperscalers, data centers and other potential customers. We are encouraged by the unique tailored energy solutions that BKV is able to offer these potential counterparties. In particular, our capability to provide a one-stop offering that combines power, natural gas and carbon capture is a true winning formula and is resonating deeply with long-term AI and data center customers as evidenced by recent announcements from major hyperscalers. We also continue to actively negotiate with OEMs to secure additional power generation capacity to serve future load growth from potential customers backed by secure commercial agreements. In our carbon capture business, we are experiencing strong momentum. Importantly, we are seeing a significant uptick in interest from potential PPA customers that are interested in the combination of gas-fired generation and carbon capture. Further, we are making meaningful progress towards our goal of an injection rate of 1 million tons per annum by year-end 2027. Existing projects are advancing on schedule and we expect to have 2 more operational projects within the first half of 2026. Overall, there is optimism following the One Big Beautiful Bill Act by emitters across the sector. BKV's carbon capture business has demonstrated strong leadership. In particular, our strong partnerships with Copenhagen Infrastructure Partners, Comstock Resources, Gunvor, and a large midstream company and others all underscore both the credibility and the momentum of our carbon capture business. Our upstream business remains a core cash engine for the company. Our Barnett and NEPA assets outperformed expectations again, delivering strong overall results, including outperforming on production, cost and capital efficiency. In the third quarter, we successfully closed our Bedrock acquisition, materially expanding our operational footprint in the Fort Worth Basin. This transaction reinforces our position as the leading operator in the play and underscores our role as the natural consolidator of the Barnett. We believe the Barnett sits at the sweet spot of all the shale plays, positioned at the epicenter of U.S. demand growth in and around the premium markets of the Gulf Coast. We continue making strong progress integrating the Bedrock assets into our portfolio and are excited to realize the benefits from the combined operations. The Bedrock acquisition brings high-quality assets for both existing production and new developments, including new wells and refrac candidates. We are excited to demonstrate the accretive nature of this transaction over the quarters to come. BKV's closed-loop strategy, combining gas, power and carbon capture is a winning formula that is in line with the biggest trends in energy. The ability to offer carbon-neutral power solutions in Texas, in particular, positions us uniquely in discussions with many customers who are willing to pay premiums for these energy solutions. We remain confident in our business and our ability to capitalize on the megatrends in the market, which are driving the future of energy. With that, I'd like to hand the call over to BKV's President of Upstream, Eric Jacobsen, to discuss our operational performance for the quarter. Eric Jacobsen: Thanks, Chris. The third quarter was another outstanding one for our operations as we further capitalized on momentum in both our upstream and CCUS business lines. Our upstream business delivered another excellent quarter, beating our production guidance at the midpoint with volumes up 9% year-over-year and 2% sequentially at 7% below our guided CapEx midpoint. As a reminder, we raised full year 2025 production guidance by approximately 4% at the end of last quarter and have continued to maintain the same base business capital range. We remain a leader in managing low base decline through the leveraging of data analytics and artificial intelligence, outdelivering new well performance expectations and setting the standard for sustained capital-efficient production in the Barnett. Moving to the close of the Bedrock acquisition. BKV has already captured value from these newly acquired Bedrock assets. Integration has been seamless. And our teams are already applying our proven operating playbook to enhance value through improved performance, reduced costs and accelerated efficiency gains, all of which we call torque or delivering value even better than underwriting assumptions. The Bedrock acquisition also adds meaningful development runway, including at least 50 equivalent new drilling locations and 80 refrac opportunities, creating substantial near-term value potential. You'll see us continue to drive these development and torque initiatives in the quarters ahead, further proving BKV's leadership strength in the Barnett. During the third quarter, we drilled 8 new wells, completed 8 wells and performed 11 refracs, bringing our total to date refrac count to over 400, distinguishing ourselves as the refrac leader in North America. Our year-to-date Barnett D&C cost average is $545 per lateral foot, representing a further 3% reduction from our second quarter performance and a 14% reduction from our 2023 to 2024 program average. This cost improvement was achieved while drilling longer laterals and implementing enhanced completion designs that have resulted in excellent well performance and accelerated turn-in lines. Further, during 2025, we turned in 3 of the 25 best 1-month peak wells in the entire recorded history of the Barnett, including 2 of the top 3 this decade, a clear proof point of our subsurface completions and operational excellence, reflecting the technical acumen of our teams. Our teams have delivered all of this with an expected capital investment as we continuously find new ways to increase efficiencies and outperform expectations. In fact, our total full year corporate capital guidance remains unchanged at $290 million to $350 million. Within that corporate CapEx range, we continue to see legacy development capital at the high end of our previously guided range, and we have added approximately $10 million of development capital to kickstart our Bedrock torque initiatives. We've delivered substantially more activity and strong results while exercising highly disciplined and capital-efficient investments. For the fourth quarter, we expect production to average 910 million cubic feet equivalent per day with a range of 885 million to 935 million cubic feet equivalent per day, representing the full integration of our bedrock assets and continued strong performance from our base business. The production guidance component of our base business, excluding Bedrock assets, is 810 million cubic feet equivalent per day, which would bring full year base production slightly above even our previous raised guidance midpoint. Our continued effective and efficient upstream performance, coupled with the Barnett positioning to supply gas to high-margin Gulf Coast demand centers, enables continued strong financial performance for the long term. We're not only driving the success of our core upstream operations, we're fueling the growth of our other business lines. Turning to our CCUS business. We are well positioned in this rapidly expanding segment. Since the passage of the One Big Beautiful Bill Act, we have received a significant increase in inquiries from potential emitter partners. These discussions are ongoing and we're encouraged by the quality of opportunities entering our pipeline. Combined with the projects already advancing through various stages of development, we believe the growth potential for this business remains strong while adhering to our capital framework. The Barnett Zero facility has now been operational for nearly 2 full years and once again achieved strong quarterly performance, maintaining over 99% uptime and injecting approximately 44,000 metric tons of CO2. Since project inception, approximately 286,000 tons of CO2 have been injected. Barnett Zero continues to serve as a vital proof point of concept for our broader CCUS strategy, showcasing BKV's technical expertise and providing tangible validation to current and prospective partners. The project we announced on our last earnings call, the East Texas project with a leading midstream company, is moving forward, and we expect FID for that project in 2026. As a reminder, we anticipate that approximately 70,000 metric tons per year of CO2 could be captured on that project. This is the second project we are developing with that same midstream company. The previously FID-ed Eagle Ford and Cotton Cove projects both remain on schedule. These projects are expected to achieve average sequestration rates of approximately 90,000 and 32,000 metric tons per year of CO2 equivalent, respectively. The Cotton Cove injection well was successfully drilled in September, and both projects have received EPA approval of their measurement reporting and verification or MRV plans. I also want to address recent developments in Louisiana, a strategic focal point for our CCUS business, where the governor signed a temporary moratorium on the consideration of new CCUS project permits. We view this as a constructive step that brings focus and clarity to the permitting process and advantages those like BKV that have already submitted quality permit applications. The state's decision to prioritize existing applications is helping to distinguish credible developers with technically sound near-term projects that can deliver real benefits to Louisiana. All 6 of BKV's permit applications, 5 from our large-scale High West Project adjacent to New Orleans and 1 from Donaldsonville near Baton Rouge have been classified as administratively complete and are among those advancing towards approval under Louisiana's primacy. We're encouraged by the state's active engagement and recent movement on permit issuances, which signal growing regulatory momentum and confidence in responsible carbon capture development. We remain on track to reach 1 million metric tons per year of CO2 injection by the end of 2027 and see the related capital requirements as very manageable within cash flow under our existing capital plan. Together with our CIP partnership and a robust project pipeline, this positions us for meaningful free cash flow generation from CCUS later this decade. I'll now turn the call over to our CFO, David Tameron, for a review of our Power business and financial results. David Tameron: Thank you, Eric. Turning to our Power business. As Chris mentioned, we are thrilled to announce our pending acquisition of a majority control position in our Power JV. Increasing our ownership to a 75% equity stake means we will have over 1.1 gigawatts of power generation capacity in the growing ERCOT market. As previously disclosed, the total purchase price will be $376 million, which includes the assumption of $145 million of debt. The remaining $231 million will be funded 50% in cash and 50% in BKV stock, which equates to 5.3 million shares based on a predetermined VWAP price. This transaction sets a clear marker on the value of this business line within BKV's portfolio and positions Power as a core growth engine for our company. The increased ownership will also come with an updated and aligned governance structure and will unlock additional potential for commercial opportunities. Following the close, which is expected to occur in the first quarter of 2026, we expect to include the Power JV results within BKV's consolidated financials, providing greater transparency into the business' strong cash flow generation and enabling investors to better recognize the value it brings to our overall portfolio. While third quarter Power JV adjusted EBITDA was below our guidance, operational performance remains very strong. We are incredibly proud of our Temple team, which has set a high bar for performance and has established a solid foundation for our growing Power business. Pricing did disappoint during the quarter, largely reflecting milder weather in Texas as third quarter cooling degree days were 15% lower than the 5-year average. While this resulted in lower-than-expected prices, market strength remains evident and robust load growth continues to support long-term ERCOT fundamentals. Power prices averaged $46.29 per megawatt hour during the quarter, with natural gas costs averaging $2.87 per MMBtu, resulting in an average spark spread of $25.82 as compared to $20.82 a year ago. For the quarter, BKV's share of power JV adjusted EBITDA was $20.4 million with gross power JV EBITDA coming in at $40.9 million. For the fourth quarter, we expect gross power JV EBITDA of $10 million to $30 million, reflecting typical seasonal patterns and continued operational execution. Shifting to BKV's corporate financial performance. We delivered another outstanding quarter, highlighted by our upstream outperformance, disciplined capital spending and a strengthened balance sheet. Net income for the third quarter was $76.9 million or $0.90 per diluted share with adjusted earnings of $0.50 per diluted share. Combined adjusted EBITDAX attributable to BKV, including our proportionate share of the Power JV adjusted EBITDA was $91.8 million, representing a 50% increase from third quarter of 2024. These results were driven by higher production volumes, improved realized pricing and continued cost reductions across our upstream operations. Accrued capital expenditures totaled $79.6 million for the quarter, 6% below the midpoint of guidance. The spending included $56 million for upstream development and another $24 million for CCUS and other. Our teams continued to deliver strong results and higher activity levels while maintaining capital discipline. During the quarter, we achieved 9% year-on-year production growth, advanced investments in our CCUS partnership and project pipeline and reduced debt levels in our power JV. With regard to the balance sheet, we closed the third quarter in a strong financial position. Several positive developments further strengthened our capital structure, leaving us well positioned to fund and advance our growth initiatives. A key highlight was the successful execution of our inaugural bond offering. We issued $500 million of 7.5% senior notes, marking an important milestone in our capital market strategy. Proceeds from the bond were used to fund the cash portion of the purchase price for our Bedrock Shale acquisition, as well as pay off the outstanding RBL balance. During the quarter, we also strengthened our liquidity position by expanding our elected commitments under the RBL, increasing it from $665 million to $800 million. The increase primarily reflects the additional borrowing base capacity associated with the Bedrock acquisition and underscores the continued support and confidence of our lending partners. Our balance sheet remains straightforward and conservatively positioned with $500 million of senior notes outstanding and no borrowings under our $800 million RBL. Our net leverage ratio as of September 30th stood at 1.3x within our stated leverage target of 1x to 1.5x. Cash and cash equivalents totaled $83 million at quarter end. And combined with remaining RBL availability, total liquidity stood at $868 million. In addition to this strong liquidity position, we continue to manage commodity price risk through our prudent hedging program. For our updated hedge positions as well as fourth quarter 2025 guidance ranges, you can refer to our press release and our updated investor presentation, which are both posted on our website this morning. We will release 2026 guidance in February. But in early looks at our budget, prior to considering any successful PPA negotiations, we see our newly combined business generating meaningful free cash flow. This is driven by both our upstream and power businesses, which more than fund the capital needs of our CCUS business. With that, I'd like to turn it back over to Chris for his concluding remarks. Christopher Kalnin: Thanks, David. The third quarter of 2025 exemplifies BKV's said-did culture and positions the company for sustained long-term profitable growth. Our achievements this quarter span all aspects of our business. In Power, we announced the purchase of a controlling interest in the Power JV, increasing our ownership to 75%, which we expect to close in the first quarter of 2026. In upstream, we successfully closed the Bedrock acquisition while continuing to drive highly competitive capital efficiency and production growth. In CCUS, we have additional momentum with high-quality projects, supported by our CIP partnership. Financially, we successfully priced our first corporate bond and maintained a strong balance sheet. The ongoing integration of our gas, power and carbon capture capabilities creates unique energy solutions that are increasingly valued in today's market. Looking ahead, we remain excited about the multiple growth vectors of our business. I want to thank our exceptional team for their continued dedication and excellence in execution and our shareholders and partners for their ongoing support of BKV's vision and long-term strategy. We look forward to updating you on our continued progress in the quarters ahead. Operator, we are now ready to take questions from the audience. Operator: [Operator Instructions] Our first question comes from Betty Jiang with Barclays Bank. Wei Jiang: Congratulations with the acquisition of a controlling stake in the Power business. So can we just start from there and talk to how gaining control of the power unit going forward would change your conversation or how you have that conversation with hyperscalers and growing the Power business over time? Christopher Kalnin: Yes, Betty, thank you. So first of all, we're really pleased with the acquisition. It's clear to us that the power markets in Texas are poised for very strong growth and our move into buying 50% of Banpu Power's position is a signal of our optimism in the market. I think the ability to kind of control the JV and consolidate does a number of things for our discussions. Number one, it allows us to bring together in a very seamless way the energy solutions that we uniquely provide between power, gas and carbon capture so that we can structure commercial agreements in a singular holistic energy solution package that a lot of these hyperscalers and data center companies are very interested in. So that's the first thing. The second thing is it positions us to really provide the transparency around our financials that investors are looking for. And I think also that allows us to be able to disclose a lot more information financially around what we're doing with the JV. And then the third angle is the way we've set it up from a growth or strategic flexibility engine for investments or additional opportunities, acquisitions, et cetera, in this 75:25 structure really is the right mix in our minds for long-term growth, and that allows us to deploy capital. When you think about expansions under the back of additional commercial agreements or additional acquisitions, it really does position us ideally. And that's a key part of these discussions with hyperscalers as well and potential data center companies. Wei Jiang: My follow-up, staying with power, and I want to ask about SB6. I understand that law might have some changes in how the power discussion and a potential PPA could be struck. Can you just speak to how that might be impacting your conversation with the hyperscalers and then the optionality and other solutions that you can bring to the market despite that policy change? Christopher Kalnin: Yes. So first of all, I think SB6 is really something that's constructive by the state of Texas. It's an effort to high-grade the types of projects that are in the queue. A lot of folks have been applying for interconnections but not all interconnection requests are created equal. And so SB6 has a framework that's being evolved to really streamline and high-grade the types of interconnections that are being requested in the state of Texas to get to the real demand that's coming in and allow that demand to materialize because in general, the posture of Texas is open for business. And we see this desire to streamline and enhance grid reliability while encouraging AI and data center investment, in particular, in the state of Texas. So we think SB6 goes a good step of the way to get there. Clearly, the rules are being laid down as we speak, and BKV is very actively involved in evaluating and participating in that process. With regards to the hyperscalers and the data center companies, I think the -- what we're seeing is the bet is that Texas figures this out pretty quickly relative to other grid regulators across the nation. And we feel like it's something that everyone wants to understand and understand how to deal with the rules. But I think what we're seeing is that there's a general feeling that this actually helps to streamline the process. And when it comes to companies like BKV with existing power-generating assets at 1.1 gigawatt of equity power today, I think it puts us in a great position to high-grade potential projects that we're looking at relative to kind of the broad universe of the interconnection request. So I think in general, I would say it's positive. Again, the rules are still being finalized. But we see this as a positive move by Texas to encourage investment in the power sector, encourage investment from the data centers and the hyperscalers. And in general, the belief is that Texas is open for business and we'll figure this out quicker than potentially other regulators across the country. Operator: Our next question comes from Michael Furrow with Pickering Energy Partners. Michael Furrow: Look, BKV has been able to put together quite the position in the Barnett relatively quickly as well as work down well costs and improve margins on the assets. So bringing back to the consolidation of the Power JV, the company is now trading at an expanded multiple and looking at it simplistically, this should ease further consolidation of the basin. So would you agree with that comment? Or are there certain dynamics of the Barnett M&A market that just may not be as clear to those of us on the outside looking in? Christopher Kalnin: Yes, Michael, it's a good question. So if you look at what's happening in the Barnett, I think, one is when you ever look at a deal, for me and for the team here, it's about fundamental economics, right? Multiples are helpful but it's about what is the hold to maturity return as the last owner. And so we're looking at deals that will be accretive from both the purchase price perspective, the strip, but also what can you do with those assets from a optimization, a synergy, a dropping costs, enhancing the development. You saw what we were able to do in the Bedrock transaction that we closed recently. And I think there's nearly a Bcf plus of opportunities in and around the Barnett. We believe that at our current multiple and with our position in the Barnett that we can continue to acquire accretive transactions in the market and we're very optimistic about continuing to be able to do that. Michael Furrow: Just a follow-up on the power JV. I mean, look, the Temple assets really appear to be running on all cylinders. The availability factors look great. I think you disclosed only 3.5 days of downtime. So beyond adding incremental sort of around-the-clock baseload capacity, what else can the company do operationally to improve margins at the power plants outside of changing spark spread? Christopher Kalnin: Yes. I mean, Michael, clearly, the number one thing is to get additional long-term contracted demand, right, and that in the form of commercial arrangements or PPAs. That's going to be front and center for the company. That's what we see the most near-term capital-efficient accretive transactions that we could pursue. So that's definitely the priority. Beyond that, if you look at Temple originally, Temple was designed for 3 power plants. Today, there's 2 power plants there. We've got ample land space, water, gas. It's flat and we're on the fiber optic super highway between San Antonio, Austin and Dallas-Fort Worth. So we think it's ideally positioned. You can imagine there's room for another power plant on the back of commercial arrangements that could be added, similar size and scale. So there's just a lot of areas of growth and reflected in our optimism about the Power business and the fact that BKV is going big in power. Operator: Our next question comes from Neal Dingmann with William Blair. Neal Dingmann: Nice quarter. Chris, my first question -- just really interested on capital allocation, specifically. Could you maybe, David, speak to how you all are thinking about managing all your opportunities throughout the closed-loop strategy? What I'm getting at is you all seem to have more opportunities when you look at the upstream opportunities. I mean, how do you think about managing this or the power opportunities along with potential shareholder return and maintaining a solid balance sheet? David Tameron: Yes. First off, let's talk about near term, right? 2026 is going to be a strong year as far as free cash flow generation. Obviously, Eric and his team right on the upstream side, we have that cash flow engine that's been there. I think once we consolidate the power results and people start to see those show up in the numbers, that's another source of funding that more than covers CCUS and any spend needed there. So we do have significant free cash flow that we have options with, right? To your point, do you delever, do you use that for strategic investments on the power side. But we do have options with that cash. And if you think about additional flexibility in '26. One, we do have the power debt that's going to be available to refinance midyear. We have additional flexibility now with the -- as Chris mentioned in his prepared remarks and I did as well, the bond and the upside to the RBL. So a number of avenues, triggers, and levers to pull as we think about financing. then finally, as it relates to power, obviously, if you start thinking about some type of commercial opportunities, that gives you financial flexibility depending on the level of counterparty you engage with, and we expect that to be a very solid counterparty if and when we get to that point. So a lot of flexibility, significant free cash flow generation and still levers to pull if you think about '26, '27. And we look at our current structure of how we have our debt and capital structure of each entity, if you will, lined up. And they're all taken with the life cycle and the maturity of each of the respective business units. So we feel very good actually about where we're at today as we head into '26. Does that answer your question, Neal? Neal Dingmann: It does. A lot of opportunities. Perfect answer. then just secondly on looking at Slide 32, just on the forecasted sequestration. I'm just wondering, besides those projects, I think there's 4 or 5 announced. Are there others that are currently in the works? Or when I'm looking at that slide and you're talking about the forecasted sequestration volumes, is that just what's known? Or maybe just anything you could comment on that about potential upside? Eric Jacobsen: Yes, sure. Eric Jacobsen here. Thanks for your question. On Page 32, I think you're referencing the target of 1 million tons of CO2 injection run rate by the end of 2027. And yes, we listed 5 or so projects that have even been -- that have either been FID-ed or announced and on track towards FID. So all of those would contribute nicely to that 1 million ton per year run rate. There are a large number of other projects in our portfolio, some of which have been brought through the CIP partnership, which has been exciting for us, some of which we've been working for quite a while. And they continue to follow our trajectory of natural gas processing, large industrial and then sort of ethanol and renewables. And all told, you can see where we have high confidence in that portfolio of projects of growing above and beyond the 1 million tons towards an ultimate kind of 16 million tons a year or so of annual run rate by the early 2030s as we've announced. You can see on Page 34, where one of the projects we're very excited about as we look to really ramp our injection volumes is our High West project in Louisiana, where we're excited about the focus the state has brought to permitting there, as well as being located in what we believe is a world-class reservoir in what I call one of the best emitter neighborhoods in the world, 30 million tons of CO2 within a 30-mile radius. So you can see where that can really step change those sorts of projects, namely High West and some other Class Vis that we've submitted already can really step change in a nice combination with the other portfolio of projects we have around natural gas processing, other industrials and ethanol. So all told, Neal, we have a very high confidence in that 1 million tons and then growing from there with a great portfolio of projects and a great investment partner in CIP to kind of split the 49% share of that check and keep our capital allocation right in line with where we want to be on CCUS. Operator: Our next question comes from Jacob Roberts with TPH & Company. Jacob Roberts: Chris, I was wondering if you could spend some time talking about the incremental autonomy that the increase in the stake in the Power JV will give you, maybe less so about pursuing the closed-loop strategy with customers, but really specifically on capital allocation to the power segment as a whole. Christopher Kalnin: Yes, Jake, it's a good question. So as you know and we shared in our press release, the governance has changed, right, on the JV. And so pro forma for close, that would give us a majority control. That allows us to there -- very efficiently decide how much capital goes into the Power business how quickly we want to grow that business while also diversifying 25% of that capital to our partner, Banpu Power. So I think what it does for us is it gives us very strong control of the ability to flex. Clearly, we're going to work with our partner in the joint venture in terms of how much capital we deploy or how much debt we pay down. Right now, the power plant is delevering debt. It's generating cash. And so we're excited about that. And then as we look to grow into commercial agreements, increase the capacity factor and potentially add additional generation capacity through -- on the back of commercial arrangements, we're going to have a lot of ability to kind of time, optimize and size that capital in a way that fits with our overall portfolio capital allocation strategy. Jacob Roberts: Great. I'm wondering if there's a possibility of future power investments or spin-ups or inorganic opportunities that might come to the business outside of this JV? Christopher Kalnin: Yes. So we're really happy with the JV structure today. I think the way we've restructured it in that 75:25 setup really does give us the vehicle for growth. Jake, if you look at how we've set up our business, we've got the upstream and midstream business, 100% owned by BKV Corporation. We're 51% of the carbon capture business in our joint venture there with CIP. And then in the Power business, we're 75% owners pro forma for the close and 25% Banpu Power. That gives us an ability to grow both the power and the carbon capture alongside of the upstream, which is our cash engine but to do it accretively. And so as we think about additional acquisitions, which we believe are there on the market and we'll be evaluating very closely and about some potential additional organic new generation assets on the back of commercial arrangements, we believe that the joint venture is the right structure for us to utilize because it does give us that capital allocation optimization and it gives us a platform that's already working and winning in the marketplace. So we see that as the right vehicle for growth, and then we'll obviously evaluate that from time to time going forward. Operator: We have reached the end of the question-and-answer session. I'd now like to turn the call back over to Chris Kalnin, BKV's CEO, for closing comments. Christopher Kalnin: Thank you, and thank you, everyone, for joining our call. We really appreciate the fact that you've spent time to evaluate BKV. We're excited about the future. BKV stands at the precipice of some of the most exciting megatrends in energy. We are at the epicenter of the macro trends that are driving energy demand, particularly in the state of Texas. We see our combination of natural gas, power and carbon capture as a winning formula that is going to transform and reshape the energy industry going forward. We're excited. We're pleased about our results this quarter. And we look forward to future results as we continue to deliver on our closed-loop strategy. Before I close, I would like to take a moment to recognize our veterans, all those who have served. We thank you for your service. At BKV, we hold dear the sacrifice that many families and individuals have made in protection of our country and freedoms. And we want to thank you as we go into Veterans Day tomorrow, and we want to recognize you. So thank you, everyone, for joining the call. Thank you, veterans, and thank you, and we'll look forward to future announcements. Operator: This concludes today's conference. You may disconnect your lines at this time, and we thank you for your participation.
Ching Ching Koh: Good morning, everyone. Thank you for joining us to our third quarter results briefing. This results briefing will be Helen's last results briefing. And so of course, we all wish her all the best, and from the fourth quarter and full year results, we'll see Teck Long [indiscernible] next year. Okay. So without further ado, I'll pass the time to Chin Yee to take us through our results. Chin Yee Goh: Good morning, everyone. Thank you for joining us in OCBC's third Q 2025 results briefing. Our third Q '25 group net profit was SGD 1.98 billion, up 9% from last quarter and largely unchanged from a year ago. This was our second highest quarterly net profit. ROE was an annualized 13.4%. Total income grew 7% from previous quarter. The growth was driven by record noninterest income, which more than compensated for the decline in net interest income. NII fell 2% to SGD 2.23 billion quarter-on-quarter amid declining benchmark rates. We continue to prioritize asset growth to support NII. Noninterest income rose 24% to SGD 1.57 billion, driven by fee, trading and insurance income. The strong results were supported by our wealth management franchise, which continued to scale and deliver record wealth management income. Our insurance business also contributed strongly, reinforcing the benefits of our diversified income streams. Loans and deposits continued to register healthy growth, up 7% and 11%, respectively, year-on-year. Asset quality remained resilient. NPL ratio stable at 0.9% for the past 6 quarters. Total credit costs in third Q of '25 were 16 basis points on annualized basis. Total NPA coverage was 160%. Our capital position remains sound. Common equity Tier 1 ratio was 16.9% on a transitional basis and 15% on a fully phased-in basis. With our solid third quarter earnings, our 9 months of '25 group net profit reached SGD 5.7 billion, 4% below 9 months of '24. The strength of our One Group franchise is reflected in the performance across our banking, wealth management and insurance pillars. Our banking net profit grew 3% from last quarter, demonstrating resilience despite a declining interest rate environment. Double-digit growth in noninterest income more than compensated for the moderation in NII. Wealth management income and AUM were at record highs. Our wealth management income grew 25% to SGD 1.62 billion, contributing 43% to group total income. Banking AUM rose 18% year-on-year and 8% Q-on-Q to SGD 336 billion, driven by net new money inflows and positive market valuation. Net new money inflows were SGD 12 billion in third quarter, above the run rate for the past 2 quarters of about SGD 4 billion to SGD 5 billion. Year-to-date 9 months, net new money inflows were SGD 21 billion. On insurance, profit contribution from GEH grew 50% Q-on-Q to SGD 347 million. This was driven by improved investment performance from insurance and shareholders' funds. GEH new business embedded value or NBEV rose 9% and NBEV margin improved to 48.8%, reflecting GE's strategic shift towards higher-margin products. Moving on to details of our group performance trends, starting with NII on Slide 8. NII for the quarter came in at SGD 2.23 billion, 2% lower from last quarter. Average assets grew 1%, but this was offset by an 8 basis point decline in NIM to 1.84%. Referring to the waterfall chart on NIM. NIM narrowed primarily from lower loan yields, which reduced margin by 21 basis points. This was driven by the fall in benchmark rates, particularly the average rates for SRA and HIBOR. The progressive reduction in our funding costs as well as cash flow hedges partly mitigated the compression in loan yields. About half of our loan book is denominated in Sing dollar and Hong Kong dollar. For these currencies, around 80% of our Sing dollar loans and almost all Hong Kong dollar loans are either on floating rates or due for repricing within a year. The exit NIM for September was 1.84%. At end September, our NIM sensitivity based on 100 basis point drop in rates across our four major currencies of Singapore dollars, Hong Kong dollars, Malaysian ringgit and U.S. dollars was about 11 basis points on an annualized basis. On NII -- sorry, on noninterest income now. For the quarter, noninterest income was up 24% Q-on-Q, supported by broad-based growth across fee, trading and insurance income. For the 9-month period, noninterest income grew 10% year-on-year to a new high of SGD 4.14 billion, listed by the same growth drivers. Fee income was a key contributor, increasing 24% to SGD 1.8 billion. Our fee income reached SGD 683 million in third Q of '25, up 18% Q-on-Q and 34% year-on-year, driven by higher corporate as well as wealth customer activities. As can be seen from the chart, our fee income has maintained an upward trajectory over the past 5 quarters, contributed mainly by the strong momentum in wealth management. The record third quarter wealth management performance lifted our 9-month fee income to a new high of SGD 1.8 billion, up 24%. Wealth management fees surged 35% to SGD 923 million, contributing more than half of fee income. Compared to last year's, customers deploy more funds into investments across all wealth segments with around 60% of banking AUM invested. Trading income for the quarter was SGD 518 million, up 38% Q-on-Q. The strong growth was driven by customer flow treasury income, which was at a quarterly high. Noncustomer flow trading income also improved, reflecting better investment performance across our global markets portfolio as well as GE's shareholders' funds. For the 9-month period, trading income was up 4% to SGD 1.29 billion, underpinned by record customer flow treasury income. The growth was contributed by both wealth and corporate segments. Moving on to expenses. Our operating expenses continued to be well managed even as we invest strategically for growth. For the 9-month period, operating expenses rose by 3% year-on-year. Cost-to-income ratio was held below 40% at 39.3%. Our loan book remains well diversified across geographies and sectors. Loans grew 7% year-on-year and 1% quarter-on-quarter to SGD 327 billion. Growth over the past year was broad-based across consumer and corporate segments. In particular, the transport, storage and communication sector grew the most as we focus on capturing opportunities in the new economy sectors and high-growth industries. Singapore housing loans also grew as we build market share. Sustainable financing continues to gain traction. Loans grew 17% year-on-year to SGD 55 billion and now accounts for 17% of our total group loans. Our overall loan portfolio quality remains sound. NPL ratio stable at 0.9%. NPAs declined by 1% Q-on-Q, largely due to higher recoveries, upgrades and write-offs, which more than compensated for new NPAs. We remain vigilant and continue to conduct ongoing reviews of our loan portfolio, including assessments on the potential impact of trade tariffs. Total allowances for 9 months of '25 were SGD 466 million, down 4% due to lower allowances for impaired assets. Allowances for non-impaired assets were higher. This included preemptive allowances set aside for trade tariffs and macro uncertainties and adjustments, MEV updates mainly to reflect the weaker economic outlook. Credit costs for 9 months '25 were at an annualized 17 basis points. Our third Q '25 allowances were higher quarter-on-quarter as we set aside allowances for impaired assets. Our NPA coverage ratio was around 160% over the past 5 quarters. Allowances for non-impaired loans maintained at 0.9% of total performing loans. Moving on to deposits. Customer deposits rose 11% year-on-year and 1% Q-on-Q to SGD 411 billion. CASA deposits grew by SGD 27 billion or 15% year-on-year across both corporate and consumer segments. CASA ratio improved to 50.3%. Our strong deposit franchise contributed to 80% of our funding structure. All funding and liquidity ratios are well above regulatory requirements. Moving on to capital. Our capital position remains strong. Transitionary CET1 ratio was 16.9%, broadly stable quarter-on-quarter. On a fully phased-in basis, our CET1 ratio was 15%. Our robust balance sheet and capital position enable us to pursue growth opportunities, navigate uncertainties and enhance shareholders' returns. With this, I end my presentation. Thank you. And I will now hand the floor over to Helen. Helen? Pik Kuen Wong: Thank you, Chin Yee. Good morning, everyone. As usual, very happy to see faces. I always say that because when I started, we can't see faces. It was COVID. So it's always good to have you at office. Just want to start with some comments on the third quarter results. Of course, it is our strongest quarter this year, and it's the second highest on record. I think we lost out -- this quarter lost out to first quarter '24 by like SGD 4 million. So -- and it's all in all, a very good quarter. Of course, net profit is up Q-on-Q by 9% and SGD 1.98 billion, of course, and is closest, as we said, closest to first quarter '24. I think we achieved this despite a declining shipment environment through a few things. I think the first thing has to mention is the ability of our diversified business pillars, right, and producing or generating balanced earnings through economic cycles. And covered by -- as covered by Chin Yee, NII and NIM moderated, but our noninterest income rose 24% quarter-on-quarter to a new high with double-digit growth across quite a variety on fees, on trading and insurance income as well. So to sustain our NII, we are focused on asset growth. I did mention before in some of the other briefing on interest rate cycles, there are always interest rate cycles, they are always up and down. You cannot rely on high interest rate to generate a wider margin. So the cost of the matter is always to focus on growth and asset growth is important to defend the NII. So -- but equally important is to manage the funding cost. So growing deposits in the right manner, especially lower cost deposits is key as well. So I think we have been able to and we continue to focus on driving regional account openings for corporates and also for commercial banking customers and capturing a lot more cash management mandates. Cash management mandates are important as they bring in the money and the operating account normally are not fixed deposits because they work on that. And indeed, as you gather the cash management mandate, that means the remittances, the FX, everything comes in as well. So this is what is important. So our robust noninterest income also reflected results of our strategic actions to strengthen our franchise. Be it in wealth and be it in our cross-border capital flow, sustainability, as Chin Yee has mentioned, our sustainable finance is growing well and also some of the newer economy customers that we are able to start to bank with more and more. Wealth management strategy, of course, continue to play out positively. We are well positioned for long-term growth. As shared by Chin Yee, net new money for the third quarter is SGD 12 billion, and this is quite good, well spread across and contributed by all segments. By that, we mean the private banking side, our premier private and our premier customer wealth segments. Quarterly wealth management fees and income grew to record levels with sustained momentum across all segments as well and product channels. We do talk about our investing in more relationship managers, but our wealth platform has been very effective for our customers. And indeed, whenever we come up with new products, we will be able to apply across our wealth platform for different segments. Of course, we check the suitability, right? So -- but that means whenever we invest in anything, we can consider to launch on the same platform, which makes our channels very effective. We continue to deepen our regional private banking and premier banking franchise. RM bank strength, we talk about private banking and also our PPC segment having more RMs. But I think importantly is the products that we develop and the advisory capabilities across the wealth spectrum, including insurance. I think productivity also is another key. Recently, we did announce private bank using AI to have our RMs to do KYC and which has significantly shortened the time spent, meaning they have more time facing the clients, but will be -- continue to be effective and protected. Trading income, we're happy with it as well, rose 38% Q-on-Q. It's now above SGD 500 million in the third quarter as customer flow treasury income hit an all-time high. This is again both for wealth and also for corporate customers as we built on cross-selling as One Group. And this is not just in Singapore, but across geographies as well. And for insurance, the profit contribution from GE was up 50% Q-on-Q. GE indeed is working on increasing collaboration with the whole group. And I would say insurance plays an essential role in our Wealth Management business. We have also seen more insurance policy working together with the trust side to -- as a way to protect the wealth of our customer. So we always talk about wealth continuum. This is what we have been working on, and it is important that we continue to have that. So cost-to-income ratio is around 40%. Of course, we exercise quite a good cost discipline as well. And important to continue to invest in our business, in our people and also in technology. This is indeed for future growth. Asset quality is sound. NPL ratio held steadily at 0.9% since June 2024. And we are closely watching risk arising from trade tariffs, but we've talked about it for the last 3 quarters already. So I think there is, of course, potential impact, but I think we have been tracking well. Our customers have been managing quite well as well. One sector we remain particularly cautious, of course, Hong Kong CRE is a question that some of you will raise, but indeed, we have been quite cautious. We're comfortable with current level of allowance coverage. I think 160% as an NPL coverage is quite satisfactory. And then coverage on performing loans is at 0.9%. Loans will also grow, I think, 7% and 4% on a constant currency basis. We have gained market share in Singapore mortgages. And through -- for one example, we have a partner care program, which we work very closely with property agents and to encourage them to bank with us more and also through the referral customers and mortgages to us as well. For corporates, we continue to expand, deepen relationships with new-to-bank customers as well as supporting customers across our international network. So that is not limited to ASEAN and Greater China, but through our major international branches as well. I'll pass to Teck Long later to talk a bit about that. Flipping the page, of course, we always say there is uncertainty and uncertainty become more complex as well. But happy to say that global trade and most major economies have shown signs of resilience. And of course, this year, in particular, supported by some front loading for trade and also technology up cycling, particularly for Asia. For this year, we are keeping to our previous guidance on our financial numbers, except for NIM, we want to -- and we are changing it to around 1.9% from the previous 1.9% to 1.95%. Looking ahead, I think as we said, operating conditions continue to be complex and 2026 may see slower economic growth across various countries and geographies. And of course, trade policies can continue to shift. Geopolitical tensions are still there that could have an implication on the demand and supply chains for our key markets, but we do feel that the fundamentals remain resilient, and we are positive on the mid- to longer-term growth prospects as well. Also want to report on our strategy. I think we refreshed our corporate strategy in 2022. We talked about a 3-year plan of incremental revenues of SGD 3 billion. Glad to report by end of September, we have already surpassed that growth of SGD 3 billion. So hopefully, we'll end the 3-year plan quite ahead. First thing is ahead of schedule, but also above plan. That means the initiatives we all put together and how we work as One Group has bear fruit. And I think this will shape up well as a firm foundation to capture growth opportunities going ahead as well. We talk about growth pillars, but also fundamentally what is important is a One Group approach, and this is an important enabler. Today, we work much more closer as One Group. That means not just collaboration, but synergy and synergy is both in business volumes and more customer and also synergy in terms of cost savings as well. So this is important because it is -- as we have more customers and they bank with us on more products and more and more countries and more effectively because we also make digital a very important offering. So I think we are managed to work as One Group together. We are well placed for the future and -- because we still have a very strong balance sheet position and the business franchise. For 2025, we stick to our commitment to deliver the 60% of dividend payout ratio, and we will complete the share buyback plans by end of 2026. That is still there. So we stay committed. So we now hand over to Teck Long to talk a bit more about the business and the business environment. Teck Long Tan: Thank you, Helen. I will share two key factors which we are monitoring. One factor is obviously the tariffs. And I would say it's not just the tariffs, but also the broader trade restrictions other than tariffs. We feel that the ripple effect of the tariffs and trade restriction has not been fully filtered throughout the economy. So we are watching this very closely. Having said that, some sectors are still growing, for example, digital infrastructure, domestic construction boom. So we see these sectors continue to grow. Indeed, from a different angle, because of trade tariff where materials come from, for example, a large market, a large manufacturer market like China, the input cost could be lower for some of these corporates in these industries. The second big factor is interest rate. Interest rate helps in the sense that the wealth customers start to relook at onboarding risk in their investment. And also for corporates, it has an effect on them evaluating the hurdle rates for investment. Having said that, the overall tone of the environment is still cautious in investing. So I will pass that back to the colleague, Ching Ching. Ching Ching Koh: Right. We'll open the floor now for questions. Maybe [indiscernible]. Unknown Analyst: Yes, so to start off, what does this mean for OCBC moving forward? And what's the outlook for the next quarter and... Pik Kuen Wong: Which one? Sorry, can you repeat that once more? Unknown Analyst: What does this mean for -- [indiscernible] for us. Pik Kuen Wong: Okay. It's an exciting set of numbers. We are happy, reflects on some of the investments and the commitment we have made in the past. We did talk about the corporate strategy, where we are focusing on and indeed improving for the wealth segment, in particular, we said we are hiring more RMs. I remember last quarter, we did talk about we achieved the number, in particular for the private bank, we achieved the number earlier than we expected, meaning we hire faster than we hope. The use of AI has generated a lot more -- some cost savings, meaning we become more productive in a sense. So we hope that this is a good foundation going forward. Fourth quarter since we're going to only announce by next year, and we're only 1 month into the fourth quarter. Of course, we hope momentum is still there. But generally, the last quarter is a more quiet time for wealth. Normally, it is the case. And we have changed our -- [indiscernible] some of our guidance, meaning we think loan growth can still be mid-single digit. We continue to try to defend our NII. But again, I think the noninterest income sees most results from what we have invested in the past. So we hope this is laying a good foundation for 2026. Unknown Analyst: Okay. So with AI assisting [indiscernible] helping RMs do KYC, so [indiscernible]. Pik Kuen Wong: If we have RMs, that's great, right, because they have more time to talk to customers. So they're able to generate business volume. I think I also mentioned in the past with the use of technology, you have not actually seen there is any need for us to say that we have to release people. First thing is because we continue to train our people so that they will be able to take on more complicated jobs. But the second thing is you invest in technology, it brings on more volume. So you also need the people to do the job. And there's always natural attrition. So I wouldn't say that because of AI, suddenly there will be a loss of job. We haven't seen that, and I do not expect it in the foreseeable future. Ching Ching Koh: Anyone else? [indiscernible]. Unknown Analyst: So one question I had was how critical is wealth management to Singapore's growth strategy right now, especially as lending margins compress? And then my second question is, how do you balance the growth opportunity from ultra-wealthy clients with heightened regulatory scrutiny around money laundering and sanctions compliance. Pik Kuen Wong: The first one you're also referring to wealth. And you asked about loan margins? Unknown Analyst: No. Mostly just how critical is wealth management to Singapore banks right now as a strategy? Pik Kuen Wong: I think wealth management has been a very important -- also in our own corporate strategy, it's a very important growth pillar. And the reason being that Asia is getting more affluent over the years. And so Singapore definitely is the center in particular for ASEAN. And wealth management -- and Singapore is a highly rated country. And even you have seen over COVID or some uncertainty in the world, actually, there will be net new money coming into the country. So that's why this is a very important growth pillar for Singapore banks. And in particular, most research would say that the Wealth business will continue to grow like high-single digit or even double digit, right? Over the next 5 years or so. So that is why it is important. When we say it is important, that means we should be able to handle business in a fair manner. Fair manner meaning that you serve your customer well, but, of course, you stick to your laws and regulations. And also we uphold to the higher standards, right, because we are responsible to -- not just to our regulators or rules and regulation, it's to our stakeholders as well, right? We defend our reputation, we defend our business franchise. So when you need that history -- to the second question, how do you balance that? I wouldn't even call it a balancing act. We strongly adhere to -- of course, we have to adhere to rules and regulations. But it is not rules and regulations that Sing -- that keeping us from not doing business. Rules and regulation is there. And if there is no rules and regulations, how do people conduct business. So that's the fundamental. So adhering to rules and regulations, there's no negotiation, yes. And then it is about how do you use your people, use your technology to identify what is not suitable. So KYC is a very important thing. And it doesn't mean that if you do KYC, you cannot put clients on. But KYC is the way for us to keep away not suitable clients, right, those -- and so I don't think it's a balancing act. It is we need to continue to invest in how we conduct our KYC. The world has become a lot more complicated. That's why AI comes in handy. Using AI information, it can summarize much better than you put in a lot of manual hours to do it, right? But I want to recap that this is not a balancing act. You just have to do it, but that doesn't stop us from able to put in more customers and offer our service to them. Ching Ching Koh: Maybe Thomas... Unknown Analyst: So I have a question for them because you just mentioned that digital infrastructure is growing sector, but a significant portion of investment obviously [Technical Difficulty] so do you foresee any possible [indiscernible] or overheating? And how do you monitor? Teck Long Tan: I think the demand will be sustained. The digital infrastructure is needed because of the trends of companies adopting digitization in their processes. It also has to do with consumer behaviors, individual behaviors, serving the net using video services as opposed to just searching on Google for information. So all these are data intensive and this fuel the growth of AI and therefore -- sorry, fuel the growth of digital infrastructure. Now AI is even more demanding for data center. So this is the beginning of the AI wave, and I think the trend will sustain. Ching Ching Koh: Sorry, maybe I go to [indiscernible] . Unknown Analyst: I have one question on the net new money inflows. So it's SGD 12 billion, and it's about the run rate of about SGD 4 billion to SGD 5 billion in the past 2 quarters. So I was wondering what changed. And in terms of the geographies, where are they coming from? Pik Kuen Wong: It's a good number, of course, and it is also a result of some of the early work we have done, the hiring of the new RMs are beginning to bear fruit, right, because we did say that we accelerated the hiring a bit more for the last 2 years. With that sometimes people say, is this the new normal? I think you cannot see it as like what you call a new normal because a lot depends on the market conditions as well. And when the interest rate coming lower also help because customers maybe actually be more active. And if you have good products and then, of course, they said, I give money -- put money into OCBC Group because you can offer me good products and give me good investment plans. Generally, fourth quarter is a bit more quiet as we always see. So don't take it that SGD 12 billion will repeat in the fourth quarter necessarily, okay? But as to the spread, it's quite well spread among our three segments that we report, meaning the private banking side and then our premium and also premier private. And it also comes from various places. It's not limited to -- I'm not to say that it's particular one country contribute the most. Ching Ching Koh: [indiscernible]. Unknown Analyst: I have two questions. The first one is what's the basis of the assumptions for the new guidance on NIM of 1.9% as the basis of assumption? And the second question is how confident are you with the asset quality amid all this macro uncertainty? And do you see any -- foresee any like specific sector stress, for instance, like Hong Kong, CRE and... Pik Kuen Wong: Yes. I think NIM, we provide guidance because we have been providing a guidance on NIM in the past. In an interest rate cycle as now interest rate going lower, NIM will continue -- I mean NIM will have pressure, yes. So what we have been focusing this year, which we described in the past is very much protecting our NII, yes. So NIM becomes like a pointer. It's not really like a target. It is a pointer to help us to look at how -- in particular, look at how we manage our funding costs. And how we defend, of course, our loan margin as well. So I think the reason why we do want to show this is because we have been showing NIM before, and we don't want to misguide because we do see NIM dropping in the last quarter, which would mean that the whole year -- I mean the last quarter and also the coming quarter because interest rates coming down. So that's why we want to provide an updated NIM. But it is -- it doesn't serve as a target. We say we need to protect that NIM because I said before, interest rate cycle -- I mean we cannot control how interest rate turn, but we can control and we can invest what we can do to bring in more volume to counter that loss and more volume also pointing to more volume on noninterest income as well. So that is it. The second question is on the quality of our portfolio. We are quite uncomfortable. It has been stayed -- the NPL ratio has been staying at 0.9%. Our coverage, I think, is quite comfortable as well. We do not see any systemic risk. There are sectors that we watch much more closer. It doesn't mean that we foresee something very bad coming up. But of course, nobody can look too far beyond. Everything is about -- I think Teck Long just talked about it. We always know that there is geopolitical tension, there is trade tariff situation, doesn't mean that it's entirely gone. And so -- but what we can -- what we are more comfortable is we feel that the area we are in still offer a lot of resilience in the economic situation. Next year, maybe the global growth may be slower. But if we are in more resilient regions, we hope that through the opportunities we have identified, through the work and investment we have put in, we'll be able to continue to grow our franchise and to grow our business. Unknown Analyst: Just a couple of questions. I think you mentioned that there will be some focus on asset growth. Will this be loans? And if so, what sectors? And will it also be on your book, your securities book? And if so, what currencies are these likely to be? That's one question. The second one is, of course, Great Eastern. You said that there were higher margin products. Just wondering -- and we're wondering what sort of products these were that give higher margins versus what they had been, I think, last year because less powerful last year. And then the -- there's one question which I'll ask to you later. It's about the strategy over your regulatory loss allowance reserves. You have it, but one of your peers doesn't. And I don't understand the reason for it because you can't use it, right? You can't -- it's not like an overlay which you can draw on if you want to boost your [indiscernible]. Pik Kuen Wong: I will answer that -- you want me now? Unknown Analyst: No, no, answer that to me -- so basically, asset growth and [indiscernible]. Pik Kuen Wong: I think I start with asset growth, but I want Teck Long to comment on it. It's both our loan book because we have onboarded more customers, especially the corporate customers as well. Mortgages, we mentioned, we have gained a bit more market share. And of course, we want to serve customers across geographies and which we have done quite well. And when we onboard big customers, we are able to serve them indeed in different countries. And of course, we do have funding growth, which we will put into high-quality securities asset. That would be quite a bit in U.S. dollars, but also in, of course, in Sing dollars, which is our home base currency as well. So I pass to Teck Long to talk a bit about the loan growth. Teck Long Tan: [indiscernible] one of our banking franchise, and we will continue to focus on that. I think the question also has to do with the overall economy, the overall uncertainty in the economic environment at the moment. As you can see that uncertainty has been there for quite a while, whether you look at it from duration day or caused by the spike of interest rate a couple of years ago. So we have navigated quite well. We see growth potential in the corporate sectors where the demand is certain, like domestically driven industries like construction or even renewable energy, where usually there's involvement of the government or major energy corporates in offtaking the generation of the power. So we look at it from an industry-led aspect to manage the risk. So we are industry specialists who will look at this valuation closely and navigate that environment. So we expect continued growth in the corporate loan book. On the other aspect is really the individuals and to some extent, the corporates as well. It relates to real estate in Singapore. So real estate in Singapore, the price is holding up and the demand for real estate continues to be there. So we will also get our market share in this part of the loan book. Unknown Analyst: Can I ask you how confident are you about the U.S. dollar? Because you mentioned that you will raise some of the U.S. dollar, you will increase -- you will buy U.S. dollar treasuries based on the asset for the securities book. So how confident are you of the U.S. dollar remaining [indiscernible]. Teck Long Tan: Okay. I think it's a new question. I didn't say anything about U.S. dollar. I think Helen made a comment. Yes, I can start answering this, right? U.S. dollar is still a major currency. So its use is still very prevalent. So although people may talk about the basement trades, that's largely focused in gold, so which also from our perspective is really U.S. dollar is still very dominant at the moment. And gold is while growing in prominence, it's not used for trade or day-to-day use. So in that sense, from a reserve viewpoint, maybe gold has grown a little bit more in prominence because of the volume as well as the price of the gold. But generally, U.S. dollar is still the dominant currency. Unknown Analyst: You are comfortable with only U.S. dollar treasuries. Teck Long Tan: Yes. Unknown Analyst: [Technical Difficulty] insurance products at... Pik Kuen Wong: Yes. I don't think we should speak on behalf of Chin Yee. They have that results session. But I think it's quite normal that you stay focused in doing a business, balancing volume and margin, right? So -- but I don't think we can speak on behalf of them. I think Chin Yee will take the RLAR question. Chin Yee Goh: Okay, RLAR, that is regulatory loss allowances reserve. When you look at our NPA coverage, we do have that as part of the total allowances. How RLAR came about was in the past, whereby there's a requirement to meet -- regulatory requirements to meet the regulatory allowance -- sort of allowances for -- allowances reserved at a minimum level from a regulatory sort of requirement. Now we have already met all that. But given the uncertainty in the environment, we decided not to release that but instead to just keep that. We can actually release that. We -- in terms of the regulatory -- meeting the minimum regulatory requirements anymore. Ching Ching Koh: [indiscernible]. Unknown Analyst: Question is from the -- I think Q1, you mentioned about some cost optimizations that the bank was looking at? [indiscernible] give an update. [indiscernible] about 3% operating cost. Is that sort of within expectations [indiscernible]? Pik Kuen Wong: I think this is part of it, meaning when we talk about cost discipline, we have -- in a way we have grown volume without need to hire a lot more people. I think that is one thing. Synergy, we also save some money on synergy because, for example, Bank of Singapore, a lot of the support functions is -- we have one -- actually one support function to serve both -- it's a separate legal entity, but they're also served by the same support functions. GE, we've discussed a lot more. And I think in the future, that's another opportunity. But very much it's also because of technology investments as well that, as we said, you do things faster. So you can generate more without investing or putting more money. Ching Ching Koh: Okay. It looks like everyone is happy. Unknown Analyst: At least a lot more information this quarter in your presentation really [indiscernible]. Ching Ching Koh: Yes, maybe Helen wants to... Pik Kuen Wong: Yes, I just want to say something. It's -- as Ching Ching said at the beginning, this will be my last results communications with the media. It's been a very fruitful and wonderful 6 years stay in Singapore with a bank that I actually started with. To me, it's always discreet feeling, a bank that I started with and I ended my career with. Retirement is just another phase of life. It doesn't mean that I forget about OCBC and all the wonderful people I have met and worked with, including you guys. So thank you all for the support all these years. You always come up with a very good question and sometimes make me think, a, are we missing something? You are interested in something that must be a reason. So help us to improve ourselves along the way as well. So I want to thank you all the while to -- of supporting the OCBC Group and supporting me very much. I hope that you will continue to provide the support to Teck Long. I'm very sure -- Teck Long has been with us for more than 3.5 years now. So he's part of the leadership team, and I'm very happy we have Teck Long to lead the group going forward. And I'm very sure that he will bring OCBC to the next stage. So a lot of things have happened over the last 6 years. But as again, I have nothing but gratitude and really feel honored to have been the Group CEO for OCBC. So thank you very much.
Operator: Good afternoon, and welcome to the Q3 2025 results presentation for Caledonia Mining. Today, we're joined by Mark Learmonth, who's the CEO, and he's going to introduce the webinar and start his presentation. Mark, over to you. Mark Learmonth: Thank you. Thank you very much, Julie. Should we open the slide deck? [Indiscernible]. Move on to the forward-looking statement and disclaimer page. Next page, there you go. And then the presenting team. So yes, I'm Mark Learmonth, Caledonia's Chief Executive; joined by Ross Jerrard, the CFO, who will run us through the financial numbers. James Mufara, the Chief Operating Officer, will talk to us about operations. Victor will say a few words about Bilboes and Craig will -- Craig Harvey will talk to us about the -- some of our exploration initiatives. Can we just move to the next page? Okay. The first thing I'll point out is that, as you probably noticed, we no longer publish the standard sort of management discussion and analysis and the detailed financial statements. So quarters 1 and quarter 3 will produce what we've done this morning, which is like a truncated version, but I think that's more than adequate for conveying the substance of what we're doing. But as we get into the presentation, first, we must recognize that we had a fatality during the quarter, and we extend our condolences to the family and the colleagues of the man who tragically lost his life. James will talk to us more about what we've done in the aftermath of that to comprehensively review our safety procedures and safety practices, and what we're doing to strengthen our risk management and workforce protection. So James will go into that in some more detail. It was a solid performance operationally. Production at Blanket was just over 19,000 ounces, and we sold just over 20,000 ounces. And that was clearly -- we've clearly been helped by the rising gold price. So the gold price is up 40% quarter-on-quarter, comparable quarter to this quarter to just over $3,400 an ounce, which drove a strong improvement in revenue and also profitability. So revenue up 52% to $71 million and EBITDA up 162% to $33 million. Ross will clearly provide more information on the financials. With respect to Bilboes, as we say in the RNS, we expect to give an update as to where we are and where we're going with that imminently. So Victor is on hand to say something. But frankly, until we've imminently said something, there's not a great deal we can say at this stage. And then Craig will run us through the exploration programs at Blanket and Motapa, which we're advancing and which is showing very, very encouraging results. And then finally, I'll just remind you all that in addition to these results, we've this morning declared another quarterly dividend of $0.14 a share. So with that, can I hand over to James to run us through the operating results? James, over to you. James Mufara: Thank you very much, Mark. Good day to you all. It is very sad that -- I mean, in this quarter, we actually have to report a loss of life incident that occurred at our Blanket mine. In this very quarter, one of the things that why it's -- this tragic is we have seen quite a serious improvement in terms of our health and safety parameters, and that's in terms of lost time injuries, in terms of environmental conditions underground, ventilation conditions underground, we have seen an all-round improvement and accident-free days, we've seen quite a serious improvement. However, we still suffered this loss of life in which the gang leader who was conducting -- in the process of conducting secondary blasting actually had a premature detonation and he lost his life. Secondary blasting operation is an operation where we break some of the bigger rocks that could have been generated during the time of primary blasting, so that you can send them through into our ore buses and be in a position to take them out to surface. Immediately after this accident, we embarked on an investigation, thorough investigation and extensive investigation to determine the root causes of this accident. We had also reported -- we reported also this to the government who also actually conducted a thorough, extensive investigation on their own to determine this root cause and possible areas where we can see improvements. The investigation is complete now and action plans that we found out are currently being implemented to avoid any possible recurrence of these significant unwanted events. So one of the key issues that we still need to deal with is the issue of our employees and higher risk appetite that we see within the operations. If you can just go to the next slide, please. And the next one. In terms of the slides that are now showing, I mean, you will see that and this depicts a consistent delivery that we are now witnessing at Blanket mine from the third quarter of 2024 to now, you can see that the delivery has almost reached a steady state. I mean almost delivering at the same level. This is the recipe to good production and actually consistency, that's what a plant wants, the plant wants consistent delivery, and this is what we're beginning to see. This has been brought about mainly by 3 issues, but there is obviously a lot more other issues behind this. And the first one is the introduction of the short interval control system that we see on the mining and the metallurgical side, where production is managed on the short interval control basis. The second reason is that we have seen is that there's been a consistent tonnage throughput, because now the plant we can feed from the stockpile, and we are in a position to see consistent throughputs due to feeding from the stockpile. The third reason for this consistent performance that we see with the tonnage and steady-state performance is because with the improvement in development that we embarked on starting the end of last year and even carrying on with this year, we are seeing an improvement with regards to flexibility as we are opening up better and more areas for production underground. However, on the center of graph, you will see that there is an unfavorable drop in the orange line, which is the grade line. The reason for the drop in the grade line is linked to the loss of life accident that we had on the 22nd of September, where we stopped our high-grade areas for up to 20 days while investigations were actually going on. You will see that this year also a negative impact in terms of our recovery, which is on the graph below on the line -- on the graph below where the graph shows that the recovery also took a negative dip, because of the grade that actually went down. The good news, however, is that the recovery for the year-to-date is still on plan, and we still expect to finish the year high with regards to our recovery. If you may just turn to the next graph, the next -- the table shows how our mining metrices were above plan for the quarter, which is actually showing a healthy production throughput throughout the whole quarter in terms of our tonnes broken, trimmed, hoisted. And most importantly, in terms of our development to generate new areas where we will mine from. You will see that we were green in these areas, and it's very important to be healthy in all these areas. This is consistent production all around. Achieving development will also help us to make sure that our flexibility going forward is going to be better, and this will actually positively impact in terms of employee productivity. The only color which is not green is the grade color, which we have already explained that some of the higher grade areas, we had to stop them after the loss of life accident that we unfortunately suffered on the 22nd. And because of that, we actually see that the grade was at 3.4 grams per tonne. However, if you can just carry on to the next table, we see that, at Blanket, we are on course to meet the increased guidance. On this presentation, you will see that the tonnes milled are still about 7% ahead of our desired run rate for the year-to-date. Also important, however, also is the issue with regards to the tail grade, which remains at 0.2 grams per tonne, I mean, which is our plan consistently very, very low, which is showing that our recovery within the plant has remained consistently very, very high. The ounces for the year to date is still, even in the end of the quarter, still 3,000 ounces ahead, clearly showing that Blanket is on course to meeting the increased production guidance as given out to the market. If we can just go to the next graph, which shows that we are still securing the future. This production has not just been to meet today's need, but it's also securing the needs of tomorrow. You can see that in terms of our reserve generation, which was positive for the quarter. We have met today's production, but without destroying our ability to meet production targets within the future. So although our set out goal at the beginning was simply not to deplete reserves, we because of better production, better development actually added reserve ounces as well in the quarter due to better production. This is a healthy state to be in. If you can just go to the last one, which talks about our focus on productivity. You will see that Blanket being a mine that has been in operation from 1904, some of the areas are further and further from the shaft barrel and deeper as well. There is a need for us to improve productivity and introduce technology within our mining space. We have seen that ourselves is mining. I mean we are price takers and the only area in which we can actually improve our competitiveness is if we can improve productivity. We have thus embarked on implementing technology in the mine, so that we can better position ourselves to be more productive going forward. In this example, I've just given 3 of the areas that we have chosen to embark on, which is engineering areas, and one of them being introducing men carriages or men riding. This is but the improved impact in terms of phase time, so that people are on the phase in good time and also so that people have got energy when they arrive on the phase. So we have started to implement this within our working areas as a way of increasing productivity, and dealing with increased cost that invariably come with an aging operation. And most importantly is the technology that we are improving. We are doing a lot of the work in-house, as a result, it's costing us less to actually implement this technology. We intend to continue to increase and implement this technology to both increase productivity, and also increase the health and safety of our employees. I'll hand over to Ross for the financial section. Thank you. Mark Learmonth: Thank you, James. So Ross, do you want to run us through the finance, please? Ross Ian Jerrard: Thank you, Mark, and thank you, James. My pleasure. Good afternoon, everybody. It's my pleasure to run through the financial results. And as what James described, it's been a challenging quarter, but certainly well delivered. So if we can turn to the next slide, a quick overview of our financial results and a summary. You'll see gold sold is up 9% to 20,000 ounces against gold produced of just over 19,000 ounces, solid quarter there. I will highlight that those gold produced ounces are the Blanket ounces. There were some 437 ounces that was generated from Bilboes, that we don't account on this table just in order to calculate our on mine costs, et cetera. So a very solid set of numbers in terms of ounces produced and sold. Just dropping down below that first line, you'll see the on-mine costs, which were up 27% quarter-on-quarter. That's driven by our sort of traditional elements of electricity, labor, and consumables. That increase was incurred this quarter, as James has indicated, there were additional volumes that were having to be processed and moved to compensate for some of those lower grades. And importantly, the teams had to be shifted around because of the unfortunate incidents. So when we're comparing against those areas that were planned to be or scheduled to be worked, there were a number of moving parts that obviously resulted in additional costs. But also additional volumes having to be moved, offset by that lower grade, which obviously came at a cost, and that has driven our on-mine costs. Dropping down to our all-in sustaining costs for the quarter, you will see that they have equally moved up some 40%, and that's predominantly due to those on-mine costs that I've just mentioned, but also the higher gold prices impacted our royalties, and that's dropped down into the impact of our all-in sustaining. Overall, a really good result driven by that gold price that Mark had mentioned at $3,434 an ounce, which was a really pleasing result, and has really benefited the operations and the results that we will talk to. So moving to the next slide, and we'll talk a little bit about the profit and loss. Happy to report another sort of quarterly revenue number of $71 million, which is back on those good ounces produced and all-time gold prices. You'll see that royalty number has similarly increased in line with those revenues. And those production costs were up, as I mentioned, in terms of additional volumes moved at a lower grade. Depreciation has largely been in line for the quarter. And I'm very pleased to report on those net foreign exchange losses where we've continued to benefit from access to the willing buyer, willing seller market, and being able to deploy our [ ZIG ] component. And if you look in the 9 months column, you'll see that we're just under $3 million compared to $10 million number for the same time last year. So we're really pleased with that result in terms of delivery in the income statement. Our corporate line items have increased, and that's due to a higher equity share-based payment valuation that was driven by the share price. But also a number of one-off expenses that you'll see in that year-to-date number in terms of some of the corporate team reshuffle. And then lower down below the line, that tax expense is higher, and that's due to the good operational performance and the benefit of the gold price. But you must remember the gold -- the solar sale that's been included in that number. And importantly, from a cash flow perspective, includes the capital gain on that solar plant sale. So if we quickly move on to the next slide and talk about cash flows. The net cash inflow from operating activities was a very solid number at just a shade under $14 million for the quarter, impacted by some large negative working capital movements of around $8 million. Those are timing in terms of some investments in terms of consumables and then the traditional working capital movements in terms of ounces, gold sales receivables and the like. Tax payments, as I've mentioned, included that $2 million in terms of cash outflows. And -- but then lower down in terms of capital expenditure, we're largely on track for the year. We're not readjusting our forecast spend, and we've continued to invest and deploy money into our fixed term deposits. So you'll see we've got $18.5 million now sitting on fixed deposits, and they all sit offshore here in Jersey. So a really pleasing result year-to-date. You'll then see the $14.7 million worth of dividends that have been made year-to-date, split in terms of $6.6 million for our NCIs and $8.1 million for Caledonia shareholders and comprising of 3 quarterly dividends that have been paid in the 9 months. And as Mark mentioned, we've declared our customary quarterly dividend of $0.14 per share earlier today. Importantly, we closed the period with $7.3 million of cash and cash equivalents at the end of the quarter. And if we want to move to the next slide, we'll see where those funds are held, and also importantly, from a liquidity position, where we sit. So in terms of having cash on hand of $15.6 million. We've got those fixed term deposits that I mentioned of $18.5 million. And then we've got some bullion on hand and gold sales receivables at the end of the quarter. But overall, including our bank facilities, we have a total liquidity of just over $44 million, which places us in a very healthy position and have the ability to deploy funds against some meaningful projects, which is very exciting. I know James has spoken about around cost initiatives, but I just wanted to turn to the next slide, and I guess, take a minute to look at our cost profile, which has been an ongoing team exercise. And I just wanted to highlight or take a minute to really look at our cost base against others. And we've been benchmarking our cost profile against our similar African peers. Admittedly, they're in South Africa versus us in Zim. But looking at mines that we compare to in terms of operating under conventional mining methods, and also those mines operating underground mines and at depth, we're not out of line and actually quite -- compare quite favorably against similar mines. You can see those metrics in terms of depth, tonnes milled per annum and also the human element, I guess, the number of people that operate those mines. And our mines, as James had indicated, really, it's around where we're operating now. Blanket is a very different mine from 5 years ago, where 60% of its ore was really extracted from a depth of approximately 750 meters or 760 meters. And now we've got a big component of our ore coming up from a depth of over a kilometer. And so in terms of tonnes and tonne meters hoisted and all the metrics that we're looking at, this all comes at a cost. So those key components of both productivity, but also our electricity costs and our tonnes of meters and additional loads that we're having to put on that electricity or the power requirement when operating at depth has a significant impact on our cost base when producing an ounce profile of around that 80,000 ounces per annum. And there are a number of initiatives that we've got on the go, as James has indicated, and we'll be hopeful that we'll be able to bring those to account and have a meaningful impact on our cost base going forward, but it's unlikely that we will return to historical levels in terms of the cost profile when operating in a very much closer to the surface and lower volumes being used. So on that basis, you would have seen in the announcement this morning that we have updated our cost guidance for 2025. So if you move to the next slide, please. Whilst the gold production and the previously guided gold ranges in terms of ounces and capital expenditure were maintained, we have looked at our cost base and looked at the volume movements and what it's meant for how we exit the year in preparing our outlook for next year. And we've increased our guidance ranges, both on-mine costs by increasing it to just over 10% to a range of $1,150 ounce to $1,250 per ounce. And equally, on our all-in sustaining costs, we've increased it for -- at 9.5% to a range of $1,850 to $1,950. And we believe that that is very reasonable and considered outlook in terms of as we exit this year and conclude on the final quarter. So we're really excited. It is mining, and there has been some challenges, and I think the team has dealt with that very well. But as we sit today and as we look for our outlook for 2025, we're really excited in terms of being able to deliver a really solid 2025. So with that, I'll hand it back to Mark, and I think it's going to Craig to talk a bit about exploration. Mark Learmonth: Yes. Thank you, Ross. So Craig, can you just talk us through the exploration at Motapa and at Blanket please? Craig Harvey: Thanks, Mark. Well, I can do that for you. So I'll just -- if we can go on to the next slide. So just very quickly, what we're doing at Motapa, the budget for the year is about -- just over 27,000 meters of drilling. At the end of Q3, we had done just under 20,000 meters. It's about 71%, 72% complete. We expecting to complete the drilling campaign during Q4. I did mention, I think, in the last quarterly that there were some issues with the laboratories in Zimbabwe. That seems to have been sorted. We have caught up quite a number of assays. So I am expecting to have a maiden resource declaration for Motapa, specifically Motapa North during H1 of 2026. If we could go on to the next slide then. So this is -- this is just -- when I talk Motapa North, I mean, obviously, it's those nice pretty colored zones that you see on that map there. But that blue line that represents the Bilboes, which is our current project that everybody knows about and the Motapa area. So from Motapa to the Bilboes boundary is literally 200 meters, and it's another 250 meters to the Isabella South pit. So quite clearly, what we're doing at Motapa and Motapa North should in all aspects have an impact on the Bilboes project going further. So currently, with all the drilling that we've done, we drilled and we've defined some mineralized zones over a strike length of approximately 2,500 meters. It remains open to the Northeast, still have some gaps between the historic old pits that we've got to do. Motapa North, its main thrust is oxide, sorry, not oxide, sulfide mineral resources below the current pits down to a depth of about 200 meters. So all of this, once the drilling campaign is complete during this year, we'll take 1 month or 2 months to get the assays in, and we'll have a maiden resource declaration for Motapa North early next year. If we go on to the next slide, some of the other drilling that we're doing. So this is about 500 meters south of Motapa North. It's the area to call Mpudzi. We're finishing up our drilling campaign here. So we've sort of drilled about 1,000 meters on strike. It remains open probably for at least another 1,000 meters to the Northeast. It's an area that hasn't been open-pitted in the past. So this program is slightly different where we are focusing on the potential for oxides, clearly, drilling some deeper holes to get an understanding of what the sulfide mineralization looks like. But this program will carry on in 2026, and we'll report drilling results as and when they will come in. If we could go on to the next slide, and I'll take us through Blanket quickly. So Blanket, we've got the underground, as we all know, and we've also got the surface. So with the underground exploration drilling, it's all of the long-haul drilling that we're doing, typically holes 250 meters to 450 meters deep. If we can go on to the next slide, I can then show you where the areas are that we're drilling. So to the south or to the right of the slide that you see, so we've got ARS, which is AR South, we've got the Blanket Quartz Reef, which is BQR, and then all of the Blanket orebodies, and we've got 7 of them. So you can see there 34 levels, you can see the little blue traces that are running there. So we currently drilling below 34 level. And a lot of our intersections are now on kind of the 36 level mark. On the Blanket orebody side, half yearly drilling results. So probably at the end of this year, we will publish a set of drilling results for Blanket. On the northern side, on the left-hand side, you can see some long-haul traces there. So that is Lima, where we are now filling in the drilling below 22 and 34 level. We've drilled the one next to it, Eroica, extensively. And we've got 30 and 34 level that can quite easily develop north towards Lima and pick up that orebody and then carry on mining like that as well. If you could go to the next slide. So in the past quarter and the previous quarter, Blanket started a surface exploration program. So if all the geologists out there, if there are any on the call, a very simplified geological map showing kind of the host rocks that we're looking at. All the blue vertical lines are the trenches that we have done. So that was a start of the exploration activities. That's over a strike length of 600 meters, the trenches are approximately 200 meters long. And out of this, we have identified an area that's approximately, yes, it's approximately 50,000 square meters surface exploration area that has got nominal gold values. If you look carefully, you can see some colored bars that are next to the trench lines. I can't put values on this yet. We haven't released anything to the market, but it gives you an indication of mineralization in those trenches. So during Q3, we have instituted a Reverse Circulation Drilling program, spaced 25 by 25 meters apart, drilling to a depth of about 45 meters. And the intention of this is quite clearly, if we have sources of ore that are probably amenable to heap leaching, Blanket mine will have access to, hopefully, an additional source of low-cost surface ounces that also do not require to take up capacity in our current plant environment and capacity that we have. And so my last closing remark on Blanket exploration on surface is if you look at an aerial map of, for instance, Bilboes, that's covered with historical open pits. If you look at an aerial map of Blanket, there are no open pits. And it's just really a function of the age of the mine when Blanket first started, it went underground very, very quickly. But quite clearly, along our lease area, this should be the first of a couple that we would see like this. This program is expected to finish up late December, so kind of early Q1 of 2026, we should have a full exploration report on this as well. With that, I'd like to hand back to Mark. All done. Mark Learmonth: Thank you, Craig. At the outset, I had indicated that Victor would talk about Bilboes. But the fact of the matter is that, as I also said, we're about to provide a very detailed update on Bilboes imminently. And so at this stage, there's nothing really Victor can say other than just repeat the word imminently. So apologies for getting that slightly wrong. So in terms of outlook, we remain on track to achieve the increased production guidance for 2025. So we're about, sort of notwithstanding a few headwinds in Q3, we're about 3,000 ounces ahead of where we expected to be at the beginning of the year, which is good. Craig has given you a good sense of the very encouraging drilling taking place at Blanket, both at depth and at the surface. Motapa, we're looking to convert the drilling into a maiden resource early next -- first half of next year, which should validate the acquisition of that asset some time ago. As I said, Bilboes' feasibility study, news on that is imminent. And we continue to look closely at cost management to see to what extent we can try and get those costs down somewhat, but acknowledging that Blanket is now a fundamentally different mine to what it was 5 years ago, and we're not going to go back to the days of enjoying the days of producing gold at $850 an ounce. So with that, we can open it up to questions. Operator: [Operator Instructions] And our first question comes from Nic Dinham. Nic Dinham: I have several questions, tidy up some details here. On the mining side, there's a lot more broken ore registering than actually hoisted. Could we have an explanation for that? And also from you, James, I think what are your immediately available ore reserves at the moment? I think you've got a sort of South African standard when you talk about that? Mark Learmonth: James, do you want to deal with those questions? James Mufara: Yes. So obviously, in this particular quarter, we broke more, but we had -- I mean, if you look at the year, for instance, we are within the normal standard of plus or minus 2%, the difference between what we broke and what we hoisted. But in this particular quarter, we had -- we broke slightly more, and this is simply because of our hoisting constraints, the stoppages that we had with the loss of life in some of the areas, and we let, but you will see that that will correct out this quarter. Then in terms of the immediately available sort of phase length, we are still very -- I mean we're still quite low. We're looking at maybe at the moment 2 months to 3 months. We need to move that up with a little bit more development that we need to do that with the flexibility. We are happy that we are already over 5% above for the year. And we are seeing -- we are actually mining -- we're actually putting back into our reserves. So we should see a big correction within the next year. And I think within the next 3 years to 4 years, we should be in a position to be maybe 3 months to 6 months or better, so that we can have better flexibility. Nic Dinham: And here's a question which I always run off you, Ross. What are you expecting from dividends from Blanket this year? And will that bring that horizon for the end of the facilitation loans any closer than quarter 1, which you spoke about last time. Obviously, things have materially improved. Ross Ian Jerrard: Hello, Nic. Yes, absolutely. So those loans basically will be paid off by the end of the year or January at the latest. So certainly earlier than originally talked about in terms of end of -- sort of Q1 next year. And then, yes, in terms of planning for the remainder of the year, we're originally targeting -- well if I deal with in cash, we were targeting a $50 million sort of cash balance to have been distributed and be sitting in Jersey by the end of the year. I think that's more likely to be between $40 million and $42 million, that type of level in terms of distributions that come through the chain. So we've had $45 million that have been distributed up from Blanket, both during the quarter and post in terms of dividends, and we continue to look to build our offshore bank account up closer to that $40 million mark. Nic Dinham: Sorry, Ross, if you can just explain again what is the quantum of dividends that Blanket will distribute over this year, given where things are at the moment? What will the total look like? Is that the number you mentioned? Ross Ian Jerrard: Yes. So those are the numbers that we've already done sort of $45 million. And depending on performance and the like, we're probably going to get between sort of $15 million to $20 million additional distributions that happen within this remainder of the year. That's obviously impacted by timings in terms of when those dividends actually get declared and the distributions get distributed up the chain. So we've done $45 million, it will probably be $60 million to $70 million in terms of actual distributions that come up from Blanket. Operator: Our next question comes from [ Joseph Tarsh ]. Unknown Analyst: My question is mainly for Mark. So you've talked in the past about how your goal is to avoid further common shareholder dilution as you fund the growth of the business. And with the favorable gold prices in 2025, Blanket, you're really starting to harvest some of the fruit of Blanket and the previous investments there. So my question is, how much do you intend to retain cash to fund the future development projects and potentially other acquisitions in Zimbabwe, as opposed to increase the dividend? And effectively, if a common shares needed to be issued, again, raise your cost of capital and doing so, as I think in hindsight, has been the case following the dividend increases with Blanket? Mark Learmonth: Okay. I'm not sure I heard all of that correctly. The upshot is that we -- there were several questions embedded in that. We're not looking at any further acquisitions in Zimbabwe. I think our plate is full. That's the first thing to say. Secondly, we do have a very substantial capital investment program in the Bilboes project, and that will become clearer imminently. And in that context, it would not be appropriate to increase the dividend. Having said that, our planning going forward is to maintain the dividend. Now clearly, we're not going to promise to maintain the dividend. But we don't see the dividend increasing, and we will do our level best to avoid reducing the dividend. I think that's all -- I think those are the answers to the questions you raised. Is there anything I've not answered? It's quite a complex question. Is there anything I've not answered? Unknown Analyst: I think that gets to the meat of it. Maybe just as a follow-up, if you were to have a general idea of when dividend increases would occur again, would it be after the current projects with Bilboes and Motapa are substantially completed? Mark Learmonth: Well, it would be after Bilboes is completed. And let's be very clear. We're doing Bilboes not for fun. We're doing Bilboes to increase cash generation and thereby increase our ability to pay dividends. That's entirely what we're about. I mean we've been paying dividends now for about 12 years or so. And if you look at the returns that we've generated for shareholders over the course of the last 10 years or so, I think it's a 1,000% return compared to gold going up threefold and the GDXJ going up fourfold. So we substantially outperformed both gold and the GDXJ. And a major contribution to that has actually been the effect of those continuous dividend payments over the last 10 years to 12 years. So paying a dividend is deeply embedded in our DNA. And I would hope that our past actions in terms of maintaining and then increasing the dividend should give shareholders a high degree of comfort that we're going into Bilboes and other projects with a view to increasing the dividend. It's very important. Operator: Our next question comes from Tate Sullivan. Tate Sullivan: I think [indiscernible], sorry for background noise. Is any of the work that you have done on Motapa going to factor into the feasibility study for Bilboes? Mark Learmonth: No, it's far too, that would -- it's far too early. It will take a maiden resource at Motapa early next year is just a staging post. To complete that work at Motapa will take -- Craig, what, 3 years, 3 years or 4 years? Craig Harvey: Yes, I'd say a timeline of 3 years or 3 years to 5 years. Mark Learmonth: Yes. So that -- if we were to -- if we're hoping to fold Motapa into Bilboes at the get-go, that would introduce a delay of many years into the project, which I'm not sure on this as we stand. So look, it is all -- if you think about the Bilboes project, the first 6 years will be mining in the Isabella-McCays area. And then the latter 4 years will be mining Bubi, which is more remote. In the intervening period, that gives us plenty of time to finish the geological work at Motapa and then in due course to fold Matapa into Bilboes as the Isabella-McCays material runs out. But at this stage, there'll be no benefit to shareholders in deferring the project. Tate Sullivan: And then for Blanket, you mentioned in the press release a plan of scheduled engineering work on winders and shafts. I'm sure that -- and then storing and then accumulating the ore for uninterrupted milling. Is this all planning for 2026 engineering work? Mark Learmonth: Your line is very poor. Could you kind of repeat the question because I couldn't pick up all of it. Tate Sullivan: Yes. You mentioned some scheduled engineering work on winders and shafts for Blanket. Is that all planning for 2026? Mark Learmonth: James, correct me if I'm wrong, but I think it's that sort of a relatively quiet period over the December, January '26, '27. James, is that correct? James Mufara: Yes, it is correct, Mark. Yes. So '26, '27, we're going to have the AC-DC conversion, yes. Mark Learmonth: Yes. And let's be clear, the whole point is to have a stockpile so that we can see our way through that hiatus without interrupting production. Operator: There are no other raised hands. So follow-up, which is from Nic Dinham. Nic Dinham: Yes. So I missed a question for Craig here. When, Craig, do you think you'll be in a position to do a reserve upgrade at Bilboes -- at Blanket? And when would that result in a technical report summary? Craig Harvey: So we are currently busy with one. So during Q1, late Q1, we will have a new technical report out. We'll have a revised capital, and we'll have revised resources. And obviously, with the life of mine, we'll have a revised reserve estimate as well. Operator: We've got another question from [ Yuvan Lowe ]. Unknown Analyst: Congratulations on the strong financial results. I've got a couple of questions. Perhaps first for James. So in relation to the development that has been done, could you just talk specifically to Eroica and BQR? Mark Learmonth: James? James Mufara: Yes. So I mean we obviously now, at the moment, I mean, in terms of the development, nothing has really changed in terms of Eroica and BQR, I mean we are developing reserves in that area. We still have got crews also that are busy mining in that area. I wouldn't say off the top of my head, it could be around, Craig, maybe 15% of our production is coming from there. These are still high-grade areas. We're still seeing good values in Eroica and the BQR area. But we also -- that we also had the loss of life was also in BQR, for instance. But we are confident that with the development that we're doing at the moment, we should be in a position to open good reserves in the next 2 years, 3 years, like we say, and we are accelerating development there. Unknown Analyst: On a related note, but this time directed to Craig. So the discoveries at Sheet or in the position of Sheet are very interesting. I know you're focusing on the oxide for heap leach right now. But have you done any deeper holes? Does there appear to be an extension at depth to Sheet? Is it disseminated sulfides or is it [ quartz ]? Craig Harvey: Yes. So that surface exploration that I showed there sits, as I say, it's 250 meters to the east of Sheet. When we extrapolated underground because, obviously, we've got the whole claim of our underground workings, it appears as though this area hasn't been mined. So there is a potential for a previously unknown or unmined orebody to be sitting in the footfall of Sheet 250 meters to the east. So we're going to tackle the surface. And in the meantime, we have -- we are in the process of procuring slightly stronger, better electrohydraulic rigs that we can drill from 9 level on from Sheet drives that we have there to actually have a look if this does carry on down. Mark Learmonth: Sorry, Yuvan, does that finish you? You done? Unknown Analyst: Yes. Thank you very much. Mark Learmonth: I can see we've got a typed question, which I think falls -- I mean, Ross, can you pick it up at the bottom? It seems to really fall into your bailiwick. Can you see them? Ross Ian Jerrard: Sorry Mark. I didn't seen enough, reading through. Mark Learmonth: Yes. I mean, the first question is what's effectively the downside gold price scenario, which -- below which we couldn't sustain the dividend? So I think that's the first question. Are you able to answer that? Ross Ian Jerrard: Yes. So on that one, that would be sort of $1,850 would be the low price that -- or downside scenario in the short term and that we've modeled on that side. Mark Learmonth: Okay. And the second one refers to lease liabilities. I don't quite understand what the question is about lease liability. Cash used for payments of lease liabilities has been increasing year-on-year. What's the long-term capital allocation strategy for managing these increased lease debt? I don't quite know what lease liabilities were referring to? Ross Ian Jerrard: Yes, not sure either in terms of the leases. Mark Learmonth: We're conspicuously ungeared. I mean we do have some loan notes, which initially were issued by the solar company. And then when we sold the solar company, we Caledonia deliberately took those loan notes over, because we're interested in helping to further develop the emergence of a debt capital market in Zimbabwe. And so we're keen as a company to continue to build those relationships with high-quality Zimbabwean institutions. So we have those liabilities. Then the other liabilities are really the nature of very short-term overdraft facilities. And as you can see, we've pretty much repaid to the latter half of those to go during this quarter. So I'm not quite sure what the lease liabilities are. Ross Ian Jerrard: It's probably related to some of the property leases and the new buildings and some of the signing of those leases. But again, not material in the total scheme of the proceeding here. Mark Learmonth: Okay. Two further questions. First, what's the percentage tonnage being hoisted by #4 in Central Shaft? So currently, the percentage -- I think for the whole of this year, the target is for about 62% to come up Central Shaft and the balance to come up #4 Shaft. And so I think the point that Ross was making is if you look at that in terms of tonne meters, in 2020, we hoisted 630,000 tonnes from a depth of 760 meters. So that's about 450 million tonne meters. If you take -- if we're going to hoist -- this year, we're going to host about 830,000 tonnes. If 62% of that is coming from 100 meters, that effectively increases the tonne meters to about nearly 900 million. So we're using pretty much twice as much power to hoist, which is, I think, the point that Ross was trying to make. And the second question is, was the pressure on production cost broad-based or unique too? The pressure on production costs has been across the board. So we're continuing to see increased labor costs, and that's a combination of overtime, and I'm going to say bonus payments based on production exceeding targets. In terms of trying to manage overtime, one of the things we're doing is we've introduced a clocking time attendance system, which is allowing us now to get a better handle as to how and why overtime is being incurred. And one of the things we want to do going forwards is to try to improve the roster and improve the way we use labor, so that the workers get to and from their places of work much more quickly. And therefore, they're less tired, and they also do less overtime. So I think that's the initiative on labor. On consumables, we've looked over the last 5 years. I mean, on our consumables, about 1/3 is what we call variable consumables, which is cyanide, drill steels, explosives, and that sort of stuff. Over the course of the last 5 years, we've actually become more efficient across the board in terms of our usage of cyanide, explosives, drill steels, kilos per tonne milled. But in every case, we're finding that the unit cost is going up, particularly in the case of, say, rods, where the average increase per annum over the last 5 years has been about 12%, I think. So we are seeing costs generally going up. And then the third one would be -- yes, it's not just labor, that's electricity and that's consumables. Within consumables, the conspicuous offender, I guess, at this stage would be the cost of running the TMMs both in terms of overtime and consumables. And that reflects the fact that some of these TMMs, the underground trackless equipment is getting old, and we need to seriously now consider whether it's economic keeping and repairing old and reliable stuff, or buying new stuff, which is more reliable and less prone to breaking down. So I hope that -- and then on top of -- sorry, also on top of the final point to that question, within the quarter, we did incur some additional costs relating to repairing a ball mill, one of the big ball mills found. And whilst we could work around it in terms of maintaining tonnage throughput, it meant that we did incur some extra costs to fix that ball mill. But primarily, the increase in costs, I guess, is structural, not specific. I hope that answers the question. Any further questions? Operator: No further raise hands. So over to you for any closing remarks. Mark Learmonth: Let me just make sure there's no one. Okay. Look, thank you very much for joining us. It was a -- I characterize the quarter as being a solid quarter. It creates a good foundation. And as we say, the real news flow is going to be the imminent news flow relating to Bilboes. So thank you all for joining us. Thank you very much.
Jan Pahl: Gentlemen, my name is Jan Pahl, and welcome to the Hypoport SE Q&A results Q1 to Q3 2025. I'm here together with this lovely gentlemen, Ronald Slabke, our CEO, here. And together, we would like to organize this Q&A session. Jan Pahl: [Operator Instructions] And we are very happy to wait until the first question on our Q3 results [indiscernible]. And in the meantime, we have decided to start with a question, which I got just a few minutes ago via e-mail. So maybe this is a good -- even it's a little bit complicated one, it's a good idea to start with. It is regarding our JV. So at least the question to Mr. Slabke is, could you please explain if Europace has maybe lost market share because of Deutsche Bank issues. So the German mortgage market volume seems to increase more than the Europace volume this year. If Deutsche Bank is priced themselves out of the market while the German mortgage market volume continues to increase, who is taking over these Deutsche Bank market shares at least. So -- and I'm sorry, I forget to start the record. Should I summarize it again. Okay, sorry for that. Now we are live on now record has started. We are already live. So once again, our first question here on our Q&A result is if maybe Europace has lost market share because of Deutsche Bank because it looks like the German mortgage market is increasing a little bit faster than the Europace volume, and this is because Deutsche Bank is pricing them out of the market, out of the Europace market. Who is taking over these shares from Deutsche Bank? Ronald Slabke: Okay. A good question. Let's start with this that -- in general, we see a healthy market environment right now. So the recovery of the German mortgage market from the crisis in 2022, second half of the year and 2023 is over and the market is, let's say, coming back. So the speed of this recovery looks slightly different in different areas of the market when you think about what the mortgage is used for, regional differences between metropolis and rural areas, but as well the different market participants perform slightly different in this market. So what we see from the reporting and as well from our numbers and activities, regional banks are pretty successful right now, especially in a year-on-year comparison because they had a weak start in 2024 still. And so they come from a lower base level when you look on the 9-month numbers. So cooperative banks and savings banks are taking market share right now. In a certain level, it may be even -- or in a small level, it may be linked to the rollout of Europace in both of their groups and the rollout of a lot of features that we provided to them, which improves their competitiveness, their efficiency in the market and as well the conversion rates of their advisers there. So they're performing well. And as you saw already in our results, we're performing well with them as well. So a next group where there are no clear statistics, but where we see that on a, let's say, daily basis that they operate well in the current market environment are mortgage brokers. A group which heavily is using Europace is depending on Europace. And with only one large German mortgage broker outside of Europace, Interhyp Group as another market participant in this area. For consumers, the interest rate is very important again right now because it has risen from a much lower level in the last 10 years. And on a higher interest rate level, comparing interest rates is something very German and very efficient and creates a huge benefit for the consumer who is comparing. And brokers, thanks to Europace or in case of Interhyp, thanks to their own system are comparing hundreds of banks and offers with them and enabling consumers a great deal at the end. And so let's say, compared to bank branches, they are usually independent structures. So freelancers working on -- for their own profit, their own benefit. They are much more agile and aggressive and using Europace better in interacting with the clients than the typical bank branch in Germany right now, which is not using Europace. So this [indiscernible] takes market share, and they are all supporting that Europace is growing. And in none of these 3 sectors, we lost a single relevant participant of the market. We just gained structures all the time. So what is certain, and this is the analysis of the one who made the questions right, the private banking sector lost market share in this environment in the last, you can say, 2 years. And this is -- Deutsche Bank plays a role there. They have a strategic goal to reduce their mortgage exposure and reduce their new mortgage volume because of their return on investment requirements. So equity is expensive for Deutsche Bank. It wants it wants to optimize its return on equity and this leads to a lower new mortgage volume and the decline in balance sheet for them in this business. So Yes, all Deutsche Bank business goes for Europace. So we see the lower numbers as well, less contribution to our overall numbers. And if you want to just look on the volume, you can say we lost thanks to Deutsche Bank a certain volume in the market. We don't treat this as a market share loss. We know that Deutsche Bank will come back and that the volume in the other markets is something where we are super successful in getting forward in all other banking groups. So longer answer to this simple question. Jan Pahl: Fair enough. Great because I think it's important. So I appreciate the detail. I got -- received a couple of questions. Let's for a moment, stay with real estate and mortgage platforms segment. There's a special, but maybe it fits because you mentioned the saving bank Sparkassen. So the question is, could you please tell us a little bit more about Project [indiscernible], which is with the Sparkassen banks? And how is that impacting FINMAS' market share with internal loan applications? Should we think about Finanz Informatik core banking software as a competitor to FINMAS? Or is it a partner? And maybe you can explain a little bit [indiscernible] because it's an acronym and maybe not everyone is aware of. So as a kickoff, maybe to start there. Ronald Slabke: Yes. As well, a good question. So we, for 10 years now cooperate with the savings bank sector. And for the last 5 years, our cooperating partner is Finanz Informatik, which is the central IT service provider for the savings bank industry. [indiscernible] a project started roughly 2 years ago is or decided to be started roughly 2 years ago, better say, and we are working on this now for 2 years is a project where we integrate the property as an asset in the mobile app environment of Finanz Informatik so that every of the 30 million users of savings banks in Germany, not just see the balance sheet of the current account and the savings products, but as well the worth of his properties and the mortgage loan linked to this. Every day when he opens the app, he's going to see this, thanks to [indiscernible]. And behind this, the consumer gets different services around the property and the mortgage provided in the app, things like renewing the mortgage are possible or if the mortgage comes from a third party, refinancing this mortgage with a savings bank mortgage. And this is in a rollout process right now. This [indiscernible] project slightly delayed, should be available -- or let's say, it's in the process with some -- a focus group already, but the full rollout should happen now in the first half of next year. So this puts Europace and the FINMAS features and actually as well the Value AG proposition and the automated value model of Value AG in a center position in the savings banks industry, which is a great progress. In addition, we work together with Finanz Informatik right now in -- on the deep integration of the Europace offers and comparisons and product presentation in the Finanz Informatik system. So should we think of Finanz Informatik as a competitor or a partner, by sure, partner. So we integrate both systems with each other more and more. We replace features out of the or we add features, we enhance the user experience of the internal system of Finanz Informatik with Europace features step by step and with this bring more volume to the Europace marketplace. So this is -- it's a strong partnership, which is driven by making savings banks more competitive and enhancing the user experience if a user is using -- is using saving bank as a mortgage adviser. And this is very successful for all 3 involved parties for now. Jan Pahl: Great. Thanks. So for now, let's stay with real estate and mortgage platforms. A short one is what EBIT we expect for this year, next year and medium term, I think it's 3 to 5 years roughly for value. So Value AG appraisal service. Ronald Slabke: Yes. Okay. So Value AG is an heavy investment from our side in valuation as a major part of the mortgage process. And to fully automate this and integrate this with the mortgage process, it was necessary to innovate it by ourselves. And this is a long journey for us by now and linked with huge investments, relevant losses that we had in the last years because of this. So on the loss side, we reduced again this year the investments that we have there and expect for next year that during the year, we will turn profitable. So first half of the year, still some losses, second half of the year, a positive contribution from the side. Why we expect this? We see a very positive traction in the adoption of digital products of Value AG. I mentioned, as an example, cooperative banking sector where we just rolled out an integration solution. We just explained here in the Q&A, [indiscernible] and the role of as well Value AG there in value adding the properties of the consumers in a digital way. So we are progressing in all sectors with this, and this gives us a clear path to profitability already. Plus we see that the efficiency of the whole structure and Value AG, thanks to a stable market environment now is turning profitable. And we see that we can get a fair pricing from our partners, thanks to the integrated solution that we are offering. So this -- the automation that we bring to the value market is -- valuation market is huge. So looking forward, it will never be a high-margin business valuation, let's say never -- not in the next 5 years, this is the horizon, but it's something which together with our offering in our UPS offering as an automated process for advice and transacting mortgages is a win-win situation for both products. So that midterm, we expect the growth from -- on both sides, thanks to the integration, and we expect double-digit growth from Value AG for the upcoming years after turning profitable. Jan Pahl: Great. Thanks. So the next 2 questions are related to Europace and a little bit more detailed. So it seems investors are pretty good informed about. Our start of Europace One, which we started in Q2, could you please tell us how it is developing so far? Ronald Slabke: Yes. So first, what is Europace One? Europace was a free-to-use SaaS solution for now for advisers. We only deal with sales organizations, which then provided this to their intermediaries. And as well for the sales organization, if they were willing to underwrite a certain level of volume, it was free of charge. But we saw that with the heavy investments we do in enhancing the user experience, integrating AI features, we need a different value stream to get a fair share out of the business which we enable and the efficiency and the conversation gains that we create with our investments. So we decided to bundle new features, which we introduced during the first half of this year to a Europace One offering where as an adviser, you book this as an additional monthly subscription offering from us to enhance your experience. You compare this with the freemium model, which is pretty popular in the mobile world, where the general use of an application of an app is for free. But if you want to use special features, you need to sign up and pay extra. So we have to establish for this a way to charge advisers. We have to establish a legal framework for this and we have to -- let's say, we had to build the features and we have to integrate the features in the bundle. So there was a lot of work that had to be done in the first half of this year. And since this summer, we offer to advisers directly, and we have a 3-digit number of advisers that signed up by now. We are still in talk with a lot of large organizations, which doesn't allow their senior advisers to make this choice. So -- and that's often about integration with their systems. We are partially replacing as well third-party solutions with the features that are part of the bundle. So these are slightly longer projects to agree on the usage of Europace OneE. But let's say, with all major partners, we are well on track on getting them signed up as well. So for next year, it will be interesting how the dynamic looks like. In the upcoming years, it will contribute with a 7-digit number to our revenue and profit. But for now, the signing up speed still needs to be improved from our side. But there is a learning path for us because we are pretty new to this way of doing business with individuals. Jan Pahl: Right. So the next question is regarding one click. So it's also once again, Europace, but Europace OneClick. The question is, is there a regulatory hurdle here? And if so, how we plan to overcome it? Ronald Slabke: Yes. So -- only good questions by now, I would say. So one thing is the offering on the credit decision side and to the lenders of mortgages, where we enable them to have a fully automated mortgage underwriting process. We introduced this in the beginning of 2022 when speed was still very important for consumers. Thanks to the massive changes in the market, the attractiveness of the product was recently less high, you can say. But with the recovery of the market now, the whole offering gets more attractive again as well for the banks, not just to speed up the process, but as well to save on the cost of labor and to provide the consumer a digital checkout process equal to this what he knows in other industries. So we have a number of banks which are productive with it and created the regulatory framework necessary to operate with OneClick under German regulation. But it's a hurdle to take, to be clear, it's a hurdle. We provid it as an entry level to this product, a solution where you can automatically score a consumer without a manual input of data just by using access to the account of the consumer to gather the data. We call this entry, Europace entry as an entry product to OneClick. So the process on the side of the property is not automated, but the process of the side of the checking the consumer credit worthiness is fully automated. And there the sign-up is significantly higher. So there's a double digit of banks experimenting with entry and using this already and allowing this and something which we as well heavily promote on the platform because it reduces the work for the adviser, streamlines the process and creates a value proposition for everyone. So the transition is ongoing, and we are constantly optimizing the approach to the market to digitalize this mortgage process even in smaller steps if necessary. And this is as well, we are talking about high single-digit percentage of the mortgage volume already generated via entry or OneClick, but there is still a huge potential going forward, as you can imagine. Jan Pahl: Great. Thanks. It seems there are right now, no more questions on real estate and mortgage platforms, but we received a couple of other questions to the other segments. So we switch now to financing platform. And here's a question, same like for Value AG. So which EBIT we expect for this year, '26 and for the midterm 3 to 5 years? Ronald Slabke: Yes. Okay. Let's say, this year, at the end of Q3 and so at the beginning or before the final quarter, which is very relevant for the success of this segment, it's, let's say, difficult to give an exact prognosis. So last quarter is seasonally typically the strongest one. So if it's this year as well, then we will be above last year. So as we are on the 9 months right now, but it's going to be decided just in the days around Christmas as every year. Going forward, as I said when I introduced this segment in the first video, we see that there's a huge potential in all 3 parts of this segment. So housing associations, we are on a great track of signing up housing associations to our ERP system linked to all the services around a strong proposition in the mortgage market there. So this under distressed market has a huge potential to grow significant. And part of this recovery would just be to the precrisis level when it comes to especially revenues from mortgage brokerage. But overall, we are on track for a great success in this industry. Personal loan business and German Mittelstand, both distressed right now. I explained this already. I would say, looking forward, these are both markets where we expect a normalization. Germany can't stay in a recessive environment much longer than it did already. Otherwise, we will have disruptive political changes here and nobody wants this. So my sense of urgency right now is high, and I have the feeling that [indiscernible] our government got the message after the summer as well. So they see that they need to act to change the trajectory in the market. And with this, we will see a very strong performance of both of these product segments in the upcoming years. So where it can end up, it's linked to the recovery of the German economy in general, you could say, the better it goes, the more success we can deliver there. Jan Pahl: Right. So there are no more questions for financing platforms right now, but there are 2 or 1 or 2 for insurance. So a little bit more on a high level. If you compare SMART INSUR with Europace, what is the penetration of suppliers so far, maybe in percent of the market that provides their policies through our platform through SMID and where are the challenges and progress to grow that platform? And what is surprising? It's the same like Europace, the 11 basis points we charge in average? Or how does it look like? Ronald Slabke: Okay. This is -- I make a short and I would say, deep dive with Jan later or in the upcoming days. So in general, SMART INSUR is the platform for standardized policies usually for consumers here in Germany. And the core value proposition is managing the whole information flow along the existence of an insurance contract that being the insurance broker on one side, the distribution side and the insurance company on the other side. It's not a transaction focused platform. It's whole lifetime of an insurance because this is a core problem in the insurance market that the information flow over the lifetime is very expensive for all parties because of their dysfunctionality and the way how information are transacted via e-mail from one side to the other. So the pricing model is volume-based. So the more volume you manage as a distribution within the platform, the more you pay. So it's a percentage of the premium the consumer pays, and this is your fee for the handling of the whole information flow, as I said, from the beginning of the contract to the end of lifetime of every contract there. So the challenge is the necessary adjustments of -- for the IT system on the distribution side. On the insurer side, for the insurance companies, we have established business relation with all of them. But for now, just some of them are paying if they receive the information and are integrated via interfaces. So this is the -- we report this as the validation process. So when there is a link between the information in the platform and the insurance company, then there is a financial link for us. But still, most of the volume in the platform is not linked to the insurance company. So the insurance company is not paying. Even when you are able to manage this kind of insurances as well as the distribution as a distributor within our system. More details, I would say, Jan in the deep dive. Jan Pahl: Sure. The next question, I'm not sure if I got it right, but I mixed it a little bit up. And if I'm wrong, don't hesitate to circle back and correct me. But I get this question right, it is during Q2 or maybe Q3, we signed some brokers for Corify, and it took longer than planned or expected. What were the headwinds? And are we in talk with additional brokers to launch right now? Ronald Slabke: Okay. Yes. So Corify is our platform offering for the industrial insurance business, where not a defined tariff and policy is underwritten by thousands of consumers. But in industry insures effectively or a fleet of class or whatever. So there are only individualized auctioned or tendered insurance policies closed between corporates and insurance companies. So we introduced this marketplace so the better version in the beginning of last year and see a huge interest in the industry. Industry was part of the development process over the last years and is now steadily signing up, and we got additional signatures for the first modules of this marketplace from the industry. There is a long line of -- in the sales funnel of brokers and insurance companies, which wants to use this for their interaction with their clients. So the pipeline is well filled looking forward. We just need to see that the contribution is not just intellectually and let's say, mutual, it needs to be as well financially beneficial for us so that our part of the investment incrementally goes down and the monetization kicks in and our partners after signing up as well are paying the transaction fees linked or usage fees linked. And when we talk about signatures, then we talk about this last step, the monetization that partners start paying for the benefits which they have using the system. And yes, we saw the progress now finally as well in Q3. And looking forward, we are optimistic that we get Corify up and flying and creating a marketplace effect in the upcoming years as well in this part of the industry. Jan Pahl: Great. We have 3 more questions in line. So once again, if you have any questions, feel free to type it in. The next one is on insurance platform as well, now on private insurance once again. So the question is, how does your distribution, distribute of insurance policy work together, compete with price comparison websites. So is this a competitor? Or is it a coop for us? How we look like? Ronald Slabke: Okay. These are different positions in the value chain. So the typical price comparison side for insurance is a perfect client for Smart InsurTech to handle completely -- the complete back-end process over the whole lifetime of the insurance contract for the comparison side. So we -- here on the distribution, you have the insurer app. So pure online insurance brokers use Smart InsurTech as their back end. And we are a great opportunity for them to focus on the consumer front-end side and the competition there and not spend IT resources in integrating 200-plus insurance companies and the lifetime of the variety of insurance contracts in their system. Jan Pahl: Great. Okay. There are 2 more questions, one a little bit detailed and the next one a little bit high level on strategic. Let's start with the detailed one, and now it is real estate and mortgage platforms again. We are here with BAUFINEX. So the question is, how has growth for the number of BAUFINEX Genoberater consultants trended so far this year? Are you having success signing up more salespeople at the cooperative banks? Ronald Slabke: Yes. Sorry -- let's say, we are active in the cooperative banking sector with 2 brands. So Genopace as a platform. BAUFINEX is a joint venture with Bausparkasse Schwäbisch Hall for the pooling activities and for the third-party distribution in this market. So the question was specific to BAUFINEX. BAUFINEX is very successful using the huge network of cooperative banks across Germany and digitalizing their external relations to local mortgage brokers, real estate developers and so on to provide cooperative mortgages, you can say, to this third-party distribution. And BAUFINEX, I would say, is right now the largest mortgage pooling offering in the market. So they surpassed Starpool and as well the competitor from Interhyp Group Prohyp and are #1 right now. So they are succeeding very well. So together with the success of the cooperative banking sector, BAUFINEX is very successful on digitalizing their third-party relations. Jan Pahl: Great. So one question left. And as a reminder, once again, don't be shy. If you have any, you can type it in. But the next one is a little bit high level on strategic and maybe on our -- also historical shift in our strategic. So could you explain the main synergies and potential scale in the interplay of our segments, real estate and mortgage platforms, financing platforms and insurance platforms? Or would you say that these are unconnected segments that have their special B2B platform for the customers? Ronald Slabke: Okay. I would say the second part answered already something, but I would give you, let's say, a better perspective on this. So up until 2 years ago, we developed the Hypoport network, a group of companies and offering in all these 3 industries independent and created synergies usually between 2 or 3 of these companies in the group. We restructured to these 3 segments, the network 2 years ago. So we formed the real estate and mortgage platform just 2 years ago after seeing where are the strongest connections, where are the highest synergies between daughter companies, which needs to be more facilitated and with more management attention and focus on to develop a joint strategy in this market. And with this the segments were created. In certain areas, we had to even split companies. For instance, the personal loan business, which is now part of the financing platform was until recently part of the Europace AG development where as well the mortgage solution was developed, and we have a significant overlap in partner structures there. So even when they are now in different segments and we -- from the legal entities, split them, they are using the same technologies and offering to the same partner. So there are interlinks between the segments, even when this is not, let's say, naturally when you would start the segments independent. So we created synergies in the past between offerings and just because we regrouped this and focus now on these areas of synergies where we see the highest benefit for the network doesn't mean that there are not other synergies. So between each of these 3 segments, there stays certain levels of synergies alive, but the focus happens within the segment. So the truth is they are less integrated between each other than within each of them, but they are not -- it's not that there are no synergies between them. Jan Pahl: Great. Thanks for this. And here's another one. Ronald Slabke: Great English Q&A today, I would say. It is good that we have a full hour. Jan Pahl: Yes. So the next question is why did the error in revenue recognition [indiscernible] happen because of -- so it is regarding Starpool last year, which you had to adjust the numbers. And yes, how it is going to be look like forward? Ronald Slabke: Yes. Okay, I would say a detailed answer in the 2024 annual report. Quick answer. The structure of the business of Starpool changed over the last year because of the strategic change on our joint venture partner, Deutsche Bank. And because of this, third-party mortgages got more important. And with this, we had to recognize all revenues generated by Starpool, including the commissions which Starpool receives from Deutsche Bank and pass through to Deutsche Bank linked mortgage brokers. So this pass-through of Deutsche Bank commission business let's say was not under our control under -- in the last years, let's say, or during the buildup of the joint venture, but lately because of the shift in the priorities and the shift to mortgage brokerage of other lenders, the situation changed, and we had to start to recognize this pass-through commissions as group revenue and group cost of revenue so that it inflated first in 2024, our revenue number and our cost of revenue number, just starting at the gross profit, it didn't have an impact anymore. Jan Pahl: Great. The next one, it's an interesting question because it seems to me that there are 2 ways to answer. So I look forward, which is your one. So the question is, where do you see cost reduction potential for the application of AI? And what would your best estimate for the amount? Ronald Slabke: Yes. So AI is a big topic publicly right now and for us in the last 10 years, where we are able to enhance our products using AI. So the question focuses on cost reduction. And when I hear cost reduction in an organization like us, it's about efficiency gains in, let's say, repetitive processes where we look across the group, especially in the centers where we have processes where we expect that AI can replace them already right now. This is linked to migration costs, to systems which provides this because in this area of HR or accounting for ourselves, we will not implement our own algorithms. Another way of cost reduction, I would say more efficiency gain is using AI in the whole software development process. This is an ongoing process now for the last 2, 3 years where our people get more efficient using AI. To be honest, I don't expect that we reduce our costs for software development. What I expect is that we increase the output in volume, in future volume and in quality. We are willing to invest this money. And we focus our people right now in getting better in using AI and getting better in shipping software fast to our platforms. So there is not a focus on cost reduction in this area, it's the focus on efficiency. Jan Pahl: Great. And actually, these are the 2 answers I expect. So at the moment, there's no more -- it looks like there are no more questions. But once again, here's a chance, we've received already couple of, actually 13, which is good, I think, 45 minutes. And if there are no more questions, maybe I hand over to you, Ronald, for last wording. Ronald Slabke: Yes. Thank you. Great Q&A today. We will talk again in March next year. We will chase our 2021 record year, and we'll want to outperform in all top and bottom line numbers next year. So I'm looking forward to this race, and you get an update when we are there in March next year. Thank you. Jan Pahl: Thanks. Goodbye.