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Operator: Good afternoon, and welcome to Peraso Inc. Third Quarter 2025 Conference Call. At this time, participants are in a listen-only mode. As a reminder, this conference call is being recorded today, Monday, November 10, 2025. I would now like to turn the call over to your host for today's conference call, Mr. Jim Sullivan. Please go ahead. Jim Sullivan: Good afternoon, and thank you for joining today's conference call to discuss Peraso Inc.'s third quarter 2025 financial results. I'm Jim Sullivan, CFO of Peraso Inc., and joining me today is Ron Glibbery, our CEO. Today, after the market closed, we issued a press release and related Form 8-K, which was filed with the Securities and Exchange Commission. The press release and Form 8-Ks are available on Peraso Inc.'s website at www.perasoinc.com under the investor relations section. There is also a slide presentation that we will be using in conjunction with today's call, which can also be accessed through the webcast link on the Investor Relations website. As a reminder, comments made during today's conference call may include forward-looking statements. All statements other than statements of historical fact could be deemed as forward-looking. Peraso Inc. advises caution and reliance on forward-looking statements. These statements include, without limitation, any projections of revenue, margins, expenses, non-GAAP gross profit, non-GAAP gross margin, non-GAAP operating expenses, adjusted EBITDA, non-GAAP net loss, cash flows, or other financial items, including anticipated cost savings. As well as any statements concerning the expected development, performance, and market share or competitive performance of our products and technologies. As well as any potential statements related to prospective future financing arrangements or capital transactions and the evaluation or pursuit of strategic alternatives. Actual results may differ materially from those implied by the forward-looking statements, including unexpected changes in the company's business. More detailed information about these risk factors and additional risk factors are set forth in Peraso Inc.'s public filings with the Securities and Exchange Commission. Peraso Inc. expressly disclaims any obligation to update or alter its forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by applicable law. Additionally, the company's press release and management statements during this conference call will include discussions of certain measures and financial information in terms of GAAP and non-GAAP. With respect to remarks on today's call involving non-GAAP numbers, unless otherwise indicated, referenced amounts exclude stock-based compensation expense, amortization of intangible assets, severance costs, and the change in fair value of warrant liabilities. These non-GAAP financial measures definitions, and the reconciliation of the differences between them and comparable GAAP measures are presented in our press release and related Form 8-Ks, which provide additional details. For those of you unable to listen to the entire call at this time, a recording will be available on the Investor Relations page of our website. Now, I would like to turn the call over to our CEO, Ron Glibbery, for his prepared remarks. Ron Glibbery: We appreciate you joining today's conference call. We had a notably strong third quarter highlighted by growing orders and shipments of Peraso Inc.'s industry-leading 60 gigahertz wireless solutions. Total revenue increased more than 45% sequentially, driven by record quarterly revenue from our millimeter wave products. Gross margin also increased significantly from the previous quarter, achieving our targeted gross margin level in the mid-fifty percent range. Consistent with prior recent quarters, we continue to exercise prudent cost management and drive operational efficiencies across the organization. Collectively, these metrics contribute to improved operating and bottom-line results as well as reduced cash burn from operations in the third quarter. Jim Sullivan: Turning to Slide four. Ron Glibbery: Beyond the 60 gigahertz millimeter wave solutions, we have welcomed a steady recovery throughout the year in market demand and customer orders, both of which are reflected in our third quarter results. We believe that fixed wireless access markets' renewed momentum is sustainable, particularly for our 60 gigahertz wireless solutions, as there continues to be growing millimeter wave adoption to enable reliable high-speed and low-latency broadband connectivity to homes and businesses without the time and cost burdens associated with fiber infrastructure. For further evidence of fixed wireless access and millimeter wave broadening market traction, with a strong background in millimeter wave technology, we had good quarterly revenue for millimeter wave products with multiple prominent wins in fixed wireless access. The first of these wins was with one of our leading partners, Tachyon Networks, which we announced in early July and covered on a previous conference call. Jim Sullivan: To briefly recap, Ron Glibbery: Tachyon Networks chose to incorporate one of our prospective series modules with an integrated 16-element base array antenna to power its latest outdoor 60 gigahertz fixed wireless solution. On a previous conference call, we announced a renewed collaboration with Wheeling Communications to accelerate the deployment of high-speed broadband access across dense urban areas in multiple major U.S. cities. More specifically, Wheeling's mesh-based fixed wireless access architecture is leveraging Peraso Inc.'s 60 gigahertz technology for both businesses and consumers in dense urban neighborhoods. Also notable, they are successfully rolling out this high-speed wireless broadband service at a fraction of the cost and implementation time of typical fiber deployments. Most recently, in September, we secured an initial volume order. Jim Sullivan: Market. Ron Glibbery: I want to highlight that this order for our prospective millimeter wave modules was not only received from a first-time OEM customer, but they are a well-established equipment supplier to service providers. As a result, this new OEM customer has the potential to facilitate broader use of our millimeter wave solutions by an expanded number of fixed wireless service providers, many of which may not have previously been aware of or experienced the benefit of Peraso Inc.'s industry-leading technology. Listening to these recent wins, we are continuously supporting a broad number of proof of concepts with wireless Internet service providers utilizing Peraso Inc.'s millimeter wave technology. With the majority of customers at or approaching more normalized inventory levels, we expect to see additional production orders as successful proof of concepts are completed. Together with our ongoing efforts to convert other existing customer engagements into production, we anticipate continued year-over-year growth. Turning to slide five. As discussed on previous quarterly update calls, we are continuing to see increased market awareness of 60 gigahertz technology that extends beyond fixed wireless to access completely new markets. New emerging markets for Peraso Inc.'s millimeter wave solutions include what we refer to as tactical communications, which includes diverse mission-critical military defense applications. During the course of exploring inbound interest and prospective engagements with potential customers and ecosystem partners, the substantial value proposition of 60 gigahertz wireless for tactical communications has become unmistakably clear. The everyday performance benefits that have made millimeter wave the go-to technology in fixed wireless access, such as high data rates, ultra-low latency, and power efficiency, are also ideal for enabling next-generation solutions for tactical communications. Additionally, millimeter wave's inherently stealthy attributes and low probability of intercept represent a unique and unmatched advantage over potential wireless technologies for overcoming critical communication challenges encountered in tactical defense environments. This included securing a strategic contact with a specialized defense contractor with whom we have subsequently continued to collaborate on a jointly developed system solution that leverages Peraso Inc.'s 60 gigahertz technology for a first-of-its-kind tactical defense application. This new mobile system solution is designed to provide heightened communications situational awareness to help safeguard military personnel and noncombatants such as medics and humanitarian responders operating in high-risk environments. As a reminder, we announced the delivery of initial production shipments of our advanced 60 gigahertz wireless solutions in support of this jointly developed solution in the June timeframe. Today, I'm pleased to report the recent and successful completion of initial field trials of this innovative solution. Upon the completion of additional trials, we expect the jointly developed solution with our lead customer to represent a significant long-term revenue opportunity for Peraso Inc. In addition to the successful initial field trial validating the robust capabilities of Peraso Inc.'s millimeter wave technology, we believe it represents and will serve as a foundation for further commercial expansion into the tactical defense communications market over the coming quarters. In fact, despite our lead customer's understandable sensitivity to being named or publishing additional details about our jointly developed solution, we are confident that this engagement is contributing to the increased dialogue and engagement that we are fielding within the tactical communications market. Jim Sullivan: Moving to slide six. Ron Glibbery: On our previous conference call, I addressed how we secured a production order to incorporate our 60 gigahertz technology in a customer's video system targeted for use in the educational market. Although the revenue contribution from these adjacent market opportunities is often smaller relative to our fixed wireless business, the purpose of my commentary around adjacent markets last quarter was to demonstrate the true versatility of Peraso Inc.'s millimeter wave technology. Like the future customers about potentially utilizing our 60 gigahertz technology in various markets, I wanted to circle back on today's call and dig a little deeper into adjacent markets. While each of these prospective discussions were focused on completely different end markets, they all shared a common use case, namely overcoming the challenges associated with processing massive amounts of high-bandwidth video for edge AI applications. A few natural examples of these edge AI applications would include last-mile delivery services, autonomous vehicles, and drones. Jim Sullivan: Stepping back for a second, what's really compelling is that the same inherent Ron Glibbery: high performance and advanced capabilities that millimeter wave brings to fixed wireless and tactical communications, the same attributes can be critical enablers for high-bandwidth video for edge AI. More specifically, 60 gigahertz millimeter wave readily supports multi-gigabit data rates for streaming or transferring high-resolution video. Additionally, ultra-low latency enables near-instantaneous data transfer for real-time applications. And lastly, 60 gigahertz millimeter wave is also inherently and exceptionally power efficient. This is especially critical for edge AI devices, many of which are battery-powered. High-resolution video at multi-gigabit data rates. We'll keep you posted with our progress over the coming quarters. Turning to slide seven. This is an updated snapshot showing the evolution of our engagements pipeline over roughly the past two years. The figures on this slide represent the different SKUs or distinct device models at each stage of engagement. And then at the bottom is the cumulative number of SKUs that customers have released to production. For those that may be familiar with previous versions of this slide, you might notice that the current number of funnel opportunities is smaller than in the past. Jim Sullivan: This is the result of a recently completed effort. Ron Glibbery: To narrow the total pool of identified opportunities down to those our team believes have the most commercial potential and highest probability of formal engagements. As such, you can consider the currently greater than 30 funnel opportunities shown at the top as qualified opportunities. We chose to do this for two reasons. First, it better reflects the number of realistic near to intermediate opportunities we are actively cultivating. And then second, it also reflects our heightened focus internally towards advancing the most attractive and highest probability opportunities into formal engagements with customers. Jim Sullivan: I can continue to like using this slide, Ron Glibbery: because it clearly demonstrates not only the progress that we made over time, but also provides near real-time insight into the literal pipeline of potential new incremental business that we are currently working on. In addition to briefly mentioning that all of the pictures shown here are actual customers and products, I want to call out a couple of key takeaways. First, we have nearly doubled the number of customer SKUs in production over the last two years, contributing to a meaningful diversification of our customer base as well as end market applications. Then lastly, this is the first time that Peraso Inc. has had a double-digit number of new customer devices in preproduction at any single point in time. This is a testament to our team's focus and dedication as these preproduction SKUs represent line of sight to new potential revenue streams once released to commercial production by customers. In closing, we had a great third quarter and we are pleased with the continued progress of our growth initiatives highlighted by the record revenue contribution of our millimeter wave product. In addition to capitalizing on the momentum of the fixed wireless access market, we are seeing rapidly expanding opportunities for our 60 gigahertz wireless solutions in new end markets and applications. All of which are poised to benefit from the high bandwidth, secure, and power-efficient connectivity offered by Peraso Inc.'s technology. Jim Sullivan: Look Ron Glibbery: of engagements into additional design-ins and production orders spanning both millimeter wave fixed wireless access as well as adjacent new market opportunities for our 60 gigahertz solutions. We believe that today we are well-positioned to deliver continued year-over-year growth from our millimeter wave products in the fourth quarter and into 2026. Coupled with this anticipated growth, we are remaining committed to disciplined expense management with the goal of driving steady improvement in our quarterly operating results. With that, I'll turn the call back over to Jim to review the financials and provide our revenue outlook for the fourth quarter. Jim Sullivan: Thank you, Ron. Turning now to the results for 2025. Total net revenue for the third quarter was $3.2 million, compared with $2.2 million for the prior quarter and $3.8 million for 2024. Product revenue from the comparable period in 2024 was primarily attributable to the reduction in shipments of memory IC products due to the previously announced end of life of the products. Specific to sales of millimeter wave products, revenues were $3 million in 2025, compared with $2.2 million in the prior quarter and $100,000 in 2024. Consolidated GAAP gross margin increased to 56.2% in the third quarter from 48.3% in the prior quarter and compared with 47% in the year-ago period. The increase in GAAP gross margin for 2025 from the prior comparable periods was primarily attributable to a more favorable revenue mix of millimeter wave products and solutions as well as shipments of inventory written down in prior periods. On a non-GAAP basis, gross margin for the third quarter was also 56.2%, compared with 48.3% in the prior quarter and compared with 61.7% in 2024, which was primarily attributable to shipments of memory IC products. GAAP operating expenses for 2025 were $3 million, full reversal for software license obligations, and $4.5 million in 2024. The decrease in operating expenses on a GAAP basis from the comparable period of 2024 was primarily attributable to reduced stock-based compensation expense and amortization expense related to intangible assets fully amortized in 2024. Non-GAAP operating expenses, which exclude stock-based compensation, were $2.9 million in the third quarter compared with $2.7 million in the prior quarter, which included a $200,000 accrual reversal for software license obligations, and $3.3 million in 2024. The decrease in operating expenses on a non-GAAP basis from the comparable period of 2024 was primarily due to containment initiatives. Ron Glibbery: Per share in the prior quarter and Jim Sullivan: compared with a net loss of $2.7 million or a loss of $0.98 per share in the same quarter a year ago. Ron Glibbery: And changes in fair value of warrant liabilities, for 2025 was $1.1 million or a loss of 15¢ per share. Jim Sullivan: This compared with a non-GAAP net loss of $1.7 million or a loss of $0.28 per share in the prior quarter and a net loss of $900,000 or a loss of 34¢ per share in the same quarter a year ago. Ron Glibbery: The weighted shares. The and fair value of warrant liabilities. Interest expense, depreciation and amortization, and the provision for income taxes. Was negative $1 million in 2025, compared with negative $1.6 million in the prior quarter and negative $800,000 in 2024. With regards to the balance sheet, as of 09/30/2025, the company had approximately $1.9 million of cash Jim Sullivan: compared with $1.8 million as of 06/30/2025. Ron Glibbery: The net positive change of approximately $100,000 in the company's cash balance for the third quarter included approximately $900,000 of net proceeds from a warrant inducement offering of certain series C warrants and approximately $700,000 of net proceeds from the company's at-the-market offering program Jim Sullivan: during the quarter. As of today's call, the company has approximately 8,980,000 shares of common stock Transaction. Ron Glibbery: As well as various potential sources of additional capital. Aside from confirming that the strategic review process continues to be ongoing, in coordination with the company's financial adviser, there are no related updates to share on today's call from what we have previously disclosed. Now turning to our outlook. Jim Sullivan: As Ron previously discussed, we are Ron Glibbery: process sixty gigahertz wireless solutions. Based on current backlog, the company expects total net revenue for 2025 to be in the range of $2.8 million to $3.1 million. This concludes our prepared remarks. We thank you for your time this afternoon. Jim Sullivan: Operator, please commence the Q&A Operator: A session. You may press 2 if you would like to remove your question from the queue. David Williams: Confident. But it sounds like you're making a lot of momentum here. So I guess maybe on my first question is on the new OEM that you announced or spoke to. Can you give a little more color on that? And it sounds like you're very optimistic about that. What does that opportunity look like and what does that mean, you think? Ron Glibbery: Well, it's the Jim Sullivan: and we feel the number two OEM in the space. Ron Glibbery: So they're very sensitive to confidentiality. So we can't really the specifics. But from our perspective, it's just to get another validation. You know, something I didn't mention on the call might sorry, Dave, that I should have said, these OEMs now, historically have been using, like, other and I won't say which competitors, but other competitors, who are who now we're beating out because we have better performance. That's exactly what happened in this case. So, you know, a couple of things are happening. Obviously, the inventory, you know, kind of correction is coming to an end. But I think more importantly, we're starting to see all of these, you know, OEMs who are using other chipset vendors come over to Peraso Inc., and I think we're gonna continue to see that over the coming quarters. David Williams: For you, obviously, it signals grand and that fixed wireless access, but does that specifically speak to, anything from your perspective in either positive or negative? Ron Glibbery: Well, broadly, it's positive. I mean, that you know, I think Starry made no bones about their use of millimeter waves, so I think it's another great validation of the technology. You know, you they'll have to infer whether they were using for us or not, but I would say, generally, it's been a very positive endorsement for Peraso Inc. But yeah. I mean, he's you know, Starry was a real advocate of and what's interesting actually is they're using it for MBUs. Multiple, dwelling units. So it's turning out millimeter wave is a really nice technology for satisfying that market as well. And we're still now, you know, in other jurisdictions. But we think the real kind of catalyst in that situation was support for MBUs, if you will. David Williams: Okay. Great. And just a couple more quick ones. But I wanted to ask about the timing customer production schedules. You talked about your funnel. You're obviously gaining some momentum there. There any way to kind of think about your customer's typical design cycles now that we're through this inventory? You get a sense they're coming to market more quickly, or will there still be an elongated, kind design cycle before we see them turn into production? Ron Glibbery: Yeah. I mean, I think it's case by case, but here's how I would look at it, Dave. Like, excuse me, in the fixed wireless space, you know, that's tried true, you know, well-oiled machine. In nine to twelve month period, you know, kind of from an engagement to kind of mass production. New opportunities like military, you know, you're looking at probably twelve to fifteen months, obviously, because there's more work that has to be done, more customization. So, you know, it really depends if it's an existing market or a new market. And, again, like, you know, we're seeing these opportunities now in Edge AI, and that may take again, twelve to fifteen months would be my estimate. But that's kind of the time frames that we're looking at normally. David Williams: Okay. Great. And then maybe just, Jim, on the balance sheet, it looks like, you've got inventory and the AR were both up, pretty sharply sequentially. And anything to speak to there, or should maybe how should we think about, your working capital going forward? Jim Sullivan: Yeah. No. The, you know, the AR was, you know, really a timing of functioning of Ron Glibbery: of sales. And I know, certainly, as of today, we've collected, I think, over 70% of it Jim Sullivan: and the remaining amount is Ron Glibbery: you know, one customer which has a little bit longer terms. Jim Sullivan: So nothing, you know, unusual in there. Just a function of the higher product revenues. And then from, you know, inventory, we've actually used a fair amount of the inventory for certain products. That we had on hand. So we've actually been building more inventory on certain products. Ron Glibbery: You know, to meet anticipated, you know, demand looking out for Q1 and Q2. So you know, the good news is we, know, continue to sell what we have and in those cases where we've depleted it, we've actually, you know, gone out and, built more wafers. So, you know, we're gonna continue to tightly manage the Jim Sullivan: you know, the working capital looking, you know, looking forward. Ron Glibbery: And, yeah, we're really kind of managing the bills based on, Jim Sullivan: you know, what we see in the backlog. Ron Glibbery: We want the orders placed, know, so we're not too you know, don't lean too far forward on inventory. David Williams: Alright. And just one last one if I can. Sorry to take up time here. But wanted to ask just on the gross margin given that you've some of that was written down. Previously, obviously, millimeter wave doing better. How should we think about kind of the balance on the gross margin as we kind of go forward from here? Jim Sullivan: You know, we're still trying to keep it in Ron Glibbery: you know, right around 50% range. It was a little bit higher here Jim Sullivan: the third quarter because of the you know, it certainly benefited from product mix. Ron Glibbery: You know, with the mix of customers. And then, as well, I've as you pointed out, the sales reserve, you know, inventory, which you know, we still have some of that we're gonna move through in the next few quarters. You know, 50 there was also a very small contribution from our memory products, you know, like 75 k or so revenue that Jim Sullivan: you know, also contributed as well as the, you know, the NRE revenue that we brought in. Ron Glibbery: On the millimeter wave side. You know, I think, you know, more realistic here in the short term is we're still kind of working through things. It's kind of in that you know, we're still targeting kind of that 50% you know, on the low side kind of Jim Sullivan: you know, high forties. But kind of right around 50 is where we're targeting. David Williams: Fantastic. Well, thanks, for all the time, and the best of luck on the quarter, gentlemen. Thank you. Ron Glibbery: Thanks a lot, David. Thanks for your time. Operator: Thank you. The next question is coming from Kevin Liu from K. Liu and Company. Kevin, your line is live. Kevin Liu: Hey, good afternoon, guys. Maybe just a follow on to some of the production schedules I mentioned earlier. You know, you have that double-digit number of customers in your pipeline that are in preproduction mode. Once they get to that late stage, how long does it typically take, before you start to see them to see them, in more meaningfully to your Oh, one yeah, once they get to preproduction, Kenneth. So preproduction is quite a long way. I mean, a lot of a lot of it's a very strong part of the pipeline process. Pipe cleaning process. Typically, that's about three months away, I think. One quarter away at the Once a customer gets to that point, they're well down the path. But, you know, the thing thing you know, it's like some more fundamental things, like, for example, regulatory approval. By then, they've normally got it. You know, they've got like, if there's any late parts in their, you know, kind of in their billing material. So there are a few things. But, once you see a customer at preproduction, it's about three months away. Kevin Liu: Sounds good. And I know you can only say so much about kind of that lead tactical defense customer you have, but you did mention some additional trials before they get to more meaningful long-term revenue for you guys. You know, how long do you expect some of these trials, to go before, you get to that? Ron Glibbery: Know? Yeah. They've got trials. I mean, there's trials coming up at Christmas. I think we'll see real production from these guys. I mean, what they're telling us now, it looks like you know, we'll start to see the real production for that in 2026. But, you know, obviously, they'll have to place the orders before then, but that's kind of the time we're working at, which, you know, net net is about that fifteen to kind of, like, call it five to six quarter, you know, lag from the time we engage to the time they're in full production. So pretty typical. But frankly speaking, now it's, you know, it's a very complex product. You know, but we put a lot of effort into it. But, I mean, just to give you a, like, a quick example. I mean, our power consumption was cut down, like, you know, 20 times from our standard power consumption. So you know, when we see these new opportunities once in a while, we have to make a contribution to get that, you know, get that product to market as well. Case it took some time, but that'll be about a five to six quarter lag time from the time we engage. But I you know, we're seeing for that customer 2026. Kevin Liu: Got it. And what's some of the adjacent market opportunities, you pointed out and these customers evaluating your products, Can you talk a little bit about kind of the pipeline of NRE opportunities and how much, if any, sort of additional research or customization might need to occur, to win these customers? Ron Glibbery: Well, it turns out that this there's kind of two buckets. And just to clarify, I mean, I tried to clarify on the call, Kevin, but, you know, really what's interesting about these opportunities is historically, you know, we're very good at doing video, but this is really let's take a VR headset. You know, that was video going to the VR headset. The change on the examples that we gave are is, like, cameras within the device, like, either in a self-driving car or maybe in like, AR glasses, that's video coming out of the device. And it turns out there's no good way to do that, honestly, today. Except for Peraso Inc. So it turns out there's two different buckets. One bucket is with our existing chips. Again, still requires some NRE to get those things to market, but, you know, they want to move very, very quickly. The other bucket is actually, you know, customization of chips. That'll take longer, but kind of a much bigger deal. So I would say that those are the two categories we're looking at in terms of NREs. Of with our existing chip, but also almost more exciting. Well, not as more exciting, but as exciting, is the opportunity to do, you know, silicon spins for these specific applications as well. We wouldn't do it unless it was a big deal. Kevin Liu: Yep. Understood. And then just lastly, maybe for Jim. For your Q4 guidance, curious how much more memory revenue there is from that deal you guys announced last quarter, and if, because of that higher margin revenue, we should assume kind of gross margin increases on a sequential basis? Ron Glibbery: Yeah. There's still, you know, we had press release Jim Sullivan: those memory orders Ron Glibbery: a couple weeks back. There's still about, 375 k memory shipments. Jim Sullivan: In this current fourth quarter. David Williams: Which will be pretty high margin. Ron Glibbery: You know, we'll definitely, you know, definitely need some improvement there. Jim Sullivan: The memory benefit. Coming in, you know, kind of mid-fifties. Kevin Liu: Alright. Sounds good. I'll leave it there. Congrats again on the quarter, and thanks for taking the questions. Ron Glibbery: Thanks a lot, Kevin. Operator: Thank you. And there were no other questions at this time. That does conclude today's Q&A session. And this also does conclude today's conference. You may disconnect your lines at this time. Thank you for your participation. Ron Glibbery: Thank you.
Operator: Good afternoon. Thank you for attending today's The Beachbody Company, Inc. Third Quarter 2025 earnings conference call. My name is Jayla, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I'll now like to pass the conference over to our host, Bruce Williams, the Managing Director of ICR. You may proceed, Bruce. Welcome, everyone, and thank you for joining us for the third quarter earnings call. Bruce Williams: With me on the call today are Mark Goldston, Executive Chairman of The Beachbody Company, Carl Daikeler, Co-Founder and Chief Executive Officer, and Brad Ramberg, Interim Chief Financial Officer. Following the prepared remarks, we'll open the call up for questions. Before we get started, I would like to remind you of the company's Safe Harbor Statements contained in this conference call, which are not historical facts, may be deemed to constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of '24. Actual future results may differ materially from those suggested by such statements due to a number of risks and uncertainties, all of which are described in the company's filings with the SEC, which includes today's press release. Today's call will include references to non-GAAP financial measures such as adjusted EBITDA, net cash, and free cash flow. A reconciliation of these non-GAAP financial measures to the most comparable GAAP financial measures is available within the earnings release, which can be found on our website. Now I would like to turn the call over to Mark. Mark Goldston: Thank you, and good afternoon, everyone. I'd like to welcome you to The Beachbody Company, Inc.'s Third Quarter 2025 Earnings Call. We're pleased with our outstanding third quarter results and the progress and speed of our turnaround that's far exceeded our expectations. Let me put this achievement in perspective. We've now delivered eight consecutive quarters of positive adjusted EBITDA. Our free cash flow performance has been equally strong. We've generated $13.1 million in free cash flow through nine months, with Q3 alone contributing $9 million of free cash flow. Perhaps most significantly, we generated net income this quarter, a seminal milestone that we identified years ago as the ultimate marker of our turnaround effort. Our cash position of $33.9 million substantially exceeds our outstanding debt principal of $25 million, providing us with financial flexibility. Our operational metrics continue to demonstrate the structural improvements we've made. We've maintained strong gross margins while significantly reducing our revenue breakeven point from approximately $900 million in 2022 down to $180 million today. A $720 million lowering of the breakeven that positions us to generate operating leverage at a much lower revenue level. Looking ahead, we're focused on our growth strategy in 2026. This upcoming year will mark our transition from a financial restructuring to capitalizing on new revenue opportunities from our innovation pipeline and from market expansion. We're launching a comprehensive retail initiative that will leverage our portfolio of billion-dollar brands entirely new channels. In 2026, we'll introduce Shakeology to retail for the first time in our company's history. That will be followed by our brand new P90X nutritional supplements line and Insanity branded supplements later in 2026. These products will be distributed in different form factors and different price points made possible by our new business model. Complementing our retail expansion, we will be launching a brand new P90X fitness program, the first in over a decade, which will create powerful cross-marketing opportunities between our digital content and our retail nutrition products. So going forward, we see a substantial opportunity to expand our TAM by developing innovative approaches, including a focus on health span, and a shorter, easier-to-perform workout program to reach underserved segments, including the 185 million overweight Americans who don't currently engage in regular fitness routines. In our current business model, our revenues are generated via multiple channels, what we like to call the omnichannel opportunity. One of the smaller elements within the omnichannel opportunity is our affiliate program. Why do I say that? Because on a go-forward basis, the affiliate program will be a smaller portion of our total revenue mix given our heavy focus on the maximization of both our direct-to-consumer channels and our upcoming brick-and-mortar retail initiative. This strategic shift reflects our evolution from what was previously an MLM-dependent model in 2024 to a now diversified omnichannel approach from 2025 and beyond. The transformation we've achieved positions The Beachbody Company, Inc. as a fundamentally different company than it was just two years ago. We've proven our ability to generate consistent positive adjusted EBITDA over the last eight quarters. We've generated positive cash flow through 2025 year-to-date, and we finally achieved a positive net income quarter in 2025. During the two-year turnaround effort, which began when I joined back in June 2023, we've eliminated the huge structural inefficiencies that previously required a massive $900 million revenue level just to breakeven on a cash basis. We've reduced that cash breakeven by 80% and brought it down to an incredibly low $180 million breakeven through a complete rearchitecture of the company and the way we operate. The efficiencies we've built into the company have allowed us to construct a powerful and nimble operating model that will allow future revenue growth to drive significant operating leverage and increase EBITDA. The headline for Q3 2025 is that The Beachbody Company, Inc. has completely reinvented itself over the last two-plus years, and with the benefits of the financial restructuring, the elimination of the MLM model, massive improvement in profitability, and increase in direct-to-consumer focus, a significant improvement in gross margin, and a more efficient sales and marketing spend. As a result of accomplishing all of the financial turnaround goals, The Beachbody Company, Inc. is now poised to open the hatch of the innovation pipeline for 2026 and roll out a slew of new innovations in both digital fitness and nutrition that will not only fortify our DTC business but will also open up a whole new arm of our omnichannel strategy with brick-and-mortar retail and an expanded Amazon presence, featuring popularly priced P90X and Insanity nutritional supplements and a new lower-priced smaller serving size Shakeology lineup. We've revolutionized and significantly improved our financial foundation. We filled the innovation pipeline, and those initiatives are set to be in motion in 2026. The market opportunities and huge increase in TAM are substantial. We could not be happier with the progress that we've made, the speed with which the turnaround has been performed, and the exciting and modernized future we see for The Beachbody Company, Inc. With that, I'll turn the call over to our CEO, Carl Daikeler, to discuss the operational details. Carl Daikeler: Thanks, Mark, and thanks to everyone for joining us today. I'm excited to share our Q3 results, which I believe demonstrate the meaningful progress we're making in executing our long-term strategy. The results that Mark described and that Brad will outline in detail in a moment really tell the story of a company hitting its stride. The vision we've had for over two decades is finally getting a chance to come to fruition. We're executing with more efficiency, thanks to our expanded sales channels, and an aggressive approach to tailoring our marketing for an environment that is definitely showing signs of improved demand. As longevity and health span have entered the mainstream, we've got the library of proven content that's getting deeper every quarter and new content coming online by the end of the year, that's gonna open up the TAM to the real holy grail of helping the more than 185 million non-exercisers in the US who are just looking for an easy way to get the benefits of lifestyle change without devoting thousands of dollars to equipment or hours in the gym. In the near term, there's some very exciting launches going into Black Friday and Cyber Monday, the holidays, and the first quarter. We launched a compelling $19 per month offer in Q3, which we're starting to build momentum around, especially in conjunction with the launch of two brand new alternative subscriptions. What we call a super trainer subscription, where people can subscribe to just the content from one super trainer for just $9.99 a month. These are essentially curated capsules from our world-class trainers. We launched this test with both the Autumn Calabrese collection and the Shaun T collection and are encouraged by the initial response. As you might recall, we said we'd be launching new content in Q3 that included a line extension to Body Lava called Slow Burn Yoga. We also launched Autumn Calabrese's Track Pilates, an innovative at-home Pilates program that drove strong demand in the third quarter, thanks to the overall strength in the Pilates category right now. So far in the fourth quarter, we've added the appropriately named Power of Four, a program from the original P90X Super Trainer Tony Horton. And we've just started to promote the Black Friday launch of a new program from Shaun T, a hybrid of his popular weightlifting program, Dig Deeper, with low-impact Insanity Cardio, which our subscribers are lining up to start on December 1 in what's going to be the largest test group in our company's history. As Mark mentioned, we started teasing the launch of P90X Generation Next, a new addition to the P90X portfolio for the first time in over ten years, leveraging the most recognizable brand in extreme home fitness. Last week, we announced that renowned British trainer Waz Asher is leading that program, and the response to the first peek at the teasers for the program was more enthusiastic and productive at attracting subscribers than we could have imagined. This new trainer is going to be a superstar. He's the new James Bond of the P90X franchise, if you will. And the user results we've seen in our initial testing of the program confirm that his new P90X format is going to introduce the greatest extreme home fitness program of all time to a new generation of users with stunning transformations. The retail opportunity will be particularly meaningful both for leveraging the existing awareness of P90X plus Insanity and Shakeology on store shelves, but using that visibility to achieve massive exposure of The Beachbody Company, Inc. brand by giving retail buyers a first-of-its-kind value add of rewarding them with access to our digital content, which will support our digital subscriber growth objectives. I'm really excited for the new supplements coming under the P90X, and in 2026, we're gonna be adding more new supplements to the catalog at more affordable prices than we ever have in our twenty-six years. A significant opportunity for us to increase LTV and to acquire new nutrition customers. 2026 marks our commitment to expand into nutrition in a very significant way, both at retail and direct-to-consumer. All of this is the innovation pipeline Mark and I have been talking about for two years. The opportunity to reach this massive TAM of over 185 million adults in the U.S. alone who are overweight or obese. And now with the progress and speed of our financial turnaround exceeding projections, this vision can start to materialize in 2026 and really hit full stride in 2027. As I mentioned last quarter, all of this will be supported by our transition to Shopify Plus, and its robust set of AI features in March 2026, which we believe will benefit order conversion and average order value at checkout. Speaking of AI, I'm also excited to add that following ChatGPT's announcement of their app development toolkit and the upcoming ChatGPT App Store, our team is quickly developing the tech to be among the first fitness apps on ChatGPT in Q1 2026, making our programs discoverable and actionable within ChatGPT. We're initially focused on personalized fitness recommendations with the goal of driving acquisition, leveraging our most recognizable brand. But we view this most as an evolving opportunity to learn how conversational AI can enhance discovery with a more personalized recommendation engine to ultimately create a more intelligent, connected experience for our members at mass scale. We've been the one company focused on the mass market of health and fitness for over twenty-six years. And now with eight quarters of positive adjusted EBITDA, and our first quarter of positive net income since we went public in 2021, we can see that the never-quit attitude of this team is really paying off. And it's incredibly impressive how our staff, trainers, affiliates, and even our subscribers believe so passionately in what we do. I'm excited for the fourth quarter, especially as we head into Black Friday and Cyber Monday, and our aggressive marketing initiatives heading into Q1. Now let me turn the call over to our Interim CFO, Brad Ramberg, to walk through the specifics of our Q3 results. Brad Ramberg: Thank you, Carl. Thank you, everyone, for joining the call today. I will review our Q3 results and provide our outlook for the fourth quarter. We produced major milestones this quarter. We exceeded our guidance for revenue, adjusted EBITDA, and net income. We generated our eighth consecutive quarter of positive adjusted EBITDA and had net income for the first time since going public in 2021. We are on track for positive free cash flow for the full year. I'd like to provide more details about the quarter. Total revenues of $59.9 million declined 6.3% sequentially and declined 41.4% year over year, in line with our expectations as we continue our strategic transition. Revenues continue to be impacted in the near term by the shift away from a multi-level marketing platform to an omnichannel model. Consolidated Q3 gross margins were 74.6%, representing an increase of 230 basis points over the prior quarter and an increase of 730 basis points compared to the prior year. We're pleased to report the consolidated gross margin was at the high end of our long-term target of 70% to 75%, underscoring the strength of our operational execution. Moving to digital and nutrition and other revenues. Digital revenue decreased 8.3% from the prior quarter to $36.4 million and decreased 32.2% year over year. Revenues were impacted by continued pressure on our digital subscription count, which decreased 4.3% sequentially to approximately 900,000 and declined 18.9% compared to the same period a year ago. We continue to experience the impact from our transition away from the MLM, which has had an outsized impact on nutrition subscriptions, as our nutrition products were almost sold exclusively through our MLM network. Nutrition and other revenue decreased 2.8% from the prior quarter to $23.5 million and decreased 50.4% year over year. Nutrition subscriptions stayed essentially flat sequentially at approximately 70,000 and fell 46.2% year over year. Digital gross margin was 88.1% for the quarter, increasing 40 basis points from the prior quarter and representing an 810 basis point improvement from the prior year. Our digital gross margin was in line with our previous long-term target of 86% to 89%. The continued strength in year-over-year gross margin was primarily due to a decrease in digital content amortization and depreciation, as a result of a more disciplined production and fixed asset spend. Nutrition and other gross margin was 53.7%, representing a 230 basis point increase from the prior quarter and a 490 basis point decline year over year. Nutrition gross margins exceeded our long-term target of 46% to 52%. The increase from the prior quarter was primarily due to one-time lower shipping and fulfillment costs, while the decline from the prior year quarter was primarily due to the discontinuation of preferred customer fees on November 1, 2024, which were part of our old business model where customers paid a monthly fee to purchase products at a discount, as well as some higher level of promotional activities in the current period. Operating expenses for the quarter declined 21% sequentially and declined 51.5% year over year to $39.7 million. Selling and marketing expense as a percent of revenue decreased 800 basis points in the prior quarter and declined 1270 basis points over the prior year to 31.9%. This significant improvement over the prior periods was primarily driven by the pivot away from the multilevel marketing channel. We no longer have partner compensation on our new sales after November 1, 2024. Enterprise technology and development expense as a percent of revenue increased 80 basis points from the prior quarter and decreased 160 basis points year over year to 17% of revenue. The improvement as compared to the prior year was primarily due to a decrease in depreciation expense due to lower technology spend. The increase as a percent of revenue compared to the prior quarter was due to revenue deleverage. G&A was 16.9% of revenue, a decrease of 120 basis points sequentially and an increase of 540 basis points from the prior year. The improvement as compared to the prior quarter was primarily due to a decrease in equity-based compensation from the headcount reduction over the past year due to the restructurings and a decrease in outside professional fees. The increase as a percent of revenue as compared to the prior year was due to revenue deleverage. The Q3 2025 net income of $3.6 million, our first net income since we went public in 2021, compared to a net loss of $12 million from the prior year. Adjusted EBITDA was $9.5 million compared to $4.6 million in the prior quarter and $10.1 million in the prior year. Notably, this quarter marks our eighth consecutive quarter of positive adjusted EBITDA. Now I'd like to move on to the balance sheet and cash flows. As we discussed on our last call, in May, we entered into a new lending agreement with Tiger Finance and SP Capital Partners for a $25 million three-year loan facility that allowed us to retire the $17.3 million of outstanding debt ahead of its February 2026 maturity date. This refinancing provided us with approximately $5 million of additional capital on the balance sheet. The effective interest rate on this new facility is approximately 15.2% compared to the approximately 28% in the prior facility. Our cash balance is $33.9 million compared to $25.6 million in the prior quarter. Our cash generated from operations for the quarter was $10.2 million. Our year-to-date free cash flow is $13.1 million, of which $9 million was generated this quarter. Q3 had a $2 million benefit from the timing of payroll, which was acute in Q3 but paid in Q4. Turning to our fourth quarter guidance. While we are pleased with the execution of our transformation, I want to reiterate that we're still in the first year of the company's new business model. As discussed, we significantly lowered expenses in our revenue breakeven point when we strategically pivoted away from the MLM model to our omnichannel marketing and distribution model. This shift has opened new growth channels that we could not previously access. We're very excited about the opportunities ahead. We now have a stronger balance sheet and a more viable long-term business model. But as with companies that are undergoing the transformation, it will take time to develop traction in these new lines of business. We expect fourth-quarter revenues to be in the range of $50 million to $57 million, net income in the range of negative $1 million to positive $3 million, and adjusted EBITDA to be in the range of $5 million to $9 million. As we continue the transition to our new business model, we want to provide additional updates to help you contextualize changes in our new financial model. As of today, we anticipate revenues to approximate 61% digital and 39% nutrition. Our long-term digital gross margin target is 87% to 89%. Our long-term nutrition and other gross margin is in the range of 46% to 52%, which is in line with our volume expectations and certain promotional activities planned. Our long-term total gross margin target is from 70% to 75%. Over the last two years, we've made considerable progress against our business transformation. We've significantly lowered our breakeven point, strengthened our financial position, putting us on a solid foundation to execute against our growth initiatives that will drive long-term shareholder value. I look forward to updating you on our progress on our next earnings call. I'll now turn it back over to Mark for closing remarks. Mark Goldston: Thank you, Brad. Operator, Jayla, could you please open it up to questions? Operator: Absolutely. At this time, if you would like to ask a question, the first question comes from Suzanne Anderson with the company Canaccord Genuity. Suzanne, your line is now open. Suzanne Anderson: Hi, good evening. Thanks for taking my questions. Nice job on the quarter. I guess maybe if you could talk about I'm curious just the customer base, if you're seeing any big change with the new business model, and then maybe if you could share any details on what type of customers are signing for the unbundled super trainer subscription. Are these new customers that The Beachbody Company, Inc. that maybe, you know, will kind of tack on more subscriptions down the road or were they existing customers? Carl Daikeler: Thanks. Well, thanks, Susan. Nice to hear from you. We're really dealing with the same type of customer that we've had for twenty-six years, quite honestly. The people who are too busy to go for a gym membership. They want the convenience of doing things at home, and they want it somewhere between twenty to forty-five minutes per workout. So in general, we're seeing the demographic be similar. In terms of the specific subscriptions, the Autumn Calabrese collection and the Shaun T collection, those are doing both a great job of winning back customers who are really just interested in the affinity with their particular trainer, but we are seeing a nice percentage of those people upgrade to the full subscription. So it's doing the job of what you might see from a high volume, low price gym, where people are attracted to the $9.99 per month but then seeing the value of the overall subscription and upgrading to the full, full monthly or annual price. So, in terms of new customer acquisition, we're seeing that come from really the more broad advertising of, you know, helping people get healthy, helping people improve their overall well-being, and that is sort of business as usual as we go into the fourth quarter. And we're very excited by the prospect of bringing in new customers with the launch of Shaun T's Dig In program, the promise of the largest test group that we've ever run as a company. Suzanne Anderson: Okay. Great. And then maybe if you can give some more color just on your new product pipeline. It sounds like you have a number of things lined up through the holiday and then maybe into next year. Maybe if you could just talk about the timing of the rollouts and any color you could give maybe around the new P90X product. Then also other products that are gonna roll out whether they're in the digital or nutrition segment. Oh, and then also I was wondering sorry. Go ahead. And then I have my follow-up. Carl Daikeler: Okay. So, just real quick, as we mentioned, we're very excited by the number of products that we're launching into the catalog nutrition products in 2026. We haven't launched this many new products, particularly at a price point that's much more affordable to our database, to our current subscribers, and to new prospective customers, since we launched the MLM. Obviously, we had to support the compensation plan for the MLM when that was such a big part of the business model. Now that we don't have the MLM, we can be far more competitive in the nutrition segment with our pricing and with our unit economics, both the form factor in the seven to fourteen servings versus everything being in a monthly unit. So we've got the P90X line of supplements, and we have the Insanity line of supplements, and we have the expansion of Shakeology as we take that out into retail. So nutrition is largely expanding in 2026. For the balance of 2025, we have the, as I mentioned on the call, we just launched Tony Horton's Power of Four program, which we licensed from him. We just launched a series of new bike programs called Chasing the West, which has gotten a great response from our subscribers. We're launching Shaun T's Dig In program, which is a hybrid between a low-impact Insanity program plus a very popular Dig Deeper weightlifting program. I'll also say we're launching something at the end of the year. I can't go into too much detail right now. But I happen to want to say to you particularly, it was inspired by a conversation that you and I had because you love running so much, but I know you want to keep doing your resistance training to help your bone density and your overall muscle tone, and I think you're gonna love what we're coming out with at the end of December. P90X Generation Next just started to get teased last week, and the response to that just blew us away, both in terms of attracting new subscribers and in terms of the current subscribers being excited for that program. And that launches on February 3. That's the extent of what we've announced so far, and I think it's frankly '25 was such a transition year for us. We didn't put that much new content into the pipeline. I think between now and 2026, our subscribers and subscribers are gonna be very impressed with what the platform offers. Suzanne Anderson: Okay. Great. That sounds exciting. I'm excited to see the new product. Maybe if you could talk about oh, I was just curious. Too. Should we think about any increase, the increase in investment in the new products should that impact the P&L at all in the op expense or have you guys already kind of planned for that? Thanks. And that's all. Carl Daikeler: It's all in line with the economics that we've been running for the business. I'll let Brad speak to any specifics, but we're really running the business in a responsible way that takes advantage and maintains the advantage of the operational leverage that we built into the business over the last two years. The company is just such an incredible job of being both disciplined but maintaining our product quality, and the innovation pipeline, which resulted in, you know, we're so excited by having an in-home Pilates program. You know, the whole fitness industry is aware of how big Pilates has gotten, and the fact that we have a Track Pilates program that people can do for $100 of equipment is just an exciting asset for us to take into 2026. So bottom line is we're gonna maintain our economics, and we feel very good about the base of assets that we have to work with. Brad Ramberg: Hi, Susan. This is Brad. Nice to hear from you. No. We are very disciplined with our spend. We are excited about our spend, and the numbers are baked into our guidance for the fourth quarter. Suzanne Anderson: Great. Thanks so much. Good luck for the rest of the year. Brad Ramberg: Thank you. Thank you, Susan. Operator: Our next question comes from JP Wollam with the company Roth Capital Partners. JP, your line is now open. JP Wollam: Great. Good afternoon, guys. Appreciate you taking my questions. If we could just maybe start on the nutrition side. So it looks like, you know, that kind of sequential decline there was actually pretty minimal maybe given some expectations out there. But just wondering if there's any more detail you can share on kind of what drove that? I think there might have been some mention of promotional activity. So if there's anything specific to call out in terms of promotions that worked well, that'd be helpful. Brad Ramberg: Hi, JP. This is Brad. Nice to talk to you. Thanks for asking the question. You know, our previous before the strategic transition, we were selling an MLM-based product. Our hero product was Shakeology at $130 a month. Carl Daikeler: So as we've moved away from that, we are doing more price testing. Brad Ramberg: We are coming up with lower price SKUs, as Carl and Mark said. We'll be introducing a new Shakeology at a smaller form factor, lower servings, lower price. We've been doing more bundle activities and more price testing, and we are seeing good demand at these new price points. We're able to maintain the number of subs, and we're able to do that at a lower price point, which makes sense given the transition away from the MLM to the new omnichannel model. JP Wollam: Perfect. And then maybe just as we kind of oh, go ahead. Mark Goldston: No. I think, JP, and this is Mark. And just on a go-forward basis, because remember we started basically a new company on January 1. So there's really no year-over-year comparisons because we dismantled the MLM, as you know, in the last year. But going forward, these new nutrition products we're bringing out under the P90X brand name, which will range in price from, you know, probably $15 to $39. And the new smaller form factor lower price Shakeology and then Insanity. These are price points that the company has, like, never offered before and certainly never offered in the retail market. So not only excited about the potential in a brick-and-mortar store, but from a direct-to-consumer standpoint, between our Amazon channel and our body website and our affiliates, you've now got something in the arsenal that we just haven't had before is these monster brand name products under P90X and Insanity and Shakeology. At much more affordable price points because we were hamstrung in the previous model by the costs and the compensation costs related to the MLM, which no longer exists. So going forward into '26, and into '27, I think you're gonna see, you know, nutritional business with much different character in terms of its composition because of our ability to sell a lower price, broader appealing product line. JP Wollam: Perfect. And then, you know, I think on the last call, we were talking about you guys being sort of in the early stages still of working with a broker in terms of getting some wins in terms of retail. And I'm just wondering if there's anything you can update us on in terms of visibility for that retail launch coming up next year. Mark Goldston: Yeah. Great question. So as you know or maybe you don't, the retail marketplace, most of the major retailers work on something called a planogram, which is the shelf set that you see when you walk in the store. And they usually have planogram revision dates that are either one time or two times a year. So our broker partner is coordinating our sell-in meetings based on the calendars of these new planogram reset dates. And typically, when you go to an account, a major retailer, and they say, yes, I'd love to add this product, going to put it into my new planogram shelf set, it's usually about five to six months from that day when you're accepted until you actually physically appear on the retail shelf. So our teams are out there right now selling in the product, making presentations. We're expecting to get answers on how that's going in the next four to six weeks. And assuming it goes the way we all expect and hope it will, we should start appearing on the shelf in some of these places, Q1, most of them into Q2. So the majority of that revenue will start to materialize Q2 and then into Q3 and four. But as you know, it's a rollout. And so, essentially, first, you gotta get it sold in. Then they have to reset the section. Then you launch and then you grow after that. So all according to how our plan was expected to go. Now that does not apply to the DTC business. So when we launch these brand new products, starting in January, we'll be able to immediately start making them available on a DTC basis and on an Amazon basis. But for brick-and-mortar, we have to run the offense, which is the planogram date, acceptance, reset of the shelf, and you show up probably five to six months later. JP Wollam: Understood. Appreciate that color. If I could just slide one more in quickly here. As we look at the selling and marketing line, obviously, great sequential step down there in terms of managing costs. But wondering if you could, one, just kind of provide a bridge from 2Q to 3Q. I think there's a little bit of an advertising reduction and maybe a reduction in some deferred commissions. But one, if you could provide that bridge at all, and two, just you know, now being sort of 32% of sales, like, how are you feeling about that line item and whether there's more cost to come out there? Brad Ramberg: Sure, JP. This is Brad. I'll take that question. One, if you look back at the end of last year while we were still in the MLM model, we had upwards of $2,526,000,000 of deferred partner costs on the books. We've been expensing that over the course of the year, and we're now down to about $3.5 million of deferred partner costs. So that's all costs related to the legacy business. As that has declined over time, we're really looking at the advertising and marketing rates on the new business. And so we're at about 31.9% for Q3. I would expect going forward it to be in the mid-thirties-ish with some variation of seasonality. But the sequential decline really is driven by the transition away from the MLM business. And, JP, just to provide additional color on that. So there are seasonal fluctuations, you know, between the quarters because Q1 is always your highest marketing spend quarter. But what's important is that that sales and marketing line, which was reduced from the $25.5 million in Q2 down to $19.1 million in Q3, really was not a result of spending less money on actual advertising and marketing. A lot of that was the cost that Brad just alluded to, which were associated with the former MLM, which are now sort of burning off. So we've not reduced our spend to the consumer. We did not cut the media budget. We just shed all those legacy marketing costs that were affiliated with the MLM. You will not see that similar type of decline obviously in Q1, because Q1 will be your higher spending quarter. But I just want to put color around that because when you look at the sales and marketing line, your first inclination is to say, the company cut its marketing spend level to the consumer. The answer to that is an emphatic no, we did not. JP Wollam: Perfect. Appreciate the detail, and best of luck going forward, guys. Mark Goldston: Thank you, JP. Operator: Our next question comes from Michael Lipinski with the company Noble Capital Markets. Michael, your line is now open. Michael Lipinski: Thank you and thanks for taking my questions and congratulations on a stellar quarter and reaching your profit milestones. Mark Goldston: Thank you. Michael Lipinski: I believe that in Q3 you kind of indicated that you felt like most of your restructuring of your Salesforce was gonna be complete. I was just wondering, is that now all been completed? Brad Ramberg: Yeah. Generally, the reorganization has taken place, and we're now multichannel with, as Mark mentioned, the performance marketing or direct-to-consumer business. We've got the Amazon business. We've got a small contribution from affiliates and obviously CRM, and we're excited to launch into retail next year. And, Mike, this is Brad. I'll say we're always looking for cost efficiencies, and we'll continue to do so. But the financial restructuring, it's, for the most part, complete. Now we're really looking at growth mode beginning now and in '26. Michael Lipinski: Okay. Perfect. I was wondering in terms of margins, with all these distribution retail distribution rollouts and also with the new products that you're talking about. I was just wondering if you can just talk a little bit about margin. Are you anticipating giving up any margin? You know, if you obviously, with some of the lower price points that you're talking about with some of your products, if you could just add a little color on that. Brad Ramberg: Sure. I'll take the case on that. So I'll tell you. So in Q3, we hit a nutrition margin of about 53%. And right now, with a lower price point and more promotional activities, we are guiding to a lower nutrition margin. We're guiding to a steady state between 46-52%. So retail in '26 is not a significant driver of revenue, at least in Q1, like in Q3, certainly not in Q4. We'll continue to adjust our margin as we gain more experience in retail. Right now, we are looking to a little bit of a decline in the nutrition margin. As we're looking to a pickup in the number of units and subscribers. At the end of the day, it really is about generating dollars. It's about generating the most number of subscribers. Michael Lipinski: Gotcha. And we're also, you know, the margin is also reflective of our increased focus on selling one-time purchases versus just selling subscriptions. So because we're actually expanding the audience, those people will ultimately end up subscribing. Michael Lipinski: And I was just wondering, do you guys frame for us like the anticipated marketing spend around the retail rollout of P90X release? Brad Ramberg: I'm sorry. Say that again. Michael Lipinski: Can you just kind of frame maybe the anticipated marketing spend around the retail rollout for your P90X release? Maybe just give us the timeline for the new P90X exercise program? Brad Ramberg: Yeah. Well, the new P90X exercise program is a Q1 program. And that will certainly be part of our overall marketing spend because of its high profile and ability to attract people into the franchise. In terms of the actual retail products, the marketing spend will be in line with what we end up getting in terms of wholesale orders. And what that revenue line will look like. So we do not have that number right now. But it will be on a normalized advertising to sales ratio based on the wholesale volume that we generate, and that's all gonna be baked into our numbers. Michael Lipinski: Gotcha. That's all I have. Congratulations again. Brad Ramberg: Great. Thank you very much. Appreciate it. Mark Goldston: Thanks, Michael. Operator: At this time, there are no more questions registered. There are no more questions registered in queue at this time. I would like to pass the conference back over to our hosting team for closing remarks. Mark Goldston: Thank you, Jayla, and thanks, everybody, for attending today. I just want to say in closing, again, this was not only an outstanding and seminal milestone quarter for us, achieving net income positivity, but the fact that in our opinion, the financial turnaround has largely been completed. Well ahead of schedule, almost I would say almost twelve months ahead of schedule. So the headline is, you know, great new operating structure, much reduced breakeven level down to the $180 million level. And now we're at the point where instead of waiting till 2026, we can actually open up this innovation pipeline starting in '26. You'll see a lot of new exciting programs, which will expand this franchise, take advantage of the operating leverage that's now been built into this P&L, and give us the opportunity to achieve all of the goals that Carl has been articulating for years. But not trying to reach just the serious exerciser, the serious nutrition consumer, but to go out to the broader audience and that huge TAM, the 185 million Americans who do not currently exercise on a regular basis and who are taking nutritional supplement products, and we want to drive them to our franchise. So thanks, everybody. We look forward to talking to you on the next quarter's earnings call. Operator: That concludes today's call. Thank you for your participation, and enjoy the rest of your day. Chris Sakai: Thank you.
Operator: Good afternoon, everyone, and welcome to the Kaltura third quarter 2025 Earnings Call. All material contained in the webcast is the sole property and copyright of Kaltura, Inc. With all rights reserved. For opening remarks and introductions, I will now turn the call over to Erica Mannion at Sapphire Investor Relations. Please go ahead, Erica. Erica L. Mannion: Thank you, Operator. I am joined by Ron Yekutiel, Kaltura's Co-Founder, Chairman, President, and Chief Executive Officer, and John Doherty, Chief Financial Officer. Ron will begin with a summary of the results for the quarter ended September 30, 2025, and provide a business update. John will review the financial results for 2025 in greater detail, followed by the company's outlook for the fourth quarter and full year of 2025. We will then open the call for questions. Please note that this call will include forward-looking statements within the meaning of the federal securities laws but not limited to statements regarding Kaltura's expected future financial results and management's expectations and plans for the business, including our planned acquisition announced earlier today. These statements are neither promises nor guarantees and involve risks and uncertainties that may cause actual results to differ materially from those discussed here. Important factors that could cause actual results to differ from forward-looking statements can be found in the risk factors section of Kaltura's annual report on Form 10-K for the fiscal year ended December 31, 2024, and our other SEC filings, including the quarterly report on Form 10-Q for the quarter ended September 30, 2025, filed with the SEC. Any forward-looking statements made during this conference call, including responses to your questions, are based on current expectations as of today, and Kaltura assumes no obligation to update or revise them, whether as a result of new developments or otherwise, except as required by law. Please note, we will be discussing non-GAAP financial measures, adjusted EBITDA, non-GAAP net loss, and non-GAAP gross margin during this call. For a reconciliation of these measures to the most directly comparable GAAP metric, please refer to our earnings release, which is available on our website at investors.kaltura.com. Now, I will turn the call over to Ron. Ron Yekutiel: Thank you, Erica, and thanks to everyone joining us on the call this afternoon. Today, we reported total revenue of $43.9 million for 2025 and subscription revenue of $42 million. We posted a record adjusted EBITDA of $4.2 million, representing our ninth consecutive quarter of adjusted EBITDA profitability driven by a strong non-GAAP gross margin of 70%, up from 68% in the same quarter last year. Cash flow from operations was $9.3 million, in line with our forecast of strong cash flow in the second half of the year. Non-GAAP net profit in the third quarter was $2 million, representing the fifth consecutive quarter of non-GAAP profitability. Before continuing the review of our third quarter results, I would like to discuss some exciting news. After market close today, we announced that we signed on November 5 a definitive agreement to acquire Ethof.ai, a deep tech GenAI lab developing conversational AgenTek AI technology and models for real-time photorealistic avatars, speech recognition and generation, and screen understanding. Esoft Avatar technology is planned to power a new line of Kaltura immersive real-time conversational virtual agents which will hear, speak, see, and understand, and harness video in other forms of rich media to provide highly engaging, personalized, customer and employee experiences. It is also planned to serve as the foundation of a new Kaltura content creation tool which would enable customers to create and publish videos with recorded avatars. This dual capability positions ESOP as an important driver of both our live conversational agentic experiences and next-generation video on demand content creation offerings. In our previous earnings call, we reiterated our vision to transform our AI agent from reactive prompt-based agents into proactive, automated, conversational, ambient agents that will anticipate needs and take action to not only drive productivity but become intelligent enough to replicate human roles and automate tasks acting as AI twins. We also said we plan to gradually evolve our offerings into AI specialists that are intended to be role-aware, use case-specific, and ultimately also industry-specific. Likewise, our investor presentations throughout the past year outlined our intent to launch immersive AI agents that would be fully automated, conversational, hyper-personalized, and context-aware, elevating us from powering video experiences to providing end-to-end video-based AI-infused customer and employee experiences. We believe we are entering the decade of agents where Avatar-based conversational agents will become a primary interface for work, learning, and entertainment. To meet this shift, organizations will require a real-time video experience generator that assembles scenes, user interface, and narrative based on user intent. Instead of static pages or precut videos, real-time immersive agents will use user context, goals, constraints, and accordingly, construct personalized digital experiences that include a tailored dialogue, visuals, data overlays, and calls for action to drive the best outcome on every digital touchpoint across all employee and customer journeys. The planned acquisition of eSelf, which is expected to close in the fourth quarter of this year, is an important milestone in achieving this vision and in our evolution from powering video content management and experiences to harness the capabilities to provide immersive virtual agents for customer and employee experiences. In our transformation from a video company to a rich media-powered AI-infused CX and EX company. After this acquisition, customers will continue to receive from Kaltura cutting-edge products to manage their video lifecycle, publish, and stream content online and on TV, run virtual events, etcetera, but the plan is that soon customers will also get from us two additional new offerings. First, a Kaltura-powered content creation tool that generates AI-based videos on demand with both photorealistic and animated avatars. And second, immersive conversational virtual agents with live avatar interfaces that utilize real-time video creation and repurposing, voice chat across over 30 languages, image creation, interactive whiteboarding, and screen sharing. This will include a wide array of prebuilt off-the-shelf agents that are optimized to fulfill CX, EX, and industry-specific tasks and roles as well as development tools and professional services to create these agents for customized needs. These immersive virtual agents will address tasks and fulfill roles in areas such as marketing, sales, customer care, recruiting, onboarding, teaching and training, communications, entertainment, and more. Essentially, they represent the next generation of Kaltura's recently launched AI-based genies, turning them into fully conversational agents and adding to them a mouth, ears, eyes, and a face. So they could better fulfill human roles, increase customer and employee engagement and retention, streamline and accelerate processes, reduce costs, and increase revenue. We plan to integrate and offer ESOP technology alongside our current video experience products, as well as offer eSelf-powered immersive virtual agents separately as new self-serve offerings which are expected to boost our product-led growth go-to-market motion, and expand our target market from large enterprises to also small and medium businesses across industries. Examples of potential integrated offerings include enabling the creation and insertion of avatars to VOD assets within our VCMS platform and video portal product, as well as adding live conversational avatars to all our products, including video portal, LMS and CMS extensions, virtual events and webinars, virtual classroom, and TV streaming apps. Examples of potential new self-serve offerings would be CX, EX, and industry-specific immersive virtual agents based on the combination of Genie and the Avatar interface that would be easily embeddable in any website and online application. These self-serve agents will include native integrations with a full suite of Kaltura products, so if warranted, they would enable our customers to harness the full powers of Kaltura across video creation, management, distribution, publishing, and monetization. ESOP was founded by Dr. Alan Becker and Elan Shoshan, and is home to an exceptionally talented team of more than 15 AI experts in the field of computer vision and vision language models, NLP, and speech. The company commenced development in 2023 and has recently started piloting its offering and receiving strong early user endorsement and industry recognition, including being recently honored by Staff Company as one of the next big things in tech in 2025. We engaged with the Esoph team as they were switching gears from piloting to further hardening and scaling their offerings towards full commercialization, and they appreciated the opportunity to join hands with Kaltura to accelerate this process and their go-to-market motion because of our proven track record of successfully commercializing enterprise products, our highly synergistic technology and product portfolio, our strong market positioning, and prominent customer base. In recent months, we presented together the planned joint offering and its future potential and promise to various Kaltura customers and prospects across industries and were met with great interest and excitement. People love the rich multimodal conversational interface, appreciate the ability to integrate it deeply into their enterprise workflows and systems, and are excited by how it connects with Kaltura's products and the vast video database that we manage and draw insights from. We believe that closing this acquisition will enrich our technology and AI development talent base, boost the breadth, depth, appeal, and mission criticality of our offerings, increase our addressable markets, shorten our sales cycles with a new PLG motion, and altogether, support revenue growth. This transaction will also support the repositioning of Kaltura from a video company to a media-rich AI-infused CX and EX company, from providing video products as an end to harnessing them as means for improved employee and customer engagement and success. As for the deal structure of the ease of acquisition, the purchase price consists of $7.5 million in cash, payable upon closing, $12.5 million in cash payable over three years contingent upon the attainment of specific earn-out milestones of incremental recognized revenue, and 4.7 million common shares of Kaltura vesting over three years subject to retention holdback provisions for ESL founders and key employees representing 3% of the company's outstanding stock before the deal. The total deal value as of the day of signing, assuming all earn-out milestones and retention targets are achieved, is approximately $27 million. We believe that this deal structure provides significant value accretion to Kaltura shareholders while at the same time, recognizes the ESOP team and shareholders for their great achievements to date and their expected significant future contribution to our joint success. For further details regarding ESOP and the transaction, please refer to the press release sent out this afternoon. You can learn more about our planned joint offering post-closing and the potential exciting opportunity ahead by visiting www.kaltura.com/avatars-agents. Next, I would like to turn to discuss another announcement from today, the repurchase of Kaltura common shares held by Goldman Sachs. Goldman Sachs invested in Kaltura in 2016. They have been a strong supporter of the company and have held all their shares since that time. Considering the extended duration that they have owned our stock, and in line with their publicly traded strategy and efforts to harvest long-tenured non-core investments, we have come to an agreement to repurchase all their Kaltura shares at a 25% discount to the thirty-day VWAP. The deal concluded on Friday, November 7, whereupon we repurchased 14.4 million shares representing 9.2% of our outstanding shares that day, for a total price of $16.6 million. Our board believes that this represents a smart, timely, and value-accretive move for all company shareholders and is committed to pursuing similar rewarding opportunities in the future in conjunction with our planned increased generation of cash and operational profit. It is worth noting that following the Goldman Sachs share repurchase in Q4 and the expected closing of the ESOP acquisition, the company is forecasting to close the year with approximately $660 million in gross cash, representing approximately $30 million in net cash after deducting our outstanding bank debt. Furthermore, once the acquisition closes, the net combined impact of these two deals, assuming all the ESOP transaction shares will ultimately vest, represents a reduction in our share base of 9.8 million shares, translating to a 6.2% anti-dilutive accretive effect. So we expect to come out of these two transactions with stronger technology offerings, positioning, and business opportunities, far fewer shares outstanding, and more than enough cash to execute our exciting future plan. Returning to the business update, new subscription bookings in the third quarter were comprised of twelve six-digit deals, including new customers such as a large Japanese conglomerate, a leading European professional services firm, and a prominent Asian telecommunications company. As for AI deals, in the third quarter, we closed five AI deals for ContentLab and Genie, following last quarter's initial sales with a multinational fast-food restaurant chain, a leading US-based healthcare provider, and three universities. We expect many more AI deals in the quarter ahead. In fact, more than previously forecasted, given the earlier stated accelerated efforts in this area. On the last earnings call, we forecasted new bookings to pick up in the second half of the year. While this has not happened yet in the third quarter, our current pipeline supports this pickup in the fourth quarter. On the gross retention front, the gross retention rate in E and T continued to be strong in the third quarter, and we still forecast an annual E and P gross retention rate in 2025 that is better than that of the previous four years. M and T growth retention rate was better than that of the first and second quarters, though still lower than usual as forecasted. We continue to expect a strong M and T growth retention rate in the fourth quarter. Moving on to the product front and beginning with our continued and growing investments in our AI offerings. In the third quarter, we expanded our family of Genie agents with additional features and functionalities. As mentioned before, these developments help prepare our genies to become proactive, automated, conversational, and ambient agents. As discussed, soon, they are expected to become fully immersive with the addition of a mouth, ears, eyes, and a face. As for ContentLab, in the third quarter, we enabled custom instructions designed to empower content creators and administrators to guide the AI with specific prompts to ensure that the generated clips emphasize the right messages, that the summaries and chapters match their communication style, that the generated metadata aligns with their internal taxonomy, and that the generated quizzes fit their specific learning objectives. Lastly, AI development, in the third quarter, we launched the first version of our new publishing agent, which automates the entire process of publishing content, taking over complex and repetitive tasks that previously required manual efforts. Once the content creator or administrator defines the publishing workflow and rules, the agent is empowered to take action and make decisions autonomously to ensure content is prepared, enriched, and published according to policy, including automated captioning, clipping, quiz insertion, metadata generation, and content approval. I want to tie all these AI developments together and also connect them to my earlier statements about eSelf and our exciting AI plans to evolve towards providing immersive virtual agents. Our AI offerings and consequently, our entire product portfolio is becoming smarter, richer, more accurate, consistent, interactive, engaging, reliable, and compliant. Our offerings are becoming more contextualized and personalized, are saving people and organizations more time and money, and are assisting in achieving more mission-critical business goals. As stated before, we are excited about this transformative transaction and the continued repositioning of Kaltura from a video company that powers video content management and experiences to a rich media-based AI-infused customer and employee experience company that specializes in harnessing the power of rich media to deliver better business results. Moving beyond our AI innovation, in the third quarter, we delivered a broad set of enhancements across our portfolio. Our virtual events and webinars product supports events with much larger scale, fewer manual steps, and lesser human resources, thanks to a more streamlined setup, including event application and our new events MCP model, a powerful new way to connect our platform with AI assistant or third-party AI system. In the video portal front, we fully integrated the modern Kaltura Studio, enabling our customers to run events directly from the portal with full chat and collaboration support, offering an integrated and streamlined live experience. We also upgraded our LMS and CMS extensions in virtual classroom with native embedding, so instructors can deliver live and on-demand classes without leaving the LMS, and students can learn in the same place. Finally, our underlying platforms for video and TV content management gained improvement in hyper-personalized content discovery, the experience API, analytics, and security. We are proud to continue to lead the market with the most robust, flexible, and engaging video and TV platforms. Continuing beyond our products, in the passing quarter, we hosted four Kaltura Connect in education events across the US, where we discussed how AI is transforming the way institutions capture, preserve, and personalize knowledge, empowering educators and learners with smarter, more connected experiences that drive engagement, success, and student retention. Additional education events are being conducted globally throughout the fourth quarter. During the third quarter, we also showcased at the IBC Broadcaster Conference in Amsterdam our newly launched media publishing agent, and the latest enhancements in our TV Genie offerings and ad monetization options. Beyond education and media and telecom markets, for the broader enterprise market, we conducted several executive-level dinners across the US and Europe and showcased our offerings at large industry conferences like DigitalX by Deutsche Telekom, CEMA, IFMA, and DevelHub. The focus of the conversation was our new and upcoming AgenTic offerings for customer and employee experiences, and we were met with great interest and excitement. In summary, we wrapped up another quarter where we surpassed the high end of our subscription revenue, total revenue, and adjusted EBITDA guidance, as well as our expected cash flow from operations. Our pipeline still indicates a pickup in the level of new bookings in the fourth quarter for both E and T and M and T, coupled with an expected improvement in our M and T growth retention rate. We continue to be fueled by customer consolidation around our platform, the maturity of our newer products, and our exciting new Gen AI offerings that are expected to yield more bookings in the quarters ahead. As for our outlook for the remainder of this year, we are guiding for the fourth quarter a sequential increase in total revenue for the first time this year. This embodies a fourth-quarter subscription revenue guide that is at the same level as our third-quarter results after taking into consideration revenue recognition delays with two existing customers. We are increasing for the third time our adjusted EBITDA guidance for the year and are forecasting to post another record high in the fourth quarter, which is reflective of the strength of our operations and our continued focus on disciplined execution. We are also forecasting another quarter of positive cash flow from operations. We are very excited about joining hands with ESOP to accelerate the introduction of additional video on demand content creation tools and our transition from providing video solutions to rich media-based AI-infused customer and employee experience solutions. We believe this will increase our value, appeal, and stickiness, shorten our sales cycle, increase our addressable market, and support revenue growth. And we see a path to achieving all of this while continuing to grow our adjusted EBITDA profits and cash flow. To that end, we remain committed to achieving double-digit revenue growth in a rule of 30 combination between revenue growth and adjusted EBITDA margin by 2028 or sooner. Lastly, we will continue to look for opportunities to allocate our capital efficiently to increase shareholder value. Now before turning it over to John, our CFO, to discuss our financial results in more detail, I would like to follow up on our announcements in early October about John's upcoming departure on December 5. To thank him again for his great contribution to Kaltura over the last couple of years, and to wish him well in his next endeavor. As noted, we have initiated a search for a new CFO, and John will continue to support and consult the company and its seasoned finance team throughout the search process and new CFO onboarding. I will now pass it over to John. John? John Doherty: Thanks, Ron. I really appreciate the kind words, and thanks to all of you joining the call this afternoon. I will say a few words about my departure after I cover our third quarter 2025 results. In the third quarter, we surpassed our top and bottom-line guidance, improved our M and T gross retention rates sequentially, and took strategic and tactical actions to allocate resources towards higher ROI opportunities while improving our overall operating efficiency. Touching on a few highlights in the quarter that demonstrate this, surpassing the high end of both subscription and total revenue guidance ranges, a record level of adjusted EBITDA, also surpassing the high end of our guidance range, and representing the ninth consecutive positive quarter of adjusted EBITDA profitability, highlighting our continued focus on operating expense management. Strong cash flow from operations, improved M and T gross retention rate, and a continued strong E and T gross retention, which is still forecasted to yield an annual E and T gross retention rate in 2025 that is better than that of the previous four years. And working throughout the quarter to subsequently announce the signing of the ESOP definitive agreement and the repurchase of our shares from Goldman Sachs. With that, let me move on to our results. Total revenue for the quarter ended September 30, 2025, was $43.9 million, down 1% year over year as expected and above the high end of our guidance range of $42.8 million to $43.6 million. Subscription revenue was $42 million, flat year over year. This was also above the high end of our guidance range of $40.8 million to $41.6 million. Professional services revenue contributed $1.9 million for the quarter, down 14% year over year and consistent with the expected trends we discussed on our previous earnings calls. Before I speak to our remaining performance obligations, the RPO metric, I wanted to let you know that we made an adjustment to this metric this quarter which has also been applied to our historical numbers. Ron spoke to our use of AI as it pertains to our product innovations and the introduction of Genie ContentLab and publishing AI agents. In addition to harnessing AI technology to boost our own offerings, we are adopting new AI-based systems internally to improve our operations and controls. To that end, as part of a new AI-based scan of all our contracts, to ensure nothing was missed in our records, we discovered that not all contracts with the termination for convenience or TFC clause have been duly reflected in our systems and RPO calculations. For context, the TFC clause means that notwithstanding the defined contract term, a customer could terminate a contract midterm at its sole discretion. The TFC clause is only included in a small percentage of our contracts. And less than 1% of our contracts were terminated before the end of their term, whether through such a TFC clause or without. We do not have reason to believe this trend will change, nor do we have any indication of any customer currently planning to exercise this clause. The current and historic RPO numbers I will now speak to all include this adjustment for consistency. We have also included a slide in the Q3 2025 investor deck that provides a full comparison of our RPO calculation both pre and post adjustments. As a result of this correction, the remaining performance obligations, including an $18.1 million downward adjustment this quarter, were $159.3 million, a decrease of 4% sequentially and year over year, of which we expect to recognize 60% as revenue over the next twelve months. Again, these comparisons are all based on corrected historical RPO figures as well. To close this one out, this correction to our RPO calculation does not reflect any change in our outlook for the business or our growth prospects going forward. Continuing to our other reported KPIs, annualized recurring revenue was $19.1 million, up slightly year over year. Our net dollar retention rate for the quarter was 97%, compared to 101% last quarter, and in the same quarter last year. This decrease was anticipated and is reflective of the increased churn in M and T in recent quarters. As Ron mentioned, we still expect our annual NDR to reach 100%, same as last year, and we are to start improving next year along with an improved gross retention in M and T. I will now touch on the segments briefly. Total revenue of our E and T segment for the third quarter was $32.4 million, a slight increase year over year. Subscription revenue was $31.8 million, up 1% year over year, while professional services revenue contributed $500,000, down 37% year over year. M and T segment performance improved sequentially in the third quarter with the deceleration of the churn impact as discussed in the last two earnings calls. Total M and T revenue for the third quarter was $11.5 million, representing a decline of 4% year over year, but up 3% sequentially. Subscription revenue was $10.1 million, down 4% year over year, but also up 3% sequentially. Professional services revenue contributed $1.4 million, down marginally year over year. GAAP gross profit in the third quarter was $30.7 million, up 4% year over year. Gross margin was 70%, which is up from 67% in 2024, and subscription gross margin was 77%, which is up from 75% in 2024. Total operating expenses in the quarter were $32.2 million, compared to $34 million in 2024, a reduction of 5% year over year. Adjusted EBITDA for the quarter was $4.2 million, an increase of $1.7 million or 72% from $2.4 million in 2024. This result is a new record for us, being moderately higher than the previous record that we set both in the first and second quarters of this year, and along with our improving expense and margin profile, highlights our continued focus on improving our operating efficiency over time. I will discuss this more in a moment. GAAP net loss in the quarter was $2.6 million or $0.02 per diluted share. This is an improvement of $1 million year over year. Non-GAAP net profit in the quarter was $2 million, or a penny per diluted share. This is an improvement of $2 million year over year. Moving to the balance sheet and cash flow, we ended the third quarter with $84.1 million in cash and marketable securities. Net cash generated by operating activities was $9.3 million in the quarter, up $6.6 million from 2025, however, a decrease of $1.4 million year over year. You may recall that in 2024, we did receive a $2.3 million payment from a large customer that had been delayed from the second quarter in 2024. As Ron touched on earlier, given the two transactions that were signed after the third quarter close, it is worth noting that following the Goldman Sachs share repurchase and the ESL acquisition expected to close in Q4, the company is forecasting closing the year with approximately $60 million in gross cash, representing approximately $30 million in net cash, after deducting our outstanding bank debt. As Ron mentioned earlier, while new bookings have not yet experienced the expected second-half pickup, our pipeline of opportunities for both E and T and M and T points for this to occur in the fourth quarter. As our strong adjusted EBITDA and net operating cash flow indicate, we are gaining operating leverage, and we believe we are in a strong position to support a growth in demand, which we expect would be further accelerated in the upcoming quarters as we continue our evolution to provide immersive virtual agents. In addition, we continue to effectively manage through the churn we experienced in M and T this year, as well as the continued uncertain macroeconomic environment. Let's now turn to a quick update on the reorganization we announced in early August. While still early, we are on track to realize the benefits that we discussed on the second-quarter earnings call, namely incremental savings of $2.6 million in 2025, and $8.5 million on an annualized basis. The total one-time charge related to the reorganization was $800,000 in the quarter. As stated, these reductions are not expected to affect our marketing and sales activities, which we still plan to sustain and gradually grow. Finally, a few financial comments related to the ESelf acquisition. The deal is expected to close around year-end, and we expect the acquisition will have minimal financial impact on 2025 numbers. This is driven by ESL's burn rate, which represents approximately 2% of ours, and their non-material revenue in 2025 as they only recently started piloting their offerings. We expect to start recognizing incremental revenue from the acquisition by 2026 following further hardening, scaling, and commercialization of their offering as well as integration with our platform and products. We will provide guidance for 2026 on our next earnings call, but can already reaffirm our plan to continue increasing our adjusted EBITDA profits and cash flow. I would now like to discuss our outlook for 2025 and for the fiscal year ending December 31, 2025. Regarding the fourth quarter, we are guiding for a sequential increase in total revenue for the first time this year, as Ron touched on earlier. We expect total revenue to be between $45 million and $45.7 million. As Ron also noted, we expect subscription revenue to be at the same level as our third-quarter results after taking into consideration revenue recognition delays with two existing customers. We expect subscription revenue in the fourth quarter to be between $41.6 million and $42.3 million. We expect to hit in the fourth quarter another record high level of quarterly adjusted EBITDA that would be between $4.2 million and $5.2 million. Accordingly, for the full year, we are expecting subscription revenue to be between $170.9 million and $171.6 million and total revenue to be between $180.3 million and $181 million. For the full year, adjusted EBITDA, we are raising our guidance for the third time this year to be between $16.6 million and $17.6 million, a $1.8 million increase of the middle of the guidance range. This is close to a $10 million year over year when compared to the $7.3 million adjusted EBITDA of 2024. As Ron mentioned, we are expecting to post again positive cash flow from operations in the fourth quarter. In summary, E and C gross retention remains strong, and we have continued to manage through the delayed M and T churn that impacted us this year, and believe that M and T gross retention will be strong in the fourth quarter. Our new bookings pipeline suggests improvement in the fourth quarter and in 2026, driven by momentum in our sales pipeline, which also includes exciting potential AI deals. We are on very solid ground given the financial operating leverage we have built over the course of the past two years. It has allowed the company to allocate capital strategically to support organic growth, to buy back over 21.3 million shares since June 2024, and to pursue the acquisition of Ecell to advance our evolution in 2026 and beyond. As most of you know, this will be my last earnings call for Kaltura. My decision to move on to another opportunity, while, of course, a professional choice, was also very personal for me with mixed emotions. Kaltura is a special company with a very passionate and committed team, strong senior leadership, a very talented CEO, as you all know, and a top-notch finance organization. The company is very well positioned within the existing markets it serves, and will be even more so with the acquisition of Ecell, as well as exposure to new market opportunities. My belief in Kaltura has never been stronger and deeper than it is today. As I have said in the past, and I want to reinforce here, I know that the company is committed to targeting both revenue growth and adjusted EBITDA profitability. And I believe that the company is on the right path to achieve these objectives and to drive consistent returns to shareholders. Our target continues to be to achieve double-digit revenue growth, the rule of 30 combination between revenue growth and adjusted EBITDA margin by 2028 or sooner. As I have said before, Kaltura has achieved this goal in the past, and I know that it will achieve it again. The company will provide guidance for 2026 when it reports Q4 2025 and 2025 full year, in February 2026, but as discussed, is already confirming our intent to continue growing our adjusted EBITDA and cash from operations. With that, we will open up the call for questions. Operator? Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, please press A. You may press 2 if you would like to remove your question from the queue. For participants using speed equipment, it may be necessary to pick up your handset before pressing the star keys. And our first question will come from Ryan Koontz with Needham. Hi, this is Jeff Hopson on for Ryan. Thank you for the question and congrats on the acquisition. Jeff Hopson: I guess I had one on the acquisition. Any thoughts on, you know, the investments that are gonna go into, you know, the new product and how it's gonna integrate in. I guess, and, like, day one, will sales reps be able to sell the product? Or was that second-half revenue contribution kinda got into, you know, like, six-month period of investing in a product. Ron Yekutiel: Yeah. Thank you very much. So in short, I would say I would focus more on the second half, not to say that things can come earlier. But we would like to set the goal kind of in a realistic comfortable way for us to get there. Big move for us, there's a lot installed for this, and it's not about immediate gratification. It's about strategic long-term value. Share a little bit about that, maybe give you a bit more information about cost structure, and how much will be needed to be invested plus what are the type of developments for your question. But first, why are we buying new stuff? And as I noted, it's like for twenty years enterprises have been streaming video. But with the advent of AI, video can be created on the fly in a very hyper-personalized, contextualized way, and we have been talking about that. Last one and a half years, we have been building AI-based agentic video workflows, and we launched our Genie family of products for work, school, and TV. And with that, we are able to repurpose video delivered in real-time. Customers, employees use that, flashcards, images, short videos. But what it did not include is an actual video representation. And now what we are doing with ESOP technology is we are giving Genie a face, mouth, ears, eyes, that's gonna be human. It's gonna be fully conversational. It's gonna also see, quote, unquote, your screen. They could do a sharing and maybe at a later time take over your screen. And that's really important. It's part of this move where we are gradually changing our mission statement, from powering video experiences to powering immersive virtual agents and experiences. So the immersive virtual agents are, again, the genie and the next generation, which it's not just video, it's fully immersive, and these are agents. It's not just about the experience. It's about replacing roles, replacing people. As such, we are moving from being a video company to a video-based CX and EX company. We believe that real-time AI-generated video and avatars are the next user interface, and we believe that each and every meaningful visual CX and EX touchpoint will be rendered as real-time video. We think navigation is gonna transform from static to conversational and seeing the video. Video carries so much emotion and context and intention. It's gonna provide a much more engaging and hyper-personalized experience. So we are excited about that. A word about, you know, what we are gonna do with this, and I am happy if there are any later questions to talk more about, you know, why we chose Eself and why they chose us. But generally speaking, Safav, what we are gonna do that's very different than some of the other folks are gonna do first. We are gonna be offering these agents running on our VCMS and TV CMS. We are gonna gradually productize them as standalone and self-served agents. And they are gonna run on any website and any app. And they are gonna cater to sales, marketing, customer care, recruiting, training, employee communication, teaching, entertainment, banking, everything. Right? So we are gonna build them. We are gonna integrate them into the product. So that's gonna be connected to our portal, connected to our events, connected to our TV system, connected to our virtual classroom, connected to the LMS. And we are gonna also connect them to more third-party systems. So you could expect to have it fed by CRM, Dan, CDP, element, you know, LX Bs LMSs. We are gonna also build a soft development kit and SDK so that could integrate a third-party agentic logic. And ultimately, we are gonna also add tools for VOD avatars as discussed. So you asked about the time to market. It will take a bit to scale it. To make sure that it's fit for compliance and security that it could run on a larger database. That's gonna take anywhere between one and two quarters. Gonna commercialize the agent. We are gonna do the integration. Everything we just said, it will gradually take the next year, but certain things are gonna come much, much quicker. I want to end up just saying why I think this differs so many other options out there. There's not a lot. By the way, they are all big and exciting. You may have seen some teaser recently. Decline a $3 billion offer by Adobe. So it said. And they raised $4 billion from Alphabet's JV fund. Agen is there. Thales is there. So there are companies that are quite exciting. We are optimized for conversational more so than others that are doing VOD. And we also include the agentic logic. It's not just the avatar. It's not just a pretty face. It's about having a smart engine behind it so you could boost the business results. But that's unique. Another thing that's unique is that it's connected, as I mentioned earlier, to our video system. So we are gonna serve within these experiences hyper-personalized rich media content. I also mentioned it's gonna be connected to our SaaS products, and that's unique. And, also, lastly, when you think about the fact that we are hitting the ground running, it's the same customers, same buyers, same use cases, and we have a very significant data and workflow mode because we are sitting on a mountain of rich data. At years of classes, meetings, events, which we are gonna feed it. And so that's extremely, extremely unique. And I am just gonna end up by saying this is the only public company that we are aware of. In this space. There's a bunch of private companies that are doing very well. But from a public company investment, it's exciting. So and also lengthy answer. I want to make sure that we all understand the context. I did promise lastly to say something about the spend. I mentioned revenue second half. But from a spend perspective, their current spend of about 17 people is $3.5 million added to our OpEx. That's gonna be added starting to be at the end of the year, coming from closing throughout next year. We might add some more people for R&D to double down on this effort. I do not think we are gonna need to add SNM or customer service or G and A because we could have that covered with our team. So all in all, that's kind of the impact, and we said we are gonna continue to grow bottom line. And I am just excited that we are entering a big market with a very differentiated technology. Jeff Hopson: Awesome. Thank you. And maybe just one follow-up. As we kind of look into Q4, just curious if there's any specific verticals or customer cohorts that are kinda coming in better or worse than your expectations. That's a good question. Ron Yekutiel: I mean, we have seen so what are we seeing in the third quarter? We have seen the gross retention starting to get better in M and T. We said that Q4 is going to get even better. So we are happy to see this kinda land in the right place. We did say that the new bookings, the kind of the sequential increase did not happen in the third quarter, and it is, we said, second half. So it's gonna what we see is we expect that to happen in the fourth quarter. It is happening in both M and T and E and T. So we expect that trend to build up in both of them. Jeff Hopson: Thank you very much. Ron Yekutiel: No. Thank you. Appreciate it. Operator: And, again, that is star one if you would like to ask a question. And we will go next to DJ Hynes with Canaccord. DJ Hynes: Hey. Good evening, guys. Congrats on all the news. Very exciting stuff. Ron Yekutiel: Thank you, DJ. DJ Hynes: Well, maybe also yeah. Of course. Ron, maybe I will start with you. I am just curious. Are you seeing any tangible signs in the customer base that the adoption of AI technologies is increasing either the velocity or the amount of video content created? I am just curious if there are data points that support that the thesis is already starting to play out or if it's still a little too early here. Ron Yekutiel: So it's definitely there's excitement that, you know, the more we have seen more people interested in utilizing Genie and ContentLab. Again, we closed five deals this quarter. Both education, enterprise, there's more around the corner. The list is growing. They are using that to generate more video, period. The whole idea of recreation, repurposing of videos, is one of the biggest issues of AI. So we are seeing that happen. Like I said, I think that the big jump is gonna happen in continuous investment in the regular stuff we have done, but also with this Genie 2.0. And I think that's 2026, so I am very excited about that. From a multi-quarter trend, there's no doubt it's getting there. Again, we have been careful from the beginning to talk about how quickly revenue is gonna hit. Because there are issues pertaining to compliance and just the rapidity in which people fully adopt these things that take a bit of time. But we have been out there in conferences showcasing also the new vision. We have people take cameras out and take photos of what we have been doing in video. Their jaws dropped. The excitement level is really high. We have had some of our customers, including the very biggest customers that we have, couldn't talk to us about what they could do with us now. So there are very, very interesting buying signs to the new stuff that we are doing. But look. We, you know, as we do not overpromise. We like to overdeliver and we also want to build this company for the mid to long term. It's not a tell-me market. You know, it's a show-me market. And, it's not overnight. I also want to set that stage that it's gonna take a few quarters here. It could come quicker. It could take a bit longer. But I think that as we go through this, we are gonna have more and more design partners, more and more launch partners. Hopefully, we would be able to share these as they come by. Hopefully, they are gonna be big and exciting, so everybody's gonna get excited by that. But we see this as very, very disruptive. DJ Hynes: Yeah. Good to hear. And then maybe we could just follow-up on the rev rec delays you called out with two customers. What is causing those? And when do you expect those issues to be rectified, and we could start to see that revenue drop in? Ron Yekutiel: Yeah. That particular there's a couple of customers that's to the tune of half a million-ish in that. Otherwise, if you add that up and it's kind of look at our current guide and maybe if we were as usually yes or no gonna meet our guidance, maybe go above and kind of coming back to the original numbers. Because we have taken it just a tad down. But let's wait and see what happens in Q4. These two are one of them is E and T. The other one is M and T. And it's really projects that were planned to have happened by the end of the year. And they spilled over into next year. And so that's gonna take a little bit longer after that, whether it's fully in Q1 or a little bit after. That's just news coming for the customers for reasons that relate to them which was not pre-known to us. And when it did come up, we needed to adjust for. DJ Hynes: Okay. So it's not a Kaltura delivery issue. It's counters on behalf of the on the customer end. Okay. Got it. Okay. Ron Yekutiel: That's correct. It's something that has to do with them. You know? DJ Hynes: Yeah. Makes sense. Okay. Thank you, guys. Ron Yekutiel: I appreciate it. Operator: And this now concludes our question and answer session. I would like to turn the floor back over to Ron Yekutiel for closing comments. Ron Yekutiel: Yeah. Appreciate that. Again, a special day for us. You know, it's once every few years, we make a leap that is inorganic in this form. If you look at our past behavior, when we have done these, they have landed significant big customers. Required DaVinci in 2014, brought in Vodafone that kinda brings $20 million a year. We brought in Neuro in 2020, and that brought in AWS. Brought in on the first year close close to $13 million a year. So it's not just the issue of technology and strategy and positioning. But the very significant, we believe, potential commercialization and revenue. It's an exciting new step, which is aligned very much with what we have been talking about for a long time. It's not a new direction. It is an evolution into the right direction, which is to become a full CX and EX platform that harnesses video in order to be a better CX and EX platform and that harnesses AI at Genie 2.0. We are excited. We love the team that's joining us, and we love the DNA mix that they bring. We commend them for what they have done so far, and thank Alan, Alon, and his team for choosing Kaltura as their partner and to continue the journey together. We are excited from what lies ahead. We did not mention, but we also repurchased stock, quite significant stock this quarter. So we are ending up as I mentioned earlier, with a lot more technology and exciting opportunity with far less shares. So it's anti-dilutive accretive value for shareholders at a great price. We are able to hopefully command the growth and profitability that we are planning to command in the quarters ahead. And that's it. I want to thank everybody for their continued trust and support. Once again, as we wrap up, thank my friend here and colleague, John, for his great support and partnership. We are gonna remain close friends, and we are gonna continue to work together. And he's gonna continue to consult the company in the months ahead as we bring in the new CFO. So and, of course, amazing, amazing finance team and leadership within the finance team that's enabling this transition to happen. We have the number one finance team in the world. So thank you, folks. Appreciate it. Have a wonderful day. Take care. Operator: Ladies and gentlemen, thank you for your participation. This does conclude today's teleconference. You may disconnect your lines, and have a wonderful day.
Operator: Good afternoon, ladies and gentlemen. And welcome to the Capricor Therapeutics Third Quarter 2025 Conference Call. At this time, all participants are in a listen-only mode. If at any time during this call, you require immediate assistance, please press 0 for the operator. This call is being recorded on Monday, November 10, 2025. I would now like to turn the conference over to our CFO, Anthony J. Bergmann, for the forward-looking statement. Please go ahead. Anthony J. Bergmann: Thank you very much, and good afternoon, everyone. Before we start, I would like to state that we will be making certain forward-looking statements during today's presentation. These statements may include statements regarding, among other things, the efficacy, safety, and intended utilization of our product candidate, our future R&D plans, including our anticipated conduct and timing of preclinical and clinical studies, our enrollment of patients in our clinical studies, plans to present or report additional data, plans regarding regulatory filing, potential regulatory developments involving our product candidate, potential regulatory inspections, revenue and reimbursement estimates, projected terms of definitive agreements, manufacturing capabilities, potential milestone payments, our financial position, and our possible uses of existing cash and investment resources. These forward-looking statements are based on current information, assumptions, and expectations that are subject to change and involve a number of risks and uncertainties that may cause our actual results to differ materially from those contained in the forward-looking statements. These and other risks are described in our periodic filings made with the SEC, including our quarterly and annual reports. You are cautioned not to place undue reliance on these forward-looking statements, and we disclaim any obligation to update such statements. With that, I'll turn the call over to Linda Marbán, CEO. Linda Marbán: Good afternoon, and thank you for joining us on Capricor Therapeutics' Third Quarter 2025 Conference Call. This has been a very busy time for Capricor, as we are just weeks away from a major milestone: the top-line readout from our HOPE-3 Phase 3 clinical study of Daramycin, our investigational cell therapy for the treatment of Duchenne muscular dystrophy. This pivotal study represents the culmination of nearly a decade of scientific development, all aimed at helping boys and young men living with this devastating disease. Importantly, HOPE-3 focuses primarily on non-ambulant individuals, a patient population that has historically had limited clinical research dedicated to it. HOPE-3 was conducted across 20 leading academic and clinical centers in the United States. The trial enrolled 105 participants and is one of the largest double-blind, placebo-controlled studies ever conducted in the Duchenne population. The study was designed with a one-to-one randomization and is statistically powered to detect changes in both upper limb function, as measured by the performance of the upper limb version 2.0, and cardiac function, as measured by left ventricular ejection fraction measured by cardiac MRI, as well as several secondary and exploratory endpoints. These 105 patients enrolled in HOPE-3 represent two cohorts: Cohort A, which received Daramycin manufactured from our Los Angeles clinical facility, and Cohort B, which received products manufactured at our commercial GMP facility in San Diego. As a reminder, the FDA required the addition of Cohort B to evaluate the efficacy of the commercial-scale product. While we have demonstrated non-clinical comparability, Cohort B provides the opportunity to generate direct evidence of efficacy for the commercial material. The San Diego facility was built to meet commercial manufacturing standards, operating under elevated quality and compliance requirements to support commercial Daramycin production. Because the San Diego-manufactured product is intended for commercialization, the statistical analysis plan for HOPE-3 includes analyses designed to evaluate efficacy both across the combined cohorts and independently within Cohort B. We believe, in alignment with our biostatisticians and clinicians who designed our statistical analysis plan with us, that while the aggregated data are informative, demonstrating efficacy of the commercial-scale product represents the most direct regulatory path to potential approval. From the standpoint of safety, which of course is the most important aspect of the clinical study, safety data from the trial have been regularly reported to the FDA, and no new or emerging safety signals have been observed. Across our entire program, we have now administered more than 800 infusions for approximately 150 boys and young men with Duchenne, with Daramycin continuing to demonstrate a strong and consistent safety profile. At Capricor, our mission remains clear: to bring forward the first therapy that directly addresses Duchenne muscular dystrophy-associated cardiomyopathy. Nearly every patient with Duchenne develops cardiomyopathy, which remains the leading cause of death in these boys and young men. Daramycin has been shown to help preserve both cardiac and skeletal muscle function, and our goal will be to emphasize to the FDA the life-limiting cardiovascular impact of this disease. Should Daramycin be approved, it would represent a first-in-class therapeutic option for this critical unmet medical need. We are now in the final stages of data preparation. Our statistical analysis plan has been submitted to the FDA, and the comment period passed without additional feedback. We plan to unblind the study once all data management processes are finalized, which, as noted, will occur within the next several weeks. The process has required review of more than 300 MRIs by independent external readers who are fully blinded both to treatment allocation and sequence, a process that requires additional time to collect and analyze the dataset. To remind you, after our pre-BLA meeting with the FDA in 2024, we submitted a BLA based on existing data from our HOPE-2 and the HOPE-2 open-label extension trials compared to an external control comparator from the cardiac consortium. At that time, the purpose of HOPE-3 was to support potential ex-US expansion as well as label expansion. However, following receipt of the CRL in July, the role of HOPE-3 shifted. The CRL primarily cited the need for additional substantial evidence of effectiveness and certain CMC clarifications. Importantly, most of the CMC issues had already been addressed in prior information request responses, and the remainder were resolved shortly after the receipt of the CRL. While the CRL was unexpected, we were well-positioned with HOPE-3 to provide the additional safety and efficacy data requested by the FDA. During our Type A meeting in August, the FDA indicated that the HOPE-3 results could be submitted to address the issues raised in the CRL. A key element of that meeting was our request to keep the current BLA open and maintain the indication for DMD-associated cardiomyopathy. To advance that path, we proposed designating left ventricular ejection fraction (LVEF) as the primary efficacy endpoint. While the FDA did not allow this formal change, they agreed to exercise regulatory flexibility in reviewing the HOPE-3 data. Accordingly, we plan to submit the HOPE-3 results as a formal complete response to the CRL with the goal of receiving a rapid review by the FDA and a new PDUFA date. As of now, the FDA has classified the resubmission as Type 2, which means the review period can be up to six months. But there is precedent for faster review times. We will make every effort to advance Daramycin toward approval as efficiently as possible in 2026. To remind you, we are eligible to receive a priority review voucher if approved, if approval is obtained prior to September 30, 2026. And PRVs may become increasingly valuable as the program approaches its statutory sunset. While we cannot predict the exact timing of approval, we remain highly motivated to achieve approval as early as possible in 2026, well ahead of that deadline. This consistency demonstrated across multiple clinical studies underscores Daramycin's potential to stabilize disease progression and preserve both muscle and heart function. We now look forward to seeing whether the data from HOPE-3 confirms these benefits in a larger, rigorously controlled pivotal trial. As we approach our quiet period, I will remind you that we expect to report top-line data within the next few weeks, and we will do everything we can to keep both the market and the DMD community informed of our further plans with respect to this program and the release of the data. We also recently published a peer-reviewed paper in Biomedicines, detailing new mechanistic insights into Daramycin's mechanism of action. The study described in the paper demonstrated that cardiosphere-derived cells, the active component of Daramycin, release exosomes and soluble factors that suppress fibroblast gene expression, collagen 1, and collagen 3 in human fibroblasts. These findings were consistent across more than 100 manufacturing lots, validating Daramycin's anti-fibrotic and immunomodulatory properties and further supporting its mechanism of action. To complement this publication, we also released a scientific video illustrating Daramycin's mechanism of action, which is available on our website, reinforcing the biologic rationale and consistency that underline our entire development program for Daramycin. Now, focusing for a moment on the CMC front, following acceptance by the FDA of all findings from our Prelicense Inspection (PLI), our San Diego commercial facility is fully operational and preparing for GMP production activities. Our manufacturing and quality systems are fully implemented, and all CMC-related items cited in the CRL have been addressed. This achievement reflects the strength of our operations and represents a critical milestone in ensuring readiness for commercialization and long-term product consistency. In parallel, we continue to prepare for launch with advancing initiatives in physician education, patient services, market access, and reimbursement. We are engaging both neurology and cardiology specialists to ensure an integrated approach to patient care should Daramycin receive approval. While our immediate focus remains on US approval, we are also laying the groundwork for potential global expansion and will share updates as appropriate. We are closely monitoring evolving US and pricing policies, including the current administration's stance on most favored nation frameworks, and will adapt our global strategy accordingly. So I'd like to spend the next few minutes talking about our exosome platform. We continue to advance our StealthX program under Project NextGen, a US government-funded initiative led by HHS and the National Institutes of Allergy and Infectious Disease to develop next-generation vaccines for COVID-19 and other potential infectious threats. The NIAID-sponsored Phase 1 clinical trial remains ongoing and is evaluating multiple dose levels of the monovalent vaccine targeting the spike or S antigen, with an additional planned arm that will utilize an additional vaccine construct targeting spike S and the nucleocapsid N antigens, pending separate FDA clearance. We expect initial data in 2026, subject to completion of the trial by NIAID. The goal is to validate StealthX as a versatile non-mRNA, adjuvant-free platform capable of delivering native proteins safely and efficiently, a model that could potentially extend to infectious and rare diseases alike. While vaccines are not our core business, this program serves as a critical proof of concept for the StealthX platform. Positive results could open the door to strategic collaborations and highlight the platform's potential for targeted therapeutic delivery well beyond vaccinology. With that, I will now turn the call over to Anthony J. Bergmann to run through the financials. AJ? Anthony J. Bergmann: Thanks, Linda. This afternoon's press release provided a summary of our third quarter 2025 financials on a GAAP basis, and you may also refer to our quarterly report on Form 10-Q, which we expect to become available shortly and will be accessible on the SEC website, as well as the financial section of our website. Let me start with our cash position. As noted, as of September 30, 2025, our cash, cash equivalents, and marketable securities totaled approximately $98.6 million. We believe that based on our current operating plan and financial resources, our available cash, cash equivalents, and marketable securities will be sufficient to cover anticipated expenses and capital requirements into 2026. Turning briefly to the financials, revenue for 2025 was zero compared to approximately $2.3 million for 2024. Additionally, revenue for 2025 was zero compared to approximately $11.1 million for 2024. I would like to point out that the source of revenue in 2024 was the ratable recognition of the $40 million we received under our US distribution agreement with Nippon Shinyaku, which had been fully recognized as of December 31, 2024. Turning to our operating expenses for 2025, excluding stock-based compensation, our research and development expenses were approximately $18.1 million compared to approximately $11 million in Q3 2024. And for 2025, excluding stock-based compensation, our research and development expenses were approximately $54.4 million compared to approximately $32.8 million in 2024. Again, excluding stock-based compensation, our G&A expenses were approximately $4.1 million in Q3 2025, compared to approximately $2.2 million in Q3 2024. For 2025, excluding stock-based compensation, our general and administrative expenses were approximately $11.1 million compared to approximately $5.7 million for 2024. Net loss for 2025 was approximately $24.6 million compared to a net loss of approximately $12.6 million for 2024. Net loss for 2025 was approximately $74.9 million compared to a net loss of approximately $33.4 million for 2024. With that, I'll turn the call back over to Linda. Linda Marbán: Thanks, AJ. As AJ just mentioned, we ended the quarter with approximately $100 million in cash, providing a solid foundation to continue executing on our near-term objectives and advancing our key programs. And let me just remind you that if Daramycin is approved, we remain eligible to receive an $80 million milestone payment from NS Pharma and a priority review voucher, which represents significant non-dilutive capital opportunities that would strengthen our balance sheet and extend our runway well into 2027 and beyond. We will now open the line for questions. Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. Should you have a question, please press star followed by the number one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press star followed by the number two. If you're using a speakerphone, please lift the handset before pressing any keys. First question comes from the line of Ted Tenthoff from Piper Sandler. Your line is now open. Ted Tenthoff: Great. Thank you very much. Excited for the upcoming HOPE-3 data. I just want to get a sense of what we should expect from that in terms of what will be actually released in the initial data reporting in the top-line data. Thanks so much. Linda Marbán: Hey, Ted. Always great to hear your voice. Yeah. So top-line data will be primary and key secondary endpoints. We will release those as soon as we have them, and we'll host a conference call to explain them and help the markets as well as the key opinion leaders help explain the ramifications of that data. Ted Tenthoff: And just one quick follow-up, if I may. With the consideration of left ventricular ejection fraction as a key secondary, are there any statistical changes in this study because of sort of elevating LVEF things? Linda Marbán: No, Ted. So thanks for that. So the great thing is the study was always powered with the idea that we were well overpowered to measure ejection fraction. We had such strong results from HOPE-2 and HOPE-2 open-label extension that it really wasn't an issue. We have tremendous power in projection fraction with power for pull, but the overarching power is quite strong for the cardiac as well. Ted Tenthoff: Great. Well, good luck, and break a leg. Linda Marbán: Thanks. We need it. Operator: Your next question comes from the line of Leland Gershell from Oppenheimer. Your line is now open. Leland Gershell: Great. Thank you for this update and taking our questions. To ask just a bit further on HOPE-3 and the SAP, you know, we're in this sort of unique circumstance of having a BLA that's for the cardiomyopathy, but the primary endpoint of the trial is the PUL, you know, 2.0. So wondering how the SAP designates treatment of the LVEF as a secondary endpoint in the situation in which you miss significance on the primary. Linda Marbán: Thanks. Yeah, Leland, thanks so much. So, this has obviously been an issue that we've spent a lot of time thinking about, working with the FDA, and we've brought in several very well-respected statistical consultants to help us build an SAP that allows for both of those parameters. Right? So you know, the Food and Drug Administration said we want the primary to remain the performance of the upper limb. We left it as a performance of the upper limb. The way that the primary is being analyzed is, as I mentioned in my remarks, we'll look at the combined cohorts A and B. But we're gonna focus then also on looking specifically at Cohort B because that's going to provide strength in the manufacturing facility that we have built and passed PLI with. The alpha is going to be used in the primary endpoint as would be in any other situation, and should we achieve the statistical significance and that alpha passes through to the secondaries and continues along until you miss a secondary. The key secondary of ejection fraction, we did not reserve any specific alpha for. But we know from our Type A meeting that the FDA was interested in looking at all of the data in its totality. So the SAP is a pretty traditional one and actually fairly simple, with which we think we have a lot of great opportunity to utilize the performance of the upper limb and then also ejection fraction. Now just to add a little bit of, you know, color to what you asked, because our open BLA is for cardiomyopathy, we are not going to ask, at least in the first iteration, to expand the indication to skeletal muscle until we are assured that we're going to get the indication and label of cardiomyopathy. Once we have achieved that with the agency, we will then, assuming that we have statistical significance in the primary, we'll then ask to expand to skeletal muscle as well. Leland Gershell: Okay. Thank you. And also just a question with respect to the cardiac MRI review procedure. Could you just run us through that? Are all of these reviewed by an external reviewer? Is there an adjudication process? If you would mind just summarizing that. Thank you. Linda Marbán: Yeah. So that's obviously very important and something that we have a charter in place that was signed off on, which is multifaceted. So first, an outside CRO reviews every single MRI. Their first quality controls. So everybody looks at them at the CRO to make sure that the image meets the standard of being able to be reviewed and analyzed. Once that happens, then they're read by a primary reader, a secondary reader, and then anywhere the primary reader and the secondary reader disagree by a certain number, which is of relevance that could not possibly change that much over a certain time period, there's a third reader that comes in for adjudication. And then the three of them look at it together to decide which in fact would be the appropriate read. So there's a tri-level measurement procedure, and they are independent to time point; they don't know which time point it is and also to patient ID and obviously the treatment group. Leland Gershell: That's helpful. Thanks very much. Linda Marbán: Absolutely, Leland. Great to hear your voice. Operator: Your next question comes from the line of Joseph Pantginis from H.C. Wainwright. Your line is now open. Joseph Pantginis: Hey, Linda and AJ. Thanks for taking the questions. Linda, I just wanted to clarify something quickly before my question. So, depending on the primary endpoint, you said you're gonna continue to look for cardiomyopathy and then if statistically significant, expand to skeletal, if I heard you correctly. Would that be in the form of an SBLA? Linda Marbán: Yep. So interesting to draft that. We don't really know exactly how we're gonna go about that yet. It's going to involve conversations with the agency. So right now, we have a CRL. The CRL said we wanna see more data. We're going to give them more data as a response to the CRL. We're going to provide all the data, which includes the primary and the key secondary endpoints, which we've also agreed that we would provide publicly, so you'll get to see them too. And then in conversations, we'll decide how we're going to do the label expansion, the skeletal should that be appropriate. Joseph Pantginis: Understood. Okay. And I just wanted to make sure because it looks like, with regard to the analyses, you're gonna be looking at the two manufacturing cohorts of A and B versus B alone. Does that include any alpha spend at all, or how should we view those, in general, impacting the SAP or not? Linda Marbán: Yeah, so the way that the analysis is built is that statistical analysis that's very commonly used called the Hawk analysis, which basically does not utilize alpha spend if you prespecify which group you are going to be directing your alpha towards. So if you are, for instance, gonna say A or B and will take either one, that's an alpha spend so that you would then have a point 0.025 going into your secondary. But if you actually direct it prespecified, you save all your alpha, and therefore, you have it to use in your secondary. Joseph Pantginis: Understood. Okay. And maybe a question for AJ, and if you'd like to fill in, that'd be great. I wanted to get a sense now with regard to your burn going forward. You have a couple of things coming down, a few things potentially going up. You'll have HOPE-3 wrapping up and the clinical trials expenses around that. Wanted to see about, you know, discussing manufacturing expenses that might be increased personnel, and then maybe a gradual increase in exosomes. Maybe some views on how the expenses might be going forward. Anthony J. Bergmann: Yeah. Thanks, Joe. I mean, obviously, our expenses in the third quarter were higher than they had been, but we were moving towards pretty much a PDUFA date as we moved got our received our CRL in July. A lot of the expenses you just said correctly have gone into the, the ex of the HOPE-3 trial, which is winding down. So we'll see those expenses hopefully continue to wind down. But they're going into the manufacturing and the development of the commercial product as we prepare and continue to prepare for a commercial launch. So we're maintaining and cautiously watching our burn in every area we can. We're building out our team in areas that are absolutely necessary. And then obviously following the results of the data and our next steps with FDA, we'll continue to put the dollars to work where they need to go. So we feel very comfortable with where we're at, and we're putting, putting diligently investing in where we hope to drive value. Exosomes, you know, same type of answer. You know, just to point out, NIAID is obviously funding that study. We've said that many times. We've already made the doses necessary for that. So that's well off our balance sheet, which hopefully will be a nice value driver and catalyst for us in the early part of 2026. Joseph Pantginis: Got it. Thank you. Anthony J. Bergmann: Thanks, Joe. Operator: Your next question comes from the line of Kristen Brianne Kluska from Cantor. Your line is now open. Kristen Brianne Kluska: Hi. Good afternoon, and I'm sending you all my best in the next few weeks ahead for the company. So on the statistical analysis plan, my understanding was when you originally designed the Phase 3 study, you powered it based off of Cohort A in terms of patient size number. And now that you will be using Cohort B, it's essentially the same size anyways. Is my understanding correct here? Linda Marbán: Yeah. Pretty close, Kristen. That's exactly right. So we combine them. You know, it's been a long journey. Right? So we started with Cohort A, then we were told by FDA we needed to add Cohort B for efficacy. Then when we were filing the BLA on the existing data, we combined A and B into sort of one clinical trial because they agreed to nonclinical comparability between the sites. But now, especially with some of the things that's going on with the administration, the fact that our manufacturing plant in San Diego has passed PLI, we've answered their CMC issues. We feel that it was important to be able to highlight the potential efficacy of Cohort B. And, yeah, the powering is pretty much the same. Cohort B is a little smaller with an 80% powering. Cohort A was a 90% powering. We still feel that we're well within the range of ability to achieve efficacy. Kristen Brianne Kluska: Okay. Appreciate that. And I know in the past, you've shared with us a little bit of the baseline characteristics amongst these patients, including the percent that had cardiomyopathy. As we now divide it between A and B, would you say that that statement is still true, or is there one cohort where the baseline is skewing a little bit differently? Linda Marbán: Yeah, so the baseline characteristics are pretty much identical across the cohorts. We didn't change inclusion-exclusion criteria for either one, and really it didn't, you know, work out in any specific way that it heavily weighted one way or the other. We have seen, and obviously, I don't know the data from HOPE-3, but we've seen from HOPE-2 open-label extension from John Soslow's natural history study that those patients that get treatment with ejection fraction over 45% seem to do specifically well compared to those that are worse off. So we're definitely trying to get to these guys as early in the pathogenesis of the cardiomyopathy as possible. I think when we did the analysis of Cohort A and B together in preparation for the CRL response, we had over 70 that would have had diagnosed cardiomyopathy. One thing that's really nice about Cohort B is we're also measuring scar as measured by late gadolinium enhancement. So we'll also be able to do correlation between the amount of damage that looks visible in the heart as well as ejection fraction and/or volume, which is gonna be very important for the field moving forward to understand sort of what the tipping points are in terms of scar aggregation and function. Kristen Brianne Kluska: Okay. Great. Thank you so much. Again, wishing you all the best. Linda Marbán: Thank you. Thank you. Thank you. Operator: Your next question comes from the line of Catherine Clare Novack from Jones Trading. Your line is now open. Catherine Clare Novack: Hi. Good afternoon. Thanks for taking my question. I just have a question on, you know, when you mentioned FDA intended to exercise regulatory flexibility, at what point would you do you intend to ask them to exercise this kind of flexibility? There's a possibility that, you know, you don't see significance on PUL, but there is some kind of apparent benefit on LVEF. You know, is this a situation in which you would want the FDA to try to look at the totality of the data going forward? Linda Marbán: Yeah. So you hit it exactly. You know, we are obviously anxiously awaiting the data. The easiest story will be if we hit PUL and we hit ejection fraction. If for some reason we miss on PUL, and I think there's a lot of information that's being discussed both, you know, in the Cognizante arenas in terms of the performance of the upper limb, what its utility is, how good of a measure it is, the reliability of it, that kind of thing. If for some reason we miss on PUL, but we hit hard on cardiac, that would be where we would ask for that regulatory flexibility. And we're hopeful that based on what we have in the Type A minutes, what we have educated the FDA about with the performance of the upper limb, and the key opinion leaders that we would still be able to succeed in getting the label for cardiomyopathy. Catherine Clare Novack: Understood. And then if there's anything you can share specifically about what FDA did say when it comes to regulatory flexibility. We've obviously seen them be more stringent when it comes to statistics in recent decision-making. If there's anything you can, you know, give us to any more specific detail you can give us about what FDA has said about what it means to exercise regulatory flexibility? Linda Marbán: Yeah, I think when we put out our press release on our Type A meeting, we actually provided a quote in there that came directly from the minutes, which basically said, we want you to submit all of your data from HOPE-3. We're not willing to change the primary to ejection fraction, but we will regard all of the data and make decisions based on pretty much the preponderance of all the data. They did not give us specifics. We did have a hallway conversation in which one of the reviewers assured the mother, Mindy Leffler, that came with us to our Type A meeting that they would be very sure to look at the cardiac data very carefully as they recognize that this was the unmet medical need with no approved therapeutics for that patient population. Catherine Clare Novack: Okay. That makes sense. Well, you know, looking forward to the top-line results. Thank you so much. Linda Marbán: Thank you so much for your time. Operator: Your next question comes from the line of Madison El-Saadi from B. Riley Securities. Your line is now open. Madison El-Saadi: Hey, guys. Thanks for taking our question. A couple from us. Do you have a sense that from the FDA's position, how did they view Cohort B? Is it, I guess, more important than the aggregate pool? And then secondly, maybe what is the bar to achieve a more rapid review time that you alluded to? And has that been a request that isn't made, or is that something that you would, I guess, request alongside the submission of the HOPE-3 data? Linda Marbán: Yeah, yeah, all really good questions. So, the reason that we're focusing a little bit more on Cohort B, which we might not have done had the original plan of the existing data been accepted and we had approval already for the cardiomyopathy, is because we knew that there was some question regarding the comparability of the product from San Diego, that it was a shift from a clinical facility to a commercial facility, and we passed the PLI. So we've seen frankly, a lot of CRLs being issued in the last few months around CMC-related concerns, and so we wanted to obviate that by targeting our efficacy data to our approved facility. We thought would be the safest way to go about it. And since the powering was basically the same, thought that would be one of the best ways to assure the fastest path to approval. In terms of timelines and speeding it up, that again is going to be based on what we see in the data, where we can convince the agency to move a little bit quicker. We have seen them do it. They did it with Calvista. They did it with Stealth. They are typically falling back on as long a review period as possible. And part of that, I think, is just because they are so understaffed and going through so many changes themselves that speed is hard for them. But we certainly will work with them and try and get this to produce as quickly as we possibly can. Madison El-Saadi: Understood. And then if I may ask one more to clarify. I think you answered this a couple of questions back. But could you clarify if the LGE stratification if that was balanced across both cohorts, or is that a Cohort B specific stratification that was reached? Linda Marbán: Yeah. So we didn't measure LGE in HOPE-2 or Cohort A, and that was largely because there was a little bit of a haze at the time that LGE might cause, you know, aggregation of the brain, that there might be some bad side effects, and so we didn't really wanna jump into, you know, that pool of messiness. But several things happened along the way. One, those substantiations were not proven to be true; LGE is safe. And two, our cardiology leaders convinced us that since we know that the pathogenesis of the cardiomyopathy associated with DMD is very different than what would be considered an adult dilated cardiomyopathy, it'd be really interesting to be able to correlate scar, how much, where, when, and then how it potentially correlates with ejection fraction. So it's an exploratory endpoint, but one, as a cardiac physiologist, I'm very excited to see. Because, you know, it could provide some very important answers in developing treatment paradigms for Duchenne muscular dystrophy. Madison El-Saadi: Got it. That makes a lot of sense. And, yeah, good luck on everything upcoming. Thanks. Linda Marbán: Madison. Talk soon. Operator: As a reminder, if you wish to ask a question, please press next question comes from the line of Gubalan Pachayapan from Roth Capital Partners. Your line is now open. Gubalan Pachayapan: Hi. Good afternoon, and thanks for taking my questions. So I just have a couple starting from the type two classification. I think this is the first time you're articulating that a type two is likely. And, obviously, this is going to garner a review period of six months. So I wonder if there were any recent developments between you and the FDA that made you believe a class one resubmission is impossible. I just wanted to know when this decision on class type two was sort of, like, you know, set in stone. Linda Marbán: Yeah. Yeah. Yeah. So thanks for your question. I think I pretty much, yeah, answered it when Madison asked a similar question a moment ago. So we know that most people are getting class two resubmissions. That's what we're expecting. That's what we've been told we should expect. In terms of being able to speed it up, I think that's gonna be incumbent upon the strength of the data. Our conversations with the agency, and sort of, you know, other imponderable factors that I cannot answer until I've not only seen the data, but also met with the agency. But we'll go as fast as we can. We obviously are looking for a quick PDUFA as well. Gubalan Pachayapan: And then secondly, can you discuss whether the potency assay adequately fulfilled the FDA's guidance for potency test for cellular products expectations. Thank you. Linda Marbán: Yeah. So we're very proud of the way that we have developed the potency assay profile for Daramycin. One of our goals was always to make Daramycin a drug product and not sort of a hand-waving cell therapy. It works, but we really don't know how it works. And so our science team did a methodical multiyear program in which they looked at the data from HOPE-2. They then were able to identify the master cell bank that we use in order to treat the patients in HOPE-2, so we know it works. And then they took those specific cell banks and they put it through some pretty rigorous and RNA Seq assays looking at 166 genes. And all of this, by the way, is in a very nice didactic few-minute overview on our website. Looking at those 166 genes, then use bioinformatics to basically quantify those that identified CDCs as a completely unique cell type and then identify which ones were up and which ones were down. Once we have identified which ones are CDCs by their genome, we then put them through an anti-fibrosis assay, one of the stated mechanisms of action, looking at the production of collagen 1 and collagen 3, or in this case, the knockdown of collagen 1, collagen 3, the main product of fibrosis. And each and every lot has to pass that by a certain quantification in order to be considered effective Daramycin. So we feel very confident on our potency assay profile. It's now been published. And again, if you're interested in more details, Dr. Christy Elliott, our Chief Science and Operating Officer, does a nice job explaining it in more detail on our website. Gubalan Pachayapan: Alright. Thank you very much. Linda Marbán: Thank you. Operator: Your next question comes from the line of Matthew J. Venezia from AG Alliance Global Partners. Your line is now open. Matthew J. Venezia: Hi, Linda. Hi, AJ. Thank you for taking my questions. Just one quick one on the potential label expansion. Is there any chance at first launch if an approval were to be granted that you could get as a cardiac and skeletal label, or are you mostly looking at label expansion further down the line? Linda Marbán: No. I think we'll obviously enter into those conversations during our labeling discussions with the agency. Of course, it's all incumbent upon what the data shows, but certainly if we achieve statistical significance in skeletal and cardiac in our labeling discussions, we will ask for the label to have both parameters. Matthew J. Venezia: Got it. Okay. And then just to switch gears a little bit to the exosomes platform, for the COVID vaccine program, we've seen Vaxart recently sell their vaccine program to Dynavaccine. What are the partnership opportunities that you potentially see? Has there been any inbound? Is there anything you could share on that front for the exosomes platform? Linda Marbán: Yeah. So we're all waiting with bated breaths for the data to come through from the NIAID study. Obviously, the government shutdown has not helped that. We are looking forward to getting that data. I think once we have that data, we'll be on a more direct shopping expedition for the appropriate partner. This vaccine is fantastic. It's a native protein vaccine. We use no adjuvants. The lipid that encompasses it is an exosome, which is a natural product, so you don't have to worry about gumming up the liver or the spleen. And if the antibody response and T cell response is anything similar to what we saw preclinically, it should have really tremendous value. Plus, because of the little bit of protein that we need to evoke a strong immune response, we can do multivalent vaccines not only with, you know, multivalents for COVID, for instance, but we could do a COVID plus flu plus RSV, and all of those are in the planning stages. So we're pretty excited to see that data. We'll provide updates as the data becomes available. Matthew J. Venezia: Great. Thank you for taking our questions. Linda Marbán: Yeah. More than welcome. Operator: Your next question comes from the line of Joseph Pantginis from H.C. Wainwright. Your line is now open. Joseph Pantginis: Hi. Thanks for taking the follow-up. Linda, I wanna make sure I'm absolutely sure on this, so forgive me if there's any repetition here. And this goes to the SAP around HOPE-3, and I'm getting questions on this as well. So, obviously, you need the primary to hit to be able to trigger LVEF, if I heard that correctly, number one. Linda Marbán: Is that a question, or did you miss talking to me, Joe? Joseph Pantginis: No. Is that the like, I just wanna make sure that's correct. You have to hit the primary in order to trigger the analysis of LVEF. And, if you don't hit the primary, you know, how would LVEF be analyzed, and what would you say would be the hurdle for success there? Linda Marbán: Yeah. Yeah. Yeah. So, you know, this is where the colloquialism of regulatory flexibility becomes the open-ended question. It depends on how far we miss on the PUL, let's say, we did, and then what the p-value independently of ejection fraction would be. I think we would go in there and fight really hard if we missed the PUL by a little and achieved really nice p-values on ejection fraction. It depends on how dogmatic the agency is going to wanna be on statistical, you know, analyses, which typically use up your alpha and your primary. But in this situation, because they have said they would be flexible, that they would look through to the cardiac data, that they know that the applications for cardiac and the BLA, were looking for more cardiac data, there may be a lot more windows of opportunity than just sort of strict statistical dogma. Joseph Pantginis: Got it. Thanks for the clarification. Linda Marbán: Absolutely. Operator: There are no further questions at this time. I will now turn the call back to Capricor management for their closing remarks. Please go ahead. Linda Marbán: Thank you so much for all of your questions and also for participating today. Obviously, the coming weeks will be transformative for Capricor as we prepare to announce the HOPE-3 top-line results. These data will define the next chapter for Daramycin and for our company as we advance toward our goal of delivering a life-changing therapy to patients and families affected by Duchenne muscular dystrophy. We remain steadfast in our mission and continue to execute with discipline, scientific rigor, and readiness across every area of our business. For the DMD community, your courage and partnership continue to inspire everything we do. We look forward to sharing the important next step with you soon. Thank you so much for joining us today. And we will be in touch soon. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Good day, and welcome to the Green Dot Corporation Third Quarter 2025 Conference Call. All participants will be in a listen-only mode. Should you need assistance, please signal a conference specialist by pressing the star key followed by zero. To ask questions, you may press star then 1 on your touch-tone phone. And to withdraw your question, please press star then 2. Please note this event is being recorded. I would now like to turn the conference over to Timothy Wayne Willi of Investor Relations. Please go ahead. Timothy Wayne Willi: Thank you, and good afternoon, everyone. Today, we are discussing Green Dot's third quarter 2025 financial and operating results. Following our remarks, we will open the call for your questions. Our most recent earnings release that accompanies this call and webcast can be found at ir.green.com. As a reminder, our comments may include forward-looking statements and expectations regarding future results and performance. Please refer to the cautionary language in the earnings release and Green Dot's filings with the Securities and Exchange Commission, including our most recent Form 10-Ks and 10-Q, for additional information concerning factors that could cause actual results to differ materially from the forward-looking statements. During the call, we will refer to our financial measures that do not conform with generally accepted accounting principles. For the sake of clarity, unless otherwise noted, all numbers we talk about today will be on a non-GAAP basis. Information may be calculated differently than similar non-GAAP data presented by other companies. Quantitative reconciliation of our non-GAAP financial information to the directly comparable GAAP financial information appears in today's press release. The content of this call is the property of the Green Dot Corporation and is subject to copyright protection. Operator: Now I'll turn it over to Bill. Bill? William I. Jacobs: Good afternoon, and thank you for joining our third quarter 2025 earnings call. Today, I will start with some comments on the quarter and then turn it over to Chris Ruppel for an update on our business development and go-to-market efforts. Jess Unruh will then discuss her financials in more detail, and I will conclude with some final comments and observations before taking your questions. First, regarding the strategic review, we continue to make progress, and we will provide updates when appropriate. Now let's turn to the quarter. It was a strong third quarter with results continuing to outpace our expectations. Adjusted revenue was up 21%, and while adjusted EBITDA declined 17%, the decline was expected, and our EBITDA in the quarter was substantially better than our internal projections. Jess will provide more detail on our financial results shortly. The team remains focused on strengthening our revenue engine by signing and launching new partners in the quarter, driving scale and savings in our operations, and investing in our infrastructure to support customers and partners while ensuring that we position the company for sustainable, long-term growth. As part of these efforts, we moved to cease operations in Shanghai in support of our business needs and growth strategy, including our goals to optimize our platforms and processes and reduce operational and geopolitical risks. We are pleased with the progress we've made on these initiatives thus far. With the transition, our teams have delivered on behalf of our partners and customers. We are seeing continued momentum and increasing demand in embedded finance, the broad range of banking as a service and money processing tools and features offered from our end-to-end embedded finance platform, ARC. During the quarter, we announced the launch of crypto.com's cash earned products feature, launched real-time payments with Dayforce, and announced a new partnership with Stripe as well as new signings with Workday for EWA and AM Scott in the FSC channel. We are preparing for product launches with Dolphintech, Credit Sesame, and other partners across the franchise. And we continued building a strong, healthy pipeline to fuel future growth. On our last call, I discussed our focus on the importance of improving the profitability of our balance sheet. We are making progress in those efforts with a growing list of customers, particularly on our ARC platform. We view balance sheet growth, not just transactions and account growth, as another growth driver in the company. The balance sheet is an important component of our growth and earning story, and we intend to continue to invest in our ability to manage that growth and improve its profitability. Now let me turn it over to Chris Ruppel to provide an update on our development and our go-to-market efforts. Chris? Chris Ruppel: Thank you, Bill, and good afternoon, everyone. As Bill mentioned, we're continuing to build on the momentum we saw in the first half of the year. The third quarter was busy with new business wins, partner launches, and collaborating with our BaaS, retail, and GDN partners on new initiatives to deliver growth both for us and our partners. Let me touch on several of the more noteworthy developments since our last earnings call. In October, we announced the launch of crypto.com's cash earn feature, a high-yield savings feature added to crypto.com's seamless embedded banking experience. And the initial results are encouraging. We are continuing to explore additional products and features we can bring to crypto.com's platform in the future. Our financial service center channel is also presenting exciting possibilities and growth opportunities. As Bill mentioned, we are very pleased to announce we have signed a new agreement with AmScot, a financial service center leader and a valued money processing partner on our Green Dot network. And as part of the new agreement, we'll expand our relationship to include a demand deposit account offered at Amscot's 235 locations. Additionally, we are excited about the expected launch of Dole Fintech's banking product in retail locations across the country in December. With approximately 5,500 agent locations, Dole Fintech will build on our momentum in the FSC market. This launch, coupled with our relationship with PLS and another recently signed FSC partner including Amscot, is expected to drive new account growth in a relatively new market for Green Dot. That is expected to help offset the declines that we've seen in our retail channel in recent years. We continue to see the FSC channel as an attractive opportunity. These partners are more engaged with their customers, and we believe will view our products as top-of-wallet offerings with higher engagement than our traditional retail business. We are also working diligently to prepare the launch of Credit Sesame, which we announced as a new customer on our last earnings call, and are targeting a launch early next year. Credit Sesame is a leading tech-driven personal finance platform that has served 18 million consumers since its founding in 2010. Both Green Dot and Credit Sesame are aligned in our respective missions to improve the financial lives of moderate and low-income customers. And this partnership to power the Credit Sesame account is a key business win and partnership for Green Dot. As Bill mentioned, you may have also seen our announcement about our new partnership with Workday, offering our EWA platform in their marketplace. EWA is a product offering that we believe has broad applicability to the US economy, particularly middle and lower-income workers. Our go-to-market strategy includes aligning with partners as a key part of that effort, and I'm thrilled to have a leading platform like Workday choose to partner with us. In our money processing division, we recently announced a new partnership with Stripe. For those that are not familiar with Stripe, they are a global industry-leading payment and financial infrastructure platform viewed as a pioneer in the next generation of financial services and payments. We will partner with Stripe to enable the SMB customers on their platform to leverage our Green Dot network and make cash deposits at more than 50,000 locations with additional enhancements and capabilities possible in the future. In my opinion, this partnership is noteworthy from two perspectives. First, being chosen by a leading global embedded finance pioneer speaks to the strength of Green Dot, our capabilities, and the unique position of the Green Dot network. Second, combined with our partnership with Clip Money, I believe it validates the opportunity in the SMB market. It is a new area of focus for us and a market that is sizable. Last, in our tax business, we expect to finalize a partnership with a leading franchise platform that has chosen us for technology stability and a growing array of products and services. This is the first sizable partner in the franchise area of tax services in many years, and we expect to launch on our platform for the 2026 tax season. In the earnings call last quarter, I talked about our increased focus on working with existing partners to deliver value, expand our relationships to drive growth for our partners and Green Dot. We continue to see success in these efforts. I specifically referenced an embedded finance partner where we have seen revenue and contribution that is approximately 55% higher than what we had expected when we signed that customer. Building on that success, we will be launching a new payment product with them that should further drive growth above our initial expectations. In our Rapid Employer Services Division, we have renewed one of our largest channel partners, bringing more of the customer experience and operational support under Green Dot's control and improving our economics. Lastly, in our BaaS division, we renewed another large partner with improved economics and a path to a deeper, more robust partnership. I think these all demonstrate the value we're able to bring to customers after the initial signing and launch. Lastly, I'd like to touch on a bit on the outlook for the embedded finance market. I recently joined the team at Money 2021, one of the largest fintech and payments conferences in the US, and I can tell you that based on the volume of meetings, interest in our platform, and variety of companies and executives we met with, the embedded finance market is not only robust but accelerating. This belief is supported by a recent study we conducted with payments.com, which we released two weeks ago and is featured on our website. Based on over 500 respondents, the survey clearly points to companies prioritizing embedded finance as a revenue growth and value driver. Approximately 94% of respondents reported that they plan to increase spending on embedded finance, with 76% saying they'll increase investments in the next twelve months. The overarching catalyst for their spending plans is to improve financial outcomes by deepening relationships with their customers and employees and differentiating their brands. So in summary, we continue to work on signing new partners, launching new partners, and growing in a market where companies are increasingly prioritizing embedded finance as a way to differentiate and drive deeper relationships with their customers and employees. With that, let me turn it over to Jess Unruh to discuss our third quarter results. Jess? Jess Unruh: Thank you, Chris, and good afternoon, everyone. In the third quarter, our non-GAAP revenue grew 21% year over year while adjusted EBITDA declined 17%. Our top-line growth was primarily driven by the performance of our B2B segment and interest income. This was partially offset by ongoing trends in our consumer segment. Although adjusted EBITDA declined, the reduction was substantially less than anticipated, largely due to high-margin revenue growth, continued expense management efforts, and certain favorable timing factors. Now let me touch on the factors that influence the performance of our segment. Refer to our press release and quarterly slide deck for segment results and key metrics. First up is our B2B segment, which is comprised of our BaaS channel, powered by our ARC platform, and our Rapid Employer Services Division. Revenue growth of just over 30% continues to be driven by a significant BaaS partner along with growth in the rest of the BaaS portfolio. Key operating metrics within the BaaS channel, such as active accounts and purchase volume, continue to show solid increases as we collaborate to drive growth with existing partners and launch new ones. We're doing a great job helping our partners grow their programs and find new ways to offer more products and services to their customers. At the same time, we're focused on the partnerships we've just rolled out and busy working on new integrations. Thanks to what we've achieved so far and the strong pipeline of upcoming launches and opportunities, I feel really good about the BaaS channel keeping up its positive momentum. Our Rapid Employer Services channel continues to show the challenges faced by our partners in the staffing industry. Similar to previous quarters, revenue declined because there were fewer active accounts and less transaction activity. Although the staffing sector has yet to recover, the new leadership team has achieved strong year-to-date sales of new employer partnerships. They have also shifted more sales support towards earned wage access and continue to integrate with new payroll platforms such as Workday, to pursue new market opportunities. Despite being an early-stage part of our offering, we remain optimistic about EWA due to its larger potential market and stronger profit margins. Overall, the B2B segment profit grew year over year, driven by an increase in our BaaS channel, although BaaS margin slightly declined due to revenue composition, particularly from the growth of a significant BaaS partner. Margins in our Rapid Employer Services channel decreased compared to last year primarily because Q3 2024 benefited from one-time cost reductions. Absent the one-time cost reductions last year, this quarter's margin for the Employer Services Group grew year over year from a continued focus on expense management and operational improvements. Similar to last quarter, our corporate segment revenues, consisting primarily of interest income net of partner interest sharing, grew sharply year over year. We benefited from rate cuts in the second half of last year that improved the balance between what we earn on cash and investments and what we share with partners. We've also been focused on optimizing our balance sheet. This year, we've already repositioned a portion of our securities portfolio, and we've been investing more cash in high-grade floating rate securities that bring in better yield. Because we're improving our asset mix and growing deposits in our BaaS business, we expect interest income to play a more prominent role in our results moving forward. I'd also like to highlight that this top-line growth comes with little to no incremental costs. Expenses in the corporate segment were up due to higher bonus accruals, with our improved earnings performance and year-over-year timing of investments in our regulatory infrastructure. Next is our money movement segment, which includes our tax processing business and our Money Processing business. While Q3 is generally a seasonally slow quarter for our tax business, we grew revenue and profit year over year. Our margin in this channel expanded considerably from a better-than-expected loss rate on our taxpayer advance program. We are working on building out numerous new products and services and adding new partnerships that broaden our product set for the 2026 season to help build on the momentum in 2025. We're excited about a new partner in the franchise market that will contribute to growth in the coming years. Revenue in our Money Processing business, driven mainly by cash transfer volumes on the Green Dot network, declined consistent with the decrease in transactions. Driven by softness in both our consumer segment active base and third-party programs. While active accounts in our consumer segment have continued to stabilize because of a ramp in new financial service center partners, these programs, at least for the time being, generate fewer reloads per active account than our branded programs in retail, which continued to experience consistent mid-teens percentage declines. Third-party cash transfers were down 5% year over year largely because of lower volume from two partners whose activity yields lower revenue per transaction. If we exclude those two partners, third-party transactions were up in the low to mid-single digit in the quarter. This shift away from low-revenue transactions led to an increase in our average revenue per transaction compared to last year, helping to partially offset the overall revenue impact from lower transaction volume. With money processing operations more closely integrated with the BaaS business under the ARC brand, we expect to keep a healthy and active pipeline of potential partners. This, together with recent launches of new cash transfer and digital disbursement partnerships, such as Stripe and others, a solid schedule of additional launches anticipated in the coming months, and continued moderation in the rate of decline in our consumer business give us confidence that we are well-positioned to reaccelerate momentum from previous quarters. Profitability in the segment remains strong with margins approximately 300 basis points. Margin improvement in tax offset some modest pressure in the money processing business with the decline in revenue. Now I'll turn to our consumer services segment, which is comprised of our retail and direct channels. While the consumer segment continues to face challenges from ongoing trends in the retail channel and pressures in the direct channel, declines in segment revenue and active accounts have moderated compared to previous years. However, this third quarter did see a slight increase in the rate of decline, though this remains significantly lower than rates observed in prior years. As retail declines have also shown signs of moderation. In the retail channel, active accounts were down only 4% from the prior year, and this notable moderation in declines is largely due to our partnership with PLS and efforts to enhance customer experience, functionality, and retention. Year to date, we continue to see growth in metrics like purchase volume and revenue per customer. Given our ongoing efforts to enhance customer retention, the upcoming launch of Dole Fintech, and another recently signed FSC partner, as well as a renewal of key agreements with Walmart, I'm optimistic that the decline in retail will be more moderate than prior years. The decrease in active accounts continued to stabilize, and I'm confident in our strategy to strengthen customer engagement through new products and features. Additionally, by expanding into new markets such as the FSC channel, we anticipate onboarding new partners and increasing our market share. Our efforts to reposition the direct channel continue. Due to reduced marketing spend over the last year, revenue and actives have remained under pressure more so than in the prior two years. We remain focused on developing a more robust product and enhancing the customer interface to drive improved customer acquisition and retention. We remain committed to investing in the platform and balancing investment in growth with profitability. We are progressing with platform feature enhancements and user experience improvements while new smaller channel partnerships present incremental growth opportunities and support our goal to return this division to positive revenue growth. Overall segment margins were down over 400 basis points from last year due primarily to the declines in revenue mix, and we had some high-margin revenue last year related to a program in runoff that is no longer contributing to our results. Before turning to our expectations for the rest of the year, I want to point out the new restructuring line item on the face of our GAAP P&L. That line item represents the cost associated with the exit of our Shanghai operation and primarily consists of severance expenses. Although a tough decision, exiting our overseas operation was best for productivity and overall expense management long-term. Now let me provide you with updated guidance for 2025. Provided the current volatility in the economy does not significantly impact customers' behavior or our business in general, we are adjusting our guidance as follows. We continue to expect non-GAAP revenue of $2 billion to $2.1 billion, consistent with our prior guidance. We now expect adjusted EBITDA of $165 million to $175 million, up from the previous guidance of $160 million to $170 million. And we now expect GAAP non-GAAP EPS of $1.31 to $1.44 as compared to our prior guidance of $1.28 to $1.42. As implied by our guidance, we expect consolidated revenue growth in Q4 to be in the upper single digits with adjusted EBITDA margin down roughly 700 basis points from last year due to some tough comparisons in the consumer channel and some incremental spending that we planned for the quarter. For the year, I expect our segment results to play out as follows. B2B segment revenue is expected to grow in the low 30% range with 50 to 100 basis points of margin decline, driven largely by revenue mix due to strong growth in our BaaS division. Money movement segment revenue is now expected to see flattish revenue growth with margins up 450 to 500 basis points given the strength of the tax processing business, the favorable mix shift in money processing, and continued vigilance on expense across the segment. Consumer segment revenue is projected to decline in the low double digits. Overall, we expect consumer segment margins to be down 450 to 500 basis points and at a level comparable to 2023. Excluding the benefits of the non-core revenue in 2024 that I just mentioned, I estimate that margins will be down approximately 250 basis points. Last, I would like to briefly touch on our ongoing efforts to drive operational efficiency and productivity. For some time now, we have been intently focused on managing costs, streamlining our organization, and driving efficiency. We recently made the decision to exit our Shanghai operation. While this was not an easy decision, this effort will result in some modest cost savings while also improving our ability to deliver on our investment priorities more efficiently and with greater speed and agility. Looking at all that we have done over the years to reduce cost and drive efficiency, I believe it's important to point out that the momentum that we are seeing in launching products, building pipelines, and signing and launching new partners is occurring even though Green Dot has a smaller employee base than we did three years ago. I believe that this validates our success in creating a more streamlined, productive company. In summary, I remain encouraged by our outlook for growth in the B2B segment where we have a backlog of partners to launch in our BaaS business. The growth of BaaS is expected to drive deposit growth, and we will continue to work to optimize the net yields on our balance sheet. While Rapid Employer Services still faces headwinds, we have a new leader at the top of the organization who is aggressively rightsizing that business and putting more focus on EWA where there is a large opportunity, and I'm confident we can see success with our Workday partnership serving as initial success. In the money movement segment, we still have several new partners to launch this year with a robust pipeline of business opportunities to drive the third-party business. And partnering with an industry leader, Stripe, will help us open up the SMB market, which we believe is an exciting new opportunity. We also expect to announce a large franchise platform in our tax business. Our continued success in signing new partners across our B2B and money processing businesses reinforces my confidence that our investments in these areas are enabling us to capitalize on the vast opportunity within those markets. Though we still anticipate declines in our consumer segment, we are preparing to launch Dole Fintech, which has approximately 5,500 locations. We signed an additional partner and are confident in our ability to win more market share in this channel, which should help moderate the overall declines of that channel. With that, let me turn it back over to Bill for some closing comments. William I. Jacobs: Thank you, Jess. It was another solid quarter, and we are pleased with the progress we are making as we sign, launch, and expand our partnerships. At the same time, we're working to improve the profitability of our balance sheet and continue executing on our operational imperatives, including realigning our resources to support our core priorities and growth strategy. We launched crypto.com in the quarter, and we are preparing to launch Credit Sesame and other recently signed BaaS partners, as well as two new FSC partners and Stripe as a money processing partner, helping us capture the opportunities in the SMB market. Just as important, those customers that we have worked with for many years continue to place their trust in us to help them deliver on their own aspirations for embedded finance. And we are thrilled that they recognize the value of partnering with us with numerous renewals and product launches. While it is still early to provide guidance for 2026, let me provide you with my perspective as we begin to exit 2025 and think more intently about 2026. Over the last several years, Green Dot has navigated a variety of challenges and headwinds. This put pressure on our bottom line results as we chose to simultaneously invest in the future of Green Dot. Based on our results this year and our updated outlook, I believe we have stabilized and helped to position the company for sustainable growth. As I think about 2026, I believe that we have a solid stepping-off point to work with based on our 2025 performance. There are still many things to take into consideration. We continue to face some headwinds in our consumer business, and we have investments we would like to make that got shelved in prior years. But unlike prior years, I believe we can absorb those and continue to move forward. With a growing list of partners and launches, and our focus to improve the profitability of the balance sheet, we have been dealt a better hand to deal with as we think about the upcoming year. We have worked to reposition the growth drivers of the company around our B2B division and our money movement operations that are benefiting from the tailwinds and the rising tide of our embedded finance marketplace. As a result, I am increasingly confident in our outlook. And I look to build off the stability and progress that have emerged this year and deliver better bottom-line results next year. The last several years, the company has undertaken numerous initiatives and made substantial investments to position Green Dot to return to sustainable, predictable growth. We have seen improved momentum with signings and launches despite the fact that the organization is smaller now than it was three years ago, which I believe validates we have made the right decisions and we're successful in executing on those initiatives. Most important is that the team at Green Dot has risen to the challenge and embraced change as they executed on our internal strategy and remain focused. They should be commended for their efforts, and I truly thank the team for their hard work and continued commitment, which I expect will pay off. It is because of their efforts that I remain confident we're positioned to win in the embedded finance market for years to come. With that, we are happy to take your questions. Operator: We will now begin the question and answer session. To ask a question, please press star then 1 on your touch-tone phone. If you're using a speakerphone, please pick up your handset before pressing the keys. And to withdraw your question, please press star then 2. Please limit yourself to one question and one follow-up. And if you have further questions, you may reenter the question queue. Our first question for today will come from Cristopher Kennedy with William Blair. Please go ahead. Cristopher Kennedy: Yes. Good afternoon. Thanks for taking the question. You talked about the strong demand for embedded finance and the rising tide. Can you just talk about what's driving that? Is it an improved regulatory environment? Or what else are you seeing out there in the market? Chris Ruppel: Chris, thank you for your question. This is Chris Ruppel. I think we've talked in the past about the pipeline that we're building in our business development efforts. And I think when we talk about the rising tide, that's both through surveys. We see companies that are interested in bringing embedded finance solutions into their customer ecosystems through their mobile apps or other environments to help deepen those relationships, monetize those relationships in different ways, and provide greater utility to their customers. And so that's generating demand. We see that increasingly being accepted as a strategic imperative for those companies. And so that, coupled with our business development efforts and our sort of rising appreciation of our value in that marketplace and prominence in that marketplace, is allowing us to grow our business development pipeline and give us confidence in our ability to grow the B2B embedded finance segment on a go-forward basis. Cristopher Kennedy: Understood. And then just as a follow-up, can you just talk about the timeline to revenue from all the new signings and onboardings that you have this year and kind of how you think that will impact the income statement as we look into 2026? Thank you. Chris Ruppel: So speaking generally about the timeline, it varies based on the type of solution that we're supporting. Our money movement solutions generally have a lower timeline for implementation. But generally, our current structure is that for closing an account, a new partner this year, often, they're launching in a six to eight-month timeframe. We're bringing that back, so it's been closer to six months. And then there's a revenue ramp with the new customers as they come on board, and that depends on the specifics of their particular solution and whether they have an existing program that we're replacing or if it's a de novo embedded finance solution. And so those things generally tend to cause the revenue ramp to move from sort of anywhere from six months to a year. So, I mean, that's a general timeframe based on implementation and then revenue ramp. So it is an extended ramp as you look out over time, but one that we've walked through with many of the customers and are active in working with those customers to shorten the ramp times within each of those organizations. Jess, I don't know if you have anything else you'd like to add to that. Jess Unruh: No. I think that was fine. To reduce the time to onboard. I think that's helpful to investors. Chris Ruppel: Yeah. Thank you, Bill. So we have an internal project called Project 30. I think we may have discussed this in prior earnings calls, and that's an internal project to move our implementation time down. Our goal for this year was to reduce implementation from a go-live perspective by sixty days. Our ultimate goal is thirty days for technical implementation, recognizing that there are other non-technical factors in the program launches and coordination with customers that often take longer than that. But to the degree that we can reduce the time and effort required for launching new customers, we want to drive that to thirty days and then work on the rest of the promotion of the program and rollout of the program with our partners. So as we think about the business on a go-forward, the timelines I gave are sort of current and where we have been historically, but we intend to reduce those times significantly when we go forward and are actively pursuing a path of work to get there. Cristopher Kennedy: Right. Thanks for taking the questions. Operator: Your next question will come from George Frederick Sutton with Craig Hallum. Please go ahead. George Frederick Sutton: Thank you. Pushing a little more on the embedded finance acceleration that you're seeing in the pipeline and in the broader market. I'm just curious, how are you focusing your efforts? Is it high-quality ads? Are there limitations to your ability in terms of the number of folks that you can add at one time? Just curious how you're thinking about that. Chris Ruppel: George, thank you so much for your question, and I appreciate diving into this. So I think we've talked about in the past that our main focus has always been on helping the world's leading brands power their embedded finance solutions. And so we have been purposely targeting customers that have either large customer bases that they're able to leverage their embedded finance solution into. And so, you know, that's been or have an existing program that they're converting to us. Either way, we know the program has the possibility for significant scale. And since we're looking at those programs, we're looking at those partners. Part of the benefit of our Project 30 initiative is that as we reduce the onboarding time, it'll help our internal ability to go down market into what I say, mid-market customers that we might not take the risk on today. But will be worth pursuing when we have a more streamlined onboarding process and a reduced technical build. And there, we can invest in companies of smaller size that may grow to have scale and to be worthwhile programs where today, we wouldn't take the risk on those programs because of our limitations. And so that's where Project 30 comes into play. But today, we are specifically targeting larger marquee brands that have large installed customer bases they can leverage the opportunity into. George Frederick Sutton: Well, speaking of large brands, obviously, Workday and the EWA space is an enormous win and Stripe on the Green Dot Network side. Can you just give us a sense of the impacts that you could ultimately see once these are both rolled out? Chris Ruppel: So within Workday, we have achieved integration for our EWA platform with them, and ultimately, it will come down to our ability to close partners in that space. But Workday is a great platform and sort of an indication of the integrations that we're doing with similar systems to allow us to leverage into a greater number of employers across the country to sell either in partnership with those partners or directly into employers that are on various platforms. So we've been working over a multi-year period to create integrations to cover the majority of the market, and we believe we're reaching maturity in that. And Workday is a great example of that, which we're very excited about that partnership and the possibility to service Workday customers and their employees with our EarnWage Access solution. So I think there's potential scale, and it'll take time for us to work through from a sales and marketing perspective. But the technical integration is done, and we can support employers that are engaged using the Workday platform today. I'm very, very excited about that possibility and continue to grow our customer base into the Workday platform. As it relates to Stripe, which is on the money movement space, particularly for business cash depositing into the Stripe ecosystem, we're working with Stripe on their marketing promotion of the service inside of their ecosystem. And we're very excited about that partnership and having success in this first phase, but I think it'll take some time for us to develop and understand the customer need within their platform as they continue to look for and promote into the platform for the use of the cash depositing. But what we see in the rest of our business, the need for cash, the use of cash in the overall economy is still very, very high, so we're bullish on the opportunity. And, of course, the scale that Stripe has in the market would lend to even with modest adoption inside of their platform would be a significant piece of business for us. George Frederick Sutton: Great. Thank you, guys. Operator: This concludes our question and answer session. I would like to turn the conference back over to Mr. William I. Jacobs for any closing remarks. William I. Jacobs: Well, I'd like to thank everybody for joining us on our call today. We're pleased with the position that Green Dot is in, and we think the future is bright for us. I'd like to thank my associates Jess Unruh and Chris Ruppel, who did a great job today talking to investors. So thank you very much for joining us, and we look forward to talking to you again. Operator: Bye. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Eric Martinuzzi: Thank you for standing by. My name is Eric, and I will be your conference operator today. At this time, I would like to welcome everyone to the American Public Education, Inc. 3Q 2025 Earnings Call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, there will be a question and answer session. If you would like to ask a question during this time, if you would like to withdraw your question, thank you. I'd now like to turn the call over to Brian Prenoveau, Investor Relations. Please go ahead. Thank you, and good afternoon, everyone. Welcome to American Public Education's conference call to discuss third quarter 2025 results. Brian Prenoveau: Joining me on the call today are Angela Selden, President and Chief Executive Officer, Edward Codispoti, Executive Vice President and Chief Financial Officer, Barry Jansen, Senior Vice President of Growth and Strategy, and Rick Sunderland, Executive Adviser to American Public Education, Inc., also on today's call and will be available for the Q&A session. Materials for the call today are available in the Events and Presentations section of American Public Education, Inc.'s website. Statements made during this conference call and any accompanying presentation or regarding American Public Education, Inc. and its subsidiaries that are not historical facts may be forward-looking statements based on current expectations, assumptions, estimates, and projections. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed or implied by such statements, such as those identified in our Form 10-Ks under the heading Risk Factors, including those related to potential impacts from government shutdowns or changing federal or state government policies, practices, and laws, including impacts on revenues or the timing of receivables. Forward-looking statements may sometimes be identified by words like anticipate, believe, seek, could, estimate, expect, and may plan potentially reject should, will, would, and similar or opposite words. Forward-looking statements include, without limitation, statements regarding expectations for registration and enrollments, revenue, earnings, and adjusted EBITDA, and other earnings guidance. Our foundation for growth, the planned combination of our institutions, governmental and regulatory actions, their impact, our response to those actions, changing market demands, and our ability to satisfy such demands and other company initiatives. This presentation contains references to non-GAAP financial information. A reconciliation between the non-GAAP financial measure we use and the most directly comparable GAAP measure is located in the appendix to today's and in the earnings release. Management believes that the presentation of non-GAAP financial information provides useful supplemental information to investors regarding its results of operations and should only be considered in addition to and not as a substitute for or superior to any measure of financial performance prepared in accordance with GAAP. With that said, I'd like to turn the call over to American Public Education, Inc.'s President and Angela Selden. Angie, please go ahead. Angela Selden: Thank you, Brian. Good afternoon, and thank you for joining American Public Education's third quarter 2025 earnings call. Before we begin with the third quarter results, I would like to take this moment to introduce Ed Codispoti, American Public Education, Inc.'s new Chief Financial Officer. Ed joined American Public Education, Inc. on 10/20/2025, and we are very excited to have him on board. Ed joins us from NV5, a leader in technology and engineering consulting solutions. Prior to NV5, Ed was CFO of Illumina Holdings, a higher education company providing learning platforms and technology solutions to universities in Latin America. I will let Ed introduce himself further before he provides the financial overview. I also want to take this opportunity to thank Rick Sunderland for his dedicated service. Over twelve years, he has been instrumental in building and shaping American Public Education, Inc. During Rick's tenure, American Public Education, Inc. has navigated significant transformation across the enterprise, including the integration of new institutions and strengthening of the company's long-term position. Rick has been a steady hand, always steering American Public Education, Inc. in the right direction through periods of growth and change, and his leadership has left a lasting positive impact on the organization. We appreciate that he has agreed to serve as an executive advisor over the next few months to facilitate a smooth transition. We will certainly miss him while also wishing him the best during his next chapter. Moving on to the third quarter. We have four areas to highlight during today's call. First, I am very pleased with American Public Education, Inc.'s third quarter 2025 performance. As we have again exceeded our guidance ranges for all metrics, including revenue, net income, EPS, and adjusted EBITDA, through continued registration and enrollment momentum and expanding margins. Registration and enrollment growth has outpaced our forecast and significantly contributed to the outperformance in our financial metrics. Registrations at APUS in the third quarter increased 8% as compared to 3Q 2024. This also represents a sequential acceleration in the rate of growth from 2Q 2025. Enrollments at Rasmussen increased 10% versus 3Q 2024. This represents the fifth consecutive quarter of year-over-year enrollment growth. I am particularly pleased that on-ground enrollments at Rasmussen are accelerating, taking advantage of our existing capacity or what we call filling the back row. Enrollment at Hondros College of Nursing continued their strong momentum, increasing 18% as compared to 3Q 2024. Angela Selden: Second, as previously disclosed, we completed the sale of Graduate School USA on 07/25/2025. Early this year, as we prioritized the combination of our degree-granting institutions, we determined that the graduate school training business was no longer a strategic fit within our future growth strategy. We were very pleased to find a new home for the graduate school that is more aligned with its mission and market position, allowing us to focus on growing our core degree-granting businesses, including the military, military-affiliated, veteran, nursing, and other healthcare communities. Third, as we continue our work to simplify the overall operational businesses at American Public Education, Inc., at the '5, we received HLC approval and submitted our combination request to the Department of Education. In Q3 2025, after dialogue with the Department of Education team newly assigned to our transaction, we were informed that we should follow a different process for the planned combination of our institutions rather than the one originally undertaken. As a result, in September, we were required to submit and completed the submission of a new application first to the HLC, which will be reviewed at their board meeting in February 2026. This application contains substantially the same content as our prior submission. We have also provided to the Department of Education our expected timeline for the completion of this newly submitted combination plan to take effect at the beginning of 2026 for the 2026 student financial aid award year. Fourth, our simplification actions have also strengthened our balance sheet and should enable our subsidiary institutions to continue to produce improved financial results. With the Department of Education removing the restrictions on the $24,500,000 letter of credit, that dated before the close of our acquisition of Rasmussen, that cash now unrestricted on our balance sheet contributes to the unrestricted cash and equivalents totaling $193,100,000 as of 09/30/2025. As a result of our recent redemption of our preferred equity, at the end of the second quarter, we will save approximately $6,000,000 annually from the elimination of the cash dividend payments. Also, the sale of the graduate school eliminated a $28,000,000 lease liability, which will save us approximately $4,000,000 in lease payments annually and also reduces our total liabilities. These changes have improved our cash position and will increase our cash flow by approximately $10,000,000 per year on a pretax basis, which will meaningfully improve net income and earnings per share. We believe we are now positioned with more financial flexibility and an improved capital structure to more confidently pursue our growth initiatives. Moving now to more details about the third quarter 2025 results. Starting first with American Public Education, Inc.'s nursing and healthcare institutions. Rasmussen continues to produce strong results. Rasmussen's enrollment increased 10% in 3Q 2025 and 9% in 4Q 2025, representing the fifth and sixth consecutive quarters of year-over-year enrollment increases. As mentioned in previous calls, by leveraging its existing fixed cost structure, Rasmussen has been and will continue to experience increased operating leverage as enrollments continue to increase. Continued enrollment growth will also flow through to EBITDA margins. Importantly, we are carrying an additional 1,300 enrollments into 4Q 2025 as compared to 4Q 2024, which we will continue to build upon in 2026. With our current campus footprint, we believe our strategy that we call filling the back row by working to ensure each of our classes and sections is maxing out capacity at our current campuses has been successful. With increasing enrollments and improving EBITDA flow through on each incremental student. At Hondros College of Nursing, as previously reported, 3Q 2025 enrollment was strong with 18% growth as compared to 3Q 2024. 4Q 2025 enrollments continue a positive trend, increasing 9% year over year to 4,000 students off of a very strong prior year comp. We believe that the business combination of Rasmussen and Hondros College of Nursing will provide us with an improved platform to add programs, scale enrollment, and increase margins. Turning to American Public Education, Inc.'s online university educating our nation's military, veterans, and their families, in the third quarter, overall APUS net course registrations increased 8% year over year. Revenue at APUS also increased over 8%. Turning our attention to Q4. The government shutdown has muted military enrollments at APUS for October and November. We are, however, pleased that several of the military branches are now authorizing tuition assistance benefits through the use of the $100,000,000 of tuition assistance funds that were authorized in the One Big Beautiful Bill Act. Further, those branches have been selectively bringing back furloughed workers to help assist with those TA approvals. Additionally, last night's Senate vote test vote yielded enough votes for the amended CR to pass the Senate, perhaps even today, and head back to the House for consideration, possible approval, and passage to the president for signature perhaps as early as the end of this week. It is our understanding that upon presidential signature, workers would be called back from furlough and TA funds would again be available for use during the CR period. We remain confident that TA will continue to be a critical Department of Defense recruiting tool, as it is a benefit to service members in exchange for voluntary enlistment. It is also seen as a force-shaping tool because by offering these educational opportunities, the military can attract and develop human capital with a higher skill set, thus strengthening our U.S. Armed Services Forces. As we await the passage of this CR and the defense appropriations bill, we have implemented various cost-saving measures and are continuing to evaluate additional opportunities to mitigate the adverse impacts. Overall, across our three education units, we are so pleased with the resilience of our team. Especially given the government shutdown uncertainty. We've delivered consistent performance that we've demonstrated over the last eighteen months. We are confident in our ability to continue executing and taking advantage of the growth drivers that we believe will accelerate growth and profitability and provide more students with more educational opportunities. We look forward to welcoming investors and analysts to our 11/20/2025 Investor Day at the New York Athletic Club in New York City to provide a longer-term view of American Public Education, Inc.'s growth strategies and financial outlook. American Public Education, Inc. enables students to experience a valuable lifelong return on their educational investment. Our vision remains to offer education that transforms lives, advances careers, and improves communities by providing online and campus-based post-secondary education to over 107,000 students. Our mission to power purpose, potential, and prosperity for those in service to others reflects our focus on a student population which is resilient in the face of AI transformation and potential threat. Our nursing education prioritizes in-person bedside care, and our military service members continue to be critical active participants in U.S. Military strategies. Each of our education units is purpose-built to deliver accessible and affordable higher education across a diverse range of subjects. I'd like to thank each of our employees and faculty that worked tirelessly to make our mission a reality. With that, I will now turn the call over to American Public Education, Inc.'s new Chief Financial Officer, Ed Codispoti. Ed Codispoti: Thank you, Angie. I'm delighted to be on today's earnings call as I begin my fourth week with the company. As Angie mentioned earlier, I came to American Public Education, Inc. after serving as CFO of NV5 Global, an engineering and technology solutions firm, and before that, I was with Illumina Holdings, a company that owned universities and delivered technology solutions to higher education institutions across Latin America. The CFO role at American Public Education, Inc. is an exciting opportunity to bring together my experience in driving growth and advancing higher education while focusing on meaningful student outcomes. I'd also like to say that I very much appreciate working with Rick Sunderland, who has done such a great job as CFO of American Public Education, Inc. for over twelve years. The transition so far has been seamless. I look forward to meeting with investors and analysts in the coming weeks and months. Turning now to our quarterly results. Total revenue in the third quarter was $163,200,000, an increase of $10,100,000 or 7% from the prior year period. As you know, we sold Graduate School USA in July. If you exclude Graduate School USA, third quarter revenue of $800,000 and third quarter of prior year revenue of $8,100,000, our revenues would have been 5% higher or aggregate growth of 12%. Total costs and expenses in the third quarter were $153,500,000, an increase of $4,500,000 or 3% as compared to 2024. The increase was primarily driven by a $3,900,000 loss related to the sale of Graduate School USA in July 2025 and a $2,500,000 increase in advertising costs as we invest in student enrollment for growth. In the third quarter, net income available to common shareholders was $5,600,000, which was almost 7x higher than net income of $700,000 in the prior year. And EPS increased significantly to $0.30 per diluted share in 2025 versus $0.04 in the third quarter of last year. Third quarter adjusted EBITDA increased 60% to $20,700,000 as compared to the prior year period adjusted EBITDA of $12,900,000, driven by increased revenue and margin expansion of 424 basis points. It was above the top end of the guidance range and represented an adjusted EBITDA margin of 13% as compared to 8% in the prior year. Looking now at our segments, at APUS, third quarter revenue increased to $83,100,000, an 8% increase as compared to the prior year period. The increase was driven by third quarter 2025 net course registration, which increased 8% as compared to the prior year period. EBITDA for APUS was $26,200,000 for the quarter, a 19% increase over the prior year period. At Rasmussen, third quarter revenue was $60,800,000, an increase of 16% as compared to the third quarter of last year. The increase was fueled by a 12% increase in on-ground enrollment and an 11% increase in online enrollment. This enrollment growth brings total Rasmussen student enrollment to 14,900 students and contributed to our EBITDA of $825,000, which grew significantly from the EBITDA loss of $4,500,000 in the prior year period. At Hondros College of Nursing, third quarter revenue was up 19% to $18,400,000 as compared to the prior year period due to continued enrollment growth. For the quarter, Hondros College of Nursing total enrollment increased 18% to approximately 3,700 students, and third quarter EBITDA was a loss of $336,000 compared to the loss of $259,000 in the prior year period. Our balance sheet and cash flows also improved when compared to the prior year period. Cash flow from operations for the nine months ended September 30, 2025, increased 56% to $73,500,000. Our free cash flow, defined here as adjusted EBITDA less CapEx, nearly doubled for the nine-month period at $45,200,000. As of 09/30/2025, total cash, cash equivalents, and restricted cash increased 22% to $193,100,000, an increase of $34,200,000 from the year ended 2024. Subtracting our $96,400,000 secured note, our net cash position was $96,700,000 at quarter end. Additionally, as noted earlier, at the end of the second quarter, we redeemed all our outstanding preferred stock for $43,100,000 and completed the sale of two corporate administrative buildings in Charlestown, West Virginia, for net proceeds of $22,500,000. CapEx totaled $11,800,000 in the first nine months of 2025 compared to $17,700,000 in the prior year period. Principal on American Public Education, Inc.'s term loan at September 30 was consistent with the prior quarter at $96,400,000, and our $20,000,000 revolving credit facility remains fully available. I believe this demonstrates the strength of our balance sheet, which we believe positions us well for future growth. Turning now to our fourth quarter and full-year outlook, which covers forward-looking statements subject to the various risks noted earlier. Before I discuss our guidance for the fourth quarter 2025, it would be helpful to refer to Slide 12 of the presentation deck so that we can describe how we have incorporated the government shutdown in our guidance. Our original revenue guidance for full-year 2025 was within a range of $650,000,000 to $660,000,000. We are pleased that APUS and Rasmussen outperformed with respect to our previous expectations by about $22,000,000. Additionally, we sold Graduate School USA in 2025, and its negative impact on the guidance, including its first-half underperformance, was approximately $18,000,000. If we assume that the shutdown would result in an impact on revenue between $20,000,000 and $24,000,000, our revised guidance for the year would be $640,000,000 to $644,000,000. For the fourth quarter 2025, APUS total net course registrations are expected to be between 65,000 to 74,400 registrations, representing a 33% to 23% decrease when compared to last year, impacted by the government shutdown. At Rasmussen and Hondros College of Nursing, fourth-quarter student enrollments are actual because the quarterly starts are at these schools. Are known at this time. At Rasmussen, in the fourth quarter, total on-ground enrollment increased 13% to approximately 7,100 students, and total online enrollment increased 6% to approximately 8,800 students, for an aggregate enrollment of approximately 15,900 students. This represents a 9% increase when compared to 2024. At Hondros College of Nursing, fourth-quarter total student enrollment increased 9% year over year to approximately 4,000 students. In 2025, consolidated revenue is expected to be between $150,000,000 and $153,500,000, again impacted by the government shutdown. The company expects fourth-quarter net income available to common stockholders to be between a profit of $5,900,000 and $8,300,000 or between $0.32 and $0.45 per diluted share. Ed Codispoti: Fourth quarter 2025 adjusted EBITDA is expected to be between $18,500,000 and $22,000,000. Therefore, for the full year 2025, we are changing our anticipated consolidated revenue to a range of $640,000,000 to $644,000,000. Net income available to common shareholders for the year is expected to be between $17,200,000 and $19,600,000. Our full-year 2025 adjusted EBITDA guidance is between $75,000,000 and $79,000,000, and our full-year CapEx is expected to be between $15,000,000 and $17,000,000. The updated full-year adjusted EBITDA and CapEx guidance translates to free cash flow expectations for the full year, defined as adjusted EBITDA less CapEx, to be between $58,000,000 and $64,000,000. I'll now pass it back to Angie for closing remarks, after which we will begin our question and answer session. Angie? Angela Selden: Thank you, Ed. Great job on your first call. In closing, we have spent much of this past year setting financial and operating goals and then delivering on those results. Rasmussen and Hondros College of Nursing are delivering consistent positive enrollment growth and profitability. APUS, with the exception of the market anomaly of the government shutdown, continues to deliver growth and high margins. At the beginning of the year, we set expectations for redeeming our preferred equity, selling our corporate buildings, and simplifying our business structure. We have delivered on these actions. Our organization was purpose-built to deliver affordable and accessible educational opportunities in fields that are in high demand. We believe that our platform and the sector tailwinds set American Public Education, Inc. up to accelerate growth and bring more educational opportunities to a greater audience across the country and across the world. We are as optimistic today as we've ever been about the long-term potential of our company, and we look forward to sharing more details about that long-term potential on our November 20 Investor Day in New York City. With that, I would now like to hand the call back to the operator to begin our question and answer session. Eric Martinuzzi: At this time, I would like to remind everyone, in order to ask a question, your first question comes from the line of Thomas White with D.A. Davidson. Please go ahead. Thomas White: Great. Thanks for taking my question. Good evening. First off, nice results on the quarter, guys. Congrats to you, Ed, on the new role, and good luck to Rick going forward. I guess just on the tuition assistance disruption at APUS. Ed Codispoti: Hoping, Andrew, maybe you could just talk a little bit about your plans for driving kind of re-enrollments for the students that were forced to be dropped. And I do not know, do you guys expect that there will be any sort of permanent demand kind of destruction as a result of this? Or is it just temporary? And then I had a follow-up. Angela Selden: Okay. Great. Thanks, Tom. First, I would say a couple of things are happening. Right? And I like to just emphasize a few. Even though the CR has not yet been approved, we are so pleased that the three largest branches, Army, Air Force, and Navy, are using the One Big Beautiful Bill, $100,000,000 of tuition assistance funds. To allow service members to register even without the approval of this CR. So we have seen more registrations flowing in December than we had in October and November as a result. So we are very pleased that we are starting to see demand come back already in December, even without the passage of the CR and inside the CR is the defense appropriations bill. We have electronic marketing campaigns to every single student who was registered in October and November and who got dropped for nonpayment. And we fully expect that those folks are going to continue their education. This has only happened once in the last twelve years, which was the last time was in 2013. And the results of that were no decrease in our demand. So we cannot be certain about what our future expectations for TA enrollments are going to be. That data point tells us that this should be a short-term matter and not a long-term decline in our expectations for TA enrollment. Thomas White: Okay. That's very helpful. Thanks. And then just maybe one follow-up if I could on the plan to integrate the three institutions. It sounds like maybe there's been a minor speed bump there. Can you just maybe explain whether the new process does it change at all kind of how you're thinking about the ultimate benefits of integrating the three institutions either from sort of an expense or revenue synergy standpoint? Thanks. Angela Selden: Sure. Great question. We remain very committed to the combination of our three institutions and nothing has changed about our conviction around that. I would say that this is a procedural matter. There's a different form that we needed to complete. And when we submitted to the HLC the second time around, instead of 3,600 pages of documentation, we submitted 4,000 pages of documentation to support the change, but I would say substantially all of what we had in the first submission was reused and reorganized for the second submission. When the Department of Education was reduced in force in 2025, we received a new team assignment. And that team assignment had a different view on which process we should follow than the team we had been working with prior. And so with that, we needed to recalibrate. We are completely in compliance with that new process. And are still on track with dialogue that we've had with the Department of Education for the expectation of a third quarter 2026 implementation in time for the 2026 financial aid award year. So we will continue to brief people if something were to change there, but that's fully still the timeline we're operating at. Gary: And this is Gary. On your second question about synergy opportunities, we're moving ahead with the opportunity to cross-pollinate the revenue. You'll hear more about that on the Investor Day. So we're not sitting back and waiting for the combination to occur to move forward our plans to, you know, expand our campus footprints as well as cross-pollinate programs from Rasmussen into Hondros in the interim period. So we do not see the timing as being an obstacle for that. Thomas White: Thank you very much. Angela Selden: Thank you, Tom. Eric Martinuzzi: Your next question comes from the line of Steven Sheldon with William Blair. Please go ahead. Steven Sheldon: Hey. Thanks for taking my questions. And first, congrats to you, Rick, on a great run and really look forward to working with you, Ed. So maybe starting here on just the guide for the fourth quarter, just wanted to confirm that you're assuming effectively a two-month slowdown for APUS registrations here and then kind of, more or less back to normal trajectory in December and into 2026. Are we kind of thinking about that the right way? Gary: So I would say, slowdown in October where I think we previously announced 1,700 registrations. Of TA flow through, which is a substantial decline. And then about 30%, we were able to recoup for November compared to the prior year about 5,000 registrations. The low end of our guidance does contemplate some shortfall in December as we ramp up not knowing the full timing for the CR. But you know, we'll see how that flows if we can, you know, get the CR, the CR in place and we continue to see the flow through from the OVBDA then obviously that would be towards the higher end of our guide. Steven Sheldon: Got it. That's helpful. And then on the cost savings side, I guess, you talk some about where you've been able to cut near-term spending. How much of that could be temporary reductions? Versus cost-cutting that could be more permanent and be something that, you know, help support profit and margin trends heading into 2026. Any detail there? Gary: Not a lot. But, I mean, we previously said we thought we had opportunities. And certainly, we've dialed back our variable costs that we think that we can manage through. We have taken the opportunity to streamline some operations at APUS. So that is an important piece to this. But for the most part, which will be permanent. That's a permanent reduction in force. But we've also made sure that we do not affect the revenue side of the equation. So we wanted to take the cost measures that we could that we thought were discrete and would not harm the business going forward. Things like not overinvesting in military marketing is a good example where, you know, we could dial that back until we had some certainty of reopening. But some will flow through to next year, but not a huge amount. Steven Sheldon: Got it. Very helpful. And then just one more if I could sneak it in. Just on the nursing side, I guess, can you just talk about how general demand to pursue nursing pathways have changed? It seems like you've been putting up very strong growth here at both Hondros and Rasmussen. Yeah, both 3Q and then into 4Q. And, generally, I think it's becoming even more attractive to learners, to pursue nursing given shortage, increasing pay, limited AI disruption risk. Will be relative to other industries. So is that starting to play out here? Are you seeing any notable uptick in application? And just generally, what are you seeing in terms of the top of funnel demand trends on the nursing side? Angela Selden: Yeah. I'll start by saying we're seeing acceleration. Obviously, we reported that we have a 13% enrollment growth on the campus side of Rasmussen in the fourth quarter, which we're very pleased to see. We reiterate that the nurses that we primarily educate are first licensure, meaning those folks are becoming nurses for the first time as opposed to post-licensure where they already have a license and are trying to advance their career. I think that there is a challenge across some sectors of the market around investing in that post-licensure degree program because the pay increase maybe isn't meaningful enough to invest in that post-licensure career in the short term. We're seeing substantial pay in our markets right now at LPN can make about $66,000 a year in an ADN, so a two-year degree RN can make $88,000. And so those are very meaningful comp packages for a forty-year career for a single educational degree and license. And so it is attractive from an ROI perspective, especially with the price point of our programs. And you know, there are plenty of open positions for people to obtain jobs. So we also believe that having insourced our marketing in the last eighteen months, we've really started to tighten those dials and identify how to reach those students in the local market effectively, and that is also driving the, you know, quarter over quarter, year over year performance improvement in our campus-based nursing program. So we're very pleased with how that's performing. Steven Sheldon: Great to hear. Nice work in the quarter. Angela Selden: Thank you so much, Steven. Eric Martinuzzi: The next question comes from the line of Jasper Bibb with Truist Securities. Please go ahead. Jasper Bibb: Hey. Good afternoon, everyone. Just on the filling the back row strategy, I'm not sure if maybe utilization is the perfect measure here, but is there any way for you to frame for us how much more room you have to drive enrollment into those existing programs and campuses at Rasmussen? Angela Selden: Great question, Jasper. We're gonna talk about this next week in our upcoming day where we're gonna give you a multiyear view of the different capacity opportunities. We've clustered our campuses into three segments. Because as we've talked in previous calls, our smaller campuses have arguably less total seats available. Our basically single market campus opportunity is the area where we believe there's the biggest opportunity in terms of filling those campuses. And then our multi-campus clusters in a single market also have significant demand. So we really look forward to sharing that with you on November 20. Jasper Bibb: Okay. Well, yeah. Looking forward to hearing more detail on that later this month. And then just last one for me. Are you expecting the decline in the registrations at APUS during the fourth quarter should give you a bit more cushion against 90 in the $25 calculation. Imagine from a mix perspective, that that might be helpful. Angela Selden: What we have seen is interestingly a shift of our primarily of our graduate military students paying their shortfall with cash. So instead of sitting out on the sidelines and not using TA, you know, waiting for TA to come back, we actually see grad military paying cash. And so, you know, every cash payer you can get one of those for every nine, you know, or 8.9 TA or FSA users. So that certainly had in a somewhat unusual way had a positive impact on our 90/10 calculation, yes. Jasper Bibb: Got it. Thanks for taking the question. Angela Selden: Great question. Thanks. Eric Martinuzzi: Your next question comes from the line of Eric Martinuzzi with Lake Street. Please go ahead. Eric Martinuzzi: Yeah. Just curious to know for the nonmilitary. So the military affiliate and veteran, if those enroll the registration trends are on track for you for those student segments? Gary: Yeah. Actually, Q3 and year to date, it's scary, we've seen very nice acceleration in the growth of both the extended family segments. As well as the veteran segments. So I would say a lot of the 8% growth that we saw in Q3 was attributable to those two segments where in the military's, I'll call it steady Eddie, you know, three, 4% growth. So I think we're very pleased with the performance year to date and especially in Q3 of those two adjacencies. Eric Martinuzzi: Gotcha. And then it was great to see the Rasmussen and on-ground 13% enrollment growth. Is that something that you feel is sustainable that there's a tailwind here macro-wise? Angela Selden: I'll start by saying, you know, we're firing on all cylinders. Now in terms of enrolling in our campuses. Certainly, as we start lapping ourselves, the comps are going to get trickier. But we believe there's a tremendous amount of opportunity to fill the back row of our Rasmussen campuses. And so we're focusing on a disproportionate amount of our marketing spend where it makes sense to make sure we're continuing to deliver on that enrollment momentum. So yeah. Eric Martinuzzi: Okay. That's it for me. We'll keep our fingers crossed for... Angela Selden: Great. Thanks, Eric. Thank you, Eric. See you next week. Thank you. Eric Martinuzzi: Next question comes from the line of Griffin Boss with B. Riley. Please go ahead. Griffin Boss: Hi, good evening. Thanks for taking my questions. Appreciate all the color you've given so far. Just one for me. Curious if you could dig in, to kind of where we should expect to see some of these cost-saving initiatives implemented in the fourth quarter. Obviously, looks like you pushed out some CapEx spend, maybe to 2026 or beyond that guidance came down a little bit. But in terms of the OpEx, just curious, I mean, are we going to see kind of a little bit more initiative on like the selling and promotion, you know, marketing expenses? Or where should we see, you know, kind of a relative uptick as a percentage of revenue in some of these areas that maybe you were not able to implement cost-saving initiatives? Gary: Yeah. I think we talked a little bit about this previously. But definitely, S and P, there will be a little bit of savings there. We want to make sure obviously, the timing of when everything comes back online will dictate that. We are looking at temporary and sometimes more permanent staff reductions in non-student facing functions. And then I would say we talked also about our variable comp that is tied to performance and that is another lever. Also important to note that given our variable cost model at APUS, which is on a per registration basis, that while we may lose x number of registrations, the variable cost for that will also come down. So there are three big buckets there. Outside from the little things that you always look at like external consulting and travel entertainment and the like. So those are the major areas that are contributing to the cost savings. Griffin Boss: Got it. Okay. Thanks for the color, Will. Great work navigating, has been a tough environment. I look forward to hearing more details next week at the Investor Day. Angela Selden: Super. See you there, Griffin. Thank you. Eric Martinuzzi: Your next question comes from the line of Raj Sharma with Texas Capital. Raj Sharma: Hi. Good afternoon. So thank you for taking my questions. Again, solid performance and resilience in the face of tough testing conditions. Had a question on the it was great that the $100,000,000 tuition assistance fund was you're able to use that. Any delays in payments from this to you? Angela Selden: You know, Raj, it's a good question. We are going to build, you know, according to our stated policy. I think the question is whether or not there are people working on the other end to push the button. But I'll turn it over to Rick who's on our call here today. Rick, do you wanna say anything about that? Rick Sunderland: Yes. Thank you. Raj, it is impacted by staffing at the various branches. It is not there to process the invoices. But the good news is, as was highlighted on the call, I mean, we've got a pretty substantial cash reserve to weather the very short-term shutdown feels long, but is actually relatively short. Given the, you know, the month or two of processing that would be otherwise processed. Raj Sharma: Got it. Thank you, Rick. And then I wanted to understand that now that the government sent assuming when the government shutdown is over, its business as usual in the sense that there likely isn't any medium-term or permanent damage from this on the enrollment. And then also, any of these registrations that you weren't able to know, get in October and November, are these sort of lost? Is this lost revenue? Or is there a scenario where service personnel might wanna, you know, double their course load to make up? Angela Selden: Well, I would say that our forecast, Raj, that what would have otherwise occurred in October, November has just simply shifted on the calendar. Right? We know that the reason why we purpose-built our education model to allow students to take one course at a time is because they don't often have time to do more than one at a time. And, you know, our flex allows them to pause and then restart. So we may see some people who are, you know, gunning for a promotion or something who wanna move like we saw some of these grad military students who are paying cash to keep going. But I think by and large, we're forecasting that we're basically gonna see those shift to when everything restarts in earnest. Raj Sharma: Got it. Thank you. And then on Rasmussen's side, the programs that are particularly showing really good momentum beyond ground healthcare, you know, up 13%. Any specific programs there that are doing really well and you expect that enrollment environment to sort of continue? Gary: Yeah. I would say our allied health programs are rad tech and our surg tech programs are doing good, although they're pretty capped right now that we're working on as part of our plans to expand that. It's really nursing. It's been across the board, predominantly in our ADN program and BSN. And it's also important to note that, you know, our growth of 13% includes the closure of two campuses in Wisconsin. Not that they were huge contributors to enrollment, but gives you a sense of how our nursing programs are growing. So we're really pleased with both our BSN and ADN programs and to a little bit smaller extent and the LPN program. But it's across the board nursing. Raj Sharma: Got it. Thank you. That's it for me, and I look forward to seeing you all at the analyst day. Angela Selden: Great. See you next week, Raj. Thank you. Raj Sharma: Yep. Absolutely. Thank you. Take care. Eric Martinuzzi: The next question comes from the line of Alex Paris with Barrington Research. Please go ahead. Alex Paris: Hi, guys. Thanks for taking my call and quick welcome to Ed. Look forward to working with you and a so long to Rick. I've enjoyed working with you. Ed Codispoti: Thank you. Looking forward to it. Alex Paris: Great. And now I know how to pronounce your last name. Now that you have the... Ed Codispoti: Perfect. Alex Paris: Just a few follow-ups. First question, on the fourth quarter guidance, just overall revenue and then APUS registrations, what are the assumptions at the low end and the high end? And related question, just to be clear, in October, even though you had to stop out some students, you still kept 1,700 students under TA. Then students that had been previously approved. And then in November, you said you're able to bring in $5,000 under the $100,000,000 OBBB? Gary: Yeah. So I'll answer that, Gary. So you think about November, about 30% of what was the prior year's registrations made it through. So on the TA registration. Prior year TA registration. So we're modeling on the low end that that's probably the same knowing that we've seen some improvement that was, you know, OBDA literally those changes got enacted the very end of the enrollment cycle. Some of the branches did keep over open for continued enrollment seven days. So we expect to do better than that. So at the high end, we're obviously assuming that we're able to improve upon that numbers. We're trying to bracket it on what we saw in November on the low end and on the high end what we would expect to see on, you know, normal pacing. Once either the CR goes through or if the OBB funding continues to flow. Alex Paris: And then what just remind me. What was the October TA registrations as a percent of the prior year? It was, 40% lower. Was under their... Gary: Oh, a lot. No. It was 1,700 registrations on what we normally would have been, I'm gonna say, this isn't exactly right, but 17,000. So it's probably 10%. So it's a very small number. May try it. Alex Paris: And then it improved. You got 30%. On a year-over-year basis. You got 30% of what you had in the previous year. As opposed to just 10% in the previous year. And then in December, you're saying the low end would assume that same 30%. Of the year-ago month. And the high end would be something higher than that. Gary: That's correct. Alex Paris: Okay. Good. Thank you. Question two. Well, that was question one and two, actually. Question three. The Graduate School USA loss, of $3,900,000 was that a lot less than you had forecasted? I thought on the last call you said to assume a $7,000,000 to $8,500,000 loss. On sale? Angela Selden: Yeah. Rick, do you want to answer that one? Rick Sunderland: Yeah. Yes. And the answer is yes. Alex, in the prior call, we estimated 6.5 to 8. We came in at 3.9. The difference was the resolution of the this is an accounting matter. The accumulated deficit that existed on the books of Graduate School is a separate company. To eliminate the deficit, we had to record a credit, which was offset to the otherwise, you know, higher number. So that number came down. Alex Paris: Thank you. And then the last question, again, just a point of clarification. Post-licensure, pre-licensure. Hondros is all pre-licensure or... Angela Selden: All pre. And then Rasmussen has some post-licensure? Alex Paris: Yes. Angela Selden: A small percentage. Yeah. Yeah. Okay. But not so but the post-licensure is contained within what is currently categorized as our online business. Right? Because that's all delivered without a need for a campus. Yeah. Alex Paris: Great. Well, thank you very much. I'll take the rest of my questions offline. Angela Selden: Okay. Thanks, Alex. Eric Martinuzzi: And then Pearson comes from next question comes from the line of Luke Horton with Northland Capital Markets. Please go ahead. Luke Horton: Yeah. Hey, guys. Congrats on the nice quarter. I know we've kind of answered most of the questions here, but just wanted to kind of touch back on the strong enrollment trends at Rasmussen, specifically on-ground. Are you seeing a change in student demographic at all? With the students that you're gaining here? And is this simply just a function of more efficient marketing and macro demand, or is there just anything else you could provide there would be great. Angela Selden: Yeah. Great question. Nice to hear from you, Luke. We are really trying to expand our marketing reach to not just enroll ADN or the two-year degree RN students, but also the BSN, the four-year, three and a half-year degree RN students. And so we are seeing momentum in both, but we are seeing an acceleration in our BSN students, which we're really pleased about. It has a longer tail of revenue, you know, often stronger NCLEX results. So we love that we are expanding our pool of BSN students at Rasmussen. Luke Horton: Okay. I got it. And then just one more, I guess. On the campus-based enrollment. I mean, are you seeing anything from a geographical standpoint? I know you're mainly Midwest harassment from in Florida to Kansas. Like, are you seeing any specific campuses outperforming on new start ins? Or new student starts at all? Or is it pretty much broad? Gary: Broad-based? I was gonna say it's a good question, but I would say it's broad. I think we're especially pleased with the I'll call it Minnesota where as you recall, we ceased enrolling in our ADN program and do what Angie just said, the BSN has been a nice lift there. But, no, it's been across the board. I mean, it's been nice to see and in Kansas, in Illinois, Minnesota, as well as in Florida. Luke Horton: Okay. Great. Awesome. Well, thank you guys for taking the questions, and congrats again on the quarter. Angela Selden: Thank you, Luke. Eric Martinuzzi: There are no more questions at this time. I would now like to turn the call back over to Angela Selden for closing remarks. Please go ahead. Angela Selden: Thank you, Eric. I'd like to thank each of you for joining our earnings conference call today. We look forward to continuing to update you on our ongoing progress and growth as we continue our rapid pace of enrollment growth, revenue growth, and margin expansion. We also look forward to welcoming many of you to New York City next week for our 2025 American Public Education, Inc. Investor Day Conference. If we were unable to answer any of your questions, please reach out to our IR firm, MC Group, whose contact information is on the last page of the PowerPoint, and they will be more than happy to assist in getting us all connected together. So back to you, operator. Eric Martinuzzi: Ladies and gentlemen, this concludes today's call. Thank you all for joining, and you may now disconnect.
Operator: Good afternoon, and welcome to StandardAero, Inc.'s Third Quarter 2025 Earnings Conference Call. I'd now like to turn the call over to Rama Bondada, Vice President, Investor Relations. Please proceed. Rama Bondada: Thank you, and good afternoon, everyone. Welcome to StandardAero, Inc.'s third quarter 2025 earnings call. I'm joined today by Russell Ford, Chairman and Chief Executive Officer, Dan Satterfield, our Chief Financial Officer, and Alexander Trapp, our Chief Strategy Officer. Alongside today's call, you can find our earnings release as well as the accompanying presentation on our website at ir.standardarrow.com. An audio replay of this call will also be made available, which you can access on our website or by phone. The phone number for the audio replay is included in the press release announcing this call. Before we begin, as always, I would like to remind everyone that statements made during this call include forward-looking statements under federal securities laws. Statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations and projections. Such risks and uncertainties include the factors set forth in the earnings release and in our filings with the Securities and Exchange Commission, including in the Risk Factors section of our annual report on Form 10-Ks for the year ended 12/31/2024. We assume no obligation to update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, except as required by law. Additionally, during today's call, we will discuss certain non-GAAP financial measures such as adjusted EBITDA, adjusted EBITDA margin, free cash flow, net debt to adjusted EBITDA leverage ratio, and organic revenue growth. A definition and reconciliation of these measures to the most directly comparable GAAP measures can be found in our earnings release in the appendix to the earnings slide presentation on our website. Non-GAAP financial measures should be considered in addition to and not as a substitute for GAAP measures. With that out of the way, I'd like to now turn the call over to our Chairman and CEO, Russell Ford. Russ, over to you. Russell Ford: Thank you, Rama, and thanks to everyone for joining our earnings call today. Before we begin, I'd like to take a moment to wish an early happy Veterans Day to all those who have served and those currently serving in the Armed Forces. I'm proud to say that at StandardAero, Inc., nearly 20% of our domestic workforce are veterans, and we are immensely grateful for their sacrifices they and their families have made through their service. Let's turn to our results beginning on slide three. The third quarter was another strong performance by StandardAero, Inc. We delivered revenue of $1.5 billion, growing 20% year over year, and adjusted EBITDA of $196 million, up 16% year over year growth. This marks another quarter of double-digit top-line and earnings growth driven by demand strength across our end markets and continued operational discipline throughout our business. Within a complex operating environment, our diversified business model across end markets, OEMs, and more than 40 platforms we serve continues to provide us with growth opportunities and resilience, enabling us to perform well through industry cycles. Now turning to our end market performance in the quarter. Our commercial aerospace revenue grew 18% year over year, led by a near doubling of LEAP revenues from last quarter and strong contributions from the CF34, CFM56, and turboprop engine platforms. Our backlog of MRO work remains strong, and the MRO supply-demand environment remains tight globally. We expect this favorable dynamic to continue for the foreseeable future. Business aviation revenue was up 28% year over year, driven by growth across mid and super midsize aircraft. We saw strong growth in our HTF-7000 program, which should continue supported by the successful expansion of our facility. Our military and helicopter revenue grew 21% year over year, fueled by AE1107 engine volumes after the V-22 grounding last year, ongoing strength of our C-130 transport aircraft programs, and the J85 engine, which powers the T-38 trainer, as well as the contribution from our AeroTurbine acquisition. From an earnings perspective, we continue to generate strong high-quality growth. Adjusted EBITDA rose 16% year over year, driven by volume growth, pricing, and mix, particularly within component repair services, where we delivered another record margin quarter. Even as we invest heavily in ramping our newest programs, we've continued to demonstrate double-digit earnings growth and margin resiliency. Our adjusted EBITDA margin was 13.1%, inclusive of some lower margin work scopes and the expected short-term impact of the ramps of our LEAP program in the new CFM56 DFW facility, both of which are expanding at a rapid pace while we come down the learning curve as planned. This result underscores the strength of our overall portfolio design. We anticipate these ramping programs will turn profitable in early 2026 and continue to accrete from there. Starting on the right side of Page four, I'll give some updates on the status of our strategic priorities, which we expect to drive long-term compounding value for our shareholders. We continue to be pleased with the progress of our LEAP industrialization and the outlook for this program. LEAP revenues continue to scale rapidly and are a key driver of our commercial growth. Through the end of the third quarter, we've inducted nearly 50 LEAP engines and expect to complete more than 60 LEAP engine inductions this year. LEAP sales in the third quarter nearly doubled sequentially from Q2. Importantly, the long-term demand outlook for LEAP is getting even more robust with multiple wins this quarter and a large number of sizable opportunities in the pipeline. With our recent wins, our planned 2026 slots are rapidly filling up, and we continue to gain even more confidence that our LEAP revenues alone will reach $1 billion annually in the next few years. Moving to our other growth platform investments. The CFM56 expansion at our DFW facility is also progressing well with strong bookings momentum, including a significant three-year award from a major North American carrier during the quarter. Last quarter, we talked about the expansion of our business aviation facility in Georgia. That expansion is now operational, with the added capacity helping drive significant growth on our HTF-7000 program, where we are seeing strong demand for mid and super midsize business jets and are positioned as the worldwide exclusive independent heavy overhaul provider on this engine platform. We are also pleased to announce today the planned expansion of our MRO facility in Winnipeg, Canada. This facility is home to our CF34 program, where we expanded our license relationship with GE last year. We continue to see outsized demand and share gains on this platform and are adding approximately 70,000 square feet to the facility to capture that growth. This expansion will increase our Winnipeg footprint for both the CF34 and CFM56 programs by more than 40% as well as significantly increase our CRS in-sourcing opportunities. We broke ground on the expansion in September and expect to complete it in 2026. The investment is supported by contributions from the Government of Manitoba, with whom we've been working closely in planning this project, resulting in a total net investment for StandardAero, Inc. in the high single-digit millions. We view this as an attractive and high-return investment opportunity given the long-term contracts we already have in place to fill a large portion of this capacity. Our component repair business continues to execute, delivering record margins this quarter, driving 32% adjusted EBITDA growth year over year. The team is performing well on synergy capture from the ATI acquisition, and we've expanded our portfolio of OEM-authorized LEAP for repairs to more than 450. Additionally, we're now the first non-OEM provider of source-controlled LEAP-1A and 1B fan blade repairs, including structural edge and coating repairs, and have stood up our dedicated LEAP fan blade repair cell at our CRS facility in Cincinnati. Furthermore, our CRS segment was awarded new OEM authorizations on two critical source substantiated fan blade repairs on the CF34-8 engine. We are continuing to expand our portfolio of over 20,000 licensed component repairs, which we expect to drive third-party sales growth and strengthen the synergies between our CRS and Engine Services business. As a result of our continuing strong performance and execution on our strategic priorities, we are raising our full-year 2025 guidance across all key metrics: revenue, earnings, and free cash flow, reflecting our confidence in the fourth quarter and continued strength across both segments. Dan will detail this guidance shortly. In addition, our balance sheet remains a source of strategic flexibility and gives us ample liquidity for both organic investments and accretive M&A. As we move forward, our priorities are clear. First, continue to ramp our growth platforms efficiently. Second, drive productivity and cash conversion across the enterprise. Third, continue expanding our CRS repair capabilities, and finally, investing organically and through acquisition in programs and capabilities that capitalize on our long-term growth opportunities. With that, I'll turn the call over to Dan to discuss our financial performance and outlook with additional detail. Dan Satterfield: Thank you, Russ. I will begin on Slide five with some highlights from our third quarter results. For the third quarter ended 09/30/2025, we generated revenue of $1.5 billion, up 20.4% year over year, including 19% organic growth. Adjusted EBITDA increased to $196 million for the third quarter, representing 16.1% growth with adjusted EBITDA margins of 13.1% compared to 13.5% year over year, driven by some lower margin Workscope mix and the ramp of LEAP and CFM56 DFW programs as those come down the learning curve, partially offset by record CRS margins. The prior period Q3 2024 included the one-time impact of our liability extinguishment that added $9.3 million to revenue and adjusted EBITDA and boosted margins by 60 basis points. Net income was $68 million, an increase of $52 million versus the prior year period, reflecting higher operating income, reduced interest expense, and lower non-recurring costs. Free cash flow was a $4 million use this quarter, a meaningful sequential improvement but still reflective of a challenging supply chain across various platforms that continues to drive record levels of contract assets in our shops due to specific constrained parts. Importantly, this is mainly a timing issue, and we expect a surge in shipping of completed engines in the fourth quarter, which will unwind a substantial portion of the increase in working capital experienced in the first nine months of 2025. As such, we are confident in raising our free cash flow guidance for 2025. I'll dive a little deeper into cash flow shortly. Now moving into our two segments, starting with Engine Services on slide six. Engine Services revenue increased 21% to $1.32 billion in Q3, driven by the LEAP, CFM56, CF34, turboprop platforms, and the HTF7000 business aviation platform. Engine Services adjusted EBITDA increased 12% year over year with margins of 12.5%, consistent with expectations given some lower margin Workscope mix in the quarter and a substantial growth on the LEAP and CFM56 DFW platforms. Keep in mind that in the quarter last year, Q3 2024, had a liability extinguishment that added $9.3 million to revenue and EBITDA and boosted margins by 70 basis points. Without that one-time gain, Q3 2024 margins would have been 12.8%. So excluding the currently dilutive effect of our growth platforms, we would have had significant year-over-year margin improvement this quarter. As Russ mentioned, we continue to expect both of these programs to become margin positive early 2026 as we move down the learning curve. On to Slide seven, CRS. Component repair services revenue increased 14% to $154 million in Q3. Notable drivers included select military platforms, continued robust demand in our land and marine business for aero derivative engines, which is benefiting from growth in applications like data centers, and strong performance from our ATI acquisition. This was partly offset by the timing of some commercial volumes that moved to the right. CRS segment adjusted EBITDA grew 32% year over year, reaching $54 million. Margins continued to see strong improvement and once again marked a record quarter. We did see some favorable mix in Q3 that we expect to normalize in the fourth quarter, which is reflected in our guidance. And more on this shortly. Now moving to slide eight. Free cash flow for the quarter was a $4 million use, continuing to reflect the impact of increased working capital, which was up $108 million in the quarter tied to key constrained part delays that persist. A significant amount of this working capital increase is purely timing related, driven by parts availability on a number of our platforms, which has been particularly challenging year to date. As a result, we had many engines largely completed and awaiting specific parts before shipment to the customer and invoicing, and thus cash collection. This situation is reflected in our contract assets balance sheet line item, which has increased $300 million over the last twelve months, with a vast majority tied to certain commercial programs. However, the good news is this is purely a matter of timing. The situation is improving, and we expect a significant unwind in Q4. As such, we expect cash flow in Q4 to be exceptionally strong, and we are raising our full-year free cash flow outlook by $15 million at the midpoint from our prior guidance, as we are now expecting free cash flow for the full year 2025 to be in the range of $170 million to $190 million. Along these lines, we also have some additional positive developments to share that will fundamentally improve the quality and sustainability of our margins and cash flow going forward. Over the past year, we have continued to execute on our goal of negotiating structural changes to several long-term customer contracts within our Engine Services segment. Historically, many of these contracts included a substantial amount of zero or low margin material pass-through revenue. Material that sits in inventory and contract assets consumes significant cash and obscures our true operating performance. We have now made meaningful progress renegotiating several contracts that achieved structural changes to reduce or eliminate this pass-through activity. And we expect to see a clear positive impact in 2026. As a result of these contract amendments, we now expect approximately $300 million to $400 million of material pass-through revenue to be eliminated next year. While that will appear to reduce our nominal top-line growth rate at the outset, it will have minimal impact on EBITDA or earnings growth, resulting in higher reported margins that better reflect the true operating performance of these programs. Importantly, these changes will improve our working capital efficiency and free cash flow conversion over time as they take effect through 2026. We'll provide full quantitative 2026 guidance incorporating these impacts when we report fourth quarter results early next year. Turning to slide nine. Our leverage at the end of the quarter improved to 2.9 times net debt to EBITDA and is down 2.4 turns from our leverage at the end of Q3 last year. We expect to continue to delever through organic earnings and cash flow growth with our long-term net leverage target unchanged at between two and three times. At the current level, we have ample balance sheet capacity to conduct organic investments and accretive and strategic M&A. Now to our guidance on slide 10. As Russ mentioned earlier, we are increasing our outlook ranges across all three of our main metrics from our August earnings call to reflect our continued operational outperformance. When we provided initial guidance for 2025 back in March, we expected 12% year-over-year revenue growth and 13% year-over-year adjusted EBITDA growth at the midpoints. Our new guidance calls for 14.5% revenue growth and 16.5% adjusted EBITDA growth at the midpoint. Expressed differently, we have increased our full-year guidance relative to our initial outlook by 350 basis points for adjusted EBITDA growth. This has come about despite the challenging 2025 supply chain environment we have referenced several times on this and prior calls. We now expect 2025 Engine Services revenue of $5.27 billion to $5.31 billion, which at the midpoint implies a 14% full-year growth rate. For our Component Repair Services segment, we now expect 2025 revenue of $700 million to $720 million, which at the midpoint translates to a 20% growth rate. On EBITDA, we have adjusted our 2025 Engine Services segment adjusted EBITDA margin guidance to 13.2% and are raising our 2025 component repair segment adjusted EBITDA margin from about 28.3% to 29%. This drives an increase to our total company 2025 revenue guidance to a range of $5.97 billion to $6.03 billion. Our 2025 adjusted EBITDA guidance increases to a range of $795 million to $815 million. As I mentioned before, we are also raising our free cash flow guidance for the year to $170 million to $190 million as we are confident in our Q4 cash generation as earnings continue to grow and working capital unwinds. With that, I'll now turn it back over to Russ to wrap things up. Russell Ford: Thank you, Dan. This call marks an important milestone for us as we recently completed our first full year as a publicly traded company last month. We continue to be pleased with the performance of the business, which is well ahead of the targets we set in advance of the IPO. And we're optimistic about the prospects for StandardAero, Inc. through this year and into the future with a positive market backdrop and the continued relentless focus on execution that's been a hallmark of our business since it was founded one hundred years ago. That concludes our remarks for Q3. And with that, operator, we're now ready to move to the Q&A session. Operator: Thank you. We will now be conducting a question and answer session. So that we may address questions from as many participants as possible, if you have additional questions, you may requeue, and time permitting, those questions will be addressed. One moment please while we poll for questions. Our first question comes from the line of Michael Ciarmoli with Truist Securities. Please proceed. Michael Ciarmoli: Hey, good evening, guys. Nice results. Dan Satterfield: Thanks, Mike. Michael Ciarmoli: I'm not sure Russ or Dan, think I heard this LEAP, are we now targeting $1 billion in revenues next couple of years? I think the previous target was 2030. Russell Ford: Yes. In the next few years, meaning towards the end of the late 2029, 2030 timeframe. Michael Ciarmoli: Okay. So still there, no change. Russell Ford: No change. But as we approach '26, '29 starts getting a lot closer. Michael Ciarmoli: Got it. Yes, makes sense. And then just the confidence level on the cash flow. I mean, you mentioned the contract assets with receivables and inventory up $185 million sequentially. What are the parts that are causing the choke points there? Do you already have them in stock? I mean, raising the free cash flow guidance, I guess you've got good line of sight and confidence there? Russell Ford: Yes, we do. Listen, first of all, Q3 would have been at my sort of my expectation level if it weren't for about a dozen engines that just slipped into Q4 in terms of shipment, and all of that is really due to the constrained parts, specific constrained parts primarily around forgings and castings. As a result, we have a line of sight on the engines that we'll ship in Q4 and result in that outcome. We're seeing the depth of delay on some of these constraint parts get better. Matter of fact, that's been the core issue all year. Is even though on-time delivery might be improving for the OEs, on certain constrained parts for me, the depth of delay got worse. So as that begins to improve, it's just a few parts on several hundred engines that result in the cash flow improvement quarter over quarter. Michael Ciarmoli: Got it. Helpful. Guys. I'll jump back in the queue. Russell Ford: Sounds good. Thanks, Mike. Operator: Thank you. Our next question comes from the line of Ken Herbert with RBC Capital Markets. Please proceed. Ken Herbert: Yes. Hey, good afternoon. Nice results. Maybe Dan or Russ, the adjustments you've made to some of your long-term contracts, which obviously I think you called out $300 to $400 million of revenues eliminated next year at zero margin. Do you see all of that benefit in 2026, or how much of that maybe then bleeds into 2027 as well? Russell Ford: Yes, most of it happens in 2026. So it starts to feather in. First of all, contracts change. I've also got to burn down existing inventory. But we believe over these contracts, the $300 million to $400 million accrues as a reduction of revenue year over year in 2026. Ken Herbert: Okay. That's great. And can you remind us what's the backlog on your LEAP business? I know you've called that out in the more recent quarters. And is there a reason maybe you're not giving an hour? Can you give us an update on that? Russell Ford: Yes. During the quarter, Ken, I we reported last time that we were a little over $1 billion in backlog, and we're seeing about 5% growth this quarter. Ken Herbert: Great. Thanks, Russ. I'll pass it back there. Russell Ford: Thanks, Ken. Operator: Thank you. Our next question comes from the line of Gavin Parsons with UBS. Please proceed. Gavin Parsons: Thanks. Good evening. Dan Satterfield: Hey, Gavin. Gavin Parsons: Just wanna go back to supply chain for a second. What unlocked there? Is your sense that that's sustainable? Or was that just kind of a surge or reallocation of parts maybe? Russell Ford: Amongst customers? I don't think it's going to be a surge of parts. During the year, I had this depth of delay on the constrained parts. That really got bad over the summer. We're seeing these constrained parts, and they really are the smallest part of our supply chain. That's holding up these very large dollar values of, in particular, contract assets. So you'll see that the contract assets unwind as these come in. It's forgings and castings, it's the same characters. And so it is true that the supply chain overall is getting somewhat better. But if it doesn't get better on my constrained parts for StandardAero, Inc. engines, sitting in the shop, engines don't ship. We are seeing that occurring now. Matter of fact, there is a discrete list of engines with ship dates on them that makes us pretty confident that all of this will unwind. This is an important part of our measurement system. Because people tend to focus on the measurement of on-time delivery. But on-time delivery only tells part of the story. You really do have to look at a second-order measure, which is what we call depth of delay. A lot of other companies use that same terminology. And the reason for that is because if you are two days late versus two months late, that's a big difference. But in the on-time delivery measure, they both count the same. So your on-time delivery may not be changing or may move one point. So you have to look to the next, the second order, which is your depth of delay. And if you see the delays that were thirty days, now becoming seven days and five days, then that gives you confidence that the supply chain in fact is getting closer to supporting the actual line flow that we need that we use for our forecasting. So that's what gives us confidence. We saw the depth of delay actually increase over the summer and then it started drawing back. So we feel comfortable that the supply chain is in fact improving even though we've not seen all of those parts flush completely through to us, we have good line of sight. Gavin Parsons: Great. I appreciate the detail. I guess speaking of days, when you think about long-term cash flow conversion, do you guys have a target DSO? And how much cash is this one day? Russell Ford: Yeah. I mean, we're gonna, you know, we've said before, we're gonna be an 80% to 90% free cash flow conversion company on net income. And that hasn't changed. Let's DSO, if that's what you're referring to, is not the driver. We get paid on time. DSOs are great. Terms are typically you'd expect in this industry. That's not the issue. It really is related to the supply chain. On a ton of demand but supply chain as it relates to some specific constraint parts. That's what the as that gets better over time, that will be the trigger for sustainable cash flows at the levels I'm talking about. Dan Satterfield: Thank you. Gavin Parsons: Thanks, Gavin. Operator: Thank you. Our next question comes from the line of Myles Walton with Wolfe Research. Please proceed. Myles Walton: Hey, good evening. I was wondering if you could start with CRS and the revenue outlook would was trimmed at the top end. Was that an internalization of the sales? That any deterioration in the core outlook? Russell Ford: I didn't understand the first part. There's not a deterioration in the core outlook. If you're asking about in-sourcing. Myles Walton: 700 to 720, right. Russell Ford: No, I mean, listen, it's a lumpy business. We're really excited about a lot of the growth we're getting in particular from the ATI acquisition. Land and Marine had a fantastic quarter. So did the GTF leap revenues were up really strong. As a lot of that work is getting in-sourced. And the military platforms are great. On the accessory side and the commercial side, it's lumpy. And it's kind of the same issue that we have on the MRO side of our house. Remember my third-party customers for CRS business are MRO operators themselves. And when they see constrained parts issues, that bleeds into their demand for component repair services as well. So a lot of the dynamics that my MRO customers are having with supply chain issues, are the same issues that flow through to CRS. But no, we're very bullish about the business. It grows strongly. Insourcing activity is up. Like I said, a lot of the play this business has 20,000 authorized repairs. And to Russ' point, that's growing rapidly. No concerns here over the medium term. Myles Walton: Okay. And the $300 million to $400 million reduction in sales from not having to pass through. Can you translate that to a benefit explicit on cash that you don't have to hold or maintain? Is there a direct working cash liquid that you have in 2026 as a result? Russell Ford: Yes. It does have a free cash flow benefit. And by the way, like personally, I'm super excited that we're making progress on this. We've been talking about this for a long time. The material pass-through overhang depressing our margins. And now we're beginning to show the true underlying margins of the ES segment. How does it benefit cash flow? It will feather into 2026 as the existing inventory winds down. And then the real benefit we'll see the significant benefit we'll see is in 2027. There was a fair amount of discussion about this during the run-up to the IPO, Myles. And we view this as we talked about this and in my opinion, is promises made, promises kept. We said we were going to do this. And in we've made very good progress. And like Dan said, moving this kind of revenue away from the balance sheet, it helps to illuminate the true financial and operational performance of the underlying business. And that's exactly why we've done it. Dan Satterfield: Yes. No, I completely concur. Makes a ton of sense. Is there platforms or customers specifically who are more interested in this than not? Russell Ford: I wouldn't say that. It's been a theme in a lot of the contracts that have been put in place over the last fifteen years. And so really there's for this as these contracts come up for renegotiation and renewal. And we're viewing this as something that we can pursue across all of our various customers. It's not just limited to one or two. Myles Walton: Okay. All right. Thanks so much. Dan Satterfield: Thanks, Myles. Operator: Our next question comes from the line of Kristine Liwag with Morgan Stanley. Please proceed. Kristine Liwag: I just wanted to follow-up on your discussion on the supply constraint parts. So in regarding your visibility, like how much visibility do you have that you're going to these parts available to you this year and also look next year when we look at the industry, demand from the OEs continues to go up, aftermarket is also very strong. Are you looking at your procurement process a little differently to make sure that you can have access to these parts? Russell Ford: First of all, visibility is strong for Q4. Otherwise, wouldn't be raising my raising guidance on cash flow. So we feel really good about those engines shipping. What will we do differently in the future? Yes, you should. We are making some supply chain changes. As it relates to constrained parts ordering those differently. However, I'll tell you Kristine, these constrained parts can change. Quarter to quarter. If you've looked into it into these forgings and casting suppliers, it can change quarter to quarter. What exactly the constraint is. But I'm confident that we'll have our Q4 cash flow. Improvement and we will have strong cash flow next year. Kristine Liwag: Great. Thank you very much. And following up on the LEAP engine, you've now done quite a few of these engines going through your shop. Can you provide some qualitative or any sort of quantitative information regarding what you've learned so far, how the processes versus what you had planned? And when you think about the potential cost reduction you could have over time in servicing these engines? Are there areas that have stood out to you so far? Russell Ford: Yes. Thanks. Good question, Kristine. Still we're still in low rate initial production. We're kind of in our first year of full production. So we're coming down a learning curve very quickly. We are learning lots of things. At the front end of the business, the backlog is really strong. The RFP environment is very busy. We're getting more than our fair share of wins here. And what we're beginning to see is more PRSV full performance shop visits, versus the early on, it was very heavily biased towards C TIM, hospital visits, lower work scope visits. So the fuller work scopes are now beginning to come through. That's important because it's really those engines that advance us down the learning curve and give us the full cycles of learning. Early on, we said that our experience with a new platform like this typically we start reaching an equilibrium state after about three years. And we are one year into it and we are coming down the learning curve exactly as anticipated. And that's why the second year, which will be next year, you'll see these things become margin positive. And then in the third year, you'll see these things start approaching accretive levels at the enterprise or the company level. So we're happy with the progress that we're making. As we come down learning curve, the other impact that has is it creates more capacity for us. We're not we don't have to spend as many hours on a set work scope and that gives us essentially free capacity. So no surprises. We're actually quite happy with how this program is progressing. Kristine Liwag: Great. Sounds good. Thank you very much. Dan Satterfield: Thanks, Kristine. Operator: Our next question comes from the line of Seth Seifman with JPMorgan. Please proceed. Seth Seifman: Thanks very much and good afternoon. Wanted to check-in on the Engine Services. Is anything you could say with regard to the mix in Q4? It looks like we'll see the margin rate step kind of back up above 13% but fairly big revenue quarter, based on your comments on LEAP, it seems like LEAP is growing pretty quickly. So just in terms of the ability to kind of see that uptick in the sequential margin? Is there any kind of mix element to that you point out? Russell Ford: Yes. Thanks, Seth. First of all, quarter for Engine Services. If you look at excluding that prior period item, and excluding the effect of the ramp, margins at ES actually accreted 70 basis points year over year in the quarter. So fantastic. In Q4, we're going to see better mix out of some of our platforms. Primarily on the biz app side and some of the military programs. LEAP is LEAP and CFM56 both of those programs as they grow they're growing at 0% margins. And that'll be the case until early 2026. And we feel really good about those turning into positive margins in 2026. Then marching their way up the learning curve. So super excited about that. But quarter over quarter, we're going to see benefit in, like I said, some of the mix on some of our platforms. In military and biz app. Seth Seifman: Okay, okay, great. And then really just more of a clarification on the last part. I think you'd said earlier that you expect to see just about all of the $300 to 400 million impact of changes in contract terms in 2026, but also that they would feather in as inventory on those particular contracts and as your work on the existing contract winds down. Does that mean there's a stub that's left to affect 2027 revenue and margin? Russell Ford: Yes, right. So what happens is the cash impact doesn't come as fast as the earnings revenue impact. Because I've got different turns on each of these engine platforms. They all turn differently. So that's one. Two, I'm going to burn down my current inventory on hand. And so you'll see the cash impact begin at 26% and get really strong at 27%. Seth Seifman: Okay. But no more revenue and margin impacts beyond 2020? Yes. So great question, Nob. Thanks for clearing that up. Russell Ford: It is a one-time impact. So you reset the level with these particular contracts to lower material pass-through and then you're done. Then you go forward on a normalized run rate. Yes. You don't recreate that in your forward contract. Dan Satterfield: Right. Russell Ford: But the margin, of course, margin benefit is ongoing. Dan Satterfield: Right. Yes, resets. Seth Seifman: Okay, great. Thank you very much. Russell Ford: Thanks, Seth. Operator: Thank you. Our next question comes from the line of Sheila Kahyaoglu with Jefferies. Please proceed. Sheila Kahyaoglu: Good afternoon, guys, and thank you for the time. If you could talk about Business Aviation, it just drove some of the guidance revenue increase across end markets. How do we think about what surprised the upside? How much of the 7,000 capacity is now at full run rate? And how do you think about the growth of that business going forward in 2026? Russell Ford: Yes. Thanks, Sheila. We're actually quite excited about that particular end market. You look at flight hours for biz av, they continue to increase. And if you look at the concentration of where those flying hours are, they're in the larger aircraft. Which is where we're at on many of the engines that we work on, in particular the HTF 7,000, where we've got the best position as being the worldwide independent holder of that license along with Honeywell. And we're seeing those aircraft platforms are just as fast as they can be built. And the flying hours are continuing to go up. So that's why we saw that coming and we've experienced that over the last couple of years as the embedded base for the HTF-7000 continues to grow. And that's why we made the investment developed program with the state of Georgia and the Economic Development Council to expand the facility there in Augusta where our HTF 7,000 engine shop is at primary one. And we opened that new facility just a couple of months ago and it's pretty much full already. So it's allowed us to take on more aircraft as well and bigger aircraft, which generally have bigger work scopes as well as more of those HTF-7000 engines. And this engine is going to be the predominant biz av engine you're going to see in the market for the next twenty or thirty years. So we're excited that we're on the front end of this thing. We've moved quickly. We have a really strong, unique exclusive position on this program. And overall, our Business Aviation Group is out in front of this and the relationships we have with our customers are excellent. We're able to bring in new customers on the larger aircraft like Gulfstream class aircraft. That we really just we had limited access to before because of the facilities. But now that we've opened up that additional capacity, gives us access to the fastest growing portion of that end market. Yes. Just to clarify, we were just down on the Augusta facility just a couple of weeks ago. So the airframe shop is full, right? It's full of these super midsize jets. The engine shop is ramping, right? So that's what's going to provide the strong revenue growth in 2026 and beyond. Is the engine shop ramping up. So there's a lot of pent-up demand there that we're now going to be able fully advantage of. Sheila Kahyaoglu: Can I just ask one more follow-up on the cash flow? Is that possible? Just to better understand the contract adjustments? Why would an airline engine OEM agree to this change? And how does that, like, pass-through change you know, work, guess, and impact the free cash flow? Russell Ford: Yes. Sure. So, it's really no difference if not some advantage to the operator. Right? So the operator today purchases the material from the OE through StandardAero, Inc. with a small handling figure. And we talked about that before, right? Low single-digit margins on this. So that'll go away that incremental profit that I'm getting and they will work directly with the COE, which really for the end customer is no change to a positive impact for them. So it's hasn't been it's a long negotiation, but it's not it is value accretive to the end customer for sure. Sheila Kahyaoglu: Got it. Thank you. Dan Satterfield: Thanks, Sheila. Operator: Thank you. Our next question comes from the line of Jordan Lyonnais with Bank of America. Please proceed. Jordan Lyonnais: Hey, good afternoon. Thanks for taking the question. Wanted to just touch on the M&A pipeline. I know you guys have said it's robust. So where are you looking to supplement the portfolio now? And what are you seeing for valuations? Alexander Trapp: Yes. It's the same this is Alex, by the way. It's same as in past quarters where there's a lot out there. And we're evaluating everything we see and just waiting for the right one to jump on. So no change really. There continues to be quite a few things out there. Just a very fragmented industry with a lot of different opportunities and not everyone is a perfect fit. Jordan Lyonnais: Got it. Thank you. Dan Satterfield: Thanks, Jordan. Operator: Thank you. There are no further questions at this time. I'd like to pass the call back over to Russell for any closing remarks. Russell Ford: Thanks, Alicia. I appreciate everybody's continued support. We're real happy with the progress. Looking forward to a strong full year here and real happy to be part of your public market coverage. And StandardAero, Inc. will continue to deliver as promised. So thanks, everyone. Appreciate your continued support. That is all. Operator: This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Operator: Good afternoon, ladies and gentlemen, and welcome to the Quest Resource Holding Corporation's Third Quarter 2025 Earnings Conference Call. At this time, all lines are in listen-only mode. Following the presentation, we will conduct a question and answer session. If at any time during this call you require immediate assistance, please press 0 for an operator. This call is being recorded on Monday, November 10, 2025. I would now like to turn the call over to Nick Nelson with Alpha IR Group. Please go ahead. Nick Nelson: Thank you, operator, and thank you, everyone, for joining us on the call. Before we begin, I'd like to remind everyone this conference call may contain predictions, estimates, and other forward-looking statements regarding future events or future performance of the company. Use of words like anticipate, project, estimate, expect, intend, believe, and other similar expressions are intended to identify those forward-looking statements. Such forward-looking statements are based on the company's current expectations, estimates, projections, beliefs, and assumptions, and involve significant risks and uncertainties. Actual events or the company's results could differ materially from those discussed in the forward-looking statements as a result of various factors which are discussed in greater detail in the company's filings with the Securities and Exchange Commission. You are cautioned not to place undue reliance on such statements and may consult SEC filings for additional risks and uncertainties. The company's forward-looking statements are presented as of the date made and the company undertakes no obligation to update such statements unless required by law to do so. In addition, this call may include industry and market data, other statistical information, as well as the company's observations and views about industry conditions and developments. The data and information are based on the company's estimates, independent publications, government publications, and reports made by market research firms and other sources. Although Quest believes these sources are reliable and the data and other information are accurate, we caution that Quest has not independently verified the reliability of the sources or the accuracy of the information. Certain non-GAAP financial measures will be disclosed during this call. These non-GAAP measures are used by management to make strategic decisions, forecast future results, and evaluate the company's current performance. Management believes the presentation of these non-GAAP financial measures is useful to investors' understanding and assessment of the company's ongoing core operations and prospects for the future. Unless it is otherwise stated, it should be assumed that any financials discussed in this call will be on a non-GAAP basis. Full reconciliation of non-GAAP to GAAP financial measures are included in today's earnings release. With that, I'd like to turn the call over to Dan Friedberg, Chairman of the Board. Dan Friedberg: Good afternoon, everyone. And thank you for joining us for our third quarter call. Quest delivered a solid third quarter that showed important progress on several fronts. During the first half of the year, we took decisive actions across the business that included reducing costs, improving operations, and generating cash flow. We're on a much more solid footing as a result of these initiatives, and our third quarter results were consistent with our stated expectation for an improved trajectory of the performance of the business. The impact of these actions is already delivering important improvements in the business and validates our confidence in the path ahead. We will continue pursuing business efficiencies, reducing variability, generating growth, and driving business margins. We are confident in our ability to continue to drive improvements in the business and maintain this trajectory as we finish 2025 and move into 2026. With that, I'll turn the call over to Perry to discuss these efforts in more detail. Perry Moss: Thank you, Dan. We delivered a solid third quarter with strong sequential improvement in our financial performance despite what remains a tough operating environment. Since taking on the CEO role earlier this year, we've been on a mission to standardize and streamline our internal processes, relentlessly track our progress, as well as foster a culture of continuous improvement. This has been a comprehensive effort that spans every aspect of the business, from customer engagement, sales, payments and collections, and more. While these cultural changes can be complicated, I have been thrilled with the response from Quest employees as well as with what we believe are the early benefits of these efforts. Our operational excellence initiatives are driving better visibility into our customers' needs, enhancing the productivity of our sales team, elevating our vendor management practices, maximizing efficiencies for our operating teams, and ultimately, improving financial results and cash generation. Overall, the macro environment continues to present challenges. Volumes from our industrial customers remain subdued and the pace of adding new clients has been slower than last year and slower than what we had anticipated. Our pipeline remains very healthy, and potential clients have not fallen out, but economic uncertainty is leading to some decision delays that are extending the sales cycle. In response, we're focusing on what we can control. We recently redefined our sales process to direct our sales team with a greater focus on share of wallet opportunities. To do this, we focused on greater levels of collaboration between our relationship managers and our sales teams. This realignment combines the capabilities and talent of each team and gives our sales team better visibility into the ongoing and dynamic needs of customers. As a result, we're broadening the number of waste streams that we're handling for individual clients, adding new value-added services to existing client accounts, and expanding our coverage with large multi-location customers to handle a larger portion of their waste. There are many more opportunities that include geographic and service line expansion within our installed base. We expect these share of wallet initiatives to contribute greater levels of organic growth for us going forward as these are clients that already understand and appreciate the Quest value proposition and have seen the tangible benefits of the services we provide. They will all be strong contributors to gross profit dollar growth as we add and optimize services. From a process standpoint, we've also resegmented and better defined the different stages for our sales process. This has provided us with greater visibility into the sales cycle for individual accounts and offers a more detailed look at our total pipeline. We've replicated the same stage of approach for share of wallet opportunities demonstrating our focus here. And now actively maintain both a new business pipeline as well as a share of wallet pipeline. These sales-focused initiatives and process improvements are contributing to improved results as we continue to bring new clients and expanded services with others. We recently launched our two wins that we announced during our last earnings call. One is a major retailer and the other is a large full-service restaurant chain. And just last week, we signed another new contract with a company in the food products end market. Additionally, we continue to execute on our refocused share of wallet efforts by adding all the cardboard and organic food waste from one of our largest new customers from 2024 and adding a significant new number of stores from another existing customer. These efforts will also be important contributors to our commitment to broadening our customer base by adding to the total number of customers we serve and also through expanding our business in nonindustrial end markets. We are committed to diversifying our customer and revenue profile by expanding in markets like retail, hospitality, grocery stores, and more. These are all markets we are present in today and where we see compelling opportunities for our sales team to further penetrate. These are all markets and businesses that tend to perform better during the fourth quarter where industrial production typically moderates. And will provide a good counterbalance to our earnings profile and seasonality. Another critical area of focus of ours is our source to contract process where we engage our vendors and nurture those relationships. These relationships are essential given our asset-light model. Strong relationships with these vendors are central to our ability to win new clients, deploy the right solutions, and deliver a best-in-class customer experience. We've added new vendor relationships, reestablished older ones, and expanded others, which has elevated our level of visibility and value proposition with these vendors. We're finding that many vendors are once again proactively reaching out to Quest, asking for new business and looking to grow their relationships with us. Strong vendor relationships have a direct flow through to service levels for our customers, and today, we currently are experiencing the lowest service disruption rates and associated costs we've ever had. On the process side, we've taken steps to optimize our payment and collection process with the goal of improving our order to cash cycle and overall working capital management. We've been able to homogenize this process and are now paying the vast majority of our vendors on term. We have also shortened our invoicing time and will continue to optimize our cash collections process. We also continue to leverage our technology and data platform, which is enhancing the customer experience through its zero-touch nature. Customers can utilize the portal to access their data to see the benefits of the Quest program. They now see the various waste materials generated, their associated costs, and end destinations. We've amassed a tremendous amount of data which we believe carries incredible value. Ultimately, we envision a subscription-like model for access to this data, adding another margin-accretive revenue stream. Looking ahead, I am confident that the continued implementation and progress of our operational excellence initiatives will continue to drive improvements in the business in the fourth quarter and beyond. Our sales pipeline is moving slower than we would like, but the Quest value proposition continues to resonate with current and potential clients alike. Our relationships with our large industrial clients remain as strong as ever. We are growing our share of wallet with existing clients, and discussions with potential new clients leave us confident that we will win more than our fair share of new business when these companies ultimately elect to move forward. We do expect to continue to experience some margin pressure as we execute our land and expand strategy and volumes at our largest industrial customers are expected to remain challenged. However, we anticipate we will be able to help offset these pressures through optimizing service levels, growing our share of wallet with existing clients, and continuing to drive operational improvements across the business. To wrap up, our key priorities remain to grow the business with new and existing customers, drive margin improvements as we execute our operational excellence initiatives, continue the development of our operating platform, improve cash generation, and pay down debt. We remain confident in our ability to the Quest value proposition and implement these organic initiatives as macroeconomic conditions and industrial volumes normalize. With that, I'd like to turn the call over to Brett to review our third quarter financial results in greater detail. Brett Johnston: Thanks, Perry, and good afternoon, everyone. We are encouraged by the sequential improvements in the business as the internal initiatives we've enacted are delivering tangible results. Revenue for the third quarter was $63.3 million, which was a 13% decrease from one year ago, but a sequential increase of 6.4% compared to the second quarter. The decline compared to the prior year was driven by the divested mall-related business and by lower revenue from clients in our industrial end market, where market conditions remain challenged. Our relationships with these clients remain strong, but macroeconomic conditions are leading to lower overall volumes. We do ultimately expect conditions to normalize and return to growth and fully expect to continue to support these clients when they do. In the meantime, we have greatly elevated our focus on share of wallet opportunities with these new clients. Sequentially, our revenue growth was driven by new clients that we have added over the past eighteen months. Year to date, these new clients have added over $24 million in incremental revenue year over year. The onboarding and progression of these new clients is advancing as planned and is beginning to contribute meaningfully to our financial results. To speak further to that progress, gross margins with these new clients have made consecutive gains for multiple quarters in a row. As a reminder, while margins with these newer clients are initially lower and can create a drag on overall gross profit margins, we have a demonstrated land and expand strategy to both grow our share of wallet and add incremental value-add services over time, which enhances the profitability of these relationships. In the third quarter, gross profit dollars totaled $11.5 million, a decline of 2% compared to the prior year but a sequential increase of 3.9%. This sequential growth was better than our expectation of flat to slightly down, as our gross profit initiatives gained traction. Our gross margin was 18.1%, which was 200 basis points better than the prior year, and a sequential decline of 40 basis points. The year-over-year growth in gross profit margin was largely driven by the sale of our lower margin mall business earlier this year. While the sequential decline was mainly a function of the aforementioned margin dynamics of newer clients combined with margin pressure from renewals previously discussed last quarter. These were largely offset by optimization improvements and other efficiency measures. As we look to the fourth quarter, we would expect sequential comparisons for gross profit dollars to be flat to slightly down but mostly in line with our previous expectations. As a reminder, we tend to see seasonably low volumes across several of our clients in the fourth quarter. Additionally, there remains significant uncertainty related to client volumes in the end market. However, the return to sequential growth in the third quarter leaves us confident that our commercial and customer initiatives are helping to offset these pressures. Our confidence is based on our visibility into efforts continuing to take hold as we optimize the business. And with new clients and expansions with existing clients coming online in the fourth quarter. We will also continue to benefit from the reduction of temporary cost increases we discussed during the prior calls. Overall, we believe these positive trends position us to drive growth going into next year. Moving on to SG&A, which was $9.2 million during the third quarter. This was $1 million lower compared to the prior year, which equates to a 10% reduction year over year. And on a sequential basis, it was a slight decrease from the second quarter. SG&A was consistent with our outlook of mostly flat sequentially. The declines are primarily related to the reduction in work in the first half of the year, increased efficiencies, and the aggressive takeout costs across the organization. We expect SG&A in the fourth quarter to be down again compared to the third quarter as we continue to reduce costs. Moving on to a review of the cash flow and balance sheet. At the end of the third quarter, we had $1.1 million in cash, a sequential increase from $450,000 at the end of the second quarter. And approximately $20 million of available borrowing capacity on our $45 million operating borrowing line. For the third quarter, we generated approximately $5.7 million in cash from operations, a sequential improvement of roughly 46%. These results are driven by improved processes resulting from our initiatives aimed at billing faster, collecting from our clients sooner, and improving vendor management practices and payment terms. Our heightened focus on these activities is reducing our cash cycle. Further benefiting from these initiatives, our DSOs also decreased nicely from the second quarter to the third quarter. Building off a modest decrease from the first to the second quarter. The approximate nine-day decrease drove DSOs into the lower 70s. Additionally, as the overall business continues to improve, we believe our model supports consistent operating cash generation. We would expect these systems and process improvements to contribute continued cash generation and further DSO reduction in the coming quarters. As a result of the improved cash generation, we paid down $4.6 million of debt during the third quarter, bringing our year-to-date debt reduction to $11.2 million. As of the end of the third quarter, we had $65.4 million in net notes payable versus $76.3 million at the beginning of the year. We expect to continue to aggressively reduce debt as these cash initiatives continue to take hold. With that, I'll turn the call back over to Perry for some closing comments before we open up for Q&A. Perry Moss: Great. Thank you, Brett. Our third quarter was an important validation of the operational excellence initiatives we've been enacting across the business. There remains plenty of work to be done, and the operating landscape remains tough. But we are highly confident in the value of our asset-light model and our ability to deliver improved financial results. Our initiatives are working, and we're well-positioned to continue to drive improvements in the business. Going forward, our focus will remain on generating cash and paying down debt while continuing to advance our customer and other commercial initiatives. With that, I'd like to request the operator to provide instructions on how listeners can queue up for questions. Operator? Operator: Thank you so much, ladies and gentlemen. Should you have a question, please press star followed by one on your touch-tone phone. You will hear a prompt that your hand has been raised. Should you wish to remove your hand from the queue, please press star followed by two. If you're using a speakerphone, please lift the handset before pressing any keys. Just a moment for your first question. Your first question comes from Gerry Sweeney with ROTH Capital. Please go ahead. Gerry Sweeney: Good afternoon, Dan, Brett, Perry. Thanks for taking my call. Perry Moss: Hey, Gerry. Gerry Sweeney: You'd spoken about end markets specifically maybe industrial remaining weak or challenging. Has that stabilized, or do you see some more headwinds in there outside of seasonality in the fourth quarter? And I'm just curious about your other end markets, how they are holding up altogether. Perry Moss: Yeah. Gerry, I'll take that. This is Perry. You know, the macroeconomic environment is still a bit uncertain. But you know, we believe the industrial markets and really all of our markets are stabilized. Of course, from the industrial sector, we'll see some seasonality effect Q4. Which is why you know, in my comments, we're trying to diversify our portfolio a bit to add customers that actually ramp up in Q4. But I think more importantly, you know, we're really focused on what we can control. Which is our share of wallet with these clients. And, you know, we've been very successful with adding incremental services with these customers, and we expect to continue to do so. You know, we talked last quarter about our strategy to renew a contract with a large client where we gave up some margin on the front end to gain an opportunity to equally share in the savings. We believe that's gonna work very well. It will take more than a quarter for us to see the gains from those shared savings. But we believe that that will benefit. So think everything is stabilized now. The sectors that I talked about earlier, retail, grocery, you know, logistics, we work in a lot of verticals. We think that they will ramp slightly in Q4. Industrials will remain a bit challenged just because of the seasonality. Gerry Sweeney: Got it. And then wallet share, that was something you just brought up now, but also in the prepared comments. You know, taking wallet share, expanding wallet share, however you wanna phrase it, it's always been, I think, part of what Quest did. Have you changed that strategy at all to accelerate it or any other details on that front? Perry Moss: Yeah. Yeah. So the answer is yes. So when I arrived a couple of years ago, you know, I brought a whole new discipline to the sales process, the new customer sales process. So we've taken that approach and used that now for share of wallet. So we have a very disciplined approach where we have a very well-defined share of wallet, which is something we didn't have before. But in addition, we're now collaborating with our between our relationship managers and our sales teams. Which is another new development. So we have people that own relationships with the customers. They may not have the same skill sets that our sales team do. So they kinda go in together and provide additional services. And we see that that's paying off, you know, with one of our largest new customers from 2024 we've added some significant share of wallet by gaining access to all of the cardboard generation and also all of the food waste, the plastic, just a number of different streams. Another customer in the retail sector, we've added a significant new number of store locations. So I would say it's an enhanced and refined approach from the way that we did this in the past. Gerry Sweeney: Gotcha. Would that include, I guess, some KPIs around it or incentives? Perry Moss: Absolutely. Yeah. We yes. So we have mapped every opportunity that we have with every customer. And we now know which ones we're pursuing. We know which stage in the sales cycle that opportunity is. And, you know, with any sales opportunity, it's always about advancing the sale from one stage to the next until, you know, closing. So, there are, there's discipline in KPIs around that whole approach. Gerry Sweeney: Got it. And then one more quick question. I'll jump back in line. Obviously, operational improvement big theme this quarter. Making some progress. How much what as we look at the fourth quarter and 2026, what opportunities are out there and what should we be thinking about in terms of how it flows through either to the balance sheet or the income statement? Perry Moss: Yeah. You know, we're on a path of continuous improvement and optimization. So one of the things that we intend to do so up to now, we have defined all of our major processes. So that's, you know, source to contract, procure to pay, order to contract, and sales to contract. And we've got those all mapped and optimized. We've got KPIs. The next step is actually putting KPIs on all of our team members. To make sure that we can get them fully optimized, ensuring that they're hitting excellence every day. So we think that's a future impact that will help us improve our financial performance. And again, with our land and expand, as we close on additional significant customers, yeah, there may be some margin pressure initially, but, you know, it's gonna be a good thing because, you know, we're significantly growing our revenue base. Gerry Sweeney: Got it. I will jump back in queue. Thanks for that detail. Operator: Your next question comes from Aaron Spychalla with Craig Hallum. Please go ahead. Aaron Spychalla: Yeah. Hi, Perry and Brett. Thanks for taking the questions. First, for me on the new food win, congrats on that. Can you maybe give any details on size and timing and, you know, maybe percentage of footprint for the customers who think about land and expand? And then just any is it competitive win? Any kind of more detail there is appreciated. Perry Moss: Yeah. Yeah. So it was absolutely a competitive win. And, you know, we generally don't talk about the size of our new wins, but I think I've mentioned on prior calls that all of our opportunities are 7 or 8 figures. So this one falls into one of those categories. We're starting out even though this one is a land to expand. We're starting out at slightly higher margins than we typically do. Of their total portfolio, this represents probably 20%. So there's a really nice share of wallet opportunity. There are a couple of operating plans that saw our value proposition and they jumped on it right away. So while we continue to pursue expansion with their corporate folks, these two plants have saw the value of our proposition and jumped right away. So I think there'll be more to come with that win, but it was competitive. And there to be a little more, I guess, granular, this is they're in the food processing business. Aaron Spychalla: Thanks. Good. I appreciate the color for that as you continue to build in that space. And then maybe just second on OpEx. Can you just kind of talk about that a little bit with all the operational initiatives you have going there in addition to the team and just working to optimize things there along with the technology investments? Just curious how you think about OpEx trending as we move forward into 2026. Perry Moss: Yeah. I mean, you know, this has been our plan all along. So we've got two full quarters now operational excellence. As I've said before, it's, you know, it's focused on standardizing and streamlining our processes and delivering, you know, continuous improvement. That's really kind of our foundational approach on everything right now continuous improvement. So, you know, the last thing we're looking for is making major improvements and then falling back the following quarter. But the results of those efforts have been, you know, improved financial results and cash generation. So, you know, we've got of those major processes, that I talk about a lot, the order to cash, procure to pay, etcetera, within those processes, we have 25 different KPIs where we're tracking very specific projects. And all 25 of those KPIs have been trending positive since April, which is when we began to implement. So I expect to see continued improvement. It's hard work. And I think, you know, as we continue to build out our operating platform and bring in some more automation, in addition to those operational improvements, we'll see some efficiencies come from, you know, our platform and our automation. Aaron Spychalla: Gotcha. Thanks for that. And then just maybe building on that real quick on the 25 different KPIs. You know, I know it's been since April and good results here, you know, progress for the first couple quarters. Just so, I mean, what inning do you think you're kind of in and implementing that, you know, across like, kind of across all the business? Perry Moss: Yeah. You know, last time, I think you asked me that same question. I think I said we're in the bottom of the fourth. It's been a long inning. And we're probably still in the bottom of the fourth or the top of the fifth. There just seems to be more and more things that we see that need to be done or that we want to do. These initiatives have really begun to gain traction in the business. So you can imagine, you know, our team has been focused on doing all of their daily work and then we bring in all of these operating initiatives and improvements. And these are projects and things that they're doing kind of at the moment on top of their day to day. And it takes a while to gain traction and see the results. And this is probably the first quarter that, you know, all of our employees are beginning to see the results of their work. And they're getting really excited about it. So one of the things that I'm very hopeful for is that this is we're gonna be carrying momentum into Q4 and then into next year. We've been, you know, we've been all working really hard. So it's nice to finally begin to see some, you know, tangible benefits. But, you know, it's well, it seems like it seems like we've been doing this for a couple of years. It's only been six months. Of or two full quarters of operational improvement. So, you know, with the continuous improvement mindset, I'm hopeful it will, you know, we'll continue this pattern as we move forward. Aaron Spychalla: Thanks. Best of luck as we move forward through the game. Thanks, Perry, Brett, and Dan. Perry Moss: Yep. Welcome. Operator: Your next question comes from Owen Rickert with Northland Capital Market. Please go ahead. Owen Rickert: Hey, guys. Thanks for taking my question here. Last quarter, you suggested we might see the sequential decline in gross profit dollars, but 3Q obviously came in a lot stronger. Can you walk us through more specifically what drove that outperformance and where results came in better than expected? And then just on top of that, was the slight sequential margin decline primarily just from ongoing maturation of newer clients. Brett Johnston: Yeah. This is Brett. I'll take that question. So I'll kinda start on the second piece of that, which is margin. Which was expected and largely was part of why we had directionally said maybe we'd be or that we would be flat to down in Q3 relative to Q2 and that's because of some of the margin pressure on some select renewals that we took in Q2 and had to flush through the P&L in Q3, and we've still got a little bit of that for Q4. So that's why we expect it down. But what we got was a lot earlier track on the initiatives. You know, we continue to get improvement on operational efficiencies that Perry's discussed. So it was great to see those come in a little bit ahead of plan and materialize in the P&L. Additionally, we got stabilized a little bit more on the industrials as well than what we would have expected. Owen Rickert: Got it. Thanks. And then secondly for me, can you guys just provide a quick update on the vendor management platform? How's that going? Brett Johnston: Yeah. It's going, you know, it's going fine. It's going as planned. And, you know, just as a reminder, our vendor management platform is just one aspect of our process improvement initiatives. Overall end-to-end workflow. So, you know, there will be ongoing opportunity just to further automate beyond just the vendor management system, but our procure to pay process and source to contract process are two processes that are heavily involved with our vendors. Our relationships have never been better. So in addition to, you know, automation that we have with our vendors and their invoices with our system, our relationships have improved. We have vendors asking for more business. We have our vendor team, you know, sourcing better rates than they have in the past. And, as a result, you know, the service disruptions that we've talked about in the past and the associated cost that come with those disruptions, they're at the lowest point really in the history of our company. They're very, very low now. So the system itself continues to progress well. But it's also the process combined with the system that's really reaping the benefits. Operator: Great. Thank you. Brett Johnston: Yeah. You're welcome. Operator: Your next question comes from Greg Kitt with Pinnacle Family. Please go ahead. Greg Kitt: Hi, Perry, Dan, and Brett. Congratulations on the good quarter that showed improvement. Perry Moss: Thanks, Greg. Brett Johnston: Thanks, Greg. Greg Kitt: The first question, kind of an open-ended question. For you, Perry. It says, we talked to I heard you on your baseball inning analogy. Maybe if I could approach it differently, how would you rank where you think the company was from a commercial execution and then operational execution standpoint when you came in? You clearly, were some opportunities to improve. And then where do you think it is? If you were to rate it out of 10, are you operational? Operationally, it seemed like there were more issues than on the commercial side because you were winning business. But we'd love to hear how you think the company is doing right now and how much more opportunity there is to improve. Perry Moss: Yeah. Greg, you always ask good questions. Appreciate that. You know, I don't really wanna comment too much on the past. I'd rather focus on, you know, the improvements. I mean, we got back to the blocking and tackling and the fundamentals of this business. My, you know, suspicion is we probably lost a little focus on those things we're going, you know, fairly well. And so we got back to blocking and tackling, clearly defining processes, putting KPIs in place. That is something that we didn't have before. So, you know, whenever you're running an operation, you should always know if you're operating within control parameters or not. Because it's so important to be able to be nimble and to flex and intervene when needed. And I don't think we had that visibility before. So, you know, I'm not gonna give us a rating of where we were before, but I think we are operating better than we ever have. On a scale of one to 10, I'd probably give us, you know, a score of six to seven. So there's still opportunity for us to do better. You know, this is a tough business. It never stops coming at you. You know, we've got vendors on one side. We've got customers on the other. And we've got, you know, incredible amounts of data flowing through this business. So, you know, I think once we start putting the individual KPIs on all of our team members, I expect that we'll see some efficiencies and performance improvements there. So I think six to seven is fair. For now. Greg Kitt: Thank you. And then I missed part of Brett's comment. What did you say about SG&A? Did you say it would be down sequentially from Q3 or down year over year? Brett Johnston: Yes, Greg. I was saying down sequentially from Q3. You know, we saw some pretty significant reductions in the first quarter from a year-over-year perspective. As we right-size the business. A lot of the focus has been on early on right-sizing and then, of course, we had the SG&A related to the divested mall business as well. Where we saw reductions. Saw a little bit of improvement in Q3, but I'd say mostly flat. But we do continue to see improvements, some additional cost reductions in Q4 as well. Greg Kitt: Okay. Thank you. That's helpful. On the data subscription opportunity that you talked about, for customers to access the portal, do you think that's something that can be a million dollars or more over time? Or is this maybe not necessarily that big? Perry Moss: Greg, I really don't know. I mean, that's why I said it's, you know, we envision. It's kind of a vision of ours. What we do know is we have a lot of data. And, you know, with the onset of AI, I mean, who knows what our data is really worth, but we think there's value there. And one methodology could be to, you know, charge a subscription for access to that data, but we're, you know, we're not there yet. And I couldn't begin to size that opportunity. It was just a little peek into what we're thinking about as we move forward. But we're not there yet. Greg Kitt: Okay. Thank you. And then on AR, you know, thank you for all your hard work to get DSOs down into it's the math I was looking at was like, seventy-five days. So really good improvement. How much of that was from maybe two-part question. In the I think on the last call, you talked about getting the percentage of customers that are billed current. To, like, 75%. That was sort of the first part. And then the second part, how do I think about that today? And then the second part of the question was, was this like, one-time why? Because maybe there are opportunities to bill customers more frequently. Or do you see this kind of from here being smaller continuous improvements, maybe a day or two every quarter getting back into the mid-sixties. Perry Moss: Yeah. Let me start. Brett, you jump in too. I think our calculators may be a couple of days better than yours, Greg. But, you know, I think that this is absolutely something that we believe will improve. So regarding the billing 75%, I don't really remember precisely what that comment was, but we are now billing the majority of our clients on time. However, there's always a billing tale. So we need to get the invoices in from our vendors in order to process it and then bill our customer. So we are working diligently to improve the timeline it takes to get some of those bills. So we can bill even faster. So we now know that we are billing current for all the invoices that come in on time. Which is an improvement from what we were doing before. Our focus now is to reduce the tail. So for those bills that aren't coming in in time for us to bill, we're focused on getting those in so we can bill on time. So we continue to make great progress there. Our exception processing continues to stabilize. We're paying our haulers to term, which is really important because, you know, I would tell you in the past, we were probably paying a little ahead. Just to ensure that we weren't receiving service disruptions. And, you know, that's another significant point of improvement is our service disruptions are at the lowest point in history. And each one of those disruptions comes with associated costs. You know, there are late fees and other fees that you can't bill the customer. And we don't really see much of those anymore. So that also flows right through to the business. And Brett, I don't know if you have anything to add to that. Brett Johnston: Yeah. I'll just, I mean, one, agree on the team's been working really hard. So we're really proud of the performance. It's something we've been seeing the improvement on our side for a while. It needed to come through. And show through the financials, I'm really excited that we finally that and, you know, have everybody's hard work pay off. To your question about, you know, the opportunity ahead, you know, this was obviously a pretty big jump. I wouldn't expect to make these types of leaps down, but we do expect to continue to make progress in Q4 and into the year. There's still some opportunities. This wasn't one of those quarters where all the things went right that we needed to go right to materialize. There was some meat left on the bone, still some opportunity there. So, you know, to Perry's point, we continue to try to build faster. We still got some opportunities on the collection side to get our clients tightened up a little bit more there. And then on the payment side, we're getting more efficient. So really pleased with the progress. This is a model that is built to generate cash and we've been more consistent with that. In the last two quarters and continue to have high expectations going forward. Greg Kitt: Thank you. If I can maybe sneak in two more. One was it looks like your Monroe debt is a little more than five points more expensive than the PNC line. Would you if you could I don't know if you can. Would you prepay some amount of that 5 or $10 million to use more of your PNC line because you could save, you know, if you prepaid $10 million, you could save half a million dollars a year in interest. Or do you like having the flexibility to draw on the revolver if you need it? Brett Johnston: Well, it's a balance. We've created a lot more room. With the recent cash generation. So that's certainly positive. Regardless of what we wanna do though, we are restricted right now through Q1 is the earliest we could pay down. We have to hit some metrics. That the banks have established to be able to make that switch that you talked about. But certainly, I'd like to pay down more expensive debt as much as possible. Greg Kitt: Okay. And then my last thing was, I think last year, when something that was unusual for this business is Quest never really lost any material customers, and some of that was RWS related and then some of it was acquisition related. But as I start to think about next year, how do you feel about the renewals that you know that are coming? And how are you positioning to make sure that you're in front of those customers, you know, ahead of time today? Perry Moss: Yeah. I think we're in a really good position, Greg. This is Perry. You know, we're back to, you know, attrition at historically low levels. We're really, you know, we started by vastly improving the relationships we had with our vendors because I would argue that it needed improving. We're gonna put a whole new refocus on relationship building and process improvement with our customers. Our customers are very happy with our program, with our execution. So, you know, we're developing a new plan to begin the renewal process for contracts earlier than we have in the past. You know, our intention is to get contracts renewed well before the contract expires. Which maintains leverage for us. So, yeah, I think we've leveled off and our attrition will be, you know, back to historical low levels. Greg Kitt: Thank you very much for your hard work. Perry Moss: You're welcome. Operator: Your next question comes from Andrew Heffer with Pinnacle Capital. Please go ahead. Andrew Heffer: Yeah. I was wondering if you could talk a little bit more about, you know, the debt reduction. You guys are generating some significant sequential cash flow and what your goals for 2026 are and like, you just said the quarter one. Brett Johnston: Hey. This is Brett. Yeah. Just same follow-up, kinda following up on what we discussed with Greg. You know, we continue to look to pay down debt. Preference would be to pay down the more expensive. We can't do that until after Q1 at the earliest because of some of the restrictions. Currently in place. But we're excited about the cash generation. That's one of our stated short-term goals. Medium-term goals is to continue to pay down debt aggressively. We want to be able to fund, continue to fund certain strategic initiatives to help grow the business and create operating leverage with the business, and we'll continue to do that. In conjunction with paying down debt aggressively. Andrew Heffer: Do you have any goals set for 2026? To where you want your operational leverage? Brett Johnston: No. We haven't talked about that externally. Operator: Alright. Thank you. Andrew Heffer: Yeah. Operator: Thank you so much. There are no further questions at this time. I'm pleased to turn the call back over to Perry Moss. Perry Moss: Great. Thank you, operator. We've made significant improvements in the past two quarters during a very challenging macroeconomic environment. But we still have work to do. As I said in my comments today, we're focusing on individual KPIs and performance goals to ensure our team members are operating at optimal levels. We plan to drive incremental efficiency in our business. Our mission is continuous improvement in everything we do. So with that, thank you all for joining this afternoon. We appreciate your continued support and interest in Quest. And we look forward to updating you all next quarter. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. You may now disconnect.
Operator: Ladies and gentlemen, good afternoon. I'd like to welcome everyone to the Theravance Biopharma Third Quarter 2025 Conference Call. During the presentation, all participants session will follow the company's formal remarks. To ask a question, please mute audio on your webcast device before asking a question over the phone. I will repeat these instructions after management completes their prepared remarks. Also, today's conference call is being recorded. And now I'd like to turn the call over to Rick Winningham, Chief Executive Officer. Please go ahead, sir. Good afternoon, and welcome to Theravance Biopharma's Rick Winningham: Third Quarter 2025 Earnings Results Conference Call. On Slide two, you'll find our forward-looking statements disclaimer, which covers certain risk factors, which could cause actual results to differ materially from any forward-looking statements we might make in today's call and which are described further in our filings with the SEC. Moving to slide three, I'm joined today by Rhonda Farnum, Chief Business Officer, Aine Miller, Head of Development, and Aziz Sawaf, Chief Financial Officer. Turning to slide four, Theravance delivered strong results in the third quarter reflecting continued execution across the business and notable progress toward our strategic objectives. We achieved several key accomplishments including solid YUPELRI net sales growth, and record brand profitability, leading to the achievement of non-GAAP breakeven. Underscoring the strength of our business model and commitment to financial discipline. In parallel, we continue to advance the pivotal Phase III Cyprus trial of ampreloxetine towards a data readout in early 2026. A milestone we believe could represent a material value inflection point for the company. Starting with our commercial business, YUPELRI, our durable cash-generating asset continues to deliver strong results. Net sales and importantly, profitability for the quarter reached all-time highs. Driven by continued demand growth and favorable net pricing. This performance puts YUPELRI year-to-date sales on track to trigger a $25 million milestone from Viatris. With ampreloxetine, we are excited as we approach a critical moment for Theravance. We remain on track to deliver top-line results from the pivotal Phase III Cyprus study in 2026. We believe this readout has the potential to be transformational for both patients and the company. As we hope ampreloxetine will become the first precision therapy for symptomatic neurogenic orthostatic hypotension in patients with multiple system atrophy, a rare debilitating disease. In preparation for the data, we will host a KOL event for investors on December 8 to highlight the significant unmet medical need of these patients and how ampreloxetine aims to address it. We ended the quarter with approximately $333 million in cash and no debt. And importantly, we remain on track to achieve near-term milestones totaling $75 million in the fourth quarter. $50 million for Trelegy and $25 million for YUPELRI. In addition, the strong growth trends for Trelegy bode well for the achievement of the $100 million milestone in 2026. Lastly, in October, we launched a new disease education campaign for healthcare professionals to raise awareness and deepen scientific understanding of nOH associated with MSA. This initiative reflects our continued commitment to the MSA community and to advancing education on the complex mechanisms underlying nOH and MSA. Theravance today stands on a foundation of financial strength, with significant upside opportunity anchored by a robust balance sheet, continued cash generation from YUPELRI, and highly probable near-term milestone payments. We enter the final quarter of 2025 with confidence and growing excitement for the rapidly approaching transformational potential of the Cyprus data readout. With that, I'll turn the call over to Rhonda to provide additional detail on YUPELRI's performance. Rhonda? Rhonda Farnum: Thanks, Rick. If you turn to slide six, you'll see that the Theravance, Viatris commercial partnership delivered a record quarter for YUPELRI. Third quarter net sales increased 15% year over year to $71.4 million. This was driven by two main factors. First, strong demand growth, up 6% year over year versus 2024. And second, continued net price improvement due to a more favorable channel mix which is the result of the close collaboration with our partners at Viatris as exemplified by effective field sales execution with a focus on fulfillment optimization efforts. Importantly, following these results, only $54 million of net sales are required in the fourth quarter for us to achieve the $250 million calendar year sales threshold required to trigger a $25 million milestone payment from Viatris. Turning to Slide seven. In addition to our solid net sales growth, YUPELRI continued to experience expanding profit margins. Reaching record levels. And positive momentum across both hospital and community outpatient channels. The hospital channel continues to be a key driver of prescribing with hospital volume increasing 29% versus 2024. Illustrating our team's sustained success in securing formulary wins and implementing therapeutic interchange protocol. This quarter, YUPELRI share in the long-acting nebulized hospital market reached a new launch to date high of approximately 21%. Moving forward, our goal is to continue to secure institutional and further expand the hospital channel as a foundational component of our brand strategy, functioning as a critical entry point for transitioning patients to community outpatient maintenance therapy. Beyond the encouraging growth trends in Q3 with net sales demand, and hospital volume, YUPELRI is positioned for continued expansion with a sizable addressable population remaining in the US. Our aligned strategies with Viatris continue to deliver strong results specifically the adoption of concomitant use with LABA therapies and switches from handheld only regimens as well as further diversification of product fulfillment. We were also excited to share two analyses presented at the recent 2025 CHEST meeting. First, we presented new post hoc analyses from a phase three safety study showing that patients treated with YUPELRI experienced a lower incidence and severity of moderate to severe exacerbations compared to those taking tiotropium. The second presentation was a new retrospective cohort study of claims data which demonstrated that following hospital discharge, patients adherent to YUPELRI experienced significantly fewer and less severe exacerbations and lower health system costs than nonadherent patients. These findings reinforce YUPELRI's differentiated clinical profile and highlight its potential to improve both clinical and economic outcomes for appropriate COPD patients. Further reinforcing the scientific foundation of YUPELRI. In summary, YUPELRI's profit margin continues to expand supported by disciplined execution, and patent protection in the US until 2039. As a result, we are confident that YUPELRI will continue to deliver long-term sustainable value for Theravance and its shareholders. With that, I'll turn the call over to Aine to provide an update on the etine development program. Aine? Thanks, Rhonda. Turning to slide nine. Before providing an update on the Cyprus Aine Miller: study, I'd like to highlight some recent ampreloxetine publications and presentations. First, we submitted a manuscript detailing the results of the prior phase three REDWOOD study, in the MSA subgroup. Where ampreloxetine demonstrated durable improvement in symptoms of nOH. I will take the opportunity to provide a quick recap of this data shortly, as it reinforces our confidence in ampreloxetine's mechanism of action and its potential to deliver meaningful benefit to patients with MSA. A community that remains underserved by current treatment options. A preprint version of this manuscript has been posted online to MedArchive. Second, a publication establishing the minimally clinically important difference for the orthostatic hypertension questionnaire was published in a peer-reviewed journal Clinical Autonomic Research. An important tool to support interpretation of clinical benefit as we head into the phase three Cyprus readout. Additionally, we had a strong presence with the recent international support Symposium of Autonomic Nervous System, organized by the American Autonomic Society or AAS. Where we had one platform presentation and three posters. The platform presentation highlighted the results from the prior phase three REDWOOD study in the MSA subgroup analysis. Along with a poster reviewing the impact of ampreloxetine on two-point hypertension in the phase three SAQIAH study which showed no worsening of supine hypertension and important potential differentiator for the product. The two other poster presentations detail the rigorous recruitment and retention methodologies used to address challenges in conducting a trial in rare disease with severely ill patients. By applying these insights in the Cyprus study, we were well positioned to successfully address the executional challenges associated with clinical studies in rare and severe neurodegenerative diseases. As I mentioned earlier, I'd like to recap the results from the subgroup analysis of patients with MSA from the Wedgewood study shown here on slide 10. The top graph shows the standing systolic blood pressure throughout the REDWOOD trial where a pressure effect was observed in the open-label phase of the trial with blood pressure at three minutes of standing increasing compared to baseline. At the end of the randomized withdrawal, compared to the open-label, blood pressure at three minutes of standing dropped in the group withdrawn to placebo while remaining stable in patients that stayed on ampreloxetine. This increase in standing blood pressure observed with ampreloxetine translated to a meaningful impact on patient symptoms and daily activities. However, the benefits seen in symptoms and short-term daily living activities shown in the two bottom graphs were only maintained in patients who remained on ampreloxetine the randomized withdrawal portion. But worsened in those withdrawn to placebo. Moving to Slide 11. We continue to make strong progress towards our pivotal Phase III Cyprus readout. At this stage, the open-label portion of the study is now complete, and a small subset of patients are now completing the randomized withdrawal portion. An important step towards completion of the trial. The team continues to demonstrate excellent operational execution and we are highly encouraged by the level of engagement across our study sites, and the broader MSA community. We remain on track to deliver top-line results in 2026. And we view this as a significant milestone for Theravance. As we advance our efforts to bring ampreloxetine to patients with MSA-related nOH. We've also made substantial progress on NDA preparation particularly across the nonclinical, CMC and clinical pharmacology components of the application. Much of this work has already been completed, positioning us to incorporate the Cyprus data quickly once available and move efficiently towards an expedited NDA submission. Should the results be positive. We also intend to request priority review if the data are supportive. Lastly, in preparation for the upcoming readout, we will host a virtual KOL event for investors on December 8. Which will feature Dr. Horatio Kaufman, professor and director of the Dysautonomia Center at NYU. One of the world's leading experts in autonomic disorders. During this event, Dr. Kaufman will provide an overview of the unmet need for patients with MSA-related nOH. And we'll highlight why we believe ampreloxetine is uniquely positioned to address this rare and debilitating condition. In addition, we will review the ongoing Cyprus study, and outline the commercial opportunity for ampreloxetine as a potential new treatment option. We are excited and well prepared as we approach the Cyprus data readout in 2026. With that, I'll turn the call over to Aziz to walk through the financials. Aziz? Aziz Sawaf: Thanks, Aine. Turning to Slide 13, I'll start with an update on our Trelegy milestones. GSK reported $1 billion in sales for the quarter ahead of consensus and $2.9 billion year to date. Given the $3.4 billion threshold required to Rick Winningham: trigger the $50 million milestone in 2025, we need only $470 million in Q4 sales to hit this milestone. Which is roughly 50% below the current run rate. Looking ahead, the $100 million milestone in 2026 is also well within reach. With a $3.5 billion sales requirement. A level that both current run rate and consensus comfortably exceed. With Trelegy continuing to post strong above expectation performance, we have clear visibility into achieving these milestones. Which together represent $150 million in expected cash inflow over the next fifteen months. Further strengthening our financial position. Turning to Slide 17, I'll summarize our Q3 financial performance, where we delivered another strong quarter. Collaboration revenue increased to $20 million up 19% year over year. Reflecting YUPELRI's strong operating leverage, which drove record brand level profitability. Operating expenses, excluding share-based comp, were $22 million as R&D costs began to decline following completion of Cyprus enrollment, while we progress towards data readout in the first quarter of next year. Share-based comp decreased 8% year over year, reflecting continued cost discipline. Our GAAP net income was positive in the quarter. Aided by a nonrecurring benefit due to a favorable true-up related to taxes from the Trelegy royalty sale in Q2. However, driven by YUPELRI's profit contribution, and continued expense discipline, we also achieved non-GAAP profit breakeven in the quarter. Given that this metric excludes one-time items, such as the income tax benefit, and more accurately reflects the underlying performance of our operations. We ended the quarter with $333 million of cash and no debt. Lastly, turning to Slide 18, I'll cover our 2025 financial guidance. First, we are reiterating all expense guidance ranges. in Q3, Second, given that we achieved breakeven on a non-GAAP based again excluding one-time items, we now expect results to remain broadly consistent in Q4. So there can always be normal quarterly variability. This guidance reflects our continued focus on operating leverage and cost discipline. Importantly, this outlook excludes the $75 million of milestones expected to be earned in Q4. $25 million for YUPELRI, which will be recognized as revenue and $50 million for Trelegy, which will be recognized as other income, not revenue. Note that while we expect these milestones will be earned in Q4, we'll receive the cash in 2026. In summary, Q3 was another step forward for Theravance. We delivered record YUPELRI performance, achieved breakeven on a non-GAAP basis, and further strengthened our balance sheet. Setting the stage for a potentially transformational 2026 with continued financial discipline and a clear focus on value creation. With that, I'll turn it back to Rick to conclude. Rick? Rick Winningham: Thanks, Aziz. To summarize on slide 19, Theravance enters the final stretch of 2025 with strong momentum. Driven by a profitable commercial business, a robust balance sheet and clear visibility into near-term milestones that will further strengthen our financial profile. YUPELRI continues to be a key driver of that performance, with sustained growth and increased profitability highlighting the durability and long-term value of the franchise. We remain confident in the execution of the Cyprus study and in ampreloxetine's potential to become the first precision therapy for patients with MSA who suffer from nOH. With Cyprus results expected in 2026, we are now approaching a significant moment for the company. This readout represents a transformational catalyst with meaningful upside potential more profitable YUPELRI franchise and strong financial position provides downside protection. Creating a compelling risk-reward profile as we approach the data. As we move into 2026, we do so with focus financial strength, and confidence in the opportunities ahead. And with that, we'll open the line for questions. Operator: Operator? Rick Winningham: Thank you, sir. Operator: Our first question for today comes from the line of Douglas Tsao from H. C. Wainwright. Your question please. Hi, good afternoon. Thanks for taking the question. Douglas Tsao: I guess Rick, just, given, you know, sort of the continued outperformance we've seen in Trelegy and you know, the likelihood of some additional cash coming in. How are you thinking about right now? You know, you've talked about the special committee committed to returning capital to shareholders, but you know, how much do you potentially need to sort of keep in house for the potential launch of ampreloxetine? Rick Winningham: Yes. Good question, Doug. I think, the obviously, the financial strength of the company is one of the one of its key elements of value. We you know, continue to view the cash on the balance sheet and the strategic review committee looks at the timing and the optimum amount, of returning capital. And if we do return again, you know, how much and when. The obviously, ampreloxetine's launch will be a fairly efficient launch in a rare disease. Not creating you know, a substantial burden. On the P&L, but nonetheless, triggering up expenses. I think for the company, and the board, what we're focused on right now because we are so close is in fact the execution of the Cyprus study through the top-line results and getting those top-line results and then making future decisions, future decisions for the company you know, on capital and capital return, etcetera, because of the as was stressed in this call, the very important nature you know, of that data. But importantly, we're in a position of financial strength, giving us terrific opportunities going forward to you know, to return capital to shareholders if that's what the board desires to do. Douglas Tsao: And I guess as a follow-up, when we think about the company over the last several years, you've obviously sort of narrowed your focus. Obviously, you know, we're sort of almost, you know, sort of dual goals of maximizing the opportunity with YUPELRI as well as executing on the ampreloxetine study. I guess when we think about the company over the long term, you know, are there pipeline assets? I mean, there were several assets, which I think some people, you know, were interesting. But sort of were put on pause. And I guess, is that ever sort of come back into the equation just given you know, you noted the sort of operational as per sort of the efficiency in launching ampreloxetine. I mean, that could just bring significant capital into the company and sort of change your position. Rick Winningham: Yeah. I think that's know, I'm again, to kind of go back to my central theme, and I think the central theme for the management and the board which is the focus on, you know, the focus on Cyprus and the focus on ampreloxetine clinical success that sets up a successful launch of the product. At that point in time, know, once we get post ampreloxetine and post success, we'll evaluate, evaluate options. I think you know, we not only need ampreloxetine success clinically, but a pathway which we believe we have as long as we you know, hit a clinically meaningful result in the Cyprus study to approval. And I think as we're going through that, obviously look at the options and the alternatives to maximize shareholder value. But, again, I'd say right now, given relatively small organization that we've got, you know, a 110% of our focus as you rightly point out, is on growing YUPELRI growing YUPELRI in a you know, in an effective way to drive additional profitability and finishing ampreloxetine clinical study and setting it up for commercial success. I think once we achieve those objectives, then we have time or intellectual space to work on other things that may increase the value increase shareholder value because I do believe you're right and that ampreloxetine being a rare targeting a rare disease that has the opportunity for, you know, a significant value inflection for the company. Douglas Tsao: Okay. Great. Thank you. Operator: Thank you. And our next question comes from the line of Julian Harrison from BTIG. Your question please. Julian Harrison: Hi, congrats on the quarter and thank you for taking the questions. First, I'm curious to what extent that recently published manuscript detailing the MCID for the OHSA composite score informs your expectations for top-line Cyprus data first quarter of next year. Any other comments on what you think a win on data would be, would be helpful as well. And then the YUPELRI data at Chestnut fantastic. Thinking about that, Samar, I'm wondering if you could talk more about how these results are supportive of YUPELRI new patient starts at the hospital call point. Rick Winningham: Hey. Rhonda, do you wanna take the chess presentations and we'll come back to Aine? And myself for ampreloxetine. Rhonda Farnum: Absolutely. Thanks, Julian, for the question, and thanks for recognizing the data. That were recently presented. Certainly, having data of this nature relative to both highlighting clinical outcome which is quite meaningful, as well as reduction in healthcare and health system cost are crucial. Knowledge points for the brand. I would say the team is first focused on ensuring we get those new data into manuscript form. And then we'll be able to think about, you know, other communications and educational efforts around these data. They certainly help further substantiate what is already an element of how and why we sell into the hospital space so they are very nicely kind of putting a bow on top of the package we already use promotionally. So we'll see in the future if these are used in kind of more expanded fashion, if that makes sense. Rick Winningham: So that's the exacerbation, data. Yeah. Very important. And again, you know, versus, versus tiotropium to you know, add to really the medical education efforts that we've got ongoing. With YUPELRI in both the community and the hospital. And that was on ampreloxetine and minimally clinically important difference in, you know, this publication is important to us because you know, effectively, a one-point difference for us is will be in the composite score will be a this kind of the minimally important difference that we need to see, in Cyprus. We obviously saw that in one seventy And Aine can touch on the steps we've taken to make sure one seventy is replicated by Cyprus. So, Aine? Aine Miller: Yeah. So thanks, Julian. I would encourage you to take a look at the publication. It is available online. There's open access to article. The article was based on the data that we have previously seen in 01/1970 and 01/1969. Looking at changes in the OHSA questionnaire, which is central, obviously, also to the Cyprus study, And, really, it was based on an anchoring analysis between changes on the scale to how patients actually felt using other scales that we've included in the study, PGI G and PGIS. We've proactively built this analysis into the Cyprus study. And from what we have seen in our previous analysis and you'll see in this publication, as Rick said, a one-point change on the scale is considered clinically meaningful. You know? And our objective with the Cyprus study is obviously to replicate the previous benefit that we had seen in the one seventy study. Where we did see that level of change. And believe that's clinically significant. And, obviously, this information is important to the overall outcome of the study and will be part of the regulatory submission. We've also had FDA review our analysis plan around the study and this anchoring analysis and feel like we're in a really good position as we move into the Cyprus readout in the first quarter of next year. Julian Harrison: Very helpful. Thank you. Operator: Thank you. And our next question comes from the line of Ellen Horste from TD Cowen. Your question please. Ellen Horste: Hi guys. Thanks for taking the question and congrats on the exciting quarter and the progress in the Cyprus study. My question is about Cyprus. So with the open-label portion complete, can you share how many patients have ultimately enrolled in the randomized withdrawal portion? And if not, can you confirm that this number is sufficient for the powering according to the original trial design? Thank you. Aine Miller: So as I said in my remarks, you know, we're really encouraged with how the study has progressed and where we've landed in terms of overall enrollment numbers. While we're not sharing specific enrollment numbers today, will say that we remain very confident in the operational execution I'm pleased with where we have landed in terms of accrual, but most importantly, also progression into the randomized withdrawal portion of the study. We do believe that we have randomized a sufficient number of patients us to be able to detect a treatment difference between the two arms. Just as a reminder, the study design and the analysis plan for the Cyprus study has been aligned with FDA, and we believe that we had a have an adequately powered study and we'll be disclosing all the specific numbers in the context. Of our data readout, which is coming really soon, and we are excited about what's to come in quarter one 2026. Rick Winningham: And then, Ellen, just the schematics. You know, that we've outlined as a part of our ongoing investor presentation. You know, on the study. You know, remains you know, remains accurate relative to you know, what we need what we are what we needed to achieve and what we are achieving with the study design. And execution. Ellen Horste: Thank you. That's really helpful. Rick Winningham: Okay. Operator, do we have any further questions? Operator: It appears that we do not have any further questions coming in from the operator. So I will just take this opportunity to thank you for joining, on our call. Third quarter call. We're very pleased with the results this year. Today, we look forward to very good fourth quarter. And then the exciting, first quarter in 2026. Headline by, by the Cyprus data. So thank you again very much for joining, and please have a good day. Jonathan: Goodbye.
Emmanuel: We'll begin momentarily. Hello, everyone, and welcome. We will begin momentarily. Hello, everyone, and welcome to PubMatic, Inc.'s third quarter 2025 earnings call. My name is Emmanuel, and I will be your Zoom operator today. Thank you for your attendance today. As a reminder, this webinar is being recorded. I will now turn the call over to Stacie Clements with the Blueshirt Group. Stacie Clements: Good afternoon, everyone, and welcome to PubMatic, Inc.'s earnings call for 2025. This is Stacie Clements with The Blueshirt Group, and I will be your operator today. Joining me on the call are Rajeev K. Goel, Co-Founder and CEO, and Steven Pantelick, CFO. Before we get started, I have a few housekeeping items. Today's prepared remarks have been recorded, after which Rajeev and Steve will host a live Q&A. If you plan to ask a question, ensure you set your Zoom name to display your full name and firm and use the raise hand function located at the bottom of your screen. A copy of our press release can be found on the website at investors.pubmatic.com. I would like to remind participants that during this call, management will make forward-looking statements including, without limitation, statements regarding our future performance, market opportunity, growth strategy, and financial outlook. Forward-looking statements are based on our current expectations and assumptions regarding our business, the economy, and future conditions. These forward-looking statements are subject to inherent risks, uncertainties, and changes in circumstances that are difficult to predict. You can find more information about these risks, uncertainties, and other factors in our reports filed from time to time with the Securities and Exchange Commission, and are available at investors.pubmatic.com, including our most recent Form 10-Ks and any subsequent filings on Form 10-Q or 8-Ks. Our actual results may differ materially from those contemplated by the forward-looking statements. We caution you, therefore, against relying on any of these forward-looking statements. All information discussed today is as of 11/10/2025, and we do not intend and undertake no obligation to update any forward-looking statement, whether as a result of new information, developments, or otherwise, except as may be required by law. In addition, today's discussion will include references to certain non-GAAP financial measures, including adjusted EBITDA, non-GAAP net income, cash flow from operations, and free cash flow. These non-GAAP measures are presented for supplemental informational purposes only and should not be considered a substitute for financial information presented in accordance with GAAP. A reconciliation of these measures to the most directly comparable GAAP measures is available in our press release. And now I will turn the call over to Rajeev. Rajeev K. Goel: Thank you, Stacie, and welcome, everyone. We delivered a stronger than expected quarter with revenue and adjusted EBITDA ahead of guidance as well as strong cash flow, demonstrating the power of our platform, continued diversification of our business, and our accelerated pace of innovation. CTV significantly outpaced the market rate of growth and grew over 50% year over year, excluding political, driven by increased premium supply, continued scaling of agency marketplaces, traction in our live sports marketplace, and growth of small and mid-market advertisers. Emerging revenues grew over 80% year over year as sell-side targeting and newly AI solutions quickly ramped. We also strengthened our end-to-end platform with cutting-edge AI innovations that are deepening our competitive moat and unlocking measurable incremental revenue opportunities. The industry is rapidly redefining itself, and we are actively shaping its future. The impending Google AdTech remedies verdict will very likely shift market share. The prioritization of data targeting and performance is shifting value creation in the ecosystem to the sell side. Over the past few months, we've seen a groundswell of AI-driven innovation reshaping the entire ecosystem. AI is now at the center of every strategic conversation, whether the objective is advertising performance, transparency, or automation. As an early adopter of AI, our leadership is a defining advantage for us and will grow over time. We continue to innovate with an AI strategy centered around three distinct layers of programmatic advertising: the infrastructure layer, the application layer, and the transaction layer. For the infrastructure layer, we own and operate our full technology stack, giving us the efficiencies, control, and independence that many of our peers don't have, evidenced by multiple recent public cloud outages. Through our technical collaboration with NVIDIA, we are deploying next-generation AI models on the world's most advanced GPU architecture. Five years in the making, this collaboration required three ingredients: physical infrastructure capable of deploying GPUs at scale, massive transaction volume to test and optimize across the full open internet, and technical sophistication to be an early adopter. Today, our infrastructure is a clear differentiator we believe years ahead of peers. The business impacts are tangible: 5x faster bid responses and 85% fewer auction timeouts, all recovering millions in ad spend. These results close the infrastructure advantage of walled gardens and directly translate into advertiser performance with higher publisher yield. Looking ahead, as autonomous AI agents begin planning and negotiating ad campaigns, industry compute requirements are expected to grow dramatically. These early investments only widen our infrastructure advantage as legacy players are constrained by cloud and computing limits. This is the monumental shift for open Internet digital advertising that PubMatic, Inc. has been building for. Next, at the application layer, we're deploying some of the most exciting and innovative capabilities we've ever launched, embedding AI directly into our products to power intelligent workflows and decision automation. We launched AI-powered buyer and publisher platforms that now handle more complexity with significantly less manual effort. Our solutions cut campaign setup time by 87% and speed up issue resolution by 70%, translating directly into faster activations, higher productivity, and better outcomes for our customers. Independent agency Butler Till has been using our AI-powered PubMatic for buyers platform. Scott Ensign, their chief strategy officer, said, and I quote, "Historically, systems don't talk to each other. Data sets are disparate. Walled garden data is hard to connect. AI allows us to scale human reasoning and run campaigns that truly look across all channels and optimize across them. Working with PubMatic for buyers helps make that possible." End quote. This same enthusiasm is building on the publisher side. Our newly launched publisher suite already includes 17 operational AI agents guiding yield, diagnostics, and creative setup. Customer feedback has been exceptional. One of our largest omnichannel partners, Overwolf, told us that the PubMatic Assistant AI chatbot is unique with respect to the accuracy and speed of execution. And finally, at the transaction layer, we're preparing for the next major step: agentic AI, where advertisers' and publishers' AI agents will be able to transact directly through our infrastructure. We are a co-founder of the newly established AdContext Protocol or ADCP, alongside partners like Yahoo, LG Ad Solutions, and Raptive, and the first to publish a model context protocol specification for agent-to-agent communication in the programmatic industry. Establishing the protocols, safety mechanisms, and interoperability standards will enable AI agents across the entire ecosystem to transact efficiently and securely. With this three-layer strategy—infrastructure, application, and transaction—we are building the complete system for agentic AI to drive on and the traffic laws to govern it all. While still in early days, we are already seeing material benefits. First, AI is driving increased platform usage. As we roll out new generative AI and agentic AI features across our platform, customers are able to launch campaigns and resolve issues faster and improve performance. Validating our leadership in AI, customers have repeatedly said they are not seeing this level of innovation from other companies in the industry. Second, AI solutions are generating new revenue streams. One example is our new AI-based yield optimization solution for publishers, which uses adaptive learning models to automate pricing and improve auction efficiency. This AI solution is driving growth for our publishers, increasing their revenue on average by 10%. Launched just a few months ago, it has already unlocked tens of millions of dollars in incremental revenue for our publishers, and in turn is generating new PubMatic, Inc. revenue as part of our emerging revenue category. And third, AI is improving our operational efficiency and profitability. In the last two months, we deployed a dozen AI agents internally to automate operational workflows, accelerate development, and reduce overhead. Our goal is to deploy substantially more agents in the coming quarters to give us measurable margin leverage while we continue to invest and strengthen our long-term moat. Looking ahead, despite the significant progress we have made, we believe we're just scratching the surface. AI will continue to drive higher usage across our platform, generate incremental revenue streams, and improve operational leverage. And because we're investing across all three layers, PubMatic, Inc. is poised to lead the next era of agentic AI advertising. While AI is a powerful driver of our long-term growth strategy, it's equally important that we execute across the four other strategic priorities I outlined last quarter. I'm pleased to report that we're making significant progress in each of those areas. First, we're broadening our demand-side ecosystem and accelerating our pipeline. We expanded a top-three DSP partnership, introducing programmatic guaranteed deals that streamline execution for advertisers across premium streaming content. This integration reduces friction in deal setup, accelerates time to market for campaigns, and unlocks incremental budgets. A great example of how our relationships with global DSP partners are becoming more strategic as we diversify beyond the legacy DSPs. We also launched a new partnership with Bliss, an omnichannel DSP that brings high-value demand from leading global brands across automotive, retail, and financial services. Bliss combines T-Mobile's app engagement data with real-world movement patterns and transaction signals to drive performance-focused campaigns with measurable outcomes, from brand awareness to store visits and sales. This partnership expands our reach into premium brand advertisers who prioritize full-funnel measurement and offline attribution. These mid-market-focused DSPs like Bliss represent one of the fastest-growing advertising segments. In Q3, ad spend from this segment grew 25% plus year over year, reflecting meaningful progress in our diversification strategy. Second, we're accelerating our investment on the buy side. We're extending our reach with independent agencies and direct advertisers, expanding our focus from the top 20 agencies to the top 150, and from the top 500 advertisers to approximately 1,500. Supply path optimization remains a key growth driver, with the majority of this addressable market as a greenfield opportunity. SPO represented over 55% of activity on our platform in Q3. As a pioneer in SPO, we are the leading incumbent offering scale and a rich history of performance and efficiency gains. Building on this momentum, we are onboarding more buyers onto Activate, our direct-to-supply buying platform. Over the first nine months of the year, the number of active campaigns grew more than 4x over last year, with a 35% increase in customers. Activate is a key solution that enables the ecosystem-wide push for increased transparency and efficiency of programmatic advertising. And this is only the beginning. We've begun integrating AI-powered agent-to-agent workflows into Activate to boost performance and reduce friction, making advertiser adoption even easier. We believe that this new technology could have a massive impact on Activate adoption over the medium term as we accelerate investment in mid-tail buyers. Finally, we continue to deepen our integration with DSPs to create value beyond real-time bidding transactions. We are the first SSP to integrate the Trade Desk's price discovery and provisioning API, which allows publishers and advertisers to share deal metadata between our platforms and better identify and resolve issues with underperforming deals in real time. Today, over 50% of programmatic deals sit dormant because this information was previously only available offline. We anticipate this innovation will accelerate our share of PMP and PG deals as we drive adoption together with The Trade Desk. Third, our momentum in Activate is also fueling our growth in CTV. Excluding political advertising, CTV revenue grew more than 50% year over year. The format remains a primary growth engine for our business. Live sports is an especially exciting category. Buying activity rose more than 150% sequentially from Q2 to Q3 as we scaled our AI-powered live sports marketplace and launched new programmatic guaranteed deals around tentpole events like the US Open for Tennis and Monday Night Football. We also continue to expand our CTV publisher footprint. New deals and expanded partnerships with a number of free, ad-supported streaming services, including Tubi, Future Today, and Local Now, added to a strong roster with over 90% of the top 30 global streamers now on PubMatic, Inc. We offer these premium content streamers incremental ad demand that other platforms can't offer because of the scale of our SPO, Activate, Curation, and Commerce businesses. For example, Fremantle, one of the world's largest entertainment content creators behind franchises like American Idol, America's Got Talent, and The X Factor, generated a 78% increase in incremental programmatic demand across their expanding fast channel portfolio by partnering with PubMatic, Inc. This is a remarkable outcome and highlights the significant incremental ad revenue our platform generates for our partners. Additionally, we are expanding ad formats on our platform. In collaboration with Dentsu, we recently launched PozAds for CTV through Activate. Advertisers can now serve dynamic, contextually relevant ads when viewers pause content, representing a premium brand-safe moment that boosts engagement and yields incremental revenue for publishers. What's more, with $155 billion of ad dollars still in linear television, we believe our CTV business has a long runway for growth given the scale, performance, and ad formats now available for buyers on PubMatic, Inc. And fourth, we're making significant progress in scaling our emerging revenue streams, which grew over 80% year over year in the third quarter. Commerce media continues to gain momentum. We continue onboarding and scaling with some of the world's leading retailers and enterprise businesses as they seek to activate and monetize their first-party audience intelligence. These partnerships are expanding our reach beyond the traditional impression model, generating platform fees and database monetization that accelerate revenue growth. Sell-side curation is another fast-growing emerging revenue stream. We expanded partnerships with leading data providers around the world. Nielsen, for example, tapped PubMatic, Inc. as their exclusive sell-side partner to bring their more than 10,000 audience segments to Australian advertisers and agencies. Together with the previously mentioned AI yield solution for publishers, these initiatives drive incremental high-margin revenue that is scaling quickly. In closing, our results demonstrate the power of our differentiated business model. We continue to innovate, diversify our business, and operate with discipline. We are leading from a position of strength. We're confident that the investments we're making today, particularly across the three layers of our AI strategy, are expanding our competitive advantage while creating sustainable profitable growth over the mid to long term. All of this is happening alongside a once-in-a-generation shift in digital advertising that will likely result in the competitive landscape being reshaped, where even a modest share shift could unlock substantial incremental high-margin revenue for us. Given our owned and operated infrastructure, PubMatic, Inc. is not only positioned to adapt, we are helping define what comes next. We have the technology, the talent, and the financial foundation to build a more intelligent, efficient, and enduring business that creates lasting value for our customers, partners, and shareholders. Let me now turn the call over to Steve. Steven Pantelick: Thank you, Rajeev, and welcome, everyone. We exceeded expectations on both revenue and adjusted EBITDA. This outperformance was driven by CTV combined with stronger than expected year-over-year growth for online video and mobile app. We managed expenses, leveraged AI, and delivered improved margins and strong free cash flow. Stepping back, it is important to call out that our efforts to transform our business started several years ago as we anticipated the value of the ecosystem shifting to the sell side. We built an end-to-end solution that prioritizes control, performance, and transparency while recognizing the need to diversify our business and unlock new paths to monetization. Today, over 40% of our revenue is derived from CTV, mobile app, and emerging revenue streams, which represent long-term value for our business, up from less than 30% two years ago. Further, these efforts directly benefit our profitability and enable continued innovation and investment in the business. Turning to the quarterly results, starting with the revenue breakdown. To provide apples-to-apples comparability, year-over-year growth rates for video are adjusted to exclude political ad spend. On that basis, total omnichannel video revenues grew 21%, underscoring the strength of our premium video portfolio and growing adoption of AI-powered optimization across formats. Within this category, CTV once again grew over 50% year over year, driven by the success of our live sports marketplace and growth in programmatic guaranteed deals across expanding buyer relationships. We monetize CTV inventory from over 90% of the top 30 global streamers. Omnichannel video contributed approximately 38% of total revenue in Q3 2025. Emerging revenue streams continued their high growth trajectory, growing over 80% year over year, scaling to 10% of total revenue in the third quarter. This growth represents incremental durable revenue streams beyond our core sell-side platform capabilities. Most notably, year-over-year revenue from Activate grew over 100%, and our Curation and Databases Connect grew over 40%. Based on the results we are seeing, we will continue to invest for incremental growth opportunities that diversify our revenue, like the new AI-driven product capabilities for publishers that are already showing meaningful traction. The growth across these key secular areas helped offset the impact from lower spend by a large DSP we identified last quarter. Following our optimizations and integration adjustments by SPO partners, spend stabilized from this DSP in August and September, resulting in a lower but steady run rate. As anticipated, display revenue was down minus 5% year over year and was the format most affected by the DSP impact. Excluding this DSP, display grew in the low single-digit percentages. With respect to Q3, ad spend across the top 10 verticals, in aggregate, grew in the single-digit percentages year over year. Health and fitness, personal finance, and technology each increased over 15%. We saw softer trends in business and automotive, which declined in single-digit percentages in the quarter. Ad spend from our mid-tier DSP partners grew over 25% year over year in Q3. Importantly, our AI-driven buyer platform is resonating well with performance-focused buyers across CTV, mobile app, and e-commerce verticals, and we believe lays the foundation for sustainable growth in the quarters ahead. We anticipate that new buyer relationships like Bliss and Mountain will bring incremental ad demand across our wide portfolio of verticals. Regionally, APAC and EMEA revenues grew plus 12% and plus 7%, respectively, offsetting a minus 14% decline in The Americas, which was primarily due to spend declines from a large DSP buyer. Moving on to our operating priorities. We continue to invest and reallocate resources to the highest return areas of the business. As Rajeev noted, we're seeing strong growth across our DSP mix and within Activate as customers increase usage and new products drive incremental revenue. Our focus on generative AI is also improving operational agility, streamlining internal workflows, and allowing us to redirect resources towards growth initiatives without adding structural cost. This efficiency has allowed us to expand our sales team, focus on buyers, grow spend from existing partners, and onboard new partners. We are making great progress integrating with the fast-growing mid to long-tail segment, and so far in 2025, we've added over 25 new DSP partners. All of these efforts help us counter the near-term headwinds from legacy DSPs and further diversify beyond the top five as I described last quarter. Core to our long-term strategy is being nimble in identifying opportunities and then executing rapidly to capitalize on them. We have achieved this while managing our costs and consistently delivering profits in many different environments. The foundation of this approach is expanding our capacity and driving down our unit costs. We processed approximately 87 trillion gross impressions in Q3, a 24% increase over last year, and a 12% sequential gain versus Q2. Nearly 60% of total impressions were from CTV and mobile app inventory, highlighting our increasing focus on high-engagement channels. Further, the increase in impressions is highly leveraged over a fixed cost base. Over a trailing twelve-month basis, unit cost in the third quarter declined 19% over the comparable prior year period. In terms of operating expenses, our investments in AI to drive operational efficiency are yielding measurable results. Year to date, every quarter, we have successfully kept our total operating expenses roughly flat at $51 million while realigning investments to the areas that deliver the strongest ROI. This allows us to scale profitably even as we invest ahead of growth. For example, we increased our buyer-focused sales team by 19% in Q3 compared to the prior year, while the overall total headcount was flat. This disciplined approach enables us to deliver our thirty-eighth straight quarter of adjusted EBITDA profitability. This is a track record few companies in our sector can match. Q3 adjusted EBITDA was $11.2 million or 16% margin, which included foreign exchange costs of approximately $1 million due to the weakening US dollar over the quarter. U.S. GAAP net loss was minus $6.5 million or minus $0.14 per diluted share. Moving to cash and our capital allocation. Our balance sheet remains a core strategic advantage. In the third quarter, we generated $32.4 million in net operating cash flows and free cash flow of $22.8 million. In addition to efficient working capital management, there were two other factors that improved our cash flow for this period. A DSP that had made changes in mid-2024 returned to growth in Q3, which favorably improved our DSOs. There was also a reduction in cash tax paid because of the new federal tax bill that went into effect earlier this year. To underscore our long-term ability to generate cash, since the beginning of 2021 through Q3, we have generated over $390 million in net cash from operations, and more than $215 million in free cash flow. We ended the quarter with $136.5 million in cash and zero debt. Given the strength, we continue to deploy our capital to shareholder value. Since the inception of our repurchase program in February 2023 through Q3, we have bought back $12.4 million Class A common shares for $180.6 million. We have $94.4 million remaining in our repurchase program authorized through 2026. This program, combined with our ongoing investments in AI innovation, reflects a balanced approach to capital allocation and a commitment to long-term shareholder value. Turning to our Q4 outlook, we anticipate strong growth in secular areas of the business, including double-digit growth for CTV when excluding political advertising, and 30% plus growth for emerging revenues. As a reminder, Q4 2024 political advertising represented about 12% of revenue, nearly 80% of which was via CTV. In terms of the latest trends in October, the typical holiday seasonal uptick thus far has been relatively muted for some consumer discretionary ad verticals, such as food and drink and arts and entertainment. Accordingly, we are taking a prudent approach to guidance based on the latest trends. We expect Q4 revenue to be in the range of $73 million to $77 million. As it relates to the large DSP that declined in July, we are assuming its associated revenue to be flat in Q4 relative to Q3. We anticipate Q4 operating expenses to be similar to Q3's level as AI-driven efficiencies continue to offset selective investments in our sales team. Q4 adjusted EBITDA is projected to be in the range of $19 million to $21 million, which also factors in continued weakness of the US dollar. For the full year, we expect revenue to be in the range of $276 million to $280 million and adjusted EBITDA to be in the range of $53 million to $55 million, inclusive of more than $5 million of estimated negative FX impact. We are maintaining our full-year CapEx projection at $15 million, which is a year-over-year reduction made possible by AI-driven optimization efforts. In closing, our Q3 results highlighted the durability of our financial model and validate the progress we are making behind our business transformation. Looking ahead, we are confident in our robust multifaceted strategy. Our AI-first end-to-end platform is driving measurable results. We're adding new revenue streams, expanding our SPO relationships, and rapidly diversifying our DSPs in line with future growth opportunities in commerce, performance CTV, and mobile app. With respect to potential remedies in the Google AdTech antitrust trial, we continue to believe that any remedies that level the competitive playing field, whether structural, behavioral, or both, benefit the open Internet and PubMatic, Inc. In 2026 and beyond, as revenue growth reaccelerates, we anticipate margin expansion in both the gross and adjusted EBITDA levels because of our efficient and leveraged business. Our decade-plus experience owning and operating our global private cloud infrastructure has given us several advantages. First, it has enabled us to expand capacity while at the same time progressively reduce our rate of CapEx and drive down unit costs through optimization initiatives. Second, it's allowed us to invest early on in next-generation technology with NVIDIA. Today, our infrastructure is a clear differentiator with investments well ahead of our peers that will continue to drive efficiencies and business impact. We're also continuing to leverage AI to drive efficiency and increase our team's productivity. We anticipate total headcount will remain relatively flat in 2026, while investments supporting our fastest-growing areas of our business will continue to increase through internal reallocations. And finally, we're also laser-focused on free cash flow generation and aim to increase cash flow next year supported by further working capital improvements and incremental AI-driven efficiencies. Collectively, we believe our efforts will lead to a return to double-digit revenue growth in the future. With that, I'll turn the call over to Stacie for questions. Stacie Clements: As a reminder, you can ask a question by raising your hand located on the dashboard, or if you're on your phone, please press 9. In the interest of time, we ask that you please limit your question to one and one follow-up. With that, the first question comes from Andrew Boone at Raymond James. Please go ahead, Andrew. Andrew Boone: Hi. Can you hear me now? Rajeev K. Goel: Yes. We can. Andrew Boone: Okay. Thanks. Rajeev, if you can maybe expand a bit on the topic of SPO and some of the recent moves companies like The Trade Desk have made, kind of leaning into OpenPath, launching open ads, and declaring all SSPs as resellers. But then on the other hand, the two of you are collaborating on that data ID management API. So I guess since we last spoke last quarter, how would you characterize the state of play there? And then I have a follow-up for Steve. Rajeev K. Goel: Sure. Yeah. Thanks, Andrew, for the question. So, yeah, let me first just address the reseller kind of noise that's out there. So the industry standard definition, which has been in the industry for over a decade, is that a reseller is the term for when inventory flows from a publisher to an intermediary and then to an SSP. An intermediary can be another exchange or some sort of aggregator of inventory. In contrast, direct is when inventory flows from the publisher directly to the SSP. PubMatic, Inc. is a platform for direct inventory monetization. Reselling is not our business. We are a direct connection to publishers, and that's how we're able to provide significant incremental value to publishers and to buyers. And I think it's pretty clear we provide value in ways that DSPs do not. Yield optimization is a key example of that. So Trade Desk, in particular, has been very clear that they are not in the yield optimization business. And so a publisher needs to have a yield function in place in order to maximize their revenue, which is core to what we do. At the same time, we're also providing value to Trade Desk and others, right, who, as you noted, Andrew, are relying on us to improve deals, you know, with our price discovery and provisioning API integration announcement. So I think, you know, what you can see here is that the ecosystem is multifaceted, certainly complex. Our focus is really on taking those direct integrations with publishers that we have, all of that inventory flowing through our platform, the data, the audiences, and really creating value for buyers in such a way that they're able to generate increased return on ad spend, increased ROI, which causes them to then spend more on our platform. Then, that in turn generates higher yield for our publishers. And so that's really the core and the focus that we have. What we're finding with Activate and other capabilities on our platform, a lot of the focus on AI that we talked about in the prepared remarks is that we have a lot of opportunity coming at it from the sell side of the ecosystem based on the auctions and the data and our close integrations with publishers to be able to add value to both the buyers and the publishers. Andrew Boone: Great. Thank you for that. And then, maybe, Steve, if I could, on the COGS point, can you just expand a little bit on the ability to drive that unit cost leverage there and how we should think about that line either on an absolute dollar or a percentage of revenue going forward? Thank you. Steven Pantelick: Sure. Well, good to reconnect, Andrew. So, you know, from our perspective, you know, we for many years have been focused on owning and operating our own infrastructure and have done it very successfully, as you noted, you know, driving down unit costs. We've consistently done that for a decade, you know, often double-digit unit growth reductions. And so, from our perspective, you know, '26 is no different, other than that, you know, we continue to leverage AI more and more, you know, to drive optimizations. As you saw in our prepared comments, you know, we increased the number of gross impressions processed by over 20% in the quarter. We didn't do that by just throwing a lot of CapEx at it. We did it through software and AI. So that basic process is going to continue, but we have more tools and more ability to do that. So I would expect, in the future, as our revenue reaccelerates, we're going to increase our gross margin. It's going to be a function of revenue and, you know, managing our costs. Stacie Clements: Thanks, Steve. Our next question comes from Matthew John Swanson at RBC. Please go ahead, Matt. Matthew John Swanson: Great. Thank you guys for taking my question. Obviously, super strong quarter for CTV growth, excluding political. And you called out a lot of the drivers there, right, the great growth in the live sports, maybe some of that expansion of mid-market DSPs in the 90% coverage now of top 30 streamers. Could you just give us kind of a little more color maybe over the past year, just what sort of evolution you've seen in the CTV environment? And kind of how you're investing to grow or continue to grow next year? Rajeev K. Goel: Sure. Yeah. Thank you, Matt, for the question. So, you know, CTV has been obviously a very strong growth area for us. And we've seen tremendous, you know, scale really building from zero organically several years ago to where we are today. And I think, you know, there's a couple of trends that are happening. First of all, we are working with more and more premium publishers. Right? So this quarter, we shared over 90% of the top 30 globally. We added some new fast streamers, Tubi, Future Today, and Local Now. This builds on our base of premium inventory from existing publishers like Roku and Paramount and NBC. At the same time, there's huge growth in the advertiser mix in CTV. So whereas traditional TV, you know, has a couple hundred, maybe 500 advertisers in aggregate that are the lion's share of ad budgets, with streaming TV, what we see is that there's tens of thousands, reaching now into the hundreds of thousands, and that number is growing very quickly. And as we have focused on going after mid-market focused DSPs, many of them are focused on small and medium businesses, like Mountain or TV Scientific, or they're focused on performance advertising. Again, some of those same folks. There's a lot more dollars that we're able to bring onto the platform. And so that's creating another layer of growth. Then third is, you know, we've really leaned into AI, as you could tell from the past calls and also the prepared remarks today. You know, all three layers of the technology stack. I think that's really unlocking incremental budgets as well. So live sports is just one example of that. Actually, one of our first generative AI creative tools we launched last year was focused on helping publishers bring in more political ad spend by scanning political ad creatives. And so we're continuing to apply that technology for other use cases. So there's a lot of other verticals like pharma, for instance, health, you know, health and wellness where there's sensitive categories, but we're able to generate the unlock of spend through AI. So we think it's a really, obviously, exciting area for us. We're going to continue to focus and invest globally in this area. And as we bring more buyers onto our platform via Activate, via our curation capabilities, and now with the ADCP launch, we think there's a long runway of growth ahead of us for CTV. Matthew John Swanson: Yeah. That's super helpful. Maybe following up on your commentary on generative AI and some of the agentic AI. Obviously, we've been hearing a lot from a lot of players in the space around these two themes. Can you just talk a little bit about the kind of the right to win and how you help, you know, your stakeholders understand the value creation versus the noise around these themes? Maybe as you said with the ads. Rajeev K. Goel: A couple of things. First of all, it's owning all of our own infrastructure. So what that means is that we're in a unique position to be able to deploy additional infrastructure, you know, like the partnership that we announced with NVIDIA. And that came as a result of multiple years of collaboration. So it's not just, you know, something you can wake up and do all of a sudden. But to be able to do that, you know, you have to really own and control and be in a position to manage all of that infrastructure. So I think that's the first right to win is our long-term capability set there and expertise. Second is you gotta have the transactions and the data flowing on your platform. So an AI algorithm, you know, is only useful to your customers and only relevant to them if you have the scale and ability to transact. Of course, we have that, you know, with a trillion or so daily ad impressions going through our platform, almost 2,000 publishers, depth in CTV and mobile app and, you know, in display and so on and so forth. So I think that's the second key for the right to win. Then I think the third is, you know, a demonstrated ability to innovate and to really build solutions, not just talk about them. I think what you've seen from us over the last is that we are significantly ahead of our competition. You know, we have launched 17 agents in our publisher platform already using AI. I think one of our competitors shared that they're planning to build their first agent. Right? So you can see that's a, you know, one to two-year advantage that we have in terms of track record of execution. What that means is that, you know, when we're launching things like ADCP, the ad context protocol, which is, you know, managing workflow via AI, we are in a position to be able to go talk to both publishers and buyers about here's how you get started. Here are the first use cases to implement. These things are available on our platform today. I think that's a key part of creating value within the ecosystem is being able to participate in those early transactions, being on the frontier, benefiting from, you know, the groundswell of growth that we see in front of us. Stacie Clements: Thank you. Our next question comes from Shweta R. Khajuria at Wolfe. Go ahead, Shweta. Shweta R. Khajuria: Thanks, Stacie. Thanks for taking my question. I have a follow-up on the first question on OpenPath, not specifically just OpenPath, but are you seeing, Rajeev, any trends that would suggest that perhaps, you know, Trade Desk is increasingly going direct and you are getting impacted by not only just as a reseller, but in terms of the impressions volume? Are you seeing any impact to your business in general? And is it related to them actually launching that Kokai platform? I would think not, but there is this concern in the industry. So if you could please, perhaps comment on that to correct that, that would be great. Thank you. Rajeev K. Goel: Sure. Yeah. Absolutely. So, you know, first of all, good news is we are a platform for direct inventory. So regardless of what label anybody wants to put on anything, we know that we are working directly with premium publishers. There is not a more efficient way for buyers to access the inventory than what is, you know, coming through our platform. So I think, underlying your question, you know, the new Trade Desk platform, Kokai, does evaluate and buy media differently from what we have seen. And so we took two important steps over the course of Q3 resulting in spend from them stabilizing in August and September, as Steve mentioned. The first is that we revised our machine learning algorithms to ensure we're sending an optimal mix of inventory to them. That work is largely behind us, so, you know, we're always doing some level of continuous optimization to drive more spend. And then second, we worked with our SPO, supply path optimization partners, to help them configure their seat in the DSP to ensure that they're getting the benefit of their SPO relationship with us. And that work is largely completed as well. We have, you know, agency marketplaces set up with pretty much every major holdco in different parts of the world, in many different parts of the world. And so these agencies had to make changes, you know, over the last couple of months, to ensure that their marketplaces stay intact and that they continue to get the performance and efficiency that they're seeking. And, of course, these marketplaces are critical to the agency's media buying offerings that they provide to their advertiser clients. So we've, you know, talked publicly, for instance, about how we power WPP's premium marketplace. And so that's built on top of our SSP. And so making sure that they're receiving their SPO data workflow efficiency benefits is key to their being able to continue to offer that in market. Similarly, you know, given we're a leader, market leader in curation, we work with our curation partners to ensure that their campaigns continue to run via our SSP and that they get the ROI, the transparency, and the control that caused them to choose to work with us in the first place. So I think Trade Desk shared that, I believe, 85% of their clients are now up and live on Kokai. So yeah, we think probably the bulk of this movement is behind us. But that's a key part of why we're also very rapidly diversifying our DSP mix. As the market evolves to a more fragmented DSP landscape, we're finding, you know, significant success with 25% plus year-over-year growth with mid-market DSPs on our platform in Q3. Stacie Clements: Our next question comes from Matthew Dorrian Condon at JMP. Please go ahead, Matt. Matthew Dorrian Condon: Thank you so much for taking my questions. My first one is just on there's been a lot of talk about the impact across the open web on publisher traffic, just given these AI platforms that are taking increased share. Can you just talk about what you're seeing across your publisher base as far as your traffic? Rajeev K. Goel: Yeah. Absolutely. So we've seen, I would say, a fairly limited impact, and I would say just stepping back, you know, we believe the overall impact in our business is limited to a single-digit percentage of revenue if there was zero search traffic going to our publishers and we took no steps to mitigate it. So that's probably a high-end, you know, kind of watermark of potential impact. So, you know, we shared in our comments today that roughly 60% of the impressions that we are processing are for CTV and mobile app. So, of course, those are unaffected by AI search. Of the remaining business, which is browser-based, where search is relevant, industry data indicates that search referral traffic is roughly 15%, with the rest of publishers' traffic coming from either social or direct navigation. And given that we work in the head of the market with the top publishers, rather than the long tail, I would expect, you know, that 15% number to actually be even a little bit lower. And so if you, you know, take 40% of the impressions, 15% impact, at the high end, to a mid-single-digit percentage potential impact. Again, if we had no mitigating steps that we took. But, actually, you know, there's a lot that we can do in terms of bringing continuing to bring onboard, you know, more CTV, more mobile app, more commerce impressions, and the like. I think the other thing that we're seeing is the offensive opportunity, which is that there's a growing number of AI search experiences that consumers are spending more and more time on. So for instance, you know, Connect launched a solution where users on their properties can, you know, search the archives of Connect articles and, you know, get hands of inventory of opportunity for us to questions. And so that, I think, is actually a growing canvas as consumers get, you know, more and more used to that AI search, you know, kind of consumption behavior, then they're looking for that from many of their traditional content partners where they consume content. And so we think that's a new tailwind that is emerging in the business. Matthew Dorrian Condon: That's very helpful. And then my second one is just on your own infrastructure and just the differentiation there and partnership that you announced with NVIDIA. Just the 5x speed improvements in bid response times. Just can you just talk about the structural difference that's allowing? And is it allowing, like, just win rates and options to be higher? And just talk about the differentiation there and how that can drive sustainable growth in 2026. Rajeev K. Goel: Yeah. Absolutely. So, actually, the good news is that there's multiple ways that having, you know, this kind of infrastructure cooperation collaboration with NVIDIA, you know, can benefit our business. And it really is a collaboration, not just in hardware, but also in software. I think NVIDIA themselves, you know, says that I think it's over half, maybe over 60% of their revenue comes from software solutions. Right? So, obviously, they're well known for hardware, but it's really a combination of hardware and software. I'll give you kind of three specific examples. So we use NVIDIA GPUs to power real-time ad decisioning in very low latency environments. So think about things like connected TV or live sports, where if we can process ad transactions faster, if we can cut latency, that leads to fewer timeouts, more bids in the auction on our platform, and then more opportunities for us to win with the publisher. And so that, you know, boosts outcomes, ROI for both advertisers and publishers, also boosts our revenue. The second example is using NVIDIA Triton inference servers, where we use a specific hardware or software with them for traffic shaping. Traffic shaping is a very important and critical role that anybody on the sell side plays, which is to figure out which of the roughly trillion ad impressions we have per day we should send to each particular DSP. Some DSPs, you know, we might send tens of billions. Some might be single-digit billions. Some might be hundreds of billions of ad impressions. It's really important that we pick, you know, the right ones. And for every DSP, there's gotta be a different decision set based on the types of advertisers and campaigns that are in their platform. Of course, these decisions have to be made, you know, within milliseconds of the publisher requesting a bid from us. And then third is in the reporting area. So we're using an NVIDIA software accelerator for Apache Spark, which allows us to streamline and improve the speed at which we're able to process data, and that in turn allows for smarter optimization across a wide range of different use cases. So those are, I think, hopefully, three tangible examples of how our NVIDIA partnership is really leading to the leadership that we talked about in the prepared remarks, in particular, at the infrastructure layer. Then allows us to derive benefit in the application and transaction layers of the AI stack. Stacie Clements: Next one comes from Robert Coolbrith of Evercore. Please go ahead. Robert Coolbrith: Great. Thank you very much. Rajeev, I wanted to go back to this 5x faster bid response for you to unlocking optimization strategies previously impossible to their programmatic rates. Can you unpack that? And assuming you have a very lead in accelerated computing in the space, are there counterparties on the demand side who can take advantage of that, or do you think you need to take on a bigger role either in, you know, optimizing demands, you know, demand or hosting demand-side logic and optimization to sort of fully take advantage of those capabilities, akin to what the walled gardens do maybe in terms of their, you know, highly vertically integrated supply chains? And then, Steve, just wanted to, you know, maybe get a finer point on this Trade Desk issue. Just given current trends, do you see the potential to maybe see growth alongside their growth in '26? Thank you. Rajeev K. Goel: Yeah. Thanks, Rob. So, yeah, let me start with your first question, then I'll hand it over to Steve. So we absolutely do see opportunity to better leverage our infrastructure through vertical integration, and I'll give you two examples of that. So one is, you know, as we work more and more with mid-market focused DSPs who themselves, you know, tend to be smaller, what we find is that there's a lot of opportunity for us to use our platform to help them compete more effectively. So what I mean by that is, you know, we have huge amounts of data on our platform, you know, from this trillion daily ad impressions. A typical mid-market DSP, they may see 5 to 10% of the traffic that a very large DSP like a Google DV360 would see. So these mid-market DSPs, because they're smaller in nature, they don't have access to all of that same data. At the same time, they also don't have access to all of the performance aspects of the auction that we're running on behalf of the publisher. And so there's opportunities for us, which we are working very hard on, to use our platform to help those DSPs, you know, derive better performance, better targeting, and ultimately better ROI. And that, you know, plays very closely with the infrastructure that we've deployed. So that's one example, Rob, of where I think vertical integration where we can do more than we have done traditionally for a legacy DSP. I think these mid-market DSPs, because they're growing quickly, they're very hungry for that kind of collaboration and our ability to help them solve problems. And then the second is with our Activate solution, where buyers are buying directly in our SSP. So here, you know, that faster processing of bids, better inferencing, all of these things, they help make Activate a very effective solution. Seeing that play out in terms of the growth, you know, up 4x year over year. Campaign numbers are, you know, growing on a similar basis in terms of the number of campaigns run. So we think there's a lot of benefit from vertical integration. And, you know, as you said, Rob, that is somewhat akin to what the walled gardens do. And, of course, it's no secret that they're very good at driving performance, and we think that vertical integration is a key part of that. I'll turn it over to Steve now. Steven Pantelick: Sure, Rob. Just correct me if I don't have the right question, in terms of our growth opportunities in '26. So obviously, we're going to come back shortly with the next earnings talk about 2026. But there's a lot of things that we've focused on to put us in a very strong position to reaccelerate growth. You know, you've heard some of the stats from the third quarter, strong CTV growth, mobile as well as our emerging revenues. So, you know, once we work through the current transition that, you know, we've identified in the second half of this year, we are very confident that we're going to be growing on a number of different fronts. Now just as a reminder, we've been investing in secular growth areas. This has been a long-term strategy. We're seeing the results of that. We are expanding, diversifying our DSP base. You know, we're growing very strongly with commerce DSPs. You know, specialized DSPs are on pharma. And so the couple, you know, are focused on secular growth, expanding our buyer base, and then innovation around AI. You know, not just in the infrastructure, but certainly, you know, in terms of capabilities, functionality. We launched this past quarter, you know, AI-driven publisher products, and that will continue to be, you know, sources of growth. So we're very positive about the growth in the second half of '26, you know, as we look at, you know, the plethora of opportunities ahead of us. Stacie Clements: Our next question comes from Jacob Armstrong at KeyBanc. Please go ahead, Jacob. Jacob Armstrong: Thanks for taking my questions. This is Jacob on for Justin. Can you discuss how you believe the role of SSP needs to evolve in coming years as agentic AI expands? And what are the key investments needed to ensure PubMatic, Inc. is best positioned to capitalize off this transition over the next few years? Rajeev K. Goel: Sure. Yeah. So, you know, I think the role of the SSP is going to expand significantly from transaction automation to a much bigger role in workflow automation, around audience and inventory discovery, planning, and measurement. If we think about, you know, where programmatic technologies have been applied so far, maybe for the last, you know, fifteen or so years, I would say it's been heavily applied at the transaction level. So meaning, we have an ad impression. We want to get a number of advertiser bids on it. And then we're helping out DSPs, you know, bid on that individual ad impression. So there's been a lot of, you know, maturation and innovation and focus on that, like, single atomic impression. But we still have, you know, RFPs that advertisers send or agencies send out to publishers via email. Fill out the spreadsheet, you know, or launching this ad campaign. We you might have available. understand what audiences or what Some human at the publisher fills that out. Then they email that back, to the agency. The agency collects those, and then they decide you know, where where they're gonna, you know, set up and and allocate budget. So that's still a a largely, manual process. Some things have have improved, but still a lot of, manual approaches. I think there's a huge opportunity, you know, to think outside of the pure atomic impression or transaction. Around the discovery and planning and then after the transaction to the measurement. To use AI where, you know, an advertiser's agent or an agency's agent can say, hey. I'm launching this product or or service Please tell me what you can do for me as a publisher media owner from an audience and an inventory perspective. Take a structured response, you know, aggregate that up across, you know, many of the publishers that we're working with. And then deliver, you know, a preconstructed campaign brief to the agency. Agency can begin to buy that, you know, using our transaction pipes. And then we can have a feedback loop around, you know, measurement with that. And then the agency can, you know, revise their their campaign. So I think there's a lot that can be done outside of that, single transaction. Element, and that's really where we are focused with the transaction layer of the stack that I mentioned earlier, you know, with ad context protocol, we're working out, you know, what exactly should those structure requests and responses look like. And then how, you know, how do they how do they get set up, who owns what data. And then how do they get optimized. So I think there's a a long runway, Jacob, ahead, in that area. Stacie Clements: Thank you. This question comes from Ed Alter at Jefferies. Please go ahead. Ed Alter: Hi, thanks for the question. I wanted to talk about the investments you're making to meet the demand from the mid-market DSPs like Mountain. Where exactly are those going to show up? Is that more headcount, tech investments? Just be great to talk about the color on that. Steven Pantelick: Sure. So, you know, we've been very focused throughout this year and really leading into this year. It's to be as efficient as possible, you know, in terms of where we deploy our teams. We made a very conscious decision in the last eighteen months to move more and more resources towards the fastest-growing areas, segment growth areas, of which, of course, you know, critical DSPs are a part of that. And so we've been increasing investment in the team that goes directly and calls on these DSPs. This year, we increased, thus far, about 19% in terms of headcount. And we've done that by reallocating members, you know, around the organization. You can see from our results. Our overall headcount is roughly flat. And so, we've done a very, you know, careful analysis of, you know, how we're going to keep on, you know, leveraging our existing resources. And, of course, all of this is supported by, you know, the progress we made in AI, in terms of becoming more efficient just in our daily activities. And so when I look ahead to '26, we're going to keep increasing the resources against those areas that, you know, are driving the greatest results. And, you know, we're on a great mission to do that, and it's not just on the OpEx side. You know, we are looking at our CapEx, and we don't anticipate, you know, increasing our CapEx in '26. Based upon sort of all the optimization, the work with NVIDIA, you know, a lot of other things that, you know, are in the pipeline around efficiency and optimizations. And so from our perspective, we're very confident that we are able to move dollars against the right opportunities without burning the P&L. So, feeling good about the progress and, you know, our ability to increase our margins as revenue reaccelerates. Stacie Clements: Unfortunately, we are just about out of time. So I'm going to turn the call back over to Rajeev for closing remarks, and we'll talk to you all in your calls very shortly. Rajeev K. Goel: Thank you, Stacie, and thank you all for joining us today. Our results demonstrate the power of our differentiated business model. We continue to innovate, diversify our business, and operate with discipline. AI innovation is leading the industry with measurable outcomes driving momentum across the ecosystem. Looking to 2026 and beyond, as revenue growth reaccelerates, we anticipate margin expansion at both the gross and adjusted EBITDA levels because of our efficient and leveraged business. We look forward to seeing many of you at upcoming conferences, including the UBS Technology and AI Conference on December 2, the Wolfe Virtual SMIDCAP Conference on December 3, and the Raymond James TMT Conference on December 9. Thank you, everyone, for joining us today. Have a great afternoon.
Operator: Thank you for everyone that has joined us so far. We are just going to give it about thirty seconds, and we will get started soon. Everyone for joining us today. We will get started momentarily. Okay. Hello, everyone, and welcome to Viant Technology Inc.'s third quarter 2025 earnings conference call. My name is Dave, and I will be your operator today. Before I hand the call off to the Viant leadership team, I would like to go over just a few housekeeping notes for the program. As a reminder, this call is being recorded. After the speaker remarks, there will be a question and answer session. If you plan to ask a question, please ensure that you have set your Zoom name to display your full name and firm you are with. And if you would like to ask a question during the call, please use the raise hand feature in Zoom, which is located in the controls at the bottom of your Zoom screen. You could raise your hand at any time and be queued. And thank you for your attendance today. I will now turn the call over to Nicholas Todd Zangler, VP of Investor Relations for Viant Technology Inc. Thank you. Good afternoon, and welcome to Viant Technology Inc.'s Third Quarter 2025 Earnings Conference Call. The call today are Tim Vanderhook, Co-Founder and Chief Executive Officer, Chris Vanderhook, Co-Founder and Chief Operating Officer, and Lawrence J. Madden, Chief Financial Officer. I would like to remind you that we will make forward-looking statements on our call today, including, but not limited to, statements regarding our guidance for Q4 2025 and other future financial results, our strategy, our platform development initiatives, including Viant AI, our pipeline, and potential partnership opportunities, and industry trends that are based on assumptions and subject to future events, risks, and uncertainties that could cause results to differ materially from those projected. These forward-looking statements speak only as of today, and we undertake no obligation to update or revise these statements except as required by law. More information about factors that may cause actual results to differ materially from forward-looking statements and our entire safe harbor statement, please refer to the news release issued today as well as the risks and uncertainties described in our quarterly report on Form 10-Q for the quarter ended September 30, 2025, under the heading Risk Factors and in our other filings with the SEC. During today's call, we will also present both GAAP and non-GAAP financial measures. Additional disclosures regarding these non-GAAP measures, including a reconciliation of non-GAAP financial measures to the most directly comparable GAAP financial measures, are included in the news release issued today and in our earnings presentation. Which have been posted on the Investor Relations page of the company's website and in our filings with the SEC. I would now like to turn the call over to Tim Vanderhook, Chief Executive Officer of Viant Technology Inc. Tim Vanderhook: Thanks, Nick, and thank you all for joining us today. We delivered a strong third quarter performance achieving new company records across all key metrics. Revenue increased 7% year over year and contribution ex TAC increased 12% year over year. Both well above the midpoint of our quarterly guidance range. When excluding temporary items like political advertising, revenue in contribution ex TAC increased 19-22%, respectively, and more accurately reflects the true strength of our business. Growth was driven by new customer wins accelerating CTV demand, a surge in streaming audio demand, greater adoption of Viant's addressability solutions, and the expanded use of the Viant AI product suite. Adjusted EBITDA increased 9% year over year to $16 million for the quarter and surpassed the high end of our guidance range. On our previous earnings call, we discussed an incremental $250 million in potential ad spend opportunities associated with ongoing discussions with major US advertisers. Representative of a new addressable market for Viant. We are thrilled with our recent progress. Which includes multiple client wins and is highlighted by a flagship multiyear partnership with Molson Coors. One of the world's largest beverage companies. Viant has been designated as the advertising platform for Molson Coors, and will power their programmatic ad campaigns deployed across the open Internet throughout The US beginning in 2026. Viant was selected because of our proprietary intelligence layer. Which combines our industry-leading addressability solutions with our autonomous advertising capabilities to uniquely activate first-party data. Reach targeted audiences, and achieve measurable outcomes at scale. Molson Coors manages a diverse product portfolio. Including core power brands, premium brands, and value brands. Each of which services a distinct customer demographic. Viant is uniquely capable of finding both existing and potential customers by leveraging our intelligence layer. By integrating their first-party data into our autonomous ad platform, we aim to empower Molson Coors to reach the appropriate legal drinking age audience for each brand while ensuring that every impression delivers measurable value. This is precision marketing at scale. Made possible through Viant's autonomous ad platform. Molson Coors joins one of many major US brand advertisers, who share our vision of achieving outcomes through autonomous advertising. With multiple wins in place, the broader market is increasingly recognizing Viant as the autonomous advertising platform for the open Internet. And for good reason. Our value proposition is unmatched. First and foremost, we are an independent and objective partner. Free of the conflicts of interest that exist with our competitors. Remember, many of our peers either sell owned and operated inventory or they monetize certain supply paths putting their interests at odds with their advertiser clients. Google direct spend to YouTube, Amazon direct spend to Prime Video, and The Trade Desk direct spend through OpenPath, all to extract more margin for themselves and ultimately to the detriment of the advertiser. At Viant, we pride ourselves in directing spend to ad inventory that drives the highest return on ad spend for the advertiser. We own no publisher content, and our incentives are directly aligned with those of our advertiser clients. Viant is also a leader in proliferating secular growth channels. CTV and streaming audio. Offering advertisers the ability to purchase ad inventory through our direct access premium publisher program. The industry's most efficient path to purchase premium CTV and streaming audio ad inventory. Through direct access, more ad spend is allocated to working media. Which means dollars deployed on Viant's platform go further. Generating more ad impressions for advertisers than on many competing platforms. And as referenced a moment ago, at the core of our autonomous ad platform, is an intelligence layer that is giving our customers the ability to drive higher returns in open Internet advertising. Viant is the only platform where advertisers can leverage AI to harness what we believe to be the industry's most powerful audience identifier Household ID. And the industry's most powerful content identifier, Iris ID. To cut through the noise and deploy precise hyper-targeted campaigns at scale through the most efficient supply paths. This value proposition is resonating with brand advertisers more so than ever before. And I am pleased to report that throughout the quarter, we made tremendous progress. Further enhancing this value proposition as part of our relentless focus on innovation. On that note, I will provide an update on performance and progress across our key strategic priorities. CTV, addressability, and Viant AI. CTV was the strongest driver of contribution TAC growth in the quarter. Exhibiting an accelerating year over year growth rate. Our results consistently demonstrate our leadership position in CTV and this quarter was no different. Total CTV ad spend on our platform reached a new all-time high. And represented 46% of total advertiser spend on our platform. Also an all-time high. Year to date, approximately half of all CTV ad spend on our platform has been directed by our customers to run through our direct access publisher program, which offers an efficient targetable, and measurable way to purchase CTV inventory. The vast majority of leading streaming services have joined the direct program, including Disney plus Paramount plus NBCU, Tubi, Samsung, and many more. Increasing adoption of our addressability solutions Household ID and Iris ID, both of which are purpose-built for CTV, further propel demand for CTV on our platform. Leading to outsized growth relative to our peers. Viant's household ID, our patented audience targeting and measurement solution, continues to see strong utilization amongst advertisers and was a meaningful contributor to top-line growth in the quarter. Household ID delivers superior addressability for advertisers looking to leverage their first-party data, to reach specific audiences and measure campaign performance. Household ID identifies approximately 95% US households. And is available across roughly 80% of all biddable ad inventory. Four times the coverage of key competing identifiers. Which reach only about 20% of biddable ad inventory. Our content targeting and measurement solution, Iris ID, continues to ramp across publishers. Enticing a growing number of advertisers to deploy contextually targeted campaigns, on our platform. We recently added Tubi, a leading fast streaming service with over 100 million monthly active users to our pool of Iris enabled publishers. Joining the likes of Paramount plus AMC Networks, Whirl, Lionsgate, CNN, LG, Vizio, and many more. In just one year since acquisition, we have more than tripled the presence of Iris ID across the CTV bid stream and we believe we have a clear path to achieve 50% of the CTV bid stream penetration in the next few months. Iris ID is a powerful performance solution enabling advertisers to achieve unprecedented levels of precision by targeting CTV ad inventory at the video level. Which includes scene level targeting. Consider for a moment the possibilities of scene level targeting where brands align with a seemingly infinite assortment of themes. Imagine brands like Tide laundry detergent targeting stains Bounty paper towels targeting spills, and Coca Cola targeting happiness. The possibilities are limitless. And most importantly, Iris ID works. When utilized on our platform, advertisers are seeing, on average, a 48% increase in conversion rates versus control groups. Given the effectiveness of contextual targeting strategies, deployed with Viant, advertisers are buying in. In fact, in Q3, revenue attached to the Iris ID more than doubled sequentially versus the prior quarter. Last quarter, we announced a partnership with IPG Acxiom where Iris ID is powering their content targeting offering. IPG is requiring all content owners with upfront commitments to carry Iris ID, and we believe this partnership will help further drive Iris ID into the CTV ecosystem. Moving on to Viant AI. Our autonomous ad platform is powered by the Viant AI product suite. We have successfully rolled out three of the four phases comprising the Viant AI product suite. Viant AI consists of AI bidding, AI planning, AI measurement and analysis, and AI decisioning. I will provide a brief update on all four phases. AI bidding continues to automate 85% of the ad spend on our platform. With AI bidding, advertisers enable Viant's algorithms to find and buy optimal ad placements across the open Internet. Aiming for the lowest cost while meeting their desired KPIs which often include reach, frequency, and other targeting requirements. With surging use, contribution x TAC generated from AI bidding more than doubled year over year in the quarter. And growth accelerated for the fourth straight quarter. We recently launched AI bidding 3.0 ahead of schedule. Which is expected to deliver even greater media cost reductions to our clients. AI planning most clearly showcases our intelligence layer at work. And represents the future of ad campaign creation and execution at Viant. AI planning enables any advertiser from an SMB to an enterprise marketer to create a brand or product-specific ad campaign in seconds. We replace the complex DSP UI with a single prompt that requires just four inputs. The advertiser, the budget, the time frame, and the goal. Within seconds of submission, an ad campaign designed to maximize return on ad spend is fully constructed and ready for deployment. Our intelligence layer identifies the ideal audience segment for any brand product, or service then utilizes advertiser first-party data together with our addressability solutions historical campaign performance data, and bidding algorithms to most efficiently allocate the budget across various digital channels, publishers, geographies, audiences, video level content, time of day, and more. To execute campaigns capable of delivering the most optimal outcomes. In preparation of our launch of AI decisioning, AI planning has been significantly enhanced. Now capable of building and executing campaigns for niche performance advertisers and even individual products or services. For example, AI planning can now build and execute a campaign for every single pair of shoes on Nike's website. Each uniquely tailored to address a specifically defined audience through calculated digital channel allocations and use of specific audience in contextual targeting segments. With this new enhanced level of precision, enterprises and mid-market advertisers can reconfigure marketing strategies for increased efficiency and performance advertisers. Including SMBs and direct to consumer ecommerce companies. They can readily engage the most highly effective digital channels like CTV. Of course, powering this enhanced level of precision are our proprietary addressability solutions. Household ID and Iris ID. Both of which are now fully incorporated into our intelligence layer. AI measurement and analysis launched earlier this year and replaces traditional reporting with on-demand insights. Historically, campaign performance data has been spread across multiple dashboards buried in spreadsheets, and has required the expertise of specialized data scientists to interpret results and identify actionable insights. AI measurement and analysis surfaces actionable insights and optimization opportunities in an instant. Via an intuitive chat-based interface. Think of AI measurement and analysis as a trusted copilot providing on-demand answers and recommendations to all campaign performance-related queries. An essential feature necessary to properly support performance advertisers. AI decisioning, set to launch at year-end will truly usher in the outcomes era of programmatic advertising at Viant, by combining AI bidding, AI planning, and AI measurement and analysis with the added capability of dynamic spend deployment. AI decisioning proactively reacts to fluid market conditions, and adjust campaigns in real-time. To deliver optimal campaign results. AI decisioning is expected to enable Viant to expand our addressable market to include performance advertisers. Who are in need of a do it for me solution. That can service them across the open Internet. Our autonomous advertising platform will compete with Google's Pmax, and demand gen solutions as well as Meta's advantage plus solution, but will direct spend to demand generation channels like CTV and streaming audio that drive incremental lift. As opposed to demand capture channels like search and social where ad spend is directed to audiences that often would have converted anyway. To summarize, we delivered impressive results attributable to strong underlying performance particularly in CTV. Where we are continuously expanding our leadership position. We believe our partnership with Molson Coors underscores our platform's unique advantages over our much larger competitors. And we strengthened our value proposition through improvements in our CTV offering. Addressability solutions and the Viant AI product suite. With headwinds easing, underlying performance strengthening and a marquee client win established we are poised to meaningfully accelerate growth going forward. With that, I will pass it over to Chris. Chris Vanderhook: Thanks, Tim. I will provide an update on our customer go-to-market strategy. We intend to maintain our dominant position within the mid-market. With the success of Viant AI, we will opportunistically expand upmarket with major US advertisers like Molson Coors, who share in our vision of achieving measurable outcomes through the use of autonomous advertising, and expand down market to enable the millions of performance advertisers including SMBs and direct to consumer e-commerce companies, participate in the open Internet just like they currently do in search and social. Touching first on the mid-market. We continue to execute across our core customer cohort as demonstrated by the acceleration in demand we generated in the quarter. Which can be seen in our underlying performance. After accounting for political ad spend in the prior year, and the departure of a seasonal advertiser due to a corporate merger, contribution ex TAC increased by 22% in the quarter. Mid-market advertisers are increasingly relying on our intelligence layer and embedded solutions like Household ID, Iris ID, and AI bidding to successfully navigate today's complex digital landscape. As a result, Viant is becoming more deeply integrated into the fabric of our clients' marketing efforts, opening up more opportunities for collaboration. For example, we recently expanded upon an existing partnership with a leading grocery chain to power their retail media network. By leveraging their extensive first-party dataset along with our industry-leading addressability solutions, we are enabling this grocer's numerous vendors to target relevant audiences with highly effective off-site ads. Beyond this existing partnership, we are in active dialogue with a number of additional major retailers exploring opportunities to utilize their first-party dataset in combination with our addressability solutions to better enable their vendors to market products more effectively across the open Internet and ultimately drive sales growth across these retailers. Across major US advertising, advertisers, we have been actively pursuing over $250 million in potential ad spend, all of which would be incremental to our mid-market growth opportunity. As Tim mentioned earlier, major US brands are increasingly looking to partner with Viant due to our independence, our leadership in CTV, and to leverage our intelligence layer that is core to our autonomous advertising platform in Viant AI. Our multiyear partnership with Molson Coors not only demonstrates our ability to win amongst major US advertisers, but we believe this win is indicative of a growing preference amongst large brands to deploy data-driven campaigns at scale. Historically, the world's largest advertisers have executed ad campaigns built for reach and frequency with minimal emphasis on addressability, and the need to tie all media to outcomes. We see a changing landscape. Where even the largest brands in the world seek to advertise with precision. Measure and drive return on ad spend, and improve the overall effectiveness of their marketing budget. This is exactly what Molson Coors is striving to achieve. And we expect they will rely on our intelligence layer within our autonomous advertising platform to build and execute sophisticated campaigns designed to achieve maximum efficiency. Together, we can connect their brands to the right audiences and the right moments to deliver measurable outcomes while reinforcing Molson Coors' legacy of brand building. At the end of the year, we plan to launch the fourth phase of our Viant AI product suite, AI decisioning. Enabling Viant to better serve performance-based advertisers via a self-service do it for me solution. The opportunity across performance advertisers including SMBs and direct to consumer e-commerce companies, is substantial. Representing 10 million advertisers and over half of the $240 billion currently allocated to search and social digital channels. Performance advertisers prioritize targeting and measurement. A capability that has emerged within CTV through the use of our addressability solutions. Performance advertisers tend to be overinvested in search and social platforms. And stand to benefit from shifting spend to CTV, where they can drive and measure incremental sales and improve their return on ad spend. Today, we believe there is no true self-service solution in the marketplace capable of addressing this customer segment for the open Internet. DSPs as they currently exist are far too complex to attract the performance advertisers in mass, until now. AI decisioning is the component of our autonomous advertising platform designed to enable any size advertiser to deploy ad spend across highly effective digital channels including CTV, streaming audio, and more. The team is hard at work preparing for the launch of AI decisioning by the end of the year. And because we have embraced a product-led go-to-market strategy, we see an opportunity to deliver faster growth and higher margins than that exhibited by early entrants currently targeting the space through their numerous sales reps, and rented technology. We believe our in-house, do it for me autonomous advertising platform limits the need for extensive personnel investment to support new client acquisition and expansion. Clearly, Viant is executing across a wide range of market opportunities. In the mid-market, where we have traditionally dominated, we continue to exhibit strong growth as demonstrated by our results. Amongst major US advertisers, a new addressable market for us we have been in active pursuit of over $250 million in incremental ad spend, with multiple wins in place. And to address the emerging opportunity amongst performance advertisers, we are launching the industry's first autonomous advertising platform built for the open Internet. With that, I will turn it over to Larry to provide more detail on our financial performance. Larry? Lawrence J. Madden: Thanks, Chris. Before I begin, I would like to remind everyone that we have posted a presentation on our Investor Relations website that includes supplemental financial information to accompany today's call. In terms of our results for the third quarter, revenue for the quarter was $85.6 million representing a 7% increase year over year and 10% increase quarter over quarter and was above the midpoint of our guidance range. Contribution ex TAC totaled $53 million in Q3, up 12% compared to the prior year period and up 10% sequentially reaching the high end of our guidance range. Both revenue and contribution ex TAC represent record results for the 3Q period. It is important to note our underlying business is performing far stronger than our reported results indicate. When excluding political ad spend contribution from the prior year election cycle, which weighed on revenue growth by approximately 600 basis points and contribution ex TAC growth by approximately 400 basis points as well as the departure of a seasonal advertiser due to a corporate merger which weighed on revenue and contribution ex TAC growth by approximately 600 basis points, Q3 revenue increased 19% year over year and contribution ex TAC increased 22% year over year on a pro forma basis. We believe this underlying performance more accurately reflects the true health of our business and adjusts for material factors outside of our control. During the quarter, we also continued to see meaningful expansion in the number of customers generating significant levels of contribution ex TAC. On a trailing twelve-month basis through Q3, saw a 39% increase in the number of percent of spend customers generating over $1 million in contribution ex TAC. Additionally, contribution ex TAC across our top 100 customers grew by 18% year over year on a TTM basis. New customer momentum also remained strong, as evidenced by the recent announcement of a newly formed multiyear partnership with Molson Coors, one of the largest beverage companies in The US. We are encouraged by our performance demonstrated ability to bring major US brand spend onto the Viant ad platform. We believe these trends fueled by growth from both existing and new customers, reinforce our strong competitive positioning and support our ability to continue outperforming the broader programmatic market over the long term. We delivered strong performance across most customer verticals in Q3, with ad spend across our top six verticals which include health care, retail, consumer goods, public services, business services, and automotive, leading the way. CTV remained a core growth driver in Q3 accounting for a record high of 46% of total platform spend with nearly half running through direct access premium publishers. In addition, CTV spend reached an all-time high in the quarter reflecting continued momentum as advertisers increasingly prioritize premium addressable video to drive performance. Spend across all emerging digital channels which includes CTV streaming audio and digital out of home, collectively represented approximately 56% of total platform spend in Q3 also a new record, and up from 50% in 2024, 43% in 2023. Highlighting the accelerating adoption of next-generation media formats and underscoring our position as a leading partner for advertisers moving beyond traditional display. Video inclusive of CTV reached a record high 62% of total platform spend in the quarter. Reflecting the continued shift towards high impact measurable formats. Non-GAAP operating expenses totaled $37 million in the third quarter. Representing a slight sequential decline and a 13% year over year increase. Notably, operating expenses include strategic investments related to the acquisition of Iris TV, closed in November 2024, and Locker, which closed in February 2025, both of which expand our long-term product capabilities and then are intended to support long-term growth. Excluding these acquisitions, organic non-GAAP operating expenses increased a modest 7% year over year and decreased 1% sequentially reflecting continued operating leverage and disciplined expense management. Importantly, we remain focused on scaling efficiently. Even as we continue to invest in innovation across Viant AI and our broader technology stack you are delivering measurable gains in productivity. Increasing contribution ex TAC per employee by over 7% year over year a clear signal of improved operational efficiency. Adjusted EBITDA for Q3 was $16 million exceeding the high point of our guidance by 7% and growing 9% year over year and 42% sequentially. Adjusted EBITDA as a percentage of contribution ex TAC was 30% for the quarter well above our prior guidance, which called for 28% adjusted EBITDA margin at the midpoint. We were able to deliver strong margins despite temporary pressures impacting our top line, and while absorbing elevated year over year operating expense growth stemming from the integration of the recent acquisitions. Both of which represent critical investments that have materially strengthened our competitive positioning. Non-GAAP net income, which excludes stock-based comp and other adjustments, totaled $11.2 million for the quarter, down 9% from $12.3 million in the prior year, Non-GAAP basic earnings per Class A share outstanding was $0.12 in the third quarter, compared to $0.15 in the prior year. The year over year declines of both non-GAAP net income and earnings per share are primarily attributable to lower interest income and higher income tax expense in the current period. Non-GAAP net income before interest and taxes increased 4% year over year in Q3. In terms of share count, we ended the quarter with 62.4 million shares, outstanding, consisting of 16.6 million Class A shares, and 45.8 million Class B shares. We ended the quarter with a strong balance sheet including $161 million in cash and cash equivalents $194 million of positive working capital, no debt, and full access to our $75 million credit facility. We also remain disciplined in our capital allocation. Since launching our share repurchase program in May 2024, we have returned $59.6 million to shareholders. Including $10 million in Q3 and $37.9 million year to date through November 7. In total, since inception, we have repurchased 4.8 million shares at an average price of $12.42 signaling our confidence in our long-term value. As of November 7, approximately $40.4 million remains available under our current authorization. We intend to continue executing this program opportunistically with a focus on maximizing value for long-term shareholders particularly during periods when our stock is undervalued. We believe our strong financial foundation combined with consistent execution and a balanced capital allocation strategy, positions us well to capture growth opportunities and drive shareholder value in the quarters ahead. Turning now to our Q4 outlook. As a reminder, our Q4 performance is being measured against a difficult comparison largely due to last year's high political ad spend contribution. This headwind is expected to pressure revenue growth by 600 basis points and contribution ex TAC growth by 500 basis points in Q4. This is fully reflected in our guidance for the 2025. Which is as follows. Revenue of $101.5 million to $104.5 million a 14% year over year and 20% sequentially at the midpoint. Excluding the impact from political, revenue is expected to be up 20% year over year at the midpoint on a pro forma basis. Contribution ex TAC of $62 million to $64 million reflecting 16% year over year growth and 90% sequentially at the midpoint. Excluding the impact for political, contribution at Stack is expected to be up 21% year over year at the midpoint on a pro forma basis. Non-GAAP operating expenses of $39.5 million to $40.5 million up 7% year over year and 8% sequentially at the midpoint. Excluding the impact from the Iris and Locker acquisitions, organic non-GAAP operating expenses are expected to increase a modest 5% year over year, and 9% sequentially at the midpoint, reflecting continued operating leverage and disciplined expense management. Adjusted EBITDA of $22.5 million to $23.5 million representing a 35% year over year increase and a 44% increase sequentially at the midpoint. And finally, we expect an adjusted EBITDA margin as a percentage of contribution ex TAC of 37% at the midpoint. Representing over 500 basis points of improvement over the prior year period. Despite these temporary political headwinds, the midpoint of our guide assumes record Q4 performance across revenue, contribution ex TAC and adjusted EBITDA. Based on the midpoint of our guide, we now expect full year 2025 revenue and contribution ex stack growth of 17% adjusted EBITDA growth of 25%, and adjusted EBITDA margins of 27% an improvement of nearly 200 basis points year over year. Notably, excluding the temporary headwinds we discussed, our Q4 guide at the midpoint implies full year 2025 revenue and contribution ex TAC growth of 22% on a pro forma basis. Indicative of strong underlying performance. As a reminder, the political ads spend headwind will no longer be a factor starting in 2026. A few other considerations worth noting for 2026 modeling. We anticipate accelerating year over year growth in revenue and contribution ex TAC throughout 2026 driven by new client onboarding. Additionally, while we expect to start servicing Molson Coors in Q1, more significant spending is expected to commence into Q2 and beyond. In terms of non-GAAP operating expenses, beginning in 2026, we will have lapped nearly all of the OpEx contributions associated with the recent acquisitions and therefore we expect to grow non-GAAP operating expenses at a lower rate in 2026 than in 2025. Given these assumptions, we expect to deliver significant EBITDA margin expansion in 2026. In closing, we delivered another record quarter executing against our strategic priorities advancing innovation across our platform, and returning capital to shareholders through opportunistic share repurchases compelling valuations. Our growth pipeline has never been stronger is supported by over $250 million in potential annualized ad spend opportunities associated with major US advertisers. A new addressable market for Viant. We are clearly executed against this opportunity as evidenced by the flagship partnership with Molson Coors. Among other sizable wins. We believe we are well positioned for sustainable long-term growth our strategic alignment with secular growth trends including CTV, addressability and Viant AI. And with that, I will turn the call back over to the operator for questions. Operator? Operator: Thank you, Larry. We will now proceed to the Q&A session. As a reminder, if you have a question, please use the raise hand feature in the controls located at the bottom of your Zoom window. And with that, our first question comes from Laura Anne Martin with Needham. Laura? Laura Anne Martin: Hey. Great numbers, guys. I have two. One is, you guys always had a self-serve platform and you have had two, like, products out of the three AIs. So what is it about the third AI product that you are delivering in the fourth quarter? That opens a new SMB TAM Is it content creation, or why would not that you know, what was why is it different? From what has been possible to date? And then, Larry, just on your guidance, your same store guidance has a 600 basis point headwind for a merger client that took spending. That is not one time. Right? That is going to be a 600 basis point headwind for four quarters in a row. Do I have that right? Or if not, tell me. Lawrence J. Madden: Larry, you want to take the first one? I will go first. So no. This was particular client was a very seasonal client. Spent the majority of their budget in Q3. And and relatively modest amounts in other quarters. So that it will be it will be very modest in terms of the headwind on that one. We are not even calling it out. But it is really the Q3 quarter that was the big hit for that for that particular Okay. Super helpful. Laura Anne Martin: Great. Tim Vanderhook: Laura, and on the first one, when we launch AI will complete the cycle of the four phases of Viant AI, and that will do is effectively make it full self-driving. Right now, we would classify Viant AI as human in the loop, approving everything, needing to add extra information, or optimizing the campaign. Based off the results, but with AI decisioning, they it will take over the complete campaign from start to completion, hopefully hitting the customer goals that the advertiser is looking for. And, Laura, just to remind everybody, know, DSPs traditionally are very complex. We liken them to, like, a Bloomberg terminal in finance. And with these smaller direct to consumer ecommerce companies or SMBs, they need a more simplified, user experience. And they really want the platforms. They they want to give you limited information than what the platform to hit their goals. And we liken it also to it is like the self-driving car. That is kind of what we are doing with AI decisioning that it is they are going to give us you know, some basic information their goals, and then the platform is going to just deliver them the results. Laura Anne Martin: Okay. Thanks, guys. Appreciate it. Tim Vanderhook: Thanks a lot. Lawrence J. Madden: Thank you, Laura. Operator: Next question comes from Matthew Dorrian Condon with JMP. Matthew Dorrian Condon: Thank you guys for taking my question. My first one is just on the Amazon DSP. It seems like they are offering 0% DSP fees that been out there in some of the articles. Just have you guys seen any increased competitive intensity here over the past quarter or so? Tim Vanderhook: I would say no on increased competition. Certainly, the Amazon DSP marketing team deserves a trophy for how much coverage they have been able to get over the past couple of months. But I would say no. The competitive, side of Amazon's ads business has been pretty consistently there. Most of their revenue is sponsored listings. The DSP, I would guess, is a very small portion. And we do not see them, you know, in the competitive bake-off processes at the finish line. Matthew Dorrian Condon: Got it. And then my second one is just on, you know, as you launch the AI decisioning product and expand into the SMB performance market, Just how do you grow awareness with that type of advertiser? Is there different investments in sales and marketing that you need to make, or how do you think about that go-to-market strategy? Tim Vanderhook: Yeah. You know, there is a lot of, channel partnerships that you end up doing. There is a whole, you know, ecosystem of direct consumer agencies, also measurement firms, that we may look to partner with as well. But that SMB and direct consumer ecommerce market is really dominated by Meta and Google. And there is a lot of interest out of those marketers to get the open Internet, to get into CTV. But I would say that the thing that you have to produce is true performance. And I think that is really what we are showing with a lot of our current customers today, whether mid-market, or the larger advertiser segment. And we know that we are we are able to show the results there, and we are really confident. Once we launch AI decisioning, we are going to be able to attack that the, the lower end of the market as well. But, Matt, just to put, I guess, a a finer answer on that, we view e you know, electric reaching, advertisers that are out there in this segment, direct to consumer e com. So we see a self-service sign-up flow, and hopefully, no humans having to interact with them to use the platform. That is the goal. Matthew Dorrian Condon: I appreciate it, guys. Thank you. Operator: Alright. Our next question comes from Wyatt Swanson with D. A. Davidson. Wyatt? Wyatt Swanson: Hey, guys. Thanks for the question. I am on for Tom White. I got a question on the client win you announced last week with Molson Coors. Can you talk about the incremental spend you expect to see from that? And maybe how that impacts the pipeline of $250 million incremental spend that you talked about last quarter there is still a lot of remaining incremental spend you believe you could capture for 2026. Tim Vanderhook: Yeah. I would say there there definitely is a lot of incremental spend. I cannot talk about any client-specific spend, given the pro nature of that information. But Molson Coors is a huge win. Obviously, we are very proud of it. We have got Coors Lights on our desk right now for the earnings call, so we are pretty excited about that partnership. But I will say that, that should continue to scale. You know, look for that to start coming on board. In the second quarter, as that client onboards, and that should continue to scale for many years. It is a multiyear partnership, so that should get bigger and bigger each year. I I will point out, though, that Molson Coors was not the largest advertiser in that spend amount that we talked about last quarter. We have won some other customers in there They we were not allowed to announce their names, so some of those are rolling forward. Into 2026, but there is still even bigger companies that that are in there that we can win for next year. So we are excited about what is ahead, and we are excited about the partnerships that we have struck heading into the future. Wyatt Swanson: Got it. That is really helpful. And then kind of a follow-up to the elevated competition recently in the DSP space. From your guys' perspective, how do you see the competitive environment evolving as companies like Google and Amazon, you know, sort of try to evolve their DSPs? Tim Vanderhook: Yeah. Why do not I start, and then you are yeah. I mean, I I view the competitive space as getting smaller and smaller. Trade Desk has made specific moves around OpenPath and charging for what used to be SSP territory. So we made in our prepared comments Google wants to sell you YouTube. Amazon wants to sell you Prime Video. And Trade Desk wants to redirect your spends through OpenPath, their their own SSP where they are making incremental margins. Viant takes a different approach from that, and so we see less competition. You look at truly objective buy-side only platforms. Historically, there was The Trade Desk and ourselves. I think with some of The Trade Desk's recent moves, that puts them more in the, I guess, no longer independent or objective when it comes to the pathways. What would you add? Yeah. And I just add on to objectivity know, we see a real opening in the market and as evidenced by the Molson Coors win in. Of these other wins, that we have already we have already achieved, objectivity is a big piece. We think that we can be kind of the inside man for marketers. That this industry is so complex, and programmatic advertising and digital overall. We talked a lot about our intelligence layer. This is really required Marketers need someone. Who is going to go out and defend their interest in market and get them their returns. And on most historically, most of the largest players in advertising are on both sides of the transaction. They are looking to sell you their own inventory. They consistently and this has been proven. They rig the results to show that their content their own inventory is driving the best results. Marketers regularly figure that out, but in the end, that ended up not being true. And I think just as a lot of these, especially with the larger brands, as now most of the money is in digital, now realizing that even though their KPIs in digital may have gotten better, total sales and total market share do not they do not tell the same story. So we are really looking to connect senior marketing leadership with the CEO and the CFO's expectations of revenue growth, market share growth, That is what is unique about Viant. We think from a competitive standpoint, we are really the only one left on the buy side that has true to actually serve that role. Wyatt Swanson: Got it. Thanks, guys. Chris Vanderhook: Thanks, Wyatt. Operator: Our next question comes from Jason Michael Kreyer with Craig Hallum. Jason? Jason Michael Kreyer: Great. Thank you, guys. So, obviously, that $250 million pipeline delivered some nice wins this quarter. Just curious if you can talk about how the sales teams are backfilling additional opportunities behind that. Tim Vanderhook: Well, really, the the larger the larger advertiser opportunity has really been product-led. We did not go out and make a huge push, and this is what has really been so exciting for the team. We are getting pulled into that, and it started about a year ago with the launch of Viant AI. A lot of these large marketers are looking to get more efficient. Better results. Like I said, they got to tie out what the CEO and the CFO are saying in terms of you know, tying outcomes true outcomes to their actual ad spend. So we are this is a product-led initiative. We are being pulled into this. And so, really, for the sales team, it has not been a massive sales effort today to go after this market. And I think we are going to continue with being pulled in from a product standpoint. When we launch AI decisioning, as well, that is going to be product-led as well. So we are really excited about that. This has not been a heavy drain on our current core sales team. But we think that we are we are good with the investments that we have that we have made throughout this year to be able to serve this end of the market. Jason Michael Kreyer: Just a follow-up for Larry. You talked about greater margin, EBITDA margin expansion in Q4, and I think you alluded to kind of similar trends as we get into '26. Are there AI efficiencies driving that, or are there some other elements driving that that you can call out? Lawrence J. Madden: I think, a lot of it is just the operating leverage in the model. As we grow spend, it is not linear to growing our overhead. So as we get bigger, we we can grow our overhead quite a bit lower than the the rate at which contribution of SAC grows. Certainly, AI has plays a role in that. We have a lot of we we have a lot of use cases where we are using it internally. That is making things more efficient. Making making people just easier to research and get tasks done. But it is really the it is the leverage the natural leverage in the model more so than than pure AI. Operator: Okay. Thank you, Jason. Our next question comes from Andrew Jordan Marok with Raymond James. Andrew? Andrew Jordan Marok: Hi. Thanks for taking my questions. Maybe again on the large advertisers. Within that incremental cohort, that you have kind of spoken about and maybe some of the unannounced, companies there, what are the characteristics of the clients that have seen that have been more promising either as unannounced deals or or as prospects? Whether that is by vertical or maybe some aspect of the advertiser that makes them a uniquely good fit for you. Tim Vanderhook: You know, when I think of the type of that is ideal for Viant, it is someone that is going through a shrinking market know, if you think of the beer market in general, it is shrinking in size, younger, generations of Americans are drinking a lot less, and so they need to get more efficient really fast. For businesses that are, you know, crushing it, I I do not think NVIDIA is for new ad partners. Their business is off and running. And so for us, we are always looking for the challenging environment where the marketer really is looking for the truth on what is driving growth in their business, and they are very open and to the data that we can point to and the the case studies that that we have been able to show. That drive market share growth even in declining markets, or grow the overall category as well. So I would say we are looking for advertisers that are somewhat feeling pain that know that what their current setup is not working, and they are looking for a new way forward. And, Andrew, the reason for that is is that oftentimes when businesses are challenged, this is when most of the innovation takes place. Almost out of necessity. You know, we are not looking you know, we have a very specific point of view in the market when we when we go out and talk to customers. We understand that what the way that we talk there some marketers do not want to hear it, and they may not like to face music. That the partners that they have chosen and the measurement systems that they use are flawed. Many of these companies it is not that they are they do not want to do the right thing. You know, for the end customer or for the brand. But a lot of times, people's incentives are at play. And they they themselves may have made that decision in a year or two previously. But when we see the customers, it is really the customers that want to know more. That they want to see that someone can save them money in the supply chain. They want customers they want a platform to show them what is truly driving incremental sales and new not just the same customers to them. So we we really attract customers who think that way. Those are the ones that we want to help service. And we think that it the whole market gets here eventually. It will just take some time. Yep. Andrew Jordan Marok: Thank you for that. That is that is really interesting. And maybe one for Larry. We have heard kind of some mixed reviews on October trends from some of the companies that we have talked to to date. I guess, what are you seeing right now? How are you incorporating the holiday season playing out in in your guidance? Thank you. Lawrence J. Madden: I mean, you are seeing our guide, for CXT was 16% before the performance, I believe. So we are seeing strength. We are not not experiencing weakness. I mean, there are some pockets where you you do see certain sectors with our customer verticals a little bit weaker than others? But we are seeing strength across the board. Alright. Thank you. Operator: Okay. Our next question comes from Barton Evans Crockett with Rosenblatt. Tim Vanderhook: Hi, Barton. You are on mute. Go ahead. Barton Evans Crockett: Hi there. I thought I pressed on mute. Can you hear me now? Tim Vanderhook: Yeah. I can hear you. Operator: Okay. Sorry about that. So, yeah, so Barton Evans Crockett: was curious when you first, not just the numbers, just a basic thing. You talked about an acceleration of the revenue growth rate next year over the quarters, Is that inclusive of political or is that exclusive of political? Lawrence J. Madden: Inclusive. That would be inclusive. Barton Evans Crockett: Okay. So ex-political, is it more kind of a steady trajectory? Lawrence J. Madden: No. We we think, certainly, we are going to from political. It will not be as big Probably not as big as it was two years ago. Or what last year. But, really, the the uptick in where we think we feel great about growing the growth rate really comes from a lot of these new new business wins. We think we can pro we we can from that, we can we believe we can increase growth rates in the couple of 100 basis points next year. From from 2025. So a lot of that is coming from the new business wins. Barton Evans Crockett: Okay. Alright. That is great. And on on the new business wins, I was curious if you could give us a sense of how much of this has already played out and how much is to come. So I think you have said Coors is one win and you have gotten some others. There is still some other deals that could be decided. Of the $250 million, I mean, what portion has been decided? And can you also give us a sense of your win rate on these bids? I am also curious just to to probe deeper who who are you competing against when you are winning these things? Yeah. Tim Vanderhook: So our win rate is actually been really good. On the ones we have already won here. There is still there is still a good amount, left I would say the minority of the two fifty has been decided with the majority still up for grabs. Is how I would describe it. But the win rate the win rate is been good. And like I just said in the earlier, one of my earlier responses, I think that it is really good because we actually choose on which customers we pursue. There is another very, very large CPG company that, you know, we have talked to in years past. We actually have not pursued an opportunity with them. Mainly because we do not actually believe that that that their headspace on where they are at, that their they are going to be right for us. We want customers who want out of necessity, feel like they need to do something different. That they cannot just run the same playbooks that everyone else runs. They cannot just rely on last touch attribution. These these companies sell you know, billions and billions worth of consumer goods. And you cannot we need customers understand that you cannot treat CTV as a last touch vehicle. We also want them to understand that everything just because you know, seven or eight years ago, certain companies in the space will deem that ad fraud is no longer an issue. Or, you know, that you know, direct direct path, inventory is not important. We need customers to actually assign value here. For us to pursue them. And, when you get a customer who who thinks the way that we do, this is typically where we are going to drive the most value for them. Barton Evans Crockett: Okay. But just in terms of who are who are you competing against who are you winning against, can you go to any target? All all the players that Tim Vanderhook: yeah. With Molson Coors, Trade Desk, Google, Nexen, I believe, was in there. It was Yahoo. I am not sure. I believe they were in there. All the majors that you would expect. Yeah. I mean, there is call it, five what you would consider that have an enterprise-grade DSP. There is about five companies that exist. You know? And, again, we think that we are really the only objective player that is specifically on the buy side. No allegiance to any sell side or supply path. Out there, and we think that it gives us a very unique position And just one last comment. It was cited in the press release this concept of findability, and it is a testament to how advanced Molson Coors is in in the space that it is not just about, hey. We have first-party data. We would like to match to you. Matching is one thing, but actually deploying and getting ads and messages in front of that audience in a real-life environment is a whole another thing. And most DSPs fall down when it goes to actually find those households that are in that customer's first-party dataset. So where it came to Molson Coors, it was not just the scalability of our household ID that it is four times greater than the next the next best partner. It is also the ability once your data is active in the DSP to actually reach them and deploy real dollars against them. That is where Viant's DSP far outshines all those enterprise-grade DSPs that we were up against. Barton Evans Crockett: Okay. Thank you. Operator: Okay. Our final question will come from Zach Cummins with B. Riley Securities. Zach? Zach Cummins: Hi. Good afternoon. Thanks for taking my questions, and and congrats on on the strong results here. Tim, I I was curious just in terms of the CTV growth rate. Nice to see that become record amounts and and as a percentage of ad spend as well in the quarter. Can you give us a sense of the durability of that growth rate, especially now that your identifiers are are largely integrated into that, moving forward from here? Tim Vanderhook: Mhmm. Oh, I think that growth rate is going to stay very high for many years. I think one most of us look at a TV becoming a computer, we are just thinking linear TV you know, translating into streaming. But I like in it more to the mobile app ecosystem. When smartphones came out, it was hard to imagine that mobile phones would be such a big opportunity from gaming to health to all types of different apps. That are now created on there. And I think you will see the same thing with smart TVs, It is going to be, yes, one leg of growth from linear TV moving into streaming. But it will be new growth that is created from new apps and gaming and time spent there as well. And also remember that smart TVs are Internet connected, so you have interactive capabilities that are still coming down the pipe in the future. Of it is two way. You are allowed to vote during games and things like that. There is going to be all types of fantastic content that comes online. That is going to grow time spent with our connected TVs pretty tremendously. So I see no risk in the growth rate for CTV. I think that thing stays very high for many years. There is also, Zach, some basics. Every time you see us make an announcement, of another large content owner, moving into direct access for us, you can expect you know, that growth to grow. Even faster. Iris ID, again, we want to have differentiation within CTV. And a lot and a lot of our customers recognize that. It is not just the direct supply path that saves them you know, 20 plus percent just straight off the top. It is also our AI bidding capabilities. They they love that. That is the probably the most loved thing we have by our customers is AI bidding. And then also the penetration of Iris ID. Competing platforms, when marketers log in to those and they go to buy CTV, they only can buy at the app level. Log in to Disney, you can only buy Disney. You do not know what show you are buying. If you log in to, you know, Paramount plus if you log in, it is like Paramount plus. You you do not know what the content is. Iris ID actually unearths what that content is about so the marketer can show up as being relevant. As Tim stated in his prepared remarks, we are seeing the performance increases. They are they are huge. So, again, these are just basic things that we want to do around differentiation that drives value for the advertiser. Understood. And my my one follow-up question is, I I know Is there a chance that client could be won back at some point in the future? You had a 600 basis point headwind from a lost advertiser in Q3. Tim Vanderhook: Yeah. I think there is. Obviously, that was a little bit different The customer was acquired, and it was part of a cost synergy that was realized. I did listen to the earnings call, and I will say their revenue was down in the most recent earnings. And the CEO cited that it was due to advertising changes that they made. So hopefully, there is an opportunity there. But with cost being realized via M&A, it is a little bit different path. That we would have to go down. But, I think with the way that this year turned out, I think there likely is an opportunity for next year. Zach Cummins: Great. Well, thanks for taking my questions, and congrats again on the strong results. Tim Vanderhook: Thanks, Zach. Operator: At this time, there are no further questions. Tim Vanderhook: Thank you, everyone. We will see you next quarter.
Operator: Afternoon, ladies and gentlemen, and welcome to the Cannae Holdings, Inc. Third Quarter 2025 Financial Results Conference Call. During today's presentation, all parties will be in a listen-only mode. Following the company's prepared remarks, the conference will be open for questions, with instructions to follow at that time. As a reminder, this conference call is being recorded, and a replay is available through 11:59 PM Eastern Time on November 24, 2025. With that, I would like to turn the call over to Jamie Lillis of Solbury Strategic Communications. Please go ahead. Jamie Lillis: Thank you, operator. Thank you all for joining us. On the call today, we have Cannae's CEO, Ryan Richard Caswell, and Bryan D. Coy, our Chief Financial Officer. But before we begin, I would like to remind listeners that this conference call and the Q&A following our remarks may contain forward-looking statements that involve a number of risks and uncertainties. Statements that are not historical facts, including statements about Cannae's expectations, hopes, intentions, or strategies regarding the future, are forward-looking statements. Forward-looking statements are based on management's beliefs as well as assumptions made by and information currently available to management. Because such statements are based on expectations as to future financial and operating results and are not statements of fact, actual results may differ materially from those projected. The company undertakes no obligation to update any forward-looking statements, whether as a result of new information, future events, or otherwise. The risks and uncertainties which forward-looking statements are subject to include, but are not limited to, the risks and other factors detailed in our quarterly shareholder letter, which was released this afternoon, and in our other filings with the SEC. Today's remarks will also include references to non-GAAP financial measures. Additional information, including a reconciliation between non-GAAP financial information to the GAAP financial information, is provided in our shareholder letter. I would now like to turn the call over to Ryan Richard Caswell. Ryan Richard Caswell: Thank you, Jamie. The Cannae board and management team remain focused on continuing to execute our strategic plan outlined in February 2024 to generate long-term shareholder value. This plan is focused on optimizing our investment strategy, capital allocation, and the management of our portfolio as the foundation for long-term value creation. We continue to make significant progress on each aspect of the plan, including one, rebalancing our portfolio away from our historical public company investments and redeploying capital in proprietary opportunities with positive cash flows that can deliver outsized returns; two, returning capital to our shareholders through share buybacks and dividends; and three, improving the operational performance of Cannae's portfolio companies to increase their underlying values. This was particularly evident and successful in the third quarter. In the third quarter, we continued to rebalance our portfolio away from public company securities, highlighted by the closing of the previously announced acquisition of Dun & Bradstreet to Clearlake Capital, which generated $630 million in proceeds to Cannae. Thus far, $424 million of the proceeds have been used to repurchase $275 million of Cannae shares, repay the $141 million outstanding under our existing margin loan, and distribute $8 million in dividends to our shareholders. Since our announcement of our strategic plan, we have now sold $1.1 billion in public company securities and transitioned our portfolio from 70% public investments when we announced our plan to 20% public investments today. We believe this change is important for our shareholders as our portfolio now consists primarily of proprietary private investments that we believe will generate outsized returns and which our shareholders would not otherwise be able to access but through Cannae. We will continue to transition our portfolio, and over the next few months, specifically, we will look to sell certain non-core assets, both public and private, to take advantage of expiring tax benefits that could generate up to $55 million in cash tax refunds for Cannae while further simplifying our portfolio. From a capital redeployment perspective, in the third quarter, we closed on the previously announced acquisition of an additional 30% stake in JANA Partners for $67.5 million, which takes our ownership position to 50%. We also invested the remaining $30 million commitment in JANA Funds as was agreed in our initial transaction. We remain excited about our partnership with JANA and their ability to grow AUM as well as management and performance fees, which will result in cash distributions to shareholders in which Cannae will participate. We believe JANA will continue to generate attractive investment returns as they have done over their 24-year history as a leader in engaged investing. Cannae also invested $25 million in Black Knight Football after closing the DNB sale, completing our earlier commitment to BKFC's capital raise. The uses of this new capital include funding operating expenses across the group, the Boardman's Stadium acquisition and renovation, and the acquisition of Moreirense FC, as well as other potential strategic team investments. In terms of future capital allocation, the Board has directed management to continue concentrating our efforts in sports and sports-related assets, where we have demonstrated a proven and durable competitive advantage. We will leverage our networks to look for opportunities in teams and related in the sports ecosystem where we can exert influence, focus on improving cash flows, and generate investor returns. We believe sports is evolving into an institutional asset class as it has demonstrated an ability to generate long-term outsized returns. Cannae is well-positioned in the sector with long-term capital and proven experience as evidenced by the value creation of both Black Knight Football and the Vegas Golden Knights, where our vice chairman is the majority owner. We will also continue to opportunistically take advantage of our long-standing strengths and network in consumer and financial services and technology. Since the start of the third quarter, Cannae has continued its strong capital returns to our shareholders through repurchasing $163 million of stock at an average discount to NAV of 31%. Year to date, we have now purchased $275 million of our stock or 23% of our shares outstanding at the start of the year. Furthermore, Cannae has returned $424 million of our $500 million commitment to repurchase shares, repay our margin loan debt, and distribute dividends in conjunction with the sale of DNB. As a result, we have $25 million remaining of the $300 million of committed share repurchases and have $52 million earmarked for future quarterly dividends. Since announcing our strategic plan in 2024, we have now returned over $500 million to our shareholders, representing 35% of our shares outstanding at the plan's announcement. This implies that roughly half of the total $1.1 billion in company public company monetizations have gone to share buybacks. During the same time, our share price discount to NAV has narrowed by approximately 20%, and we are confident that this is just the beginning. In the third quarter, we also continued to work with our management teams to create value at our portfolio companies. As an example, at Black Knight Football, we continue to see strong results both on and off the field. At AFC Bournemouth, we closed the fiscal year with double-digit increases in revenue driven by continued growth in commercial coupled with additional revenue associated from our ninth-place finish in the Premier League. Bournemouth also had one of the most successful summer transfer seasons in European football and was ranked by Tifosi Capital and Advisory as generating the second-highest net transfer proceeds across all European football. We also continue to make progress on our stadium renovation. As discussed before, we acquired Vitality Stadium earlier this year and have started on a two-phase expansion, which will increase capacity from 11,300 seats to over 20,000 seats, add additional hospitality experiences, and further enhance the revenue growth potential of the club. The first phase is expected to be completed by the start of the 2026-2027 season and will increase the stadium seating capacity to 17,000 seats. This improvement in infrastructure follows the opening of AFCB's new performance center earlier this year. Lastly, despite the significant player sales, Bournemouth has continued strong on-field performance as the team now sits in ninth place in the Premier League after 12 matches. At FC Lorient, the team currently sits in seventeenth place in Ligue 1. We have continued to work with management to better connect FC Lorient with Black Knight to enhance player development and player pathways. We are focused on working to keep the team in Ligue 1. We remain excited about the opportunity of FC Lorient within the multi-club, with the most recent example being the success of Eli Junior Krupi at AFC Bournemouth. He was acquired from FC Lorient and has already seen significant opportunity in playing in nine matches with four goals. Lastly, our newest majority ownership interest in Moreirense SC of the Primeira Liga in Portugal has started off well. We quickly implemented a strategic plan of evaluating new leadership and hiring a new head coach. We worked closely with their recruiting team over the summer to improve the roster and also invest in players that could move up the Black Knight pyramid. After 11 matches, Moreirense is in sixth position in the table. Alight, our largest remaining public investment, reported total revenue of $533 million in the third quarter, down 4% year over year. Despite the modest top-line decline, adjusted EBITDA, adjusted EBITDA margin, and free cash flow all improved significantly in 2025 compared to the prior year third quarter. However, management reduced their 2025 forecast ranges for revenue, adjusted EBITDA, and free cash flow to the lower end of prior forecasts. Alight continued to return cash to shareholders, repurchasing $25 million of its common stock during the quarter and also paid $22 million in dividends to shareholders. The Watkins Company continues to see strong demand for its products. The third quarter was slightly softer than anticipated, but the fourth quarter has started off strong and, given the seasonality of the business, will be critical for full-year results. We hired a new head of sales and remain excited about the business and the initiatives to drive growth and margin. I will now turn the call over to Bryan D. Coy to touch on our financial position. Bryan D. Coy: Thank you, Ryan. Cannae's operating revenue was $107 million for 2025, down $7 million from $114 million in the third quarter of the prior year. This was driven by reduced guest counts on a same-store basis and 10 fewer restaurant locations, partially offset by higher average checks per guest at both brands. Nearly all the location brand as the '99 continues to generate same-store revenues at flat or slightly down levels year over year, which is in line with the Baird real-time restaurant survey results for the casual dining segment. Cannae's total operating expenses decreased by $12 million in 2025 to $120 million. Approximately $5 million of the decrease is directly related to the Restaurant Group location and operating cost reductions. $3 million is from the ICE fees in the prior year's totals as Cannae monetized its remaining Dayforce shares and terminated the ISIP plan. And $2 million of the reduction is from the termination of the external management agreement earlier this year. Cannae's net recognized gains were $8 million in the current year third quarter, down $15 million from the prior year comparable period. This reflects lower mark-to-market gains on PaySafe offset in part by a pickup on JANA Funds and other items. Cannae's equity and losses of unconsolidated affiliates was $57 million in 2025, compared to $25 million in the third quarter of the prior year. The change was driven by our share of Alight's goodwill impairment, and partially offset by record player trading profits at Black Knight Football. As Ryan discussed above, our margin loan was fully repaid in conjunction with the DNB sale. Concurrently, we amended the margin loan to reflect Alight as the sole collateral, lowered the interest rate spread by 35 basis points, and extended the maturity to 2028. Now Cannae's only corporate debt outstanding is the fixed-rate term loan that matures in 2030, which has $47.5 million outstanding after our $12 million paydown earlier this year. That concludes our prepared remarks, and we will be happy to take questions. Operator: We will now begin the question and answer session. To ask a question, you may press star then 1 on your touch-tone phone. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. And your first question today will come from Kenneth S. Lee with RBC Capital Markets. Please go ahead. Kenneth S. Lee: Hey, good afternoon, and thanks for taking my question. First one, about the potential tax benefits. I assume they are probably from NOLs. And in terms of the potential investment monetizations that you could look at over the next few months, would you be driven mainly on unrealized gains? Or are there any other criteria that you could talk about there? Ryan Richard Caswell: Yeah, of course. Yeah. So the tax assets that we are referring to are some historical gains that we have where we could utilize losses to get a refund from those taxes. So part of that, we will be looking to monetize assets where we have losses to realize the loss to generate the tax refund. Does that make sense, Ken? Kenneth S. Lee: Yep. That makes sense. That makes sense. And then any criteria you would look at when potentially it sounds like you would then look at mainly unrealized losses more than I'd say. Ryan Richard Caswell: Yeah. Correct. I think in the near term, we would be most focused on realizing some unrealized losses to take advantage of it. And then I think we will continue to monitor our broader portfolio to, you know, to monetize assets that we think are less strategic today. Kenneth S. Lee: Gotcha. Helpful there. One follow-up, if I may. Noticed within the latest, some of the parts within the other investments you also list some additional new investments, I think, in SpaceX and in Brasada Resorts. Wondering if you could talk a little bit more about some of these investments, the relative size of the holdings. I assume it's probably somewhere around $30 million in total. Where were they sourced? What are the expected returns and opportunities here? Ryan Richard Caswell: Yeah. I think so with the investments that you are referring to, all of those have been in there for a while. Maybe we have updated the foot recently, but none of those are new investments. And I think going back to your other question, as we look at kind of what's more strategic and less strategic, I would think some of those smaller assets would be ones that we would look to monetize. But I do not think there's been a change. It might have just been a footnote that changed at some point. Kenneth S. Lee: Gotcha. Very helpful there. One last question for me. More broadly, how do you view the risk of AI on the fintech and software space? Obviously, you have a lot of investments within that space, and a lot of them were made a while back before AI started really growing. So how do you assess that risk? And how do you think about that, the potential impact on the portfolio companies there? Thanks. Ryan Richard Caswell: You know, we look at AI more broadly like everyone is doing across their portfolio. You are right in saying that some of the businesses are we made the investments before I think that AI was as popular, as big of a thing as it is today. Look, we tried to make investments in businesses with good kind of market share and what we thought were defensible moats. I think for most of those businesses, they are trying to deploy AI in their processes and leverage AI as best they can. So we do not see in any business in our portfolio, we do not see that AI is going to make it obsolete. But I do think that like all businesses, and like that we do at Cannae, we are to think of ways to more efficiently or for the business to more efficiently leverage AI in its workflow processes. You know, relationships with consumers, could that improve revenue, could it improve margins? So hopefully, that helps. Kenneth S. Lee: That's very helpful. Thanks again. Operator: And your next question today will come from Ian Zaffino with Oppenheimer. Please go ahead. Isaac Arthur Sellhausen: This is Isaac Arthur Sellhausen on for Ian Zaffino. Thanks for taking the questions. I guess just a follow-up to the previous one on divesting non-core assets and, you know, as you continue to monitor those, I guess the question would be how do you view returning that capital or proceeds via the buyback or dividend? You know, versus continuing to invest behind Black Knight Football and the sports assets. Thanks. Ryan Richard Caswell: You know, look, since we initiated our strategic plan in February 2024, we returned about $500 million of capital to shareholders. So clearly, we have and will continue to be very focused on capital returns. I think we have about $25 million of the $300 million that we initially set out with the sale of DNB. And, you know, as we look to monetize assets in the future, I think each time, we will evaluate kind of the merits of investing, you know, buying back more stock. Or, you know, does it make sense to look at, you know, new investments? And so that's kind of the process that we will do. But, again, I think if you look historically, we've obviously been very focused on capital returns to shareholders, and that's clearly something we'll think about. And we obviously have the dividend in place today, which generates a consistent capital return to our shareholders. Isaac Arthur Sellhausen: Okay. Great. And then just as a quick follow-up on AFC Bournemouth and the stadium, maybe if you could provide just a quick update as far as the renovation expansion activity. And, I guess, a timeline for completion there. Thank you. Ryan Richard Caswell: Yeah. So we've started the first phase of the renovation. That will take the stadium up to about from a little over 11,000 to 17,000. More importantly, though, it will take hospitality above 1,300, and it will take with kind of premium GA above 2,000, which we really have very limited of today. So we're very excited about the first stage. And, again, I think we've said before, but that's kind of a we believe that's going to be kind of a mid-teens type return on invested capital. So we think it's we try to be very conservative and thoughtful around the renovation. The first phase of that is supposed to open at the beginning of next season. And then the second phase will open at the beginning of the following season. And that will take it up to 20,000. We've started on improving a bunch of the hospitality areas. And we're doing a modular build, we've started to deal with all of the contractors who will be doing that. So it's all moving along. I think the big push will be kind of at the start of next year through the summer when the season ends, and then you can start installing all of this. But thus far, we generally seem to be on track. There is some approval and planning process that we are continuing to go through. But overall, we're very excited and optimistic as it goes forward. Isaac Arthur Sellhausen: Great. Thanks very much. Operator: This concludes our question and answer session. I would like to turn the conference back over to Ryan Richard Caswell for any closing remarks. Ryan Richard Caswell: To conclude, we have maintained our focus on executing the strategic plan we initiated in February 2024, and we are pleased with the progress we've made and the results that have followed. We are excited about the direction our board has set and the foundation we have built for long-term value creation. Thank you for your support. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Tamiya: Thank you for attending today's Informa TechTarget Third Quarter 2025 Financial Results Conference Call. My name is Tamiya, and I will be your moderator for today's call. All lines will be muted during the presentation portion of the call with an opportunity for questions and answers at the end. I would now like to pass the conference over to your host, Charles Rennick, General Counsel. You may proceed. Charles Rennick: Thank you, and good afternoon, everyone. The speakers joining us here today are Gary Nugent, our CEO, and Daniel T. Noreck, our CFO. Before turning the call over to Gary, we would like to remind everyone on the call of our earnings release process. As previously announced, in order to provide you with an update on our business in advance of the call, we posted a press release to the Investor Relations section of our website and furnished it on an 8-K. You can also find these materials at the SEC free of charge at the SEC's website, www.sec.gov. A corresponding webcast as well as a replay of this conference call will be made available on the Investor Relations section of our website. Following Gary's remarks, the management team will be available to answer questions. Any statements made today by Informa TechTarget that are not factual, including during the Q&A, may be considered forward-looking statements. These forward-looking statements, which are subject to risks and uncertainties, are based on assumptions and are not guarantees of our future performance. Actual results may differ materially from our forecast and from these forward-looking statements. Forward-looking statements involve a number of risks and uncertainties, including those discussed in the Risk Factors section of our SEC filings. These statements speak only as of the date of this call, and Informa TechTarget undertakes no obligation to revise or update any forward-looking statements in order to reflect events that may arise after the conference call, except as required by law. Finally, we may also refer to certain financial measures not prepared in accordance with GAAP. A reconciliation of certain of these non-GAAP financial measures to the most comparable GAAP measure, to the extent available without unreasonable effort, accompanies our press release. And with that, I'll turn the call over to Gary. Gary Nugent: Thank you, Charles, and thank you all for joining our call today. As always, we greatly appreciate you investing the time. I am pleased to report that 2025 demonstrated the momentum that we had anticipated following our Q2 results and that we made good progress in unlocking the benefits of the scale, breadth, and diversity of our combined business. We have said many times that we view 2025 as the foundation year for our combined company as Informa TechTarget. Executing upon our plan to align and integrate our ease and seize the benefits with the combination of forces, I am convinced we will be a key point of differentiation in the market as we move forward. Our early strategic initiatives are gaining traction and beginning to bear fruit, and we're seeing improving performance from our business. The B2B technology market is a dynamic one, with artificial intelligence, cybersecurity, and generally digital transformation as key drivers. With a $5 trillion end market today, our own Omnia analyst forecasts this end market to double by 2034. Our ability to inform, educate, and shape the market and connect technology vendors with engaged, purchase-ready IT decision-makers has never been more valuable. Our clients are, in the main, performing well. However, they are currently engaged in a strategic AI investment cycle, with the majority of resources being redirected towards R&D in this arena. While this may be temporarily impacting go-to-market and marketing budgets, these investments will ultimately need to demonstrate an ROI, which will drive increased demand for our products and services in the midterm. Regardless, it is a large addressable market out there. We signed at around $20 billion for our business, of which we have only penetrated 2.5% market share. Thus, there is plenty of runway for growth to leverage the breadth and scale of our client proposition to compete and win, increase our share of wallet with our customers, and take market share. Our strategic focus remains on four key areas: The first is a revamped go-to-market strategy, focusing our resources and efforts on the largest clients and the hottest market, largely artificial intelligence, cybersecurity, and the channel market. Second, our product innovation. We are aligning and integrating the portfolio of products and services, leveraging the breadth and scale to offer and deliver solutions that align to the needs of our clients across their product life cycle, and by extension, positioning ourselves as a strategic partner and improving our average order value. The third point is improving our operational efficiency and effectiveness, unlocking the cost savings and the synergies that the combination affords us. And then fourth, is a focus towards diversifying our audience development and engagement strategies, including establishing our discoverability through AI answer engine in Leli. In terms of our financial performance, from a revenue and an adjusted EBITDA perspective, we are delivering in line with what we had previously indicated. Today, we are reaffirming our full-year 2025 guidance. We continue to expect broadly flat revenues on a combined company basis compared to the prior year, and an increase in adjusted EBITDA from last year to over $85 million this year. What is particularly encouraging is the sequential momentum that we've built throughout the year, moving from a negative 5.8% in year-on-year growth in Q1 to negative 1.6% in Q2 and now achieving positive year-on-year growth in Q3. Q4 is seasonally our strongest quarter of the year, and this trajectory demonstrates the underlying strength of our combined platform and the effectiveness of our strategic initiatives. Third-quarter revenues were $122 million as compared to the prior year $121 million on a combined company basis, a growth of around 1% year-on-year. However, it also represents sequential growth of 2% on Q2, which was versus a modest seasonal sequential decline last year. So revenue momentum is building. I think in particular, there's a bit of catch-up here as we work through the aligning and integrating combination in the first two quarters of the year. The business generally exhibits attractive profit drop-through on revenue expansion, which together with the cost savings that we were delivering resulted in our adjusted EBITDA growth in Q3 being ahead of our revenue growth, both on a year-on-year basis and on a sequential basis, delivering healthy margin expansion. In Q3, the adjusted EBITDA grew by 9% year-on-year. The company posted a net loss of $77 million largely as a result of an $80 million non-cash impairment, given the reduction in our market capitalization during the quarter. Our Q3 wind wall, as we would describe it, which is a device we use internally to keep track of and celebrate our successes, is covered in interesting anecdotes and postage. We have consolidated our Intelligence and Advisory brands under the unified Omnia banner, bringing together the expertise of Canalys, Ward's, and ESG into a single powerful market intelligence platform. This consolidation is already showing results in terms of client clarity and cross-selling opportunities. We launched in September the Informa TechTarget portal, which is the first product leveraging our combined audience data set. We are now able to provide our clients with unified access to intelligence, intent, and demand via an improved common interface. It represents a significant increase in the intent data signals, over 40% increase, and greater audience reach, improved performance in ROI reporting, and the ability to seamlessly integrate with the majority, if not all, of our customers' preferred marketing and sales platforms. On that note, we were delighted to receive in October the Demand Based Technology Partner of the Year Award. Our editorial teams have won 47 awards for their original, authoritative, and impartial B2B journalism year to date. It is such an asset in a world where trust and trusted sources of information command a premium. In addition, the editorial team has recently launched a new publication, a channel guide, targeting the North American technology channel partners. We collaborate with major tech companies on marketing, sales, and distribution. An important point to note is that in this industry, over 70% of all value goes to market via the channel, and therefore, it is a critical market for us to compete in. Our Allstar editorial team for this combines talents from TechTarget, channel futures, light reading, and CIODAI. Our go-to-market focus on the largest players and the hottest markets is beginning to bear fruit, with bookings up year-on-year, longer-term contracts, and increased average deal sizes as we present more comprehensive integrated solutions to our clients. We continue to successfully reposition Netline to target the volume end of the demand market, which is delivering significant growth in revenues and bookings year-on-year. But to us, most pleasing of all, I'm proud of the way our team has embraced the combined company culture that we are building, and we're seeing excellent collaboration efforts across the business. We continue to view AI as a significant opportunity for our business, as a technology market to serve in its own right, as a tool to improve productivity and quality, and as a catalyst for enhancing existing and inspiring new products and services. The focus of our efforts today lies in four key areas: to provide conversational AI interfaces into our proprietary market and our permissioned audience data, enhancing the efficacy and the speed of building and executing on their go-to-market programs for our clients. The second area is on providing conversational AI interfaces into audience experience across the network, enhancing our audience's ability to discover and engage with the original, authoritative, and unbiased information that better informs and shapes their buying journey. Finally, it's about enhancing the productivity of our market experts as they create original data and insights that inform, educate, and shape the market, and the productivity of our marketing and sales teams as they seek to scale our presence in what is that $20 billion addressable market. While AI is evolving the way audiences discover and consume information, Informa TechTarget is well-positioned for this shift given our wealth of market expertise, our trusted original content, and the diversity of audience development techniques that we have. We are being proactive and agile in adjusting to the fundamental change in how technology buyers discover and consume information. With the rise of answer engines and AI-driven search, there's an accompanying skepticism towards generic content. According to our own search, over four out of five technology buyers do not fully trust AI today. Our focus on high-value, expert-driven editorial content and specialized audience communities is proving prescient as audiences seek to verify with trusted sources. To that, we're seeing a two to three times higher membership conversion rate from answer engines and LLM citations compared to traditional organic search. We believe this is validating our strategy of prioritizing quality, expertise, and our diversified capabilities in attracting membership, such as growth in direct traffic and newsletter engagement, which has meant that our active audience membership grew modestly over the period. Looking forward, we remain focused on capitalizing on the breadth and scale the combination affords us to become an indispensable partner to the technology industry, informing, educating, and shaping the market, connecting buyers with sellers, accelerating their growth via an expert-led, data-driven, and AI-enabled B2B marketing leader. We aim to further build our momentum in Q4 and into 2026 as we leverage the benefits of combination. We believe that we are well-positioned to capitalize on the opportunities ahead and deliver consistent profitable growth and increased value for our stakeholders. I want to thank our entire team for their dedication and continued execution of our strategy. I have spent the large part of the last eight weeks or so with our customers in Massachusetts, California, New York, Washington, both DC and state, Texas, France, the UK, Dubai, and Tel Aviv. Without exception, our customers have gone out of their way to highlight the quality of our people, and the relationships that they have built. Their expertise and commitment are the foundation of our success. With that, we're now happy to answer your questions. I'll ask the operator to open up the line for Q&A. Tamiya: Absolutely. We will now begin the question and answer session. The first question comes from Joshua Christopher Reilly with Needham. You may proceed. Joshua Christopher Reilly: All right, great. Thanks for taking my questions here. Maybe just starting off on one of the last topics you were just talking about there and the whole concept of driving traffic via search engine optimization related to the AI, LLMs. What are you seeing and what have you done? Maybe you can just expand on this a bit more. As a company, as you obviously have to pivot from traditional SEO to the answer engine optimization concept. How are you progressing in that? How much more work do you have to do? What are you seeing in terms of the readership trends as customers and users ultimately find more answers via the answer engine optimization versus traditional web search? Gary Nugent: Yes, Joshua. Wanted to hear your voice. Thank you for the question. Well, I think the first thing I would say about that is that as a combined company, our strategy and tactics for attracting audiences and converting them to members are quite diverse. Very diverse. Less than 50% of the kind of top of the funnel comes from search engine within the business. We have an array of tactics that we use to drive audiences. Like I mentioned in my note, we've actually seen although there is a dynamic in the marketplace at the moment, we're actually seeing our active membership increase modestly through the period, which obviously gives us comfort. In terms of we're also seeing that the traffic from the answer engine is growing. I think we had over 77,000 citations through the period that we talked about. Interestingly enough, it's not just that we're seeing increased traffic coming from these sources. The conversion rate of that traffic to members, and remember, it is the member that is the valuable asset for our business, not the traffic. The conversion to members is two to three times what it was from or what it is from search. What we're really seeing is we're just seeing a slightly more qualified audience member coming to us. What we really also think we're seeing is just that the AI answer engines are filtering out some of the traffic that actually was not buyers that would have been valued to our membership. Does that make sense, Joshua? Joshua Christopher Reilly: That's super helpful and interesting. All right. So moving on, maybe we could dive in on the quarterly progression of revenue that we've seen this year so far. We know Q1 was depressed due to the integration process. Would you say that Q2 revenues and now Q3 are back to a normalized run rate for the combined business? Or were they also depressed somewhat? The reason I'm the angle I'm trying to get at here is if we look at the sequential implied increase from Q3 to Q4 for total revenue, I believe it's roughly a 15% sequential increase. If I remember correctly, in the old days, the normal TechTarget business would have about a 10% sequential increase from Q3 to Q4. Maybe you could just kind of help us understand what's gone on with the revenue trends here year to date? Gary Nugent: I think we're, as I said, I would use it in our progressive momentum in the year first and foremost. I think we are, I mean, you asked if it's the run rate, I mean, I would say that we are aiming to improve that constantly over time. The other thing you need to remember, of course, is that within the combined company in Q4, there is revenue from our Canalys business, the Canalys Forums, which is a series of events that run in the fourth quarter in October and in December. That is also effectively explaining the delta between your traditional 10% and the 15% that you're seeing. Joshua Christopher Reilly: Got it. So you recognize the full amount of that revenue maybe for a year subscription in Q4. Is that kind of the right way to think about it? Or is there one-time, is that event-based revenue? Gary Nugent: It's event-based revenue that is one-time and recognizes when the flow when the event flows. Joshua Christopher Reilly: Got you. Understood. Last question for me is you obviously were talking about AI as an opportunity for your business. Maybe you can speak to what specifically from a product perspective you're doing that could drive some tangible revenue over the next couple of years? Really help us understand better what are you doing to productize ultimately the AI opportunity for the new TechTarget? Gary Nugent: Yes. I touched upon this in my opening comments. I described it as conversational interfaces into our market data and our proprietary audience data, sorry, our permissioned audience data. You think about this, it's really a way we're offering our customers the opportunity to interrogate our data in a way that's a natural language way. What that does is it makes it more actionable, it makes it more accessible, especially when you're then transitioning from the marketing persona to the sales persona. What you will see increasingly from us, and we actually have demonstrations of this, is how you can actually do a natural language interface through a conversational AI interface, interrogate, for example, our intent data. In interrogating that intent data, it then gives you a greater sense of the context behind why that particular company or that particular prospect is somebody you should be focusing your attention on in actioning. That we see as being a major way to make the ability to extract value from our data and lower the barrier to the ability to extract value from the data. Joshua Christopher Reilly: Understood. Thanks, Gary. Tamiya: Next question comes from Jason Michael Kreyer with Craig Hallum Capital Group. Proceed. Cal Bartyzal: Thank you. This is Cal Bartyzal on for Jason Michael Kreyer tonight. So, you know, maybe you kind of touched on the call a little bit about seeing some longer and some larger deals, but just curious broadly how you'd characterize the backlog in the pipeline and that kind of plays into your confidence for some accelerating growth trends here in Q4? Gary Nugent: Well, I mean, given that we've reaffirmed the guidance for the year, both pipeline and the backlog support that outlook for the year. Generally speaking, we feel confident that we will roll into 2026 with a healthier backlog given the profile of bookings and revenue through the fourth quarter. I would say both of those are true. Cal Bartyzal: Great. And then just as a follow-up, can you just kind of provide an update on the unified go-to-market strategy you've had and the success that you're seeing tapping into more spend with your existing large customer base? Gary Nugent: Yes, of course. I mean, this is effectively organizing ourselves around the largest customers in the industry. I think I've mentioned in the past that about 150 to 200 end represent about half of the addressable market in the marketplace. Now we're focusing on all 150 to 200 at present. We've taken a cross-section of that to prove out this concept. We build effectively intact teams across the organization. So not just sales, not just SDR, not just customer success, but all of the capabilities within the business that service customers. In an intact team basis to wrap our arms around these customers and ensure the quality of offering service to them. What it also means is that we're seeing our ability to then land within those customers and expand our presence within them. I talked earlier on about these strong relationships that we have and the strong sponsorship that we have. The key thing that we're looking at constantly is are we penetrating new product business units? Are we penetrating new field marketing and sales units? Are we penetrating different dimensions like industry vertical marketing or channel marketing or corporate strategy, where there are new budget pools for us to address? That's really kind of a measure of our progress is where we are expanding our presence inside these larger accounts. It's obviously nice to grow an existing relationship, but actually what we want to do is expand those relationships within these very large customers. Cal Bartyzal: Great. Thanks for the time and congrats on the progress. Gary Nugent: Thank you, Cal. Tamiya: As a quick reminder, if you'd like to ask a question, please press the star key followed by the number one on your telephone keypad. Next question comes from Bruce Goldfarb with Lake Street Capital Markets. You may proceed. Bruce Goldfarb: Hey, congratulations on the results. Just a couple of questions from me. Are you seeing any changes in sales cycle duration or deal size within Priority Engine or your subscription offering as we move into year-end budgets? Gary Nugent: Thanks, Bruce. It's good to hear your voice. I would say no, nothing material changing either in terms of the cycle time on deals or on the average values at a transactional level. No material change. Bruce Goldfarb: Thank you. And then can you comment on the pipeline for potential tuck-in acquisitions? Are there adjacencies either in data or workflow tools that could accelerate growth in 2026? Gary Nugent: At this stage, we are very focused on aligning and integrating the existing assets within the business and bringing that to bear in the marketplace. That's really our focus is to ensure that we do that well, we do it quickly, we do it well. We build a platform for the future. I think it won't be until we roll into the second half of next year that we'll give consideration to that. Bruce Goldfarb: Great. Thank you. Gary Nugent: Thank you. Tamiya: There are no more questions waiting at this time. This concludes today's conference call. Thank you for your participation. You may now disconnect your line.
Operator: Alright, everyone, and welcome, everyone. And thank you for joining us to discuss Insight Molecular Diagnostics third quarter 2025 results. If you have not seen today's shareholder letter, please visit Insight Molecular Diagnostics Investor Relations page at investors.imdxinc.com. Today's prepared remarks build upon the information already shared in this robust letter. Joining us today are Insight Molecular Diagnostics President and CEO, Josh Riggs, Chief Science Officer, Ekke Schutz, and CFO, Andrea James. We also have our analysts with us as panelists. After our prepared remarks, our analysts may ask questions. Before turning the call over to Josh Riggs, I'd like to go over our safe harbor. The company will make projections and forward statements regarding future events. Any statements that are not historical facts are forward-looking statements. These statements are made pursuant to within the meaning of the safe harbor provision of the Private Securities Litigation Reform Act of 1995. We encourage you to review the company's SEC filings, including the company's most recent Form 10-Ks and subsequent Forms 10-Q, which identify risks and uncertainties that may cause future actual results or events to differ materially. Please note that the forward-looking statements made during today's call speak only to the date they are made, and Insight Molecular Diagnostics undertakes no obligation to update them. And with that, I would like to now turn the call over to Josh Riggs. Josh Riggs: Thanks, Gabby, and welcome, everybody. If you've had a chance to look at our shareholder letter, you'll have seen that our momentum is building. I'd like to talk a little bit about how we got here before shifting to how we are positioning ourselves for success in 2026. A couple of years ago, we set out to change how transplant patients are managed. The idea was and is simple. Transplant centers should have the tools on-site to monitor their patients. Intuitively, that makes a lot of sense. Each year, hundreds of thousands of tests, hundreds of millions in payments go out for post-transplant monitoring. As of today, not one of those tests is performed at a transplant center, and not $1 of reimbursement accrues to these centers' benefit. In 2026, with the expected FDA authorization of GraftAssure DX, this is going to change. Last summer, we started a pilot program that put a research version of the assay, the same design we were taking to the FDA, in the hands of researchers around the world. We wanted to do three things. One, get feedback on the workflow so that we could get ideas on what needed to be improved. Two, get technical data on the performance of the assay so we could have a sense of how robust our design was in the field. And three, engage with clinician researchers so we could get a look into what clinical demand might be for a regulated product. Feedback from transplant centers' labs helped us optimize our test workflow from two steps down to one step. That improves our turnaround time and ease of use, which means faster results with less labor for our customers. As you probably recall, our PCR-based technology is already much simpler and faster than sequencing-based technology used by major centralized labs. With our one-step workflow, we have further increased these advantages. Just last month, we published a white paper that showed that our performance across multiple centers from Singapore to Switzerland had exceeded expectations. You can find this white paper on our website. This gives us high confidence that the assay will perform well in the very rigorous FDA process. Across the board, in the U.S. and Europe, we are feeling pent-up demand for in-house testing. Because we are a kit-first company, we are seen as a partner in patient management, and institutions are eager to support our mission of broadening access. I should point out that just getting through the FDA is not enough to give us the market. The expectation is that clinicians will want to familiarize themselves with GraftAssure and compare it to legacy technology before making a switch. This could look like head-to-head comparison or interacting through the registry program we recently announced. Case in point, earlier this year, we saw data come out of Heidelberg, a research transplant center in Germany, where they compared the performance of our test to another commercially available RUO assay that is on the market in Europe. This data showed statistical equivalence on the relative measure of ddCF DNA between the two tests. It's great because the market today is largely dominated by the relative measurement method. Showing that we get to the same answer with an easier-to-use technology reduces the barriers to adoption. Recently, we've also seen preliminary results from a 100-plus patient study at a major center here in the U.S. that is a direct head-to-head against a leading U.S. centralized lab test. We and the researchers are very happy with those results. Showing that you can get equivalent to better results with on-site technology is critical to our success. There are more of these types of studies ongoing, and we expect that data will start coming out in the new year that shows clearly that GraftAssure is reliable and that it compares well to legacy technology. The feedback we get from transplant centers, primarily in the U.S., is that they are optimistic about being able to bring testing in-house, but fully expect that some level of head-to-head work will be needed to fully support conversion and internal adoption within their center. We welcome this activity. The more data that gets out there showing positive comparison to cumbersome legacy providers, the faster we'll see broad adoption. Alongside the generation of head-to-head data, we announced the launch of a registry program. The goal of this program is to capture how the industry uses our alternative measurements of ddCF DNA, namely absolute quantification and our proprietary combination model score algorithm, while they use our currently available relative measurement for patient management. The benefits of this approach in our registry are twofold. Firstly, it familiarizes clinicians with our report and test, probably making them more likely to use the technology once it's available in-house. And secondly, it generates real-world data on the utilization and performance of our alternative measures. Early data and publications suggest that these alternative methods may be superior ways of quantifying and analyzing the ddCF DNA data. If we are successful, we should see improved biopsy yield at transplant centers that are using the combination model score because of its expected higher positive predictive value. When the Centimeters score data first came out at the World Transplant Congress this summer, we saw an immediate spike in interest from our clinical partners. So we've been moving as quickly as possible to get the novel score into production. I expect that we will see the first reports going out with the new Centimeters score in 2026. Early access is likely to be limited to participants in the registry. Once the peer-reviewed publication is out, we will start to make it more broadly available and begin a conversation with MolDx on any potential positive billing impact. I'm amazed by the progress we made in such a short time. That is attributable to our team of researchers and development scientists, clinicians, and centers around the world that have embraced our partner-first approach and the strong support from Bio-Rad, who have been with us every step of the way in our planning engagement with the FDA. And now, after almost three years of absolutely grinding on product development with a modest staff, we are in November 2025, very close to our planned FDA submission. While the shareholder letter details our recent accomplishments and our FDA submission timeline, I'd like to add some color on our clinical trial. You can really feel the energy at the sites right now. They're excited. They're engaged. We love to partner with them. Tampa General was the first to bring in samples, and Vanderbilt and Cleveland Clinic were up and running shortly thereafter. These are leading transplant centers in the U.S., and they are genuinely committed to this effort, and that makes all the difference for us. Some of you may have recognized this sentiment in the comments from Dr. Anthony Langone of Vanderbilt University on our August 15 KOL call. He pointed out the issues with the current paradigm of send-out transplant monitoring, many of which can be resolved with in-house testing. Now I'm gonna take a few moments to talk about what's going on at the FDA. After our planned submission in December, we start the clock on their review process, which is listed as 150 days on their website. That being said, the FDA is not accepting new submissions while the government is shut down. We have been told that our FDA reviewer team is still working through the shutdown, which is good for clearing their docket and review backlog. At the same time, the FDA has paused answering questions from companies like ours that are preparing a new submission. It's common for companies like ours to ask the FDA questions on their preferences and what they would like to see. We do have some outstanding questions that we asked in September. Since the government shutdown on October 1, we have not received those answers. We are staying focused on what we can control, which is completing our clinical trial and being ready to submit to the FDA by the end of the year. I want to make clear that the government shutdown does not affect our ability to drive engagement with customers. We can process tests at our Nashville CLIA lab and pursue our registry study even while the government is closed. Looking forward to 2026, we expect to move forward with validation of both heart and lung assays in our lab. That work sets us up to submit for reimbursement for heart in 2026 and lung in 2027. The nice part is that for heart and lung, we can leverage all of the analytical work already done for kidney when we go to the FDA, which really streamlines the regulatory submission process. We are excited about Heartnext. You'll see a chart in our shareholder letter that showcases our assay versus legacy technology regarding the threshold for rejection detection in heart transplant patients. We are in the rare event detection business, and so lower on the bar chart is better. Being able to quantify at low volumes matters when you need to establish a trend line prior to reaching the clinical threshold. We've also made real progress on our registry study, which we announced in September. The study design is complete, the protocol is written, and we already have 10 centers, including three of the top 10 programs in the country, lined up and working their way through legal. We expect that you'll see the registry study show up on clinicaltrials.gov early next year. As we approach FDA submission, I believe the excitement around our company is building. This excitement extends to other companies with whom our products and services are symbiotic. We continue to be thrilled with our relationship with Bio-Rad, which has been mutually supportive and productive. And we continue to pursue strategic relationships that can support our increasing reach and need to scale as we go into 2026. We've been a development-only stage company for the past two to three years, and that period of time is coming to an end. Now we are focused on shifting into a commercial organization. We believe we are building a product that is going to be the de facto standard of care assay. We also have opportunities to grow the pie. There are developments changing the structure of the market itself. We see tailwinds when we look at the potential for reference lab adoption, anti-CD38 approval, and ddCF DNA guideline adoption. We believe we are bringing to market the most precise testing for transplant rejection while broadening access to the test for patients. The margins available to us in GraftAssure, along with a highly concentrated market, represent a rare opportunity to create an exceptionally profitable business line with an operating margin that should be industry-leading. Now let me turn it over to Andrea, then we can take questions. Andrea James: Thank you, Josh. Hi, everyone. Thank you for joining us. And I also just want to do a quick shout-out to Gabby Woody, who's emceeing this call and whose Zoom decided to malfunction right before we went live. So, anyway, you've got our financial tables in the shareholder letter and in the 10-Q, so I'm just gonna touch upon the highlights. We finished the quarter with $20 million in cash and equivalents and no debt. Lab services revenue came in as expected, and you can model that sequentially flat in Q4. Last year, recall that we did perform some work late in Q4 that came in, and, of course, we'd be thrilled to do that again if the work comes in. So far in the fourth quarter, we've billed for about $100,000 worth of these services. We kept our cash burn in Q3 below our stated goal of $6 million per quarter, and we expect that $6 million to tick up a bit in Q4 due to expenses associated with our FDA submission and clinical trial. This is the same as our prior communication with one small change. The Q3 cash burn came in favorably because some expenses did shift into Q4 instead. You can see that we've invested incrementally in research and development over the course of this year as we prepared for FDA submission. We were able to absorb these expenses while still maintaining our cash burn levels at $6 million a quarter, and we achieved that by continuing to deliver gross profit by performing extra lab services work at our Nashville lab. We're really proud of that, actually, and we expect to continue to cultivate activities like this and others to extend our cash runway. Also, it's worth noting that going into next year, we have the option to scale back select expenses as needed because much of the incremental 2025 research and development expenses are tied to consulting, software development, and laboratory supplies and materials associated with our FDA program. Okay, onto some quick housekeeping for our analysts. Historically, our company has presented its operating loss on both a GAAP and a non-GAAP basis. Starting next quarter, we will begin talking about adjusted EBITDA instead, which is essentially the same line item as non-GAAP operating loss, but it's just more intuitive phrasing for investors. We also intend to introduce non-GAAP net income and a corresponding non-GAAP EPS. The primary reason for this is we want to give you metrics that help you to track the underlying profitability of the business that we are building. To do this, it makes sense to back out certain non-cash items, such as the contingent consideration line that fluctuates from quarter to quarter. Contingent consideration, for those of you who are not familiar, relates to acquisition accounting. In our case, it's tied to certain earn-out arrangements related to our prior acquisitions. Okay. I want to leave you with two ideas as I close. The first is I want to give you an easy way to think about our total addressable market or TAM and how it's growing. And then the second thing is I want to give you fly-on-the-wall visibility into our strategic planning meetings that we hosted all last week at our Nashville headquarters. Okay. So on our TAM, I'm gonna throw a bunch of numbers at you, but I think you can follow this. So we publicly state that we have a greater than a $1 billion TAM. And this is for kitted transplant testing. And I want to walk you through some of the easy math on our assumptions and how to think about our growth relative to TAM expansion itself. Okay. So we assume about 150,000 transplanted organs per year in our key markets. That's the U.S., Europe, some of Asia, and Latin America. Then we talk about total patients under management being 10 times the annual transplant volume, and that's based on estimated median survival rates. So the total expected patients under management is simply 10 times 150,000 or 1.5 million patients. Next, you take the 1.5 million patients under management and you assume a number of tests per year per patient. You're gonna see a lot of numbers out there floating around, but the most conservative is two per year per patient. And this number factors in higher testing volumes in earlier years post-transplant and lower testing volumes in later years for an average of two. In fact, the MolDx Draft LCD, which many of our analysts are very familiar with, on kidney surveillance testing, is for four tests in the first year of a transplant and two tests per year thereafter. So you can see that assuming two tests per year per patient under management is a conservative and reasonable number. If you take the 1.5 million patients under management and multiply it by two tests per year, you get 3 million testing opportunities per year. You multiply 3 million testing opportunities per year times our expected ASP on our kit, and you can easily get an expected TAM of over a billion dollars. That ASP is supported by the fact that our laboratory version of our kidney test is reimbursed by Medicare at $2,753 per result, and we believe we can sell our kits to hospital customers for a significant fraction of the reimbursement value. So you'll hear us talk about market expansion a lot, and it's usually focused on one of those key levers that I just described. For example, expanding into more solid organs helps us to grow into our sedative TAM. Also, some organs, such as the heart, require more than two tests per year. Investments in market access and geography should also help us expand into our state of TAM. But then there are some things that could grow the TAM itself, and this is what Josh was talking about when he talks about growing the pie. So remember the multiplier, two tests per year. When Josh mentions reference lab adoption, anti-CD38 drug approval, ddCF DNA guideline adoption, we're actually talking about developments that would help the industry to increase its testing volumes well beyond an average of two tests per year. Also, any therapies that extend the lives of patients grow the patients under management because they're living longer, and therapies that require testing to manage dosage already grow the testing opportunities per year. Okay. And then organ transplant itself—I'm sorry. This is so macro, but I think it's important. Organ transplant itself is growing as a category, so remember that our kitted testing strategy sits within the macro truth about the strong benefits of organ transplants. For example, kidney transplants not only dramatically improve a patient's life but also can represent a tremendous cost savings over dialysis, and so we believe we are so well situated with these tailwinds. And that's just in transplant. We haven't talked about oncology today. Our long-term objective after we establish our GraftAssure franchise is to also unlock whole new testing markets in cancer, which, of course, grows our TAMs substantially. Another thought I wanted to leave you with is we're shifting from a development stage company to an integrated commercial operation. This is obviously very exciting. Our strategic planning meetings last week were appropriately intense and pinpoint focused on driving engagement and utilization of our assay via our Nashville laboratory. This is something we can do now even before we have achieved FDA marketing authorization for our test kits. We're also honing and streamlining our market access strategy in the U.S. and EU, which we believe will set us up with some nice natural growth over the coming years as we achieve expanded coverage. I believe that if an investor or an analyst could have been a fly on the wall during these meetings, you would have seen that we are a company that is playing and preparing to win. We want to enable our customers, which are the transplant centers themselves, to participate in the testing value chain, and we want to drive better and more localized accessible patient care. But this doesn't mean that we intend to lose our hard-earned cost discipline. If you look at the market capture activities that we seek to invest in, we see customer acquisition costs that are quite favorable relative to these customers' expected long-term value. This is particularly owing to the fact that we are targeting a highly concentrated market with only about 100 transplant centers doing most transplants in the U.S., for example. It is also owing to the fact that the life sciences industry, and particularly kitted diagnostic tests, usually enjoy a nice degree of customer stickiness that we believe should help us to retain our customers for many years. Okay. Now we can take questions and just, IT house housekeeping, Eric, if you could please bring everybody up into gallery view. And we also have Gabby back on screen. Yay. Gabby Woody: If go ahead. Andrea James: And wonderful Gabby appears to be frozen. So I will just start. Mark Massaro, you popped up on my screen first. Mark Massaro at BTIG. Go ahead. We'll take your question. Mark Massaro: Hey. Thanks, Andrea. Yeah, congrats on the progress. Wanted to start with maybe a macro question. Just about the LCD that we're waiting for with Palmetto GBA. I think if I heard you correctly, you know, you're talking about the four-two-two kidney protocol. Is it safe to say that even if the interval is finalized as is, you know, you expect to have that billion-dollar opportunity in front of you? And then maybe, Josh, if I could just get, like, your latest temperature on how you think the final LCD might come in. You know, do you see there's any opportunity for improvement from the interval? And, also, do you think there's a possibility that the limits could potentially be removed? Josh Riggs: Oh, man. Some great questions there, Mark. I think you know, I'll start by saying, you know, I think we're hopeful along with the rest of the industry that the brakes get taken off. Here. It feels unnatural to, you know, limit access to a technology that a clinician feels they need to manage their patient. I think we heard some of that commentary from Dr. Langone when he was, you know, speaking in the KOL call. We're behind him 100%. You know, he expects that if he had this technology in-house, that he'd be doing four tests a year. And so, you know, right now, he wouldn't get paid for that under the current draft of the LCD, which is unfortunate. I mean, I think we'll support him in that process as far as negotiating with MolDx on expanding. We haven't heard anything around how that conversation is going, so I don't have any special knowledge there. But, you know, we agree with the industry that this needs to be a clinical decision. Mark Massaro: Okay. And then, I think you mentioned this, but, certainly, the increasing organ transplant access model or IOTA—I wanted to just maybe pick your brain on that. You know, to what extent do you think that could be helpful to the utilization of transplant testing? And I'm just curious if you have any thoughts on that as a potential driver. Josh Riggs: You know, it's another great reason why you don't take the clinical out of the hand of clinicians. Right? As you're changing how transplant centers are being incentivized to use more at-risk organs and then tell them, well, they can't monitor them on the scale and schedule that they need, it feels counterintuitive to me. You know, we have seen some positive feedback, some negative feedback on the program itself. But in general, I think it drives demand for testing. I think it's natural as you use more at-risk organs that you're going to want to follow those patients more closely. You should expect to see higher rates of AMR in that population. And so then you need to know if you can bring in these next-generation drugs, like the fezartumab or daratumumab. So we're optimistic that it increases demand for technology and, you know, more kidneys going into patients. Mark Massaro: Okay. And I'll just ask one more if I can, and then leave some FDA questions for others. But I wanted to ask about GraftAssure core LDT. You know, recognizing you've got the lab up and running in Nashville, maybe just walk me through how you're thinking about that as a potential source of upside. Obviously, I think that could be potentially, you know, a source of, if you will, cash preservation. So can you just give me a sense for what the strategy is on, you know, the LDT? Josh Riggs: Thank you. And it's very closely tied to the registry for us. I mean, we've looked at the market initially. I think one of the big reasons we went kit is that we didn't feel like we could compete, at least initially, toe to toe with the big guys that are out there. You know, when the opportunity to do the registry came up, it's like a natural fit for us and a reason to kind of spool up sort of our capabilities with the CLIA lab. And we think the process is gonna be, you know, call it somewhere between four and six months with each site as we kind of negotiate through the various contracts. And I think we've engaged with about 10 right now. That puts us kind of '1, '2 before we start to see patients coming in off of that registry. The expectation is that we'll be able to bill, you know, for the relative measurement of ddCF DNA, which is what our current claim is with MolDx, you know, while we capture the information around those other measures that we have. I'd say, in general, I mean, this has been very normal for the industry. I think, you know, we've seen, you know, very successful registries out there for our competitors. I think we're kind of following in that vein, although with a slightly different clinical question that we're asking. So yes, it should improve the revenue profile for next year. But we're not predicting that that starts in a meaningful way in Q1 or Q2. That's kind of like just when it starts to pick up. Andrea, anything that you would add to that? I know you've been a little bit closer to the numbers on that than I have. Andrea James: No. I love it. The only thing I would add is you might be wondering, like, what changed? Why are we doing this? And it really is we press released that late-breaking data at the World Transplant Congress. We do have the opportunity to look to see if there is extra clinical utility in our And so that's really what changed and what's driving the strategy. It's we've had new data come out in our favor. Mark Massaro: Got it. Thanks, guys. I'll hop back in the queue. Josh Riggs: Thanks, Mark. Andrea James: I'll just keep calling on people. Harrison Parsons at Stevens. Please go ahead. Harrison Parsons: Hey. Yeah. This is Harrison on for Mason. Thanks for taking the questions this afternoon. So as institutions validate GraftAssure DX head-to-head against current readout assays, what conversion curve are you expecting over the next twelve to eighteen months post-clearance? And what are the gating factors to go from early adopter physicians to center-wide adoption? Josh Riggs: Yeah. I'd say Andrea put out a curve in our shareholder letter back in, I think, August. So coming out of Q2 of last year, which gives at least a look at it. I think what we're trying to do is influence that curve right now. I think when we get a little bit more confidence in how clinicians are feeling about the technology and what kind of engagement we're getting, I think we'll update that curve. But right now, that should be considered our best thinking, and then we can share that with you afterwards if you don't have access to it. But I think in general, it's, you know, the market's gonna be very much show me. You know, which is, you know, they've been very comfortable using technology that has helped them, you know, manage their patients for five, six, seven years now. And I think they're gonna want to see that they're getting similar to better results before they jump. I think once there's enough data out there, there's kind of a saturation point where the question comes off of the table. But, you know, certainly in the early days, it's incumbent upon us to help generate that data and get it out there for the industry. Andrea James: Yeah. And Harrison, if you look in the shareholder letter, we actually put a launch framework graphic where we talk about driving engagement and utilization with potential future customers. We can't start talking about GraftAssure DX as a kitted test until we have FDA marketing authorization. So there's a wall there, and you can't But we can start to drive utilization of our Nashville labs, start talking about a registry study. And so when we talk about influencing the slope of that curve, these are activities that we can do now. Today, and we are doing them actively today. Harrison Parsons: Got it. Yeah. That I think that all makes sense. And then, I guess, next, so you previously highlighted the favorable PPV data and how, you know, this could be a differentiator for your kitted product. Could you share any broader feedback you've received from clinicians on this point? Josh Riggs: Yeah. I think I'm happy to. And, Ekke, if you have any comments, I think you've been out there on the front end with some of our research partners. Love to hear how you think about it. But I'd say it's broadly been very positive. I think there is a general sense that we are, you know, applying biopsy too frequently. And, you know, that a higher positive predictive value perhaps is better suited to the screening application that the world is looking at right now. But let me hand it over to Dr. Schutz, who's been out there. You know, he's obviously the one that created the score. I've been working with our research partners on it, and sort of why they're looking at it and what they're looking for. Ekke Schutz: Thank you, Josh. Yeah. Harrison, I think what the entire field in transplant was always missing is gets to the fact that if cell-free DNA is normal, is a way of using cell-free DNA as a rule-in test, well. Right now, it's a rule-out testing, so which also you might forfeit a biopsy. But if it's not, then you do a biopsy. But under those where you are doing a biopsy, way more than fifty percent are not turning out to have a rejection. So and that's actually the, I would say, conundrum clinicians are in. And what we are able to provide is a way of testing that if you see, okay, this patient doesn't look normal, which means I would not forgo a biopsy, then your chance of having really a rejection is way over fifty percent. So it's actually really good for the patients. So you are not biopsying patients when you only have a thirty percent chance of that the patients even had something. And that is clearly something that clinicians understand. They don't want to do a biopsy if it's not really necessary. And we have only had really a lot of positive feedback. It's really up to people are saying, oh, that's a change in paradigm for cell-free DNA. And so, yeah, that's why we put it in the center of our registries and, okay, let's convince the field that this is really a huge step forward for your clinical interpretation of cell-free DNA. And I think it's going to more or less get into a world of its own once we can show that there's going to be a lot of clinical debates around are you using do you want to use a test that really has no positive predictive value or do you want to use a test where you can also make the positive decision for a biopsy with way better chance of doing it in the right situation. Harrison Parsons: Okay. Thank you, Ekke. And then I'd just had one more last question, and then I'll let others go. I guess so at this point, after the government shutdown, is mid-2026 still the right timeline to think about potential regulatory approval or commercial launch, or has that timeline been pushed out at all, if any? Thanks. Josh Riggs: You know, it's tough. Government ever opens again. Yeah. I think we're hopeful that the government, you know, gets funded and stays funded. Obviously, the current conversation that's going on in Washington only funds the government through January. I can't predict, you know, what happens if the government shuts back down. I can't predict, you know, what's going to happen to, you know, to our reviewers. I would say, you know, it helps that these reviewers are funded by industry, you know, by and large, you know, through the doofah. But, you know, I can't guess. I mean, I assume as long as everything's normal, and we get through the FDA fine, then, yes, we're still on pace. But outside of that, there's the piece that we don't control. Andrea James: If I could just add, Harrison, I think the takeaway is that we are still preparing for a mid-2026 launch, and we're not changing anything. And there's things that we can do regardless of the government shutdown, which is focus on the engagement and utilization of our assay, which we are very much gonna focus on. We can drive revenue out of our Nashville lab. We don't need the government to be open to do those things. And then the other thing, and we pointed this out in the shareholder letter, but we got word that our reviewer was working, you know, that's nice to hear that they were working even though they were not accepting new submissions. So just focused on that. And the final thing I would say is when we've talked about the FDA review timeline, we did bake in some time for them to ask questions and for them to respond. The FDA would say that the review timeline is actually shorter than the number of months we gave you. Because we did bake in a bit of cushion for them to ask questions. They stopped the clock. We respond. And so we're still planning on the same thing we've been planning on all along, but, of course, we have as much insight as you do into what's gonna happen with the government. Harrison Parsons: Great. Thank you. Andrea James: Of course. Thanks, Harrison. Okay. Mike Matson, I'm gonna take your question. Thank you for coming on video. Oh, I need him. Here. Mike Matson: No problem. Thanks. So, you know, just in terms of the trial, it sounds like it's still on track, you know, for the end of the year. But I was wondering, can you give us any sort of metrics around enrollment or samples that have been collected to date? Josh Riggs: Yeah. I would say the, you know, gosh. I guess everybody would say that sample enrollment is going slower than they would like. Yeah. But, you know, we are enrolling samples. You know, there are, I think, we can't actually update our clinical trials that go up listing right now because, you know, the government is shut down. But I think we actually have five sites that are actively enrolling patients at this point. And so I think we're medium to high confidence that we're gonna have all of the samples that we need to complete the submission by year-end. Mike Matson: Okay. And then you mentioned that, you know, in terms of, you know, once the test is commercialized, the centers and the doctors are likely to try to, you know, do head-to-head testing or maybe potentially use the registry. Can you maybe just explain I guess I'm a little confused in terms of how the registry would help them figure out. You know, I understand head-to-head. You run both tests and kinda compare them. But the registry, how does that kinda pull, you know, serve that same purpose, I guess? Josh Riggs: Oh, it's a wonderful question. And I think it's really on the engagement and utilization front. And so it's an opportunity for a clinician who's never used our technology before to have, you know, our report in their hands, you know, see how it comes out, see the data, and then use it in their patient and see how it performs in kind of a real-world setting. And so that's that familiarization piece that we're trying to get to. Also, show them the new ways of measuring donor-derived cell-free DNA. So to engage that kind of intellectual curiosity that they have around it. So that, I think, is that's not head-to-head. That's more getting in their head, if you will, and getting them comfortable using our technology. Mike Matson: Alright. And then, you know, in terms of if the doctors, the centers are doing head-to-head testing, how would that work from a reimbursement standpoint? I imagine they can't bill for both, and then I would be sort of helping them out with that. I mean, I don't even know if that's you're allowed to do that, but giving them a price break or test or something like that. Josh Riggs: Oh, so, no, it's a great question. And we've done this before in some of our oncology assays, and what we call is a clinical evaluation program. And so it's a specific program. It's where we sign an agreement with them for a certain quantity of samples. And it's, I think the number is 20 samples where they send 20 out to our competitors. They send 20 to us. We don't bill for those samples. We just generate a report because under CMS rules, only one center is allowed to bill per patient. So we basically just eat the cost on that to generate the data for them. Mike Matson: Okay. Got it. And then finally, just stepping back, you know, the mid-2026 launch, what do you think are the biggest risks to that timeline? Is it mainly the FDA, as you mentioned, in terms of them, you know, back and forth there kind of stopping the clock? Or is there something else you would point to, I guess? Josh Riggs: Yeah. I guess there's always unknown unknowns. I'd say we feel like we've checked a lot of boxes, kind of your retiring risk over the past, you know, two and a half years. Obviously, government being in flux right now is a big one for us. That can immediately impact the timeline. Outside of that, I think, I mean, that's probably the biggest risk. I don't know, Andrea, if you've got some I know we get this question a lot, and I think you generally have better answers because I'm so optimistic on all of this stuff. It's hard for me to say, you know, where it's all gonna blow up. But Andrea is much more level-headed than I am. Ekke Schutz: Go ahead, Ekke. Yeah. I think, Mike, we are pretty confident with production and everything. So I think we don't have really a big risk in-house. We are right now producing our third lot for the FDA trial, and it's working out pretty well. Just looked at the results today. So I would really think our biggest risk is the FDA. If they drag it out, then there's not much we can do about it. My philosophy or strategy right now is that whatever we can think of that the FDA might ask us, we shall be prepared to have the answer already before they ask. So which means it's not really stopping the clock. They're always if they're sending out a question, they stop the clock until they have the answer. And my wish is that when they send us a question in the morning, the answer goes out in the afternoon. So that's more or less what I'm trying to do. Mike Matson: Yeah. Okay. That makes sense. Kinda like prepping for an earnings call. You wanna try to predict what the analysts are gonna ask you guys. Right? Ekke Schutz: Yes. Yes. Mike Matson: Alright. Thank you. Andrea James: I love that. And, Mike, the other thing is we've communicated with you guys. We had all those pre-submission meetings with the FDA. So that's great because the team has been getting feedback from the FDA. And so it's not like the first time the FDA sees our submission. They're like, what is this? There have been, you know, meetings I have. Mike Matson: Alright. Thank you. Thomas Flaten: Thomas Flaten at Lake Street. Hey, guys. Thanks for taking the question. So not to get too granular, Josh, but so there's fifty-one days or so until the end of the year and a bunch of holidays. And with five of 10 sites recruiting, you know, are the others gonna meaningfully contribute to the number of samples? And then how many days do you guys need to take that data, analyze it, compile it, get it into a format that is acceptable to FDA, and squeeze it into an application then send it off. Can you just walk us through I know we're getting way in the weeds here, but Sure. Sure. Sure. Josh Riggs: Yeah. I'll take the first half of the question, and I'll hand the second half to Dr. Schutz, who's a lot more closer to it than I am. I'd say there are sites that won't contribute to the first phase of the submission. You know, we are looking at this in two waves with the FDA. So the first is to get basically just over the bar, which is, you know, that 85% negative predictive value. And then there's the combo score, which is kind of the second wave of this. And that's where, you know, the other sites come in. We're gonna continue to enroll past the new year. Andrea talked about this in the shareholder letter. I think we have a few more points to prove with, you know, with this study that will create kind of like follow-on submissions. But, you know, Ekke, maybe you can talk us through. I know a lot of focus on the number of events as much as the number of samples that are going into the study. Ekke Schutz: Yeah. So, Thomas, if we are recruiting as we think we are, we know from each and every one of our co-sites how many biopsies they are doing per month. And from there, we can more or less calculate are we on track? We are on track. And we are right now full steam writing the submission already. So we are not waiting until we have this data. This clinical data are, believe it or not, the smallest part of the entire submission. It's, if you wish, a very simple evaluation. What is the sensitivity? What is specificity, and I can do the calculations in an hour. So what we are doing, we are really preparing the entire submission right now. And at the very last day, if you wish, we just plug in these two numbers from our clinical study and push the submit button. Thomas Flaten: Got it. Super. Yeah. Got it. Yeah. Okay. Super helpful. Andrea, I know you said your expenses were ticking up a little bit because of the study and FDA expenses, etcetera. How should we think about the first half of next year? I know we haven't gotten there yet, but do you expect the cash burn to moderate a little bit? Or do you expect it to go up as you prepare for launch? Andrea James: It's a great question. Right now, I would say we're preparing to keep it flat. If we were to go faster and we want to go faster for some reason, we would communicate that to you. I would keep your expenses flat for now. Now I would say flat to, you know? I mean, I think they're gonna grow up a go up a little bit. We are looking at areas where we could invest to go faster. We scrutinize every dollar, and so we haven't greenlit anything yet. But I think we'll come back at you in March, and we'll update you on how we think 2026 is gonna look. Thomas Flaten: Got it. Appreciate it, guys. Thank you. Josh Riggs: Thank you. Ekke Schutz: Thank you, Thomas. Josh Riggs: Alright. Any other questions? Alright. Well, guys, thank you so much for making time for us today. You know, it is fun to get to share sort of the results of all the hard work that the team has put in. I think we're encouraged. We're excited. You know, we've been waiting to celebrate submission for about two and a half years, and you know, it feels like we're finally about to give birth. So, we're excited and looking forward to sharing this positive news when it happens. So thank you, everybody, and we'll talk soon. Andrea James: Thank you all. Ekke Schutz: Mike, can you hang up? Josh Riggs: You still have 40 participants. Yeah. Everyone can see, I think. Andrea James: Alright. I think we are still broadcasting live to everyone, so we probably just hang up. Bye bye.
Operator: Greetings, and welcome to the Plug Power Third Quarter 2025 Earnings Conference Call and Webcast. At this time, a question and answer session will follow the formal presentation. You may be placed into the question queue at any time by pressing star one on your telephone keypad. As a reminder, this conference is being recorded. If anyone should require operator assistance, please press star 0. It's now my pleasure to turn the call over to Teal Vivacqua Hoyos. Please go ahead. Teal Vivacqua Hoyos: Thank you. Welcome to the 2025 Third Quarter Earnings Call. This call will include forward-looking statements. These forward-looking statements contain projections of our future results of operations, or of our financial position or other forward-looking information. We intend these forward-looking statements to be covered by the Safe Harbor provisions for forward-looking statements contained in Section 27A of the Securities Act of 1933. Andrew J. Marsh: And Section 21E of the Securities Exchange Act of 1934. However, we believe that it is important to communicate our future expectations to investors. Investors are cautioned not to unduly rely on forward-looking statements. Such statements should not be read or understood as a guarantee of future performance or results. Such statements are subject to risks and uncertainties that could cause actual results or performance to differ materially from those discussed as a result of various factors, including but not limited to risks and uncertainties discussed under Item 1A Risk Factors in our annual report on Form 10-Ks for the fiscal year ending December 31, 2024, or subsequent quarterly reports on Form 10-Q, as well as other reports we file from time to time with the SEC. These forward-looking statements speak only as of the day on which the statements are made. We do not undertake or intend to update any forward-looking statements after this call or as a result of new information. At this point, I would like to turn the call over to Plug Power Inc.'s CEO, Andy Marsh. Andy Marsh: Good afternoon. And thank you for joining us. Plug Power Inc. delivered a strong third quarter, one that reflects continual growth, improving margins, and disciplined execution across our global hydrogen business. For the quarter, we reported $177 million in revenue, with balanced strength across our core businesses. Our GenEco electrolyzer business generated about $65 million, up 46% sequentially and 13% year over year. Clear evidence that Plug Power Inc. technology continues to gain traction globally as customers scale hydrogen production. I think just as important, we're improving the quality of the growth. Operation cash burn improved by more than 50% from the prior quarter, driven by pricing discipline, better execution, and tighter working capital management. These results show the tangible impact of Project Quantum Leap, which is transforming Plug Power Inc. into a leaner, more efficient, and more profitable enterprise. Bottom leads about focus, simplifying the business, aligning investment to near-term profitability, and resolving legacy issues that have limited performance. The noncash charge we've recognized this quarter reflects that effort, cleaning up the past while sharpening our strategic priorities. As a result, today, Plug Power Inc. is more streamlined, more focused, and better positioned to deliver continual margin improvement and cash flow gains. Operationally, we continue to execute at scale. To date, Plug Power Inc. has more than 230 megawatts of GenEco electrolyzer programs underway across Europe, Australia, and North America. A real highlight this quarter was the delivery of our first 10-megawatt electrolyzer, the GAP project in Portugal. The first phase of a planned 100-megawatt installation, a clear validation of Plug Power Inc.'s ability to deliver complex world-class hydrogen infrastructure. Our hydrogen production network also continues to improve. In August, our Georgia green hydrogen plant produced 324 tons, with 97% uptime and 92.8% efficiency, underscoring the strength and reliability of our operating platform. Earlier today, we announced a strategic initiative to monetize our electricity rights in New York and one other location, in partnership with a major US data center developer. This transaction is expected to generate more than $275 million in liquidity through asset monetization and the release of restricted cash. It also positions Plug Power Inc. in the rapidly growing data center market, where our fuel cell systems can deliver resilient zero-emission backup power to mission-critical facilities. This initiative is directly linked to our new global hydrogen supply agreement with one of the world's leading industrial gas companies and potential purchases from some of our North American electrolyzer companies as they deploy hydrogen sites. The agreement secures competitively priced long-term hydrogen supply for Plug Power Inc. and our customers, a major strategic milestone that reduces the need for near-term self-development of new plans. As a result, we suspended activities under the DOE loan program, allowing us to redeploy capital towards higher return opportunities across our hydrogen network. Together, these actions strengthen our balance sheet, expand our reach into dynamic new markets, and reinforce our disciplined approach to capital allocation. Finally, I want to touch on leadership. As announced last month, Jose Luis Crespo will become Chief Executive Officer on March 1. Jose has been instrumental in driving Plug Power Inc.'s commercial growth and building our customer relationships worldwide. This transition represents continuity in strategy, not change. The roadmap we've built together remains in place, focused on growth, profitability, and disciplined execution. Also, look, the world changes. It gives Jose flexibility to evolve our strategy as the hydrogen market matures. He is the right leader for this next chapter, and I am confident Plug Power Inc. will continue to thrive under his direction. In summary, Plug Power Inc.'s progress this quarter demonstrates a company that is executing, improving, and building momentum. Our technology, people, and strategy are delivering results, and the fundamentals of our business have never been stronger. With that, I'll turn the call over to Jose, who will discuss our commercial performance and marketing activities in more detail. Jose? Jose Luis Crespo: Thank you, Andy. Good afternoon, everyone, and thanks for joining us today. This is my first earnings call as President and incoming CEO of Plug Power Inc. I have to say I'm both excited and honored to take on this role. I've been with Plug Power Inc. for twelve years, helping drive our commercial growth and making sure customers are always at the heart of what we do. And that won't change. My focus will continue to be on growth, profitability, and disciplined execution. As Andy mentioned earlier, we delivered $177 million in revenue in the third quarter, and we're seeing solid momentum across our core markets. Let's start with material handling. This business continues to perform well, and our customers are really seeing the productivity and energy benefits that come with fuel cell technology. More than ever, customers are recognizing how fuel cells free up utility power in their distribution centers, power that they can use elsewhere or simply save by reducing peak demand. And the investment tax credit for fuel cells has been reinstated, which makes the financial case for our customers stronger than ever. We're having great conversations with our major pedestal customers, Amazon and Walmart, about their 2026 plans, and we are expecting to continue growth there. We are also excited about new customers like Floor and Decor, where we deployed our GenDrive fuel cells and GenFuel hydrogen systems at the Frederickson, Washington facility. Floor and Decor has strong potential to grow into one of our next pedestal customers. Now I'm going to turn it into our GenEco electrolyzer business. We have delivered $124 million in revenue year to date. This is up 33% year over year, and it's putting us on track for a record year in the electrolyzer business, around $200 million in expected sales. We continue to see big opportunities for green hydrogen, particularly in replacing gray hydrogen in refineries like GALP and BP and in the production of e-fuels, such as e-methanol, synthetic fuel jet fuel, and ammonia. Our $8 billion electrolyzer funnel remains very active, and the quality of the projects we are pursuing right now is the best that we have ever seen. The probability of many of these projects reaching final investment decision (FID) has never been higher. In Australia, government support remains strong. Andy spent time there recently, and we are very encouraged by the progress on the three-gigawatt Allied Green Ammonia project as it moves towards FID. We're also happy to have Alfred Alight Green's CEO speak at our symposium next week, November 18. In Europe, we are seeing policy clarity finally take hold as the Green Deal and Red Free mandates are being transposed by the EU member states and becoming law. This is giving our industrial customers more certainty around their green hydrogen targets and timelines. We're also seeing subsidy programs like those from the European Hydrogen Bank start real projects, many of which should reach FID in the next twelve to eighteen months. And we are already executing at scale in Europe. We delivered our first 10-megawatt electrolyzer array to GALP in Portugal, part of the 100-megawatt project we have there, and 25 megawatts of containerized systems to Iberdrola and BP in Spain. These are flagship projects that demonstrate Plug Power Inc.'s ability to deliver large, complex systems globally. Here in the US, we announced a new partnership with Edgewood. Plug Power Inc. will provide engineering, plant design, and commissioning for a facility that will convert waste streams into sustainable aviation fuel, renewable diesel, and biomethanol. If you want to hear more about that, Steve Edgewood's CEO will join us at the symposium on November 18, so I encourage you to come. Edgewood is a great example of how we are adapting to market conditions. The US continues to support blue hydrogen, and we're using our deep experience with more than 20% of our team coming from oil and gas backgrounds to capitalize on those opportunities as well. Our path to profitability will be powered by growth. We have built real, scalable capabilities. We know how to produce, deploy, and operate hydrogen solutions. We have an $8 billion funnel of opportunities ahead of us that gives Plug Power Inc. a unique position to lead as the hydrogen economy accelerates globally. Thanks again for joining us today, and I'm looking forward to sharing more at our Plug Power Inc. symposium on November 18 and to continue this journey towards sustainable profitable growth. Back to you, Andy. Andy Marsh: Okay. It gets question time. Teal? We're ready for questions, Kevin, please. Operator: Thank you. We'll be conducting a question and answer session. If you'd like to be placed into question, you may press star 2. If you'd like to remove your question from the queue, for participants using speaker equipment, it may be necessary to pick up your handset before pressing star 1. One moment please while we poll for questions. Our first question today is coming from Colin William Rusch from Oppenheimer. Your line is now live. Colin William Rusch: Hey, Colin. Andre Adams: Hi there. You've got Andre Adams on for Colin. But Hi, Andre. Got a couple questions for you. Hi there. So first, could you just speak to the cadence of JUUL margin improvements and when we might expect margins for that business to turn positive? Paul B. Middleton: You wanna take that, Paul? Which business did you ask about, Andre? Was there a specific one you mentioned there? Andre Adams: Fuel. Fuel. Paul B. Middleton: Oh, yeah. So I'd say what you see is a progression in the margin even in Q3. We had some plant issues in the network from the suppliers and from ours. But despite that, you see a progression because of the strategic agreement which dropped that, you know, we're starting to see the benefits from that. You'll see even incrementally more benefits from that in Q4 given, you know, the leverage of that. And there's certain of that agreement that allow us to work with them and collaborate to, you know, navigate the network more efficiently as we move forward. So, again, start to build. Plus, Plug Power Inc. is continually investing in its own infrastructure in our own networks and how we distribute and manage our plants. And so there's just this continual building process. So I expect to see, you know, another big step function improvement in Q4. And I think, you know, in the course of next year, kinda targeting kinda middle of the year, moving to that breakeven target, if not sooner. So we're laser-focused on it, and you know, we postured with the right cost structures between what we have in our supply and the supply agreement of the new arrangement that we can, you know, continue focusing on all the levers that drive in that direction. Andre Adams: Great. Thanks. And then, appreciate the color on the electrolyzer pipeline and just hoping you could give us some expectations on the cadence of growth on an annual basis that you would expect for that business? Jose Luis Crespo: You wanna take that, Jose? Andy Marsh: I'm going to just add. We're not yet providing any guidance for 2026. No. But there is a good deal of activity in the electrolyzer business. You know, we would expect growth next year, and our plan is for the business to continue to grow. We've been very cautious about guidance because, you know, one quarter slip on a project developing can change your results, but as you could see, we grew 43% versus the last quarter. We have a strong quarter coming up. I think most of GAAP will be deployed by the fourth quarter. And that were shipped by the fourth quarter. So I think you'll continue to see, I think, some good announcements coming out. And good progress, especially later this quarter and the beginning of next quarter. With announcements. Jose Luis Crespo: You're right. We will see some good progress in the next few weeks. And projects that we're gonna be able to deploy in 2026. So we will be able to see revenue from those projects in 2026. We've been working in many of the projects that we have in the funnel for years now. These projects take a long time to materialize and to go to FID. But we're seeing that many of these projects are gonna come to FID in 2026 and 2027. Because they are very large projects. It will take time to also deploy them once they go into execution mode. In many of them, we have the project-based revenue recognition in the contract. So we will see some revenue. And as Andy said, we will see growth in 2026. And as time goes by and more projects go FID, we're gonna continue to see that growth into the following years. Andy Marsh: What I would add, Jose, is our sales team has said the quality of the engagements are so much higher than we've ever had. Jose Luis Crespo: A 100%. I mentioned a little bit of that in the introduction. We're seeing the quality of projects and projects that have high probability to go FID in the funnel compared to a few years ago where we had a lot of projects that had, you know, not so many chances to actually materialize. Andre Adams: That's great. Appreciate all the color. Operator: Thank you. Next question is coming from Manav Gupta from UBS. Your line is now live. Manav Gupta: Good morning. I just wanted to focus a little bit on the news announcements today morning. I think you signed a nonbinding letter of intent with the need to ask to raise to the monetizing of electricity to the data center. So help us understand a little bit your leverage to this entire data center and AI revolution. And various ways in which Plug Power Inc. can benefit from it. I'm assuming through power would be the primary ways. If you could help us elaborate on those. Andy Marsh: Yeah. I think it's we've taken a step back and first, I wanna take a wanna make a note. We expect this transaction will close in the first quarter. It's been far along, you know, we've, you know, so, you know, think it's mid-first quarter when this closes. This will provide the liquidity on the balance sheet which, you know, which part of Project Quantum Leap has been about. And, you know, Plug Power Inc. next year, is gonna be sitting there with a strong balance sheet which will have a complementary improvement to our income statement. So it's really about liquidity to start. And the second item that's driven a good deal of this is, and I touched on in my opening remarks, about not only our relationship with a large industrial gas company, but relationships with people who are going to build hydrogen plants. Who want our electrolyzers. So, you know, we looked at the world and said, we know how to do a combination of sourcing competitive hydrogen and generating competitive generating hydrogen to balance those two out. As part of this program, we've been exploring with our product management team and development team opportunities to provide levels of backup power using hydrogen to support the data center deployments. It'll make sense in some applications, and so that is a real focus that Jose and the team will continue to be engaging in next year. So, you know, it's, you know, it's not going to be primary power. But, at least in 2026, I think when you get in out years, you know, us here in North America are not always aware of activities going in Europe including hydrogen pipelines. And in that case, you know, Plug Power Inc. fuel cells become a real viable solution even for primary power. So we're excited. I'm primarily excited that, you know, Jose and Paul next year will have not be spending as much time worrying about where's the cash gonna come from. You know, I think your cash usage last quarter was operational cash use. Was $90 million. Manav Gupta: Yeah. Andy Marsh: And that was a 50% improvement. And so, you know, we're gonna have a good balance sheet to really position ourselves to achieve being, you know, achieving the goal of being cash flow neutral as soon as possible. And that is the goal. Hope that helped. Manav Gupta: Thank you so much for taking my questions. I'll turn it over. Operator: Thank you. Next question is coming from Eric Stine from Craig Hallum. Your line is now live. Eric Stine: Everyone. Thanks for taking the questions. Andy Marsh: Hey, Eric. How are you doing? Eric Stine: Hey. Doing well. Thanks. So just sticking with the data center opportunity, I remember several years ago, you had a, I think it was a pilot project with Microsoft to some degree. And so I'm curious. You know, I know that over the last, I don't know, year to two years, you've been prioritizing some other growth initiatives, but curious kinda how that product offering has evolved or the technology has evolved because, clearly, you know, certainly sensing a higher level of confidence that that potentially is something near term, at least in terms of announcements, whether, you know, whether that means near-term deployments or not, I guess, remains to be seen. Andy Marsh: Yeah. I would say we've gained a lot of experience, Eric. Both in providing we have sites where we're actually powering electric vehicles. We have done some smaller backup power deployments. We do see opportunities there. Don't want to overstate the opportunities, but you know, the products work. We have confidence in the products. You know, we think a lot about hydrogen all the time. And you know, we're, you know, working with people who actually get things done. So I would just say that I don't want to, you know, the big growth opportunities for us is certainly electrolyzer projects that's going on around the world. Material handling, next year will be core to this company's success. But I think we'll keep on seeing more and more activities associated with data centers in hydrogen. As you think through how you can provide sensibly cost hydrogen to provide that critical backup. Eric Stine: Okay. Thank you for that. And then maybe last one for me. Just, I'm it sounds like you've obviously got a lot of confidence. In getting to that gross margin positive or neutral level exiting the year, but I guess I'm unclear whether you're sticking with that. And then I also noticed in your commentary. Andy Marsh: So let me be clear. We're sticking with that. Eric Stine: Okay. Good. Alright. That's good to hear. It seemed like it, but just clarifying. And then on, EBITDA positive, that previously had been an end of '26 goal. And I noticed in your release that it looks like that may now be a mid-'26 goal. So maybe or I'm sorry. Let's see. Target in the second half. But potentially before the end of the year. So maybe some of the drivers that are leading to that increase confidence as well. Paul B. Middleton: I think I'll let Paul answer that one. Paul B. Middleton: Yeah. And I think, you know, we maybe terminology, we're focused on the second half just given our projections and thoughts on cadence of sales and volumes and cost downs and things we're doing. I'd say the good news is it doesn't take much movement of the needle on sales to have a meaningful effect. So our focus is to keep doing the prudent things and driving cost down and doing, you know, all of the different cost initiatives we have and trying to ramp those as fast as possible. But you know, we definitely see continued strength in the pipeline and the efforts that we got going on in the sales channels. And so, you know, our focus is to continue trying to pull as much of that forward as we can. So more to come, I guess, as we evolve the next couple quarters and see how it's tracking. But it's definitely in the art of the possible to go sooner. But you know, that's we're laser-focused on driving volumes and driving cost downs and maintaining headcount, you know, not growing the overall resource base so that we can achieve those goals as fast as possible. Eric Stine: Got it. Thank you. Operator: Thank you. Next question is coming from Craig Irwin from ROTH Capital Partners. Your line is now live. Craig Irwin: Good evening. Thank you for taking my questions. Andy Marsh: Hey, Craig. Craig Irwin: The thing you said in the prepared remarks that got me the most excited is that your pedestal customers are moving again. Can you unpack that a little bit for us? Can you maybe explain what they're seeing or what changed for them that has these very important customers saying it's time to buy again, grow our fleets, and, you know, use more fuel cells going forward? Andy Marsh: So I wanna start off by, you know, I think that, you know, the customers, Craig, have always loved the solution. I mean, we do help the Walmarts and Amazons move more goods. And that's the business they're in. I think that what they have seen over the past, and I can tell you, one of these customers I had deep discussions with over the last three months. What they have seen that Plug Power Inc. is actually on the right track and financially much stronger. And third, when you look at policy, and I think all of us were pleasantly surprised that the bill that passed in July, you know, extended the investment tax credit through 2032. Republicans have always supported. If you go back to last time it passed, it was under President Trump in 2018. So they like the application. They can see that Quantum Leap is actually working. The government supports it. And they basically what's always driven was they save money by using fuel cells. And not using batteries. So that's why they're growing. It's never been a loss of desire to use the product. I think us getting our financial house in order has dramatically changed our relationship with these customers. Who want to do business with us. Craig Irwin: That's really nice progress. That's good to hear. So my next question is really one of clarification. And I may be reading the tea leaves a little bit here, but your GALP commentary in the press release, you know, 10 megawatts on the 100-megawatt project, it sounds like you could probably ship the rest of that pretty quickly. Is it possible that we see the rest of GALP shipped in the fourth quarter, or is this something that's gonna go out over the course of '26? Jose Luis Crespo: We are gonna ship the majority of it before the end of the year. There's gonna be a portion of it that is gonna be shipped in Q1, mainly tax because the tax we wanna get them there, you know, when as close as possible to installation and commissioning. So you're correct. We are aiming at shipping the majority of GALP in the next couple of months. Andy Marsh: And just I think this is probably the largest real deployment in Europe. The largest real deployment in Europe. Right now. Yes. Craig Irwin: Excellent. Well, congratulations again on the progress. Thank you. Andy Marsh: Thanks, Craig. Operator: Thank you. Our next question today is coming from Sherif Elmaghrabi from BTIG. Your line is now live. Sherif Elmaghrabi: Thanks for taking my questions. First, on the excuse me, first on the electricity rights, are those permanently being signed over or, you know, some years down the road, do you have the ability to come back and use that power to produce green hydrogen? Andy Marsh: We are permanently signing them over. Doesn't mean that there couldn't be other relationships established. But we are permanently signing them over. And look, as I mentioned before, you know, by showing we can build plans, we dramatically change the competitive environment for purchasing hydrogen. And that, you know, our goal is to continue to work with these folks and look for opportunities to deploy hydrogen where it makes sense. And look. I think when you look at what this will do for our balance sheet, and the fact that, you know, we're taking care we'll take care of a good deal of the debt overload overhang. I think it'll be I think investors will see this as really will be a real good decision for the company long term. Sherif Elmaghrabi: Thanks, Andy. And then on the equipment side, for these plans reaching FID over the next twelve to eighteen months, sounds like mostly in Europe. Can you tell us a little more about the different sectors they're in, like oil refining for example? And really here, I'm just hoping to get a sense of the revenue opportunity for downstream equipment. Jose Luis Crespo: So, Sherif, we're getting the majority of the opportunities on green hydrogen right now. On transformation from gray hydrogen in industry, especially in Europe, to green hydrogen. This is the directive from the European Green Deal. So given that, what we're seeing right now is opportunities, as you mentioned, refineries. There's a lot of opportunity there. There's a lot of hydrogen that needs to be converted. The laws, you know, at the members levels, at the country levels, are being finalized right now. If not final already in many of the countries. And they determine the pace and the quantities of hydrogen that needs to be converted into green. That's gonna drive adoption. Also, when you think about the same kind of concept, you have the EU moving or pushing industries like aviation and maritime towards e-fuels. We see a lot of the opportunities also on sustainable aviation fuels and ammonia or in methanol. So we are seeing the majority of the projects at scale in those areas in Europe and really globally. Same thing in Australia. We are working with Allied Green for an ammonia project. Which is kind of the same logic. And then the majority of the large projects are in that in those markets. Sherif Elmaghrabi: That's great color. Again, thank you both. Andy Marsh: No. Thank you. Jose Luis Crespo: Thank you. Operator: Our next question today is coming from Sameer S. Joshi from H. C. Wainwright. Your line is now live. Sameer S. Joshi: Hey, Andy. How are you? Andy Marsh: Okay. Thanks for taking my questions. Sameer S. Joshi: Jose, first of all, congratulations on the new role. Looking forward to working with you. Jose Luis Crespo: Thank you. Sameer S. Joshi: Just to follow-up sort of follow-up on some of the earlier questions. We, of course, we have Portugal megawatts and maybe a majority of the 100 megawatts going before the end of the year. And then Australia is also emerging. Given the international exposure, are you planning to deploy resources? Like, are you increasing your sales presence in Europe and Australia and other regions? Andy Marsh: Yeah. So, Sameer, we have a big presence, especially in Europe already. We have probably close to 300 people in Europe. Paul? Paul B. Middleton: Yeah. Andy Marsh: So, you know, we have, you know, if you look at our product development activity, a good deal of that happens in alpha and in the Netherlands. If you start thinking about how we build an electrolyzer product, the products that are going to GALP, the system portion of it were actually built with one of our fabricators in The Middle East. And it's sent to Portugal, and our stacks are married at the site. You know, we have activity in Vietnam. We have large integrators in Europe. So we do have a relatively large international footprint both with fabricators and our own people to support the business. So, you know, we have people in The Middle East today, for example. So there's, you know, that footprint, you know, we've been able to build this business because we do have a sales team in Europe. We do have a sales team in Australia. Do have salespeople in The Middle East. So, you know, that, you know, we don't expect, you know, there may be some strategic decisions to make some expansion. But we are there already. And I think and more important, we can make products there already. So if you think about GALP, that's good. What we're using doesn't really have, you know, the Trump tariffs have almost zero impact on us at GALP. Sameer S. Joshi: Yeah. No. It makes sense. Thanks for that color, Andy. On the cash and balance sheet front, of course, this transaction will provide additional cash or free up additional cash. I think when the last capital raise was completed, there was talk about paying down some of the Yorkville lower. Given all these dynamics, how long do you have a runway? I mean, I think it is is it going to extend beyond 2026 with your current cash on hand? Or how should we look at your cash burn over the next six to twelve to eighteen months? Paul B. Middleton: Yeah. It's a good question. I guess I just put context that if you look over the last two years, the fact that each consecutive year we continue to the burn by 50% to 60% directionally it's going the right way, right? So when you look at next year, I mean, we haven't given exact guidance and thoughts on next year, but I would tell you I certainly expect that trend to continue. And it should be, you know, a much more nominal amount. And when you look at the combination of the capital that we had on our balance sheet at the end of the third quarter plus the capital raise from the recent equity transaction from an existing investor and then you look at the $275 million targeted on this data center deal, you know, we feel like we have more than ample capital accessible to us to bridge through that positive cash flows. So we're in a great position and that, you know, we even have more if we wanted to deleverage some of that, we could. So and probably will work with our lenders to do that. So, you know, it's just a question of timing, but we feel like we're in a great position to navigate through bridge and to get to a point when we get that positive cash flows. Sameer S. Joshi: Understood. Thanks a lot, Paul, for that, and thanks for taking my question. Andy Marsh: Thanks, Sameer. Operator: Thank you. Next question is coming from George Gianarikas from Canaccord Genuity. Your line is now live. George Gianarikas: Hi, everyone. Thank you so much for taking my questions. Andy Marsh: Sure. George Gianarikas: Oh, thanks. So maybe this is for Jose Luis. I'm just curious, you know, first, congratulations on the new role coming next year, but also yeah, if we look to March of 2028, two years after having taken the position, you know, how do you think Plug Power Inc. will look different? Like, what are the metrics by which, you know, we should sort of judge the performance of the company by then? Obviously, profitability is a big milestone, but what growth drivers do you think we should look forward to over the next couple of years that may be underestimated by us on this side of the table? Thank you. Jose Luis Crespo: So, first, George, thank you. It's exciting to take over this new role. And, on the question, 2028, well, you know, from 2028? Yeah. He asked about twenty twenty years ago. Two years from now. I gave you two years. We've only given him a few months. Well, number one, the financials of the company would be in line to what we've been discussing. Profitable company, now, you know, being able to probably think about growth in other areas of the hydrogen market. And have access to. To be able to finance us to that type of growth. We will concentrate on still on ELX. ELX has a lot of room to grow all the way to the end of this decade or if not beyond. And we will keep on being the leaders in that market. And the more we deploy, the more the more profitable we will become. Our values will go higher and, you know, profitability of the company will improve. On material handling, we will keep on growing. We were looking today at what is the available market for material handling. And it's over $14 billion. And, obviously, we have only started scratching the surface on that market. Right? So as you know, more hydrogen is available, the cost of the technology goes down, we will go deeper into that market as well. And then as you said before and we were talking before, we kind of put a little bit of a pause on high power stationary. By that time, probably, we'll be we will be thinking about taking again on that the data center market, once we understand and find solutions for the hydrogen equation on that market. And there would be a pretty substantial opportunity for growth in that market as well. Andy Marsh: So those are some of the things that, you Andy, you may have other other ideas. 2021. I would just say, a strong balance sheet, strong revenue growth in our core markets, will give you opportunities to explore new applications for hydrogen and fuel cells as they evolve. It's clear that hydrogen needs to be part of the global energy solution. Whether as a substitute in things like ammonia or methanol production oil refineries, but, you know, execution over the next year will open up a whole new array of opportunities. And I'll be cheering for you as the chairman. George Gianarikas: Thank you. And maybe as a follow-up, clearly, a thawing or an increase in activity from an electrolyzer perspective in Europe, when you go into these competitive bids, what's the, I guess, couple reasons that you're winning, and who are you seeing from a perspective? Thank you. Jose Luis Crespo: So the other day, somebody asked exactly the same question to one of our customers. And the way that the customer answered was when we look at other electrolyzer companies, there's no other electrolyzer manufacturer that actually has deployed their own technology and operates the technology the way that Plug Power Inc. does. That is incredibly valuable for companies that have not deployed electrolyzers before. Knowing that the OEM, the partner that they're working with, in this case, Plug Power Inc., has done it, is doing it, and is operating those plants. That is a competitive advantage that no other electrolyzer company can put on the table. On top of that, we have deployed at scale. We are, you know, we've been in this market for almost three decades. And that's also really valuable. And when we start and when we have started to show that we can turn around the company and our financials are beginning to improve, this makes a very strong partner for anybody that is looking to deploy an electrolyzer project anywhere in the world, really. Thank you. Operator: Thank you. Next question is coming from Chris Tsung from Wolfe Research. Your line is now live. Chris Tsung: Hey, guys. Good afternoon. Thank you for taking my question. Andy Marsh: Hey, Chris. Chris Tsung: Hey, Andy. I wanted to just clarify on Texas, like, about the DOE loan with activities paused, is that the other location where the electricity rights that was sold? Andy Marsh: You know, Chris, I would love to answer the question, but I've been asked not to. As part of the LOI. Chris Tsung: Okay. Alright. Understood. Alright. And then could you just as you continue to shore up your balance sheet, which is certainly better and better, just potentially look to divest or monetize your Georgia asset or maybe even your Tennessee Louisiana, like, liquefaction sites. Andy Marsh: I don't expect to. Don't expect to. Going to keep we're going to keep offering them. Those facilities give us first cost competitive hydrogen. But, look, it lets people know, you know, we can deliver hydrogen ourselves and produce cost-effective hydrogen. So I think it's a healthy it gives us a healthy negotiating position. The fact we know how to build. Right? Okay. Go ahead, Chris. Operator: Thank you. Next question today is coming from Ryan Finks from B. Riley Securities. Your line is now live. Ryan Finks: Hey, guys. Thanks for taking my questions. Andy Marsh: Hey, Ryan. Ryan Finks: Andy, you're gonna be my last question ever. Is this CEO on an earnings call. Andy Marsh: That's why I waited to hit star one because I wanted that honor, actually. Ryan Finks: So that would be a good question, Ryan. Bill Peterson just supplied it to you. So I'm sure someone else is gonna hop back in the queue now, but I appreciate it. Alright. So for the electricity rights monetization, are there other opportunities to complete similar transactions based on the assets that you have today or will this likely be the only announcement of this kind? Andy Marsh: The first question is, we do have other assets. And I noticed I didn't use plural. And I don't know if it'll be the last one, but we have been engaging in another asset. Ryan Finks: Understood. Appreciate that. And then for 2025 guidance, not sure if I missed it, but are we still targeting $700 million in revenue for this year? Jose Luis Crespo: Yes. Ryan Finks: Excellent. Thanks, guys. I'll turn it back. Andy Marsh: Okay. Sorry there. I was hoping you were the last. But, Bill, next question is coming from Bill Peterson from JPMorgan. Your line is now live. Bill Peterson: Yes. Hi, Andy, Jose Luis, and Paul. And I thought I hit star one, like, forty-five minutes ago, but apparently, I didn't. So I'm happy to be your last question here. Actually, probably a few sort of clarifiers that are follow-ups to some of the prior questions. Maybe first on the quarter, you just had reiterated that $700 million is a target. Maybe within that, sort of the puts and takes amongst the various segments you have, and then on gross margin neutral, I think you're probably saying that's coming off the adjusted loss of $37 million not the GAAP loss of $120 million. So I guess, similarly, amongst your various segments, what are the puts and takes that gets you there? That's my first question. Then I'll save the last one for Andy on the second one. Andy Marsh: K. You wanna go, Paul? Paul B. Middleton: Yeah. And there's three elements, Bill. One is if you think about the math on the volume, that means that higher volume in Q4 than Q3. So volume, particularly in equipment sales, is incredibly lucrative for us. So that every incremental dollar of equipment sales means a lot. Number two is, you know, we've already been making a lot of traction on service. We're trying to be prudent and thoughtful about that progression. But we expect that to continue and that will actually provide meaningful margin enhancement in Q4 and onward just from that continued progression. It helps us in many different ways, but that's another step function change as we continue to enjoy that positive trend. And then the last, as I talked about earlier, is fuel. You know, we saw certainly progression in Q3. We expect to see a lot more progression in Q4 as we leverage new platform, and we really continue to drive improvements off of our efficiencies. So those are the biggest drivers that kind of drive the levers here for Q4. Bill Peterson: Yeah. Terrific. And then again, somewhat similar to some earlier lines of questions, but you know, in the last year or so, you've been focusing primarily on materials handling sounds like data center is now maybe back to being an emergent application. So can you speak to when you may actually need to make investments to bring on new hydrogen capacity? Would you prefer to still pursue Texas or maybe expand your supply agreements with the third parties under, you know, the renegotiated terms? Guess I'm trying to get a sense, at this stage, would you need to pull the trigger around taxes at some point, or maybe there's your second set you're talking about? Or is there any other types of funding you could be considering if that, you know, the deal amount, which is off the table. Andy Marsh: So, Bill, I when I take a look at our new agreement with the industrial gas company, when I look at opportunities Jose has been developing for folks who are looking to build plans, we're gonna be strategic and thoughtful about when we build next. I don't foresee a need in the immediate future. You know, we've spent a lot of time looking at this. And we sat down and we thought about it from a financial performance point of view, you know, it feels quite honestly, Bill, it feels really good. To hand off to Jose and Paul a balance sheet that works. You know, we've discussed a lot over the last year about Quantum Leap being improving the income statement. But look, Jose is gonna be and Paul are gonna have essentially zero debt. You know, and we between the $150 million we ended with or $160 million, the $350 million we raised, this activity, you know, we're gonna focus on let's get our debt down. And, you know, I look in and I wanna position them. So and we wanna position because we're doing this as a team. The position that next year, you know, when Jose goes to see customers, he can say to them, look how strong my balance sheet is. Look how strong my income statement is. And as I mentioned earlier in the call, people want to buy from us. And strong balance sheet will make it a lot easier. And for every electrolyzer dollar Jose sells, you know, it really contributes 30 to 40¢ to the bottom line every dollar. So I think the company is much healthier. And with Jose's leadership, I think the company will continue to expand. And, you know, I think growth is tied very, very tightly to this balance sheet. And now it's gonna be a much, much better balance sheet. Bill Peterson: Appreciate that, Andy. I appreciate the dialogue in the past several years. Look forward to following the progress and look forward to hearing more about strategy in a few weeks. Or actually next week. Thanks. Andy Marsh: Great. Good. Good. Good. And for us, Bill, because I need to remind folks. You can too, you can register for digitally for the listening to Plug Power Inc. symposium. Know, it's an exciting event. Have many cast what customers are gonna be here, Teal? Teal Vivacqua Hoyos: Oh, we have lots of customers. We'll be showcasing our electrolyzers with customers like Arcadia. We have customers like Amazon and Uline. Presenting on customer panel. So we'll have lots of customers showcased throughout the different panels we're excited about. Andy Marsh: Yeah. I am excited, and I know teams put a lot of effort in and we really wanna show folks all the great progress. Plug Power Inc. has made to date. Probably more important, where Jose is gonna take us in the future. So thank you, everybody. Operator: Thank you. That does conclude today's teleconference and webcast. You may disconnect your line at this time and have a wonderful day. We thank you for your participation today.
Operator: Welcome to ON24's Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. Please note this conference is being recorded. I will now turn the conference over to Lauren Sloane of Investor Relations. Thank you and you may begin. Lauren Sloane: Thank you. Hello and good afternoon everyone. Welcome to ON24's third quarter 2025 earnings conference call. On the call with me today are Sharat Sharan, Co-Founder and CEO of ON24, and Steve Vattuone, Chief Financial Officer of ON24. Before we begin, I would like to remind everyone that some information provided during this call will include forward-looking statements regarding future events and financial performance, including guidance for the fourth quarter and fiscal year 2025 as well as certain fourth quarter and full year non-GAAP projections. These forward-looking statements are subject to known and unknown risks and uncertainties that could adversely affect ON24's future results and cause these forward-looking statements to be inaccurate, including our ability to grow revenue, attract new customers, and expand sales to existing customers, the success of our new products and capabilities, and our ability to achieve our business strategies, growth, our process for evaluating indications of interest, or other future events or conditions such as the impact of adverse economic conditions and macroeconomic deterioration. ON24 cautions that these statements are not guarantees of future performance. All forward-looking statements made today reflect our current expectations only, and we undertake no obligation to update any statement to reflect the events that occur after this call. Please refer to the company's periodic SEC filings and today's financial press release for factors that could cause our actual results to differ materially from any forward-looking statements. We would also like to point out that on today's call, we will report GAAP and non-GAAP results. We use these non-GAAP financial measures to evaluate our ongoing performance and for internal planning and forecasting purposes. Non-GAAP financial measures are presented in addition to, and not as a substitute for, financial measures calculated in accordance with GAAP. To see a reconciliation of these non-GAAP financial measures, please refer to today's financial press release. I will now turn the call over to Sharat. Please go ahead. Sharat Sharan: Thank you and welcome everyone to the ON24 Third Quarter 2025 Earnings Call. I appreciate you joining us today. With me is Steve Vattuone, our Chief Financial Officer. First, let me touch on Q3 results. From a P&L perspective, I am happy to share that we delivered a strong Q3, with revenue and profitability above the high end of our guidance and had a strong performance on gross margins and free cash flow. We ended Q3 with $124.5 million in total ARR. While we expected Q3 to be seasonally soft, we did see some unexpected impact to growth ARR in Q3 from slower new growth bookings, including in the life sciences vertical. In Q3, we did see some deal slippage, many of which have already closed in Q4. Importantly, we expect significantly better ARR performance in Q4 compared to Q3, which will set us up well for a stronger 2026. There are a few commercial highlights that I would like to share. First, we recently signed a major new partnership with LinkedIn, which I will discuss shortly. Second, we continue to see strong performance from our AI offerings. Close to one in five of our customers is paying for our AI offer, and we expect this number to increase into Q4 and future quarters, especially with the launch of two new packages, AI Translate and AI Propel Plus. And third, win backs from boomerang customers, especially in regulated industries, continue. While our Q3 ARR performance was below expectation, we are excited that our customer base continues to adopt more of our products, and we continue to see an increase in customers using two or more products, with that metric also hitting an all-time high. In addition, at the end of Q3, we are seeing customers commit more and more to our platform, with the average core ARR per customer reaching over $80,000 at the end of Q3, and the percentage of our ARR in multiyear contracts was the highest ever. Next, at the end of Q3, I will discuss the exciting announcement we recently made with LinkedIn to drive the next generation of event marketing. This partnership brings together ON24, the premier B2B intelligent engagement platform, and LinkedIn, the world's largest professional network. This integration is a game changer for our customers that will enable them not only to multiply event promotion on LinkedIn but also drive additional audiences to their ON24 events. Ultimately, our collaboration will completely transform digital events by providing customers with seamless workflows that push ON24 events directly into LinkedIn events, frictionless registration that syncs event registration data directly from LinkedIn registration forms directly to ON24, and expanded audience reach, promoting ON24 events with high-quality audiences on LinkedIn. The integration will be rolled out in several phases, and ultimately, this partnership will turn digital events into powerful connected campaigns that will drive business forward for both our customers and new prospects alike. Now I will discuss our product innovation that is centered around AI. We continue to make significant enhancements with our AI-enabled offerings. Recently announced, ON24 AI Propel Plus, a brand new modern, intuitive, AI-forward solution that can easily turn every webinar or digital event into an omnichannel multi-touch campaign or engagement. At the core of AI Propel Plus is our AI-powered analytics and content engine, which, as a reminder, enables our customers to repurpose webinars and other digital events into derivative content, including short video clips, blog posts, and nurture assets, which enable a multiplier campaign effect. AI Propel Plus is powered by ON24's first-party engagement data, all of which can be synced into CRM and marketing automation systems for use in retargeting and lookalike audience match. And for those enterprise customers driving global engagement, customers can pair our AI product capabilities with ON24 Translate, our multilingual translation offering, which allows customers to localize every piece of content so they can seamlessly launch their campaign in over 60 countries. Imagine taking a single webinar or virtual event and converting all elements of that, including registration pages, lobby pages, webinars, and all derivative content, in over 60 languages. As an example, one of the largest global technology companies expanded its use of ON24 to localize and scale its digital event program across multiple markets. The team needed a faster, more efficient way to translate and publish localized content for regional audiences without relying on external vendors. With ON24's built-in translation and automation capabilities, the company can now localize over 4,500 events annually in 12 languages, ensuring consistent branding, faster campaign timelines, and deeper engagement in key international markets. Next, I will share a couple of new AI-powered technology solutions that we will be launching soon. First, one-click social publishing, a capability that will help marketers repurpose and refine their content across social media channels. This AI-powered solution will further support our customers' ability to create and post short-form video clips across major social media channels like YouTube, LinkedIn, Facebook, and ads with one click of a button. Second, is our focus on AI agents. These ON24 AI agents will help customers automatically set up events with the right registration and lobby pages to ensure the experience is tailored to the right target audience. And for our global customers, we are going to support agentic AI video translation that will convert videos into multiple languages while maintaining the speaker's voice, tone, and delivery, even synchronized lips to speech to provide a global footprint for presentations. Another area is the Genetic AI video clip optimization, which will allow our customers to identify and develop different types of video clips using an iterative chat interface to refine the video output of video clips and determine the clip's relevance for different use cases. These video clips will also support dynamic layouts, such as vertical as well as horizontal or landscape orientations, and we design social media sharing to magnify program reach and engagement. Finally, and most importantly, we are focused on AI and LLM search discoverability. As LLMs take a bigger role as default search engines, ON24 will use AI to help our clients create a deep reservoir of fresh LLM search-optimized and discoverable content. Our AI discoverability solutions will help customers optimize content for LLM indexing and readability, enhancing landing pages, and summarizing content using the right HTML and JavaScript markup and information architecture. Sales and marketing go-to-market is being transformed, and ON24 is in the driver's seat, becoming the AI-enabled engagement platform that empowers business users to do more with less and achieve measurable results. I am proud that in its latest report, G2, the world's largest and trusted marketplace for software, based on user reviews, ranked ON24 as the number one leader in the enterprise grid for webinar platforms as measured by market presence and customer satisfaction. We see this recognition by G2 as proof that our AI-driven engagement engine is delivering ROI to customers at scale. Next, I want to discuss our continued momentum and customer win backs from boomerang customers, especially in the regulated industry verticals. Here are a couple of examples. A leading provider of retirement and investment management solutions selected ON24 to enhance and scale its retirement plan education programs. Previously managing a large number of recurring sessions through a legacy provider, the team faced challenges with manual workflows and limited personalization. On ON24, they can now automate post-event engagement, integrate insights into their CRM, and deliver personalized participant experiences at scale. Another example of a win back was from the big pharma space. A global biopharmaceutical leader will join ON24 to elevate its digital HCP engagement strategy and move beyond basic web conferencing tools. The team needed a compliant, interactive, data-rich platform that could support live education and integrate directly with its CRM and Viva systems. With ON24, they now deliver immersive, fully branded experiences with interactive features, all while capturing first-party engagement data that drives more informed follow-up. Finally, let's turn to how we are using AI to drive efficiencies in our own organization. We generated positive free cash flow for the seventh consecutive quarter and expect to drive further progress on profitability in 2026. Specifically, we are leveraging AI to increase efficiency in operations. Moving forward, we are actively focused on deploying AI tools within the company to improve productivity, especially in sales and marketing, and to drive higher profit margins. We are targeting a double-digit improvement in sales and marketing expenses as a percentage of revenue in the next two years. Currently, sales and marketing as a percentage of revenue is in the low forties, and we expect to reduce this to the mid-thirties in twelve months and to the low thirties in two years. With the benefits of AI, we believe we can better align our overall expense structure without compromising our innovation roadmap and go-to-market success. To sum up, we believe we are well-positioned to capture the growth opportunity in our market by bringing AI innovation to our industry. We are making ON24 the AI-enabled engagement platform that empowers business users to do more with less and achieve measurable results. We continue to see impressive win backs as boomerang clients recognize the power of the ON24 platform to automate post-event engagement, integrate insights into their CRM, and deliver personalized participant experiences at scale. We are excited about the enhanced solutions we can deliver to our customers through our partnership with LinkedIn and the expansion of our AI solutions, including Agentic AI. We look forward to driving the company to profitable ARR growth in 2026. Before I turn it over to Steve, I wanted to provide an update. The company has received indications of interest for a potential acquisition of the company. The board is evaluating the indications of interest with Goldman Sachs as its financial adviser. There can be no assurances as to the outcome of this process. The purpose of our call today is our third quarter results, and we ask that you keep your questions focused on this topic. Now I will turn it over to Steve. Steve Vattuone: Thank you, Sharat, and good afternoon, everyone. I am going to start with our third quarter 2025 results and will then discuss our outlook for the fourth quarter 2025 and full year 2025. Total revenue for the third quarter, which includes revenue from our virtual conference product, was $34.6 million. Total subscription and other platform revenue was $32 million. Total professional services revenue was $2 million, representing approximately 8% of total revenue. Revenue from our core platform, including services in 2025, was $34 million. Moving on to ARR. ARR represents the annualized value of all subscription contracts at the end of the period and excludes professional services and overages. Total ARR at the end of Q3 was $124.5 million, and ARR related to our core platform was $122.4 million. As Sharat discussed earlier, while we did see some softness and deal slippage in our growth business during a seasonally softer summer quarter, including in the Life Sciences vertical, we see many positive signs in our business, and we expect to improve ARR performance in Q4, which I will cover in our guidance discussion. Now let me cover some of our customer metrics. Our continued focus on larger enterprise customers resulted in improvements in a number of our customer metrics. Our continued focus on enterprise customers resulted in our average core ARR per customer reaching its highest level ever at over $80,000 per customer. Our strategy of moving customers to longer-term commitments has resulted in the percentage of our ARR in multiyear agreements hitting another all-time high at the end of Q3. This number was 51% at the end of 2024 and increased sequentially each quarter in 2025. Our emphasis on increasing the deployment of our product set, including our new AI-enabled products within our customer base, has shown results. In Q3, the percentage of our customers using two or more products hit an all-time high, having increased sequentially every quarter in 2025. As Sharat discussed, almost one in five of our customers are now using and paying for our AI solutions, a number which has continued to grow sequentially each quarter of the past seven quarters since the beginning of 2024. In Q3, the $100,000 and above customer cohort represented approximately two-thirds of our total ARR, consistent with last quarter, with 294 customers in this cohort. The total customer count at the end of Q3 was 1,521. Before turning to expense items and profitability, I would like to point out that I will be discussing non-GAAP results going forward. Our non-GAAP results exclude stock-based compensation, restructuring charges, impairment charges for real estate, amortization of acquired intangibles, shareholder activism-related costs, certain legal costs related to litigation regarding the 2021 IPO, as well as certain other items. Our GAAP financial results, along with a reconciliation between GAAP and non-GAAP results, can be found within our earnings release. Our gross margin in Q3 was 76%. Our year-to-date gross margin through Q3 was 77%, which is consistent with our gross margin for the 2025 fiscal year. Now moving on to operating expenses. Sales and marketing expense decreased in Q3 to $14.4 million compared to $15.9 million in Q3 last year. This represents 42% of total revenue, compared to 44% in the same period last year and 43% last quarter. Our sales and marketing expenses have decreased in absolute dollars and as a percentage of revenue both year over year and from last quarter as we continue deploying AI tools to increase efficiency. R&D expense in Q3 was $6.6 million compared to $6.7 million in Q3 last year. This represents 19% of total revenue compared to 18% in the same period last year and 19% last quarter. We have continued to invest in product innovation for our platform, including AI-enabled features that utilize our first-party data advantage. G&A expense in Q3 was $5.8 million compared to $6.2 million in Q3 last year. This represents 17% of total revenue compared to 17% in the same period last year and last quarter. We have taken actions to reduce our G&A spending, and as a result, our G&A expenses in absolute dollars have decreased as compared to the same period last year and last quarter as we have continued to streamline our G&A functions. Moving on to our bottom line performance and cash flow metrics. Operating loss for Q3 was $400,000 or a negative 1% operating margin compared to an operating loss of $800,000 and a negative 2% operating margin in the same period last year. Net income in Q3 was $1.2 million or $0.03 per share based on approximately 45.1 million diluted shares outstanding. This compares to net income of $1.1 million or $0.02 per share in Q3 last year using approximately 45.6 million diluted shares outstanding. We delivered positive adjusted EBITDA in Q3 and delivered our seventh consecutive quarter of positive free cash flow. Our free cash flow in Q3 was positive $2.7 million, excluding cash outflows related to our restructuring efforts, shareholder activism fees, and certain other legal costs, which collectively totaled $500,000 in Q3 2025. Our free cash flow in Q3, including all of these items, was positive $2.2 million compared to positive $100,000 in Q3 of last year. Cash provided by operations in Q3 was $2.5 million compared to cash provided by operations of $300,000 in Q3 last year. I would like to provide an update on the $50 million capital return program we announced in May. In Q3, we utilized approximately $7 million for share repurchases under this program and a further $2.4 million thus far in Q4 under this program. Since we launched this program in May, we have utilized a total of approximately $13.8 million under this program. This share repurchase program followed the completion of three earlier capital return programs. Our three earlier capital return programs collectively returned $191 million to shareholders. Our balance sheet remains strong with approximately $175 million of cash and investments at the end of Q3. Now turning to our guidance. Regarding Q4 guidance, we expect Q4 total revenue, which includes our virtual conference product, in the range of $33.9 million to $34.5 million and core platform revenue, including services, in the range of $33.3 million to $33.9 million. Professional services is expected to represent approximately 8% of total revenue. We expect our gross margin to be 76% to 77% in Q4. We expect a non-GAAP operating loss in the range of $800,000 to $200,000 and non-GAAP net income per share of $0.01 per share to $0.02 per share using approximately 44.8 million diluted shares outstanding. In Q4, we also expect to be adjusted EBITDA positive. We expect a restructuring charge of $500,000 to $800,000 in Q4 related to our ongoing cost reduction efforts, which is excluded from the non-GAAP amounts provided above. Amortization of acquired intangibles, shareholder activism costs, certain other legal costs, and certain other items are excluded from the Q4 non-GAAP amounts provided above. Now I would like to provide our outlook for ARR. We expect to see a meaningful improvement in ARR performance in Q4 as compared to Q3. We expect to end the year with the strongest gross retention in 2025 and expect our growth bookings to deliver a strong performance. That being said, it is early in the quarter, and Q4 tends to be a back-end loaded quarter, so we are providing a wider range for Q4 core ARR performance. In Q4, we expect core ARR to increase by 1% to an increase of $500,000 as compared to Q3 levels. For our Virtual Conference product, we expect the ARR to be $2 million at the end of 2025. Now turning to our annual guidance for 2025. For the full year, we expect total revenue to be in the range of $138.6 million to $139.2 million. Professional services is expected to represent 7.5% to 8% of total revenue. We expect core platform revenue, including services, to be in the range of $136 million to $136.6 million. We expect a non-GAAP operating loss in the range of $4.2 million to $3.6 million and non-GAAP net income per share of $0.05 per share to $0.06 per share using approximately 45 million diluted shares outstanding. We expect gross margins for the year to be 76% to 77%. We expect to be adjusted EBITDA positive in Q4 and 2025. Excluding any incremental non-GAAP expenses, we expect to deliver positive free cash flow in 2025, our second consecutive year of positive free cash flow. Restructuring charges, amortization of acquired intangibles, shareholder activism costs, certain other legal costs, and certain other items are excluded from the full-year non-GAAP amounts provided above. As Sharat discussed, we are making progress in improving our go-to-market strategy, which has allowed us to lower our sales and marketing spending as we exit 2025 and head into 2026. We are actively deploying AI tools at ON24 to improve efficiency and streamline our operations, including in the go-to-market functions. We are very focused on improving our profitability and expect to lower our sales and marketing expenses as a percentage of revenue by mid-single digits by the end of next year and by double digits in the next two years. This should bring our sales and marketing expenses as a percentage of revenue down to the mid-30s in twelve months and low-30s in two years. We expect these cost reductions will flow to the bottom line and increase our profitability in 2026 and beyond. In summary, in Q3, we made significant progress on our strategic roadmap while delivering P&L results above guidance. We expect to deliver better ARR performance in Q4 driven by improved gross retention performance, increased AI penetration in our customer base, new business performance from regulated industries, and our exciting new partnership with LinkedIn. We expect to deliver positive adjusted EBITDA in Q4 and 2025. With a focus on lowering our sales and marketing spending over the next two years and actively deploying AI within our organization to lower costs and streamline operations, we expect to deliver improved profitability in 2026 and beyond. Our goal is to return to ARR growth next year with a more profitable operating model. With that, Sharat and I will open the call for questions. We will now be conducting a question and answer session. Our first question comes from Rob Oliver with Baird. You may proceed with your question. Rob Oliver: Great. Thanks, operator. Good afternoon. The first question for me is around Sharat, I think you called out nearly 20% of customers paying for your AI solutions. That is a really impressive number. Was hoping to get a sense from you guys of what sort of potential uptick you are seeing from that, recognizing it's still early, but that's a pretty sizable chunk. And so I just wanted to get a sense of how that's impacting contracts, whether that's contributing to that continuously improving ACV number at enterprise. Any color there would be helpful. I just had a quick follow-up for Steve as well. Sharat Sharan: Yeah. Rob, as you said, we now have one in five customers that are paying for AI solutions. And this number as a percentage of revenues continues to increase every quarter. We expect it to continue to increase in Q4 and in future quarters. And this also provides a significant white space as we move forward. And now we have recently announced our AI Translate and AI Propel Plus offerings. AI Translate allows the customers to take a webinar and convert that into 30 different languages and campaigns. And AI Propel Plus is a brand new modern intuitive AI-powered solution that can easily turn every webinar or digital event into an omnichannel, multi-touch campaign or engagement. So these two offerings, in addition to AI, will continue to provide increased momentum and grow penetration with our AI offerings. You asked a question about, you know, already our AI solutions are, if you look at our expansion agenda, after our content marketing solutions, they are number two in terms of where they fall in. And my open expectation is sometime next year, they will cross to become the largest driver of expansion for ON24. We expect our ASP on that number to increase with the additional products. We also expect the penetration on the number of customers to increase. Now the other thing is this is also helping us both from a retention point of view. It is helping us from an expansion point of view. And also, close to 40 to 50% of our new deals are including AI too. So that is an important thing as we move forward. Now as we move yeah. I've talked about AI Propel Plus. I talked about AI Translate. As we move forward, we continue to focus on our agentic AI and AI search discoverability agenda also. And so all this that we are doing, Rob, is building on our strengths and first-party data. We have over a billion engagement minutes annually in our platform. We have hundreds of thousands of webinar experiences on our platform. And in the age of AI, both content and first-party data will win. The last thing I want to also mention, which I we will also mention on the call, that we are not only doing this for our customers, but we are also leveraging agents and others internally in the business, and that's what gives us confidence in some of the stuff that we talked about on sales and marketing. Hope that helps. Rob Oliver: Yeah. That does help. And that actually was gonna be part of my second question for Steve was around, you know, clearly, it sounds, Steve, like you guys are, you know, some of that really nice improvement on the sales and marketing and efficiency is coming from AI. Wondered if you could give us a little bit more color around how much is that tech innovation, how much of it is that low-hanging fruit internally, how much of it is potentially headcount? And then you guys have made some nice progress not just stabilizing the business, but also growing at the higher ARR accounts at the enterprise level. So I guess two-part question. One, some more color around the component of those that go-to-market efficiency. And secondly, how do you do that in a way where you make sure you do not disrupt kind of the improvements that you guys have been showing at the upper end of the client range? Thanks very much. Steve Vattuone: Sure. Let me go ahead and answer both of those questions for you. So first off, we have streamlined our go-to-market over the past few years, and we've reduced our sales and marketing quarterly spending from about $25 million in mid-2022 to less than $15 million a quarter in Q3. That's a reduction of about $10 million per quarter or $40 million annually. Now in terms of how we'll lower the expense going forward, we have been deploying AI within our organization to increase efficiency, and we'll continue to do that. That includes using our own products to be more efficient. We're also looking at reallocating resources within our go-to-market organization to focus on the areas with the highest growth potential, which are currently in the regulated industries, particularly in financial services and professional services. Life sciences, while currently under some macro pressure, is also an area where we have historically been strong, and we will continue to invest there. And lastly, we'll continue to look at ways to be more efficient and do more with less, which has allowed us to lower our sales and marketing spending over the past number of years, and we'll continue to do that. We can do all this while maintaining the right number of go-to-market resources. And that'll allow us to return to ARR growth in 2026. Rob Oliver: Great. Thanks very much. Steve Vattuone: Our next question comes from Michael Rackers with Needham. You may proceed with your question. Michael Rackers: Hi. This is actually Scott Berg. I guess lots of questions here. Sharat, I wanted to start with the deal slippage you mentioned from Q3 to Q4. Sounds like you closed a number of those transactions already in the quarter, which is obviously good. But wanted to see was there any commonalities with some of these deals that slipped out of Q3 and into Q4? Or was it more, I guess, random in nature? Sharat Sharan: I think, Scott, where we saw a little challenge in Q3, if you look at the pipeline, this is especially on the new business side. We saw a little less urgency in closing a deal from proposal plus to closure. I think, you know, Q3 tends to be a seasonally summer quarter, seasonally softer. We saw deals move from discovery to proposal plus. With proposal plus, closure. We saw them, you know, we saw $6.7 million worth of deals that slipped into Q4. And like I said, about 60-65% of those deals have already closed in Q4, which gives us a good sense. And so that's what we saw predominantly on the new business side. Our installed base business was fine. We did expect it to be a seasonally soft quarter, so that's what happened. We also did see some pressure in the pharma business. Now that has been a great business for us. In the last six to nine months, we've seen some short-term pressure in the pharma business. That being said, as we talked about it, our average core ARR per customer reached its highest level ever at over $80,000 per customer. The percent of ARR in multiyear agreements hit an all-time high. And the percentage of customers using two or more products also hit an all-time high. So now as I look at let me just also give you a color on Q4 ARR. And Steve talked about it. Q4, you know, it's hard to kind of provide guidance on ARR in itself. And Q4 is even harder because it's such a back-end loaded quarter. We've given a wider range of 0.5% to minus 1%, but we believe we are within striking distance of getting to positive ARR. We expect this to be one of the best gross retention quarters in Q4 in the last four to five years. We expect continued momentum from our AI offerings both from new and expansion business. And we also expect that the LinkedIn partnership will also start helping us drive improved new business and customer retention. And we will continue to see momentum in win backs and continuing traction in regulated industries. So yes, we have some work to do, but we've made some significant progress and enhancements in our business. Scott Berg: Sure. Very helpful there. Thank you. And then on the LinkedIn partnership, just wanted to connect on that, I guess. When you look at that, is that, I mean, we kind of described it as sounding like a channel something for your customers to be able to tap into from a distribution perspective. But is there any monetization opportunity with that? Or is it really just more about enhancing the platform to improve customer kind of retention stickiness and make it even more attractive? Sharat Sharan: Thank you. Yeah. I think there are stages to that. So let me just explain this. And it's bigger than you may be thinking right now as we launch the various stages. But, you know, this will literally drive the next generation of event marketing. We are the only webinar platform, maybe this engagement platform that LinkedIn has done this collaboration with. And I believe this is gonna be a game changer for our customers, and this partnership will ultimately transform digital events. So what this allows you to do is if you are publishing an event in ON24, you can literally seamlessly drive audiences from LinkedIn to come into that event. You can publish events directly on LinkedIn in just a few clicks and then quickly promote and capture registrants to drive seamless registration. And this is just the first phase of our integration. As we move forward, what you will see so in the first phase, yes, it is gonna be more about retention. It's gonna be more about new customers. But just imagine now customers can get through LinkedIn ads automatically for the event that they're doing. They can drive ten, twenty, fifty, 100 registrants right from the LinkedIn channels. Seamlessly. But in subsequent phases, what we'll be able to do here, Scott, we'll be able to leverage our first-party engagement data. And with LinkedIn, we'll be able to allow with that, they will allow lookalike audiences from LinkedIn. So we provide them some data, say, these are the people that we want. They'll provide lookalike audience data. And that will be able to provide those very specific audiences into the events of our customers. Now that will be monetized. We'll have a monetizable SKU on that that would impact our top line. We are very excited about the potential of this partnership and its impact on our growth in 2026 and beyond. Scott Berg: Very helpful. Thanks for taking my questions. Steve Vattuone: Our next question comes from D. J. Hynes with Canaccord Genuity. You may proceed with your question. Luke: Hey, guys. This is Luke on for DJ. Thanks for taking the question. So maybe to start, could you just tell us a little bit more about this AI search discoverability agenda you laid out? You know, the vision there, what those products will entail, what they look like, and what you think you can achieve there. Sharat Sharan: Yeah. So some of this is an early look, and I don't want to disclose everything. But let me share some of this information just at a high level. When our customers do events, they have registration pages, they have lobby pages, they do the webinar, and now they get the derivative content. They get the blogs, takeaways, all AI transcripts. They get all the video key moments and those and all that kind of information. Right? Now as you know, what the LLMs do, they basically scour places, like the search, and they develop a foundation. What we are gonna be able to do, if you are doing, like, 100, 200, 300, 400 webinars, we'll provide you things like transcripts, but all other things. As you structure your content on the ON24 platform, we make it, you know, and once it is done, we'll make it available to you whether it's in on-demand and others. So all that content can be indexed by the LLMs. Okay? So it's discoverable by the LLMs and indexed by the LLMs. Remember, you are no longer talking about a live event. That is done on an event basis. You're talking about really continuous engagement. All the other content, you'll be able to take all your video content, publish it to YouTube and other stuff. So be an ability to take all that content, index that into the LLM so that they become part of the search. Okay? Hopefully, that makes sense. And so there is a lot more work that we are doing in that regard. Again, with all the content, 130,000 experiences that we have on the platform, and all the other derivative content. Imagine with especially with translations. We have 130,000 experiences on the platform. And each experience converts into 15 more derivative contents or different languages and other stuff. Imagine you've got over 2 million pieces of content across the platform. And now how do you make it so that it is indexable by the LLM? How do you make it very easy so that it's searchable by the LLMs? That's an area that we are very focused on. Luke: Excellent. Very helpful. And maybe just a quick follow-up. As we think about this LinkedIn partnership, you know, you've described it as a multiphase approach. Just how should we be thinking about the timeline in the various phases and when that will be complete? Sharat Sharan: I think you should be thinking in terms of the first phase is this year. Phase two will launch approximately by the end of the year, which is gonna be much more what I think of as the partnership. And by Q1, you will start to see elements that will be monetizable in the platform. You should assume by February, we'll be able to launch things like the lookalike audiences that will be monetizable by ON24 for our customers. So that's where we believe that is going to move forward. And by the end of Q1, I expect the integration to be extremely tight now between ON24 and LinkedIn to really provide meaningful capability to our customers and start to provide an inflection on our top line. Luke: Excellent. Thank you. Steve Vattuone: Our next question comes from Linda Lee with William Blair. You may proceed with your question. Linda Lee: Thank you for taking my question here. Just a quick one to start off. Since changing, updating the go-to-market motion into more of an enterprise focus, how has the new go-to-market motion performed compared to your expectations so far? Sharat Sharan: Yeah. So, Linda, when we talk about the go-to-market motion, there are multiple parts to that. Again, it's more enterprise-focused. It's also we deliberately made a thing about being focused more on regulatory industries like financial services, life sciences, and professional services. I'll just provide you some information. Our regulated industries business is about 50% of our business now. Four, five years back, that was about 33-34% of our business. Now I know we are having some short-term headwinds in the life sciences business. But if you look at our financial services business, which is about 20%, and if you add our professional services business, which also has national and state regulations, so it's part of the regulated industries. Those two businesses with the 35% are growing mid-single digits year over year. They're also very high gross retention businesses close to 90%. So essentially, I think that execution and really tightening up our focus on financial services and life sciences and health. Also tightening up our focus on the go-to-market as we are focused on our strategic accounts and the next tier accounts, both from a customer success, marketing, and sales point of view, has helped us significantly. And we expect to continue to basically do that. As we move forward, you will see us continue to emphasize our AI-based offerings. You will see us continue to focus a lot more on the regulated industries. And this is also being seen in cases of the win backs. We are seeing whether it's in the regulated industries or otherwise, I'll give you an example of a customer win back. A leading provider of retirement and investment management solutions left us to go to one of the collaboration tools, and they came back to us because when they went there, they do a lot of recurring sessions, and they could not do those through a legacy provider. The team faced challenges with manual workflows and limited personalization. With ON24, they can now automate post-event engagement, integrate insights into their CRM, and deliver personalized participant experiences at scale. So as we move forward, and I think we've talked about the sales and marketing efficiency, you will see us double down even more in that category. Linda Lee: Well, and another question here, with the new CMO joining early in the year here, how has the transition been in terms of the onboarding of the new CMO, David Lee? And also, what are the strategies here in terms of as you guys are focusing more on the AI products and features and capabilities to your customers, in your conversations with sales teams, if you could give more color on that? Sharat Sharan: Yeah. I think David has joined, and it's been some time since he joined now. In our business, that's kind of a lifetime. So he's very well ramped up. And when we look at our team's go-to-market teams, Linda, David has a head of demand generation. Now we also got to change that position. And there's a really good VP of demand generation that he brought on. Also brought on a VP of corporate marketing that's really driving a lot of our agenda on LinkedIn and other stuff. And he's got other people like VP of product marketing. Now the corporate marketing and demand generation leaders are very closely tied with the sales teams and the customer success team. So that's become a very important part of our agenda. So the focus on LinkedIn, the focus on they're doing campaigns for financial services and regulated industries. So they're doing full campaigns on the expansion team. And for AI-based offerings. So, again, I think the go-to-market team is working very, very closely. David and his team are quite ramped up. And that gives us confidence that we can, as we move forward, be more efficient in the sales and marketing spend and also continue to deliver our growth numbers. Linda Lee: Awesome. That's helpful. Thank you. Operator: Ladies and gentlemen, this concludes our question and answer session. And does conclude today's teleconference as well. Thank you for your participation. Please disconnect your lines and have a wonderful day.
Operator: Good afternoon, and welcome to the Mobile Infrastructure Corporation Third Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press 11 on your telephone. You will then hear an automated message advising your hand has been raised. To withdraw your question, please press 11 again. Please be advised that today's conference is being recorded. I will now turn the call over to Casey Kotary, Investor Relations Representative. Please go ahead. Casey Kotary: Thank you, operator. Good afternoon, everyone, and thank you for joining us to review Mobile Infrastructure Corporation's third quarter 2025 performance. With us today from Mobile Infrastructure Corporation are Stephanie L. Hogue, CEO, Paul M. Gohr, CFO, and Manuel Chavez, Executive Chairman. In a moment, we will hear management statements about the company's results of operations as of 2025. Before we begin, we would like to remind everyone that today's discussion includes forward-looking statements, including projections and estimates of future events, business or industry trends, or business or financial results. Actual results may vary significantly from those statements and may be affected by risks Mobile Infrastructure Corporation has identified in today's press release and those identified in its filings with the SEC, including Mobile Infrastructure Corporation's most recent annual report on Form 10-K and its most recent quarterly report on Form 10-Q. Mobile Infrastructure Corporation assumes no obligation and does not intend to update or comment on forward-looking statements made on this call. Today's discussion also contains references to non-GAAP financial measures that Mobile Infrastructure Corporation believes provide useful information to its investors. These non-GAAP measures should not be considered in isolation from or as a substitute for GAAP results. Mobile Infrastructure Corporation's earnings release and the most recent quarterly report on Form 10-Q provide a reconciliation of those measures to the most directly comparable GAAP measures and a list of the reasons why Mobile Infrastructure Corporation uses these measures. I will now turn the call over to Mobile Infrastructure Corporation CEO, Stephanie L. Hogue, to discuss third quarter 2025 performance. Stephanie L. Hogue: Thank you, Casey. Our third quarter results were comparable to the second quarter, representing resilient performance against a challenging backdrop. Portfolio-level utilization in the quarter was comparable to last year's levels, although revenue and NOI were lighter than expected. As ongoing construction and longer redevelopment timelines continue to have a short-term impact on key assets. Our focus continues to be on controlling what we can control, capturing as many monthly consumers as possible, and ensuring the portfolio is in a position to capture the growth and activity around our assets from central business district redevelopment efforts in many of our markets. In the third quarter, contract parking volumes continued to trend higher, increasing 1.4% sequentially and growing 8% year to date. While pricing remained competitive, higher utilization typically leads to long-term pricing power, and we expect to see the benefits of these volume gains as business conditions strengthen. Transient volumes, while up sequentially, were down approximately 5% year over year, largely driven by softness in hotel and event traffic. Several of our core downtown markets continue to experience temporary defined headwinds, including long construction cycles, event cancellations, and lower hotel occupancy, all of which pressured near-term results. While construction is affecting assets in a handful of our most important micro markets in the short term, we remain optimistic about the opportunities for long-term value creation at these locations as these projects reach completion and traffic increases. Our internal data indicates that hotels in several of our markets saw a decline in occupancy this quarter, including Houston, Denver, Cincinnati, and Nashville, among others. In addition, event activity was lighter across our portfolio, influenced by both consumer uncertainty and construction in Fort Worth, Nashville, Cincinnati, and Detroit. Four markets that together represent approximately one-third of our stalls and a slightly higher share of the portfolio's transient demand base. During the quarter, transient rates expanded modestly, though not enough to offset the decline in transient traffic. Monthly parking remained a buyer's market, with rates modestly down year over year, but there are encouraging signs of continued demand as residential activity strengthens around our assets. In today's fluid work environment, Mobile Infrastructure Corporation has benefited from a strategic emphasis on residential parking, capitalizing on multiple demand drivers continues to be one of the strongest indicators of the portfolio's long-term health. And we believe that there is a long runway to continue driving residential mix within garages that were historically reliant on monthly employee parking. While the leasing pace at recently converted downtown rental properties is ramping slowly, we are capturing an increased share of current demand, and the unit economics on these parkers is desirable. Our residential monthly contracts have increased approximately 75% year over year and are up nearly 60% since year-end. Residential and commercial monthly parking now represent approximately 35% of trailing twelve months management agreement revenue, providing a stable base of recurring income and giving us greater optionality to experiment with the pricing lever over time. As we noted in today's earnings release, we are pleased with the improved performance of several of our assets. We've seen particularly positive trends in Cleveland. Transient growth of 8% in the quarter over 2024's third quarter has been complementary with strong growth in residential and commercial monthly contracts, up over 50% year over year. Importantly, because assets in Cleveland are approaching stabilized utilization, we've seen an average of 5% rate expansion in monthly contract users, allowing us to hold transient rates stable in a somewhat uncertain environment. Downtown Oklahoma City continues to thrive as well. The city's successful metropolitan area projects have committed over $1 billion to six projects through 2028. These projects include new sporting arenas, a new entertainment district, and a dense mixed-use urban environment. As the twentieth largest market in the United States, its ability to host marquee events has driven hotel, event, and transient traffic. Staying ahead of market events has allowed us to drive volumes to stabilized levels of performance. The team has continued to focus on creating the best possible customer experience at this garage by engaging with our parking operators on ways to offer a seamless in-and-out experience. These examples continue to reinforce our broader point. Transient traffic will ebb and flow, but our focus on recurring contract-based parking creates the foundation for durable performance. In Cincinnati, a market in which we have three core assets, transient traffic continues to be significantly impacted by the temporary closure of the convention center. Despite the disruptions, our assets have performed remarkably well. Contract volume is up 15% year over year, supported by residential demand, and we anticipate a step change in performance beginning in 2026 when the convention center is scheduled to reopen. Of course, while we expect a material step change in that district's activities, we note that construction projects near many of our assets simply have taken longer than original schedules dictated. In Detroit, as we've previously discussed, monthly parkers have been leaving faster than expected ahead of the Renaissance Center's multiyear redevelopment, which is scheduled to begin in early 2026. During the construction period, we expect this asset to operate as a transient-heavy garage serving both visitors and the construction workforce. Over the longer term, we remain confident that this asset will benefit significantly once the redevelopment is complete. To this point, a recent appraisal on this asset supports our belief that the value of rents and garage could increase by more than 50% when the project is completed. Earlier this year, we shared Mobile Infrastructure Corporation's strategy to unlock substantial value by segmenting the portfolio into core and noncore assets. From a balance sheet perspective, this strategy had a nuanced hurdle because several of the noncore assets in our legacy portfolio were captured in CMBS debt, which restricted our ability to rotate assets out and add more accretive assets to the portfolio. We announced last week that we completed an ABS transaction, which Paul will discuss more fully. This transaction provides the needed flexibility for our plan to optimize our portfolio. Consistent with the asset rotation, we closed on the sale of a small noncore lot last week. I am pleased to report that we expect to have sold or be in contract to sell approximately $30 million in noncore assets by the end of the year, consistent with the capital plan we announced earlier this year. With a robust acquisition pipeline, we will strategically balance acquiring new assets with optimizing the balance sheet through debt paydowns where appropriate. And finally, as we think about diversification of revenue streams, we are seeing a growing recognition that EV charging is no longer simply an amenity to be offered to tenants. Historically, this appealed to consumers but generated no return on investment for owners, as parkers would simply park and stay rather than move their vehicles, a dynamic that limits profitability in EV charging because it relies upon vehicle turnover. Our best EV partners are helping us manage the retraining of the consumer in this space. We continue to make measured investments in this area, focusing on locations where utilization and pricing support longer-term profitability. This will continue to evolve as the industry shifts from viewing EV charging as a cost center to viewing it as a contributor to net operating income. With that, I'll turn it over to Paul M. Gohr for a financial review. Paul M. Gohr: Good afternoon, everyone. I am pleased to discuss the financial details of our third quarter 2025 results. Revenue was $9.1 million in the third quarter, compared with $9.8 million in 2024. The lower year-over-year revenue was primarily due to lower transient volumes reflecting lower nearby hotel occupancy, a reduced number of special events, and lower associated attendance, as well as continued construction-related impacts at several of our locations. As we have discussed in the past, the decline in transient volume was partially offset by increased transient rates, which speaks to the value of our locations and will be helpful as demand increases. Revenue per available stall, or RevPAS, a key metric we use to manage our portfolio, was $212 in 2025, consistent with our second quarter, but down 7.1% from $228 in 2024, resulting from the factors I just mentioned. Adjusting for our Detroit location, which is one of the largest assets in the Mobile Infrastructure Corporation portfolio, RevPAS increased modestly sequentially but was down 4.8% year over year. As we've discussed before, at our Detroit location, redevelopment is actively underway, so while it has some near-term challenges, longer-term, the asset is extremely well-positioned. We see RevPAS as a valuable tool to track our assets, particularly as we convert more assets to management contracts, and a larger portion of our portfolio is included in the calculation. Property taxes remained consistent with the prior year at $1.8 million. Property operating expenses were also flat at $1.8 million in 2025, benefiting from our disciplined cost management. Net operating income, or NOI, was $5.5 million, up modestly sequentially but down from the $6.1 million in last year's third quarter. The decrease was a function of the lower transient volumes year over year. General and administrative expenses of $1.3 million were in line with the prior year third quarter. This excluded non-cash compensation of $800,000 in the current year quarter, compared with $1.3 million non-cash compensation in the prior year quarter. We continue to be well-positioned to enjoy operating leverage as we scale the business. Adjusted EBITDA was $3.9 million, up modestly sequentially but down about 10% from the $4.4 million in the prior year. And adjusted EBITDA margin was 42.6%. Turning to our balance sheet, at the end of the quarter, we had $12.1 million of cash and restricted cash on hand. We ended the quarter with total debt outstanding of $213 million, stable with both the second quarter and 2024. Importantly, as Stephanie mentioned, at the end of the third quarter, we successfully completed a $100 million refinancing via an asset-backed securitization of 19 of our facilities. The notes received an investment-grade rating of triple B and a private letter from a big three rating agency. With the proceeds, we refinanced $84.4 million of near-term debt, extending our maturities to 2030 while increasing our capital flexibility to pursue our portfolio optimization strategy. The refinancing allows us to sell noncore assets, consistent with our strategy, and we see this as an important long-term value driver for our asset base. As a reminder, our published net asset value, or NAV, is $7.25 per share, and this does not credit our assets for their meaningful replacement value. Considering the material discount in Mobile Infrastructure Corporation's stock price relative to NAV, we intend to continue taking potential dilution off the table by settling preferred redemptions with cash and using our repurchase plan to buy back our stock in the open market. To date, we have repurchased over 1 million shares at an average price of $3.36 per share. Given the current share price and evaluation relative to our NAV, our shares continue to be an extremely compelling investment. As such, repurchases are a key focus area for capital deployment. With that, I will turn back the call to Stephanie for closing remarks. Stephanie L. Hogue: Thanks, Paul. While our year-to-date results came in below our expectations, we believe we have demonstrated resilient performance in light of the operating environment and the specific challenges that we have faced in certain markets. That said, several of the headwinds we are managing are beginning to position us to capitalize on the emerging opportunities in the year ahead. In Cincinnati, the reopening of the convention center early next year will drive both event and hotel traffic with seven events booked in the first quarter, historically our slowest quarter in parking, and a strong pipeline of events developing through 2026. In Denver, the 16th Street Mall redevelopment is seeing the start of a recovery. It officially opened on October 4 with foot traffic approaching 30,000 people. In Nashville, which was impacted by construction from the Christmas Day bomb in 2020, our garage will benefit from the 2nd Avenue Corridor project, which is expected to be completed by December 2025, restoring easy drive-in and out access into our garage. Meanwhile, our Fort Worth and Detroit assets, though affected by near-term disruptions, are positioned to benefit from long-term urban revitalization and the eventual completion of surrounding projects. In summary, the factors impacting our results are understood, time-bound, and fixed with diversification, and most importantly, to projects that we believe will enhance long-term asset value. Our conviction in the long-term fundamentals of Mobile Infrastructure Corporation has not changed. The secular tailwinds supporting our markets continued urban revival, increased residential conversion, increasing return to office trends, and the modernization of mobility infrastructure remain in place. We continue to believe that the company's portfolio is materially undervalued as compared to its underlying NAV, and as the temporary disruptions around our assets subside, we expect that value to be increasingly recognized. Our employees and operating partners are navigating a challenging environment with professionalism and creativity, giving us confidence as we move into 2025 and look ahead into 2026. Operator, please open the call to questions. Operator: Certainly. As a reminder, to ask a question, please press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. One moment, please. First question comes from the line of John Massocca with B. Riley Securities. John Massocca: Good afternoon. Maybe if we think about kind of top-line performance heading into 4Q 2025, is there any reason to think maybe the level of disruption from either some of the event demand drivers not being there or some of the ongoing construction near some of your assets phased in that quarter? Or should we kind of think about the year-over-year impact being relatively similar to what you saw in 3Q 2025? Stephanie L. Hogue: I think it's gonna be a little bit mixed. You know, in Denver, specifically, in the fourth quarter, we think that that will start to ease. You had the 16th Street Mall officially open in October, and it drew 30,000 plus people on foot. In Nashville, 2nd Street closure will open in December. So we should start to see some of that ease in Q4. But towards the '4. And, you know, really, we're looking into 2026 where we start to see some real year-over-year pickup and how those markets perform. John Massocca: You know, I guess maybe as we think about the $30 million of potential sales that you talked about on the call, where do you think the use of proceeds from that go? Is it buying back the stock? Is it capital recycling? Is it maybe paying down the line of credit? Just kind of curious, you know, where how much kind of money net you think you get out of those deals and where the proceeds go? Stephanie L. Hogue: Yep. Great question. You know, obviously, we're always evaluating the best possible place to place capital. So looking at that capital allocation. I think right now, you know, we have a long pipeline, but I think in the near term, we'll focus on repaying the line of credit. But certainly, considering as the acquisition pipeline shifts, and that's more accretive to shareholders, we're evaluating with our broader board every month. But near term, we'll focus on line of credit. John Massocca: Okay. And then, yeah, maybe you can detail the front. What was the impairment in the quarter? Paul M. Gohr: The impairment of $2.5 million was just related to our normal testing that we do every quarter and evaluating, you know, fair value of the properties, and it just coincided with our asset rotation strategy and the evaluation that went along with that. John Massocca: Okay. So it's coming primarily out of the bucket of properties you're looking to sell here by year-end? Paul M. Gohr: Yes. John Massocca: Okay. And then last one for me on the ABS front. You know, what kind of made that transaction attractive? Is that more about pricing or is there a level like a flexibility you get with that deal on the side that wasn't there with some of your kind of nickel or the debt financing that was in place on those assets prior to the ABS transaction? Stephanie L. Hogue: Yeah. It's a great question. So really, we talked about it in the script. The ability to sell assets, the noncore assets, as we've lined those up, so many of them sat in the CMBS, which is why we were able to execute on one within a week of closing on the ABS. So really, this is starting to set the balance sheet up for what we've talked about and using it as a tool for continued accretion to shareholders with more accretive properties. John Massocca: Okay. I'll hop back in the queue. Thank you very much for the answers. Stephanie L. Hogue: Thanks, John. John Massocca: Thank you. Operator: And our next question comes from the line of Kevin Steinke with Barrington Research. Kevin Steinke: Great. Thank you. Just wanted to dig into the outlook a little bit more. You know, sounds like headwinds in transient are, you know, kind of the main contributor there. I think you talked about maybe a couple of markets I hadn't heard before with some disruption, like Fort Worth and Houston. So is there anything incremental you know, you've seen with disruption or softer transient trends relative to, you know, what you were seeing on your last call? Stephanie L. Hogue: Yeah. A lot of the transient in those two in particular is around either construction that is new in the quarter or just taking longer. Fort Worth, for example, the convention center is having some upgrades. So we anticipate, like with most things, the construction over the longer term will be positive for the portfolio. It just, you know, sort of hits in the short term and either prevents access or just decreased demand around transient specifically. Kevin Steinke: Okay. Thanks. You talked about, you know, some of the improved performance at a couple of your assets, Cleveland and Oklahoma City. And then you also mentioned that actions are underway to improve retention and utilization at other assets that you expect will begin driving improved performance in 2026. So can you just maybe dig a little bit into the actions that you're taking and how you think that's going to drive the improved performance next year? Stephanie L. Hogue: Yeah. The single biggest item that we focus on is utilization. And so as we've talked about on prior earnings calls, it's really arming and partnering with our operators on monthly contracts, making sure that we're driving both residential and to the extent there's a return to office in the market, commercial, which gives us a really stable base. So we will continue to focus on that. That was a heavy focus in the fourth quarter last year in Cleveland, which is where we're starting to see that pickup. That will continue to be a focus, and we talked about that in Cincinnati as well. So that's really the focus area. And then beyond that, you know, once you get to a stabilized level of utilization, then you really start to have the lever around pricing. Know, whether that is specific to event or just across the board, but utilization has to be the first step. Kevin Steinke: Okay. Got it. And so it like some good trends in the residential monthly contract growth. Did anything meaningfully change there with contract additions kind of either positive or negative relative to, you know, what you were seeing, you know, several months ago? Stephanie L. Hogue: I think the only thing that's really changed or has not been as expected, it's just taking longer for the lease-ups of the apartments themselves. You know, once they're leased, we're in pretty good position. We're well-priced. We have sort of nested areas for parkers that are near elevators. So there's premium pricing and premium product. It's really down to leasing and the time it's taking for our assets to lease, which is slower than we thought. Kevin Steinke: Okay. Got it. And then with, you know, the new ABS refinancing, does that now kind of free up all the noncore assets that you were hoping to sell or, you know, that had the CMBS debt or are there others that you still need to address? Stephanie L. Hogue: Nope. That was it. So that was really why it was such a critical piece of the balance sheet for this quarter. Kevin Steinke: Okay. Got it. And so, I guess, lastly, it sounds like the Cincinnati Convention Center is on track with where you expected it before in terms of reopening. Just wanted to confirm that haven't seen any delays there or, you know, that might impact your performance different than what you expected previously. Stephanie L. Hogue: Yeah. No. We're really, really excited about it. Its event schedule is filling out well. So we have seven confirmed events for the first quarter, which, as you know, is typically our slowest quarter. And that will positively impact all three garages as early as mid-January. So we're really excited about it. We're positive. It's a positive trend for this particular micro market in Cincinnati, and no changes that we're aware of at this point. Kevin Steinke: Okay. Thanks. Appreciate you taking questions. Stephanie L. Hogue: Yeah. Thank you. Operator: Thank you. And just as a reminder, to ask a question, please. Our next question comes from the line of Marc Riddick with Sidoti. Marc Riddick: Hey, good evening. Stephanie L. Hogue: Hey, Marc. Marc Riddick: So I wanted to touch a little bit on some of the drivers that you mentioned in your prepared remarks. So I was thinking about around the hotel and event activity. You touched on some of the conference activity that you see picking up in the next quarter or so. Maybe you could talk a little bit about maybe is this sort of a, it seemed as if I remember correctly, it's kind of a difficult comparison on some of the consumer-driven events and maybe hotel drivers. Maybe you could touch a little bit on what you're seeing there and if that's just sort of a general macro situation. Stephanie L. Hogue: Sure. Yeah, I think it's more micro, it's more market-specific than a generalization across. You know, each market has its own kind of impacts. Detroit, for example, you know, that has turned into a transient garage much more quickly than we expected because of the Renaissance Center redevelopment, but we think that's really positive. Where Chicago just had hotel down. So it's really specific to market across the board. Marc Riddick: Okay. And then you made mention on utilization on a couple of remarks. I think the commentary was that on a portfolio level, it was basically flat sequentially. Was there much of a difference between the, I guess, maybe the core and noncore assets as far as utilization levels and how much room do we have, run do we bandwidth, I guess, that we have to sort of get to, you know, not necessarily peak, but, you know, the utilization levels you'd like to see. Stephanie L. Hogue: Yeah. I mean, I think, you know, first and foremost, I think the fact that the utilization for the portfolio is flat is really an achievement given that transient is softer this year than we expected. You know, that really speaks to our focus on monthly contracts, both on residential and commercial and capturing the market that's there. So as the more transient side of the business picks up, we will see that incremental change in utilization just naturally happen. You know, core and noncore, we look at them comparably. Certainly, focus is driving NOIs, we're focused on the same things across various markets. Driving utilization, driving monthly contracts, and driving rate once we have a stabilized utilization. So there's not a ton of not a lot of difference between the two. Marc Riddick: And it seems as though some of the things that you mentioned for, you know, improving conditions going into next year would sort of be a natural beneficiary to RevPAS. Is it a reasonable, is there sort of a reasonable RevPAS growth level that we might be looking at potentially for, you know, going into next year, or is it early for that? Stephanie L. Hogue: It's probably a little too early for that. I think we're anticipating giving guidance with our year-end results in March, so we'll dive in specifically then. Marc Riddick: Okay. Great. And then I guess maybe last one for me. Is there much in the way of room for on management on, I'm sure you've already been doing that, but I'm sort of curious as to maybe what you're seeing there and some of the efforts there as far as, you know, managing the expenses and the markets that were sort of impacted by things that are sort of beyond your control. Stephanie L. Hogue: We absolutely always focus on expense, and it's really why transitioning the business to management agreements was so critical because we now have that insight. You know, to the extent we have an opportunity to pull back on expenses, whether it's payroll or, you know, technology fees, we are always looking at ways to optimize. But as we've talked about in the past, you know, this is a largely fixed-cost business. So once you get to that stabilized base, it's pretty fixed. Marc Riddick: Thank you very much. Stephanie L. Hogue: Yep. Thanks, Marc. Operator: Thank you. We have a follow-up from John Massocca with B. Riley Securities. John Massocca: Just a quick one for me. What are you expecting roughly the NOI impact to be from the $30 million of sales, either kind of a cap rate on the way the average cap rate on those transactions or just kind of what the drag on NOI could be from selling those assets? Stephanie L. Hogue: Yeah. It's fairly nominal. It's under a million dollars from an NOI perspective. And sub-three cap for cap rate. John Massocca: Appreciate that detail. That's it for me. Thanks. Paul M. Gohr: Thank you. Operator: Ladies and gentlemen, thank you for participating. This does conclude today's program, and you may now disconnect.
Operator: Good afternoon, and welcome to iHeartMedia, Inc.'s Third Quarter 2025 Earnings Call. All participants are in a listen-only mode. After the speakers' remarks, we will have a question and answer session. As a reminder, this conference call is being recorded. I would now like to turn the call over to Michael B. McGuinness, Head of Investor Relations. Please go ahead. Michael B. McGuinness: Good afternoon, everyone, and thank you for taking the time to join us for our third quarter 2025 earnings call. Joining me for today's discussion are Robert W. Pittman, our Chairman and CEO, and Richard J. Bressler, our President, COO, and CFO. At the conclusion of our prepared remarks, management will take your questions. In addition to our press release, we have an earnings presentation available on our website that you can use to follow along with our remarks. Please note that this call may include forward-looking statements regarding our performance and operating results. These statements are based on management's current expectations, and actual results could differ from what is stated as a result of certain factors identified on today's call and in the company's SEC filings, including our recent 8-K filing. Additionally, during this call, we will refer to certain non-GAAP financial measures. Reconciliations between GAAP and non-GAAP financial measures are included in our earnings release, earnings presentation, and our SEC filings, which are available in the Investor Relations section of our website. And now, I'll turn the call over to Bob. Robert W. Pittman: Thanks, Mike, and good afternoon, everyone. In the third quarter, even though 2025 is a non-political year, we generated adjusted EBITDA of $205 million, slightly above the midpoint of our previously provided guidance range of $180 million to $220 million and flat to the prior year. Our consolidated revenue for the quarter was at the high end of our guidance of down low single digits and was down 1.1% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 2.8%. Turning to our individual operating segments, the Digital Audio Group generated third quarter revenue of $342 million, up 13.5% versus prior year, above our previously provided guidance of high single digits. The Digital Audio Group generated third quarter adjusted EBITDA of $130 million, up 30.3% versus prior year, and the Digital Audio Group's adjusted EBITDA margins were 38.1% compared to 33.2% in the prior year. We are making continued progress toward our stated goal of achieving full-year adjusted EBITDA margins in the mid-30s. Within the Digital Audio Group, our podcast revenue was in line with our guidance of up low 20s; it grew 22.5% compared to prior year as we continue to feel the flywheel effect of our number one audience position in podcast publishing according to PodTrak. We believe we have the most profitable podcasting business in the United States, and importantly, our podcasting EBITDA margins remain accretive to our total company EBITDA margins. In Q3, approximately 50% of podcasting revenue was generated by our local sales force, up from about 11% in 2020, demonstrating the unique advantage of having what we believe is the largest local sales force in media, a presence across 160 markets in addition to our strong national sales force. In the third quarter, our non-podcast digital revenue grew 8% compared to prior year. Earlier today, we announced an exciting new partnership with TikTok that will bring TikTok creators into iHeart's ecosystem. This partnership will include a slate of podcasts from TikTok creators, a dedicated broadcast radio station available across the country, and expanded access to our live events starting with the 2025 Jingle Ball Tour, which will deepen creator engagement across audio and video platforms, open new monetization opportunities through integrated sponsorships and cross-platform distribution, and reinforce iHeart's unique position at the intersection of culture, content, and scale. Turning now to the Multiplatform Group, which includes our broadcast radio networks and events businesses. In the third quarter, revenue was $591 million, down 4.6% versus prior year and in line with our previously provided guidance range of down mid-single digits. Excluding the impact of political advertising, Multiplatform Group revenue was down 2.5%, and the Multiplatform Group's adjusted EBITDA was $119 million, down 8.3% versus prior year. As we mentioned last quarter, historically, we've seen that the largest advertisers and advertising agency groups are a good indicator of what's to come, and we continue to see growth in the performance of the top 50 advertisers and the four largest advertising agency groups for both the Multiplatform Group and the total company. These results give us confidence that our plan to return the Multiplatform Group to revenue growth is on the right track. What gives us further confidence in our ability to get the Multiplatform Group back into growth mode is that it all starts with audience. We have more broadcast radio listeners today than we had ten years ago and even twenty years ago. Our challenge is one of monetization. A key component in meeting that challenge is to make our broadcast inventory transact like digital, unlocking a significant monetization opportunity for the company, which will greatly benefit our broadcast revenues. On last quarter's call, we announced the hiring of Lisa Coffey as our Chief Business Officer, and I'm happy to report she's already making real progress, including last week's announcement of our programmatic audio partnership with Amazon, which provides advertising using Amazon DSP access to iHeart's vast audio portfolio. Our non-podcast digital inventory will be available immediately, and our podcast and broadcast radio inventory will follow in 2026. One of the essential components of our programmatic capability is the digital iHeart audience database, which includes the radio simulcast listening on our digital services. This enables our targeting, measurement, and attribution tools to bridge between broadcast impressions and digital identity, enabling broadcast inventory to transact in DSPs alongside streaming video and display. In essence, making our broadcast radio inventory look like digital inventory. It's important that we continue to grow and improve the proprietary audience database, and part of our investment in this initiative includes partnering with third parties through non-cash marketing plans aimed at increasing our digital audience and engagement. In turn, we provide meaningful marketing for those partners as part of this relationship. Looking at our cost structure, we're still on track to generate $150 million net savings in 2025. Rich will get into more detail, but I want to take the opportunity to announce that we have taken actions that will generate an additional $50 million of incremental annual savings beginning in 2026. As a reminder, we run the company with a relentless focus on maximizing the efficiency of our operating structure, including using new technologies like AI-powered tools and services. Now let me share with you what we're currently seeing in the ad market. We're feeling similar momentum to what some of the other ad-supported companies have discussed. Right now, spending is holding up, and discussions with advertisers are positive. At the same time, the government shutdown does add a level of uncertainty. This year continues to be an important one for iHeartMedia, Inc. The company continues to make significant progress in the growth of our digital business. We're seeing important signs of improvement in our broadcast business, specifically in the strength of our HoldCo and our biggest national advertising partners. We're making progress in our sales monetization efforts, which we expect to have wide-ranging implications for iHeartMedia, Inc., and we remain committed to our culture of innovation and efficiency. And now I'll turn it over to Rich. Richard J. Bressler: Thank you, Bob, and good afternoon, everyone. Our Q3 2025 consolidated revenue was at the high end of our guidance of down low single digits and was down 1.1% compared to the prior year quarter. Excluding the impact of political, our consolidated revenue was up 2.8%. Let me provide you with some additional detail on our advertising revenue performance this quarter. As Bob mentioned, the continued strong performance of our largest clients and advertising agency partners is encouraging. And as a reminder, we have diversified advertising revenue. There is no advertising category greater than about 5% of our total advertising revenue and no individual advertiser that is more than about 2% of our total advertising revenue. As you can see on Slide 11, in the third quarter, the largest category gainers in terms of absolute dollars were healthcare, telecom, professional services, and retail. The four categories that declined the most in terms of absolute dollars were political, financial services, food and beverage, and entertainment. In the third quarter, our five largest advertising categories in terms of absolute dollars were healthcare, homebuilding and improvement, financial services, auto, and entertainment. Our consolidated direct operating expenses decreased 2.6% for the quarter. This decrease was primarily driven by a decrease in employee compensation costs in connection with our modernization initiatives taken in 2024, partially offset by higher variable content costs associated with the revenue growth of our digital businesses. Consolidated SG&A expenses decreased 1.1% for the quarter, driven primarily by our modernization initiatives, including decreased employee compensation costs, partially offset by increased employee health and benefit expenses. We generated a third quarter GAAP operating loss of $116 million, which includes the impact of a $29 million impairment charge directly related to the value of FCC licenses, compared to an operating income of $77 million in the prior year quarter. We generated adjusted EBITDA of $205 million, slightly above the midpoint of our previously provided guidance range of $180 million to $220 million and flat to the prior year. As a reminder, 2024 benefited from political spend related to the presidential election cycle. Before I turn to our segment performances, I also want to reiterate Bob's statement on our cost management work. We remain on track to generate $150 million of net savings in 2025. As a reminder, our Q3 results included the benefit of $40 million of net savings. In addition, this quarter, we took new actions that will generate $50 million of additional annual savings beginning in 2026, and the majority of these savings will benefit the Multiplatform Group. We have again included slides in our investor presentation, Slide 5 and 6, that provide more details on our cost savings. Turning now to the performance of our operating segments. As a reminder, there are slides in the earnings presentation on our segment performances. In the third quarter, the Digital Audio Group's revenue was $342 million, up 13.5% year over year and above our guidance of up high single digits. The Digital Audio Group's adjusted EBITDA was $130 million, up 30.3% year over year, and our Q3 adjusted EBITDA margins were 38.1%, up from 33.2% in the prior year. Within the Digital Audio Group, our podcasting revenue was $140 million, which grew 22.5% year over year in line with our guidance we provided of up low 20s. Our third quarter non-podcasting digital revenue grew 8% year over year to $202 million. Turning now to the Multiplatform Group. Revenue was $591 million, down 4.6% compared to the prior year and in line with our previously provided guidance range. Excluding the impact of political revenue, Multiplatform Group revenue was down 2.5%. Adjusted EBITDA was $119 million, down 8.3% from $130 million in the prior year quarter. The Multiplatform Group's adjusted EBITDA margins were 20.2% compared to 21% in the prior year quarter. Turning to the Audio and Media Services Group. Revenue was $67 million, down 26% year over year. As a reminder, Q3 of the prior year benefited materially from political advertising. Excluding the impact of political revenue, the Audio and Media Services Group revenue was down 3.4%. Adjusted EBITDA was $23 million, down 49.1% compared to the prior year, again, due almost entirely to the impact of political advertising in the prior year quarter. As Bob mentioned in his remarks, investment in our proprietary audience database is a key component of our sales modernization efforts. Some of that investment takes the form of marketing partnerships to drive engagement with the iHeartRadio digital services. In Q3, those relationships drove an increase in our non-cash marketing revenues, and due to the timing of our marketing campaigns, some of the corresponding expenses relating to those agreements will be recognized in subsequent periods. While we may continue to experience some quarterly mismatching of these non-cash partnership marketing campaigns in both directions, we believe that obtaining these critical marketing resources for our sales modernization initiative on a non-cash basis is a prudent way to preserve capital. In the third quarter, our free cash flow was a negative $33 million compared to $73 million in the prior year quarter. This year-over-year variance has three main drivers. Q3 of last year benefited from approximately $40 million in political revenue, which is the only advertising category that is paid in advance of the airing of the advertisement. Second, as I mentioned earlier, we generated revenue from new marketing partnerships on a non-cash basis as part of our sales modernization initiatives. Third, we were negatively impacted by the timing of working capital items that will positively impact Q4. We expect to generate meaningful free cash flow in Q4. At quarter-end, our net debt was approximately $4.7 billion. Our total liquidity was $510 million, and our cash balance was $192 million, which includes $100 million borrowed under the ABL facility, which we intend to pay back by year-end. Our quarter-ending net debt to adjusted EBITDA ratio was 6.6 times. Let me now turn to our fourth quarter guidance. We expect to generate fourth quarter adjusted EBITDA in the range of $200 million to $240 million compared to $246 million in the prior year quarter. As a reminder, the fourth quarter financial results of last year benefited from the presidential election cycle, which generated $83 million of political revenue for us. We expect our consolidated Q4 2025 revenue to be down low single digits compared to the prior year and up mid-single digits excluding the impact of political revenue. We are still closing the books for October, but we expect October revenue to be down mid-teens and approximately flat excluding the impact of political revenue from Q4 2024. Turning to the individual segments for Q4. We expect the Digital Audio Group's revenue to be up high single digits with podcasting revenue expected to grow in the mid-teens. That would mean for the full year, we expect our podcasting revenue to grow in the low 20s. We expect the Multiplatform Group's revenue to be down low single digits and up low single digits excluding the impact of political revenue. We expect the Audio and Media Services Group revenue to be down approximately 20% and up approximately 15% excluding the impact of political revenue. Now we will turn it over to the operator to take your questions. Thank you. Operator: Thank you. Our first question comes from Aaron Watts from Deutsche Bank. Please go ahead. Your line is open. Aaron Watts: Hi, thanks for having me on. I've got a few questions if I can sneak them in here. Rich, if I heard you correctly, on the free cash flow, there were some timing items in there that skewed this year compared to last year. Fourth quarter is going to you're going to see that reverse. As cash flows in, after you repay the ABL, how do you think about or using your excess cash towards, whether it's front-end maturities, perhaps attacking some of the some of your debts that's trading at a larger discount in the market? Richard J. Bressler: Aaron, thanks. Thanks for the question. So just a couple of things, Jess. I think you captured correctly the point in terms of negative free cash flow for Q3 and the fact that we expect to generate meaningful cash flow and also to reiterate our plan on paying back the ABL in Q4 of this year. In terms of maturities, look, I think we've always done a pretty good job historically. The company with looking to reduce the overall cost of our capital structure. And we're gonna be opportunistic, and continue to have that one goal in mind. To create a more efficient capital structure for all of our stakeholders. Aaron Watts: Okay. And in your MPG group, I believe your third quarter revenues excluding came in a little bit light relative to your expectations. That looks like it's trending better in 4Q overall, though I imagine CrowdOut is helping there. Can you just talk a little bit more about the underlying ad environment? What's balancing the large the momentum you're seeing with your large clients? And then maybe relatedly, as you turn the corner into 26, how we should be thinking about political and the upside you see there perhaps versus past cycles for you? Richard J. Bressler: Well, maybe I'll just start on a couple of points. Actually, I think in terms of the Multiplatform Group, the trend and everything, you know, that came in pretty much as we expected. Into Q3 out there. So and obviously, Bob talked about in terms of our future, we'll talk about more. About our confidence and continued strengthening of that group. Just to take your last question second, on political we're not going to talk anything about specifics on political going into the 2026 election cycle. The two the only couple of things I would say is we expect it to be a strong revenue cycle for us on a political front without giving any details on any numbers. Again, when you look at our capabilities, including the build-out of our audio tech stack and all of our recent announcements on things like with Amazon and broadcast and in the DSP. We're just going to continue to be better and better equipped, to take more dollars. As we go forward as a company. Out there. But I think overall, it should be a good election year based on everything we know today. You guys will, seeing the same things on the phone that we know. Maybe Bob comment on the advertising environment. Robert W. Pittman: Yeah. Look. I think the advertising environment is pretty good. We've looked at the looked at our big advertisers, our largest advertisers and our biggest advertising agencies, the big holdcoes. And the trends are very good. I mean, sort of no one knows what the impact of government shutdown is. But right now, we're not feeling anything on it. Continue to feel good about it. Aaron Watts: Okay. That's helpful. And if I can just sneak one last one in. Sure. You mentioned, and we've seen a couple of announcements this past week around advancing your programmatic initiatives, including with Amazon, StackAdapt, I thought the inclusion of broadcast radio inventory was particularly you remind us where you stand with the other major DSPs now? Should these agreements be incremental to the current revenue base? And what's the timeline for this to be a material mover for the P and L? Robert W. Pittman: I think as we look at the DSPs, we are and we have agreements with all the major DSPs, at least part of our inventory. And in the case of Amazon, we announced we'll be adding a broadcast inventory next year. In the case of DV360, we do have a broadcast inventory in there, Yahoo! As well. And we're looking at the major DSPs. We have the relationships in place. It's really building out. And as we think about programmatic in very rough terms, Rich and I think about it as really we're building another podcast business that we think it probably has that kind of flow through. And if you remember, I think it was a 2020, we did about $50 million in podcast revenue. And you see how it's grown. So our expectation is that programmatic also grows. It's roughly sort of that same trajectory. And we think it's got the same kind of potential for us in terms of developing new incremental revenue sources for the company. And so for us, we think it's very big positive for us and it's the reason we've invested so much in building out that programmatic platform. Richard J. Bressler: Aaron, the one thing I just might add in terms of what Bob built upon, and you mentioned about Amazon. And and Bob, mentioned it, you know, in his opening remarks and the announcement that we made this morning with TikTok. The way I I and Bob gave the a a the analysis with respect to podcasting, you know, the way we think about it is we've got, as Pat commented on, our unparalleled audience. The value of that unparalleled audience. And we've got all of our platforms. And what we are constantly focused on and continue to the monetization of our existing platforms is how do we continue to look at looking at other potential new revenue streams. Off of those platforms that are on the revenue streams. You know, podcasting, is an interesting one point. Bob pointed out what the numbers were. We just I just mentioned TikTok. We talked about programmatic for broadcasting. So I think you should think about it as our constant focus to take the unique engaged audience we have and how do we continue. Get new revenue from that audience. Revenue streams. Aaron Watts: Okay. Great. Appreciate all the detail. Thanks, guys. Operator: Next question comes from Sebastiano Petti from JPMorgan. Please go ahead. Your line is open. Sebastiano Petti: Hi. Thanks for taking the question, guys. Maybe just starting with podcasting for a minute there. Both Bob and Rich. You know, third quarter numbers kinda came in a little bit better than expected. I feel like, you know, this has been a common theme with you guys. I mean, anything to think about why the growth rate in podcasting might slow to the mid-teens level? It seems like you you have a relatively easier comp as you look at the prior year's growth rate relative to you know, the, you know, 2024. And also if you kinda look at it on, like, you know, two-year stack basis, seems to be, seems to be a little conservative there. So anything that maybe particular call out? And then relatedly, obviously Netflix deal, you know, also announced TikTok. Any way to perhaps unpack not necessarily looking forward guidance related to those deals, just maybe the phasing and the cadence on how long as that kinda comes on, how we should be thinking about that phasing into the P&L over time and, you know, what that could mean. Richard J. Bressler: Yeah. Thanks for the question, Sebastiano. Look. No surprise. We're not gonna comment in terms of phasing of anything. Going forward, in terms of that and just back to the question I just answered before, with Aaron. I just you know, I think the whole bucket of, things does come under that bucket. Of, the focus of generating new revenue streams. From our unique audience that's out there. If you look at podcasting, just for a second, if you look at the first three quarters, the guys Q4, again, we look at it everything in a couple of different ways. That gives you about a 23% growth rate on revenue. From podcasting. But also, it's a little misleading because you get numbers and percentages sometimes could be misleading. If you kind of take the guidance we've given for Q4, and compare it to the actual number we just reported on for Q3, the absolute dollars in podcast revenue growth is bigger in Q4 than Q3. And again, I think, you know, it could be a middle three if you just do percentages because you're obviously, it's math. You're dealing on a bigger base and the numbers are getting bigger. But if you look at the dollars that are there, I think Q3 were up about $25 million in podcasting revenue sequentially. If you kind of do the kind of the range or know the range, we'd be up about $30 million in terms of Q4 out there for podcasting. So again, what counts is follow the money, the money, the money, not the percentages. And so it show any signs slowing down. Robert W. Pittman: And by the way, to just add, last year, it was a lower percentage in Q4 than earlier in the year. But it was just like this year a higher number in terms of absolute dollars added in Q4. In terms of just the way we see podcasting and the way we see opportunities growing, we do think let's talk about video podcasting. I don't think there's any evidence that it's a transformation of audio to video. But what it is, is an opportunity to add video podcasting on top of the audio podcasting we have today. So again, our constant quest to find new revenue streams for our existing products. And so and if sort of look at where's that big pool of money everybody is shooting for these days, it's YouTube's got a lot on their video. And so I think it's if you look at the industry, there's a lot of discussion about that. And and we sort of see it that way not as a threat to audio but as an adjunct. Sebastiano Petti: Rich, if I could follow-up with a phasing question you might be willing to answer. On the $50 million cost-cutting program that's going to be more hitting the numbers in 2026. How should any way to perhaps think about the phasing of that in terms of when we kind of hit full run rate? Is that a full run rate out the gate since you guys are kind of announcing it a couple of in advance here? Any just maybe way to think about that $50 million as it pertains to MPG Group's financials next year? Richard J. Bressler: I would it's a good question. I would think about it exactly in terms of the rhythm of coming into let me go back. Yes, it is a full run rate at the beginning of the year. Very similar to where we had our $150 million program we did last year. If you look at the slides in the deck where we broke down this year's numbers on the cost program, I would look at taking the new program of $50 million and both think about it phasing in. The same way in terms of Q a little smaller in Q1. And more evenly Q2, Q3, and Q4. And I would look at it when you look at the percentages I think there's actually a slide on Page six in there. It actually kind of breaks out for you in the investor debt which shows about 61% to MPG. And I don't have to read through it, but it goes through all the different ones. It's right behind the slide on the $150 million net program. Operator: Our next question comes from Stephen Laszczyk from Goldman Sachs. Please go ahead. Your line is open. Stephen Laszczyk: Hey guys, great. Thanks for taking the questions. Maybe just a follow-up on podcasting a little bit longer term, but just curious as you look out into 2026, '27, if you think these levels of growth that we're seeing in the podcast business north of 20% is sustainable based on the pipeline of new content or visibility you might have into certain renewals that could potentially be up for grabs in terms of bringing new content on or the monetization levers you think could come into focus as some of these digital capabilities and inventory scale, I'd be curious on your thoughts on the sustainability of either high teens or 20 plus percent revenue growth in that side of the business. Robert W. Pittman: Well, look, I don't want to do any projections for the future. But I will say that if you look at the trends, what you're finding is more people are listening to podcasts today than ever. And the people who are listening are listening to more episodes than ever. So we got two vectors of growth there. And of course, we're bringing more and more advertisers to podcasting as well. It's probably the hottest category in media right now. And so you're seeing the net impact of that too. Richard J. Bressler: Yeah. And Stephen, one point I think to build upon paused advertising because the one point you didn't say, just to hit that head on, is there is the demand out there. And I would use the word the effectiveness of the advertising. There's a reason you're seeing the growth in podcasting revenue out there in terms of the consumer use. And by the way, the stickiness of it, I think it's something like approximately, I don't know, 75%, 80% of all podcasts are listened all the way through, and you can fast forward and you can do everything else. You can do it online video. Out there. And just as a reminder, it's only been a relatively small number of years that big advertisers, to Bob's point, have really come to podcasting. Prior to that, I mean, play advertising, but it was much more of a Doctor direct response medium. The reason why big advertisers come to podcasting is so important is because it brings big dollars. And then the last point, just to close off, that we started to talk about last quarter in Q2 and now Q3, now about 50% of our podcasting advertising revenue is originated locally. And if you go back, you know, I know, three, four years ago, about 10% of our podcasting revenue was originated locally. So I just think you look at all those data points. And from our standpoint, and you look at projections by all these third parties, that talk about the growth whether it goes to $4 billion, $5 billion, $3 billion, whatever, over a period of time significant growth in projected revenue for U.S.-based advertising podcasting revenue no surprise because of the effectiveness of it. You look at us continuing to take market share because of the position we have in podcasting. So I think it sets up very well. I want to just add one other thing. Robert W. Pittman: We talked about our ad tech platform and we talked about programmatic. And we sort of focus on how that's going to help broadcast radio. But remember, it's also a vector of growth for podcasting as well to get podcasting in the programmatic DSPs as well. Stephen Laszczyk: That's helpful. And then maybe just one on the broadcast side if I can. I'm curious, Bob, as you look at the competitive environment for advertising more holistically, there's been a lot made about AVOD inventory coming on over the last year or two. I would just be curious if you could speak to the visibility you have into competitive intensity, where we are and really that playing out. If you think that impairs maybe some of the monetization points you would make on Trash Trail Radio, you're recovering from a monetization perspective over next year. So how much of a headwind that is? Robert W. Pittman: I don't think it's a headwind at all. As a matter of fact, I think if you talk to people in the advertising business, radio has sort of got a little bit of a renaissance here. People are talking about all the studies coming out. One just came out from WPP, major study which if you're not at it's probably worth looking at. Which makes the point that adding radio early in a campaign preconditions the consumer and the best way to get more money is to add radio to campaign. That's WPP saying that. From their study. And we've got a number of other studies which are showing the same thing. Showing that if you add radio, to a social campaign, the response rate I think is up like 83%. As you think about if you're an advertiser, you say, okay, need more need more business. Well, I can either spend more money on the increasing my social spend or I can spend money on radio to get more response rate out of my existing social spend. And I think they're finding that that ladder is a much more economic choice. And also at the same time they get the added benefit of getting brand building as well on top of their performance marketing. So actually we're quite encouraged about what's going on. I think sort of the final frontier for us is that you've got people who are planning and buying advertising. Almost all of it is on this one platform and on this one screen of digital. And then radio is over to the side and it's a lot of extra work to buy it. We think and we indeed talking to the experts all are encouraged by it. That as you move that to the same screen so they can easily buy radio and buy on the same criteria they're buying their other digital I think breaks down the biggest hurdle because you say when you've got the big reach you've got the impact, Almost every study shows radio has better engagement than almost any other medium. The results are great. You got more radio listeners today than you had ten or twenty years ago. Why isn't it performing as it should? And we think it's structural issue, and we've invested heavily in fixing that structural issue. Richard J. Bressler: Yes. And can I just mention very quickly, just going back Stephen, because of your question, of your question then Bob's point, and then I'm just going to go back and repeat what we said a couple of times in this call? And here you have all within the last couple of days Amazon the Amazon announcement you saw and talking about getting our broadcast inventory into the DSP. And the TikTok announcement that was made this morning with ourselves and TikTok in addition to other aspects of the announcement and podcasting and everything else, you'll see that this also goes into broadcast radio with the rollout of a TikTok radio. Which will be a new iHeartRadio station. That will be done with TikTok. So to me, all the data points from an iHeart standpoint talk about the potential upside the future and the recognition of the capabilities of broadcast radio to deliver results. Robert W. Pittman: And to be clear, one of our major goals is to get our Multiplatform Group back to revenue growth. Stephen Laszczyk: That's helpful. Thank you both. Richard J. Bressler: Thank you. Operator: Our next question comes from Patrick William Sholl from Barrington Research. Please go ahead. Your line is open. Patrick William Sholl: Hi. Thanks for taking the question. Just another question on podcasting. I was kind of curious on how you view the longer-term opportunity within podcasting to bring in political dollars? Like, how do you think that's currently being monetized versus where you think it can go longer term with the increased ad sales from local at that helps maybe buy a set higher. Robert W. Pittman: It's a really good question. And if you look at all the chatter from last year's political spend, it's clear that people said wow, one of the real variables was podcasting. And so we think it is a very positive for political advertising moving to podcasting as well. Patrick William Sholl: Okay. And then just in the ad market, is any sort of variance across some of the local markets and how that is trending? Any local headwinds? Or is it more broad-based? Robert W. Pittman: Yeah. I don't think we've seen any big Nothing unusual. No changes there. Operator: Okay. Thank you. Our last question comes from Ken Silver from Stifel. Please go ahead. Your line is open. Ken Silver: Bob and Rich. Thanks for the time. A lot of my questions were answered. Let me just ask you two. I guess the first one is on the sponsorship and events revenue line. I know it's a small line. But it was down almost 10% in the third quarter and it's down almost 6% year to date. How like can you maybe help us understand that a little better? And like, what's the outlook for '26? Like, is that gonna sort of revert back to sort of stable or up? Or is there sort of something that's going on that's sort of going to continue to put pressure on this line item? Richard J. Bressler: Yes. Look, I would just it's very it's really small numbers. In terms of some ups and downs. And remember, we've got all the large events that you guys all know about. We do 20,000 events in total as a company. So I think the small is just some not real, but small time issues. And as you think about it going forward, on your question again, we're not going to talk about anything specific going forward. But I think you can continue to expect the events business to be play the same role it has with iHeart. Both from an absolute dollar and from a promotional standpoint and very importantly, one of our key multi platforms. And again, I think if you again, another endorsement looking at our announcement this morning with TikTok, and the connection that we're going to bring and step up even more between artist creators, our community with the power of storytelling this is going to be another really great ability to continue to demonstrate to artists and to the advertising community and our listeners what we can do. Robert W. Pittman: Yes. Let me just add on the events too. Is if you look at the brand attributes of anybody doing music or audio or anything, the one area where iHeart goes bonkers in terms of consumer is they identify us as the brand that has the big events. It has been tremendous for us in building the iHeartRadio brand. And now you think about not only we're building the iHeartRadio brand, but we're making a profit on it. And the second issue which is probably not fully captured in the numbers, is that when we do the big events we'll bring advertisers into them and we use it as a marketing opportunity for us and we often package together the events with other advertising as well which show up on other lines. Ken Silver: Okay. That's helpful. So just to be clear, like, you haven't lost any significant partner sponsors for your event. Richard J. Bressler: No. Okay. No. And that's implicit in the question. Zero. No. Yep. Okay. You. And then the follow the other one I wanted to ask you was, this quarter and I think last quarter, you started showing, the incrementals on, you know, margins on the digital and the decremental margins on the terrestrial, you know, the Multiplatform Group. And I think you're showing 90% decremental margin for Multiplatform. I'm just trying to get a sense of, is there a way to, like, meaningfully improve that? Richard J. Bressler: We again, with the member of Cinemulti platform group, exact specifically, your question would say two things. If you look back from a trending standpoint, we've continued to make improvement on that. And I I think in terms of the the flow of the improvement on that for lack a better term, negative flow through or the flow through. If if you track that, we're happy to take you through that. And then the second, piece and and most important is continue to show the progress we're making on the revenue side. Remember, multi platform has got a fixed element more than our other platforms in it. And the incremental flow through is 75%, 80%, EBITDA margin flow through dollars even 85%. I highlighted political for last year, which is our highest flow through business. So it's a combination of continuing to get back to making improvement on revenue then positive revenue growth. And as we just announced today, with our $50 million in terms of monetization program and taking more cost out, continue to make sure we're taking advantage of all technologies, AI, all the other investments to bring more down to the bottom line. Robert W. Pittman: Yeah. I mean, in summary, revenue growth is great because we've got high operating leverage on the Multiplatform Group. And then add that to cost reductions. And we think it's the responsible way to impact that line. Ken Silver: Okay. Alright. Appreciate it. Happy holidays. Richard J. Bressler: Thank you. You too. Thanks very much, Ken. With that, I'd like to thank everybody on the call. I all of our shareholders and stakeholders for taking the time listening to the call. And Bob, myself, Mike and the rest of the IR team are available anytime to answer any questions. Thank you. Operator: This concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: All sites on hold. We do appreciate your patience in holding and ask that you please continue to stand by. We should be getting started in approximately two more minutes. Thanks again, everyone. Please stand by. We're about to begin. Good afternoon, everyone. Welcome to the Arcturus Therapeutics Third Quarter 2025 Earnings Call. At this time, all participants are in a listen-only mode. Later, you will have the opportunity to ask questions during the question and answer session. Also, today's call is being recorded. And if you should need any operator assistance during the call today, please press 0 at any time. Now at this time, I'd like to turn things over to Neda Safarzadeh, Vice President, Head of Investor Relations, Public Relations, and Marketing. Please go ahead, ma'am. Neda Safarzadeh: Thank you, operator. Good afternoon, and welcome to Arcturus Therapeutics Quarterly Financial Update and Pipeline Progress Call. Today's call will be led by Joseph E. Payne, our President and CEO, and Andrew H. Sassine, our CFO. Dr. Padmanabh Chivukula, our CSO and COO, will join them for the Q&A session. Before we begin, I would like to remind everyone that the statements made during this call regarding matters that are not historical facts are forward-looking statements within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of performance. They involve known and unknown risks, uncertainties, and assumptions that may cause actual results, performance, and achievements to differ materially from those expressed or implied by the statement. Please see the forward-looking statement disclaimer on the company's press release issued earlier today, as well as the risk factors section in our most recent Form 10-K and in subsequent filings with the SEC. In addition, any forward-looking statements represent our views only as of the date such statements are made. Arcturus specifically disclaims any obligation to update such statements. And with that, I will now turn the call over to Joseph E. Payne. Joseph E. Payne: Thank you, Neda. It's good to be with you again, everybody. I will begin today with an update on our ARCT032 program. This is our messenger RNA therapeutic candidate for cystic fibrosis, or CF. ARCT032 utilizes Arcturus' LUNAR lipid-mediated aerosolized platform to deliver CFTR messenger RNA to the lungs. Expression of a functional copy of the CFTR mRNA in the lungs of people with CF has the potential to restore CFTR activity and mitigate the downstream effects that cause progressive lung disease. In October, the company announced interim data from its ongoing Phase II clinical trial of ARCT032. Treatment with inhaled ten milligram doses daily over twenty-eight days in six class one CF adults was generally safe and well tolerated. A protocol pre-specified analysis of high-resolution computed tomography lung scans, or HRCT lung scans, using FDA 510(k) cleared AI technology revealed reductions in mucus burden in four of the six class one CF participants in our second cohort. The ongoing third cohort is enrolling up to six subjects to assess the safety and tolerability of the fifteen milligram dose daily over twenty-eight days and the impact on the efficacy endpoints. The company intends to evaluate daily dosing of ARCT032 over a twelve-week duration in up to 20 CF participants. Safety and preliminary efficacy data will be collected in this study, which is planned to begin in 2026 after the third cohort top-line data is understood. Joseph E. Payne: Two weeks ago, I, along with our team, had the privilege of attending the North American Cystic Fibrosis Conference in Seattle. It was great to meet with the CF Foundation leadership team and share our enthusiasm for the class one population based on our encouraging data. I met with the physicians and principal investigators involved in our ongoing clinical trials and was very pleased to hear their anecdotes, positivity, and encouragement. I enjoyed meeting with multiple CT scan experts and felt their passion as they described the present and future importance of HRCT imaging data in lung disease trials. I affirmed my appreciation of the significant unmet medical need represented by class one CF and other CFTR modulator nonresponders here in the United States. There is an even higher prevalence of people with class one CF in countries outside the US, especially in Europe, India, the Middle East, and Israel. All in all, the conversations with the CF Foundation, people with class one CF, their physicians, investigators, CT scan experts, and global CF representatives reinforced Arcturus' commitment to advance ARCT032 further into development. The safety and tolerability profile data, along with the before and after treatment HRCT scan images showing mucus plug reduction, were well received by the CF community. We look forward to collecting additional and potentially meaningful clinical data in 2026 for our CF program. Moving on to the ARCT810 program, this is our messenger RNA therapeutic candidate for ornithine transcarbamylase deficiency, or OTC deficiency. With positive interim phase two data in hand, the company is diligently preparing for meetings with regulatory agencies in 2026 to discuss pivotal trial strategy for both pediatric and adult populations. Understanding what the FDA requires for ARCT810's path to approval is the next key milestone for this program. We aim to provide more details pertaining to these regulatory alignment meetings in 2026. I will now provide regulatory updates for our partnered COVID-19 vaccine program, also known as Costave. Our Japanese partner, Meiji Seika Pharma, has launched the two-dose vial of Costave updated for the JN1 variant XE in Japan. This is the first time the two-dose vial presentation is being distributed in Japan. Meiji received approval from the Pharmaceuticals and Medical Devices Agency, or PMDA, in August. Also in August, the company published the phase three manuscript on the immunogenicity and safety of our self-amplifying mRNA COVID-19 vaccine ARCT2303. The study shows that ARCT2303 induces a robust immune response against SARS-CoV-2 and can be co-administered with licensed influenza in adults with no impact on safety or immunogenicity of either vaccine. The results were published in eClinical Medicine. Moving on to ARCT2304, this is our next-gen STAR vaccine candidate for pandemic A/H5N1 influenza virus. This is the program contracted with and funded in part by BARDA. We conducted a Phase I study in 132 young adults and 80 older adults. ARCT2304 induced a humoral immune response after a single dose in all tested dose levels. The administration of a second dose of ARCT2304 further increased immune responses. ARCT2304 at dose levels of 1.5, 5, and 12 micrograms induced a hemagglutinin-specific immune response similar to or higher than the MF59 adjuvanted pandemic vaccine in both young and older adults. No safety or tolerability concerns were raised from available data. These data further validate our STAR SA mRNA platform. The study results support the further development of the self-amplifying mRNA pandemic influenza vaccine candidate. With that, I'll now pass the call to Andy. Andrew H. Sassine: Thank you, Joe, and good afternoon, everyone. The press release issued earlier today includes financial statements for 2025 and provides a summary and analysis of year-over-year performance. Please also reference our most recent Form 10-Q for more details on the financial performance. The Costave BLA filing has been delayed indefinitely due to the sudden regulatory changes by the FDA. Combined with uncertain commercial visibility for Costave in the United States, we have decided to reduce additional expenses to extend the runway for the cystic fibrosis and OTC program. The company expects continued support from CSL to commercialize Costave in Asia and Europe and will provide additional detail on our year-end call in March. Revenues for the three and nine months ended 09/30/2025 were $17.2 million and $74.8 million, respectively, representing a decrease of $24.5 million and $54.7 million compared to the same period in 2024. These declines were primarily driven by reduced revenues from the CSL collaboration reflecting lower supply agreement activity and lower amortization of the upfront payment as Costave became a commercial product. Total operating expenses for the three months ended September 30, 2025, were $33.7 million compared with $52.4 million for the three months ended 09/30/2024. Total operating expenses for the nine months ended 09/30/2025 were $119.8 million compared with $191.8 million in the prior year. Andrew H. Sassine: R&D expenses were $23.3 million for the three months ended 09/30/2025 compared with $39.1 million in the prior year. The decrease was primarily driven by lower manufacturing costs for the COVID, flu, and CF program, as well as reduced clinical trial expenses for COVID and cystic fibrosis. Lower payroll and employee benefits further contributed to the decrease. R&D expenses were $87.7 million for the nine months ended 09/30/2025, compared with $151.4 million in the prior year. The decrease was primarily driven by lower manufacturing and clinical costs related to the COVID program reflecting the program's transition from a development program to the commercial phase. Additional decreases were attributable to lower manufacturing costs for the cystic fibrosis and flu program. These reductions were partially offset by higher clinical costs for Phase II of the cystic fibrosis program. Payroll and benefits expenses also decreased primarily due to lower stock-based compensation expense. G&A expenses were $10.4 million and $32.1 million for the three and nine months ended 09/30/2025, compared with $13.3 million and $40.4 million in the comparable period last year. The decreases in both periods were primarily due to reduced share-based compensation expense as well as reduced payroll and benefits. We expect general and administrative expenses to continue to decrease slightly in fiscal year 2026. For the three months ended September 30, 2025, Arcturus reported a net loss of approximately $13.5 million or $0.49 per diluted share, compared with a net loss of $6.9 million or $0.26 per diluted share in the three months ended 09/30/2024. Cash, cash equivalents, and restricted cash were $237.3 million as of 09/30/2025 and $293.9 million on 12/31/2024. Based on the additional planned cost reductions in Q4 and the delay in the phase three cystic fibrosis clinical trial commencement, the cash runway remains extended into 2028. More details regarding our cost reduction and runway will be provided on our year-end call in March. In summary, the company remains in a strong financial position and has the cash runway needed to achieve multiple near-term value-creating milestones for both therapeutic programs. I will now pass the call back to Joe. Joseph E. Payne: Arcturus continues to make progress across our mRNA therapeutics and vaccine pipeline. We look forward to initiating the planned twelve-week CF study for ARCT032 in 2026 and engaging regulatory agencies regarding the pivotal trial designs for ARCT810. With that, let's turn the time over to the operator for questions. Operator: Thank you, Mr. Payne. Ladies and gentlemen, at this time, if you do have any questions, please press 1. And if you find your question has been addressed, you can always remove yourself from the queue by pressing 2. Again, 1 for questions. We'll go first this afternoon to Yasmeen Rahimi of Piper Sandler. Yasmeen Rahimi: Good afternoon, team. Thank you for the update. I guess the first question is, given this data, have you been able to do some PKPD modeling to help us understand the sort of expectations as you are initiating the third dose cohort and what do you hope to gain and how we should be thinking about that? That's sort of question one. And then question two is, as you are preparing for the meeting with the agency to discuss your OTC pivotal program, what are sort of some of the optionalities of sort of base case, best case, both in development for the pediatric population as well as development in the adult population. Joseph E. Payne: Thank you so much, and I'll jump back in the queue. Hey. Thanks, Yasmeen. It's good to hear from you. With respect to PKPD modeling, the third cohort, which is being evaluated at a dose level of fifteen milligrams, is being conducted in a very similar manner to the first two cohorts at five and ten milligrams respectively. So all of the activities with respect to data collection are going to be in line with the first two cohorts. With respect to the fourth cohort, or, I guess, you would say this planned twelve-week safety and preliminary efficacy study, this is an expanded study. So in addition, from extending the duration of the study from four weeks to twelve weeks, we're also increasing the population up to 20. But a large amount of the data that's being collected is very similar to what we're doing in the first three cohorts. There are some noted differences that we're intending to conduct this trial under. First of all, we're going to be adding an extra screening visit to establish a more stable FEV1 baseline. We're also going to be, of course, looking at the high-res CT scan before the study, but at twelve weeks this time instead of at four weeks. So we'll allow those two additional months to occur before we take an imaging scan. We're also going to be looking at adding questions to the questionnaire. There's what's called an EQ-5D-5L general health questionnaire where we're going to be looking at mobility and self-care and usual activities, pain and discomfort, anxiety, depression. We're going to be adding this general health questionnaire to the standard validated CFQR questionnaire that people are familiar with in CF. But with respect to PK and PD markers, it'll be very similar to the first three cohorts. With respect to your second question, you were asking about OTC. We're looking at two separate populations. The adult population and then the more severe disease in children. And these will likely require two separate conversations with regulatory agencies to gain alignment on a pivotal study. The adults will likely be involving glutamine as a biomarker because that's where we captured success already, and we've learned that we've collected some positive data already in our trials to date with respect to glutamine in adults. With respect to children that are suffering from more severe disease, the focus will be more on ammonia itself. And getting alignment with the FDA on that. Can we do a single-arm study, for example, in children to capture approval? But these sorts of conversations are separate and distinct enough to have separate meetings to address them is our expectation. The best-case scenario, of course, is that we gain alignment with both adults and pediatrics, and that would be very exciting for this program to have line of sight in a broader population to get this approved as soon as possible. And any different scenarios would be if one or both of these were approved to proceed, for example. But, anyway, thanks for your question. Yasmeen Rahimi: Thanks, Joe. Operator: Thank you. We'll go next now to Myles Minter of William Blair. Jake Roberge: Hi. This is Jake on for Myles. Thanks for taking my question. Just reflecting back on the imaging data you showed for CF, do you expect that the improvements you see in mucus over time, especially in that twelve-week study, will be bronchial or alveolar specific as you sort of showed in that initial dataset? And is that what you saw in the mucus burden from the ferret model preclinically? And then just wanted to also check in on Costave and see if you've updated your guidance as to when you're going to start realizing revenue from that program. Joseph E. Payne: Thanks. Okay. So first the first question is, with respect to mucus plug reduction, one of the key observations that we've observed and is familiar with the field is mucus plugs form in the smaller airways. Right? So as you resolve that, you measure smaller changes in airway improvement. FEV, on the other hand, is mainly a measure of larger airways. So they're complementary, but they do not measure the same thing. And given enough time, we believe that both of these will improve. And so that's one of the purposes of the twelve-week study. Before I move on to the Costave commercial question, did I address your question, Jake? Jake Roberge: I guess I wanted to know whether you expect those mucus reductions to occur across the entirety of the lung or whether a specific bronchial or specific alveoli are going to be resolved given that's you sort of boxed specific bronchioles in your presentation. Yeah. Denoting that because potentially LNPs are directed there primarily, that's where you're going to see an effect. I just wanted to know that and whether you also saw sort of bronchial specific reductions in the lungs of the ferrets when you dosed those. Joseph E. Payne: No. Great question. So first of all, with respect to the data that we collected in the images, you do see in the lower register the lower lobes that they are first to resolve and show a reduction of mucus plugs. And that's simply because this is an inhaled therapeutic. We've talked to now several pulmonologists that view this as a confirmation that we see first the lower register, the lower lobes being addressed simply because this is an inhaled therapeutic. We expect over time that the effect will continue to improve, and that's one of the primary purposes of the twelve-week study is through an extended duration that will continue to address not only the lower lobes but the upper lobes as well. With respect to your question about ferrets, this is a different lung type entirely. They're not a vertical animal. So gravity is not and this was an injected process. This wasn't a traditional inhaled therapeutic like the humans experience. So we didn't expect to see a similar dataset. And we didn't do CT scans in these ferrets as well. We analyzed the data separately through mucociliary clearance. Now with respect to the second question on Costave guidance, Andy, do you want to provide, you know, maybe an answer there? Andrew H. Sassine: Yeah. Thank you for the question. Typically, we do not provide guidance with respect to, you know, Costave commercial revenue. And as of the last comment that came in the press release that came from Meiji, they did order about a million one doses for the fourth quarter. And that was delivered to them in October, November. So they're in the process of selling those doses in Japan. We don't really have an update subsequent to that. But probably look for an update sometime at the end of the year call in next March. Hope that helps. Jake Roberge: Thank you very much. Joseph E. Payne: Thanks, Jake. Operator: We'll go next now to Seamus Fernandez with Guggenheim. Evan Wang: Hi, guys. Thanks for the question. This is Evan Wang on for Seamus. Just two questions on cystic fibrosis. With the upcoming fifteen mg dose, can you just talk through about the metrics that will drive the go/no-go decision? It's ten or fifteen mg in the subsequent phase two. Whether it's FEV1, CT scan, or both, and what specifically you might be looking for. And then with the subsequent twelve-week study, curious what you define as success then with longer treatment in terms of either FEV1 or high-res CT we think about data relative to the interim data we've shown so far? Thanks. Joseph E. Payne: Yeah. Thanks, Evan. With respect to the fifteen milligram cohort, we want to gain additional confidence in the dose response. If we did not see any mucus plug reduction at five milligrams, yet we saw four out of six in the second cohort at ten milligrams exhibit mucus plug reduction. So one of the things we're looking for at fifteen milligrams is is there a continued or elevated response, and is that a dose response? But the most important dataset that we're collecting from this third cohort is really safety and tolerability. If it's well tolerated, then I think we have our dose that we will select for this twelve-week study coming up. The first half of next year. With respect to what we would define as success is if we see continued or further reduction of mucus plugs and that translates into additional benefits, that can be either imaged or experienced in terms of lung function improvements, then that would be fantastic. Given that this is a first-in-line therapy for a considerable unmet medical need in class one subjects and modulator nonresponders. So anything positive for FEV would be viewed positively. If we see an improvement with extended duration or elevated dosing in this twelve-week study with respect to the mucus plug reduction and mucus burden being decreased, that would be also very promising to encourage the board and our company to advance this into a phase three trial. Evan Wang: Thanks. And if I could ask one follow-up. Just curious in terms of the CT scan when you get bugs, what mentions you as clinically meaningful and what in terms of some of the regulatory discussions you've had, especially as they approach to include CT scan as an exploratory endpoint. What they might view as potentially approvable endpoint or whether focus would be on FEV1. Thanks. Joseph E. Payne: Well, we'll be the first company in CF to establish that. That's one of the key tasks at hand here as a group. As we share this data with the FDA, we need to determine what's clinically meaningful. What do we know now is that the more optimized mature modulators out there after a year of treatment, you can see near complete resolution of mucus plugs. And at an interim time point, you'll see not a complete resolution of mucus plugs. Unfortunately, we're the first company in therapeutic to evaluate CT scan measurements after only twenty-eight days of treatment. So the fact that we saw some of these subjects responding 30, 40% mucus reduction after just twenty-eight days is encouraging. But the question you asked is what is meaningful? I think we're already in that phase of a meaningful reduction. We just now need to extend treatment to see if that translates into other benefits and lung function improvements over an extended term. But the specific number, we're not prepared to share right now. No one is. That is something that we can discuss at a later time with the agency. Evan Wang: Great. Thank you. Operator: We'll go next now to Whitney Ijem with Canaccord. Angela Qian: Hey, Whitney. Hi. This is Angela on for Whitney. Thank you for taking our questions. So you're planning to start the twelve-week study starting in the first half of next year. Any idea when we should expect to see data from the fifteen milligram cohort? And any thoughts on what endpoints you would show for the fifteen milligrams? Joseph E. Payne: Well, for the fifteen milligram cohort, if you're referring to the third cohort, that's the twenty-eight day study. It's the same data being collected under the same protocol for the first two cohorts, and that data is expected likely in the first quarter of next year. And as soon as that top-line data is understood, we will be able to quickly then transition to the twelve-week study and focus on that. But the parameters and the efficacy endpoints and safety and tolerability investigations are all identical to what we did for the first two cohorts for the fifteen milligram third cohort. Did I address your question? Thanks, Angela. Angela Qian: Yeah. Maybe just one quick follow-up. Any chance you would show the analyses of the CT scan for patients who might not have responded and seen the decrease in mucus plugs, or do you expect it to be similar? Joseph E. Payne: Well, there's going to be a time for us to share the complete data package for the first three cohorts. Right? We do have a five, ten, and fifteen milligram cohort. I'm sure that'll be a nice presentation or publication at some point. We haven't determined exactly when, but that would be an appropriate time to share all the data we've collected. Determine if there's a dose response and provide those details. I've already shared on this call already that at five milligrams, we did not see any mucus plug reduction. There was none observed. And at ten milligrams, we saw four out of six. So the fifteen milligram cohort, we'll see if that recapitulates or gets better, and we'll have the opportunity to see if there's a dose response at that time. Angela Qian: Great. Thank you, guys. Joseph E. Payne: Thanks, Angela. Operator: We'll go next now to Yanan Zhu with Wells Fargo. Kwan Kim: Hi. Thanks for taking our question. This is Kwan on for Yanan. So our question is also around CF. Are wondering, have you seen any data from fifteen mg? And if so, any updates on the safety? And will you be planning to evaluate any dose higher than that? And I have a quick follow-up. Thank you. Joseph E. Payne: Yeah. Fifteen milligram will be the highest dose that we're evaluating. We intend to choose either ten or fifteen milligrams or something in between perhaps for the twelve-week study next year. When the fifteen milligram cohort data is completed in the first quarter of next year, that's when we'll be able to make that decision. In terms of when we share data around that third cohort, that hasn't been guided. We'll first collect it and then make a determination how and when to share it. Did I address your question, Kwan? Kwan Kim: Yes. Thank you for that. Yeah. And we're wondering, do you need to show a clear correlation between mucus or plaque reduction and FEV1? Wondering, hypothetically, you only, for example, only mucus or plaque reduction data is positive, and FEV1 is not. Would that affect how you view the program and how you make the go/no-go decision? Joseph E. Payne: I had great conversations with a lot of the experts here at the NACFC in Seattle last month. And, yes, CT imaging has been a primary endpoint previously. However, that's not our present expectation. The FDA may not yet consider CT imaging as a surrogate endpoint at this time. But I think it's safe to assume that it will be a supportive endpoint for, like, a phase three or a pivotal trial. We first have to collect the data from the twelve-week study and then share it with the FDA and have that conversation. You know, if the data's convincing, yes, we'll look at a primary or a co-primary endpoint that involves CT scan. But the present expectation is that CT imaging will be a supportive endpoint, very similar to what ORKAMBI had to go through, where they had their primary being FEV, but the supportive data played a key role in getting that approved as the first modulator. One of the early modulators. Kwan Kim: Got it. Thank you so much. Joseph E. Payne: Yeah. Thank you. Operator: Thank you. We'll go next now to Yigal Nochomovitz of Citi. Joohwan Kim: Hi. This is Joohwan Kim on for Yigal. Thanks for taking our question. Regarding the extra screening visit that you had mentioned for the twelve-week study, can you just provide additional clarity on whether you're planning on averaging the screening visits together to get a more reliable baseline? And also, are you planning on just doing the one extra measurement? And I guess why not multiple? Joseph E. Payne: And why not do multiple? It's a great question. We haven't had that conversation with the FDA yet. But our present thinking around designing the trial is not only increasing the duration from four to twelve weeks and increasing the number of participants from six to twenty, but it's also strengthening the baseline. And whether that's an additional FEV pre-visit or a second one, and do we average screening and two FEV pretreatments or not, that conversation will be one of the key questions that we'll have with the FDA. If once we have aligned on that, I can provide more clarity. But the present expectation is just an additional pretreatment value that can be averaged and strengthening the baseline twofold. Joohwan Kim: Got it. Thank you. And if I could just follow up more, I believe you had mentioned previously that the quality of life assessment for the phase two for the CFQRS was also variable. And so you had decided not to share that. But I guess is there a strategy in mind to reduce the variability there so you could better interpret meeting in place in the future? Or is the EQ-5D-5L questionnaire just less subject to variability? Joseph E. Payne: Yeah. So just to catch everybody up, the validated questionnaire that's used in the modulator space is well validated and quite comprehensive. And it addresses multiple organs in the body. Our CFQR is truncated and focused on just the lungs because it's an inhaled therapeutic. So there are questions in the pulmonary section. And because of that and for other reasons and because of the smallness of the nature of these n of six cohorts, the variability is just, you know, these questionnaires are more powerful in larger phase three studies, but it's still variable. To address that in our upcoming twelve-week study, we do intend to add additional general health questionnaire questions, what's called an EQ-5D. And I touched on this earlier, but we look at mobility and self-care, and pain, discomfort, anxiety, depression, and this general health questionnaire will be coupled with this truncated CFQR that's more validated. Just to add weight to the questionnaire, and we'll see what we can glean from that. And to what extent we modify it or keep it for the phase three trial will also be helpful in this upcoming twelve-week study. Joohwan Kim: Got it. Thank you very much. Appreciate it. Joseph E. Payne: Yes. Thanks, Joohwan. Operator: Thank you. We'll go next now to Thomas Eugene Shrader with BTIG. Thomas Eugene Shrader: Hi. Good afternoon. Thanks for taking the questions. I'm wondering in the next CF cohort, there's any interest or thoughts about adding slightly less impacted patients where the lungs might be a little cleaner and delivery might be easier? And then I appreciate you're at arm's length on Costave, but can you comment are there ongoing discussions, or has the FDA kind of made a statement and there's no room to discuss anything? Thanks for the answers. Joseph E. Payne: Yeah. Cool. There's definitely room to discuss. They, of course, are interested in this first-in-line therapy for such a huge unmet medical need in the CF space. So there is still flexibility to discuss. With respect to your first question about less impacted individuals, we did it you'd have to go to our website, but we labeled the cohort patient five. Cohort two patient five. This is someone who had more advanced disease and much more numerous plugs and even larger plugs. And we've we just got, you know, considerable positive feedback from this subject even though their mucus plug reduction was only 9%. And because the mucus of the plugs that were reduced were meaningful, were larger. So we found we had just, you know, success, I would call it, with one particular more advanced subject. So the short answer to your question is no. We're not refining the list of who's going to be getting the drug for this upcoming twelve-week study because we found success in less advanced and more advanced disease. Thomas Eugene Shrader: Okay. Great. Thank you. Operator: Thank you. We'll go next now to Yale Jen with Laidlaw and Company. Yale Jen: Thanks for taking the questions. I apologize I missed this. Earlier part of the conversation. Just a quick question about the CSL. In terms of the I understand the initial contract deal with them just sort of full target infectious disease area. Yeah. Treatments and virus treatments. So I wonder any progress on those two other than the influenza and COVID? Any comments on that? And thanks. Joseph E. Payne: Yeah. It's a great question. CSL and Securis are considering a demerging process, and they've publicly disclosed that. The timing of that remains uncertain. But if CSL and Securis demerge, then Securis will be focused on the vaccine enterprise going forward, especially the flu enterprise. So the future of the program and the collaboration will come through that arm of the company. As of right now, you know, COVID is, of course, still very active. Any guidance on the flu program will come from them going forward and likely the Securis branch if they demerge. With respect to any new programs, we have communicated in the past that those are being considered or active in certain degrees. But we haven't disclosed any of those details that there'll be the right time and place to do it, and it'll likely be coinciding with any updates we hear from a CSL Securis demerger. Yale Jen: Okay. Great. Thanks a lot. Appreciate it. Operator: Thank you. And we'll take our next question now from Lili Nsongo of Leerink. Lili Nsongo: Hi. Two questions. First, on the cystic fibrosis program. The program the study was initiated in January, about nine patients were dosed by September. You had mentioned initially that the three additional patients for cohort three would be dosed by year-end. How should we think about the enrollment pace? Is three patients a quarter what we should expect moving forward? And does that also apply going into the twelve-week study? Joseph E. Payne: Yeah. We've expanded the third cohort from three. At our last quarterly call, we indicated that we or estimated that we would have three subjects in our third cohort. We've now communicated that that could be expanded up to six. And that would take us into the first quarter of next year. With respect to did I address that question? Lili Nsongo: I mean, this wasn't a question, but based on that pattern of having about three patients enrolled per quarter, should we also expect the pace of enrollment for the 20 patients for the twelve-week study to be similar? Joseph E. Payne: Yeah. No. We're looking to add a considerable amount of sites in different countries as well to facilitate enrollment for this twelve-week study. I alluded to this previously, but when we were at the Seattle conference, or the NACFC, we got to meet with a variety of investigators globally, not just limited to the US. So the percentage and prevalence of class one and modulator nonresponders in other countries is extraordinary and untapped. So in addition to the dozen or so sites that we have open here in the US, I believe that we'll be adding additional sites outside of the US. And that is intended to accelerate the enrollment pace to support the n of 20 rather than the n of six for this upcoming twelve-week study. So the short answer to your question is that we expect the enrollment rate to increase with these additional sites and additional access to class one and modulator nonresponders. To what extent that increases, we'll be the first to find out. Lili Nsongo: And is there a global extension and the additional is that captured in the current cash runway guidance? Joseph E. Payne: Yes. But, Andy, you can confirm that that's captured in the runway guidance. Correct? Andrew H. Sassine: Yep. That is all captured in the runway guidance. And the good news is that we had produced additional material for the CF clinical trials and consequently, the additional cost of expanding the trial is pretty much de minimis. So we're in very good shape there financially. Lili Nsongo: Thank you. Second question regarding the OTC program. So can you give us an age range in terms of what your pediatric population target would be? Because the data we've seen so far is in 12 and older, and I was wondering what would it take to go to the younger patient, or would you solely focus on pediatric patients that are 12 to, you know, the 12 to 18? Joseph E. Payne: That's one of the agenda-related questions that we expect for these type C meetings with the regulatory agency, with pertaining to pediatrics, is what the cutoff age is. It's whether it's five years old or eight years old is going to be determined and finalized as part of that meeting. And then adults as well, is it going to be 12 and above or 16 and above, that'll be that's one of the purposes of these meetings to get aligned with the pivotal trial protocol. And that clarity will be provided in the first half of next year as our anticipation. Lili Nsongo: So you expect to be able to go into pivotal in pediatric patients without an additional study needed to bridge between the data with teens? Joseph E. Payne: Well, if we can accomplish that, then that would be fantastic. But, yes, that's the intent. To what extent we can accomplish that, we'll find out. And all I know is there's a much more considerable unmet medical need in these young, especially X-linked males or boys. And the younger they are, the more severe the disease. And the less their requisite or requirement that we have to track glutamine as a primary driver like it is in the adults. Adults is likely going to be more closely associated with glutamine as a biomarker. So they're two separate discussions. Lili Nsongo: Thank you. Joseph E. Payne: Thank you. Operator: Thank you. And, Mr. Payne, it appears we have no further questions this afternoon. Sir, I'd like to turn the conference back to you for any closing comments. Joseph E. Payne: Hey, thanks, everyone, for participating on the call. And if there are remaining questions or by those that weren't able to pose them, don't hesitate to reach out to our team. We'll get back to you as soon as we can. Thanks again. Operator: Thank you very much, Mr. Payne. Again, ladies and gentlemen, that will conclude the Arcturus Therapeutics third quarter earnings conference call. Again, thanks so much for joining us, everyone. And we wish you all a great afternoon. Goodbye.
Operator: Good day, and welcome to the Myomo Third Quarter 2025 Financial Results Conference Call. All participants will be in listen-only mode. After today's presentation, there will be an opportunity to ask questions. Please note this event is being recorded. I would now like to turn the conference over to Tirth Patel, with Alliance Advisors IR. Please go ahead. Tirth Patel: Thank you, operator, and good afternoon, everyone. This is Tirth Patel with Alliance Advisors IR. Welcome to the Myomo Third Quarter 2025 Financial Results Conference Call. Joining me on today's call are Myomo's Chief Executive Officer, Paul Gudonis, and Chief Financial Officer, Dave Henry. Before we begin, I'd like to caution listeners that statements made during this call by management other than historical facts are forward-looking statements. The words anticipate, believe, estimate, expect, intend, guidance, outlook, confidence, target, project, and other similar expressions are typically used to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and may involve and are subject to risks, uncertainties, and other factors that may affect Myomo's business, financial condition, and operating results. These risks, uncertainties, and other factors are discussed in Myomo's filings with the Securities and Exchange Commission. Actual outcomes and results may differ materially from what's expressed in or implied by these forward-looking statements. Furthermore, except as required by law, Myomo undertakes no obligation to revise or update any forward-looking statements to reflect events or circumstances after the date of this call today, 11/10/2025. It's now my pleasure to turn the call over to Myomo's CEO, Paul Gudonis. Paul, please go ahead. Paul Gudonis: Thanks, Tirth. Good afternoon, and thank you all for joining us today. I'm pleased to announce that Myomo had another strong quarter with revenue of $10.1 million, coming in at the high end of our expectations. This was driven by record revenues in our international markets and a growing number of O&P providers. In addition, we saw our pipeline increase, and for the first time this year, our quarterly authorizations and orders increased sequentially. We are seeing more Medicare Advantage payer authorizations and orders from the new in-network contracts we signed earlier this year. Now before turning the call over to Dave to review the financial results in detail, I'd like to touch on the progress we made during the quarter on the key initiatives that we outlined on our last call. These were to: one, improve the identification and qualification of prospective patients; two, expand the MyoConnect program and O&P channel; three, expand insurance coverage; and four, reduce our overall operating costs. First, as mentioned, the core area of focus has been improving the identification and qualification of prospective patients. The number of new patient candidates who qualify for MyoPro is growing, and with the shift in our advertising media mix, the cost per pipeline add is beginning to decrease. In Q3, we shifted more of our advertising spend to TV from social media, which yielded a higher percentage of leads that met our clinical criteria to become a successful patient. These candidates were also more motivated to quickly complete the screening process. Thus, we enhanced the quality of our pipeline adds as well as generating a sequential increase in the number of candidates in the pipeline. We hired a new head of marketing with extensive experience in healthcare direct-to-consumer advertising as well as B2B marketing to support our efforts, particularly in reinforcing our message to physicians, therapists, and O&P practitioners. We will optimize the use of our various media to educate patients, family members, clinicians, and payers about the benefits of the MyoPro. Second, we believe the path to lowering customer acquisition cost is by developing recurring sources of patients that do not depend on a prospective candidate's self-initiating response to a paid advertisement. That is central to our new MyoConnect program and the growing O&P channel. Our MyoConnect clinical referral program is off to a good start, generating high-quality patient referrals by therapists and physicians at rehab clinics around the country. Importantly, there is no advertising expense incurred to educate these clinicians and these patients since we are already engaged with them. In mid-year, we launched MyoConnect, where our field clinical teams engage directly with therapists and physicians across the country to expand the network of clinicians who understand the benefits the MyoPro can produce. These clinical practitioners, who are responsible for the design and delivery of patients' treatment protocols, refer qualified patients to us through our local O&P channel partners. Over the years, we have trained numerous occupational therapists who have seen the improvement in patient functionality from the MyoPro. Their willingness to refer patients was facilitated by CMS's decision to cover the MyoPro for Medicare reimbursement and by the introduction of the new MyoPro 2X model this past spring. The result is we are beginning to see more OTs and physicians sending their patients our way to obtain a MyoPro. While still early in the rollout, we are encouraged by the initial traction and believe this program can develop into a scalable and cost-efficient source of high-quality referrals over time. Another source of recurring orders is the O&P channel. We are continuing to provide clinical and reimbursement education and certification to the O&P practitioners, which is the mechanism to expand adoption in this channel. In September, we attended the American Orthotics and Prosthetics Association National Assembly, which is the major trade show for the O&P industry. We had a productive set of meetings with existing and prospective channel partners, and I am confident that sales to these clinics will continue to grow as we diversify our revenue sources beyond our direct-to-consumer advertising and direct billing business. Revenue from this new O&P channel more than doubled year over year, and their patient pipelines are growing with the training and clinical support we are providing to these certified prosthetists and orthotists. In the past 45 days, I've had meetings with senior managers of the large and small O&P clinical groups in the industry as we work together to bring the MyoPro to their patients. We have good working relationships with these firms, and they are eager to work with MyoPro on programs to help improve the upper extremity impairments this important segment of their patient population has. They already treat stroke patients with various lower extremity assisted devices to enable their mobility. Meanwhile, our own chief channel partners in Germany placed a record number of orders in the quarter, leading to strong growth in revenues from our international operations and a greater number of patients in the pipeline for continued growth. Third, to expand insurance coverage, our Chief Medical Officer and reimbursement team have been following up with the major Medicare Advantage payers to obtain more MyoPro authorizations for their beneficiaries. We saw a sequential increase in authorizations for patients covered by some of these plans and from payers with whom we have contracts. These positive results led to the higher number of authorizations and orders this past quarter. During Q3, we signed an additional contract with a payer to become an in-network provider for our direct billing business, which now brings us to 35 million covered lives among private payers. We have other contracts pending as well to increase access to MyoPro for patients covered by these commercial health insurance plans. There's also a development in the payer industry that could be positive for Myomo. Insurance companies that offer Medicare Advantage plans are withdrawing Medicare Advantage coverage from certain geographic areas, thereby reducing their member count. For example, UnitedHealthcare projects a 1 million member drop, and other payers are making similar announcements. If these patients choose to enroll in standard fee-for-service Medicare, those that are medically qualified for MyoPro may be more likely to obtain our device for their paralyzed arms under Medicare Part B coverage. To support increased reimbursement, we continue to add to the published research on the MyoPro. During Q3, a highly respected Topics in Stroke Rehabilitation Journal published a systematic review of patient outcomes from the use of the myoelectric orthosis. Providing this information to payers, rehab physicians, and therapists, as well as O&P professionals, leads to greater insurance coverage and clinical adoption. Lastly, during the quarter, we implemented manufacturing changes to improve our gross margin and also managed headcount and other cost reductions to lower operating expenses. We are positioning ourselves for improved operating leverage as we grow future revenues based on the larger patient pipeline augmented by the increased number of authorizations and orders we expect from the MyoConnect program and the expanded O&P channel. Based on the backlog going into the fourth quarter and the number of patient cases progressing through reimbursement, we are able to reiterate our full 2025 annual guidance of $40 million to $42 million, which represents an increase of more than 23% over last year. With that overview of our performance and actions, I'll turn the call over to our CFO, Dave Henry, to provide more of the financials and details on our newly executed term loan facility, which is designed to provide us with growth capital to continue scaling the business to sustainable profitability and positive cash flow as our MyoPro volumes and revenue increase. Dave Henry: Thank you, Paul, and good afternoon, everyone. Let me start with a review of our third quarter financial results. Revenue for 2025 was $10.1 million. This represents a 10% increase versus the prior year and was driven by a higher number of revenue units offset by a lower average selling price or ASP. We delivered 186 MyoPro revenue units during the quarter, up 16%, with 57% of those units from authorizations and orders received in the third quarter. Our ASP decreased 5% versus the prior year to approximately $54,300 and was roughly flat sequentially. ASP in the prior year period was unusually high due to the change in revenue recognition for Medicare patients to be upon delivery instead of payment. In that period, we began recording Medicare and some supplemental revenues at delivery in addition to some at payment on deliveries prior to the accounting change. This had about a $4,300 favorable impact on ASP in 2024. Normalized for the accounting change, ASP increased 3% year over year. Medicare Part B patients represented 54% of revenue in the third quarter. Medicare Advantage revenue was 18% of third quarter revenue and in dollar terms was down 18% compared with the prior year. Medicare Advantage revenue remained constrained by the high number of pre-authorization denials, forcing us into an appeals process in order to serve these patients. This is not unique to Myomo. Unfortunately, insurance companies force patients into this process, hoping they will not appeal. And while successful appeal rates vary, we typically see about 45% to 50% overturned on appeal for those that stay engaged with us in the process of trying to receive a MyoPro. 73% of revenue in the third quarter came from the direct billing channel, compared with 81% in the prior year quarter. International revenue was a record $1.8 million in the quarter, up 63% and representing 18% of total revenue, primarily from Germany. Revenue in the O&P channel was also a quarterly record at $900,000, up 154% year over year and representing 9% of total revenue. As Paul mentioned, the O&P channel is emerging as a high-quality, lower-cost source of qualified patients, and we intend to continue to develop this channel. As of 09/30/2025, the pipeline stood at 1,669 patients, an increase of 32% year over year. In the third quarter, we added 826 patients to the pipeline, which is up 28% from the prior year quarter and up 1% sequentially. There were 266 Medicare patients in the pipeline, an increase of 21% year over year and 4% sequentially. We ended the quarter with a backlog of 208 patients, down 34% versus the prior year. As a reminder, backlog represents insurance authorizations and orders received but not yet converted to revenue. In the case of Medicare Part B patients, whom we have collected medical records and deemed qualified for delivery based on our inclusion criteria. The decrease represents reduced Medicare Advantage authorizations and the fact that intra-quarter fill units are making up an increasing percentage of our quarterly revenues. In other words, we were able to convert more of our backlog into revenue faster. Indeed, 57% of third quarter revenue units came from intra-quarter fill units, up from 24% a year ago. We received 229 authorizations and orders during the third quarter, an increase of 11% sequentially and 2% year over year. The higher authorizations and orders helped us to generate record revenue from intra-quarter fill units. Gross margin for 2025 was 63.8%, down from 75.4% for the prior year quarter. Prior year gross margin was favorably impacted by a change in accounting for revenues from Medicare patients that I mentioned earlier, which favorably impacted third quarter 2024 gross margin by approximately 200 basis points. In addition, with our growth, we opened a new facility and hired additional staff, leading to higher payroll and lease expense. Finally, an unfavorable change in the overhead absorbed in inventory in 2025 negatively impacted gross margin, as well as higher material costs. Higher labor and overhead spending and change in absorption impacted gross margin by approximately 800 basis points and represents an opportunity to improve gross margin as activity increases. Total operating expenses for 2025 were $10 million, up 26% over 2024 but down 6% sequentially. This increase was driven primarily by higher payroll and advertising spending and by higher R&D due to development efforts on a mobile app for our MyConfig software, the MyoPro 3, and funding for a pilot of a randomized control trial at the University of Utah. As Paul touched on, we are focused on more efficient customer acquisition, leading to a sequential reduction in cost per pipeline add. We are investing in our MyoConnect platform and expect to gain further leverage with our growth in patients. Operating loss for 2025 was $3.5 million, compared with an operating loss of $1 million in the prior year quarter. Net loss for 2025 was $3.7 million, or $0.09 per share. This compares with a net loss of $1 million, or $0.03 per share, for 2024. During 2025, approximately 600,000 pre-funded warrants were exercised. As of 09/30/2025, approximately 3.8 million pre-funded warrants remain outstanding from our offerings in 2023. These pre-funded warrants are considered common stock equivalents under GAAP accounting and are included in our weighted average shares outstanding. Adjusted EBITDA for 2025 was a negative $2.7 million, compared with a negative $600,000 for 2024. Turning now to our balance sheet and cash flow. As of 09/30/2025, cash, cash equivalents, and short-term investments were $12.6 million. Cash burn was $2.9 million in the third quarter, including $1.8 million from operating activities and $1 million from capital expenditures related to the setup of the additional manufacturing space we took over in the third quarter, along with capitalized software costs for one of our product development projects and demo unit builds. On 11/04/2025, we entered into a loan and security agreement with Avenue Capital, which provides for a committed term loan facility of $17.5 million, of which $12.5 million was funded at closing. The remaining $5 million is available to borrow at our discretion from November 2026 through May 2027, assuming certain conditions are met. We will make interest-only payments for the next eighteen months, after which we will repay principal in 24 equal monthly installments. Use of proceeds went to repay the borrowings of our $4 million under our credit facility with Silicon Valley Bank and fees and expenses, with the remaining $7.6 million to be used for general corporate purposes. Pro forma for the funding provided at closing, net of repayment to Silicon Valley Bank and fees and expenses, our cash balance as of 09/30/2025 is $20.1 million. For more details regarding the term loan facility, please refer to our current report on Form 8-K filed today. Let me close with our financial guidance. Given our backlog entering the fourth quarter and anticipated fill units, we continue to expect full-year 2025 revenue to be in the range of $40 million to $42 million. While we are not providing specific 2026 guidance at this time, we want to convey that we are focused on diversifying our revenue streams in 2026, relying less on advertising-driven revenues and generating growth through our MyoConnect platform and further penetration of our O&P channel in international markets. We plan to improve operating leverage and lower the cash burn in 2026. With that financial overview, I'll turn the call back to Paul. Paul Gudonis: Thanks, Dave. Operator, we're now ready to take our attendees' questions. Thank you. Operator: We will now begin the question and answer session. And while we're waiting for the first question, I'd like to mention that we will be attending the Craig Hallum Alpha Select Conference in person in New York City on November 18. Hope to see some of you there. Okay, operator, whenever you're ready, let's take the first question. Chase Knickerbocker: Yes. First question comes from Chase Knickerbocker with Craig Hallum. Please go ahead. Chase Knickerbocker: Good afternoon. Thanks for taking the question. So maybe just to start, could you help us quantify the scale of your U.S. O&P business at this point? So just from a domestic O&P perspective, how many units did you ship into that channel in the third quarter just to help us think about how that business is scaling? Dave Henry: It was about $900,000, and I must say it was roughly 30 units, but I'll get you the exact number. Chase Knickerbocker: No worries. That's helpful. And then maybe just as far as your new Head of Marketing goes, can you just cue us in on what kind of levers were identified as far as potential avenues for improvement in terms of reducing customer acquisition costs? I respect that you're becoming more focused on MyoConnect here, but just kind of within that direct billing channel, any levers that were initially identified as far as we need to be doing this, need to be doing this better, etcetera? Paul Gudonis: Yes. During the interview process, Chase, we were looking for people who had experience in various media: social media, television, YouTube, other channels. And so we're looking at that and doing a comprehensive review right now of, okay, how effective is our television advertising? Are we using social media the right way? What else should we be doing to again generate more leads at a lower cost per lead for qualified patients? So that's the review that's underway right now. And she started about two weeks ago. Chase Knickerbocker: Got it. Maybe just kind of turning to the pipeline, etcetera. There was a noticeable uptick as far as backlog drops are concerned. Can you just kind of walk us through what might be the driver there, kind of what you saw in the quarter as far as how the backlog progressed? Dave Henry: Yes. I think a lot of the backlog drops, I would say about 40% of them came from Germany as a result of what I think was, I don't think the backlog in terms of some of those trials that did not convert was updated, and I think there was some cleanup that went on in the third quarter. And so I think part of that higher number of backlog drops is due to that. So like I said, about 40% of those drops related to that, with the rest just normal activity. Chase Knickerbocker: Got it. Maybe just last one for me, Dave. Is this the right way to think about OpEx for the foreseeable future? I mean, how should we be thinking about OpEx kind of building off of Q3 levels? And then along those same lines, if you could just talk about how you guys are thinking about the time to return to positive adjusted EBITDA and kind of how you're managing the business with that in mind? Dave Henry: Yes. So I think in terms of the operating expenses, our plan is to, there is going to be some growth in the operating expenses. For example, we do intend to spend more on advertising, though not as much of an increase as in 2025. We are going to spend more on R&D, particularly for that randomized control trial that we're funding that I mentioned earlier. But other than that, our intention is to not grow the operating expenses as much as possible. And we want to be generating and showing that we can generate operating leverage and grow revenues faster than operating expenses. And in terms of when we get back to positive adjusted EBITDA, again, we'll provide more of an update when we give our 2026 guidance. Chase Knickerbocker: Understood. Thanks for the questions. Operator: Thank you. The next question comes from Scott Henry with AGP. Please go ahead. Scott Henry: Thank you and good afternoon. A couple of questions on the metrics. I guess first, reimbursement or not reimbursement, but pipeline adds, they were up slightly in Q3 to Q2. Do you think you could still see big gains there, or is it going to be harder at some point, there's a saturation level? Or is it maybe it's just flattening before jumping higher again? How do you think about that pipeline add or that top of the funnel? Paul Gudonis: Well, Scott, given the size of the market opportunity, of the prevalence and a quarter million new cases just in the U.S. every year, I don't think we're near saturation. I think we've got to find better innovative ways to reach those patients. But also, I think through the O&P channel referral program, I'm expecting we're going to see more of our patient pipeline adds coming through those channels. And so I expect that's what's going to drive more growth not only this quarter but into 2026 because there are so many people coming out of these rehab hospitals and stroke clinics with a paralyzed arm. We want to make sure that they know about the MyoPro because what we found is they are more medically qualified. They pass our screening criteria because they are more recent to their stroke. We also find that they're more motivated because they might have just lost their ability to use that arm a year ago versus twenty-five years ago. So you don't have that sort of patient inertia. That's why we want to capture more patients in the prep in incidence population. I think we'll grow the pipeline, but also improve the quality of the pipeline. Scott Henry: Okay. All right. That's helpful. Thank you. And then when we think about Q4, you're going to have a smaller backlog entering Q4 than you did entering Q3. And typically, the quarter before you use backlog is an indicator for what we should expect in the next quarter. So I know your guidance targets growth, but if you could just kind of walk through sequential growth from Q3 to Q4, if you could just talk about how you're going to do that with a smaller backlog? It may just be other levers that are pulling, but I just want to get a better understanding from your perspective. Thank you. Dave Henry: Yes. Well, it's obviously going to come from fill units and from authorizations and orders that we get inside of the quarter. You're correct that the backlog is lower. But we've also been demonstrating that as we get authorizations and orders, our operations are actually able to turn them into revenue faster. And so that's what we plan on seeing, that growth in the fourth quarter coming from. Scott Henry: Okay. So we should expect that to continue and even accelerate, that day trippers, if you will, people that come and go in the same quarter. Dave Henry: I think as the authorizations and orders go up, I think that we will probably, the number of fill units that we have just in whole numbers will probably also go up as we go through time. Scott Henry: Okay, great. And then I guess final question, and it's somewhat strategic. It's always a little higher risk profile to take on debt when you're losing money. The question is, is this a sign that you think, I mean, obviously, you have eighteen months runway before you have to start paying it back. But do you feel based on your ability to take this debt that eighteen months from now, you could be close to breakeven? Just trying to get a sense of the decision to take debt over equity, even though I know you're not probably happy with the share price, but certainly debt has a degree of risk that comes with it. Dave Henry: Sure. First off, I guess, we would not have done this transaction if we didn't feel like we could pay it back. That was really the first criteria. And so, I think that also sort of says that before in the eighteen months that we, before we started having to pay this back, we would expect that we're not burning cash by the time we get to that point. That's so we're managing the business that way through continuing to grow revenues. And by holding down the growth in operating expenses and generating more incremental operating income from those additional revenues. So we feel like that we could pay it back. Obviously, that was the first criteria. And then it was the best combination of capital that was provided to us with the minimum amount of dilution. And so we've been very consistent that if we were to look for additional, we wanted to do it in a way that was the least dilutive way possible. And we feel that we accomplished that. Scott Henry: Okay. Thank you for that insight into the decision-making. I appreciate that. That should do it for me. Thank you for taking the question. Operator: All right. Thanks, Scott. The next question comes from Anthony Vendetti with Maxim Group. Please go ahead. Anthony Vendetti: Hi, it's Anthony. So Paul and David, in terms of the O&P clinics, how many have been trained so far? Do you have a goal in terms of the number you'd like to have by the end of '25? Or by the end of '26? And then, I was wondering if you could discuss a little more of the details of MyoConnect. What's behind that initiative and what do you hope to accomplish there? Thanks. Paul Gudonis: Yes. Hi, Anthony. So we've been training a lot of O&P clinicians, but in various stages of their certification process. For example, a couple of hundred have taken the online training program on how to evaluate a patient. And then those that have moved forward to get that patient into an evaluation, we show up in person with our clinical team to do the evaluation with them. So there's that additional training. Then they have to fit up three units in order to become fully certified. That number is growing. The good news is we've got a lot of interest among Hanger clinicians around the country. We've got the other major firms like Ottobock has a number of clinicians, O&P has its four motion clinics, and Equal, there's like 90 clinics. So we continue to do seminars on reimbursement, on clinical training, on how to do the marketing as well. So our goal is to have a couple of dozen, I would say, that are actively placing orders this year, and our goal is to continue to expand that. I think what you'll see is, I've mentioned this in previous calls, someone will do one order, see how it works out for their patients, get good outcomes, make sure they get the reimbursement check, they'll do another one, and that starts to take off from there. As far as MyoConnect, one of the assets we have is we've got a dozen field clinicians, primarily occupational therapists, who are well-versed in the MyoPro. They're in these rehab hospitals all the time, training therapists on how to work with users who get a new MyoPro. We train some 80 to 100 therapists every month, and in the process of doing so, we conduct in-service presentations, and we're seeing a growing number of clinical referrals now. And we think that will be a real source because the strategic shift that I'm looking to execute here is from one-time sort of advertising-driven orders from a patient to recurring sources of patients. So that's O&P providers in the U.S. and Germany and rehab hospitals who will hopefully provide us with a steady flow of new patient candidates. So that's the outline of the MyoConnect program. Anthony Vendetti: Okay. And then just lastly, maybe more for David, but just in terms of getting to breakeven, any update on what that quarterly revenue run rate needs to be or timeline for getting there? Dave Henry: Well, when we did the headcount reduction earlier this year, prior to that, we kind of gave some guidance of about $17 million to $18 million of quarterly revenue was required to breakeven. I think after that headcount reduction in July, you probably shaved about $1 million a quarter off of that. So I would say around $16 million to $17 million. Anthony Vendetti: Okay, great. All right, thanks. I'll hop back in the queue. Appreciate it. Operator: The next question comes from Sean Lee with H.C. Wainwright. Please go ahead. Sean Lee: Hey, good afternoon, guys, and thanks for taking my questions. I just have two quick ones. First, I think you mentioned it's $1.8 million of revenue from Germany this quarter. It seems to be increasing quite well. So I was wondering if you can provide some color on that. What's behind the increase there? Paul Gudonis: Well, we've got a network of 100 O&P channel partners there that have been developed over the last several years, Sean. And in Germany, we've had very good success with the statutory health insurers so that virtually anyone in Germany who medically qualifies for the MyoPro can get access to it. We don't have to go through the same type of pre-authorization hassles that we sometimes face here by some payers. We have to appeal these and so on. So patients that are medically qualified can get a MyoPro, and that's helped drive the growth there in Germany. Sean Lee: I see. Thanks for that. And my last question is on the advertising spend. So do you think you've reached a new plateau now with the advertising spend following your switch to more focus on TV? Or do you expect that to go up more in Q4? And how does that impact your pipeline? How do you expect that to impact your cost per pipeline add? Dave Henry: Well, as I mentioned a little bit earlier, we are intending to spend more on advertising in 2026 but not at a rate of growth like we did in 2025. So the growth rate in advertising spending will be lower in 2026 versus 2025. But I think the bigger impact might be from MyoConnect and some of the efforts with the O&P channel in terms of growing the pipeline adds. And obviously, I think there's, for dollars that we invest in advertising, more pipeline adds come from that. But we're looking to increase the quality of the pipeline adds because, as Paul mentioned, people that are in the incidence population that the MyoConnect program is really targeting, those people are closer to their pre-stroke life in terms of what they remember what it was like before the stroke. And so we think that they're going to be more motivated. The quality of the pipeline should improve. And so a pipeline add overall, as the mix of patients that come from referrals and from the O&P channel increases, the conversion of those pipeline adds to revenue should increase over time. That's the intent of doing this. And we're doing MyoConnect with the people that we have today. So right now, we're not spending more for it. And so those are the reasons why we're doing it and why we think that the pipeline adds should grow, but not only that, but the quality of the adds should grow in 2026. Sean Lee: Okay. And that does make it a lot clearer. Thanks for that. That's all I have. Paul Gudonis: All right, Sean. Thank you. Operator: The next question comes from Edward Wu with Ascendiant Capital. Please go ahead. Edward Wu: Yes. Thanks for taking my question. It looks like International Germany continues to do very well. How is the rest of your international business? And any updates on your partnership in China? Paul Gudonis: Ed, you've always been a proponent and an early spotter that Germany is going to be a really good market for us. I think we validated your thesis on that. So again, Germany is growing with a growing pipeline. We expect continued record revenues next year. Other international markets, we've just decided we're not going to spend a lot of money at this point to try to get reimbursement, which is a couple of year process there. From our last call with the China JV, they're still conducting a clinical trial to get NMPA approval. So not much progress over there, but it doesn't really cost us anything at this point. We're just regularly engaging with management of the JV. Edward Wu: Great. Well, thanks for the update and congratulations on Germany. And I wish you guys good luck. Paul Gudonis: Thank you, Ed. Thank you. Operator, any more questions? Operator: No. There are no further questions. I would like to turn the conference back over to Paul Gudonis for closing remarks. Paul Gudonis: Well, thanks. Well, just to summarize our business plan going forward, we expect continued revenue growth through our direct-to-patient marketing as well as expanding O&P channels as we discussed here in the MyoConnect referral program. We're increasing market access for patients by signing additional payer contracts and engaging with the Medicare Advantage and commercial plans for coverage. We're managing our cost structure as Dave described and enhancing our manufacturing processes to demonstrate operating leverage as we scale, and we continue to innovate product development to maintain our market leadership position. Thank you all for your questions and for your interest in Myomo. We look forward to speaking to you again when we report our Q4 and full-year 2025 financial results in about four months. Have a nice evening, everyone. Operator: Thank you. The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.