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Operator: You all sites on hold. We appreciate your patience. And please continue to stand by. Good afternoon, and welcome to Getty Images Holdings, Inc. Third Quarter 2025 Earnings Conference Call. Today's call is being recorded. We have allocated one hour for prepared remarks. At this time, I would like to turn the conference over to Steven Kanner, VP of Investor Relations, Treasury at Getty Images Holdings, Inc. Thank you. You may begin. Good afternoon. Steven Kanner: And welcome to the Getty Images Holdings, Inc. Third Quarter 2025 Earnings Call. Joining me on today's call are Craig Peters, Chief Executive Officer, and Jennifer Leyden, Chief Financial Officer. Before we begin, we would like to note that due to the ongoing regulatory review process, we will not be able to comment on the Q3 2025 Shutterstock operating results. We appreciate your understanding. This call will include forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements are subject to various risks, uncertainties, and assumptions which could cause our actual results to differ materially from these statements. These risks, uncertainties, and assumptions are highlighted in the forward-looking statements section of today's press release in our filings with the SEC. Links to these filings and today's press release can be found on our investor relations website at investors.gettyimages.com. During our call today, we will also reference certain non-GAAP financial information, including adjusted EBITDA, adjusted EBITDA margin, adjusted EBITDA less CapEx, and free cash flow. We use non-GAAP measures in some of our financial discussions as we believe they represent our operational performance and underlying of our business. Reconciliations of GAAP to non-GAAP measures as well as the description, limitations, and rationale for using each measure can be found in our filings with the SEC. After our prepared remarks, we will open the call for your questions. With that, I will hand the call over to our Chief Executive Officer, Craig Peters. Craig Peters: Thanks, Steven, and thanks to everyone for taking the time to join us today. I will begin with a high-level view of the quarter, after which Jennifer will dive into the details of our financial performance. Third quarter revenue for 2025 was $240 million, representing a slight year-over-year decrease of 0.22% on a currency-neutral basis. Adjusted EBITDA came in at $78.7 million for the quarter, down 2.4% reported and 4.4% on a currency-neutral basis, at a margin of 32.8% of revenue. Within the quarter, we posted growth in Creative and declines in Editorial. Creative was aided by normalization of premium access revenue allocations following the shift in 2024 consumption away from Creative and to Editorial driven by the Paris Olympics. While Creative is in growth, we continue to see declines across agency customers consistent with prior quarters and commentary. Editorial declines are the result of a difficult compare given the same Olympics and the 2024 election cycle. These declines are partially offset by growth in Entertainment and Archive. We continue to see some revenues from AI data licensing in the quarter, but these were down from 2024 given the accelerated nature of revenue recognition for these deals. With that said, within the quarter, I was excited to realize some new opportunities within the AI landscape that more closely align with our traditional content licensing business. Within the quarter, we inked multiple deals to allow AI large language models and search experiences to utilize our content within their experiences to provide authentic, high-quality content in context. One of these agreements was a multiyear agreement with Perplexity, and it includes commitments for both Image Credit and LinkBags. Another opportunity was within our custom content business where we create content specific to customer needs. In this case, a business leveraged our expertise and our network of global contributors to create training content specific to their needs. In each instance, Getty Images Holdings, Inc. is doing what it has always done so well, providing high-quality content to customers to enhance their offerings at scale and on an economic basis. We see more opportunity here. On the merger front, the UK's Competition and Markets Authority, the CMA, has referred the proposed merger of Getty Images Holdings, Inc. and Shutterstock to a phase two review process. We were disappointed to receive this notice as we do not believe the transaction in any way reduces competition or harms customers or suppliers. We offered comprehensive remedies to avoid a phase two review. This transaction is about the delivery of cost synergies and the resulting benefits they provide. The parties remain 100% committed to the transaction and to working with regulators in the UK and US to secure the necessary approvals. However, the realities of this process push any close into 2026. Elsewhere on the legal front, we received a judgment for our UK litigation against Ability.ai, which ruled in favor of Getty Images Holdings, Inc. on our trademark infringement claim, confirming that inclusion of our trademarks in AI-generated outputs infringe those trademarks, and that the responsibility for infringing outputs rests with Stability versus the end user. This is a win for rights holders everywhere. While we were unsuccessful on the secondary infringement claim and dropped the training claim ahead of trial due to lack of clarity on the location of such training, the ruling affirmed Getty Images Holdings, Inc. copyright-protected works were used to train stable diffusion. We will be taking forward these findings of fact into our US case where we refiled our case in California due to delays in Delaware, and the court is now reviewing motions. We are also evaluating an appeal in the UK. And with that, I will turn it over to Jennifer Leyden to take you through the more detailed financials. Jennifer Leyden: Our Q3 results broadly reflect the quarterly cadence we anticipated with headwinds from our compares against a very strong editorial calendar in Q3 2024, yielding an expected flattening of growth in the back half of 2025 beginning with Q3. While those year-on-year comparisons impacted our reported results, we continued to see strong growth in our subscription business and a return to an adjusted EBITDA margin north of 32%, even as we continue to navigate declines in our agency business and a broadcast and production business that has yet to return to its pre-Hollywood strike performance level. Q3 revenue was $240 million, essentially flat on a reported basis and down 2% on a currency-neutral basis. Included in these results are certain impacts of the timing of revenue recognition, which contributed approximately 40 basis points to Q3 growth. Also as expected, we saw the comparison to a very strong editorial event calendar in 2024 impact some of our reported year-on-year results and metrics this quarter. I will highlight a few of those items here. Annual subscription revenue was 58.4% of total revenue, up from 52.4% in Q3 of last year, representing year-on-year growth of 11.2% or 9.3% on a currency-neutral basis. This growth was driven primarily by premium access or PA, which makes up just over one-third of our total revenue and grew 17% or 15% currency-neutral. Our PA performance benefited from a large renewal in the quarter, which represented a meaningful upsize in scope and term for this customer, a testament to the continued demand for our content. We added 6,000 active annual subscribers to reach 304,000 in the Q3 LTM period, representing growth of approximately 1.7% over the comparable 2024 LTM period. Annual subscriber growth was driven by Unsplash Plus, with gains partially offset by iStock where we continue to see some impact from the discontinuation of our free trial customer acquisition program in June 2025. The annual subscription revenue retention rate was 90.3% in the Q3 LTM period compared to 92.2% in the corresponding 2024 period and 93.4% in the Q2 LTM period this year. The year-on-year decline primarily reflects the absence of major political, sporting, and certain one-time events that boosted a la carte subscriber spend in 2024. Paid downloads were down slightly at $93 million in the Q3 LTM period, while our video attachment rate was flat at 16.4%. Creative revenue was $144.9 million for the quarter, up 8.4% year-on-year and 6.4% on a currency-neutral basis. The $11.2 million increase was primarily driven by premium access revenue, which included a multiyear agreement signed in the third quarter with significant upfront revenue recognition. In addition, subscriber download patterns in the prior year period, which benefited from a robust event calendar, skewed allocation of revenue more toward editorial than creative. With no comparable events of similar magnitude in Q3 2025, download trends returned to historical allocation levels. Combined, the impact from the upfront revenue recognition and the shift in download patterns were the primary contributors to the year-over-year growth in Creative this quarter. We also had gains across video, Unsplash Plus, and custom content while agency headwinds persisted. Agency, which sits entirely within Creative, declined 22% year-on-year, reflecting ongoing macro uncertainty but also reflects the headwind from the year-on-year compare to our stronger Q3 in 2024 for agency driven again by the 2024 editorial event calendar. Editorial revenue was $89.3 million, down 3.7% year-on-year and 5.6% on a currency-neutral basis. The performance was driven by double-digit decreases in news and sports, which faced tough comparisons due to a strong event calendar in 2024. This was partially offset by growth in entertainment and in archive. Other revenue was $5.8 million, down from $14.1 million in Q3 2024 due to the timing of prior year revenue recognition for creative content deals which included some level of AI rights. As Craig noted, our pipeline for these types of deals remains healthy in 2025. Despite some quarterly top-line variability that comes with these types of deals, we expect full-year revenue from these deals to be approximately 2% to 3% of total revenue as we previously shared. From a geographic perspective, on a currency-neutral basis, we saw growth of 0.8% in The Americas, our largest region, while EMEA was down 4% and APAC was down 10.8% due primarily to declines in agency. Revenue less our cost of revenue as a percentage of revenue remained strong at 73.2% compared with 73.4% in 2024, with that year-on-year slight variability due largely to product mix. SG&A expense was $101 million, up $900,000 year-on-year with our expense rate increasing to 42.1% of revenue from 41.6% last year. Excluding stock-based compensation, SG&A increased to $97 million in the quarter or 40.4% of revenue, up from $95.8 million or 39.8% of revenue in 2024. This increase in SG&A relates primarily to $3 million of professional fees tied to the acceleration of our SOX compliance efforts, and $1 million for the ongoing litigation with Stability AI. We have previously shared that we expect approximately $8 million of SOX acceleration costs in 2025, with approximately $5.4 million of that incurred year to date through Q3. Adjusted EBITDA was $78.7 million for the quarter, down 2.4% or 4.4% on a currency-neutral basis. Adjusted EBITDA margin was 32.8% compared to 33.5% in Q3 2024. Excluding the impact of accelerated SOX compliance and litigation costs, our adjusted EBITDA margin would have been 34.5%. CapEx was $14.7 million in Q3, up $2.2 million year-over-year. CapEx as a percentage of revenue was 6.1% compared to 5.2% in the prior year period, but still well within our expected range of 5% to 7% of revenue. The year-on-year increase reflects the timing of payments for routine CapEx spends. Adjusted EBITDA less CapEx was $64 million, down 6.1% or 8.1% on a currency-neutral basis. Adjusted EBITDA less CapEx margin was 26.7% compared to 28.3% in Q3 2024. Free cash flow was $7.9 million compared to negative $1.8 million in Q3 2024. The increase in free cash flow reflects changes in working capital primarily due to the timing of receivables and payables. Free cash flow is stated net of cash interest paid of $26.2 million, a decrease of $14.6 million over the prior year. Cash taxes paid in the quarter were $9 million, a decrease of $1.3 million over 2024. We finished the quarter with $109.5 million of balance sheet cash, down $300,000 from the Q3 2024 ending balance and down $700,000 from 2025. We also have a $150 million revolver that remains undrawn. As of September 30, we had total debt outstanding of $1.38 billion, which included $540 million of 11.25% senior secured notes, $503 million of euro term loan converted using exchange rates as of 09/30/2025 with an applicable rate of 7.94%, $40 million of USD term loan, and 11.25% fixed rate and $300 million of 9.75% senior unsecured notes. Our net leverage was 4.3 times at the end of Q3, compared to 4.2 times in Q3 2024. The slight uptick in net leverage primarily reflects the impact of the weaker dollar on the value of our euro term loan debt, partially offset by an improvement in the trailing twelve-month adjusted EBITDA. We had a busy third quarter with respect to financing transactions, all executed with an eye to our pending merger with Shutterstock. In October, we completed an exchange offer to extend the maturities on our senior unsecured notes, replacing $294.7 million of 9.75% notes due March 2027 with new 14% senior unsecured notes now due in March 2028. The new notes are prepayable at par until the original maturity date or for six months following the close of the merger. In addition, we issued $628.4 million of new 10.5% senior notes due 2030 to fund the estimated merger cash consideration, refinance existing Shutterstock debt, and to cover anticipated merger-related fees and expenses. The proceeds from this financing will remain in escrow subject to the closing of the merger. While in escrow, the financing carries an approximate net interest cost of $3.5 million per month. We opted to execute this financing sooner rather than later so we could be poised for transaction close once we clear regulatory approval, and also to allow for management focus to pivot to integration planning and to operating our standalone business in the interim. Considering the foreign exchange rates and applicable interest rates on our debt balance as of September 30, factoring in the quarterly amortization payment on the euro term loan, and the impact of the exchange offer, our estimated cash interest expense for 2025 is $127 million. The first cash interest payment related to the merger financing currently held in escrow will be in May 2026. Now turning to our outlook for the full year of 2025. Taking into consideration our financial performance year to date and assuming full-year FX rates with the euro at 1.12, and the GBP at 1.32, compared to the euro at 1.1 and the GBP at 1.3 previously, we are updating our reported revenue guidance range to $942 million to $951 million, representing year-on-year growth of 0.3% to 1.2% or a decrease of 0.5% to growth of 0.5% on a currency-neutral basis. Our guidance reflects approximately $6.5 million positive impact from FX for the full year, which includes an estimated $4.3 million benefit in the fourth quarter. We are also updating guidance on our adjusted EBITDA range to $291 million to $293 million, which translates to a year-on-year decrease of 3% to 2.3% or 4.1% to 3.3% currency-neutral. Included in the adjusted EBITDA expectation is an approximate $3.5 million tailwind from FX in 2025, including an estimated $1.7 million benefit in the fourth quarter. Please note this guidance reflects the anticipated impacts of the odd year versus even year editorial event calendar comparisons largely impacting the 2025 as well as some continued lag in a return to pre-Hollywood strikes production levels. On the cost side, our guidance continues to include approximately $8 million in one-off increases in SG&A for SOX acceleration efforts, including $2.5 million expected in the 2025. The updated adjusted EBITDA guidance also reflects the benefits from our disciplined approach to managing our costs in the current environment. Please note all other merger-related costs are excluded from this guidance as they are considered one-time in nature and, therefore, excluded from adjusted EBITDA. Finally, any potential broader impacts which may result from tariffs and other global macroeconomic conditions remain unknown and may not be fully reflected in this guidance. With that, operator, please open the call for questions. At this time, if you would like to ask a question, we will move first to Ron Josey with Citi. Your line is open. Ron Josey: Hi. This is Jake Kalek on for Ron Josey. Thanks so much for taking our questions. First, Craig, could you take a step back and unpack for us Getty Images Holdings, Inc.'s PAI initiatives in the quarter and how they tie back to your overall AI strategy and potential impacts to '26 revenue? In particular, we would really like to better understand the structure and benefits of the Perplexity partnership. Then with respect to iStock, I think you highlighted bundling those AI capabilities directly into the subs. Are you seeing that drive new customer acquisition, retention, or upsell? And then I have a follow-up. So let's just start then. Craig Peters: Okay. Thanks, Jake. Well, obviously, I cannot get into the specifics of the Perplexity deal. It is confidential in nature. But it is a licensing deal, very, very similar to other licensing deals that we have done traditionally with technology platforms that leverage our content within our product offering. So, you know, we think it is one of many that are out there as I mentioned. We did multiple of those in the quarter. And, you know, given the volume and investment that is going in, the volume of these large language models and the investments going in, we think that could be something that could develop into a material revenue stream for the company. With respect to the bundling, yeah, one of the things that we talked about in our last call was bundling the generative AI, most notably modifications for our customers. So they get more value out of our pre-shot content. And that is what we have been observing in terms of their utilization of our AI capabilities prior to that bundling. That is a strategy that is ultimately focused on providing value to our customers, our existing customers. We think that they are getting value out of it when we talk to them. We expect that that will show up over time in our renewal rates across that subscription business. And we are happy to make those tools available to our existing customers. From a new customer standpoint, we continue to see that our content and the value delivered through our pre-shot content is the primary driver. But we will see how that evolves over time, but it is too early to give you anything with respect to 2026. But those are the two primary fundamentals of our AI strategy with respect to customer-facing. Clearly, we continue to do some level of data licensing for AI training to third-party platforms, and that continues. So that is kind of the third revenue leg of the AI. And then, we are deploying AI within our cost base and within our functions across the business to better operationalize the business and drive efficiency. Ron Josey: Thanks, Craig. That is helpful. And then just quickly, Jennifer, on the results. In terms of the customer segments, you gave good details on agency, down 22% in the quarter. Could you dive a little deeper into the health of the corporate and media customer segments, and in particular, on media, maybe just double click on what you said about the Hollywood strikes? Like, we are not seeing production come back to those pre-strike levels. So just want to better understand how those other segments are faring. I know you have mentioned corporate retention rates in the past have been north of 100. So just want to get a sense of the health on those two segments. Thanks. Jennifer Leyden: Yeah. So hey, Jake. So within media, in Q3, media was in decline about 3%. But broadly speaking, within media itself, the only segments, you know, there are many subsegments within media. The only subsegments within media that were in decline were still those sort of broadcast and production segments. So, you know, we are still seeing those production, you know, film segments, subsegments inside of that broad media space in decline. Not quite the levels of decline, of course, that we saw in the height of that dual strike period. But, you know, they are not back, certainly not back to pre-strike levels. And in this quarter, we did see them in decline. So that is what we are referencing there. Corporate, this quarter, we did see in a slight decline. But broadly speaking, you know, that remains a growth segment for us. By far, the largest portion of our revenue base, you know, approaching 60%. That is the portion of the business where we see both SMBs and enterprise. You are correct, you know, when you think about those enterprise customers. We still see those customers, you know, in the 100% close to 100% retention level. So very, very healthy portion of our business. Ron Josey: Oh, thanks. Appreciate the color. Operator: We will take our next question from Mark Zgutowicz with Benchmark. Your line is open. Mark Zgutowicz: Thank you. Hi, Craig and Jennifer. Question on premium access subscription retention. Curious what that was in 3Q versus 2Q. And how does the rest of the subscription business compare? And then I have a follow-up. Craig Peters: Yeah. Hey, Mark. This is Craig. It is not a statistic that we offer out into the market, but our premium access is our largest subscription offering. That we have out in the market. It represents roughly about a third of the company revenue. And the retention rates on that are our highest levels across all of the subscriptions that we offer. And that has held consistent over time. We have not seen any variability, you know, within this year, Q2 to Q3, nor have we seen any variability, you know, over years in recent periods. That continues to be an incredibly durable offering for our customers. As you move down the subscription stack, most notably into iStock or into Unsplash, we see higher levels of churn there. Obviously, they are focusing in on small businesses and freelancers, those two brands respectively. And so you see more in and out of that subscription, but still healthy, relative to other subscription offerings that would target those same customers. So, our subscription business continues to perform well. As Jennifer referenced in her remarks, we are continuing to see high utilization as the subscriptions as demonstrated through the paid download side of things. And we continue to see, you know, retention really strong with historical, you know, kind of benchmarks across each and every subscription, but that premium access one is, you know, strongest at the top of the ladder. Jennifer, anything that you would add? Jennifer Leyden: No. You just broke up a bit for me there, Mark. I was not sure. Were you asking premium access or the annual subscription revenue retention rate overall compared to last quarter? Mark Zgutowicz: No. That was it. Craig covered it. Craig Peters: So we are good there. Mark Zgutowicz: Okay. Thank you. Yeah. You are welcome. Maybe one I could just in terms of Creative, what customer cohorts drove the sequential recovery there? And how should we think about fourth quarter compares either sequentially or year over year? Craig Peters: Yeah. Well, both Jennifer and I touched on this. And I would not read too much into the Creative growth within Q3. Last year, I do not know if you remember, Mark, but we talked about kind of the Creative decline in Q3 of last year because of the premium access allocation between Creative and Editorial. And as the Editorial consumption went up, because of things like the Paris Olympics, allocation of premium access revenues to Creative went down. And that created a bit more of a negative impact on Creative. Well, the reversal of that this year. Right? We do not have a Paris Olympics. And it is not creating that level of consumption shift. So we benefit on a year-over-year compare basis. But as both Jennifer and I referenced, you know, our agency business continues to be in decline. And that is something that has been the primary pressure point against the Creative business is really the agency portion of our business, and that kind of performance was, you know, I would say, consistent to where, on an event basis because, again, we do generate some agency business as a result of things like where sponsors do activation. On an event that has been fairly consistent. So we are seeing the business kind of continue as it did in Q2 on the Creative side of things, which is, you know, a bit soft, and that softness focused in on the agency portion of the business. Jennifer Leyden: Okay. Yeah. And I am just going to add a little bit more context there. That PA mix shift that Craig mentioned, and we both mentioned in our remarks, that is about, you know, Creative growth this quarter on a currency-neutral basis, about half of that growth came from that year-on-year comparison with that mix shift slipping back to what we know to be the historical allocation between Creative and Editorial. So that is just sort of that business kind of rightsizing back between Creative and Editorial. So that is about half of that growth coming from that normalization flipping back. And then we mentioned we had, you know, a deal hit Creative this quarter, which is a great deal for Creative that came with some really healthy upfront revenue recognition and that, you know, a little less than half of Creative's growth came from that. So, you know, again, a legitimate bump in Creative growth for the quarter, but a bit of a skewing of Creative performance in the quarter as a result of that upfront revenue recognition. So to Craig's point, as you think forward to Q4, you know, probably puts us back to, you know, very, very low single-digit growth for Creative in Q4 when you think about those agency drags continuing into Q4. Mark Zgutowicz: Got it. Thank you. Operator: And it does appear that there are no further questions at this time. I would now like to turn it back to Steven Kanner for any additional or closing remarks. Steven Kanner: Thank you again for joining us today and for your continued interest in our company. As always, our team is available to address any additional inquiries you may have after the call. We look forward to staying connected and updating you on our progress in the quarters ahead. Have a great day. Operator: This does conclude today's program. Thank you for your participation. You may disconnect at any time, and have a wonderful afternoon.
Stewart Joseph Grisante: Good afternoon, and welcome to Repay's Third Quarter 2025 Earnings Conference Call. With us today are John Morris, Co-Founder and Chief Executive Officer, and Robert Hauser, Chief Financial Officer. During this call, we will be making forward-looking statements about our beliefs and estimates regarding future events and results. Those forward-looking statements are subject to risks and uncertainties, including those set forth in the SEC filings related to today's results and in our most recent Form 10-K. Actual results may differ materially from any forward-looking statements that we make today. Forward-looking statements speak only as of today, and we do not assume any obligation or intent to update them, except as required by law. In an effort to provide additional information to investors, today's discussion will also reference certain non-GAAP financial measures. Reconciliations and other explanations of those non-GAAP financial measures can be found in today's press release and in the earnings supplement, each of which are available on the company's IR site. With that, I will now turn the call over to John. John Andrew Morris: Thanks, Stewart. Good afternoon, and thank you for joining us today. During the third quarter, Repay executed on our promise to sequentially improve growth in the second half of the year. Our core growth strategy is built on our drive to optimize digital payment flows across our consumer and business payment verticals. We embed our payment technology into software platforms for a seamless experience. And during 2025, we remain focused on the path of returning to sustainable growth as we exit the year. In Q3, we achieved 5% revenue growth and 1% gross profit growth on a normalized year-over-year basis, which excludes the political media contributions during 2024. Our adjusted EBITDA margins remain robust at 40%, and we continue to generate strong free cash flow conversion of 67% while reinvesting into organic growth initiatives. These financial results demonstrate the strategic improvements that are underway. Across Repay, we have been enhancing our go-to-market implementation pipelines and operations. We're automating processes, strengthening partnerships, enriching our capabilities, and fine-tuning our clients' experience. We are testing and deploying AI tools across the company to build Repay for a scalable future. Repay is using real-time API observability for our gateway monitoring, which is leading to some of the highest authorization and uptime across the industry. We have been utilizing assisted AI functionality during the client onboarding process for faster API connectivity with software partners, reducing manual documentation, and improving implementations. During the quarter, we developed Repay's Dynamic Wallet, allowing loan payments to be seamlessly integrated into iOS and Android's digital wallet. Dynamic Wallet provides instant access to loan details, reminders to make payments on time, and tap and pay directly within the consumer's digital wallet. Easier access leads to a better customer experience for our clients and increased digital payments for faster and secure transactions. Also, we have been adding new software partners during the quarter. We added five new software partners, bringing our partnership network to 291 across our consumer payments and business payment segments. Our investments in enterprise sales and customer support teams have built a healthy sales pipeline across the verticals we serve. This is reflected in sustained year-to-date bookings growth. Additionally, operational initiatives are leading to improved productivity, increased automation, and quicker implementation workflows. As these positive trends continue, our normalized growth is expected to sequentially improve further in the fourth quarter. Now moving on to our Q3 segment highlights. Within the Consumer Payments segment, reported gross profit increased 1% year over year. Our core growth algorithm is built on both the recurring and incremental contributions from existing clients and the ramp of recent client wins. As a reminder, Q3 gross profit growth was partially impacted by approximately 3% from the previously mentioned clients rolling off our platform. Without these impacts, gross profit increased single digits year over year. In Q3, we increased our consumer software partnerships to 188 while also enhancing many existing integrations to further improve client and customer experience. During September, we announced a partnership with Alpha Systems, a leading provider of SaaS software within the auto and equipment financing industry. The partnership combines AlphaSystem software with a complete solution of payment acceptance across modalities and channels. Financial institutions and lenders that use Alpha's loan management platform can utilize Repay's out-of-the-box seamless payment experience while also streamlining their internal accounting and reconciliation processes. This partnership is a great example that embodies Repay's embedded payment strategy while also presenting additional subvertical growth opportunities. We also announced a new integration with Fuze, an AI-powered LOS platform that serves banks, credit unions, and financing institutions. Fuze's software embraces automation capabilities while also now embedding Repay's secure payment processing technology directly into workflows to enhance financial institutions' operations. By combining our extensive software partners that span across our consumer verticals with our direct go-to-market approach, our sales teams are building on strong sales and booking pipelines by adding many new clients, including 11 new credit union wins in our financial institutions vertical. Year to date, core consumer bookings have continued to increase from this go-to-market strategy. Our teams are continuing to focus on client implementations and ramp processes. The momentum we see in software partners, sales bookings, and improving implementation workflows instills our confidence in our sustainable growth profile as we exit the year. Now turning to the Business Payments segment. In Q3, normalized gross profit increased 12% year over year, which excludes the political media contributions during 2024. Please keep in mind that we also lapped approximately 10% impact from last year's client loss. Without these impacts, our gross profit growth was over 20% year over year. Business payments growth was driven by our accounts payable platform and payment monetization initiatives of floating common and expanding our enhanced ACH offering. We continue to win and implement new clients in our healthcare and hospitality verticals, leading to double-digit growth in our core AP platform. Our strategic focus is on increasing total pay adoption, as we continue to prioritize our go-to-market and partnership resources towards AP opportunities. Our supplier network increased to over 540,000 suppliers, growing approximately 60% year over year. As we see great traction in our hospitality vertical, and we are building on existing software relationships such as Blackbaud in our education and nonprofit verticals. We also recently announced a new integration with Youse, a leading provider of AP automation software across multiple industries. Repay's directly embedded technology ensures timely vendor payments while improving productivity by reducing the need for manual processes organizations. We are pleased with the business payments momentum for our sales teams and expect to see sustained AP traction from our 103 strategic partnerships and embedded integrations. In Q3, Repay took positive steps in the right direction through execution. We returned to profitable normalized growth while generating significant free cash flow and maintaining a strong balance sheet for financial flexibility. We opportunistically deployed capital towards our organic growth initiatives, repurchased approximately 3% of our outstanding shares in August, bringing our total share repurchases to $38 million year to date, and reduced our debt outstanding by retiring $73.5 million of our 2026 convertible notes at a discount. Looking forward, we expect the momentum to continue, giving us confidence across both consumer payments and business payments into Q4 2025. And lastly, I would like to welcome Rob Hauser, Repay's Chief Financial Officer, who joined the company in September. Rob has already hit the ground running, bringing over a decade of payment experience and a proven operational track record. I look forward to working with Rob to build on Repay's success. With that, I will turn the call over to Rob to review our Q3 financials. Robert Hauser: Thank you, John, and good afternoon, everyone. First, I'm very excited to join Repay. My first couple of months have been incredible and busy. I've been learning about the company culture and technology, all of which have confirmed my belief in the opportunities ahead. Repay is a tremendous payment platform across our consumer and B2B verticals that is positioned to benefit from the secular digital payment trends. I look forward to digging deeper and getting to work and helping drive the company forward. Now let's go over our financial results for Q3 2025. Revenue was $77.7 million, and gross profit was $57.8 million. Normalized revenue growth and gross profit growth increased 51%, respectively, which excludes the political media contributions during last year's presidential election cycle. Our Q3 growth was impacted by approximately 4% as we continue to lap the previously discussed client losses from 2024. When excluding these impacts, Q3 gross profit increased mid-single digit year over year. During Q3, our gross profit margins compressed approximately 3.4% year over year. Our gross profit margins were impacted from lapping one-off client losses and contributions from political media, a larger mix of clients with volume discounts as our client base volumes continue to grow significantly, and we continue to ramp enterprise clients with volume pricing. An increased mix of revenue from ACH and check volumes. As our clients adopt more of our modalities and undergo provider consolidation, we are processing more of our clients' overall volumes. In addition, we have experienced an increase in average transaction value as we continue to move upmarket towards larger enterprise clients. Higher overall transaction values caused higher than expected assessment fees on capped interchange lines. Going forward, we expect these impacts to continue. Consumer payments gross profit increased 1% year over year. Our 3% impact from one-off client losses, gross profit increased single digits during the quarter. Business payments normalized growth profit increased approximately 12% in Q3 2025. In addition, business payments growth was impacted by an approximate 10% headwind related to the previously communicated client loss during 2024. Q3 adjusted EBITDA was $31.2 million, representing approximately 40% adjusted EBITDA margins. Throughout 2025, Repay has been able to manage OpEx while balancing resource allocation and making incremental investments towards the sales, implementation, and client service teams to support future growth. Third quarter adjusted net income was $18.2 million or $0.21 per share. Free cash flow was $20.8 million during the quarter, resulting in 67% free cash flow conversion and demonstrating our solid cash generation as we execute towards sustainable profitable growth. As of September 30, we had approximately $96 million of cash on the balance sheet with access to $250 million of undrawn revolver capacity for a total liquidity amount of $346 million. Repay's net leverage was approximately two and a half times. During the third quarter, we opportunistically reduced debt outstanding by retiring $74 million of our 2026 convertible notes at a discount to principal value. Total outstanding debt of $434 million is comprised of a $147 million convertible note due in February 2026 with a 0% coupon and a $288 million convertible note due in 2029 with a 2.875% coupon. In addition, as the company previously announced, Repay reduced outstanding shares by repurchasing approximately 3.1 million shares for $15.6 million in August. We repurchased a total of $38 million and 7.9 million shares year to date, reducing fully diluted shares outstanding by approximately 8%. As of September 30, we had approximately 92 million shares outstanding with $23 million remaining under our existing share repurchase program. As we move into the fourth quarter, we're refining our financial outlook. In Q4, we now expect 6% to 8% normalized gross profit growth and free cash flow conversion to be greater than 50%. Our updated outlook reflects the normalized growth that Repay can sustainably achieve as we benefit from secular digital payment tailwinds, growth from existing clients, and the ramp of new clients onto our platform. Our go-to-market and sales pipeline remains robust, which will continue to lead to solid volume and revenue growth opportunities. However, normalized gross profit growth is expected to be towards high single digits, which is at the low end of the previously issued growth due to ongoing margin pressures we saw during Q3. Going forward, we expect gross profit growth to be impacted from an increasing mix of larger clients with volume discounts and pricing, an increased mix of ACH and check volumes, and higher overall transaction values. Additionally, the Q4 growth outlook naturally benefits from fully lapping one-off client losses from 2024. The Q4 normalized growth would be closer to the lower end of the updated range if we didn't experience this benefit during Q4. And as a reminder, our reported financials will be lapping strong political media contributions causing an approximate 10% impact to Repay's Q4 reported growth. The updated Q4 free cash flow conversion outlook is expected to be above 50%, compared to the prior outlook of 60%, due to the timing of net working capital. For the remainder of 2025, our capital allocation priorities remain focused on organic growth investments, managing CapEx as a percentage of revenue, maintaining a strong balance sheet with liquidity, and incremental cash generation to address the remaining February 2026 convertible notes at maturity. We plan to use cash on hand to further reduce a portion of our outstanding debt while also using our revolving credit facility for the remaining balance at maturity. And under our current share buyback authorization, we are able to opportunistically repurchase shares. In addition, we continue to be open to M&A to further accelerate Repay's position and growth potential. Over the next few months, I look forward to building my first hundred days as we begin the budget process for next year. We plan to provide details related to our 2026 outlook and capital allocation strategy on our next earnings call in early 2026. Until then, I'm going to meet with all of our shareholders and analysts while continuing to execute towards our updated Q4 outlook. Thank you. I'll now turn the call over to the operator to take your questions. Operator? Operator: Thank you. Ladies and gentlemen, we will now begin the question and answer session. If you would like to ask a question, please press star and one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star and 2. For participants using speaker equipment, it may be necessary to pick up your before pressing the star key. Ladies and gentlemen, we will wait for a moment while we poll for questions. The first question comes from the line of Peter Heckmann from D.A. Davidson. Please go ahead. Peter Heckmann: Hey. Good afternoon. Thanks for taking the question. In terms of the free cash flow outlook, I guess, do you see that trending into 2026? You know, we've seen, you know, fairly strong or fairly high free cash flow conversion in some years and kind of off in some years. But I think your updated guidance is now greater than 50% for 2025. I guess, you know, kind of best guess is for 2026. How are you positioning that? Robert Hauser: Hi, Pete. It's Rob. Thanks for the question. Yeah. So we're I can lay out how we're thinking about it for Q4, and we're gonna give 2026 guidance in the next earnings call. But we're rolling you know, we'd expect to be in the upper fifties in Q4, and it's really due to just working capital timing. We had a 67% free cash flow conversion in Q3, which was pretty strong. As we talk about working capital and some of the margin compression that we laid out on this call, we're holding around the upper fifties. And I would model it that as our exit rate going into 2026. Peter Heckmann: Okay. That's helpful. And then just can you remind us, it may be in the appendix of the slide deck, but just the specific political media spend headwind from the fourth quarter of last year. Robert Hauser: Yeah. So the headwind we had in the fourth quarter last year was $4.6 million of gross profit. For the fourth quarter of last year and on an annual basis, the political media was around $11.75 million for fall 2024. Peter Heckmann: Okay. On a gross profit basis. Got it. Alright. I'll get back in the queue. Appreciate it. Robert Hauser: Yeah. No problem. Operator: Thank you. Ladies and gentlemen, if you wish to ask a question, please press and one. The next question comes from the line of Tim Chiodo from UBS. Please go ahead. Timothy Chiodo: Great. Thank you for taking the question. I was hoping you could expand a little bit upon within the B2B business. The Visa commercial enhanced data program, the CEDT, that's been rolling out this year. Talk a little bit about the various data requirements, maybe how they differ from the prior level two, level three requirements, what you think this might mean for overall B2B interchange, what are some of the puts and takes there? And, of course, I believe there's a slightly higher network fee associated with it as well. We would appreciate any of the context on your business and for the industry overall. John Andrew Morris: Hi, Tim. So, good evening. How are you? This is John. And specifically, was your question on the B2B side? Was it associated with the AP side or the AR side? You may have not been specific. I'll talk a little bit about that. It's a very detailed question as well, so I won't go so deep. Timothy Chiodo: Okay. I guess on the AR side, it might mean slightly lower interchange. And on the AP side, I'm sorry. Hold on. So might be slightly lower as well. So I was just wondering I mean, I guess both is the short answer. But, really, I was hoping you could talk about what the requirement changes are, if there's anything you need to do differently on the AR side. And then what it might mean in terms of the interchange rates that you might earn on the AP side. And then, also, there's that little extra network fee, I believe, as well. John Andrew Morris: Yeah. So there's I'll start on the so level ultimately, it's level two, three, and level two itself is going to be going away. And that's really talking about the enriched data coming out of the invoices coming really from the mostly from the accounting ERP systems. And there's several different requirements there to go through that, and those have to be passed through with the transaction to qualify for the level three rates. The level three rates themselves are a little bit better. But the level two rates, you have to now add some additional incremental pieces of data to that to get to qualify for the level three rates. We obviously are very aware of that. Visa is really associated with Visa. And those requirements are actually, Visa is fine-tuning some of those things as you uniquely this will come out ultimately in the next spring. But they're doing testing with many of those things today. So we're working through that. Our ability to pull data, our embedded solutions is a positive thing for us. Meaning, like, we have the ability to be able to go and work with our ERP systems to achieve that. But it's a work in process for most everybody in the industry. As those are a few changes that have come about. And on the AP side, obviously, we have virtual cards that can be Visa or Mastercards. So we would look to optimize what's best in our favor on the AP side as in that case, we're receiving interchange on the AP side. So we would optimize what's the best rate for us there. Timothy Chiodo: Understood. Alright. Thank you so much. Operator: Thank you. Ladies and gentlemen, if you wish to ask a question, once again, a reminder, ladies and gentlemen, if you wish to ask a question, we take the next question from the line of James Faucette from Morgan Stanley. Please go ahead. Shefali M. Tamaskar: Hi. This is Shefali Tamaskar on for James. Thanks for taking my question. Just on consumer payments, in the presentation, you called out some pockets of consumer softness. Could you speak to what subverticals you're seeing this in most and what trends have looked like through early November, if possible? John Andrew Morris: Sure. So good evening, Shefali. So from an overall perspective, on the consumer side, we would consider a stable consumer on the marketplace. Obviously, we're not the actual those are not actually our end customers. Our customers are businesses. But we consider a stable consumer. And then softness wise, we've talked about previously that we saw some softness in the automotive to used car piece of that. We think that's still relatively in the same position there. And that would be consistent with what we've seen previously, and we see that consistently the same now. Shefali M. Tamaskar: Great. That's helpful. And then you mentioned also being open to M&A as you look ahead to '26. So I just wanted to hear about what potential targets look most interesting to you in terms of where you're seeing most like subvertical momentum across business payments and consumer payments? I know you've previously called out B2B being the more focused point for M&A, but curious how the pipeline looks today. John Andrew Morris: Sure. So a couple of things. So as we mentioned earlier on the call, we actually take we bought back stock up to 8% of the stock in the July, August time frames. And then we actually, as you've heard as well, we retired $73.5 million of our February convertible debt. That's still a priority for us from a capital allocation perspective is addressing our February maturity, which we expect to do. But from an M&A pipeline perspective, we do see a healthy pipeline of some activity in the marketplace. We are gonna obviously always pay attention to opportunistically where that is. We see that both in consumer and B2B. And just for clarification, we bought 3% in August, 8% year to date. Just wanted to get that clarification when we bought back stock. Shefali M. Tamaskar: Got it. Thank you. Operator: We take the next question from the line of Alex Newman from Stephens Inc. Please go ahead. Alex Newman: Hi. Thanks for taking the question. I just wanted to double click on the nature of the net working capital that's leading to the lower of the free cash flow conversion? Thank you. Robert Hauser: Yeah. I mean, it's hi. How are you doing, Alex? This is Rob. It's really just when we snapped the line on when working capital. And you know, like I said, when we've been generating pretty good free cash flow. Conversion at 67% in the quarter. And the guide slightly down from what we had in Q4 previously at 60% to above 50% is literally just timing of when we snap the chalk line on working capital. For the year as well as the compression that we talked about for going upmarket and some of the pay modality mix that we saw that fell through on the GP is probably the biggest driver to where the guide now is above 50%. But we continue to yeah. Go ahead. Go ahead. Alex Newman: No. Sorry. Robert Hauser: No. I was just gonna finish that. We continue to generate free cash flow, really good free cash flow conversion. Again, it was just really snapping the chalk line on when the working capital falls through. Alex Newman: Got it. And then a couple of quarters ago, you announced a partnership with the Gateway in Canada. I was just wondering if you could update us on that partnership and how that's ramping. John Andrew Morris: We're still working through our implementation integrations there, so no major real update associated with that currently. Alex Newman: Got it. Thank you. Operator: Thank you. Ladies and gentlemen, a reminder, ladies and gentlemen, if you wish to ask a question, please press star and 1. As there are no further questions, I would now hand the conference over to the Co-Founder and Chief Executive Officer John Morris, for his closing comments. John Andrew Morris: Thank you, everyone. I do have a slight correction on our supplier count that we mentioned earlier on the call. We're exiting Q3 with 524,000 suppliers. A very good number for us. We're excited about our growth rate there. As I close this out, thank you for your time today. Continue to make great progress in our strategic initiatives. Remaining focused on returning to profitable normalized growth, generating strong free cash flow, and maintaining a strong balance sheet for financial flexibility. Thanks again for joining us. Operator: Thank you. Ladies and gentlemen, the conference of Repay Holdings Corporation has now concluded. Thank you for your participation. You may now disconnect your lines.
Jordan: Ladies and gentlemen, thank you for standing by. My name is Jordan, and I'll be your conference operator today. At this time, I would like to welcome everyone to the Skye Bioscience, Inc. Third Quarter 2025 financial results and business update call. All lines have been placed on mute to prevent any background noise. After the speakers' remarks, I would now like to turn the conference over to Bernie Hertel, Head of Investor Relations. Please go ahead. Bernie Hertel: Hello, and thank you all for participating in today's call. Before we begin, I'd like to caution that comments made during this conference call will contain forward-looking statements under the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995, including statements of Skye Bioscience, Inc.'s expectations regarding its development activities, timelines, and milestones. Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially and adversely, and reported results should not be considered as an indication of future performance. These forward-looking statements speak only as of today's date, and the company undertakes no obligation to revise or update any statements made today. I encourage you to review all of the company's filings with the Securities and Exchange concerning these and other matters. I'll now turn the call over to Kaitlyn Arsenault, Skye's CFO. Kaitlyn Arsenault: Thanks, Bernie. After the market closed today, we issued a release and filed Skye Bioscience, Inc.'s Form 10-Q with the Securities and Exchange Commission, outlining our quarterly financial results. We encourage you to reference our filings for the details of our financials and the risk factors described therein. I will now provide a brief overview of our key financial results for the third quarter ended September 30, 2025. We ended the third quarter with cash and cash equivalents and short-term investments totaling $35.3 million. We expect our current working capital to fund operations and key clinical milestones into 2027. This includes the completion of the extension of our Phase 2a study for Nimazumab, certain manufacturing, and preparatory clinical activities needed to initiate the next study. In addition, our runway continues to include a modest discovery R&D budget, the dose concentration, and process intensification work required to support our expected TPP and scale and support later-stage studies for Nimazumab. R&D expenses for the three months ended September 30, 2025, were $9.4 million as compared to $4.9 million for the same period in 2024. The increase was primarily due to contract manufacturing, clinical trial costs associated with our obesity study for Nolasimab, discovery R&D expenses, salary and stock-based compensation expense, and consulting, advisory, and professional fees. General and administrative expenses for the three months ended September 30, 2025, were $3.9 million as compared to $4.6 million for the same period in 2024. The decrease was primarily related to decreases in consulting, advisory, and professional fees, recruitment fees, salaries, and stock-based compensation expense. Our net loss for the three months ended September 30, 2025, totaled $12.8 million, including non-cash share-based compensation expense of $1.9 million, compared to $3.9 million for the same period in 2024 with non-cash share-based compensation expense of $1.9 million. Now, I'll turn the call over to our President and CEO, Punit Dhillon. Punit Dhillon: Thanks, Kaitlyn. Today and during this quarter and the subsequent quarters, we're really focused on what matters most: turning the answers from our CBEYOND study into the logical next steps. We're going to walk you through what we've learned from our Phase 2a CBEYOND study so far, and how that data has really sharpened our focus, maintained our focus on our clinical path, and strengthened our conviction in the Nimazumab opportunity. From the start, we said that the next step for Nimazumab would be to determine an optimal dose for Nimazumab. And to that end, the top-line data from the Phase 2a study provided us with a wealth of information that we continue to mine for further insights. Most importantly, it gave us evidence in the biological activity of Nimazumab and the clarity on the PK to move forward confidently on our combination development pathway while simultaneously planning to further understand Nimazumab's benefit in a monotherapy setting. On today's call, we'll walk you through the progress that we've made over the past ninety days, the data that we've generated, and the path that we're really focused on in terms of charting forward. We're going to cover four key areas today. One is clinical development, specifically what we've learned from the CBEYOND study, how those insights are shaping the potential for future next studies. Number two is CMC and product economics, how we're designing Nimazumab for scalability and long-term market penetration. Number three is R&D and the work we're doing there, the science that continues to validate that peripheral CB1 antibody. And, or sorry, the Nimazumab or peripheral CB1 antibody is differentiated, and it's a durable mechanism. And four, the continued emphasis on just really strong accountability and consistency, how our actions this quarter measure against what we said that we would deliver. And I'm going to conclude with an outline of what's next. I'll look ahead at the key milestones and the catalysts over the coming ninety days. So first, let's get into clinical development. We'll start with what we said last quarter and where we are now. In Q2, we committed to three different things. One was to deliver top-line data in Q4 from CBEYOND. Two was to use that dataset to inform the dose-ranging strategy for the next clinical phase, and three, maintain operational and regulatory milestones and readiness to move efficiently into the next study. And we've delivered on each one of those commitments. At Obesity Week last week, Dr. Louis Aroni presented the late-breaking results from CBEYOND, and the findings are both clear and very encouraging. They showed synergistic efficacy with Nimazumab plus semaglutide and achieved an additional approximately 3% weight loss at twenty-six weeks compared with semaglutide alone. This is with a p-value of 0.0372 on a modified intent-to-treat population. That's nearly a 30% improvement with this combination with no observed plateau at twenty-six weeks. We also showed quality of weight loss that the combination of Nimazumab and semaglutide improved lean to fat mass ratio of 0.26 versus 0.13 with a p-value of 0.0126. And reduced waist circumference by an additional 3.17 centimeters with a p-value of 0.0492. We also showed durability that in the twelve-week post-treatment follow-up, Nimazumab plus semaglutide blunted weight regain with only an 18% regain or 2.3 kilograms versus 50% regain or 4.7 kilograms on the semaglutide alone arm. And that's with a p-value of 0.006 versus placebo. The safety signal has also been very positive. There's been no neuropsychiatric signal and no additive GI burden. And so this overall data really confirms that Nimazumab is biologically active, clinically meaningful in combination, and exceptionally well tolerated. They validate our long-held view that the mechanism is sound, and that the value now lies in refining, really, the dose to unlock the Nimazumab true efficacy window and fully capture the therapeutic potential of a peripheral CB1 antibody. Additionally, in September, we completed enrollment of the twenty-six-week extension study. A total of forty-three patients were enrolled with nineteen and twenty-four patients in the combination and monotherapy cohorts, respectively. Retention in the extension study has been very strong. And the data from the twenty-six-week extension study is expected in late Q1 2026, and we'll provide information on the potential for full treatment duration of fifty-two weeks followed by a twelve-week follow-up period. This long-term follow-up from the extension will be a new inflection point with a richer dataset and a more complete understanding of Nimazumab's clinical potential. In parallel, we're going to continue moving up the dose. So the monotherapy extension study is evaluating a slightly higher dose where we've stepped it up from two hundred milligrams to three hundred milligrams weekly, but our current plan is to even go higher. Analysis of our preliminary PKPD model showed that patients achieving higher systemic levels of Nimazumab corresponded with greater weight loss. And that aligns with the range where we expect to show clinically significant results. Our PKPD model based on the clinical data and the preclinical dose-ranging really gives us confidence that a higher dose of Nimazumab can potentially achieve better monotherapy efficacy and drive even further weight loss when combined with semaglutide. The parallel approach that we're taking with further clinical data from the extension study for the durability and then evaluating a higher dose-ranging in a well-powered Phase 2 focused combination study. With understanding a better characterization of the monotherapy dose, will really keep the development of Nimazumab on track and we're really focused on that. And we think that that's the next logical step for understanding our next important decision points. Next, I'll move to CMC. So another area that we've continued to make progress in has been all of our manufacturing and CMC work. That includes our high concentration formulation strategy. And that remains on track. And we believe a path to achieving the formulations that really align with our clinical protocols and expectations for our TPP. As well as patient convenience. Remain on track. This isn't simply, like, a technical milestone for us. It's really rooted in a commercial TPP, and our focus is on reducing overall injection volume, lowering costs per gram, and ensuring we can compete as pricing pressures on incretins continue to intensify. This aligns, we believe, perfectly with our titration-free target product profile. And that's a key advantage over the incretin-based injectables that require a step-up dosing for tolerability. To clarify, Nimazumab has shown no additive GI burden at the two hundred milligram once-weekly dose. And we expect to evaluate any higher dose without the need for titration, making it easier for both prescribers and patients. Equally important, we're continuing to evaluate and manage execute on measures that can significantly impact our cost of goods. This process includes optimization of the upstream and downstream manufacturing steps for Nimazumab and scaling up into high fermentation volumes, and we're continuing to evaluate multiple delivery devices, including autoinjectors, that will improve the patient experience. Together, these activities will have a significant impact on reducing our cost of goods to support an eventual pricing model that aligns with Medicare and is rapidly influencing the obesity market. Ultimately designing a product that is potentially not only clinically differentiated but commercially durable and real-world affordability. From a manufacturability standpoint, next, we'll move into R&D. So beneath all of the clinical data sits an increasingly powerful scientific base. The preclinical and translational work continue to show that Nimazumab reduces fat mass while preserving lean mass, improves insulin sensitivity and glucose control, lowers leptin, increases GLP-1, reduces hepatic steatosis and inflammatory markers, and maintains weight loss durability after treatment stops. And this is consistent with what we're seeing clinically. Combination studies in DIO models with tirzepatide and semaglutide show greater than additive weight loss and minimal rebound, confirming that peripheral CB1 inhibition complements incretin biology mechanistically. And collectively, these results reinforce why Nimazumab is really the right molecule, the right mechanism, and the right program to move forward. Our message to investors ever since we began development on the Nimazumab program has been about discipline and delivery, and that remains true today. In Q2, we said we'll complete the top-line readout by late Q3, early Q4, and we did that. And we presented late-breaking data at Obesity Week last week. We also said we're going to continue with the current dataset to guide our dose-ranging, and that's what we're doing. We're going to continue advancing our CMC readiness in parallel. And we continue to improve manufacturing capability. As well as process improvements are going to continue to be ongoing. We're focused on the higher concentration formulation path, and that's on track and synchronized with our clinical development planning. We ultimately expect our monoclonal antibody to be the best way to target CB1 inhibition to enable confidence in the safety, and this pathway will ultimately show the clearest mechanism validation in terms of targeting this particular pathway. With our Phase 2a data, we have now provided an important initial demonstration of Nimazumab's utility that does offer the validation of the mechanism and, notably, we did that by showing that there are no neuropsychiatric adverse events or other unexpected adverse signals across the different cohorts that receive Nimazumab. And we've just completed the fifth DMC meeting this past week with no concerns. So every commitment that we've made, we've made it on time, we've made it with precision, and we're going to continue doing that. Over the next ninety days and into 2026, our focus is on converting what we've learned from the clinical data into further execution. We're going to generate a more complete picture of Nimazumab's potential using insights from our PKPD modeling and the ongoing extension study. We're finalizing the next Phase 2 design. We're concentrating on combination and also in the maintenance indications where the data already point towards a really strong direction. And we're continuing to advance the formulation and manufacturing work so that Nimazumab can be delivered practically at scale and with the cost discipline that the market demands. We'll also be presenting at several investor conferences beginning next week and into December and gearing up for sharing new preclinical and clinical data at all the major scientific conferences and meetings in 2026. Across each of these fronts, the through line is really about consistency. We said what we would do, and we've delivered on the data, then on the timelines and on the execution. Our next steps are an extension of that same discipline, and we're interested in continuing to focus on translating all of this into momentum and the momentum into value. So this concludes the prepared remarks and comments today. We thank you everyone for joining the call, and we'll now open the call for questions from our covering sell-side analysts. Operator, over to you. Jordan: Thank you. As a reminder, if you'd like to ask a question, press 1 on your telephone keypad. Our first question comes from the line of Michael D'Afurrier from Evercore ISI. Your line is live. Michael D'Afurrier: Hi, guys. Thanks so much for taking my question. Just two for me. Now that you've had some time to further digest the data from the trial, have you gained any additional insight between late weight loss and exposure? Recalling at the time that the data were revealed, only had PK exposure versus weight loss up to sixteen weeks. That's my first question. My second question is regarding the twenty-six-week extension. Simply, are there enough patients? Forty-three patients seem sort of low, and do you have enough patients to draw any statistically significant insights? Thank you. Punit Dhillon: Hey, Michael. Thanks for dialing in and the questions. So I'll take the first question and kind of hand it over to Chris because he can further elaborate. But as you indicated there, obviously, we showed a really strong validation of the mechanism in the combo efficacy. Monotherapy dosing, I think, has been evident in terms of issue with dose, not the biology. The exposure response really has demonstrated that the observed concentrations at the two hundred milligram dose didn't achieve the efficacy that we would expect because they were patients were underdosed. But Chris, yeah, can further elaborate in terms of what we've seen now based on the twenty-six-week dataset as well as any he wants to point to from the preclinical data. Christopher Twitty: Thanks, Punit. Yeah. So to that point, we have, in fact, looked at a more complete PK dataset. I would just note that the final PKPD analysis is still underway, likely won't be available probably for another few more weeks to a month. But we do have a more robust build-out, and we looked at a mixed-effects model both controlling for the placebo effect as well as doing a similar type of modeling where we controlled for the semaglutide effect and looked at that in a combo setting, and in both instances, we see that there's really no bias in the residuals, so the models fit well. They align with the observed weight change that we saw in the trial. And importantly, they point to the point you're making. That is, we're seeing a nice slope, a very believable, credible slope that demonstrates this response related to exposure. We feel very comfortable that the PK data is holding. We'll again have the final PKPD model, but we feel very confident that, in fact, there is a dose response. And as we get to better and better exposures, we will see better and better weight loss as both monotherapy and in combination. And the other thing I've just pointed briefly since we've last talked, Michael, the translation of the DIO data has been further validated. We've done some important biodistribution studies looking at where are the compartments and how those fill relative to what's in the serum and using that along with some other approaches to really get a good fit in terms of how the DIO data, which demonstrates very clean dose response as well, how that translates to the clinical doses. So both those pieces are really supporting this concept of higher dosing in the clinic to see better weight loss. Punit Dhillon: Michael, would you mind just repeating your second question? Or did we answer it? Michael D'Afurrier: No. So my second question is regarding the twenty-six-week extension data. It just seems that only forty-three patients are enrolled, it seems kind of on the low side. And I was wondering if that's enough patients to draw any statistically significant insights for when the trial wraps up. Punit Dhillon: Yeah. So the good news on the extension is that enrollment has been well, obviously, that was good. That we saw a good interest in the study, and then retention has continued to stay really strong. You know, it is a smaller number of patients relative to the core study, the first part. But we do believe that there will be a clear separation, that we would be able to see, especially, if you recall in the twenty-six-week time point, the first twenty-week time point in the combination, we did see a really strong difference. And then the slope wasn't plateauing. It continued at So we hope that we're going to continue to see that separation between semaglutide alone. On the monotherapy, you know, as we've indicated, we believe that there's still room to go higher in terms of dose. So we'll see what the data reveals. But, at this point, it's a little tough to comment on that because we don't have that separation that we expected in the first twenty-six weeks. Michael D'Afurrier: Great. Thanks so much. Jordan: Your next question comes from the line of Andy Isaiah from William Blair. Your line is live. Andy Isaiah: Great. Thanks for taking our questions. We have two. One is more on the regulatory side. So we're curious, you know, very provocative data looking at the weight rebound. Do you need to have a monotherapy approval before a potential maintenance approval? Just trying to get a sense of the sequence and requirements, you know, based on your regulatory discussions with the agency. So that's number one. Number two is we looked at comparative kind of randomized withdrawal studies in particular step four. With semaglutide, it seems like in that study, the weight regain was about 50%. Out to one year. In this study, the weight regain was much faster. So I'm curious if there's any sort of patient baseline characteristics that you want to highlight that could explain the more rapid than expected weight regain from the semaglutide arm. Thank you. Punit Dhillon: I think these are both great questions and interrelated. I can pass it over to Dr. Arora to take those, and then I might come back with some additional commentary on the maintenance setting. Puneet Arora: Yeah. Andy, to address your first question, yes. If we were to do maintenance therapy with Nimazumab as a monotherapy, that would require monotherapy approval. Although, you know, if that is the strongest suit for the drug, then the approval could be as maintenance as well. And, you know, we are as part of our plan as we go forward is to continue looking at the monotherapy to find that optimal dose and frequency on how to dose monotherapy for varying indications, including maintenance. That's a question that we will be discussing with the agency, and I think that will be part of our continuing interaction with them as to how to push both monotherapy and combination forward and what differential path each one may need. So I'm sorry. What was your second question? Punit Dhillon: It's just on the regain piece. Yeah. Dr. Arora, I think Oh, yeah. Puneet Arora: So, you know, if you look across if you look at weight rebound data across a bunch of studies, there was a step one withdrawal study. I think it's one of the ones you're had some. And then tirzepatide did some randomized withdrawals. In one year, the total weight regain is about it does tend to be somewhat accelerated in the first half because the weight begins faster initially and then tends to plateau a little. We do see a somewhat faster regain in this study. We don't know why. It's, you know, we don't know particular characteristics that we're seeing in the demographics. The study of, frankly, the same as you see in most other studies. So we don't know why these patients regain their weight this quickly, but they did. And, you know, being a randomized trial, we figure that both the cohorts are effectively similar. Punit Dhillon: If I could just elaborate on one thing, Andy. So you look. The durability data that we've showed last week with the only eighteen percent regain versus fifty percent semaglutide alone, is I believe, a real cornerstone of our strategy, and it really validates what you saw from an R&D preclinical perspective. It shows that peripheral CB1 inhibition can provide a durable effect after treatment stops, which is a significant issue for the incretin-only therapies. And I noticed, you know, from coming from Obesity Week, there's been a growing emphasis of the incretins or companies that have incretin pipelines focusing on the maintenance market as well. We believe that it's this comment we made at the last earnings call, and we stand by it, is we do believe that we really have an interesting opportunity for Nimazumab to aggressively pursue a maintenance indication, which we, you know, conformally kind of look at once we finalize our dosing strategy. But we see a massive commercial opportunity that's differentiated because it's more likely and doctors will confirm this, that they would treat with a differentiated mechanism rather than maintenance with another incretin after induction of incretin is completed. And, no twos investigated that from a commercial standpoint, from the survey that we've done. And that's been confirmed. Two, do you want to just expand on that? Christopher Twitty: Yeah. No. I don't I think you kind of covered it. Pretty well. I think it is important to understand that the maintenance approach therapy is something that's being looked at a lot, not just by Skye Bioscience, Inc., but from investigators and clinicians as well as obviously, you know, other companies. And then as Punit said, you know, right now, there's not a lot of options other than another GLP-1 to go on. And so physicians are generally either reluctant or, in fact, I said at least the ones I've spoken to, generally, I should put them on something else other than a GLP-1. Like a phentermine or something like that. That makes more sense because it's a different mechanism of action. Even though it may have some other comorbidity issues as well as maybe not be as effective. So I think, again, in that space, I think there's a real market for a drug like Nimazumab. That we think we can where we think we can win. Andy Isaiah: Oh, great. Thank you so much. Yep. Jordan: Your next question comes from the line of Ananda Ghosh from H.C. Wainwright. Your line is live. Ananda Ghosh: Hi, guys. Thanks for taking my question, and congratulations on the combo data. Looks really impressive. One of the questions I have is, like, what kind of, you know, the magnitude of data do you believe can be clinically and commercially viable when you are thinking about the combo potential? And was also curious to know what was the quality of weight loss in terms of, you know, the lean mass. That will be helpful. Thanks. Punit Dhillon: Yeah. I think it's a great thanks, Ananda. I'll turn it over to Puneet Arora. He can take both those questions. Puneet Arora: Yes. Ananda, thanks for that question. Now you've seen that a lot of the effective weight loss medications that we've cluster is around the 22% range. In fact, if you, you know, if you speak to most basic physicians, they'll tell you that a lot of patients don't even need, frankly, once you start exceeding about 10% weight loss, you can reverse a lot of comorbidities. But insofar as the benchmark today is about 20%, semaglutide or a generic GLP-1 usually gives you about 15% and then you start seeing the other combinations adding up to another 6% like you see with tirzepatide, the differential that we would hope for. We're already seeing in our protocol set here of 14 and 14 something percent weight loss. At twenty-six weeks, which is three and a half percent more than semaglutide alone. So about a 35% increase. And we think that when we do a full 52, actually, a sixty-eight-week treatment, which is where all these are measured, we will have a combination treatment effect that will be in the range or better than what we are seeing with all these other current combinations. We are actually seeing improvement in body composition along with this thirty extra. So we had planned this at Obesity Week as well. What they're showing is that if you just look at the crude numbers, semaglutide alone has about 72% fat loss and 28% lean mass. And when you add Nimazumab to it, this actually becomes 76% fat loss and only 24% lean fat loss. So there is a transition towards fat mass loss. And when we break this down, we see that as you know, there is 30% extra weight loss. Right? But the fat loss goes from 15% for semaglutide to more than 20% when we look at the combination. Whereas the lean mass loss almost doesn't change. It goes from about 5.5 to 6%. And that is what is showing that is the effect that we are seeing in the Lean2FatMask ratios and why the body composition is improving. So all of the additional weight loss that we've seen is almost all fat mass loss. Our secondary endpoint, to be specific, was linked to fat mass ratio. And that ratio should increase with weight loss. And the more the increase, the better your body composition is. And in our trial, semaglutide increased that lean to fat mass by 0.13. And the combination improved it by 0.26, which is twice the improvement. And this number was actually significant. The p-value was 0.01. Ananda Ghosh: Got it. Thanks. That was very helpful. Jordan: Your next question comes from the line of Jay Olson from Oppenheimer. Your line is live. Jay Olson: Oh, hey. Thank you for providing this update. We have two questions. Our first question is about your current thinking around the potential for studying a combination of Nimazumab plus semaglutide for induction of weight loss versus maintenance of weight loss. While acknowledging the regulatory considerations, it seems like they both may offer potentially significant commercial opportunities. So how are you weighing the pros and cons of induction versus maintenance? And then I had a second question, if I could. Punit Dhillon: Yeah. Thanks, Jay. Thanks for joining the call today. That's a key question. We are certainly focused on the induction side, you know, when we're seeing this improvement that we've showed over the course of this early dataset with no observed plateau at twenty-six weeks. It really demonstrates a synergistic activity. And it's been very encouraging. We're looking forward to seeing what the fifty-two-week data reveals, but the current focus for the Phase 2b is on evaluating the right and optimal dose in combination with sema. And I think there's a little bit of other supportive data that we've seen from a preclinical perspective that Chris might be able to point to, in terms of why we feel confident that dosing higher can lead to a better deeper weight loss in sema because of the data that we've seen so far, which tirzepatide and SEMA in combination. Chris, do you want to discuss that? Christopher Twitty: Sure. Yeah. To that point, we directly ask that question in light of our recent clinical data. It's important to understand as we get better exposure moving from what we've modeled to be something very similar to our CVRN lumasiran dose, which we're calling sort of a suboptimal dose in this DIO preclinical model, and then a more active dose. An active dose represents something that we're looking towards potentially using in future trials. So, comparing the difference between the active and the suboptimal, you can, of course, see that as a monotherapy in terms of weight loss. Importantly, when we look at this in the setting of combination, we see while the additive effect is there, we really see a large improvement beyond the magnitude you might expect with the monotherapy. So it seems to really unlock the combo potential as well and maybe even beyond what we said with monotherapy. It's important, we think, to really get the dose right as we look towards sort of that induction or that combination approach in the clinic. Punit Dhillon: And I think it's just important to us to emphasize that it's really relevant in terms of being a truly differentiated, alternative or orthogonal approach to what's out there in terms of current combinations. So although the data is early in the twenty-six-week data, it is very, very encouraging. When you do stack it up across these other combinations, it's really interesting to see how deep that response is initially. So like, you know, we're all excited to see what how that reveals in a longer fifty-two-week data point. But it makes a at the moment, it makes a very compelling case for us to evaluate this in a Phase 2b combo. Hey, Jay. Jay, this is two. I just wanted sort of also add in the relevance of this sort of this rebound data and what I think that also means potentially for a market opportunity, not just in the maintenance setting, but also more in the combination setting where you can get that induction of weight loss. And if, you know, in the real world for patients, you know, need to go on a dosing holiday. For whatever reason. Maybe they're actually going on holiday. They just don't want to bring their drug with them. Or maybe they have other things. Maybe there's access issues, things like that. You know, what our data suggests is that that's not going to be a big as big of a problem as it has been when patients do either lose access to their GLP-1 or lose or have to go on vacation or have other reasons, that they're not going to have a significant rebound by like, we're seeing in that, like, the step one data has shown and that you can have this sort of holiday without sort of losing the gains that you've achieved through the treatment. So I think that's really meaningful. I think a lot of because physicians are looking at that and what that means as well, how you can manage patients' weight. Over a much longer period of time than just sort of these sort of compressed times you're seeing in clinical trials. And what that really, really means in the real world for patients. Jay Olson: Okay. Great. Thank you. That's super helpful. And if I could ask a second question. Can you please talk about any KOL feedback you've received following your top-line, CBEYOND Phase 2a data and also any feedback you may have received at Obesity Week? Punit Dhillon: Yeah. I think Chris is, or sorry. Two, probably versed and two and Dr. Arora, you guys can take those questions. Christopher Twitty: Yeah. Thanks for the question, Jay. I'll say that the reaction was positive. I think they see the combination data as very intriguing. They think that the responses that they're seeing are different, and they definitely look forward to us looking at much at sort of the dose-ranging study. They obviously see that that's a key and that's going to be really important for us to establish that sort of baseline with that optimal dose. Dose is going to be. In terms of the blunting of the rebound, data that also has kind of resonated with a number of physicians and KOLs that we've spoken to to the point that I actually just brought up earlier in one specific physician actually brought that up and said, this is really cool data. And if this means that a patient can, you know, go on a dosing holiday and not have to worry about gaining their weight back, then this can be really meaningful for their practice. So, yeah, I think ultimately, positive. They and, again, from a monotherapy side, I think they recognize our need to dose higher. And but they don't see that as necessarily a deterrent for the future of the program. Puneet Arora: And I think that, you know, some of the leading physicians out there had experience with CB1 before. So that's where they've had interest in for a long time. And the, you know, psychiatric events have been a source of trouble. They're really I think they're really enthusiastic about the idea that you can get these if and get them in a safe and tolerable manner. So there's a rekindled interest now that we are showing with this biological activity, and you can do that with an antibody without crossing the blood-brain barrier and getting these neuropsychiatric effects. Punit Dhillon: Yeah. That's great that you emphasized that, Dr. Arora. I mean, I think that was the biggest immediate takeaway once the data hit the tape that we saw when we spoke to our clinical advisory board and other investigators that a lot of folks had recognized that this was a big leap forward for the class. This is the first time that any dataset has been shared with no neuropsychiatric adverse events. So that's a really important kind of step for us in being able to give us the comfort to be able to dose higher. And we feel confident that there's going to be biological activity. Jay Olson: Excellent. That's super helpful. Thanks for taking the question. Punit Dhillon: Thanks, Jay. Jordan: Your next question comes from the line of John Wolleben from Citizens. Your line is live. Catherine: Hi. This is Catherine on for John. I got kind of a quick question about what you expect from the monotherapy arm. In the twenty-sixth-week update. What do you want to see in order to give you confidence in kind of choosing the password? I know that we talk a lot about the comm arm because for obvious reasons. I was wondering about that. Punit Dhillon: Hey, Catherine. Thanks for joining the call and stepping in for John. We, yeah. So from the next twenty-six-week data, the differences here is that we've added increased the dose from two hundred milligrams to three hundred milligrams. What we have emphasized, obviously, to our clinical sites is really making sure that there's strong follow-through in terms of the not only from a patient retention standpoint but ensuring that if there's any noise here regarding compliance, we rectify that. So at the end of the day, what we're really looking for is a better understanding for our PK model. At this dose. In terms of efficacy, so really hard to predict at this point in terms of what that's going to be relative to what we've seen so far in the first, you know, based on the twenty-six-week data. We're obviously encouraged by the PKPD modeling that we've done at higher doses that we should be able to reach the five percent or higher bar but we need to see that data, and we want to make sure that we have improvement in terms of our sensitivity around the PKPD understanding. Puneet Arora: Okay. So much. Definitely. That's just to clarify, we did use a slightly higher dose in the extent but as Punit said, primarily to help us help us refine our PK models. We will be when we do a Phase 2 study, we will look at meaningfully higher doses and different exposures, and we think that will give us a more positive result. Catherine: And I know that in the past, said about a thousand you're going to go up to a thousand milligrams. Have you changed your thinking at all on that on the target for the higher dose? Punit Dhillon: Yeah. We're still working through that, Catherine. For monotherapy, we expect basically to unlock efficacy at higher doses. So we've, you know, like we said, it's in line with our exposure in response modeling, and it hasn't necessarily ruled out that the two hundred and three hundred are effective doses as well. I think we had some lack of consistency in terms of what we saw in the face in the first twenty-six weeks and in our slides that we shared during the top-line data review. I think we showed some indication of what the optimal dosing would reveal and those patients that had increased exposure response, they tended to do really well. Versus the patients that were suboptimally dosed or had lower exposure response. So I think what we need to see is if that is kind of course-correcting in what we're evaluating, and then we have confidence that dosing higher is definitely going to show a higher likelihood of efficacy signal that we expect to see and we expect that to be over five percent at twenty-six weeks. At these higher doses that we want to evaluate. Thank you. Jordan: Your next question comes from the line of Ted Tenthoff from Piper Sandler. Your line is live. Ted Tenthoff: Great. Thank you so much for taking that question. And I wanted to maybe dig into the other side of going higher on dose. And from the combination of earlier studies preclinical data, and then the initial CBEYOND results, obviously, we're going to keep a close eye on potential CNS side effects. Is there anything else that we should be really focused on or that could sneak up on us from a safety standpoint of taking the doses to the substantially higher level? Thanks so much for answering the question. Punit Dhillon: Hey. Thanks, Ted. Yeah. I think we feel really confident about the safety signal and allowing us the room to go higher in terms of dose, especially from the standpoint of any concern of neuropsychiatric adverse events. So we, you know, in this study, based on our phase one data, based on our tox data, there's a substantial amount of room relative to where we're at in terms of dosing. In terms of other safety concerns, I think we have to see. So we don't have, you know, the data yet with at higher doses over this longer period of time, whether that's a change in terms of GI tolerability. But we feel at this point, based on the data that we've seen in the Phase 2 that there wasn't any concerns to be able to go higher. But, you know, across the class, it seems to be a little bit different. Some small molecules have had only about 30% GI issues, and then the 60% GI issues. And we don't know if that's linked to CB1 yet or if it's, you know, or it's, like, if it's molecule specific. At the moment, though, there still seems to be substantial room for us to be able to evaluate that. And mechanistically, it's not, you know, it's not the same. It doesn't the mechanism is different than what the GLP-1 drugs are doing. So we feel that we shouldn't have any exacerbated GI burden. But, Dr. Arora, you might want to take that further. Puneet Arora: Yeah. You know, it's been my sense that even with the data, if you go back to rimonabant, that even though they showed 30% GI effects, there was a certain placebo effect as well that's worth comparing to, which seems to suggest that the GI effects that you see with the CB1 pathway are not that significant. And, of course, with Nimazumab, we are showing even better results at this dose where essentially there's no difference between placebo and what we are seeing with the drug. Some with the GLP-1s, which is where, you know, all the attention comes from, I believe that a lot of the GI effects tend to come because of the central action on the area on places near the hypothalamus like the area postrema, whose job is to see what's going on in your blood and cause you to have nausea or vomiting if they think that there is something that's deleterious and stimulating receptors that is causing that. And it's very possible that the CB1 mechanism doesn't actually do that. And that's why you see GI effects being so much more muted with this mechanism, and especially with the antibody, Nimazumab. We will test this as Punit said, with higher doses, but we're pleased to see that at least with the dose that we've tested, we are seeing really neutral effects. Ted Tenthoff: Yeah. That's great. And in the next study, how long do you think you'd be able to dose? Thanks so much for taking my questions. Punit Dhillon: Thanks, Ted. So in a yeah. Puneet Arora: Oh, go ahead. Go ahead, Punit. Punit Dhillon: Yeah. Go ahead. So in a Phase 2 study, I mean, we would we wanted those people all the way out to a year of fifty-two weeks, but we haven't we're still looking at what the primary structure of the study should be. What we'd like is to design a study that will move us meaningfully towards doing pivotal studies. So we may still read out data at, say, twenty-six weeks where, you know, you can get a substantial indication of how individual doses are working and get a lot of safety information. But, you know, we do want to design studies in the end where the patients that we recruit get longer-term treatment and can be treated for a year or even longer. Ted Tenthoff: Yeah. That's great. I really appreciate all the answers, guys. Thanks so much. Punit Dhillon: Thanks, Ted. Jordan: There are no further questions for the Q&A session. Thank you for attending Skye Bioscience, Inc.'s Third Quarter 2025 earnings call. You may disconnect. We are now back in private mode. Great job, everybody. Have a great day.
Operator: Good day, and thank you for standing by. Welcome to the Gevo, Inc. Third Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you'll need to press star 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again. Please be advised that today's conference is being recorded. I would now like to turn the conference over to your speaker for today, Eric Frey, Vice President of Finance and Strategy. Eric, you may begin. Eric Frey: Good afternoon, everyone, and thank you for joining us on today's call to discuss Gevo's Third Quarter 2025 Results. I'm Eric Frey, president of finance and strategy at Gevo. With me today, we have Patrick Gruber, our chief executive officer, Oluwagbemileke Agiri, our chief financial officer, Chris Ryan, our president and chief operating officer, and Paul Bloom, our chief business officer. Earlier today, we issued a press release that outlines our third quarter 2025 results and some of the topics we plan to discuss. A copy of the press release is available on our website at www.gevo.com. Please be advised that our remarks today, including answers to your questions, contain forward-looking statements within the meaning of the Private Securities Litigation Reform Act. These forward-looking statements are subject to risks and uncertainties that could cause actual results to be materially different from those currently anticipated. Those statements include projections about the timing, development, engineering, financing, and construction of our alcohol to jet projects, our future carbon credit sales, our Gevo North Dakota and RNG plants, and other activities described in our filings with the Securities and Exchange Commission, which are incorporated by reference. We disclaim any obligation to update these forward-looking statements. In addition, we may provide certain non-GAAP financial information on this call. The relevant definitions and non-GAAP reconciliations may be found in our earnings release, which can be found on our website at www.gevo.com in the investor relations section. Following the prepared remarks, we'll open the call for questions. I'd like to remind everyone that this conference call is open to the media, and we're providing a simultaneous webcast to the public. A replay of this call and other past events will be available via the company's Investor Relations page at www.gevo.com. I'd now like to turn the call over to CEO of Gevo, Patrick Gruber. Pat? Patrick Gruber: Thanks, Eric. What a change we've had. The acquisition of our ethanol plant, carbon capture plant, and class six sequestration well is turning out even better than we imagined. All of this is located at Gevo, North Dakota, or GND as we refer to it internally, and it's all operating really well. We learned that our carbon sequestration well is unusual because, a, it has a class six sequestration well that's been operating since June 2022. B, we are the only ones using the formation of our well, and that simplifies the auditing as such. And c, it's in an unusually good geology. In fact, a European certification group, Pure Earth, which is owned primarily by Nasdaq, certified our well as a thousand-year performance well. We understand that we're the only alcohol site in the world so far with this certification. Also, I must say that North Dakota is an outstanding state in which to do business and grow. It's pro-agriculture and pro-energy business environment, so we fit in really well. Great assets combined with a great business environment combined with growing markets, I believe, leads to great opportunities for growth and making money. That's what's in front of us. At Gevo, we have long believed that carbon is an important coproduct that if we can monetize the value for carbon, we can unlock economics for growth products like jet fuel. We are pleased to find out that we can, in fact, monetize carbon value through a variety of methods that Paul Bloom, our chief business officer, will explain in a few minutes. In our business model, we view selling carbon as a key initiative. On a separate and unrelated front, we are learning how to generate and sell production tax credits. These credits are based on the volume of ethanol produced and the carbon intensity score of that ethanol. Because we have a very efficient ethanol plant, with a carbon capture and sequestration well beneath it, we can achieve very low CI scores utilizing the rules of section 45Z of the one big beautiful bill. Oluwagbemileke Agiri: Like, Yagiri, our CFO, will give more color on this topic in a few minutes, but I can't hold back. I am just so pleased that we sold all of our credits for 2025 production for a total of $52 million worth of credits. I gotta say, we had a lot of learning to do about this too. Lots of auditing, lawyers, insurance people to make these deals as bulletproof as possible. When we start adding up the potential adjusted EBITDA from selling carbon, generating tax credits, making more ethanol, using more of the well, we can see a picture for GND where we could potentially generate more than $100 million a year of adjusted EBITDA just from that site. Get this. This is all without deploying any large capital projects or building a jet fuel plant. Now the question is how best to go about it. Obviously, we're gonna go for the low-hanging fruit first, like incremental expansions of CO2 volume. Through my incremental ethanol expansion. And by optimizing which markets we place our carbon credit products in. It's all pretty exciting. Haven't seen our recent investor deck, please go take a look at it. It spells out more clearly what we're thinking. When we meet with investors and they see what we're doing at GND, they suggest that we should figure out how to use more of the well, produce more ethanol. To improve the adjusted EBITDA base. And then, of course, get on with getting the jet plant built. GND provides an outstanding platform from which to grow. It's obvious when people see what we're doing. GND does, in fact, present a great site to build a jet fuel plant. We have ethanol feedstock, great farmers to supply the ethanol plant, carbon sequestration, an industrial complex that's already built. And so now adding a jet fuel plant is incremental. It makes a lot of sense. When we look forward, we think that adding a 30 million gallon jet fuel plant would add an additional adjusted EBITDA uplift of about $150 million to the site. Operator: Think of that. Patrick Gruber: We recently were notified by the Department of Energy that they consider shifting their loan guarantee to Gevo North Dakota from South Dakota. I suspect they see the same things we do. Infrastructure already exists, The plants that are there make money. And we can build upon that. And we'll be working with them to sort it all out, taking advantage of what we learned from our ATJ 60 project. I hope to get the financing for the ATJ 30 plan closed sometime mid-2026. Chris Ryan, our president and chief operating officer, will talk about the operations of GND and our RNG facility, then give an update on where we are, with the ATJ 30 project giving color to the growth plan and cost. Okay. I've talked enough. I'll turn it over to my team. Leike. Oluwagbemileke Agiri: Thanks, Pat. We are pleased to have delivered another quarter of improved financial performance. Now here are the numbers. We ended the quarter with $108 million in cash, cash equivalents, restricted cash. During the quarter, combined operating revenue, interest, and investment income was $43.6 million. Our loss from operations was $3.7 million, and our non-GAAP adjusted EBITDA was a positive $6.6 million. Gevo North Dakota generated income from operations of $4.3 million, and a positive non-GAAP adjusted EBITDA of $17.8 million. Gevo RNG generated income from operations of $500,000, and positive non-GAAP adjusted EBITDA of $2.7 million. Net loss per share attributable to Gevo was 3¢ per share for the third quarter. Just as a reminder to everyone, last year, third quarter revenue was approximately $2 million, This year's third quarter revenue was approximately $43 million. Or an increase of approximately $41 million. Last year, our third quarter adjusted EBITDA was approximately negative $16.7 million. This year, third quarter adjusted EBITDA was approximately $6.6 million. Or an increase of approximately $23 million. A key driver for improved financial performance can continues to be Gevo North Dakota. Which is now a core earnings engine for us. This site is demonstrating reliable energy production, efficient carbon capture, and consistent monetization of clean fuel production credits, or section 45Z tax credits which are based on production volumes, we generate and carbon intensity score. We're also successfully selling voluntary carbon credits to customers who value verified carbon removal. After the end of the quarter, we completed a sale of our remaining 2025 section 45Z clean fuel production credits from Gevo, North Dakota bringing our total contracted sale for the year to $52 million of credit. We also received net proceeds of approximately $29 million so far. We expect to bring in the rest of the cash over the next quarter or two. We just need to get our carbon into the ground first. We generate production tax credit based on two key metrics. Our production volumes and our carbon intensity score. Our score reflects how we manage energy usage at our plants, the amount of cargo we sequestered, and other operational factors as measured under the section 45Z methodology. In order to deliver the credit to customers and bring the associated cash in, we need to generate the credits first. However, when we produce the gallon of ethanol, the value of the related credit is applied to our cost of goods sold. So this creates a timing difference between what we see on the income split versus when the cash comes in. One way to think of it is that our cash from operations can temporarily lag our adjusted EBITDA performance. We view this as a normal aspect of the tax credit monetization cycle. As we move forward, we expect our operating cash flows to normalize and trend towards breakeven or better in the coming quarters. An additional point I can't forget to mention, and it's important, is our tax credit sales continue to be backed by a tax insurance policy which mitigates much of the residual risk. Of this credit transfer transaction. Taken together, these steps positive adjusted EBITDA generation, recurring monetization of 45Z tax credit, and a credible pathway to breakeven operating cash flow. Positions us for steadily improving cash generation and financial flexibility. Now I will hand it over to Paul. Paul? Paul Bloom: Thanks, Lincoln. One of the most exciting parts of our progress this year is how we're capturing and optimizing the value of our carbon dioxide coproduct is approximately 165,000 tons per year, that we are sequestering at our CCS site in North Dakota. During Q3, roughly 90% of all the carbon benefits associated with our CO2 sequestration remained attached to ethanol gallons and were sold into low carbon fuel markets. We are seeing strong values in select low carbon fuel markets, and look to take advantage of those where we have active pathways that include CCS. Going forward, we are applying for more pathway approvals in low carbon fuel markets that include CCS, allowing Gevo optionality to target those markets with the highest returns. More importantly, we are expanding the portion of our carbon value derived from CCS that we separate from the fuel and sell into the carbon dioxide removal or CDR credit markets. Our recent $26 million five-year agreement with BioRecro for carbon dioxide removal credits is a prime example of this growth. In addition, earlier this year, we were featured in Nasdaq's corporate sustainability report as one of their suppliers of high integrity, durable carbon dioxide removal credits. This is great recognition and we believe it shows that major corporations are looking for the high integrity carbon removal credits that Gevo can provide. We think the high durability and quality of our carbon dioxide removal credits are critical components of the credit value and market acceptance. We anticipate our CDR sales will continue to grow from $1 million in the second quarter to 3 to $5 million by the 2025. We expect this business to keep growing in years to come. Backed by a combination of spot sales and multiyear agreements. Our CDR credits are certified under the PURAL EARTH standard, which we believe is becoming one of the leading frameworks for corporate buyers. When you buy our carbon credits, the CO2 has already been verified as being sequestered over a mile underground in the appropriate geological formation where it mineralizes over time and is rated to remain secure for at least a thousand years. We also believe our ability to produce high integrity credits to the market today is a differentiator for Gevo. According to the reporting platform CDR FYI, focuses on the durable carbon credit removal market, approximately 38.5 million metric tons of carbon dioxide removal credits have been sold. But only 2.5% of these have actually been delivered. We think this puts Gevo in a unique position of being able to produce and deliver credits today while others are still working to activate their projects this growing global market, that we understand has a total value exceeding $10 billion. We believe the ability to detach the carbon value from the commodity fuel is unique and powerful because it allows us to serve the market more efficiently. This approach also aligns with our planned synthetic aviation fuel business. For example, the agreement we signed with Future Energy Global or FEG in April demonstrates our intentions to offer customers more choices and improve service by selling voluntary carbon credits separately from our commodity jet fuel. Since it will take time for SaaS to be available at major airports worldwide, our agreement with FEG will allow airlines and corporate customers to purchase carbon credits from FEG which have been separated from the physical fuel we produce to offset their emissions through a book and claim approach. And, of course, we believe all of this will be better enabled by Verity, our digital carbon tracking and verification platform to deliver the proof customers need while avoiding double counting. Through measuring, reporting, and producing verifiable carbon intensity, from farm to flight or fleet Verity aims to simplify carbon accounting through complex supply chains to track final fuel products, and carbon credits with the transparency, trust, and truth customers require. It's going to help us farmers, and other biofuel producers turn carbon into measurable and marketable coproduct while bringing new transparency to the low carbon fuel ecosystem. And to that point, Verity has been installed at our Gevo North Dakota facility, and we anticipate it will be fully functional by the end of the year. In addition, in Q3, Frontier Holdings LLC announced a strategic partnership with Verity and Gevo to offer North America's first integrated carbon management platform for ethanol producers. Frontier plans to deliver CO2 by rail solutions and permanent CO2 storage in Wyoming while Verity provides the digital platform for full carbon tracking. Frontier anticipates this unique combination will provide carbon management solutions to ethanol plants don't have direct access to geological storage or access to proposed CO2 pipelines. While Verity brings our carbon accounting platform to the table, to help ethanol producers monetize their carbon dioxide coproducts. We like this approach for Gevo as it could unlock new potential ATJ 30 sites that we can explore with more verified low carbon ethanol producers. And with that, I'll hand it over to Chris. Chris? Chris Ryan: Thanks, Paul. At this time of year, the thing that takes up a lot of our attention in operations is corn harvest. At Gevo North Dakota, we're happy to have a great relationship with the farmers up there who supply us with the 23 million bushels per year corn we need to keep the plant running. This year, those farmers have done a great job turning out a record harvest in North Dakota in spite of the early frost that occurred in the western part of the state. This season is a good reminder that while weather can have a negative impact on some farmers, overall, the ag industry continues to get more crop out of the same amount of land which creates a need for new uses such as staff. Which I'll talk about in a minute. Farmers in North Dakota are nearing the end of harvest, and at Gevo, North Dakota, we're nearly full of our 3 million bushel capacity with our cash bids currently around 40 to 60¢ per bushel under the Chicago board price dependent upon delivery month. This is important for our investors to understand. The point is when thinking about making products like SAF from alcohol to jet, have a lot of low cost, low carbon, easy to handle feedstock at scale begins with our relationship with the farmers. Related to that, a few weeks ago, we had our second community event where we had nearly 100 farmers and community members spend a couple of hours with us at Gevo while we talked about our improvements at the North Dakota site and our vision for the future. The audience was very engaged and supportive, which makes our work up there much more meaningful. Moving beyond the farmers to our Gevo North Dakota operations, I'd like to acknowledge once again the great job our team is doing in maintaining, improving, and operating the assets. There. The improvements include fundamental things such as new truck scale critical for receiving corn and selling feed, improving roads to ensure safety for those farmers, and several energy efficiency improvements. The operations team successfully completed a safe turnaround of the plant in five days in September and came back online quickly. For Q3, they ground over 5 million bushels of corn, while producing and selling over 16 million gallons of fuel ethanol 46,000 tons of high protein animal feed, nearly 5 million pounds of corn oil, all while sequestering 42,000 tons of carbon dioxide which generates the carbon dioxide removal credits Paul mentioned. That brings us to over 550,000 metric tons of CO2 that's been sequestered at the site since the sequestration operation began in June 2022. That's proof that we can capture carbon reliably each and every day we operate. Which is well over 350 days a year. And remember that the captured CO2, it was it was originally pulled from the air through photosynthesis by plants. Then released during our fermentation process in nearly pure form us to sequester underground. Addition to the operations team, we have a team of engineers at Gevo engaged in engineering a number of improvements at the site along with engineering the 30 plant. Which is designed to make staff. Improvements include expanding the ethanol plant, both incremental and step change expansions, expanding corn storage and receiving, expanding our carbon sequestration and utilization, improving energy efficiency, We expect that incremental improvements to will lead to substantial increases in adjusted EBITDA at North Dakota. And the step change projects we have in mind could make it even bigger. The ATJ 30 project and expected adjusted EBITDA would be even more growth on top of it all. On the ATJ 30 project, design and engineering work are progressing well. We're leveraging our patents and know how from previous project design work to shorten our design time simplify construction, increase efficiencies, and and manage carbon. We currently estimate the installed capital cost to be around $500 million not including financing related costs. I'm happy to report that we've partnered with the state of North Dakota on a couple of our improvements, thanks to the North Dakota Department of Ag, for their generous grants of over $3 million to help us improve energy efficiency of the plant and expand infrastructure required for the ATJ 30 project. Our long term vision for the future of jet fuel plants is straightforward. Build ATJ 30 right here at Gevo North Dakota, prove it out, and then copy, edit, and paste that same blueprint across other strategic locations in The US and globally. Today, we want the site to showcase farming and carving management done right. In the future, we want ATJ 30 to showcase alcohol to jet done right. A model that can be replicated efficiently using abundant domestic feedstocks, proven carbon management systems. Behind all this progress is a talented team of operators, engineers, and community partners who make it happen every day. And, of course, we couldn't do it without the support of our farmer partners in the state of North Dakota which continues to be a terrific place to do business. Back to you, Pat. Patrick Gruber: Thanks, Chris, Paul, and Leke. We have advanced. We've been derisking our plans to get the jet fuel production. We've known that to achieve the best economics and carbon scores for jet fuel that ethanol and the ATJ process need to be integrated And that we need a carbon sequestration to achieve our carbon footprint goals. At Lake Preston, we would have had to build all three greenfield, albeit the sequestration would have been done in cooperation with the Summit Pipeline. Well, today, we have an outstanding ethanol plant and sequestration. Great. Derisks. We make money on those assets to boot. Oh, and we get learn we get to learn how to monetize the carbon with real carbon products. Now we should maximize the adjusted EBITDA from those assets and get on with the ATJ plant. The pieces are coming together. Let's go ahead and open it up for questions. Operator? Operator: As a reminder, if you'd like to ask a question at this time, please press wait for your name to be announced. To withdraw your question, please press 11 again. Our first question comes from Derrick Whitfield with Texas Capital. Derrick Whitfield: Good afternoon, guys, and congrats on all of your progress over this last quarter. Patrick Gruber: Hey, Derek. Yeah. Thank you. It's been pretty cool. Referencing slide 12, it it's clear Gevo North Dakota represents significant upside to your EBITDA projections. Maybe speaking to this slide, could you elaborate on the incremental capital and steps required to optimize your operation? And a reasonable time line to achieve a $110 million of EBITDA. Yeah. So I it's incremental capital. Incremental capital is like in that $15 million ish, plus or minus a few million. Range. That's what we think it is. It could change. And this is about debottlenecking the ethanol plant to its natural get it so can reduce maximally with what we have there. Also, optimize the energy use, the capture of more carbon dioxide, all those kinda normal things you can do. Remember, there's leverage every time we do something like that because it's produced more ethanol. You get more CO2. We can capture more CO2. We can optimize energy, capture more CO2, etcetera. And when Chris is referring to a step change, that would be adding additional ethanol capacity per se, like a whole another plant. We're gonna look at too. I just wanna have a timeline for that. So what you see on slide 12 in our investor presentation, and what, for everybody else, what Derek is referring to is that we have a net EBITDA of something like $40 million on the left side adjusted EBITDA on the left side of the slide, it's $40 million On the right side, it's plus $100 million That, say, over the next eighteen months to twenty four months, we could get up there to a $110 million. How fast we do it I don't know. It depends on how the world is working for us. We're well on the way. If anyone's paying attention, they should see this. We're well on the way to moving towards that $40 million. This is all about just doing what we're doing. And have a full year at it and getting better at it capturing, more value from the carbon. We expect our CI scores to go down in the future, so that makes more for the 45Z tax credit. We have, Paul's team is really learning how to maximize value from the carbon by selling it as a bundle with a gallon. The carbon value with a bundle as a gallon at low carbon fuel markets. We're separating the carbon and selling it separately and maximizing that value. As they learn how to do that, I expect to that they will continue to increase. But that's what I'm most keen on is watching those numbers. Around the carbon value per ton. So, we made a good move by buying this plant. There's no question. Certainly. Great acquisition for you guys, and and as my follow-up, I wanted to touch on the DOE loan extension that you guys announced few weeks ago. Could you elaborate on kind of how that extension and the scope change of scope that you guys are pursuing increases the likelihood of DOE financing. I would say well, I'm gonna I'll I'll comment first. I'm gonna hand it over to Leke to give it a little more color. From my point view, you know, whenever you have a change of administrations like this, the fact that we survive straight away, was good. I mean, that's a good thing. It says we're kind of in their in their zone of that are interesting and attractive. They have taken a long time to get leadership in place. They've been you know? And I'm talking about not at the secretary level, who's the secretary. And so it took a while for people to get into place. And musical chairs a little bit. They're getting their act together. They're they're looking at it. They see realistically what we've done, and I'm gonna reiterate this. When you compare the site that we have at, like, Crestwood, the thing is Greenfield, to taking that site and moving north, to North Dakota where we have an ethanol plant that operates and makes money, has sequestration stuff right underneath the plant, It makes money. It is a different game to play in terms of how one thinks about the possibilities of financing. Now remember, they were committed. A you know, the conditional commitment is an actual commitment. To do the financing if we do all the prerequisites and get the rest of the funding in place, etcetera. We would be surprised that they suggested they suggested shifting it up to North Dakota because we think it's a good idea too. So it was a kind of a meeting of the minds thing. So we're very pleased about that. It's just the very beginning, and we gotta go work through it. So I think if they liked it before at Lake Preston, they're gonna like it a heck of a lot better up in North Dakota because we all make more money, and it doesn't require as much external financing. The project is much smaller. Because you only have to build an ATJ increment. Plus, might have to do some energy. Does that help you? Derrick Whitfield: It does. Thanks for the color. I'll turn it back to the operator. Operator: Our next question comes from Amit Dayal with H. C. Wainwright. Amit Dayal: Hey, good afternoon, guys. Thank you for taking my questions. Great to see the execution continue to come through. You know, with respect to the EBITDA drivers for next year, Can we maybe, you know, just give a little bit color on whether it's primarily gonna come from the sequestration capacity expansion or some of these, you know, debottlenecking efforts you may be implementing Just a sense of, you know, where the drivers are and how we should think about growth and cash flows for next day? Patrick Gruber: Yes. So on Slide 12 in our presentation, on the left hand of that slide is what I think a picture of what is closer to what 2026 should look like. It's something like that. And give or take still, we're working on it. We'll finalize something after the first year is what we really think. But that's kind of the picture. And remember, we're ramping up, and so this is kind of a curve that's going upward. And so how fast is go upward? How much faster can it go upward? We know for a fact that there's gonna be improvements of carbon score in 2026. Built into the big beautiful bill. So we know we're gonna make more money at that front. And then on I think on the carbon side, and I'm gonna let Paul comment on it, in the next year to give a picture of that. Because I think that's the the one I'm keeping my eye on mostly. I wanna see that grow. It's incremental. Already, we're projecting as to what we should be able to do from where we are today and on an upward trajectory. The ethanol itself is gonna be ethanol. The RNG is gonna be replanned super conservatively on RNG. And this is simply because we're realistic on this market. It is just a tough market with, you know, in general, but our plant operates really well. So we aren't these big we aren't padding anything or being super optimistic about that, although it generates value for us. So it's good. And, hopefully, if the market turns great, it'll be a huge upside for us. We are not planning that optimistically. But, Paul, I think this question of what's the growth look like gonna rephrase yours, Amit. Paul. Give us some color on what you think you know, the dollars per ton going forward. How's it look? What's that build look like, what's in front of us, how does that pan out? Because we're doing something different than everybody else here. Paul Bloom: Yeah. Thanks. Thanks, Pat. So just a a little more color on the carbon business. Right? As we talked about during this quarter, we're we're moving more. You see 90% of our carbon value today being sold in fuels But with, like, the BioRecord deal, we're selling much more into a separated carbon dioxide removal market. Right? These credits. And that's exciting for us because those can be like the BioRecord deal, longer term, deals in the market where we're bringing in more ratable revenue. We're not as subject to, you know, the ups and downs in the volatility that you see in low carbon fuel markets even in the low carbon fuel credit prices. So that's gonna continue to grow. That's you know, with the even with the BioRecord deal, right, we start growing into, you know, $5 million just, you know, a year down down the road with that type of a deal. And then we're gonna look to do more of those. Right? So you see this a big piece, and this is how long term we think this can start adding in this $30 million type range you know, over the next two years. Between the compliance markets and the voluntary markets as we balance that So we see where either of those markets go. But we've got a lot of flexibility That's what we like. And that's why we're continuing to do both. Right? We're putting on more pathways in the the compliance and the regulatory fuel markets where we can go after low carbon fuel, with that CCS value attached, or we can separate that out into the carbon dioxide removal market where we have that flexibility to to maximize our returns. And then I think the way to look at Slide 12 is on the right side of that. Slide is you know, a little further out, and I don't have a time frame on it per se because we could do it faster or slower depends on how projects get done. But that includes an incremental expansion of the ethanol plant taking it up to, like, 75 million gallons a year. That produced more ethanol, more CO2. So you can imagine how the numbers increase because of that because we have leverage. We're making more ethanol. We make more CO2. We generate more credits, generate more production tax credit. Etcetera. And that's why you see those numbers. So it's that's what our picture looks like. And as we work through stuff, and this is all with the the low capital version. Kind of exciting. It's a good place to be. And, ATJ is completely on top of all of that. That'd be a different spend in a different bucket, a different project. Amit Dayal: Right. No. Makes sense, man. So it seems like, you know, expanding the ethanol capacity to 75 million gallons per year is pretty natural. I guess, in terms of how you are executing and all the other interest you have over there to, you know, be able to monetize that. What I'm trying to get at is, you know, if if you were to have to make a call between ATJ 30 and, you know, much larger expansion of the ethanol capacity would you lean more towards the ATJ 30 with or without DOE funding? Patrick Gruber: Well, the ATJ 30 plan right now the way it pencils in with our contracts would be at a at an uplift of about $150 million a year of EBITDA. Now 45 turning back to ethanol. Ethanol the 45Z credits are they end at the end of what, 2029? So you're looking at long term plans of building new plants, what's gonna be in the money? Well, ATJ plant, a jet plant, is dependent upon the long run economics of a 45Z tax credit. Remember, our site, if we're lucky, we can take a Q too. And so we're pretty much indifferent between those two at the moment. The way that the world is structured. Remember, a queue runs out for twelve years. So we're in good shape on that kind of a front, and so we don't take it's not crucial It's we'd love to have it extended. Love to. But you know what? It'll be what it is. It's gonna compete economically, Paul, be successful, and his team will be successful selling carbon. So you know, it'll be what it is. Ethanol, if we can get it built really fast and do a, like, say, duplicate of what we currently have of capacity, how fast can we get it built, how long will the credits last really. You don't wanna be in a business of just doing ethanol. You do not wanna be in a plain old ethanol business. That's not a good business. It's too dang volatile. This is why Paul was emphasizing turning carbon into a product and selling it gets us into a ratable business. The BioRecord deal was a multiyear contract. Think of that. A multiyear contract selling carbon really. That's what we just did. We're gonna do more of that. That changes the game of what's possible and gets us out of this volatility. Over the long run. So that's how we're thinking about it. The getting to 75 million gallons is the natural expansion of what we should do in debottlenecking. There'll be other things we can do to optimize energy, lower the CI score further. We're already a very, very low CI score. And it'll go lower. As we improve. Well, after 75 million gallons, now we gotta build a brand new plant, and that's in the to do that capacity, that's in the multiple dollars per gallon. You know, two cut rounding it to $2.50 a gallon for new capacity. Once you're doing a full size plant, say 50 million gallons to 100 million gallons. It's in that kind of a range. Wallpark, So does it make sense? Under what circumstances it makes sense? Depends. So we'll sort that out later, but that's not our focus. We're gonna evaluate make sure we understand it so we can jump all over it. Make it happen. If we need to, if the right market conditions are there, But I'll tell you, first things first. Get the low hanging fruit. Get the 75 million gallons, get the credits, generate more credits, generate more revenue. Learn get better and better at selling the carbon. Remember, we have an advantage We have a sequestration site directly underneath our plant. The only ones in the world with that. We don't have all the complexities that everybody else has of you know, pipelines and sharing and all this kind of stuff. Ours is relatively straightforward, and still, it's a huge amount of work to get it audited and insured, and all the rest to generate these viable credits. So we need to need to get good at this. So we're gonna do that. Walk in before we run, expand incrementally, use our capital wisely, save our powder, we'll debottleneck, save our powder with the DOE, work work with them, get that plant financed, and the economics are good. And we will also treat then a full build out of a new ethanol plant as an opportunity to be evaluated on the market conditions as we see them and working with partners who wanna do it. Amit Dayal: Right. Understood. How we think about this. So use what we got, maximize what we got, expand ATJ, and then sure we're not losing sight of these other opportunities. To grow because we could have them. They might be very much real. Got it. Just last one on the Verity offering. How much more development work needs to be done before you can get more aggressive towards commercializing that offering? Paul Bloom: Paul, go ahead, man. So I want to Yeah. So I I think we're we're getting to that point right now. Amit. So this is what you know, I was talking about getting this implemented at at Gevo North Dakota is a critical step for us. I mean, we've we've already got it in implemented with other customers, but having it running in our own we'll be able to show, you know, even other Verity potential customers say, hey. Come look at it. Right? Stop by our plant. See how we're using it. See how it simplifies your life, how it makes everything better, totals up all your carbon. For voluntary markets, for compliance markets, for tax credits. Right? It's it's really a simplification tool. And and so we think that you know, we're really nearing that point, right, where we can now scale this just like Chris was talking about, ATJ 30 to do the the copy edit paste. I mean, this is where we can start to do the the copy, edit, paste for for Verity really, more broadly with biofuel producers. So we're in a we're in a really good spot. Amit Dayal: Yeah. Interesting. I think this is gonna be a really interesting catalyst. Well, here's here's and here's for everyone's perspective, there's everyone and their brother is going, hi. We know how to count carbon. We know how to you know, measure CI, all this. No. You actually don't. It's actually kinda complicated. And you gotta keep track of heck a lot of stuff. There's simple know, on the Internet, you can find air and you do everyone does their chat GPT version. Sorry. To get a product that someone buys and transfers money, actual cash, the barrelhead to pay you for something, that takes a whole lot more diligence to make sure it's right and have multiple parties auditing it. In our case, you heard, you know, Nikki talk about getting insured. How does that work, you know, in in getting that system operating well, working well. And then with Verity, that offers a whole new level of assurance and gets it tracking it back to farm by farm, field by field. Integrating the plant in its energy and giving you even a stronger score that can be verified and audited. This is the important part. Auditing throughout the whole supply chain. That's why we can get paid now That's why we will get paid in the future and why Verity is important because we can take that technology and use it as a service and get paid with other plants. That's why it's important and why it's interesting. We're doing an end to end solution. Other people aren't. They're doing pieces and parts and using their equivalent of Internet says we're not doing that. Amit Dayal: That's all I've missed. Thank you so much for all the color. Appreciate it. Operator: Our next question comes from Craig Irwin with Roth Capital Partners. Craig Irwin: Hey, Craig. Hey, Pat. Good evening, everyone. Thank you for taking my questions. Pat, can you maybe update us on the conversations with potential customers that could be using your well in Richardson to sequester their carbon? You know, these I guess, that would be tolling customers or, you know, customers where you provide the service for them. I mean, where do you stand with those those potential incremental additions to the the overall profitability? Patrick Gruber: Yeah. So I'm gonna restate your question. So we have this big site. Our capacity is million tons per year. We're currently only using, six about 16, 17% of that well. We should use more of it. And so Craig is right. We should use more of it. Paul? What's the plan? Paul Bloom: So, Craig, you know, couple couple things. One, as we expand our our footprint there and and make more fuel, we'll have more CO2 to sequester So that's that's one. Step one. Right? So that can we love that because we don't have to go anywhere else. We've already got the capacity. The second part is, you know, think about a complex. When when we're thinking about Gevo North Dakota, we're also thinking about what energy source we need, all the different stuff that we have to put in place. To really build out the the 30 plant, but hey, it could be other partners as well. So we are looking and have ongoing discussions today with other companies that would maybe wanna co locate with us and take advantage of some of that sequestration wells. So we could be storing CO2 for others, and, you know, obviously getting fees for that, helping them sell their carbon credits, all those type of things. And so we're we're pretty excited about that. And then just like this this deal where Frontier is looking at you know, taking CO2 by rail to North Dakota there's always options like that. We think we talked about on one of our earlier calls around looking at how can we take more CO2 in kind of virtual pipelines style, those are things that we're contemplating. Today. We don't have any concrete plans, but all of that coupled helps to use that capacity that we've already invested in. So it's really about how do we harvest that value from the investment that we already made with this great purchase at Gevo North Dakota because of that extra pore space that if we use it ourselves, use it for third parties, absolutely. Patrick Gruber: Yeah. So amplifying what Paul said, this thing about the virtual pipeline, what that means is taking CO2 at rail. That's how CO2 is transported. Has been transported forever. And, we could do that. The deal with Frontier contemplates that and tracking it, tracing it, the deal We we had a a rail terminal for example, and we can offload CO2 and put it down the hole for others. It that that also accomplishes yet another thing, I think, that in in a few years' time, call it, in the five year time frame, you know, the Bakken's gonna need more CO2. And, you know, great. Maybe there'll be a market for enhanced oil recovery CO2. So I think the world at large in that area is gonna be interested in CO2 collection. Sourcing treating CO2 as a product, great. People wanted to put it down a hole. Awesome. We can get paid for that. Cool. Get more credits for that. Great. Or sell it to somebody else. So it's a paradigm shift, and that CO2 is a product, should be valued, should be collected, and utilized. So we have to put those plans together, but that's part of what we're working on and figuring out. That kind of incremental expansion is not included on our slide 12 that we referred to earlier It's not part of that. That would be on top of it. That's gravy on top of what you see there. Craig Irwin: Understood. Understood. So then, actually, I wanted to go back a little bit of the content on your slide 12. The CI the incremental CI improvement that you you guys are tracking for over the next number of quarters, how should we go about projecting that or forecasting that from our side it ends up having a fairly material impact on on the overall level of profitability. And is this something that we should we should parse the the capital plan and and and the different pieces of of your capital plan that are likely to be completed on, you know, on a finite time horizon or what should we do to kinda to kinda understand and maybe be a little bit ahead of the curve as as we see the CI CI score improvements over the next couple of I think, Leke, you can help with this one. But there's basically and the big, beautiful bill, the CI score drops automatically next year. That's a large part of it. And, so go ahead and give that some color, like, hey. Then we'll come back to Oluwagbemileke Agiri: Thanks, Pat. So high level, I think Pat already sort of touched on it. In the big beautiful bill, the no eye look that reduces RCI score. By a tangible amount, which effectively increases our fortified degeneration by another 10¢ per gallon. And then the last bit of the puzzle, which for us we're working on is are there other decarbonization measures that we can introduce to our facility to effectively be able to get another 10¢ per gallon increase in credit generation. So the $52 million tax credits that we sold this year from Gevo North Dakota, I think folks can easily do the math based on our ownership of the asset for eleven months. Out of twelve months. That number rounds up to about call it, 80¢ per gallon of credit generation. So next year, we are working actively with the no eye look and the other decarbonization strategies hoping to be closer to a dollar per gallon. And keep in mind, production tax credit is also subject to inflation. And those annual inflation, for example, this year, that's released by the IRS, was around 6.6% and some change. Maybe inflation is not going to be that high next year. But you have to factor that into your math as well. So next year, we're we're gonna have tangible increase in that 45Z generation from where we are today. Does that help? Yeah. Craig Irwin: That definitely helps. That definitely helps. Well, that's also gonna help your cash flow. So, you know, congratulations on the progress. Patrick Gruber: You know, it's it's an interesting game, isn't it, Craig? I mean, it's like a the world, we did good. Our timing was good, and we're learning how to sell the car. Being having a real carbon product to figure out a real tangible thing where it's actual tons. Then what does it mean in terms of CI score? How do you monetize tax credits? One of the things that's different from what we're doing from what I think everyone else is doing, we're selling them directly. Directly. Lakegate's team has done an outstanding job of interfacing directly with the purchasers of these carbon credits. We aren't going to a broker where the broker has to go figure it out later. Our stuff is done from based on real CI scores audited by multiple parties, stuff that's based on carbon that's gone down a hole. And and then Lakegate's been able to strike really good deals getting good value. When he says remember, it's a 67 million gallon plant. He's talking about a dollar a gallon. The maximum value you can get is about a dollar a gallon from the 45Z. So we are one of the lowest CI score plants under the 45Z big billable bill. And it looks like we're in a really good position. That's awesome thing. And this is before we've done anything around decarbonization of the energy at the plant. It's just that it's a very efficient plant. It is not taking into account agricultural practices like so many people talk about. It's not taking that into account. It's just well run. A great sequestration plant. We're good our team is good at capturing carbon, putting it down a hole. Craig Irwin: So may maybe I can ask another question. Right? Red Trail, what did they do right on the commissioning of their well? You know, there's another well that was supposed to be testing, maybe commissioned. You know, it's another class six well for I guess, the third guy that's supposed to be on, but they've been late. And they're not eager to confirm that there's a ribbon cutting on Wednesday. Right? You guys have brought up your wealth, generated credits consistently off it. And, you know, obviously, had pretty clean execution. What did Gevo really do? What what did Redtail really do right, the team at Gevo now? That that that allows you to execute consistently? Yeah. Chris, would you wanna go ahead and explain this? Chris Ryan: Yeah. Go ahead and explain this because it's a fascinating story. Well, okay. Let me tell you that it starts with the former CEO of Red Trail, guy by the name of Gerald Bachmeyer, who, really led that And he earlier in his career, he did oil. And, was involved in drilling. So he I I would argue he knew how to pick the right contractors to do the work. And they really focused on doing good quality execution because, you know, the guys that ran that plant, including Gerald, were were boots on the ground, you know, get her done guys that know how to get things done. And know how to get things done well. And so that's really the nation that really led to doing that, doing that well. So so what you got here is, remember up in that area, you got farmers and farm remember, retro was a co op, big giant co op, 90 900 plus members. But corn guys or oil guys and vice versa out there, And so it's this very it's actually a wonderful place for to have a plant like this where you're trying to work with the petrochemical industry. And the guys are big farmers anyway, and so everybody cooperates. And so they have a lot of expertise about how to drill wells. That's what Gerald was about and knowing how to do it. And he definitely had his own way of going about it that was different than what was being sold to others. That I've been told over and over again, and I believe it to be true. And so that's why I think we didn't have the problems that other people have seen. Craig Irwin: Understood. Well, we don't have to to talk about those problems. I will say congratulations for your success. And and thanks again for thanks for taking my questions. Patrick Gruber: Course. Operator: As a reminder, if you'd like to ask a at this time, please press 11 on your touch tone phone. Our next question comes from Peter Gastric with Water Tower Research. Peter Gastreich: Hi. Congratulations on your results, and thanks for taking my my questions. The the partnership that you've discussed with Frontier, it's certainly very It looks like it presents a a lot of opportunities for you. You know, some of the pipeline has obviously been very, very quiet. Just curious you know, if we look at Frontier, entering this market, are they coming in as a potential competitor here to Summit, or should we think of Frontier more as being complementary and maybe focusing on the ethanol plants that are not you know, on that pipeline route? Like, how should we think about this this this entry into the the market Paul, go ahead and take that on, please. Paul Bloom: Yeah, Peter. No. Good great question. You know, I think it's if you look at what we had in or Frontier really had in the announcement, you know, they talk a lot about how many plants are kinda stranded. They don't have access to geological sequestration They don't have access to pipelines today. So I think that's really the the first and foremost market because like Pat said, you know, CO2 is transported by rail all the time. So this gives those plants that optionality. And, basically, so now you know, you think about you either have the right geology You may have access to a pipeline. Or if you don't, now you've got a real opportunity to to go to a sequestration site. Like what have in Wyoming and we have in in North Dakota. Okay. Got it. Thank you. Just a second question. About overseas markets. Could you talk a bit more about the agreement that you've entered with Hausch in Europe with and the ethanol to jet facilities? With the SAP feedstock restrictions in Europe, what's the strategy there? And, also, just curious broadly, your traction overseas markets and where you see the best prospects there. Paul, go ahead and take that one again. Paul Bloom: Yeah. Sure. How how should the interesting company that we really have enjoyed working with And, you know, they've got a a good focus. They're a hydrogen company fundamentally, and and you know, so as we're trying to find the right combination of sites and feedstocks, we think we've got a good partner. We When we think about the feedstock, right, there are limitations. So we do need to think about Refuel EU doesn't allow corn ethanol, crop based fuels to qualify. So we are looking at sources carbohydrate sources still for for ethanol, obviously. But could they come from waste and residue type feedstocks that that will qualify for those markets. So that's that's kinda where we're focused. Those exist We have a whole team that that's taking a look at that. And then the really comes down to what are the economics, the the netbacks from from Europe versus North America. But like Chris said, we really see ATJ thirty as a as a global business. So even not just Europe, this is, like, where can we find the right carbohydrate feedstock We ethanol is ubiquitous. And so it's really about how do we have a plan and then have the right partners in those geographies that we can execute. Peter Gastreich: Okay. That's great. Thank you very much, and, congrats again to the team. Paul Bloom: Thanks. Operator: That concludes today's question and answer session. I'd like to turn the call back to Patrick Gruber for closing remarks. Patrick Gruber: Yeah. One of the interesting things if, I would encourage people to take a look at the growth of the jet fuel demand out to the future. It's quite interesting in that continuing to increase here in The US and around world. Refining capacity, however, is not increasing. Not here in The US. In fact, it's decreasing. There's only a finite amount of jet fuel in a barrel. This means that there's going to be a shortage of jet fuel here in The US, a shortage, incremental shortage. But it adds up to big numbers, about 2.4 billion gallons a year by about 2024 of and we have to do something different. Bring it in, import it, or make it through alternative sources. You'll find that if anyone does start searching and looking at this, you'll find that the world predicts that everything is gonna be fulfilled with SaaS. And I and SAF you know, of course, is jet fuel plus it's carbon. But think of it as just jet fuel. And the question is, will all that get built really? And you look at these projections, and it's already behind schedule everywhere in the world. You know what that means? Jet fuel price is likely to go up and likely with The US, we'll have to import more jet fuel. With this administration, they're not big on importing products. And we can make them domestically. Remember our premise. We can because we get netbacks, of value from the coproduct of carbon, because we get netbacks from protein, and the oil, the corn oil. We can deliver cost competitive jet fuel to the marketplace. Cost competitive with petrol. Pretty fascinating. 2.4 billion gallons, remember, is more like 70 plants needed in The US over the next decade. Well, that's a target rich environment. That's what we're looking at here. That's what makes it interesting and why we don't lose track of those ATJ plants. Can use more ethanol. We can use more corn. And it makes huge huge job growth. It improves energy security. It's a good overall practical story of doing cost competitive energy delivered to the marketplace. As an alternative. And do I think that we'll wind up building 70 plants? No. That's not the ethanol industry did it when they blew when they when them went big, when ethanol did their boom between, what, 2007, 2012. They did more than that. So it's possible to do. But for us, realistically, no. I'll just take a bite of that, though. That would be great. And then we can do the same thing around world. That's what's in front of us. We got a great platform, Gevo North Dakota. Acquisition turned out better than we ever expected. We have cash flow coming It's good to see. We can expand it. And then we have this huge opportunity and platform along with all of our intellectual property and designs around the jet. One of the last comment around the ATJ that I'll mention because I think it's relevant to the questions that we get in the marketplace, is that in technology readiness sense, every single step that we're planning on deploying at our at ATJ thirty, every one of them is proven proven commercially already in this world. Technology ready level as nine. For all the steps. That's different than anyone else's ATJ technology. Thank you all for joining us. I appreciate it. For all your support. I'm proud of my team. Proud of what we've done. Thank you. This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, and welcome to SI-BONE, Inc.'s third quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. We will be facilitating a question and answer session towards the end of today's call. As a reminder, this call is being recorded for replay purposes. I'll now turn the call over to Saqib Iqbal, Vice President, FP&A, Investor Relations at SI-BONE, Inc. for a few introductory comments. Please go ahead. Earlier today, SI-BONE, Inc. released financial results for the quarter ended 09/30/2025. A copy of the press release is available on the company's website. Before we begin, I'd like to remind you management's remarks today may include forward-looking statements within the meaning of federal securities laws, which are made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to a number of risks and uncertainties, including those set forth in our SEC filings such as our most recent Form 10-Ks, and actual results may differ materially from any forward-looking statements that we make today. Accordingly, you should not place undue reliance on these statements. These forward-looking statements speak only as of the date that they are made. Saqib Iqbal: And we do not assume any obligation to update any forward-looking statements except as required by law. During the call, management may also discuss certain non-GAAP measures, including the company's adjusted EBITDA results. Unless otherwise noted, any reference to profitability is in terms of positive adjusted EBITDA. For a reconciliation of these non-GAAP measures to GAAP accounting, please see the company's full earnings release issued earlier today. Unless otherwise noted, all results are compared to the comparable period in the prior year. With that, I'll turn the call over to Laura. Laura A. Francis: Thanks, Saqib. Good afternoon, and thank you for joining us. In the third quarter, we continued to advance our vision to provide better outcomes for patients with compromised bone. Our strong performance in the quarter reflects the continuation of healthy demand trends and our disciplined execution over the last several quarters. We delivered another quarter of robust revenue growth, achieved sustained adjusted EBITDA profitability, and reached a major milestone in delivering positive operating cash flow. Additionally, we successfully commercialized iFuse Torque in Europe and made significant progress on the two new products expected to launch in 2026. Our worldwide revenue reached $48.7 million in the third quarter, representing approximately 21% growth. In the U.S., our revenue grew over 21% to $46.4 million, driven by growing adoption of our solutions. We also experienced a notable increase in international revenue growth in the back of the quarter, fueled by the launch of iFuse Torque. This consistency of more than 20% annual top-line growth speaks to the strength and balance across our portfolio. Our flagship solutions continue to perform well in a large underpenetrated market, while our newer products are gaining meaningful traction and accelerating our overall growth trajectory. This is evident in the double-digit volume growth across all modalities and the record number of physicians we added in the quarter. The progress we made on profitability and cash flow is equally exciting. We delivered positive adjusted EBITDA of $2.3 million for the quarter, which translated to an adjusted EBITDA margin of approximately 5%. We also achieved our second consecutive quarter of net cash flow breakeven, importantly, our first quarter of meaningful positive cash flow from operating activities. Achieving these milestones at a stage in our growth when many companies are still consuming cash to reach scale underscores the real strength of our differentiated platform, hybrid commercial model, and operating discipline. Now I'd like to highlight the progress we made on our four key priorities: innovation, physician engagement, commercial execution, and operational excellence. I'll begin with innovation. Our platform was built to address complex challenges in sacropelvic anatomy, an area where bone density is often poor and mechanical stability is critical. We're focused on improving surgical outcomes for patients with compromised bone across multiple modalities. Over the last four years, we've harnessed our biomechanical and clinical expertise to create an industry-leading platform. We pioneered the sacroiliac joint fusion category and continue to extend our leadership position with both surgeons and interventional spine physicians. Led by iFuse Torque, our growing surgeon procedure volume represents the majority of our SI joint dysfunction business. In parallel, adoption with the interventional call point continues to grow. In the third quarter, our interventional case volume doubled compared to Q3 2024 as physicians recognize the value of our clinically validated solutions and comprehensive commercial expertise. TORQ and Intra have positioned SI-BONE, Inc. as the preferred choice for interventional spine physicians. Over the last year, we believe Insura has become recognized as a leading percutaneous implant system for SI joint procedures when performed in office-based labs. For 2026, a 17% increase in reimbursement for office-based SI joint procedures. The growing physician interest and the improved reimbursement environment are strong tailwinds for our interventional business. Building on the learnings from TORQ and Intra, we recently filed the 510(k) application for our next-generation technology. This solution optimizes the physician workflow across all sites of service, but with a focus on ambulatory surgery centers. Assuming normalized FDA operations, we anticipate launching this product in 2026. We believe this technology will drive market penetration and extend our leadership within this fast-growing site of service. We leveraged our expertise in treating SI joint dysfunction to redefine the standard of care for spinal pelvic fixation with the launch of iQueue Bedrock Granite. Granite has been highly successful in the adult deformity market and remains a key contributor to our revenue and physician growth. Additionally, the number of procedures using more than two granite implants per case grew approximately 40% in the quarter, which resulted in the stronger than anticipated procedure average selling price. In October, we received FDA 510(k) clearance for instruments that enhance procedural flexibility for surgeons and allow the use of granite and torque within robotic workflows. Early feedback from the field has been encouraging, and we're well-positioned to drive adoption and expand our foothold in this segment. The majority of our granite volume has come from adult deformity procedures. With the introduction of granite 9.5, we're steadily expanding into the degenerative spine procedure market, which represents nearly 100,000 annual procedures that end at the sacrum. Physician interest continues to grow, and we're investing in additional surgical capacity to meet rising demand. Proposed reimbursement changes may further benefit Granite in 2026. Based on the CMS proposal, we expect the transitional pass-through, or TPT, payment for Granite, including a $0 device offset, to be extended for calendar year 2026. The TPT enables facilities to use granite in the outpatient setting and be reimbursed for the full cost of the implants for Medicare patients. Additionally, the proposed level seven APC payment of nearly $28,000 would compensate hospitals for complex multi-level spine fusion procedures performed on an outpatient basis. This change should benefit our business as less complex degenerative procedures where granite would be used migrate to lower-cost outpatient facilities. In 2024, we continue to advance innovation with the development of iFuse Torque P and T. We believe this breakthrough technology will transform the treatment paradigm for patients with sacral insufficiency fractures, a nearly $300 million market opportunity. Since launch, TNT has contributed to the threefold increase in the number of trauma surgeons using our solutions. Given the strong clinical reception, multiple large national distributor networks have expressed interest in partnering with us and expanding access to this technology. On the reimbursement front, a new technology add-on payment, or NTAP, took effect on October 1. This NTAP of more than $4,100 represents up to a 30% increase in hospital reimbursement for pelvic fracture fixation in Medicare patients. The large untapped market, improved reimbursement, and growing distributor network positions TNT to be a significant contributor to our growth for the next several years. Finally, we made meaningful headway on our third breakthrough device, which incorporates much of our engineering and biomechanical learnings from our broader portfolio. We expect to finalize the design in the coming months, followed by comprehensive testing and validation in 2026. We remain on track to submit our 510(k) application for FDA approval in 2026, with the potential to commercialize as early as 2026. We believe this revolutionary solution can become standard of care, addressing one of the most pressing needs in spine surgery. We have an extensive pipeline of novel technologies under development. We expect to launch several solutions over the next five years to address poor bone quality. We're enthusiastic about the impact of the expanding platform on the long-term growth trajectory of the company. Next, let's move on to physician engagement. In the third quarter, approximately 1,530 physicians performed procedures using our solutions, representing a 27% year-over-year increase. This growth was driven by double-digit expansion across all call points. We added 330 physicians in the quarter, which marks the largest quarterly increase in the company's history. We expect this growth to continue based on the interest in our expanding platform across the diverse group of practicing physicians. Additionally, our academic training program is cultivating the next generation of advocates. We also saw a 25% increase in the number of physicians performing more than one procedure type. Of the physicians who completed an SI joint fusion procedure in the quarter, only 25% of them performed at least one other procedure type. We have a huge opportunity to continue driving procedure density with our sizable SI joint fusion physician base as we expand the application of granite and degenerative spine procedures. Furthermore, we continue to see physicians who stay with us longer perform more procedures. Physicians who are active in both 2025 and the prior year performed more than twice as many cases per physician compared to those who were active only in the current quarter. These dynamics demonstrate that our expanding procedure platform is not only attracting new physicians but also deepening engagement among our existing physicians. Looking ahead, with the significant degenerative spine opportunity for Granite, the launch of our new joint dysfunction solution early next year, and the anticipated introduction of our third breakthrough device in late 2026, we expect physician density to become an increasingly important growth driver. Now let's turn to commercial execution. Our trailing twelve-month average revenue per territory was $2.1 million, up 16%. This marks our twelfth consecutive quarter of double-digit growth in territory productivity. We ended the quarter with 88 quota-carrying territory managers, up from 85 in the last quarter. As we expand our platform and deepen penetration within existing accounts, we plan to increase the number of territories over the next year. The growth in the number of territories and the expansion of the hybrid network will ensure we capitalize on the sizable market opportunity ahead of us. Before I hand it over to Anshul, I'd like to congratulate all my SI-BONE, Inc. colleagues on recently completing 135,000 procedures. Thank you for your relentless pursuit of best-in-class technologies that address unmet clinical needs, which have helped improve the lives of these patients. With a vast untapped market opportunity and a pipeline of innovative solutions under development, we're going to be able to help hundreds of thousands more in the years to come. With that, I'll let Anshul provide an update on our fourth key priority, operational excellence, and share our third-quarter results and updated guidance in more detail. Anshul Maheshwari: Thanks, Laura. Good afternoon, everyone. My comments today will highlight the impact of our continued operational excellence on third-quarter revenue growth, profitability, and liquidity. I will then walk through our full-year guidance. All the comparisons provided will be against the prior year period unless noted otherwise. Starting with revenue growth, our worldwide revenue was $48.7 million in the third quarter, representing growth of 20.6%. U.S. revenue was $46.4 million, representing 21.2% growth driven by procedure volume growth of over 22%. We continue to benefit from broad-based demand with volume across all modalities growing at a double-digit rate. International revenue in the quarter was $2.3 million, representing 10.2% growth. Based on physician enthusiasm and adoption trends observed in the initial month, we expect TORQ to accelerate international growth in 2026. We are actively pursuing regulatory clearance to commercialize additional products across several international markets, which will have a meaningful impact on international growth in 2027 and beyond. Moving to profitability, our gross profit was $38.8 million, an increase of $6.9 million or 21.8%. Gross margin was 79.8%, expanding by 75 basis points year over year. We were able to absorb the higher instrument depreciation and freight costs associated with increased revenue by maintaining a disciplined pricing strategy and ongoing supply chain optimization initiatives, resulting in overall margin expansion. Our operating expenses were $44.2 million, an increase of $4.7 million or 11.9%. The increase reflects growth-related investment and higher commissions from increased revenue, as well as elevated G&A spending. We're pleased with the 1.7 times operating leverage in the quarter, which underscores the strength, efficiency, and scalability of our business model. Our net loss narrowed to $4.6 million or $0.11 per diluted share compared to a net loss of $6.6 million or $0.16 per diluted share. We delivered positive adjusted EBITDA of $2.3 million for the quarter, which translates to an adjusted EBITDA margin of approximately 5%. For the trailing twelve months ended September, we delivered positive adjusted EBITDA of $5.7 million, a dramatic improvement from an adjusted EBITDA loss of $11.7 million in the comparable prior year period. Our improvement in profitability over the last twelve months validates our strategy that we can deliver industry-leading growth, invest in innovation, and do so while expanding profitability. This momentum gives us confidence as we look ahead to sustaining profitable growth. Turning to liquidity, in the third quarter, we were breakeven on a net cash flow basis and ended the quarter with $145.7 million in cash and marketable securities. This was our second consecutive quarter of net cash flow breakeven. We are proud to have achieved another major cash flow milestone in the third quarter, generating $2.3 million cash from operating activities. The earlier than expected inflection in cash flow from operating activities reinforces our confidence in achieving positive free cash flow in 2026. Year to date, our net cash consumption was $4.3 million compared to a net cash consumption of $15.2 million for the comparable prior year period. This represents a 72% reduction in cash consumption. This substantial improvement is an outcome of our increasing scale and asset-light business model. We continue to invest in building surgical capacity while remaining focused on working capital efficiency. Our improving profitability combined with the inflection on cash flow positions us to self-fund our innovation, advance our deep pipeline of novel technologies that address additional unmet needs, and consistently deliver robust growth. Now let me provide an update on our outlook for 2025. We're updating our full-year revenue guidance to range between $198 million to $200 million. This implies year-over-year growth of approximately 18% to 20% as compared to the previous guidance of approximately 17% to 18%. Given the durability of our gross margin, we are now expecting the full-year gross margin to be at 79.5%. We're maintaining our annual operating expense growth guidance at 10% at the midpoint of the revenue range. With that, I will turn the call over to Laura. Laura A. Francis: Thanks, Anshul. We're encouraged by the momentum we see and remain focused on outperformance as we exit 2025. Going into 2026, we're confident in our ability to sustain strong top-line growth, expand margins, and inflect on free cash flow. This confidence is driven by the substantial adoption runway for our current portfolio, our promising pipeline of new products, and continued disciplined execution. After pioneering the SI joint space, we expanded our addressable market by adding new applications of our technology and expertise developing solutions for compromised bone. Today, we've built a durable innovation engine capable of funding and developing a broadening array of solutions that help more patients and deliver long-term value for shareholders. With that, happy to answer your questions. Operator? Operator: Thank you. At this time, we'll conduct a question and answer session. A reminder to ask a question, you will need to press 11 on your telephone and wait for your name to be announced. To withdraw your question, please press 11 again. And our first question comes from the line of Patrick Wood from Morgan Stanley. Your line is now open. Patrick Wood: Beautiful. Thanks so much, guys. Love to start on the physician density side of things. Just because you mentioned it. And I guess there's kind of two components to that. You know, I guess, one, you know, as we go into next year and the bag gets larger, let's say, do you think there's going to be a halo effect between the different product categories and that side of things? Does the demand across the groups? And then two, like should we think about operating leverage? You've always been super disciplined with the reps. And expansion on that side. How do we think about leverage down the P&L and then kind of halo effect between a broader offering for SI-BONE, Inc. in totality? Thanks. Laura A. Francis: Thanks, Patrick. Good question. Physician density is actually a very important focus point for us. And just given how much our platform has expanded, that's really a very large opportunity for us. We've obviously broadened out our platform from just SI joint fusion to pelvic fixation, and now pelvic ring fractures as well. And as we said, think only around 25% of our SI joint surgeons are currently performing another procedure type. So there's a lot of opportunity for us to grow just by increasing the use of our technology cross-platform. In addition, we have a product roadmap, and we've talked about a couple of different products that we're going to launch in 2026. And one of those in particular will provide another opportunity to further deepen that relationship with our surgeons. We also talked a little bit about if surgeons are regularly performing our procedures, for example, those surgeons that performed a procedure in this last quarter versus a year ago, they're doing around double the number of procedures. All of those things really do point to this opportunity to significantly increase physician density in the coming year. We're also obviously growing the number of physicians that we're working with in a significant way. 27% growth in the quarter. It was a record 330 additional physicians were added during the quarter. So we have around 12,000 opportunities with the number of surgeons that we can potentially target for our various procedure types. And so we're really just a short way into this whole journey. Now the last question you asked was more on the leverage side, and certainly, by growing density, we have the opportunity for further leverage, and I'll have Anshul talk a little bit more about that. Anshul Maheshwari: Yeah. Thanks, Laura. Patrick, nice to connect. In terms of operating leverage in our business, you know, if you look at the midpoint of our guide for the revenue and OpEx growth for the year, you're sort of tracking to about 1.5 to 1.9 times operating leverage at that midpoint. So really pleased with the strong operating leverage in recent years, which is an outcome of our strong revenue growth. Predominantly the 20 plus percent growth that we've been able to demonstrate over the last several years. And just the operational excellence and discipline that's come into the business as well. Now when you think about operating leverage going forward, you know, our priority does remain to deliver that strong top-line growth at or above the levels we've delivered in the last several years. And as we've shared previously, we do anticipate operating leverage to sort of range between, let's say, 1.25 and 1.75 times. So you know, revenue growth outpacing OpEx growth in that range. There'll be some natural variations depending on the phase of investments we are in where we are in a product launch cycle. But, you know, we feel pretty good about sort of that leverage. And even if you assume an average leverage of 1.5 times, that should be able to drive pretty significant margin expansion over time. Patrick Wood: Super clear. Thanks, Anshul. Thanks, Laura. Operator: Thank you. One moment for our next question. Our next question comes from the line of Caitlin Roberts of Canaccord Genuity. Your line is now open. Caitlin Roberts: Hi. Congrats on a great quarter, and thanks for taking the questions. Guess just to start off on guidance, you raised, you know, the midpoint of guidance a little bit more than the beat this quarter. Can you just talk through the philosophy for the update here and if there are any early signs of momentum in Q4? Laura A. Francis: Yeah. I'm happy to at least give it a start. I'll talk about the quarter, and then I'll have Anshul talk a little bit more about the guidance philosophy. We're obviously very pleased with how we performed in the quarter, 21% revenue growth overall. Seeing a nice reacceleration of our international growth with the launch of Torque as well. So both of those things bode well. I think just to highlight if you think about how we've grown since our IPO in 2018, we have consistently delivered over 20% annual revenue growth. And it's really an outcome of us building this comprehensive platform, you know, starting with the SI joint fusion market, but then just leveraging our technological expertise to expand into these high-growth adjacent markets as well. In terms of the growth in the quarter, I did mention it was broad-based. We're seeing the top-line momentum dropping to the bottom line with our adjusted EBITDA and net cash flow breakeven. And it really does highlight the differentiated high-margin asset-light business model that we have here. So when we started to think about our guidance for the remainder of the year and then thinking about 2026, we always take a thoughtful approach, but it's based on the knowledge of the continued growth that we have consistently seen since we've been a public company. And I'll have Anshul talk a little bit more about the details of the guidance. Anshul Maheshwari: Yeah. Thanks, Caitlin, for the question. When it comes to our guidance, let me just add a few key points. First, as you know, we maintain a very thoughtful approach to guidance. Just to provide some perspective, we started the year with a guidance of $193.5 million to $195.5 million, and our current updated guidance is $198 million to $200 million. So what you've seen is continued outperformance, including the nearly or over four percentage point outperformance in the third quarter as well. Second, again, aligned with our philosophy, our updated top end of the guidance incorporates only the $2 million outperformance in the third quarter, which is generally how we've done whatever we've outperformed by. We put it up in our guidance as well. So I think being continued and thoughtful there is important for us. Now the question on what we're seeing coming into the fourth quarter, you know, what I'd love to highlight is that 27% growth in active physician base. Right? So significant physician momentum coming into the third quarter is persisting. We already have October in the bag, and it was a really strong October. And the momentum trend in November is also looking very strong. So net-net, we do expect April to be another strong quarter. But I just want to remind you that it's worse than the tougher comp with a very comparable portfolio. So even with that, we're feeling really great about the setup in Q4. Caitlin Roberts: Great. Maybe just another quick one. You generated cash again in Q3. Any updates to, you know, the cash burn expectations for the rest of the year? I know you talked about a little bit of a cash burn expectation for the second half last quarter, but any updates to that? Anshul Maheshwari: Yeah. So, again, Caitlin, really really pleased with how the strong growth, the inflection on profitability, the discipline on working capital efficiency is translated into our second consecutive quarter of net cash flow breakeven, and more importantly, our first quarter of positive cash flow from operating activities. Now as we get into the fourth quarter, like we had said in our prior earnings call, we do expect to use a little bit of cash in the fourth quarter. A lot of that is just based on building up surgical capacity and also building up some capacity for the new product that Laura has talked about that we expect to launch in, you know, Q1 of next year. So, again, feeling good about where the business is headed from a cash flow standpoint, and getting increasingly confident of being able to get to free cash flow at some point in 2026 as well and then self-fund growth and investment in innovation going forward. Caitlin Roberts: Awesome. Thanks for taking the questions. Operator: Thank you. One moment for our next question. Our next question comes from the line of Matthew O'Brien of Piper Sandler. Your line is now open. Matthew O'Brien: Great. Thanks for taking my question. So Laura, you mentioned all these different areas where we're seeing a lot of momentum. I mean, the physician number in the quarter was unbelievable. The reimbursement updates, etcetera. When I look at the street, I don't want I don't want guidance here for '26 right now. But I look at the street, we're modeling more like mid-teens growth next year. I guess, why wouldn't it be, you know, upper upper teens growth, if not better, for next year? Is there something specifically that you would call out, with all these moments that you're seeing in expanding Salesforce, etcetera? And then I do have a follow-up. Thanks. Laura A. Francis: I think it's a really good question. We did really have a very strong quarter in a lot of different ways, and some of those forward-looking metrics give us a lot of confidence on, you know, where we're headed as well in Q4 and beyond. But, you know, the way that we're thinking about things from a 2026 perspective is we feel pretty comfortable with where the current consensus is at. You talked about some of the things that are going to benefit us next year. This combination of favorable reimbursement changes in 2026. We're reaccelerating our international growth from torque, and those are tailwinds. Then there's also what I would say is actually incremental ups that will be based on the timing and the ramp of new products as well. So like I said, feeling comfortable with where we're at from a current consensus perspective, believe that we have upside based upon the launch of new products as well. But as we always are, being very thoughtful about how we're setting expectations. Matthew O'Brien: Okay. Appreciate that. And then Anshul, the gross margin, you know, topic came up a lot coming out of Q2. It was really strong in Q3 versus expectations. How durable are gross margins? And then I think we had expected them to be down pretty meaningfully in '26. Is that not the case anymore? Will these new products weigh on those? On that metric? And how do we think about gross margins going forward? Anshul Maheshwari: Yeah, Matt. So coming into this year, our gross margin expectations were between 77-78%. And at close to 79.5%, we've not only exceeded our gross margin guidance but also improved our margins year over year from disciplined execution and benefit from several operational initiatives. So we're starting to feel a little bit more confident about the durability of those gross margins. But look, they're going to be a little bit dynamic over the next few years, given the active pipeline of products. So I'd say over the medium term, we now expect gross margins to sort of stabilize around that 78%, 78.5% area, which is much better than what we had previously expected. And part of that is the durability that we're seeing in our gross margins. Most of that gross margin change in the future years will be driven by the increase in noncash items, like depreciation from expansion of surgical capacity. What would offset that, though, is the potential for any future implant tray, implant cost reduction initiative, which is not incorporated in sort of that 78% expectation going forward. And then the last thing I would leave you with is as we scale and expand, our GAAP and non-GAAP operating profit will become more important for us. So you know, you'll continue to see us invest in surgical capacity and new products because we know they can meaningfully accelerate our revenue growth. And we expect any pressure on the gross margins to be offset by the significant operating leverage we see in the rest of the P&L. Operator: Thank you. One moment for our next question. Our next question comes from the line of Travis Steed of Bank of America. Your line is now open. Grisha: Hey, this is Grisha on for Travis. Thanks for taking the question. And congrats on a great quarter. My first question I just wanted to ask about if there's any more directional color that you maybe wanted to give on increasing territories for the next year. Laura A. Francis: Yeah. I'm happy to answer that question. In terms of our territory productivity, as you can see, we have been dramatically increasing territory productivity over the last three years. And what we've done is we've developed this hybrid model that includes our territory managers, senior quota-carrying territory managers, and then we added junior reps, our then junior manager representatives, to support those territory managers. And then in addition, we actually have added a significant number of third-party agents that carry our products too. And so what's happened is if you look at the territory productivity over these last few years, we've more than doubled that. Territory productivity, and now at around $2.1 million in productivity at this point. In terms of how we are thinking about the future, what we want to do is make sure that we are walking a line in order to continue to first and foremost drive continued growth and penetration into the market while also using this hybrid approach. So, you know, we're not giving out specific numbers at this point in time, but what we are doing is, you know, being thoughtful as we add territory managers. You know? And we always kind of thought of that, you know, the range that we're in currently being able to continue to add to that number. I think we're 88 as of the end of the third quarter. You know, add judiciously to those numbers in the next year in order to drive the growth of the business. Anshul Maheshwari: Yeah. The only thing I would add there, Grisha, is what we've shared publicly is we want to get to 100 territories over the next twelve to eighteen months. So that still remains the target for us. And then concurrently, we expect to grow our hybrid model as well as we add more agents to our network as well. And a lot of the expansion of that commercial footprint is in anticipation of the demand that we're seeing for the existing platform, but also preparing for the new product launches in the next year, of which will allow us to increase adoption within the SI joint dysfunction space. And the other one, as Laura talked about, our third breakthrough device, which is targeting a whole new town with the existing cohort. Grisha: Great. Thank you. And then just to follow-up, a little bit on the last question, you obviously had a great performance and saw didn't see the typical seasonality that you would normally see in Q3, and I think a couple of other people in the spine space has agreed with that. Just wanted to see if there's anything to call in the market or if you're really sort of offsetting what you would typically see in procedures with that strength and uptake in products. Thank you. Anshul Maheshwari: Yeah. I would say, Grisha, a lot of that is specific to SI-BONE, Inc. You know, the typical seasonality is there in the summer with patients and physicians taking vacations. But what we have been focused on is how do we execute through that. Part of that has been making sure that we're putting out surgical capacity, making sure we're engaging physicians across multiple modalities, driving sort of that adoption curve across all our call points. And what you've seen is a combination of the continued demand in the SI joint dysfunction space where we've seen double-digit volume growth, double-digit physician growth in the quarter. Once again, the continued benefit from Granite 9.5 that is driving adoption within Granite for both deformity and degenerative spine incrementally. And then finally, our TNT product, which drove almost a threefold increase in physicians that were doing procedures in the quarter on the trauma side. So you know, a lot of that is just the execution by our commercial team and just the focus on making sure we have the capacity to drive adoption. Grisha: Okay. Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of Young Lee of Jefferies. Your line is now open. Young Lee: Alright, great. Thanks for taking our questions. So, I mean, you added a lot of surgeons this quarter at 330. I think that's around 300 on a quarterly basis for the year. You know, the past two years, you're adding about maybe in the low 200s range. Wanted to hear a little bit more about, you know, what are the biggest drivers for those apps and the type of surgeons that you've been getting, whether it's, you know, private practice, academic guys, or, you know, new surgeons versus people that have recently graduated from fellowships or priorly trained ones coming back. Laura A. Francis: Thanks for the question, Young. It's really all of the above. So what we've seen is pretty broad-based growth, and that's how we're hitting the numbers that we are. So we're now at 1,530 active physicians just in the quarter alone. And that was 27% growth. You're right. It was 330 surgeons that we added year over year, and that is the largest increase we've ever had. I think part of it is just we have expanded the number of physicians that we are targeting currently. So we started out with spine surgeons, around 7,500 spine surgeons that we have been targeting. And there's a couple of ways that we're reaching those spine surgeons. One is with continuing to expand the number of surgeons doing SI joint fusion procedures, first of all. And then secondly, those that are interested in doing these adjacent procedures. In most cases, they are doing pelvic fixation with our granite product if they're using a second modality. But some are also using our solutions for pelvic ring fractures too. So we continue to further penetrate the surgeon base in those ways. In addition, the expansion into intervention, we did talk a little bit about that in our prepared remarks. The number of procedures done by those interventionalists doubled year over year. So it actually added to the total addressable market that we were going after. We think that there are around 4,500 interventionalists that are potential targets to perform SI joint fusion procedures. And so if you add it all up, there's around 12,000 physicians, and to be honest, I'm not even including the general ortho trauma surgeons that are also starting to do our TNT procedure as well. So we have a pretty significant number of targets that are out there. We have a lot more that we can penetrate, so it really provides this very nice upside for us. What we're trying to do at the same time, though, is to make sure that we're focusing our sales team, and our direct sales force is very heavily focused on SI joint fusion, while we do get assistance from third-party agents with pelvic fixation and more and more with pelvic ring fractures too. So it's this balance that we're striking in order to go after a very large number of targets while also doing that in an efficient way. Young Lee: Alright. Great. Very helpful. I guess another question is just on your comment on the new products pipeline over the next five years. Was kind of curious if you can share a little bit about how much that can expand your market TAM from the almost half million annual procedures currently. Laura A. Francis: Yeah. It's a good question. And, you know, right now, what we're doing is we're talking more broadly. We're certainly getting into more details in terms of 2026 specifically. And the first product that we're talking about launching in Q1 is an SI joint fusion product, and it's targeted towards physicians that are performing procedures in ambulatory surgical centers. It's continuing to help us to penetrate that large opportunity with SI joint fusion, which is a big part of that half a million TAM that you just mentioned. The second product that we're going to launch in 2026, however, really does have a significant impact on growing the TAM even further. And I won't get into details, but what we're really trying to do is address one of the most pressing needs in spine surgery using our core competencies from an innovation perspective to create that innovative solution to address this unmet clinical need. So that's how we're thinking about 2026. And then as we think about the broader pipeline, it's really more around this concept that we've been talking about of compromised bone. When we started SI-BONE, Inc., we started in SI joint fusion. Why is that relevant to compromised bone? Because the bone in the sacrum tends to be some of the poorest quality bone in the body. We've been developing solutions since the inception of the company around poor bone quality. And so what we're going to do is continue to apply those in ways that focus on our current call points to address this unmet clinical need. So more to come on that in 2026, but hopefully, that gives you a flavor. Young Lee: Alright. Thank you very much. Operator: Thank you. One moment for our next question. Our next question comes from the line of Ross Osborne of Cantor Fitzgerald. Your line is now open. Ross Osborne: Hey, thanks for taking our questions, and congrats on the quarter. And apologies if I missed this, but how did ASP trend during the quarter? Anshul Maheshwari: Yeah. How did you that was on the ASP side, Ross. As you can see, our US volume growth was around 22%. So and the revenue growth was a little north of 21%. So modest ASP impact in the quarter. Most of that was driven by procedure mix. You know, our overall implant ASP remains quite stable. So you know, as we've always said, we start the year, and as we progress through the year, we make conservative assumptions on ASPs. Just because of how the portfolio is evolving. Several of our procedures use three or more implants, but in trauma and in degen, you will generally use anywhere, you know, between one and two implants, so that can impact ASP. But overall, very pleased with how the ASP is trending. We're seeing good traction in granite, especially with multiple implant cases. So more than two implants per procedure. And that brings the overall ASP higher as well. Ross Osborne: Okay. Great. And then for a second question, would you remind us the breadth of your TORQ European launch to date? And then touch on how you're thinking about next year, the game plan to drive deeper penetration within existing geographies or beginning adding new regions? Laura A. Francis: Yeah. So TORQ is really just started in the EU. As you're probably aware, the earlier months in the quarter, July and August, in Europe tend to be quieter months. And so we really just started to see the momentum in September. And so what we would expect is, you know, to see that continue to build in Q4 as well as in 2026. You know, international is just a small percentage of our business, but we do see it as an important market. And you know, if you think about how we built the business there, they had only been selling IQ 3D, well, iFuse since the inception of the company, and then IQ 3D has been on the market for seven years. So it was really important for us to put TORQ out there and become a meaningful accelerator for growth. So we are very optimistic given the early torque adoption that we've seen. And as I said, it was really more the month of September where we truly started to see the impact. And do expect for it to be a meaningful contributor in 2026. And then we're also evaluating the potential for other products across various international markets. You know, now that we've gone through that whole EU MDR process in particular, and it is a cumbersome process, it does give us the ability to take some of our other products internationally as well. So we're excited to do that and see the long-term potential of our OUS business to drive growth. Ross Osborne: Thank you. Operator: Thank you. One moment for our next question. Our next question comes from the line of David Saxon of Needham and Company. Your line is now open. David Saxon: Great. Good afternoon, Laura and Anshul. Thanks for taking my questions and congrats on another strong quarter here. So I wanted to ask on the TNT and NTAP. So would love to hear how you guys are thinking about that. It relates to TNT adoption. And then, I believe that just became effective in October. So, you know, any trends you'd call out, you know, after that effective date that kinda give you confidence in that ramp? Laura A. Francis: Yeah. Thanks for the question, David. We're pretty excited about the NTAP in particular. So it was effective as of October 1. It's around $4,100. That translates to up to 30% improvement in reimbursement in the hospital setting for pelvic ring fracture for Medicare patients. So we do think that this is an important driver. And, you know, more importantly, TNT is considered one of the most exciting innovations in trauma in recent history. It's just another example of our ability to develop a unique anatomy-specific solution that addresses an unmet clinical need. And so I think the NTAP is important in terms of making sure that the health are appropriate there. But in addition, from an adoption perspective, with the ramp ahead of us, what's really important is to see the expansion, the further expansion of our commercial footprint here. And, you know, I mentioned in an earlier question how we're thinking about continuing to grow our business while focusing our sales team. And so what we're doing is we're fielding inbound interest right now from multiple large national distributors that want to partner with us and expand access to the technology. And these are distributors that have a footprint specifically in trauma. So it's another way for us to leverage our hybrid model in order to capture the opportunity that's here while also being efficient and continuing to gain operating leverage in our business. David Saxon: Okay. Great. Thanks for that, Laura. And then maybe onto one for you, and I'm not sure if I'm really going to get an answer here. But just on longer-term profitability, your 5% EBITDA margin now just you guys have talked about kind of your capital-light model. As it relates to longer-term profitability, like do you think SI-BONE, Inc. can be more or less profitable than kind of a traditional spine company? Anshul Maheshwari: Yeah. So let's just start with our business model, David. First, we look for unmet clinical needs. Second, we come up with unique solutions that can carry high ASP. Third, because we don't focus on me-too products, we can leverage on this hybrid commercial infrastructure Laura talked about and get P&L leverage. And then, you know, our asset-light model where because of the high ASP low footprint of our trays and implant sets, allows us to get a lot of leverage on the working capital side as well. So these are really unique to SI-BONE, Inc. and sort of differentiate us from what people see in traditional spine. So I want to give that backdrop. And then, you know, when you think about the future, you know, our focus remains to deliver the revenue growth at or above the levels that we've demonstrated. We've got a huge TAM that's untapped. We got new products on the horizon that will further expand the TAM as well. So you know, we think that revenue growth is what's going to drive leverage. Now on a prior question, I did talk about the operating leverage in the business. Ranging between 1.25 times to 1.75 times. Depending on where we are in the investment cycle. But even with that kind of leverage, you see margin expansions at a pretty healthy clip in the outer years. So we're not going to put an anchor on what that EBITDA margin or adjusted EBITDA margin should be. But we know that with the business model that we have, that top-line growth can translate into pretty good expansion there. Laura A. Francis: David, I think it's a very good question that you're asking too. And if you just look at what we've been able to accomplish to date in terms of being at the revenue levels that we're at, being adjusted EBITDA profitable for the last few quarters, starting to see an inflection on cash, we just look very different from a lot of the orthopedic or spine companies that are out there with our asset-light model. So I really do think it's worth highlighting that and reinforcing how important that is, and it's not just talk. You can see it in the results that we've shown in terms of bottom line and cash flow. David Saxon: Great. Thank you. Thanks so much. Operator: Thank you. One moment for our next question. Our next question comes from the line of Richard Newitter of Securities. Your line is now open. Robbie: Hi, thank you for taking the questions. This is Robbie here for Rich. So I guess I want to kind of follow on to that profit question. Laura, you said you're kind of comfortable with where the street is for next year. So, you know, let's just say you were able to outperform that. Should we think about the kind of, like, the high end of that 1.75 being the case? Or you know, kind of giving the comments on being able to self-fund R&D kind of from the cash flow of operations. The thing that we're all trying to get at is, you know, how quickly can EBITDA inflect for this company given the growth seems to be sustaining at a pretty nice trajectory here? I have a follow-up. Thank you. Anshul Maheshwari: Yeah. No. Robbie, thanks. I can take this question. From a leverage path standpoint going into next year, like Laura said, we're comfortable sort of where consensus is on the revenue side. Now we do have two big launches next year, and there's a lot of R&D work going on to be able to get those products commercialized. One in the first quarter. The second one commercialized as early as potentially 2026. So what I would say is, you know, you should expect leverage to be a little bit on the lower end of that range that I mentioned in the 1.25 to 1.75 times. So maybe in the 1.3 times range at the consensus revenue numbers right now. From '26, now that leverage does grow pretty systemically as these new products start to contribute meaningfully to revenue. In '27, '28, and '29. Laura A. Francis: And I think that's very consistent, Robbie, with our focus on growing our way to profitability. Right? We have a very significant growth opportunity here with these two products coming out in 2026. And we want to lean into them while still being cognizant of the bottom line and cash flow. Robbie: Great. Thanks very much. And then maybe one on the interventional comments. You know, I think you mentioned 4,500 docs doing SI joint cases. Yeah. This is an area, at least from our checks, we've picked up some significant interest from interventional pain docs to do these cases. I just understand a little bit maybe the trade-off between that call point and the others in kind of the customers that you go against to see, you know, who's actually going to be doing these cases. I guess what we're trying to figure out is, you know, how market expansionary could that be, or are you kind of just moving the case from one doctor to the other? And then I guess the last question would be regarding the products coming out next year, sounds like kind of given your trajectory, any sort of special coding or payment or reimbursement terms that we should be looking for as these things get closer to launch? Thanks. Laura A. Francis: Yep. Great. There's a lot there. Let me start on the interventional side at least. So we're definitely pleased with the level of engagement with interventionalists. The 4,500 physician number I gave was really the entire universe of targets. And so what we initially did was we went after around a thousand of those physicians who were already regularly performing surgical procedures. And so we've been really pleased. What we're seeing is that, you know, as time goes on, we're seeing deeper and deeper penetration into that 4,500. There's a lot of interest by interventional spine physicians to perform procedures and specifically SI joint procedures, and more and more of them are becoming comfortable and being trained appropriately to do them. So it is a very significant expansion opportunity in our SI joint fusion business. And we believe that we have the product that can appeal to different physicians. And we also we really have the strongest commercial infrastructure here. The other thing you asked about is whether it's just taking business away. The interventionists that we have been working with have been in areas where there are not physicians already performing the procedure or specifically spine surgeons performing the procedure. So it is additive to our surgeon-led business. And as I said, comprehensive portfolio and gives us a lot of confidence that this is going to be a growth driver. You also asked about reimbursement and CMS proposed a 17% increase in the payment for SI joint fusion procedures performed in office. And our intra product, we believe, is the leading percutaneous SI joint fusion procedure done in office-based labs. So that reimbursement effective January 1, we believe, is a tailwind for us. And then more broadly, you were asking about new products and reimbursement there. If I talk about new products, the product that we're going to launch toward 2026 is a breakthrough device. And so we will be seeking a new technology add-on payment for that particular technology as well. So a lot of tailwinds that we have in the business with new products, with reimbursement, with a new call point that's additive here that really bode well for the business in 2026 and beyond. Operator: Thank you. I'm showing no further questions at this time. I'll now turn it over to Laura for closing comments. Laura A. Francis: I just want to thank everybody for participating in the call today and also really appreciate your interest in SI-BONE, Inc. We look forward to seeing you all at upcoming conferences. Thank you. Goodbye. Operator: Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen. Thank you for standing by. Welcome to LivePerson's Third Quarter 2025 Earnings Conference Call. My name is Irene, and I'll be your conference operator today. At this time, all participants are in a listen-only mode. After the prepared remarks, the management team from LivePerson will conduct a question and answer session and conference participants will be given instructions at that time. To give everyone the opportunity to participate, please limit yourself to one question and one follow-up. As a reminder, this conference is being recorded. I would now like to turn the conference call over to Mr. Jon Perachio, Vice President, Investor Relations. Thank you, Irene. Jon Perachio: Joining me on today's call is John Sabino, CEO, and John Collins, CFO and COO. Please note that during today's call, we will make forward-looking statements, predictions, projections, and other statements about future results. These statements are based on our current expectations and assumptions as of today, November 10, 2025, and are subject to risks and uncertainties. Actual results may differ materially due to various factors, including those described in today's earnings press release, and the comments made during this conference call, as well as in 10-Ks, 10-Qs, and other reports we file with the SEC. We assume no obligation to update any forward-looking statements. Also during this call, we'll discuss certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP financial measures is included in today's earnings press release. Both the press release and the supplemental slides, which include highlights for the quarter, are available on the Investor Relations section of LivePerson's website, ir.liveperson.com. With that, I'll turn the call over to LivePerson's CEO, John Sabino. Thank you so much, Jon. And thank you all for joining us today. John Sabino: I will begin by briefly reiterating the decisive actions we took to the company this quarter. Then I will cover our results and key business updates. First, the debt refinancing agreement we discussed on our last call is now closed. This is a pivotal achievement and most importantly, resolves a concern we heard from our customers and partners. Second, we executed a cost restructuring to reduce our cash burn. This ensures we can operate efficiently and allows LivePerson to retain cash on the balance sheet. Together, these actions address a primary headwind of renewal hesitation and slower bookings and indeed, the tone of our customer conversations has started to change. They recognize that our cost and capital structures have been stabilized and are looking to us for continued strategic partnership. Now turning to our operational performance for the third quarter. We delivered results that were above the high end of our guidance ranges for both revenue and adjusted EBITDA. Revenue came in at $60.2 million, exceeding the high end of our $60 million guidance. Adjusted EBITDA was $4.8 million. This significantly exceeded our high end of our guidance range, demonstrating our continued financial discipline with the cost reductions made during the quarter. Turning to our product. We're seeing strong momentum and validation from both our customers and the market. Our customers' adoption of our Generve AI suite continues to grow, with nearly 20% of all conversations on our platform now using generative AI. At the same time, Gartner recently recognized LivePerson as a niche player in their 2025 Gartner Magic Quadrant for conversational AI platforms. One of only 13 vendors. We were also recognized in the 2025 Gartner report for digital customer service. Building on our previously announced partnership with Google, we were honored to join them on stage at their recent RCS event. LivePerson's integration with Google's RCS platform enables brands to deliver rich, interactive, and verified messaging experiences, that drive higher engagement, and customer trust. It also allows businesses to seamlessly transition from campaigns to two-way messaging, combining multimedia content with LivePerson's platform to create personalized scalable customer conversations. It's an exciting development and we expect to share more on this in the future. This partnership with Google extends even deeper. We just launched Copilot Translate built on Google's Gemini 2.5. This capability is embedded directly within our agent workspace, eliminating language barriers by automatically translating all inbound and outbound messages. It allows our brands to effortlessly serve customers in many languages, boosting agent productivity, and delivering a truly AI-native experience. Our innovation extends beyond these powerful partner integrations. We are applying our deep conversational expertise to solve customers' most fundamental challenges. We continue to hear consistent feedback from our customers and prospective customers about the challenges they face in deploying and scaling both AI and human agent workforces. These challenges range from the complexity of safely training and validating AI models before production to the long ramp times, high training costs, and quality assurance demands of their human teams. To address these needs in the market, we are leveraging our decades of conversational expertise and deep culture of innovation to introduce Conversation Simulator. This is a transformative product that enables brands to safely test, train, and validate AI agents in real-world conditions while simultaneously providing in-workflow training and quality management for human agents. Our fundamental differentiator is providing this dual capability in a single unified platform. It accelerates the time to value for AI deployments, improves human agent performance, and positions our customers to scale more efficiently, driving stronger business outcomes across the enterprise. This will be a standalone product with its own revenue stream. And we believe it represents a significant new opportunity for LivePerson. It has a fundamentally open architecture designed to serve as the vendor-agnostic testing and insurance hub for a business' AI and human conversational ecosystem. This means that while it integrates seamlessly with our platform, it will also work with any CCaaS platform and any third-party AI. The core purpose of this product is to make AI agents more predictable, trainable, testable, and audible. This product allows businesses to simulate, analyze, and continuously improve performance across their conversational ecosystem. This is precisely where we bring AI and human training together. For AI bots, this product validates and optimizes performance against business-critical synthetic scenarios before they ever reach a live customer. This tests end-to-end conversational orchestration of care, sales, and commerce use cases across live agents and virtual agent experiences. For human agents, it provides a new style of training. We can inject synthetic scenarios and test agents directly in their workflow. This provides real-time feedback and training without ever taking them out of their day-to-day activities. The value this provides to our customers is significant. Early data points to a 30% decrease in agent ramp time, and a 60% reduction in the time to test AI bots. Beyond these efficiencies, it's giving our customers the confidence to launch AI agents at scale for high-stakes customer-facing use cases. Our product provides the visibility, risk management, continuous monitoring, and training necessary to bring velocity and trust and scale to AI deployments. We believe these capabilities remove key obstacles that have prevented further generative AI adoption. This proactive, continuous approach marks a shift from recent failure analysis from excuse me, from reactive failure analysis. Customers can now identify and preempt errors. This is how we will deliver trust, value, and more predictable business outcomes. Driven by a unified strategy for both AI and human agents. This capability unlocks a significant opportunity by extending LivePerson's reach beyond the traditional enterprise segment. Conversation Simulator has been designed to provide critical assurances to businesses of all sizes, allowing us to address an adjacent market for training, simulation, and compliance. This market represents a $10 billion TAM today and is projected to grow to $20 billion by 2030. Best of all, this is resonating with our customers. We have several early access customers actively using the product and seeing initial results. These customers include Telstra and Open University amongst others. Additionally, we have a strong pipeline of customers expected to begin testing in the coming months. This early adoption is validation that Conversation Simulator provides a critical new layer of trust and predictability that the industry demands and we are uniquely positioned to lead. We look forward to updating you on the growth and success of this new product. Now moving to go to market. We are seeing encouraging early signs of improvement in our commercial performance. Nowhere is this progress more evident than in our renewal discussions, where the tone and confidence of our customers has shifted meaningfully. We successfully renewed several large accounts that had previously expressed hesitation, including a major U.S. telecom company and a leading amusement park and entertainment company. This renewed confidence extends beyond renewals and into new growth opportunities. For example, a leading travel brand which had initially raised concerns about our financial stability, recently signed a new upsell contract. In addition, a large financial services organization which had shared similar concerns is now expected to grow with us, including an upsell this quarter. These expansions from accounts that had previously expressed concern are powerful indicators of increasing confidence in our innovation and stability. This returning customer confidence is also beginning to appear in our numbers. We delivered a slight sequential increase in bookings this quarter, even as we continue to navigate the headwinds from renewal hesitation, longer deal cycles, and new AI-related approval processes across the industry. Our commercial momentum is being strengthened through our key technology partnerships as well. Notably, we're now officially live on Google Cloud Marketplace. A major milestone that makes it significantly easier for organizations already operating in the Google ecosystem to discover and purchase our platform using their committed Google Cloud spend. This opens a powerful, new, frictionless channel for growth, and it deepens our reach across enterprise markets. In fact, we already have a deal flowing through this new channel, validating the strategy. At the beginning of this call, I laid out the decisive actions we took to stabilize this company and we're beginning to see the benefits. The tone of our customer conversations is changing, and we're seeing better momentum in key enterprise accounts. We're also seeing continued strong adoption of our Genever AI capabilities, early traction of our new Conversation Simulator, and a growing partnership with Google creating additional paths to market. With better than anticipated variable revenue performance in Q3, falling through to the full year, we're raising our full-year revenue guidance range to $235 million to $240 million, up $2.5 million at the midpoint. And our full-year adjusted EBITDA guidance to a range of $7.5 million to $12.5 million, up $8 million at the midpoint. With our financial foundation stabilized, commercial traction building, we are well-positioned to continue to execute our strategy. Now let me hand our call over to John Collins. John? John Collins: Thanks, John. In the third quarter, we continued to deliver on the plan we committed to at the start of the year. We closed the previously announced debt refinancing agreement and significantly reduced our cost structure. Together, these milestones give LivePerson the financial foundation needed to succeed in the market. In addition, we began migrating customers to our public cloud infrastructure and we launched a new product innovation, as John discussed, Conversation Simulator, for which we already have paying customers and a growing pipeline of opportunities. While it's early, we are seeing indications of meaningful demand. In terms of deals and significant wins, in the quarter, we signed a total of 28 deals including two new logos and 26 expansions and renewals, translating to a sequential increase in total deal value of 14%. Key themes for the quarter included continued traction in regulated industries, mainly banking, healthcare, and telecommunications, where there is demand for compliant, centralized, and AI-agnostic orchestration to securely deploy and manage a variety of AI agents. Significant renewals and expansions included a 7-figure deal with a leading US health plan provider, a leading amusement park and entertainment company, and Sanlam, a leading South African financial services group. We also added a global industrial company as a new logo. In addition, with the debt transaction behind us, we began proactively educating customers on our improved financial foundation, which has already resulted in the renewal status of certain customers changing from cancellation or short-term extension to full renewal. As for our third-quarter financial results, total revenue was $60.2 million, above the high end of our guidance range. Note that the upside relative to guidance, which resulted in a slight sequential increase in revenue, was driven by variable overage revenue and the timing of revenue recognition for certain deals. Adjusted EBITDA was $4.8 million, also above the high end of our guidance range, driven by strong cost discipline and the immediate benefits of the cost restructuring executed during the quarter. Revenue from hosted services was $51.2 million, down 18% year over year. Recurring revenue was $55.1 million, or 92% of total revenue. Further segmenting revenue, professional services revenue was $9 million, down 23% year over year. From a geographic perspective, U.S. revenue was $37 million and international revenue was $23.2 million, or 61% and 39% of total revenue, respectively. Average revenue per customer was $665,000, up 6% year over year, driven in part by expansions with our largest customers and in part by customer retention. RPO declined to $182 million, consistent with the same factors driving declines in revenue. Net revenue retention was 80.4%, up from 78.2% in the second quarter. This sequential increase was driven by the same factors that caused the sequential increase in revenue. In general, we expect net revenue retention to track within period revenue and experience slight sequential declines going forward. Finally, in terms of cash, we ended the third quarter with $107 million of cash on the balance sheet. Turning to guidance. Considering the revenue upside in the third quarter, which we are flowing through, and our improved outlook on renewals, we are raising guidance for the full year. For revenue, we now expect a range of $235 million to $240 million, an increase of $2.5 million at the midpoint. For adjusted EBITDA, we expect a range of $7.5 million to $12.5 million, an increase of $8 million at the midpoint. We also expect adjusted EBITDA to exceed capital expenditures for the full year. The implication for revenue in the fourth quarter is a range of $50.5 million to $55.5 million. Note that the sequential decline is driven in part by the timing of revenue recognition that benefited the third quarter. We expect recurring revenues to be approximately 93% of total revenue in the fourth quarter. As for adjusted EBITDA in the fourth quarter, we expect a range of $0 to $5 million. Before taking questions, I'll briefly summarize by emphasizing that the third quarter demonstrated strong execution against our strategic plan. We strengthened the capital structure and rationalized costs, setting us on a path toward producing sustainable free cash flow. Simultaneously, we continue to deliver value for customers, with on-schedule GCP migrations and product innovation in the form of Conversation Simulator. Collectively, we believe these milestones have positioned LivePerson to continue building commercial traction going forward. And with that, we can move to Q&A. Operator: Thank you. We will now be conducting a question and answer session. If you would like to ask a question, one moment please while we poll for questions. The first question we have is from Geoff Henry of Craig Hallum Capital Group. Please go ahead. Jon Perachio: Hey. Good evening. This is Daniel Hipschman on for Jeff Van Rhee. Maybe just Hi, could open with giving a little bit of color on the upside to the core and what drove that. I mean, sounds like a few factors perhaps, you know, customers getting some additional confidence in the finances. And a few other factors to test out. But maybe if 80/20, you could point us to what drove the upside this quarter. John, do you wanna talk about revenue? And I'll talk to bookings afterwards. Thank you. Yeah. John Collins: No problem. Good to hear from you, Daniel. In terms of the upside, we characterize it as timing, which means there's some deals that were to otherwise taken place in the fourth quarter than that are now in the third. And there's variable revenue that we recognized in the third. That drove the balance of the upside in the quarter. The timing is the larger factor there. For your 80/20. John Sabino: Okay. And then on bookings is Daniel, as you can imagine, the conversations around financial stability and other things not only impeded renewals, but it also had to do with our ability to expand in some of those accounts. And we're starting to see those conversations have some forward progress. Positive progress. Okay. And then on the competitive landscape for conversational simulator, maybe just walk us through. You know, I'm not familiar with the landscape there. What are some of the key peer products that are out there for this already? Jon Perachio: You know, what's the differentiation that LivePerson is looking to bring to the market? What's the right to win? Just anything about the tiers there. John Sabino: Yeah. There's a few things with that. There are quite a few folks that are in the space, but no one that really addresses both sides of the equation, which is both human and bot. We're one of the few that we can find that do that in the market. Additionally, our experience around the verticals and the businesses we plan give us the dataset and the unique knowledge in which to train certain scenarios, personas, for our customers that separates us quite a bit from some of our competition. But the interesting thing around this is that the approach that we're taking, the ability to actually inject a training scenario or evaluation of a human agent's performance right into their daily work stream or messaging queue, is something that's pretty unique to us. So we're not you know, you're not training in an out environment. You're there doing your job, and the ROI is still there in place. And when it comes to bots, we're able to do this in a way that really does allow you to simulate at scale how that full orchestration is going to perform. And so because we have both sides of the equation, our product is pretty unique in that regard. Additionally, it's an open product, meaning that we can test any LLM that's out there, any CCaaS platform in addition to activity on our own. So what I think really does separate LivePerson here is that we're not looking at one side of this in isolation. We're looking at it from a complete CX perspective, and we can do a continuous improvement in training loop compliance and governance, in a way that is pretty unique in the market. So those are the things that we think differentiate it. And we haven't really seen someone else doing exactly the same thing as us. Or being in a position to because we are both human and AI in how we, how we address an agent and a CX experience for a brand. Jon Perachio: Okay. Thanks, John. That's helpful. Then just one last one for me on the modeling. Just, I think, John, you mentioned a little bit on restructuring and some additional costs coming out. Just anything is that something that happened here in Q3? Is that in reference to something that's layering more so in Q4? And then just anything on the scale of that, I see the EBITDA here guide is a Should we take, you know, something in that scale is what A few million ahead of the street for Q4. You know, the few million, maybe sequential change in OpEx is what driving that beat in Q4? Just any thoughts on that. John Collins: And to answer your earlier question, Yeah. That's correct, Daniel. That's what's driving the beat in Q4. The timing was Q3, so we shouldn't begin to experience the full effects of the cost restructuring during Q4 and for full year '26. Jon Perachio: Okay. Great. Thanks, guys. John Sabino: Thanks, Daniel. Good to hear from you. Operator: At this time, there are no further questions. And with that, this concludes today's teleconference. Thank you for joining us. You may now disconnect your lines. John Sabino: Thank you.
Operator: Thank you for standing by. My name is Tina, and I will be your conference operator today. At this time, I would like to welcome everyone to the CoreWeave, Inc. Class A Common Stock Third Quarter 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. Thank you. It is now my pleasure to turn the call over to CoreWeave, Inc. Class A Common Stock. Deborah Crawford: Thank you. Good afternoon, and welcome to CoreWeave, Inc. Class A Common Stock's third quarter 2025 earnings conference call. Joining me today to discuss our results are Michael Intrator, CEO, and Nitin Agrawal, CFO. Before we get started, I would like to take this opportunity to remind you that our remarks today will include forward-looking statements. Actual results may differ materially from those contemplated by these forward-looking statements. Factors that could cause these results to differ materially are set forth in today's earnings press release and in our quarterly report on Form 10-Q to be filed with the SEC. Any forward-looking statements that we make on this call are based on assumptions as of today, and we undertake no obligation to update these statements as a result of new information or future events. During this call, we will present both GAAP and certain non-GAAP financial measures. A reconciliation of GAAP to non-GAAP measures is included in today's earnings press release. The earnings press release and an accompanying investor presentation are available on our website at investors.coreweave.com. A replay of this call will also be available on our Investor Relations website. Now I'd like to turn the call over to Michael Intrator. Michael Intrator: Good afternoon, everyone, and thank you for joining us. CoreWeave, Inc. Class A Common Stock, once again, delivered an exceptional quarter showcasing the accelerating momentum underlying our business as AI adoption proliferates globally across industries. We continue to operate in a highly supply-constrained environment, where the demand for CoreWeave, Inc. Class A Common Stock's best-in-class AI cloud platform far exceeds available capacity. This insatiable customer demand is a clear signal that the world's leading companies trust CoreWeave, Inc. Class A Common Stock to power their most critical AI workloads. In Q3, we beat expectations, delivering revenue of $1.4 billion, up 134% year over year. We added over $25 billion in revenue backlog in the third quarter alone, bringing us to over $55 billion in revenue backlog to end Q3, almost double Q2 and approaching 4x year to date. Further, CoreWeave, Inc. Class A Common Stock has reached $50 billion in RPO, faster than any cloud in history. These results demonstrate the deep confidence customers have in CoreWeave, Inc. Class A Common Stock, the company they trust as their essential cloud for artificial intelligence. We continue to scale aggressively even as the industry remains capacity constrained. We expanded our active power footprint by 120 megawatts sequentially to approximately 590 megawatts while growing our contracted power capacity over 600 megawatts to 2.9 gigawatts. This leaves us well-positioned for future growth with more than one gigawatt of contracted capacity available to be sold to customers that we expect to largely come online within the next twelve to twenty-four months. In Q3, we executed large-scale compute contracts with many of our largest customers, including Meta and OpenAI. Each represents a meaningful expansion of existing relationships and a diversification away from any single customer. We also grew our relationship with a leading hyperscaler, marking the sixth contract with this customer to date. In fact, nine of our 10 largest customers have now executed multiple agreements with us, the only exception being a new customer we onboarded in Q3. CoreWeave, Inc. Class A Common Stock is the force multiplier that empowers pioneers to accelerate breakthroughs in AI innovation. These are the world's most sophisticated AI organizations, and once they experience the performance, flexibility, and reliability of CoreWeave, Inc. Class A Common Stock Cloud, they consistently expand with us. That is the strongest validation we could ask for. Our exceptional growth illustrates just how quickly AI adoption is progressing beyond the frontier AI labs and hyperscalers. Broader global demand and our recent large wins are driving diversification of our revenue base. For example, the number of customers that exceeded $100 million of revenue over the last twelve months tripled year over year. AI native and enterprises across sectors are embracing CoreWeave, Inc. Class A Common Stock to transform operations and unlock new sources of innovation, productivity, and growth. At the forefront of foundation model development, Poolside selected CoreWeave, Inc. Class A Common Stock to power its mission to build artificial general intelligence and enable the deployment of agents across enterprises, while Periodic Labs is using CoreWeave, Inc. Class A Common Stock to push the boundaries of scientific discovery and computational research. At the application layer, we added AI native customers like Jasper, who chose CoreWeave, Inc. Class A Common Stock as their cloud partner as they transform the digital marketing landscape. We are also seeing incredible momentum within enterprises. CrowdStrike chose CoreWeave, Inc. Class A Common Stock to advance the development of AI agents for cybersecurity, while Rakuten is using our platform to transform their visual language models, helping to achieve greater transparency, reproducibility, and speed in their AI workloads. We also saw further expansion with a wide range of enterprise customers, including a leading software design platform and a large telco operator in the U.S. Our reach now extends into the public sector, a market with unique performance and security requirements. We recently launched CoreWeave Federal to bring our cloud services to U.S. government agencies and the defense industrial base. Already, NASA is leveraging our services to advance scientific exploration at its Jet Propulsion Lab. We are honored to help strengthen America's AI infrastructure, enabling agencies to accelerate innovation and address critical missions and our national interests. These recent wins underscore that we are enterprise-ready. With our customer base broadening across verticals and geographies, we are excited to welcome John Jones as our first Chief Revenue Officer. John joins us from AWS, where he served as global head of startups and venture capital. John is a strong addition to our team and will play an important role in scaling our global revenue organization, driving expansion through this next phase of growth. Next, as I move to discuss our growing data center footprint, I want to briefly touch on our previously proposed acquisition of Core Scientific, which was terminated in October. While the deal made sense strategically for both companies, the valuation required by their shareholders was simply not a price that was appropriate for CoreWeave, Inc. Class A Common Stock, particularly because the outcome of the transaction in no way adversely impacts our ability to achieve our growth ambitions in the coming years. Instead, we will continue to work closely with Core Scientific on the approximately 590 megawatts of capacity we have already leased. Our disciplined approach to expanding our capacity footprint ensures we are meeting the surging global demand for CoreWeave, Inc. Class A Common Stock's cloud services. As I mentioned, we grew our contracted power capacity to 2.9 gigawatts this quarter as we diversified across size, geography, and developers, enhancing resilience and flexibility across our portfolio. As of Q3, no single data center provider represents more than approximately 20% of our contracted power portfolio. In the past quarter, we added eight new data centers across the U.S., strengthening our domestic coverage with additional expansions underway across Europe, including a major new presence in Scotland, which is being developed in partnership with the UK government. And as we announced over the course of the summer, we have embarked on self-build projects to further accelerate our footprint and provide us greater operational control. While we are experiencing relentless demand for our data center developers across the industry, they are also enduring unprecedented pressure across supply chains. In our case, we are affected by temporary delays related to a third-party data center developer who is behind schedule. This impacts fourth-quarter expectations, which Nitin will discuss shortly. Having said that, the customer affected by the current delays has agreed to adjust the delivery schedule and extend the expiration date. As a result, we maintain the total value of the original contract, and the customer preserves their capacity for the full duration of the initial agreement, demonstrating the confidence they have in our ability to provide the most performance solutions in the market. We are incredibly proud of our technical accomplishments, and our customers continue to tell us that CoreWeave, Inc. Class A Common Stock is the absolute best place to run AI workloads. In the third quarter, we continued to deliver many of the initial scale deployments of the GB200s, while once again being first to market, this time with the GB300s, further highlighting our incredible track record of operational excellence. CoreWeave, Inc. Class A Common Stock's industry leadership is unmatched. We are the only cloud provider to submit MLPerf inference results for GB300, setting the benchmark for real-world AI performance. And just last week, Semi Analysis once again recognized our dominance, awarding CoreWeave, Inc. Class A Common Stock its highest possible distinction, its platinum cluster max ranking, for the second time ahead of more than 200 providers, including the hyperscalers and emerging neo clouds. No other cloud has achieved this once. CoreWeave, Inc. Class A Common Stock has done it twice, underscoring yet again that CoreWeave, Inc. Class A Common Stock stands alone at the forefront of the AI cloud. Demand for AI cloud technology remains robust across generations of GPUs. For example, in Q3, we saw our first 10,000 plus H100 contract approaching expiration. Two quarters in advance, the customer proactively recontracted for the infrastructure at a price within 5% of the original agreement. This is a powerful indicator of customer satisfaction as well as the long-term utility and differentiated value of the GPUs run on CoreWeave, Inc. Class A Common Stock's platform. CoreWeave, Inc. Class A Common Stock is the world's first AI cloud at hyperscale, comprising compute, storage, networking, and software purpose-built for AI workloads. Our growing cloud portfolio is underpinned by an expanding suite of software and services that help our customers build, train, and deploy new products faster. In addition to mission control, our proprietary orchestration solution, which is critical to autonomously operate our AI cloud at the bleeding edge, we recently launched CoreWeave AI object storage, a fully managed storage service that eliminates any friction of moving data between regions, clouds, and tiers with zero egress or transaction fees. CoreWeave, Inc. Class A Common Stock's AI object storage delivers the highest amount of throughput of AI workloads while cutting the customer's cost by more than 75%. We have already seen tremendous interest in this offering, adding a number of initial customers, including Frontier AI Labs like Mistral. Across our entire storage platform, we have seen rapid customer adoption, eclipsing $100 million in ARR in Q3. Combined with our unique global network backbone purpose-built for AI, this positions CoreWeave, Inc. Class A Common Stock as the hub for customers and their key AI workloads, enabling consistent best-in-class performance and seamless user experiences when utilizing CoreWeave, Inc. Class A Common Stock Cloud or a secondary provider. We've supplemented these capabilities with further expansion of our observability and security suites to ensure that CoreWeave, Inc. Class A Common Stock is best positioned to handle all of our customers' critical workloads, regardless of the use case or geography. Our role over the last few years has been to support the pioneers who are developing and improving AI. Now we are expanding our role to help put AI to work. From the tools that developers require to build AI to the solutions that the physical world requires to adopt AI, we've used M&A as a key tool to accelerate this journey, including the recently announced acquisitions of Open Pipe, Marimo, and Monolith. With Open Pipe, we quickly integrated their solutions into our broader fine-tuning product suite and introduced the first publicly available serverless reinforcement learning tool. With Marimo, we are expanding CoreWeave, Inc. Class A Common Stock's exposure to and impact within the open-source community, starting with entry-level exploration and prototyping. Both Open Pipe and Marimo fit seamlessly with the capabilities of weights and biases, where we are rapidly growing the developer base reliant on CoreWeave, Inc. Class A Common Stock's holistic platform. With Monolith, we are expanding these capabilities into the physical world to unlock the monetization of AI today, initially focusing on industrial use cases with an established enterprise customer base and mature workloads, including leading auto OEMs like Nissan and Stellantis. Through the rapid and successful launch of new products and services, we are expanding our addressable market and growing with our customers. We are fundamentally evolving the capabilities of CoreWeave, Inc. Class A Common Stock, creating beachheads and expansion opportunities into new markets, all in the service of further supporting the rapid growth of AI and enabling AI builders and innovators to get to market faster, more reliably, and drive ROI. Our engagements are getting more sophisticated, as evidenced by our partnership with CrowdStrike, which will unlock and accelerate partner-driven growth. Our new storage product and partnership with Vast Data is another example of accelerating both our product portfolio and partner go-to-market motions and allows us to compete in new markets where we previously had limited or no offerings. This facilitates customer-driven platform adoption and product-led growth, creating tailwinds for our business. As I close, I want to emphasize what truly sets CoreWeave, Inc. Class A Common Stock apart. We are the essential cloud for AI, combining unmatched technical and operational excellence with a rapidly diversifying customer base. We deliver the most performing infrastructure, the fastest time to market, and the most advanced capabilities in the industry. The world's leading AI innovators choose CoreWeave, Inc. Class A Common Stock because we enable them to move faster, scale smarter, and achieve outcomes that simply are not possible anywhere else. Our momentum has never been stronger, and the opportunities ahead continue to expand. Powered by exceptional products, an extraordinary team, and unrivaled execution, CoreWeave, Inc. Class A Common Stock is ready to enter the next phase of growth as a full-stack AI service provider and hyperscale. The future runs on CoreWeave, Inc. Class A Common Stock, and we are just getting started. With that, here's Nitin. Nitin Agrawal: Thanks, Michael, and good afternoon, everyone. Our impressive third-quarter results reinforced the relentless demand for CoreWeave, Inc. Class A Common Stock and our focused execution in building the essential cloud for AI. As Michael shared, we continue to execute within a highly supply-constrained environment, which we expect to persist for an extended period of time. Our continued focus on delivering the most performance solution in the market and investing up and down the stack is spurring growth and diversification across our customer base, from new enterprises and AI natives to expansion with existing customers. Now turning to Q3 results. Q3 revenue was $1.4 billion, up 134% year over year, driven by robust customer demand and strong execution. Revenue backlog for the quarter ended at $55.6 billion, almost doubling in the third quarter alone. Demand remains robust for not just the Blackwell platform but across our GPU portfolio. In the third quarter, we signed a number of deals for older generations of GPUs, adding new customers and re-contracting existing capacity. The breadth of demand for CoreWeave, Inc. Class A Common Stock's cloud services has enabled us to reduce our customer concentration significantly. Today, no single customer represents more than approximately 35% of our revenue backlog, down from approximately 50% last quarter and even more meaningfully from approximately 85% to begin the year. Additionally, as of Q3, more than 60% of our revenue backlog is tied to investment-grade customers. This is what successful execution against our stated goal of platform customer diversification looks like. Operating expenses in the third quarter were $1.3 billion, including stock-based compensation expense of $144 million. We continue to ramp our investments in data center and server infrastructure to execute against our growing revenue backlog, which contributed to the increase in our cost of revenue and technology and infrastructure spend in Q3. In addition, the increase in sales and marketing was driven by investments in marketing and scaling our go-to-market organization to capture the rapid growth of AI opportunities across enterprises and AI natives. The increase in G&A was driven by professional services and headcount. Adjusted operating income for Q3 was $217 million compared to $125 million in 2024. Our Q3 adjusted operating margin was 16%. Adjusted operating income was better than expected due to higher revenue, lower costs due to timing of data center deliveries from our third-party partners, and improved fleet efficiencies. Net loss for the third quarter was $110 million compared to a $360 million net loss in 2024. Interest expense for Q3 was $311 million compared to $104 million in 2024 due to increased debt to support the scaling of our infrastructure, partly offset by the benefit from better interest rates on our debt as we make further progress in lowering our cost of capital. Adjusted net loss for Q3 was $41 million compared to approximately breakeven in 2024, while adjusted EBITDA for Q3 was $838 million compared to $379 million in 2024, increasing more than 2x year over year. Our adjusted EBITDA margin was 61%. Turning to capital expenditures. CapEx in Q3 totaled $1.9 billion, lower than anticipated due to the delays Michael mentioned related to deliveries from a third-party data center provider. The meaningful growth in construction in progress to $6.9 billion, an increase of $2.8 billion quarter over quarter, is a direct result. As a reminder, construction in progress represents infrastructure not yet in service and is excluded from CapEx until it is deployed. Now let's turn to our balance sheet and strong liquidity position. As of September 30, we had $3 billion in cash, cash equivalents, restricted cash, and marketable securities. Growing rapidly and operating at scale demands a strategic approach to securing capital. CoreWeave, Inc. Class A Common Stock has established itself as the leading AI cloud and the leading innovator financing the infrastructure required to power the world's most advanced workloads, enterprises, and AI labs. We continue to make great progress in strengthening our capital structure and lowering our cost of capital. In Q3, we amended the DGTL 2.0 facility by increasing its remaining drybulk capacity by over $400 million to create a new $3 billion tranche at SOFR plus 4.25%, which is significantly below the original cost of the facility. As we discussed previously, we also closed TDTL 3.0 in the third quarter, priced at SOFR plus 400, which represents a 900 basis point decrease from the non-investment grade portion of our prior facility. Going forward, we expect to continue to be able to finance at lower spreads as our capital providers increasingly appreciate our best-in-class execution as well as the durable cash flow and visibility that underpin our take-or-pay customer contracts. Further, we raised $1.75 billion in senior notes in July, extending our exposure to the high-yield market at a cost 25 basis points lower than our inaugural offering in May. Year to date, CoreWeave, Inc. Class A Common Stock has successfully secured $14 billion in debt and equity transactions to support our execution on our rapidly growing backlog and efficient scaling for long-term growth. Other than payments related to OEM vendor financing and self-amortizing debt through committed contract payments, we have no debt maturities until 2028. Turning to tax, in Q3, we recorded a non-cash tax benefit primarily due to the impact of One Big Beautiful Bill. While the size of the impact to Q3 was one-time in nature, due to a year-to-date catch-up, we expect the change in law to enable CoreWeave, Inc. Class A Common Stock to realize cash tax savings in future periods. Now turning to guidance. As mentioned, the delays in powered shell delivery associated with the data center provider will have an impact on our fourth-quarter results. These delays are temporary, and as Michael noted, the affected customer has agreed to adjust the delivery schedule to preserve their capacity for the full duration and the total value of the original agreement. With that backdrop, we now expect 2025 revenue in the range of $5.05 billion to $5.15 billion. In addition, we anticipate 2025 adjusted operating income between $690 million to $720 million and expect to end the year with over 850 megawatts of active power. In Q4, we will be bringing online some of the largest scale deployments in our company's history. This will have a near-term impact on adjusted operating margin due to the timing difference between when data center costs are first incurred and when we start recognizing revenue. We expect 2025 interest expense in the range of $1.21 billion to $1.25 billion, driven by increased debt to support our demand-led CapEx growth, partly offset by an increasingly lower cost of capital. Moving to CapEx. We now expect 2025 CapEx in the range of $12 billion to $14 billion. We expect this reduction in CapEx from our prior guidance will be mostly reflected by a corresponding increase in construction in progress due to the buildup of infrastructure waiting to be deployed following the delivery of powered shell capacity. As such, the vast majority of the remaining CapEx had previously anticipated to land in Q4 will now be recognized in Q1. In addition, given the significant growth in our backlog and continued insatiable demand for our cloud services, we expect CapEx in 2026 to be well in excess of double that of 2025. These investments in our infrastructure platform will strengthen our competitive moats and support our continued hyper-growth. In closing, we delivered a record third quarter and remain more confident than ever in the long-term trajectory of our business. Over the course of this year, we've made tremendous progress, accelerating our revenue backlog growth that now exceeds $55 billion while diversifying our customer base, executing strategic partnerships and acquisitions to strengthen and broaden our platform, accessing new capital pools that meaningfully reduce our cost of capital, and scaling both our capacity and organization at an unprecedented pace. This progress enables us to seize the opportunities in front of us today and create a strong foundation for years to come. Our addressable market continues to expand, not only as AI adoption proliferates across industries and use cases but also through deliberate business decisions we've made to broaden our product portfolio and capture greater wallet share across the industry. CoreWeave, Inc. Class A Common Stock is reaching escape velocity, scaling more rapidly and efficiently, and solidifying our leadership as the essential cloud for AI. Thank you to our investors and analysts for your support and engagement. We look forward to updating you on our progress in the quarters to come. With that, we move to Q&A. Operator: And our first question comes from the line of Mark Murphy with JPMorgan. Please go ahead. Mark Murphy: Thank you, Michael. Every discussion we have across the AI landscape, we hear that bookings are booming, and obviously, that applies to CoreWeave, Inc. Class A Common Stock. But the bottlenecks around power and manpower are becoming so severe. Can you speak to that situation relating to the third-party provider? Specifically, is it a shortage of power or manpower? Is it something outside of that with GPUs or memory or storage? And then have you spoken to your other third-party providers to get a sense of their own trending relative to schedule and whether they think they can hold on their deliver on their commitments into early next year? Michael Intrator: Let me take that question apart a few different ways. Right? So first of all, correct. It is very frustrating for clients. It's very frustrating for us. The kind of systemic challenges that exist within the supply chains that are necessary to deliver the global infrastructure required for artificial intelligence. Having said that, we have taken a number of steps along the way here to really drive home our ability to manage that environment, which is going to be challenging into the future. We've really spent a lot of time diversifying our data center providers. We have created a significant portion of the company dedicated to being able to facilitate and assist with the operational component of delivering infrastructure. We set up our own self-build efforts, including Kenilworth and Lancaster, Pennsylvania, so you see us kind of really spreading out and ensuring that we're doing everything that is possible to limit the damage associated with or the delays associated with delivering this infrastructure, which is just overwhelming the supply chains. Now, when you have a diversified portfolio of paths to infrastructure, the relative impact of each delay becomes smaller. You'd just be able to draw on different data centers as you're getting delivered. And so we really look at this as this is a significant block of infrastructure that's come on late. But the fact that the ultimate end customer that's going to be consuming this has shifted the contract back to allow us to be able to deliver the full contract value in spite of the delays really speaks to the value that the customers get out of our infrastructure. So you're going to be hearing this theme repeated again and again as you talk to not just CoreWeave, Inc. Class A Common Stock, but you talk across the space. And it is a real challenge at the powered shell level. It's not a challenge for power. There's plenty of power right now. And we believe that there will be ample power for the next couple of years. But really where the challenge is is the powered shell. Mark Murphy: And so, Michael, does this not relate to Core Scientific in any way, or is this totally removed from that situation that you've gone through? Michael Intrator: So I'm not going to speak to any specific one of our data center providers. We're working with all of our data center providers to do everything we can to facilitate the ultimate delivery of the infrastructure that they're going to deliver to us. We've had some incredible success getting infrastructure delivered to us as you continue to see us scaling. You saw us hit approximately 590 megawatts. We're up 120 megawatts since the last call. So you are seeing a significant amount of success as we continue to scale delivery. But I don't think it really matters who the individual data center provider is. This is a systemic problem that the industry is going to have to deal with for the foreseeable future. The important part here is that the infrastructure, which is undergoing a delay, is not going to impact our backlog and our ability to extract the full value from the contracts that we're going to deliver on. Operator: Our next question is from the line of Keith Weiss with Morgan Stanley. Please go ahead. Keith Weiss: I just want to thank you guys for taking the question. And congratulations on another super impressive quarter in terms of building out that backlog. You're right, we've just we've never seen this in terms of any cloud provider being able to build out that quickly. Mike, I wanted to ask you a question that's been asked of us a lot that we're hearing a lot on CNBC. And it's really about sort of the risk of overcapacity. And I think it's more narrow than that, that people are worried about overcapacity from or of what's being contracted by AI labs out there. The question I want to ask you though is how we should think about your guys' infrastructure and the infrastructure that you build and how fungible that infrastructure really is. When you're building out for a particular customer, do those data centers, is that usable for any customer? Is it usable for inference and training? Or do you really build suit a certain customer that would lock you in and give you kind of less degrees of freedom, if you will, if one customer is doing better or worse? Michael Intrator: Yes. Keith, that's an excellent question. It's actually something that we've spent a lot of time thinking about here as we kind of proceed with our relationships with all our customers. And so in short, the infrastructure is fungible. It would be able to be transferred from one client to another. The infrastructure is built to the most demanding specs, so it's able to be used for training, able to be used for inference. We really have thought a lot about making sure that we maintain as much flexibility in our infrastructure build as possible. And I want to highlight for everyone that a lot of that flexibility, a lot of that fungibility really does tie back to the incredible software suite we provide that allows for such effective use of the infrastructure. When Semi Analysis did their annual review of the alternatives out there, there's a reason that CoreWeave, Inc. Class A Common Stock has come back time and time again as singular as the best solution for this type of infrastructure that exists in the world. And that includes the hyperscalers, neo clouds, and everyone else that's trying to deliver this infrastructure. We just do a great job, and we believe that there's a lot of value that we are protecting by providing such a robust software suite to be able to deliver infrastructure. Operator: Our next question comes from the line of Kash Rangan with Goldman Sachs. Please go ahead. Kash Rangan: Hi. Thank you very much and impressive back growth. Two things that I wanted to just touch upon. One is Mike, I think you've talked about how you're going to be diversifying your contractors and the data center side. Maybe you could give us an honest-to-goodness update on how far are we away from potentially reaching a point where any disruptions that have nothing to do with your business should not affect your revenue outlook, how far away are we from that point? And secondly, when you look at the developments, I mean, nobody expected maybe some did, but at $250 billion contract for OpenAI with Microsoft, nobody expected a $300 billion contract OpenAI with Oracle. All of a sudden, certainly, CoreWeave, Inc. Class A Common Stock has got a unique value proposition being able to stand up clusters very quickly and very effectively. At the speed of thought, almost in a landscape where we're talking hundreds of millions of dollars being awarded to the hyperscaler giants, what gives you the uniqueness three to four years from now when things have sort of settled into a supply equals demand, what when we look back at CoreWeave, Inc. Class A Common Stock, what will be the shining value proposition that keeps you in the game at that point? And thank you so much, and that's it for me. Michael Intrator: Yeah. Thank you. Let me break that question into two pieces. Right? The first question you asked is about diversification and when does it start when does it stop kind of causing dislocation in our numbers as we're delivering them quarter to quarter. And what I would like to focus you on here is as the individual builds become smaller relative to the size of the entire portfolio of data centers that we are running, the impact of being a couple of weeks late will become less and less meaningful in the general accounting of what's going on. Right? So when you're delivering 590 megawatts of power, and you have a step function of two or 300, it's a material percentage that's going to be delivered over the next quarter. Right? As we become larger and larger and start to build out the full 2.9 gigawatts of power that we have, having a data center that's 100 megawatts delayed a week or two is not going to have a material impact. And as Nitin said, we expect the overwhelming majority of that 2.9 gigawatts of power to be brought into service over the next twelve to twenty-four months. And so that'll give you a really good idea of how the curve begins to become more smooth as we get larger and the relative impact of each data center becomes smaller. And so that's the first part on the scaling side. The second part is the question you're asking has been asked of us since we started this business. Why is CoreWeave, Inc. Class A Common Stock going to be able to deliver GPUs faster? Why are we going to be able to deliver the GPUs that NVIDIA uses to run its ML perf? Why are we going to be able to create software going to define the space? And with each quarter, you see us extending the lead with which we have because of the customization of our cloud to the use case that is required. And once again, you saw us in the semi analysis, like, we're singular in this. We are out there building our product offering. We're building or buying additional capacity to further decommoditize compute that we're delivering. And so a company that's built singularly to deliver this type of compute will be effective on a go-forward basis. Operator: Our next question is from the line of Amit Daryanani. Please go ahead. Michael Intrator: Amit, are you on mute? Unmute. Your line is open. Nitin Agrawal: Operator, let's go to the next question, and we'll come back to Amit. Operator, can we go to the next question and we'll come back to Amit? Operator: Our next question is from Tyler Radke with Citi. Please go ahead. Tyler Radke: Hey, hopefully you can hear me okay. Thanks for taking the question. So double-clicking on some of the delays that you called out in the quarter, can you just help us understand the implications on 2025? I know, Nitin, you provided some high-level commentary on CapEx. But just given the visibility you have particularly on the twenty-four-month component of RPO, how should we be thinking about sort of the revenue implications of the shift? Is this a delay that you think kind of gets fully resolved into Q1? And should we see sort of a step-up in growth rate next year relative to this year? Just any color on that would be helpful. Michael Intrator: Yes. So I'll start, then I'll hand it over to Nitin. I think it's important to understand that the ramp that we are seeing is associated with the infrastructure from a single provider. And we are parallel with other providers for other contracts. And so you're going to see a short-term impact associated with this delivery. And then what you're going to see is our ability to accelerate through the year back to schedule. So the overwhelming majority of the delay that you're seeing should be taken care of within Q1 of next year. Nitin Agrawal: Yeah. Tyler, that is correct. The vast majority of the CapEx push out that we experienced in Q4 will be done in Q1. And as you can imagine, we're going to ramp the capacity through the course of Q1 for this. As Mike earlier mentioned, the impact on the total revenue associated with the customer is not impacted here because we've been able to adjust the delivery dates associated with the customer so that the customer keeps the full capacity as well as contract value associated with it. We'll share more details on the 2026 build and our revenue plan associated in the next earnings. But as we highlighted in this quarter, given the strong customer demand that you see, that is demonstrated in our revenue backlog growth, as well as the continued customer demand we see, 2026 CapEx to be well more than double that of 2025. Operator: Our next question is from the line of Michael Turrin with Wells Fargo. Please go ahead. Michael Turrin: Hey, thanks very much. I appreciate you taking the question. Want to just try to tie some of the commentary together. Because the bookings growth clearly stands out and there are a lot of questions just around the sequencing. And so it sounds like what you're saying is the supply chain impacts you're seeing are more single customer specific. What I'm trying to get a better sense of is does this at all impact the cadence at which you're able to sign on new customers or is this more tied to post-ramp signing and one more specific customer environment? And just as a small follow-up, does the NVIDIA deal specifically show up in the backlog metric? It might be useful to hear you expand on what that deal opens up given it's a bit of a different structure there as well. Thanks very much. Michael Intrator: Sure. So there is no impact on our ability to bring on more clients. I think it's important to understand that we're parallelizing the build of infrastructure. There is a problem at one data center that's impacting us. But there are 32 data centers in our portfolio, all of them are progressing to one extent or another. And so each one of those is independent. And as Nitin spoke earlier, we have 2.9 gigawatts worth of contracted power that will come on in the next twelve to twenty-four months. And we are going to be looking to fill that with clients that are going to be using that, which will have a substantial impact on our revenue on a go-forward basis. This one data center will catch up, and then we will move forward from there. Want to talk about the NVIDIA deal? Nitin Agrawal: Michael, on the NVIDIA deal perspective, we're really excited about this deal. This contract allows capacity contracted and reserved for NVIDIA to be interrupted and resold to different customers. So the nature of this contract allows us to offer our services profitably to a wide range of smaller customers, such as high-growth AI labs that prefer shorter and lower upfront commitments while eliminating any utilization risks capacity from our side. So we're really excited about this. Given the flexibility in the contract, interrupt and to resell capacity, accounting rules require us that we exclude the amount we expect to be resold to other customers from RPO. To be clear, if not resold, capacity will remain committed to NVIDIA and will be recognized as revenue. So you see this NVIDIA contract in our revenue backlog, but not in our RPO to a large extent. Michael Intrator: So just to follow up with that for a moment there. As Nitin said, we're extremely excited about this because what this contract is going to allow us to do is to provide infrastructure to emerging companies, startups, companies that are struggling to get access to the computing infrastructure that they require to be able to build their business. And so the interruptibility here is an incredibly powerful tool for the resiliency and opportunities for new companies to become part of CoreWeave, Inc. Class A Common Stock's broader offering. And we're really excited about this. We think it's a great structure. It is a deal with NVIDIA. They fully underwrite the economics because we will sell the compute to them. And I want to be clear that this really does represent an incredibly disciplined way of financing the compute in order to be able to reach parts of the market that we have been unable to reach or anyone for that matter has been unable to reach up to this point. Operator: Our next question comes from the line of Brent Thill with Jefferies. Please go ahead. Brent Thill: And then just wanted to be clear, you cut CapEx by 40% for the year. And just to be clear, this is from one customer, correct? This is you're not assuming other delays across the board. Correct? Nitin Agrawal: That is correct. So this is associated with a single provider, data center provider partner. The delays associated with that. As we talked in our prepared remarks, most of it, a vast majority of it is going to be recognized in Q1. And in Q4, you're going to see a major impact on the buildup of construction in progress associated with the buildup related to it. Brent Thill: Okay. Terrific. Operator: And our next question comes from the line of Raimo Lenschow with Barclays. Please go ahead. Raimo Lenschow: Perfect. Thank you. As we think about CapEx next year, Nitin and Michael, can you speak as well about the sources of funding a little bit? Because what we've seen for a lot of the other players is that leasing is coming up a lot more. Talked about CapEx, is kind of what you need to do. How do you think about that path for you going forward between the different ways of kind of funding the business, which might give you even more flexibility? Thank you. Michael Intrator: Thank you. So look, we've driven innovation on the technology side. And we've driven innovation on the financing side. The way that I look at this is that we will look at the full suite of potential ways of financing and expanding our footprint. And then we will choose whatever is the most cost-effective way of increasing our scale and serving our clients. And so if leasing is the path, that's the path we'll go. But we've seen a lot of different structures. We've created a lot of different structures that have given us access to capital over the past three years. And we believe that we're going to explore the full suite of those as we look forward. We don't sign customers without knowing where the financing is going to come from. We go deal by deal. We make sure that we have the physical data center spoken for. We have the power spoken for. We have the GPU spoken for, and we have the financing spoken for in order to ensure that we are able to successfully deliver compute to them. Operator: Our next question comes from the line of Amit Daryanani with Evercore. Please go ahead. Amit Daryanani: Yep. Hopefully, this works better. Michael Intrator: We got you. Amit Daryanani: Alright. Perfect. Mike, I was hoping if you could just talk about as you shift from, you know, third-party data center providers to perhaps do more of your own self-build, how does that impact your CapEx and time to market for Power as you go forward? Would love to just understand how do you think that optimal mix looks like and what the CapEx requirements could be as you perhaps go more towards self-build versus third-party data center providers? Thank you. Michael Intrator: Yeah. So I want to be clear. We're not saying that we're going to go self-build and not use third-party data center providers. What we are saying is that self-build is a component of the way that you go about de-risking delivery across the broader portfolio. And so we're going to go ahead and we're going to work with our partners who provide data center capacity that allow us to co-locate at their facilities that build facilities for us. All of that is going to continue to be true. We need that capacity in order to be able to continue to move and operate at the speed and scale that we are. We just look at self-build as an additional piece of the puzzle. It puts us closer to the physical infrastructure. It embeds us deeper into the supply chain around the world so that we have firsthand information. We just think that you need to be on both sides of this fence in order to be as effective as you can be de-risking what is a complicated supply chain environment. Operator: Our next question comes from the line of Brad Zelnick with Deutsche Bank. Please go ahead. Brad Zelnick: Great. Thank you so much for taking the question. Mike, with 2.9 gigawatts committed power and over a gigawatt yet to be contracted out to customers, meanwhile, we continue to see a number of other large deals get announced industry-wide. How do you think about and how might you frame for us the pacing on contracting out the remaining capacity given the demand is insatiable out there? Michael Intrator: Yes. So look, thanks for the question here. The fact that there are other deals getting contracted out there is incredible validation for the supply-demand environment that we have been describing for years now. There is no entity that has the capacity to be able to deliver infrastructure globally in order to meet the demand that's being driven by the largest technology companies in the world, by the largest AI labs in the world, by government, by enterprise, all of these things are coming to bear. And so the fact that there are other deals going to other players is part and parcel for the fact that we, like the hyperscalers, like the AI labs, like the data centers, are being overwhelmed by demand. It is just reinforcing and validating the theme that we've been talking about. We think that, at the end of the day, the product that we deliver, which is full stack everything from the hardware all the way through the software, is the most valuable representation of this infrastructure that can be delivered to the market. And we continue to think that that will drive a significant amount of demand for our infrastructure. As far as the remaining capacity goes, being very thoughtful about continuing to drive diversification across our cloud. We're continuing to think about different applications that are going to be meaningful contributors to the way the world will work in the future. And we are allocating that infrastructure to those parties as quickly as we can in order to ensure that they are successfully able to launch their products, their enterprises. Nitin Agrawal: And, Brad, a couple of things to kind of keep in mind here as we kind of talked about in our prepared remarks. Today, you know, approximately, no customer represents greater than 35% of our revenue backlog, which is meaningfully down from where we began the year at 85%. And 60% of our revenue backlog is with investment-grade customers. So vectors that we are very thoughtful around as we care for the capacity that we have available to be sold. Operator: Our final question comes from the line of Brad Sills with Bank of America. Please go ahead. Brad Sills: Great. Thank you so much. I did want to ask a question around this concept of the PowerShell as a bottleneck here, Mike. Is there any IP that CoreWeave, Inc. Class A Common Stock has you contribute to the build-out of these data centers? Any learnings from this delay that you might be able to apply to other contracts? Just trying to get a sense for how much is in your control here to kind of solve for this bottleneck issue that you're experiencing with this one contract itself? Thank you. Michael Intrator: Yeah. What I would say is, Brad, I don't think that I would say that our learning has come from this one delay. We've been operating in a systemically supply-constrained market globally now for three years. We understand how difficult it is with each additional wave of demand, the market gets tighter and tighter. So, you know, when you ask, you know, what are we doing to position ourselves on a go-forward basis, what I would really encourage you to think about is the fact that we've built out an entire organization within CoreWeave, Inc. Class A Common Stock that is capable of helping us build and deliver additional capacity on the self-build side. That's where you embed yourself into the supply chains. You understand where the power is, how it's being contracted. You understand what it takes to build the powered shells because you're doing it yourself. In addition to the fact that you're using other third-party providers, those are the type of relationships that will enable us to be as successful as possible in what is going to be a challenging environment for quite a while. Operator: Thank you. And that concludes our question and answer session for today. I would now like to turn the conference over to Michael Intrator for closing remarks. Michael Intrator: Thank you all for joining us today. As we wrap up, I want to emphasize how proud we are of the strong foundation we built this year and the incredible momentum driving our business forward. Our team's exceptional execution to build the essential AI cloud has positioned CoreWeave, Inc. Class A Common Stock to capture a significant and expanding market opportunity. We appreciate your support and engagement, and we look forward to updating you on progress next quarter. Thank you. Have a good night. Operator: This does conclude today's conference call. You may now disconnect.
Operator: Good day, and welcome to the Rocket Lab USA, Inc. Third Quarter Earnings 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on a touch-tone phone. 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 Murielle Baker. Director of Corporate and Launch Communications. Please go ahead. Murielle Baker: Thank you. Hello, and welcome to today's conference call to discuss Rocket Lab USA, Inc.'s Third Quarter 2025 Financial Results, Business Highlights, and Other Updates. Before we begin the call, I'd like to remind you that our remarks may contain forward-looking statements that relate to the future performance of the company. These statements are intended to qualify for the safe harbor protection from liability established by the Private Securities Litigation Reform Act. Any such statements are not guarantees of future performance, and factors that could influence our results are highlighted in today's press release. Others are contained in our filings with the Securities and Exchange Commission. Such statements are based upon information available to the company as of the date hereof and are subject to change for future developments. Except as required by law, the company does not undertake any obligation to update these statements. Our remarks and press release today also contain non-GAAP financial measures within the meaning of Regulation G enacted by the SEC. Included in such release and our supplemental materials are reconciliations of these historical non-GAAP financial measures to the comparable financial measures calculated in accordance with GAAP. This call is also being webcast with a supporting presentation, and a replay and copy of the presentation will be available on our website. Our speakers today are Rocket Lab USA, Inc. founder and chief executive officer, Peter Beck, as well as chief financial officer, Adam Spice. They will be discussing key business highlights, including updates on our launch and space systems programs. We will discuss financial highlights and outlook before we finish by taking questions. So with that, let me turn the call over to Peter Beck. Peter Beck: Thanks, Murielle, and thanks, everybody, for joining us today. It was another record-breaking quarter for Rocket Lab USA, Inc. We're up 48% year on year with $155 million in revenue and strong gross margins as well. This is the second time in a row we've delivered record-breaking growth quarter by quarter, once again demonstrating our relentless execution. Electron demand is accelerating faster than ever before, and the momentum continues to build with the largest launch contract backlog yet with 49 launches on contract. We've just launched our sixteenth mission this year, equaling last year's launch record, and we've got another launch scheduled in the coming days that'll take us to 17, with more to come and a new precedent set for Electron annual launch cadence. We see this precedent continue in 2026 as well. Amazing performance is also the theme across our space systems groups. A twin spacecraft for NASA Mars mission are integrated onto its launch vehicle and are ready for liftoff in Canaveral in the coming days. And for Neutron, we've got a full update to share on our progress to the pad following the official opening of the Launch Complex 3 in August, ticking off a critical milestone in the program. We'll share more detail about that in the upcoming slides. So before we get into it, I want to zoom out and talk about our performance over the last five years, given this is sort of a little bit of a wrap-up for the year in some respects. Execution and reliability are critical in this space industry, but even more so in the public markets. Our ability to consistently deliver results for our customers, expand our capabilities, and grow our revenue and gross margins really sets us apart in the sector as we set new benchmarks for operational and financial success. From $35 million in revenue just five years ago, to an implied full-year guidance of roughly $600 million at the midpoint, and approximately 1600% increase over that time period. Our gross margins are looking great, too, from negative 34% GAAP gross margin in 2020 to the midpoint of our implied full-year guidance of slightly over 34% positive in 2025. Looking great to exit '25 with an even higher 37 to 39% in the fourth quarter. Our position as a leading end-to-end space company has never been stronger. We're a trusted disruptor of the industry, and we're proving that we can move quickly to scale our products and our services across both launch and space systems. That focus is translating into the double-digit growth results you're seeing on the page here. Right, on to Electron. As the title says, it's been a record-breaking quarter for launch contracts. 17 dedicated launches were signed in just three months, but all but two of them were signed with international customers from Japan, Korea, and Europe. Those new missions plus the ones already on the books for international space agencies like ESA and JAXA prove Electron is not just a leading launch vehicle in The United States. But it's becoming the preferred small launch vehicle globally. Electron's business model is one of schedule flexibility for our customers, and you can see from these new bookings demand is stronger and growing for Electron. For Haste, our Hypersonic Test Vehicle continues to redefine the way technology is being developed and tested in the United States. In Q3, we launched back-to-back missions from launch complex two in Virginia with 100% mission success, enabling technology to be tested in real-life hypersonic environments, which is a critical capability for the next generation defense programs like Golden Dome. By leveraging our commercial speed, our vertical integration, and our execution history with Electron, Haste delivers the proven agility and responsiveness that these programs demand. Speaking of momentum, we're on track to fly our seventeenth launch of the year in the next few days, which will officially surpass our previous annual launch record set in 2024. This pace is only possible because we are very intentional about designing Electron for scale. This extends beyond the vehicle itself to all the supporting infrastructure like manufacturing, processing, and operating a high-volume launch range infrastructure as well. It's an important approach that we're deploying for Neutron too, ensuring that we're thinking well beyond first flight. As of right now, there are only three American commercial launch providers who have launched to orbit more than once this year: SpaceX, ULA, and, of course, us. Which really does highlight just how rare Electron's capabilities are. Now let's turn to space systems. Starting off with a little bit of an update for M&A for the quarter. We closed the Geos deal to create a new payload business unit, strengthening our offering as a prime contractor for national security programs like Golden Dome, and for the Space Development Agency. Our history and expertise in buying and expanding smaller shops, to meet industry demand, we're turning our attention now to scaling a new electro-optical and infrared sensors for lucrative future contracts. Also closer to acquiring laser communications company Manaruk. They have completed their financial restructure under German law in August, which was a pivotal moment in the acquisition process and one that brings us nearer to closing out this deal. Rocket Lab USA, Inc. has been a force in the U.S. Space industry, and we're ready to bring that same energy to the European space sector with our first European foothold and expansion into Germany. As for what's next, we've built up our dry powder future M&A with more than $1 billion in liquidity following the market offering program implemented in September. It was a very strategic move to lock in capital that will allow us to act quickly on some of the exciting opportunities in the pipeline. We're not ready to reveal the details of these strategic players just yet, but I can assure you that the pipeline is active. We've always taken a disciplined approach to acquisitions, and our successful track record speaks for itself. We've got a bit of a knack for identifying, acquiring, and then integrating businesses that enhance our end-to-end capabilities and make us a stronger competitor for large-scale programs. That's made us the consolidator of choice for many companies in the space sector. We're often the ones being approached first by companies wanting to join Rocket Lab USA, Inc. now because they see the value we create for growth and innovation. Onto our upcoming space systems missions. We're a few days away from two of our spacecraft launching for the escapade mission. The initial launch attempt was unfortunately scrubbed by a launch provider yesterday, but by this time Wednesday, they're scheduled to be launched from Cape Canaveral, and they'll be on their way to Mars. What makes this mission truly groundbreaking is that we're tackling these interplanetary challenges with spacecraft built from an order of magnitude less than the usual cost developed in about one-third of the time. We're proving an entirely new, more accessible model for sending satellites to other planets. In short, this mission is a tough one both in flight and in the design, but, you know, of course, we love a challenge. Another program with a big green tick this quarter is our Transport Layer Constellation for the Space Development Agency, which has cleared critical design review to be able to move it into spacecraft production now. While existing and fully funded contracts like a half-billion-dollar program can continue under the government shutdown, the situation does continue to have an impact on the timing of new awards for the SDA tranche three constellation. Neutron. Alright. Moving on from space systems. Let me give you a bit of an update for Neutron for the quarter. Now I've spent a lot of my time in the recent weeks elbow to elbow with the teams at the various sites for Neutron testing. I have to say I'm extremely happy with the progress, but more than that, the thoroughness of the team during this critical qualification and acceptance testing phase. We're into the big meaty bits and the meaty tests where we have whole systems integrated together and large subassemblies. This is the time when you find out on the ground what you got right and what you got wrong, and, of course, rather than finding out during the first launch. Now at Rocket Lab USA, Inc., we have a proven process for delivering and developing complex spaceflight hardware. I think that process speaks for itself with respect to our hardware always looking and, more importantly, always working beautifully. Our process is meticulous, but it works. Electron, for example. It's the world's most frequently launched small launch vehicle, as we all know. We scaled the production and launch of it faster than any other commercial launch vehicle in history. Which is great. But if we think about how many others have tried to develop a launcher, the results have been extremely poor. Those who have failed to deliver are numerous. Basically, every new space company except Rocket Lab USA, Inc. and SpaceX has failed to build an orbital rocket that has scaled to any kind of launch cadence and is reliable. This is the Rocket Lab USA, Inc. process in action, and I've been resolute about sticking to this approach. With all the hardware in front of us now and significant testing programs underway across all parts of the vehicle, we can see we need a little bit more time to retire the risk and stick to the Rocket Lab USA, Inc. process. Yep. It might mean things will take a little bit longer, but I want to give some context here. I mean, the labor cost for the program is about $15 million a quarter, which we make back four times over a single launch anyway. So it makes zero sense to change what we know and what is proven to work. So we're aiming to get Neutron to the pad in Q1 next year, if all goes well, with the first launch thereafter. Once again, though, that's provided that myself and the team are confident we have completed Neutron's qual testing and acceptance testing program to the Rocket Lab USA, Inc. standard. As always, this is a Rocket program, so that's been completed at a pace and a cost that nobody has achieved before. The financial and long-term impacts are insignificant to take a little bit more time to get it right. Now we've set high expectations for Neutron's first flight. Our aim is to make it to orbit on the first try. You won't see us minimizing some qualifier about us just clearing the pad and claiming success and whatnot. That means that we don't want to learn something during Neutron's first flight that could be learned on the ground during the testing phase. Excuse me. At the end of the day, Neutron will fly when we're very confident it's ready. We're not going to break the mold of the Rocket Lab USA, Inc. magic. Now over the next few slides, I want to take you through some of the testing campaigns we've been running to paint a bit of a picture of what it takes to deliver a reliable rocket to the launch pad. As you've seen for some time, we're very hardware-rich across the entire vehicle. Now it's all in sort of assembly and qualification and acceptance testing before it's all brought together under the East Coast sites. Okay. So these pictures are just a snapshot of many of those activities. We're deep diving into the qualification test and acceptance of every major assembly, subassembly, and system before we get into launch operations. In fact, I'd say we're putting Neutron through an even more extensive barrage of testings than we did Electron. Because it's not your kind of conventional rocket that we're developing. We have a couple of novel things being the world-first architecture like hungry hippo fairing, suspended second stage, and the vehicle itself is, let's not forget, the world's largest flying carbon composite structure ever built. We're making tremendous progress in these structures, testing across all levels of the vehicle. Every one of Neutron's major structures is tested on the ground to the levels that exceed what the rocket may see in flight. Includes testing of our primary structures like propellant tanks, thrust structures, the end stage, pushing them all to their limits to ensure they meet the demands of launch and reusability. Before we can call these qualified, we go through a full run of load cases axial lateral torsional transient and combined loads. The main and primary structures must withstand a liftoff of 1,500,000 pounds of thrust from the Archimedes engines, worst cases of aerodynamic loading on the way up as the vehicle through MAX Q, and all the separation loads. And then for the structures that come back on stage one, they have to survive all the thermal and aerodynamic loads too. Now we test secondary and auxiliary systems to the same level of scrutiny as well. This involves pulling and pushing across the same load cases even down to the smallest fixtures and the smallest bracket that holds every device in Neutron's primary structure. Across both stage one and two structures have yielded a wealth of valuable data, by anchoring and validating our engineering models through these tests, we're able to uncover and retire technical risks on the ground well before we fly. With Neutron's reusable fixed fairing design and our suspended second stage that passes through it, we're working with the unique architecture never been seen on a rocket before. We've been taking it through its paces to rid the entire system for its first flight. This has included testing the hungry hippo's aerodynamic control surfaces, as well as turning the electromechanical actuators and the control systems in all the entire mechanisms. The Hungry Hippo's open and closed systems have passed performance testing, and so is the staging system systems pneumatic locks and pushes and guides and all of the stuff that's inside of second stage that passes through the hungry hippo's mouth. While it's been one thing to build these huge assemblies for flight one, the team has also set up the infrastructure for this testing that allows us to get as close as to a flight test as we possibly can on the ground. This is important because it also lays the foundations not just for the first launch, but flights two and beyond. You can see some of the giant towers in these staging tests on the right-hand side of the slide there. In fact, some people thought we were building a launch site. It was so big. In the Neutron flight software and GNC team, we've been flying to orbit virtually almost now for two years. Leveraging a proven approach from the Electron program with our own flight software and hardware in the loop testing that integrates physical components with simulated flight environments to validate system-level functionality and performance. In preparation for Neutron's first flight, our operators and engineers have been running virtual test and launch operations week in, week out. We've been exercising our operations team on console going through static fire operations and launch day operations that we can hit the ground running when the vehicle arrives at Launch Complex 3. Our world-class simulation tools built in-house allow us to exercise our avionics, GNC, and software tools well in advance of conducting these operations with a fully integrated vehicle. This not only allows us to reduce risk, but also serves as a training platform for operations team. Combine that with a full suite of vehicle avionics in the loop, and we bring tests like you fly to a whole new level. It's all part of the smart, rigorous approach that we apply to every program and mission. On to Archimedes. Since the last engine update, the propulsion team has continued to validate its performance across the entire run box. The upstage engine is on the test stand too, and we continue to work for all the qualification testings on these engines and test as you fly configurations as you well as you know. The test cell is operating at a 27 rate. Meaning twenty hours a day, seven days a week. The only way you can get through years of qualification know, always expected for an engine program, is to squeeze years of hours into months. So as you can imagine, no weekends or evenings are left on the table at the Stennis test facility. Now onto our ocean recovery for Neutron. While return on investment barge won't be used for the first flight, the recovery team is making great progress on having it ready for flight two. The three main propulsion generating sets for the 400-foot length barge recently passed factory acceptance testing and have been cleared to be sent to the shipyard in Louisiana. Each of return on investment three diesel electric gensets capable of more than three megawatts of electrical power. Combined, that's more than 2.5 times the total electricity capacity for all of launch three. So these things are big. All in all, return on investment is looking good to enter service next year for the launch. Okay. Finally, wrap up our progress it was a great moment to be able to cut the ribbon at the launch site last quarter. Neutron will bring the largest lift capacity to the Mid Atlantic Regional Space Port has ever seen. So opening it was an important milestone not only the path of first launch, but for the assured access to space that the nation needs as a launch as launch congestion continues to build up across the country. The team is running through the final activation as they prepare to receive neutron on the launch mount, otherwise all ready to go. Most recent tests have included flowing cryogens through the propellant systems, and tests continue to run smoothly. We've designed the site to be able to turn missions within twenty-four hours. That was the design requirement. Now that's important for response to space and the launch cadence we expect for the vehicle. But equally so, we can get Neutron straight into back and back back to back testing during the launch and readiness. Campaigns as well. You can see there's been lots of Neutron activity this quarter. The team has made significant progress towards Neutron's first launch. While continuing to prioritize our very rigorous testing and qualification processes over rushing to the pad. We've seen what happens when others rush to the pad with an unproven product, and we just refuse to do that. Methodical and deep approach to qualification is what's driven reputation for success and reliability in the industry. It's been a cornerstone of our success with Electron. And it's the same philosophy that we'll be applying to Neutron. Okay. Here's Adam with the financial highlights for the quarter and outlook ahead for Q4. Great. Thanks, Pete. Third quarter 2025 revenue was a record $155 million coming in at the high end of our prior guidance range and representing an impressive year-over-year growth of 48%. This strong performance was driven by significant contributions from both our business segments. Adam Spice: Sequentially, revenue increased by 7.3% underscoring the continued momentum across the business. Our Space Systems segment delivered $114.2 million in revenue in the quarter, reflecting a sequential increase of 16.7%. This growth was primarily driven by increased contribution from our satellite manufacturing business, which continues to perform exceptionally well and provides comforting diversification alongside our robust, but at times lumpy launch business. Meanwhile, our launch services segment generated $40.9 million in revenue, representing a 12.3% quarter-over-quarter decline due to fewer launches during the period, driven primarily by customer spacecraft delivery delays. We have a busy Q4 manifest and as a result, expect a strong return sequential revenue growth in our launch business in the fourth quarter. Now turning to gross margin. GAAP gross margin for the third quarter was 37%, at the high end of our prior guidance range of 35% to 37%. Non-GAAP gross margin for the third quarter was 41.9% which was above our prior guidance range of 39% to 41%. The sequential improvement in gross margins was primarily driven by a onetime benefit from the transition to overtime revenue recognition for certain HACE divisions. Paired with revenue recognition of an electron emission cancellation due to a customer's internal program cancellation which was recognized at a 100% margin. We ended Q3 with production related headcount of 1,190 up 48 from the prior quarter. Turning to backlog. We ended Q3 2025 with $1.1 billion in total backlog. With launch backlog accounting for approximately 47% and space systems representing 53%. During the quarter, launch backlog contributed to gain share, supported by strong underlying trends as we convert a robust pipeline of opportunities across electron minhase. This includes the 17 Electron bookings signed within the quarter that Pete mentioned earlier. While space systems bookings remain inherently lumpy due to timing of increasingly larger and high impact program opportunities, Space systems backlog continues to hold at healthy levels to despite the step up in revenue run rate recognized over the last few quarters. We're actively cultivating a strong pipeline that includes multi-launch agreements, large satellite manufacturing contracts across government and commercial programs. As noted earlier, these larger needle moving opportunities can there's lumpiness in backlog growth. But they are critical drivers of long-term value and scale for the business. Looking ahead, we expect approximately 57% of our current backlog converted revenue within the next twelve months. Additionally, we continue to benefit from relatively quick turns business, across launch and space systems components businesses that drive incremental top line contribution beyond the current twelve month backlog conversion. Turning to operating expenses. GAAP operating expenses for the 2025 $116.3 million above our guidance range of $104 million to $109 million Non-GAAP operating expenses for the third quarter were $98.1 million which was also above our guidance range of $86 million to $91 million The sequential increases in both GAAP and non-GAAP operating expenses were primarily driven by continued growth in prototype and headcount related spending to support our Neutron development program. Specifically, investments ramped up in propulsion as we continue to qualify our committees, as well as in test and integration of mechanical composite structures our facility in Middle River, Maryland. In RV specifically, gap expenses increased $4.6 million quarter over quarter, while non-GAAP expenses rose $4.8 million These increases were driven by the ramp up of Archimedes production along with higher expenditures related mechanical systems deposits as just mentioned. Q3 R and D headcount was ten nineteen, representing an increase of 84 from the prior quarter. In SG and A, GAAP expenses increased $57 million quarter over quarter. While non-GAAP expenses rose $6.4 million quarter over quarter. These increases were primarily due to the acquisition of GEOS during the quarter. Paired with higher legal expenditures, insurance renewals, and fees associated with our annual proxy statement and related filings. Q3 ending SG and A headcount was 385. Representing an increase of 42 from the prior quarter majority of those coming from the closing of the Geos acquisition. In summary, total headcount at the top at the end of the third quarter was 2,602. Up 174 heads from the prior quarter. Turning to cash. Murielle Baker: Purchase of property Adam Spice: equipment, and capitalized software licenses were $45.9 million for the 2025. An increase of $13.9 million from the $32 million the second quarter. This increase reflects ongoing investments in Neutron development we continue testing and integrating large structures at our facility in Middle River expanding cap capabilities at the engine test stand in Synagis, Mississippi, and scaling additive manufacturing at our engine development center in Long Beach. As we progress towards Neutron's first flight, expect capital expenditures to remain elevated. As we invest in testing, production scaling, infrastructure expansion. GAAP EPS for the third quarter was a loss of $3 per share, compared to a loss of $0.13 per share in the second quarter. The sequential improvement to GAAP EPS is mostly attributable to the $41 million tax benefit we recorded during the third quarter. Which is due to the partial release of the valuation allowance against corporate deferred tax assets. Murielle Baker: As a result of acquiring an equal amount of deferred tax liabilities, Adam Spice: emanating from the Geos acquisitions purchase price accounting. GAAP operating cash flows was a use of $23.5 million in the 2025. Compared to $23.2 million in the second quarter. Similar to the capital expenditure dynamics mentioned earlier, cash consumption will remain elevated due to Nutra development longer lead production for SDA, investments in subsequent neutron tail production, and infrastructure expansion to scale the business beyond the initial test flight. Overall, non-GAAP free cash flow, defined as GAAP operating cash flow, less purchases of property, equipment, and capital software, in the 2025 was a use of $69.4 million compared to a use of $55.3 million in the second quarter. The ending balance of cash, cash equivalents restricted cash, marketable securities was just over $1 billion at the end of the third quarter. The sequential increase in liquidity was driven by proceeds from the sale of our common stock under our aftermarket equity offering program which generated $468.8 million in the quarter. These funds are intended to support acquisitions, such as the announced Menarc acquisition, as well as other targets in our robust M and A pipeline, alongside general corporate expenditures and working capital. We exit Q3 in a strong position to execute on both organic and inorganic growth initiatives and to further further vertically integrate our supply chain, expand strategic capabilities, and grow addressable market. Consistent with what we have done successfully in the past. Adjusted EBITDA loss for the 2025 $26.3 million which was below our guidance range of $21 million to $23 million loss. The sequential increase of $1.3 million in adjusted EBITDA loss driven by higher revenue and improved gross margin, which was more than offset by increased operating expenses. Related to new term development. With that, let's turn to our guidance for the 2025. We expect revenue in the fourth quarter to range between $171,180,000,000 dollars representing 12.8 quarter on quarter revenue growth at the midpoint. We anticipate further improvement in both GAAP and non-GAAP gross margins in the fourth quarter. With GAAP gross margins to range between 37% to 39% and non-GAAP gross margin to range between 43 to 45%. These forecasted GAAP and non-GAAP gross margins are benefited by a higher mix of launch contribution in the quarter, as well as underlying improvements in launch ASPs and greater launch overhead absorption due to higher forecasted launch cadence in quarter. We expect fourth quarter GAAP operating expenses to range between $122 million and $128 million and non-GAAP operating expenses to range between $107 million and $103 million The quarter over quarter increases are primarily driven by ongoing Neutron development spending related to flight one. Including staff costs, prototyping, and materials. However, we expect to see a shift in spending from r and d to flight to inventory. Which is an encouraging sign of progress as we move closer to Neutron's first flight. I'm optimistic that with the impressive strides we've made towards this milestone, we're approaching peak Neutron R and D spending, and are on the path towards meaningful operating leverage and positive cash flow in the future. We expect fourth quarter GAAP and non-GAAP net income to be $3.5 million which is a function of higher cash balances as well as the conversion of approximately $192 million of convertible notes since September 30. We expect fourth quarter adjusted EBITDA loss range between $23 million and $29 million and basic weighted average common shares outstanding to be approximately 571 million shares, which includes convertible preferred shares of approximately 46 million, and reflects the conversion of approximately 37 million shares of convertible notes thus far in Q4. Lastly, consistent with prior quarters, we expect negative nine GAAP free cash flow in the fourth quarter to remain at elevated levels. Driven by ongoing investments in Neutron development and scaling production. This excludes any potential offsetting effects from financing under our ETF facility. Murielle Baker: And with that, we'll hand the call over to the operator for 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 speaker phone, please pick up your handset before pressing the keys. If at any time your question has been addressed and you would like to withdraw your question, please press star then 2. At this time, we will pause momentarily to assemble our roster. The first question today comes from Ryan Koontz with Needham and Co. Please go ahead. Ryan Koontz: Great. Thank you. Really nice to see the strong bookings and backlog jump there for launch. Really impressive. Sounds like a lot of that was international. Any particular color you can share on, you know, the use cases, versus government, anything you can share as far as what's really driving that pickup in backlog and how you feel about it, you know, going forward over the next few quarters? Peter Beck: Yes. Hi, Thanks very much. Yeah. So it's a bit of both. So strong commercial bookings, but also, you know, for the first time, we see, you know, space agencies who typically, you know, use their own sovereign capabilities, but you know, Electron is really the only vehicle of its kind in operation in the world right now. So it was very, very promising to see space agencies now, you know, kind of standardizing on the Electron as a platform. Ryan Koontz: For sure. That's great. And how are you feeling about supply chain relative to meeting that kind of demand for Electron at this point? Peter Beck: Electron's like 90% plus built in-house. So, you know, we don't see too many challenges there. You know, the factory that we built here was ultimately designed to build 52 rockets a year. And so, you know, I think we'll be fine. Ryan Koontz: That's great. Maybe one last one just to wrap up just to clarify what Adam said about launch gross margins. There were a couple of onetime events there. Any color you can share with us on that, Adam? Adam Spice: Yeah. You know, as Electron continues to kind of as a business, you know, we've got a deep pipeline and backlog, and, you know, you're gonna have customers that have changing priorities, you know, programs get canceled. Fortunately, you know, we have very strong contract terms, which allow us to make sure that we're protected in the event that people programs get canceled or change their priorities. You know, I think on the Haste change, that was really kind of, again, a pivot on some of the Haste emissions where the contractual terms are such where really more appropriate under ASC 606 to recognize revenue over time and use EAC accounting to measure the cost that you're incurring and you recognize revenue and margin importantly. So we now have a nice in that business where you have point in time and over time, and it really just a function of contract terms. And Haste is evolving into an important and meaningful part of our business, of good things come from that. The fact that you've got typically higher, ASPs, you've got, you know, I would say along with that now, you've got a little bit more stability, I would say, or predictability to revenue contribution from that given the fact that some are gonna be point in time, but some are gonna be overtime, and that overtime allows a little bit more of a I would say, like, a little bit more predictability and I think it's a healthy place to be. Ryan Koontz: That's great. Appreciate the questions. Thank you. Operator: The next question comes from Andres Sheppard with Cantor Fitzgerald. Please go ahead. Andres Sheppard: Hey, everyone. Good afternoon, and thanks for taking our questions. Pete, it's really great to hear all the great progress over the last few years to see everything up until this point. Two quick questions for us, on space systems and one on launch business. On the space systems, maybe for Adam, can you remind us the revenue recognition associated with the FDA tranche two award. I think in the past you had targeted 40% revenue recognition, in 2026. Just wondering if that's on track or unchanged? And then also on the FDA tranche three award, now obviously the government shutdown has maybe delayed the decision there slightly, but we still feel confident in that award and in that decision? If awarded, that would be the largest contract, I think, awarded in company history. So curious on your thoughts there. Thank you. Adam Spice: Yeah. I'll take the first piece of rev rec. I'll give you my thoughts on t three and then I'll head back over to Pete. On the rev rec, yeah, we were still very much in that path to recognize the revenue over that pattern where it was you know, kind of think about these larger long-lived government programs as kinda 10% in the first year after you achieve award, and then it's 40, 40, 10. So think about that as the shape of the curve. And FDA has got a tranche to transport layer shaping up to be similar to that. Yeah, everything is consistent there. As you know, similar to the other overtime rev rec, you basically estimate your cost to complete the mission as you incur costs proportionately. You recognize revenue at the program margin. So, yeah, it's been so far, we've had that program has been going very well. As Pete mentioned, that part of the business is performing very, very well. On t three, you know, yes, that would be the largest contract company would have won to date. And you're right. The timing has been a little bit delayed due to the government shutdown. I think we've all seen recently that there's signs that perhaps we could be coming to an end of that shutdown, which I think would be great to get that momentum back in the awarding of those types of contracts. But I'll turn over to Pete in regards to confidence in that win. Peter Beck: I think you've said it well, Adam. I mean, I think, you know, we've put ourselves in a really strong position as a prime contractor on those awards especially with some of our acquisitions. So we're feeling good, and you know, we just need the government to come back and finish off that last little piece. But, no, I think we're feeling good, Andres. Andres Sheppard: Wonderful. That's great to hear. And maybe just as quick follow-up on, Neutron. With the first launch now, targeted for early next year, should we still be assuming kind of three launches for next year, five the following year and seven? Or is there perhaps a change to that cadence as well? Thank you. Peter Beck: Yeah. The way we think about that cadence is it's you know, the clock starts for the next one from the first one. So depending on the, you know, the first flight, think of it as like a twelve-month kind of rate from there. But maybe, Adam, if you yeah, any different views. Adam Spice: Yeah. No. I think that's right. I think, you know, I just remind folks that, the first launch is a test launch. It's an r and b launch. We've been expensing that vehicle. Over its manufacturing period. So the communicated cadence was, you know, one test launch, which is still the case, and then we expect to be in revenue for the flights thereafter. So I would say that you know, depending how early we get the test launch off in 2026 will dictate whether or not we get as Pete said, we kinda complete the next three missions in a twelve-month window. That would fall within that Andres Sheppard: Wonderful. Very helpful, and, congrats again. I'll pass it on. Operator: The next question comes from Edison Yu from Deutsche Bank. Please go ahead. Edison Yu: Hey, good afternoon. Wanted to ask about the future constellation. I know it's quite a long-term question. But there's been a lot of activity in some operators around Spectrum. And I'm curious what's your thinking about the value of Spectrum in your kind of calculus for any type of future constellation? Peter Beck: Well, I mean, that would be making an assumption that you I guess you're settling on a comms application as well. But clearly, spectrum is an important element to any kind of scaled comms business, although we have been seeing some interesting approaches where that becomes less so. But I think you're just seeing some kind of natural consolidation in the industry right now around some of those spectrum assets. And, you know, I suspect that will continue. But, you know, look, Rocket Lab USA, Inc. is not gonna go out and buy billions of dollars' worth of spectrum speculatively. That's for sure. Adam Spice: This is Adam. Sorry. I got dropped. Some unfortunate conference call dropped me. So don't know if did I did I answer your question fully? Andres, on the launch cadence? Edison Yu: Eight was actually Edison on now. Peter Beck: Yeah. We just Edison Yu: Okay. Thank you. Peter Beck: Nice to see that you got dropped out in this time and not me. Adam Spice: It's not just me today, for sure. Yep. Edison Yu: So totally separate topic. Wanted to ask about. I'm sure everyone has seen you know, NASA. We got Isaac Mann, you know, seemingly back. Do you see increased opportunities in this type of changeover around whether it's moon, Mars, space, and what do you think those incremental opportunities could potentially come from? Peter Beck: Short answer is yes. I think if you know, if Jared is cemented as the NASA administrator, I think if you look at Jared's approach to how he believes NASA should be run and the role that commercial entities like Rocket Lab USA, Inc. will play, I think that bodes very well for the way that we operate and the value that we can bring the agency. So I would view that as a very positive very positive thing for Rocket Lab USA, Inc. Great. Thank you. Operator: The next question comes from Gautam Khanna with TD Cowen. Please go ahead. Gautam Khanna: Yeah. Thanks. Good afternoon, guys. I was wondering if you could elaborate on how soon after Neutron arrives at the complex realistically it can launch? Does it is there a minimum interval of time and then, you know, what sort of explains that whatever that range might be? Peter Beck: Hey, guys. It's a little bit difficult to answer because it really depends on what you find. If we put the vehicle on the pad and we go through all of that fueling and detanking all the operational tests and static hot fires and all of that sort of stuff, and it all flies through, then it's a fairly straightforward path. But if we go there and we find some stuff that we don't like, then we're gonna fix it. And I think as I tried to explain during the call, there's the way that we develop these kinds of things is you know, I'm suspicious if everything just flies through. Because, you know, that in some cases causes more time to be spent than less because you know, generally, you expect to see you expect to see something because the whole vehicle is built on a safety factor of 1.1. Or 1.2. So you expect to see some things And depending on the magnitude of those things, we won't just blindly walk past them You know, we'll go out and not only fix them but really, really deeply understand how they occurred and then also go one step further and feed that back into all of our engineering models to make sure that next time around, we're doing a similar thing that the I guess, the ability to predict and the you know, the fineness of that becomes better and better and better. So look, we know a lot more when we have a vehicle on the pad. We know even more when we hot fire it. After hot fire if that's a successful campaign and we're happy with what we see, then the turnaround to launch after that point's pretty quick. Gautam Khanna: Okay. And I was curious also maybe I missed it, but the cumulative catch-up adjustment or the onetime, how large was it? Gautam Khanna: In the quarter? Adam Spice: Sorry, Gautam. What what you're talking about the are you referring to the the the haste? I'm not sure if you can maybe sorry. I got dropped again from the call from my provider, but here's my question. I yeah, I think you mentioned in the remarks that there was a well, I know in the Q, it says there's a revenue adjustment of net $10 million favorable in the quarter. Wanted to know I think you described the EBITDA margins were lifted by a contract closeout of some sort. I was just curious if you could quantify how large that was? Adam Spice: Yeah. So there was one contract close-up that was about I think this is a little under $5 million. That was the value that we received when that cancellation occurred. And, yeah, then there were some other things moving around with regards to the we recognized revenue with higher gross margin associated because well, there was a benefit to the gross margins as well because in Q3, when we made the change in Q2, we end up actually taking a margin hit because we recognized revenue without having associate basically, zero margin. Because at that time, we didn't have the ability to estimate with cost were gonna be to complete the mission as we did this transition. So the path was essentially revenue in Q2 at no margin, Q3, we got again, normal amount of revenue from that overtime contract, but that was at now at margin. Right? So I think those are really kind of the two prior things. But when you look forward to into Q4, given our, the guidance that we've provided, you know, even with those things not recurring, in Q4, you still see our gross margins improving. So you can just see that, you know, yes, that was kind of a unique dynamic in the transition from q to Q2 to Q3, but from Q3 to Q4 without those unique events, we still show gross margin strength and growth sequentially. Gautam Khanna: Thanks very much, guys. Appreciate it. Operator: The next question comes from Erik Rasmussen with Stifel. Please go ahead. Erik Rasmussen: Yeah. Thanks for taking the questions. I wanted to just on Neutron, I totally understand. Peter, and the team, you guys operate. You're not looking at an iterative process and having things blow up. So that's great. And that's you you always operate it that way, but I wanted to see, though, with this latest push out, you know, what does that do from a timing perspective for things like the NSSL and other things that you might have been looking at that Neutron would obviously be is geared towards. Peter Beck: Yeah. No. Hi, Erik. Great question. So, look, the NSSL team worked shoulder to shoulder with us. They're on every review in the program. And, you know, obviously, I can't speak for them, but I think they take at least the feedback we've had from us. They very much appreciate our approach. Of both transparency but also the diligence of the way we build vehicles. So the awards for the initial sale contracts have not been made yet and there's some time away for them to be made. We need to have a flight under our belt, a successful flight under our belt before they'll make those awards anyway. So, you know, largely speaking, it's pretty irrelevant. And, you know, we've been very careful, and I think there's been a lot of conversation previously about you know, booking Neutron and making sure that we can deliver for our customers So, you know, long story short, we're not letting anybody down here, Erik. We're in a good spot. Erik Rasmussen: Great. And maybe just my follow-up question here. You know, you closed the Geos acquisition. Mine Eric is soon to soon to soon to close, I would presume. But with Geos, are you seeing you know, traction in expanding the footprint in national security and defense? I mean, that was part of the reason. But what are you seeing? Now that you've closed the deal? Peter Beck: Yeah. It's look. It's just it's night and day to before. So, you know, obviously, we had a good relationship with SDA, and, to the intelligence community, obviously, for launch and things like that. But I would just say we're in a totally different league now and working with totally different folks. And you know, there's long, long relationships that have been built with the Geos team. And now that they have the support of Rocket Lab USA, Inc., we're really able to expand and supercharge those And also, you know, those relationships expose them to the larger offering of Rocket Lab USA, Inc. because it always surprises me, you know, sometimes you know, people just think we're just this little launch company and don't have all this other capability. So no, it's been incredibly important. And also just now being a payload provider, is you know, it brings you up to a whole another level because you're having really detailed mission discussions. Rather than just talking about how you can provide a bus or a component or something. We're really in mission formulation territory. Erik Rasmussen: Great. Thanks, and good luck with the Neutron development. Operator: The next question comes from Michael Leshock with KeyBanc Capital Markets. Please go ahead. Michael Leshock: Hey, good afternoon, everyone. I wanted to ask on Archimedes side I know you're constantly testing and iterating the engine. But how close are you to having a finalized design that meets all the performance requirements and ready for first flight And then secondly, given your production cadence, I think you previously said a new engine was coming off the line every eleven days or so. How quickly can you ramp production of the engine to have nine Archimedes for the first stage of Neutron's debut launch? Peter Beck: Yeah. So thanks, Michael. The engine design is pretty stable at this point, and, you know, we've met all the performance criteria. What we're doing is know, obviously, with Ascent, there's one set of environments, and with Ascent, there's an entirely new set of environments. And much more challenging environments because your propellants are warm and lower pressures, and you've had algae mixing and all kinds of stuff. So, you know, going through all of those things is has been really important. And, you know, I think the team I gotta, you know, check on the exact number, but, I mean, the vast, vast majority of all of the components for flight one engines are either complete or in some kind of some kind of form of build. So, you know, we're iterating on the engine for sure, but you know, the production machine has stood up and ready to support. But you know, with the end with Archimedes, we wanna make sure we're you know, as we are sending on first flight, nobody is worried about an engine. And, obviously, it's the most complicated, you know, part of the vehicle. So know, there's just no substitute for putting, you know, hours and hours and hours on test articles, and hence, the reasons why we have two cells running now at Stennis, not just the one, as we think we talked about that last earnings. And it's just kept switching between engine and engine. And some of the more interesting tests, you know, just extra long durations to try and promote some fatigue in the engine because, obviously, we wanna reuse this engine over and over again. Just doing really extended burns to try and promote fatigue and items is, you know, some of those kind of things. They just take time. Like, there's just no substitute for just burning. Michael Leshock: Okay. Great. And then sticking with Neutron, is that original budget for Neutron of $250 million to $300 million is that still intact given the updating timing of Neutron's first launch? And you'd said you're near peak Neutron spending just any way to frame how much you've spent so far or what's left to go? Thanks. Adam Spice: Yeah. I could take a swag at that. So yeah, I mean, the program, as Pete mentioned, I mean, we've continued to make a lot of progress. The $250 million to $300 million kind of original estimate I mean, we kind of that got a little bit I would say, behind us with the with the kind of with the push from launching '25, the '25. And so now as we get into kind of a 2026 scenario, right now, I'd say that, you know, we're estimating that we will have spent approximately $360 million exiting in q cumulative across r and d and CapEx. Through the 2025 So, you know, we're above that. And as Pete mentioned, you know, it's about a $15 million impact on the human capital side of things per quarter. Just by extending. Obviously, prototyping, you're gonna spend, we're gonna spend. It's really not impacted by the time frame. It when the program kinda delays, you end up, obviously incurring an extension of that. The staffing related expenses after the program. So right now, again, we're looking at around $360 million exiting 2025. So, again, as I mentioned, do think we're approaching peak If hopefully, Q4 is the peak, and it all depends on kinda when the timing of that first launch occurs. And this, of course, it'll a bit. Launch as well. Michael Leshock: Yep. Thank you. I appreciate it. Operator: The next question comes from Suji Desilva with ROTH Capital. Please go ahead. Suji Desilva: Hi, Pete. Hi, Adam. Congrats on the strong backlog build here. On the Electron launches, you gave some sense of pricing, but any noticing on the trend in the size of the number of launches, maybe if not now into 26 or if you're trying to extend those or is that fairly stable? Peter Beck: Hey, CJ. I don't know if Adam, if you if you got that one, but I struggle to see you on that one. Yeah. Suji broke up. Suji Desilva: Oh, sorry. I mean, I'll repeat it. Just any observations on the Lectron launches, the deals in terms of number of length of the launches? Are people trying to extend the visibility there? In the next few quarters? Or is it pretty stable? Peter Beck: You know, I think when we talk to customers, as you can see in the last quarter, it's generally not sort of one launch You know, we see folks locking in their launch capacity and buying lots of launches in one hit. We're we never try and let a customer down or leave a customer on the pad, so we map production with launch demand very well. But, you know, and that that isn't been a problem to date. But, no, we just continue to see just growth in the demand for the product. Adam Spice: Yeah. And I would add to that that, Suji. So we've seen these larger bulk buys over long periods of time occur more on the commercial side. As we talked about in the past, you know, it's kind of hard to differentiate sometimes commercial versus government because a lot of our commercial customers actually end up fulfilling customer government demand. So it's a quasi commercial government. But, also, we've been growing our Haste business pretty significantly over the last couple of years. And those have come, I would say, more like Electron originally did, where kinda, know, the onesie twosie kind of size contracts. And I think that's hopefully the next kind of shoe to drop for us is the ability to start lying and start signing larger paced deals that cover a long period of time and a greater number of launches because that would give an even more, you know, certainty to the to the to the revenue ramp in that part of the business. I think that's you know, again, that's something that we're looking forward to. So I think, you know, that would be a very helpful indicator that the longevity of that Haste business and the and the ultimate scaling of it. Suji Desilva: Okay. Helpful, Adam. And my other question's on the, m and a environment. And with targets. Is there a sense that maybe among the targets that consolidation and being part of larger companies increasingly important maybe more willingness to come to the table. Are you seeing any of that trend? Now, among m and a discussions? Peter Beck: Yeah. I think you're seeing it in a few different places both on the larger scale, but also I think we're seeing it also on some of the smaller scale stuff as well is I think it's a difficult environment to scale in, and there hasn't really been too many great companies that other companies want to join And as I think I mentioned on the call, we're becoming the de facto go-to guys if you want to, you know, really scale your products and the opportunities that you have in front of Suji Desilva: Okay. You do Thanks, Pete. Adam Spice: No worries. Thanks, Sujit. Operator: The next question comes from Andre Madrid with BTIG. Please go ahead. Andre Madrid: Hey, everyone. Good afternoon. Thanks for the questions. Know, I think earlier today, it was announced that the s c FDA was moving some some funding earmarked for some of their programs over to true payments. This was at more of a a DOW level. But seeing that, and then you called it out, you know, decreased cash receipts in the slide deck too related to SDASAT work. I mean, if things don't get resolved this evening, which hopefully they do, I mean, when does the shutdown pose a significant risk to your internal '26 outlook and beyond? Adam Spice: What? I can okay. Go ahead, Pete. Peter Beck: Oh, you go ahead, No. I was gonna say, think that there's, you know, so far, the government shutdown, I wouldn't say, has really dramatically affected us. Yes. There have been slightly slower cash receipts, but for example, we got a very large cash payment on Friday, from SDA. So I would say that, you know, this ticket has not been shut off. I think it's just kind of just been a little bit slower and flowing. So that to me, that's very helpful. That even before the line of sight to the ending of government shutdown, you know, we were still getting and we received a very large payment. The end of last week. So right now, it doesn't really I think there's gonna be any obviously, we factored in everything we believe is to be the most likely case in our Q4 guide that we described earlier. So it's hard, you know, no one's got a crystal ball for kind of what happens know, with this they bring the government back and kind of where they reprioritize their dollars. But yeah, I think we've been very fortunate so far that we've really not felt any significant impact from the shutdown to date. Andre Madrid: Got it. Got it. That's helpful. And oh, go ahead. Sorry. I didn't mean to cut you off. Peter Beck: The only sorry, sir, Joe. The only thing I'd add is, like, the requirement for what is the STA is doing is not diminishing. It's expanding. So, you know, it's an important program. So as far as, like, the need for the program, it's that's not getting smaller. Andre Madrid: Got it. Got it. That's fair. I'll leave it for one. Thanks, guys. Peter Beck: Thanks, Andre. Operator: The next question comes from Jeffrey Van Rhee with Craig Hallum. Please go ahead. Jeffrey Van Rhee: Great. Thanks for sneaking in here. The Andy, on the on the margin, gross margins for Q4 and the guide, it looks like maybe a couple of 100 basis points of sequential improvement. Is that just kind of break it down maybe a little more? Which side of the business you're expecting that sequential increase? And then any sort of even inklings as to maybe revisions on what you think target gross margins might be for either of those two segments? Peter Beck: Yeah. So, you know, Adam Spice: the gross margin trend, you know, in the proven sequentially Q3, Q4, again, is driven really by a mix where as we get more scale into our Electron business, we've always talked cadence being super important for the margin profile for that business because there's so much fixed cost related to it. So as you scale cadence, and Pete kinda, you know, mentioned earlier in his comments that we're expecting you know, hitting a new record for launches in the year. So, that's all good for overhead absorption. So think of it as there's a lot of good underlying dynamics going on within the launch business as far as, you know, size of the backlog, the ASP increasing within that backlog. We're getting greater overhead absorption benefits. So that's really kind of what's driving the strength in the launch business. And as it becomes a bigger piece of the mix in Q4, that's really the biggest fact. I would say that within our space systems business, the trend of margins actually has been quite solid in that as well. You know, we talked in prior calls about how we've made very, very significant improvements in our gross margins from our Solero solar business. You know, we've kinda talked about a long-term target there of you know, we get to 30 points of gross margin. That was kind of an aspirational target, and I think we're very comfortable that we're, you know, we're very close to that. I think we're at we think about revisiting that one upward a bit, I think. But overall, you know, we stay we still believe that we that our launch business on Electron First, you know, has the potential to be a 45 to 50 non-GAAP gross margin business. We think long-term Neutron has the ability to be at least as good as that. Helped by the reusability nature of that vehicle. And then on the space system side, you know, it's really two different elements that kind of have different margin characteristics. On the space systems components or subsystems business, that has a wide range with solar kinda being at the low the lowest end of that, and, again, around 30 points. Hopefully, we can push that a little bit higher. And then for some of our other components business, where we have margins that are, you know, well north of 60 in some cases, 70 points margin. And I think overall, that brings the gross mow market profile for that subsystems business around, call it, low to mid-forties. The satellite manufacturing business, because of the nature of those programs, you know, we're able to take what for many people is either high single digit or low double-digit gross margins and have those more in, I'll call it, the I'd say, 25 to 35 points depending on the programs because of the level of vertical integration that we bring because those same components that we sell into the merchant market at very high margins we basically obviously design into our platforms. So I think longer term, I think we still see again, again, a gross margin business from launch that is in the probably, if you wanna call it, the 50% range and for space systems. You know, probably in the I'd say, the 40, maybe low forties percent gross margin range. So puts in a nice spot overall. But I think it's also helpful to note that, you know, in space systems, it's not as r and d intensive. As the launch businesses when you're getting a new vehicle established. So the operating margins or contribution margins for the space systems businesses, even the ones that aren't kind of in those high gross margin ranges is still quite healthy. And then I think on again, I think the margins for launch speak for themselves. Got it. Got it. Very helpful. Last one then on space systems. Jeffrey Van Rhee: The can you talk about the pipeline? Obviously, tranche two, tranche three are big needle movers. But what's the next layer beneath that like? Like, how many, you know, 8 figure, 9 figure deals? Just some semblance of what the distribution of deal sizes that are later stage in the pipeline would be helpful. Thanks. Peter Beck: Yeah. So there's you know, we're always chasing a variety of stuff. So I think the, you know, the intelligence community and the DOD is obviously big opportunities for us. And, you know, things like Geos really provide us new new kind of access and visibility to some things that aren't very visible at all. So on that side of the equation, I think there's really good opportunities for us there. But I would say also like, if we think about the, you know, the bids that we've got in play, there's also some extremely meaty commercial bids as well. So say it's fairly well distributed across the opportunity is fairly well distributed across both commercial and defense. But there's always the big meaty programs. But, I mean, you know, all of the business units, we kind of run the business units like little start-up companies as well. And, you know, they're expected to grow really healthily every year. And, you know, you see new products coming on all the time because know, as they as they reach saturation with their customers, these business units have to develop new products to continue that growth. So this year alone, I think it's been a really, really great year. There's we set we set goals for those units. And then there's kind of the Pete stretch goal. And, you know, they've all all met or exceeded the, you know, the Pete stretch goal this year. So you know, it's not it's not just about I guess what I'm saying is not just about these big big projects. You know, they're obviously important needle moving, but just the underlying business and just continuing to drive that growth in all the business units. And the underlying business is equally as important. Jeffrey Van Rhee: Got it. Got it. Congrats on the great performance. Thanks. Operator: The next question comes from Anthony Valentini with Goldman Sachs. Please go ahead. Anthony Valentini: Hey, guys. Thanks for getting me on. Just a quick clarification question on the backlog and Neutron Is there anything in the backlog today for Neutron? Or is it zero? Adam Spice: Anthony. We do have, we have launches in backlog for Neutron. There are two fully priced missions in the backlog right now for Neutron. There's a third contracted mission, which is right now anticipated to be a rideshare. But we don't have that in backlog because we don't do that until we've actually added the payloads into the manifest. And, again, we've got a primary customer, but not on that third cusp on that third launch, we've not put any in the backlog yet. Anthony Valentini: Okay. That's helpful. Is there a way to think through, you know, how that backlog Neutron specifically ramps up? Like does that happen once you guys do that first R and D launch? Or is it a certain number of successful launches? Just historically, and, like, what you guys know about the industry, like, how does that start to flow through? Peter Beck: Yeah. It's a good question, Anthony. Mean and I think we sort of alluded to this in one of the previous questions. It's like we don't want to ever let anybody down. And, you know, when they're looking to buy neutrons, aren't typically looking for one. Looking for many. So, know, there you know, a number of customers are looking to see that the vehicle does work and it scales. So and, you know, we work very closely with those customers we go along. And these are both commercial and government customers. So I think the unlocking point is certainly a successful flight. In a number of these contracts. But also you know, that you know, we want to make sure we don't let customers down And the last thing we want to do, and we've talked about this previously, is customers will be happy to book a bunch of neutron at, like, half price. And we're just not gonna do that. Anthony Valentini: Right. Okay. That makes a ton of sense. And then last one for you, Peter. As I'm thinking through the opportunity set, on the Tranche three transport layer and just looking back at the previous tranches, there's competition from the defense prime, and some of these new space tech companies, including yourself. I'm curious how you think through the differentiators for Rocket Lab USA, Inc. and when you guys are presenting to the customer, what you think really separates you from the rest of the group? Peter Beck: Yeah. So I think one the big separators and one of the reasons why we you know, we won a prime spot on our first SDA contract is that you know, we're so vertically integrated that if we look across all of these programs, they're typically plagued by delays. You know, not so much cost overruns because, you know, it's a firm fixed price, but certainly delays. And, you know, when you control so much of your own supply chain, then you know, if there's a delay in a component, you get to choose what resource you swell or push around to solve that problem. So I think that that's a big element is just schedule certainty Obviously, Adam talked about some of the margin and margin stacking, so price is a big element as well. But at the end of the day, all this stuff's gotta work. And this is where, you know, your reputation in this industry is just so critical and why we just never ever deviate from putting ourselves in a position where that can get compromised. You know, when people buy a piece of Rocket Lab USA, Inc. hardware, know, firstly, it turns up and it looks great, and it works. And, you know, in an industry where that seems to be challenging, I think, you know, that's an important element. And also, finally, there's a set of requirements, and then there's how you go about solving those set of requirements. Like, you know, with the technologies that you can bring to bear. We just have such a war chest of technologies that we can bring to bear to provide solutions to meet everybody's requirements and then some. That I think, you know, it puts us in a really strong position. Anthony Valentini: Great. Thank you so much for the, the thoughtful response. Peter Beck: Of course. Operator: The next question comes from Kristine T. Liwag with Morgan Stanley. Please go ahead. Okay. Good evening, everyone. Peter, Adam, from your commentary from our previous question, I mean, it sounds like you're not going to go out there and go buy a spectrum. So first question, is that a fair assessment of your statement earlier? And also second to that, you know, with over a billion dollars in liquidity, and, you know, with the broader and deeper capability set in space systems, What's your priority for m and a? Peter Beck: Yeah. So we look at a number of things, Kristine. So you know, I would say that there's always opportunities for tuck-ins, and you've seen that with things like Manaruk where you know, that gives us a capability that we didn't have. So we'll always do those. But I think the Geost acquisition is a really good example about you know, acquiring a company that just brings us into a totally different customer set and a totally different capability and also puts us at a totally different level know, if you think of the big traditional primes, one thing that sets them apart from lots of little space companies is they own the payload. So, you know, we'll continue to look at for opportunities there where we can own the payload. And really drive the missions. And look, we're always looking at big needle moving stuff as well. And you know, we always look for things that we think, you know, have a step change in either the scale or other elements of the company. So you know, that's the way we look about you know, that's the way we think about it. Kristine T. Liwag: It's been super helpful. And, look, you know, when you look out into the market, you know, it's hard not to see what's SpaceX is doing in terms of their path towards that end to end, you know, space and recent So when you look at your portfolio today, I mean, it looks like you're kinda marching in a similar direction. With your Flatellite product set too, and now you've got, you know, these additional payloads. Where do you see your role in terms of that industry? You know, do you at some point, wanna own your own consolation and be able to sell more of that as a service. How do we think about where you are in this journey And, you know, what does the exit look like? Peter Beck: Yeah. We've just sort of quietly and methodically going about making sure we amass all of the kind of the strategic elements we need to ultimately deploy things at scale. So Neutron is really important element of that. If you look at look at others, you know, access to space and low-cost rapid and reliable access to space is kind of the place you start. Neutron gives us that multi-tonne capability. And then as you point out, you look at the space systems growth then really at this stage, I don't think there's any satellite we can go and build. I mean, we've got two going to Mars here shortly. So if you, you know, wanna talk about complexity of spacecraft. So I think from an engineering perspective and a component perspective, all of those kind of bases are loaded. And we'll be very strategic about how we think about the next step, which would be building our own constellation and whether we're providing services or infrastructure, I think, is yet to be determined. Kristine T. Liwag: Great. Thank you very much. Operator: The next question comes from Peter Arment with Baird. Please go ahead. Peter Arment: Nice results, Pete and Adam. Just a quick one, I guess. On Electron, of the demand environment. I think you've previously talked about the demand for around 30 flights a year. I was wondering if that still kind of holds just given the uplift that we've seen tied to kind of all the national security launches and kind of what's going to be expected with Golden Dome and additional testing if there's upward bias to that and it certainly seems like it. Thanks. Peter Beck: Yeah. Hi, Peter. I mean, look, I think that's fair. If depending on how quickly and what scale Golden Dome grows to, think we're in a very strong position to provide critical services there. And, you know, we see nothing but upward trajectory in both government, taste, and commercial launches for that product. Peter Arment: Appreciate that. And just a quick follow-up. For the comments on the Archimedes, the testing that you've been doing. Could you give us a little context? Is that much different in terms of the rate that you did originally with the retrofits around Electron? Thanks. Peter Beck: Yeah. It is. It is at a much, much higher intensity and rate because for Rutherford, we only had to do half the job, meaning that we only had to go up. For Archimedes, we have to go up and down. So it's like twice the amount of environments, twice the amount of run box. And twice the amount of qualification. Peter Arment: Appreciate the color. Thanks, guys. Operator: This concludes our question and answer session. I would like to turn the conference back over to Peter Beck for any closing remarks. Peter Beck: Great. Thanks very much, and thanks for the thoughtful questions. So before we close out today, I would like to share that Matt Oko is finishing up his time on the Rocket Lab USA, Inc. board of directors. Matt's tenure as a member of the board will end November 30. Matt is a cofounder and managing partner at a deep tech venture capital firm, DCVC, and was one of Rocket Lab USA, Inc.'s earliest investors serving as a member of the board since August 2021. And as a member of the legacy Rocket Lab USA, Inc. board since January 2017. So since then, we've been incredibly grateful for his leadership and his guidance as we grew Rocket Lab USA, Inc. together from a small start-up to a publicly listed company. Now the world's one of the world's leading global space firms. And, look, I just personally also want to thank Matt for backing us from the beginning, and wish him all the best in his continued work in deep tech as he transitions out of Rocket Lab USA, Inc. Otherwise, here are some upcoming events and conferences that the team will be attending. We look forward to sharing more exciting news and updates with you there. And thanks for joining us That wraps up today's call, and we look forward to speaking with you again soon and sharing some more progress at Rocket Lab USA, Inc. Operator: The conference has now concluded. Thank you for attending today's presentation. You may now disconnect.
Operator: Good afternoon, everyone, and welcome to the DHI Group, Inc. Third Quarter 2025 Financial Results 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. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star and then one on your touch-tone telephones. To withdraw your questions, you may press star and two. Please also note, today's event is being recorded. At this time, I'd like to turn the floor over to Todd Kehrli with Pundell Wilkinson. Please go ahead. Todd Kehrli: Thank you, operator. Good afternoon, and welcome to DHI Group's Third Quarter Earnings Conference Call for 2025. Joining me today are DHI's CEO, Art Zeile, and CFO, Greg Schippers. Before I hand the call over to Art, I'd like to address a few quick items. This afternoon, DHI issued a press release announcing its financial results for 2025. The release is available on the company's website at dhigroupinc.com. This call is being broadcast live over the Internet for all interested parties, and the webcast will be archived on the Investor Relations page of the company's website. I want to remind everyone that during today's call, management will make forward-looking statements that involve risks and uncertainties. Please note that except for the historical information, statements on today's call may constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements reflect DHI management's current views concerning future events and financial performance and are subject to risks and uncertainties. Actual results may differ materially from the outcomes contained in any forward-looking statements. Factors that could cause these forward-looking statements to differ from actual results include the risks and uncertainties discussed in the company's periodic reports on Form 10-K and 10-Q and other filings with the Securities and Exchange Commission. DHI undertakes no obligation to update or revise any forward-looking statements. Lastly, on today's call, management will reference specific financial measures including adjusted EBITDA, adjusted EBITDA margin, free cash flow, and non-GAAP earnings per share, which are not prepared in accordance with US GAAP. Information regarding these non-GAAP measures and reconciliations to the most directly comparable GAAP measures are available in our earnings release, which can be found on our website at dhigroupinc.com in the investor relations section. With that, I'll now turn the call over to Art Zeile, CEO of DHI Group. Art Zeile: Thank you, Todd. Good afternoon, everyone, and thank you for joining us today. I'm Art Zeile, CEO of DHI Group, and with me is Greg Schippers, our CFO. If you're new to the story, welcome. At DHI, our mission is simple. We help employers find and connect with the technology professionals who drive innovation across the US economy. We do this through two brands, ClearanceJobs and Dice, both with strong positions in attractive markets. Our model is straightforward. More than 90% of our revenue comes from annual or multiyear subscriptions. Customers who are employers or recruiters use our platforms to search, engage, and recruit tech talent. Our exclusive focus on tech occupations, brand longevity, scale of our communities, data insights, and continued product innovation give us a durable, competitive advantage. ClearanceJobs is the leading marketplace for professionals with active US security clearances, serving over 1,800 customers including Lockheed, Booz Allen Hamilton, Leidos, Raytheon, and many others. With 1,900,000 candidates on our platform, we have the largest number of profiles of US cleared professionals, giving CJ a significant competitive advantage as a platform for hiring cleared talent. Dice is essentially LinkedIn for tech hiring. Built over thirty-five years, with 7,600,000 profiles in our database, representing the vast majority of technology professionals in the US. While LinkedIn emphasizes a person's title, we focus on tech skills. Tech professionals on Dice actively update their profiles with new tech skills making it the most relevant platform for recruiters who need to source tech talent. Both businesses generate strong recurring revenue and robust EBITDA margins, particularly at ClearanceJobs, where margins run above 40%. Investors often mistake us for a staffing and recruiting firm, but we are an essential software tool used by employers and recruiters to find top tech talent for their open positions. Over 6,000 employers and staffing companies subscribe to our two SaaS platforms. Despite a mixed macro backdrop, and recent headlines, tech hiring has stabilized this year, although remaining under historical levels. While we don't have updated BLS tech job posting figures, due to the government shutdown, we know from our alternative source Lightcast, that new tech job postings were roughly the same as the second quarter. Dice is an essential platform for staffing firms. And according to the staffing industry analysts pulse reports, the median tech staffing firm in their membership is now growing revenue in low single digits compared to 2024. The most notable trend driving current and future tech worker demand is AI. At the beginning of 2024, approximately 10% of job postings on Dice required at least one AI skill. As of last month, that number has risen above 50%. As companies expand their use of AI, the need for skilled technologists that implement these projects will only increase. Platforms like ClearanceJobs and Dice with their combined databases of over 9,000,000 tech professionals, are an essential tool for employers seeking to find, attract, and hire the tech talent they need to fill these projects. Now I would like to provide an overview of our brand performance quarter, and outline the steps we've taken to improve our position moving forward. ClearanceJobs continues to generate strong margins and retain its leadership position, despite a bookings decline of $800,000 or 7% due to the government hiring freeze and eventual shutdown. But the long-term outlook is very favorable. The proposed $1.1 trillion US defense budget for fiscal year 2026 marks the largest single-year increase in peacetime history, representing a 13% increase over the previous year's budget. Historically, the defense budget has grown roughly in line with GDP growth rates of around 3%. So this is a significant year-over-year increase. Also, NATO countries are boosting defense spending to a target of 5% of their GDPs, which would represent a spending increase of more than $500 billion, with US contractors likely to secure a significant portion of this incremental spend. Traditionally, over 60% of EU defense procurement spending goes to US military contractors. These dynamics are promising for ClearanceJobs, with over 10,000 employers of cleared tech professionals and more than 100 government agencies also in need of cleared tech professionals, CJ has a significant growth opportunity as government contractors look to staff new projects. On the product side, we've integrated Agile ATS with our ClearanceJobs offering and are beta testing our premium candidate subscription ahead of its general release in 2026. Our first candidate monetization opportunity. As we announced last quarter, Agile ATS is the only applicant tracking system in the market designed specifically for the cleared recruiting environment. It's the only ATS on the market developed from the ground up to meet the unique regulatory and compliance requirements of government contractors. With Agile ATS now integrated with ClearanceJobs, we have begun offering a bundled solution to customers who want a seamless end-to-end cleared hiring workflow. Based on our analysis, we believe approximately half of our CJ customers today meet the target profile for this solution. With a historical average contract value of around $7,000 annually, we see strong incremental recurring revenue potential for Agile ATS, both from our existing CJ customer base and from new customers in the broader GovTech market. Additionally, we are excited about the opportunity for CJ to create a new recurring revenue stream from our new premium candidate subscription. We will be looking to roll out a similar offering on Dice in the future. With our Dice brand, the third quarter, we continue to face macro headwinds from tariffs, budget uncertainty, and higher interest rates. As a result, the number of new tech job postings remain around 70% of normal, resulting in Dice bookings being down 17% year over year. Having said that, as I mentioned earlier, we are seeing significant interest in AI-related job postings, which we believe will drive future tech hiring demand. During the quarter, we made meaningful progress with our Dice platform from a product perspective. More than half of our 4,200 customers, primarily smaller accounts, have now migrated to the new platform, with all customers expected to be migrated by 2026. This new platform allows existing customers to add new products to their existing subscription online. It also allows new customers to sign up for a subscription with a swipe of a credit card. The price point is $650 a month for the lowest tier subscription package, which is easier for smaller customers to manage than an annual upfront charge. This move to a more self-service model allowed us to reduce Dice operating expenses significantly moving forward. Looking ahead, even though the past few years have been difficult, we have successfully laid the foundation for future growth. Dice is increasingly becoming the go-to destination for AI talent. In ClearanceJobs, operates in a specialized high-barrier market at the intersection of defense, security, and technology, with significant upside from defense budget growth and NATO spending. Our subscription model and margin structure give us resilience. We continue to believe the market doesn't fully reflect the value of each distinct brand today, which is why our board authorized a new $5 million buyback program starting this month. Over time, as we execute, modernize our platforms, and grow our customer base, we see a clear path to meaningful continued shareholder value creation. And as always, remain committed to delivering solid profits and robust free cash flow for our shareholders. With that, I'll turn the call over to Greg to walk you through the financial results and our guidance in more detail. Greg Schippers: Thank you, Art. And good afternoon, everyone. Jumping right in, we reported total revenue of $32.1 million, which was down 9% on a year-over-year basis and roughly flat compared to the second quarter. Total bookings for the quarter were $25.4 million, down 12% year over year. Our total recurring revenue was down 11% compared to the prior year, and the bookings that drive our recurring revenue were down 13% for the quarter. ClearanceJobs revenue was $13.9 million, up 1% year over year and up 2% sequentially. Bookings for CJ were $12 million, down 7% year over year. We ended the third quarter with 1,822 CJ recruitment package customers, which was down 8% on a year-over-year basis and down 2% on a sequential basis. This reduction is attributable to churn with smaller customers, whereas the number of CJ accounts spending greater than $15,000 in annual recurring revenue increased versus prior year. Also, as Art mentioned, CJ's new business teams were impacted by uncertainties surrounding the federal budget freeze and eventual shutdown. Our average annual revenue per CJ recruitment package customer was up 7% year over year and up 2% sequentially to $26,600. Approximately 90% of CJ revenue is recurring and comes from annual or multiyear contracts. For the quarter, CJ's revenue renewal rate was 85% and CJ's retention rate was 106%. This solid retention rate demonstrates the continued value CJ delivers in the recruitment of cleared professionals. Dice revenue was $18.2 million, which was down 15% year over year and down 1% sequentially. Dice bookings were $13.4 million, down 17% year over year. We ended the quarter with 4,239 Dice recruitment package customers, which is down 3% from last quarter and down 13% year over year. Dice revenue renewal rate was 69% for the quarter, and its retention rate was 92%. The reduction in customer count and Dice's renewal rate from the prior year quarter is mainly attributable to churn with smaller customers spending less than $15,000 per year, representing over 75% of the total churn on count, and who are more likely to be impacted by the difficult macro environment and uncertainty. We believe the introduction of our new Dice platform, which offers customers the flexibility of monthly subscriptions, will help reduce future churn among smaller accounts by lowering upfront commitment and improving affordability. Our average annual revenue per Dice recruitment package customer was $15,727, down 4% year over year and up 2% sequentially. As with CJ, approximately 90% of Dice revenues were recurring and come from annual or multiyear contracts. Despite this churn, both brands onboarded notable clients in the third quarter. For CJ, this includes Blue Origin, Boston Fusion, and CDW. While Dice landed HighIQ Robotics, Cloud AI Technologies, and Mango Analytics as customers in Q3. Let's move to operating expenses. For the third quarter, our operating expenses increased $1.9 million to $36.6 million when compared to $34.7 million in the year-ago quarter and includes a $9.6 million impairment of the intangible assets. Excluding the impairment, our third-quarter operating expenses declined $7.6 million or 22%. Because of the difficult market conditions over the past two and a half years, we have reduced costs through restructurings in 2023, in 2024, in January, and most recently in June. Together, these restructurings have reduced our annual operating and capitalized development costs by approximately $35 million. For the quarter, we had an income tax benefit of $800,000 on a loss before taxes of $5 million. Our tax rate for the quarter differed from our approximate statutory rate of 25% due to deduction limitations on executive compensation. The new tax law signed in early July allows for the immediate deduction of R&D costs, which will reduce our income tax payments in 2025 by over $2 million while also providing an incentive for technology spending in the broader US market, thereby increasing tech hiring. Moving on to the bottom line, we recorded a net loss of $4.3 million or $0.10 per diluted share in the third quarter. For the prior year quarter, we reported a net loss of $200,000 or 0¢ per diluted share. Net loss for the quarter was impacted by the previously mentioned $9.6 million impairment. Non-GAAP earnings per share for the quarter was $0.09 per share compared to $0.05 per share for the prior year quarter. Diluted shares outstanding for the quarter were 44.8 million shares, down slightly from the prior year quarter. Adjusted EBITDA for the third quarter was $10.3 million, a margin of 32%, compared to $8.6 million or a margin of 24% in the third quarter a year ago. Margin for the quarter benefited from certain expense savings that are not expected to recur. On a segmented basis, CJ adjusted EBITDA remains strong at $5.9 million in the third quarter, representing a 43% adjusted EBITDA margin as compared to adjusted EBITDA of $6.3 million or a margin of 46% in the prior year period. Dice's adjusted EBITDA increased $2.2 million or 56% to $6.2 million, representing a 34% adjusted EBITDA margin, which compares to $4 million and a 19% margin last year. Operating cash flow for the third quarter was $4.8 million compared to $5.5 million in the prior year period. Free cash flow, which is operating cash flows less capital expenditures, was $3.2 million for the third quarter compared to $2.3 million in the third quarter of last year. Our capital expenditures, which consist primarily of capitalized development costs, were $1.6 million in the third quarter compared to $3.2 million in the third quarter last year, a savings of $1.6 million or 51%. Capitalized development costs in 2025 were $400,000 for CJ, and $1.1 million for Dice, as compared to $600,000 for CJ and $2.5 million for Dice in the 2024 period. We are targeting total capital expenditures in 2025 to range between $7 million and $8 million as compared to $13.9 million last year. From a liquidity perspective, at the end of the quarter, we had $2.3 million in cash and our total debt was $30 million under our $100 million revolver, resulting in leverage at 0.86 times our adjusted EBITDA. We continue to target one times leverage for the business. Deferred revenue at the end of the quarter was $41 million, down 13% from the third quarter end of last year. Our total committed contract backlog at the end of the quarter was $94.3 million, which was down 9% from the end of the third quarter last year. Short-term backlog was $72 million at the end of the third quarter, a decrease of $2.2 million or 3% year over year. Long-term backlog, that is revenue to be recognized in thirteen or more months, was $22.3 million at the end of the quarter, a decrease of $500,000 or 2% from the prior year quarter. During the quarter, we repurchased 741,000 shares for $2.1 million under our stock repurchase program. For the year, we've repurchased a total of 2.6 million shares or $6.2 million under our stock repurchase program and from the vesting of share-based awards. Following the close of the third quarter, we completed the $5 million plan authorized in January and last week, our board approved a new $5 million stock repurchase program, which will begin this month and will run through November 2026. Moving to guidance, we are reiterating our annual revenue guidance of $126 million to $128 million. For the fourth quarter, we expect revenue to be in the range of $29.5 million to $31.5 million. We are raising our full-year adjusted EBITDA margin guidance to 27%, reflecting our cost management and operational efficiency. To wrap up, although the hiring environment over the past two plus years has impacted our revenue growth, we remain optimistic about the road ahead. We anticipate the record-breaking defense budget will be a growth driver for CJ and that companies across all industries will steadily increase their investments in technology initiatives, creating a strong growth opportunity for both ClearanceJobs and Dice. We remain focused on strengthening our industry-leading solutions, optimizing our go-to-market strategy, and executing with efficiency, ensuring we are well-positioned to capitalize on the opportunities that lie ahead. And with that, let me turn the call back to Art. Art Zeile: Thank you, Greg. I want to thank all of our employees once again for their outstanding work this quarter. It has been a pleasure to be part of such a great team. That said, we are happy to answer your questions. Operator: Ladies and gentlemen, at this time, we'll begin the question and answer session. To ask a question, you may press star and then one using a touch-tone telephone. To withdraw your questions, you may press star and two. If you are using a speakerphone, we do ask that you please pick up the handset prior to pressing the keys to ensure the best sound quality. Again, that is star and then one. Join the question queue. We'll pause momentarily to assemble the roster. And our first question today comes from Gary Prestopino from Barrington Research. Please go ahead with your question. Gary Prestopino: Hey, Art, Greg. How are you? Art Zeile: Good. Good. Thanks. Appreciate it. Gary Prestopino: How are you? Greg Schippers: Good. Just fine. Thanks. Gary Prestopino: Several questions, but I won't ask them all at one time. Somebody else can get in the queue. But the Dice margin expansion is just fantastic. And I guess there's no one-timers or anything in there. Right? It's that is just pure adjusted EBITDA numbers quarter to quarter. Greg Schippers: So yes, Gary, I'll take that. There are a few, I would call true-ups in there. And so really what's driving that is we had some headcount vacancies during the third quarter that have now largely been backfilled. And then we also had a few kind of what I'd call year-to-date expense true-ups that, you know, were the result of some of our margin changes throughout the year and forecast on the revenue side. And then also as it relates to Dice, the tech team had a very efficient quarter. Therefore, there was more cost allocated to the capitalized development costs in the quarter as opposed to operating expenses. And really, that was a result of the delivery of the DX platform. That we've been talking about that was delivered in September and, you know, another release in October. So that team really zeroed in. And as a result, there was a classification from OpEx down to capitalized development. But from a dollar perspective, there was no change. Free cash flow on that. So I would expect that, you know, we're gonna return to a little bit more of a normalized margin on Dice next quarter. Gary Prestopino: And what would that be? Greg Schippers: So on Dice, you know, we had been running in the mid-twenties, so I would say we're gonna stay in that range. Gary Prestopino: Okay. Thank you. That's helpful. And then what was the write-off for $9 million? Was that in Dice or ClearanceJobs? Greg Schippers: Yep. It was the Dice trade name. So which is directly related to Dice revenue. Trade name valuation uses a technique called a relief of royalty rate and so you apply a third-party royalty rate to a revenue stream. And discount that back. And so that's the nature of that test that has to be done every year. And, you know, it resulted in impairment in this case given the revenue declines that Dice has experienced. Gary Prestopino: Okay. And then last thing I want to ask about capitalized development, you're looking at $7-8 million for this year. Given what's going on in the market, particularly with Dice, do you see that that changes in any way to the upside next year? Our spending on Capdev, will it get better next year as in decrease? Greg Schippers: I don't anticipate we're gonna have a significant decrease next year because our teams are pretty well put together now. I think we have the right staffing levels. And so, you know, we'll continue largely at a level similar to what you would see this year. Maybe slightly less given that the first part of the year, we had more employees before the restructure that happened in June. Gary Prestopino: Thank you. Operator: And our next question comes from Zachary Cummins from B. Riley. Please go ahead with your question. Ethan Waddell: Hi. This is Ethan Waddell calling in for Zachary Cummins. Thanks for taking my questions. I guess to start with the I think you said 70% bookings declined from government volatility. Maybe can you speak to how much of that impact you're seeing from government shutdown versus maybe government efficiency initiatives, just broader volatility? And how do you view that being offset going forward in light of the robust defense budget? Art Zeile: So, ultimately, I think that we have seen a lot of the smaller and midsized defense contractors become more conservative over the last let's say, three to six months. We're entering a period of time right now, specifically in December and January, where we have a seasonal high amount of our larger enterprise bookings take place. And these are with firms like Lockheed and Raytheon and Booz Allen Hamilton. They are actually feeling much more bullish because they can obviously withstand the government shutdown. They could withstand kind of turbulence of the market in general. They have larger balance sheets. So I personally think that we're getting now to the point where people acknowledge that the $1.1 trillion budget is going to be a big benefit to the defense establishment in the United States in total. We mentioned also the impact of NATO spending is positive for the US military establishment. I would say that we have to get to the actual bills being passed and signed into law by President Trump. So there's still a process of reconciliation between the house bill, the senate bill, and they've gotta be debating this. They have to essentially make sure that the reconciliation process happens. This year, it took until February, March for the reconciliation to take place. So really have an estimate as to when this is gonna happen for fiscal year 2026. But there seems to be more urgency I have to say, also, with the administration. The articles you read just about every day indicate that Secretary Hegzip wants speed to be part of the equation for getting more military gear and weaponry and preparedness into the hands of our warfighters. Ethan Waddell: Got it. That's some helpful color there. Thank you. And then in terms of the new platform migration, it's nice to see that you're seeing traction there. I guess, are there any particular actions that need to be taken to onboard the remaining customers that you have by first quarter? And do you expect any uptick in churn with your final customers on the legacy platform? Art Zeile: So I would say that much like any major technology implementation and any feature that's delivered on either one of the platforms, we always make the migration to our smaller customers first. Because it's just a risk-off kind of way of moving through waves of customer migrations. And so we've had a very good experience with those customers moving over. We've moved over half of them. I personally do not perceive that there is churn risk with the remainder of the customers that we move. Now they become the mid and large-sized customers, so the stakes are higher. But I think that we've also honed the process by virtue of these small customer migrations. Ethan Waddell: Thank you. That's all really helpful. Appreciate it. Operator: Our next question comes from Max Michaelis from Lake Street. Please go ahead with your question. Max Michaelis: Hey guys, thanks for taking my questions. Few for me. First, kinda wanna start with just the macro in general. I know you said Dice seems to be stabilizing. Play devil's advocate just a little bit here. The bookings seem to bookings declined seem to increase from last quarter, so down 17% versus down 16%. Can you kind of characterize the stabilization you are seeing in the market just to kind of give me a better sense? Art Zeile: That's a good point to say that ticked up by one percentage point versus the last quarter. I would say the two things that are giving me confidence personally then I'll turn it over to Greg. Are that you know, we are seeing this slow and steady increase in the number of new tech job postings. And they are very much AI-related. So I believe that that is indicative that the United States economy is moving towards one that is going to accept AI at ever larger scale. And then I'd say, the third quarter is traditionally our smallest renewal book. For the business. And it consists of our smaller customers. So I don't think that it's necessarily a matter of the percentage point decrease that really should be focused on. But Greg, do you have additional thoughts? Greg Schippers: Yeah. The one other thing I'd mention is the amount of inbound opportunities has started to pick up a bit. That doesn't necessarily translate quite yet to bookings, but is a little more activity in that area too. Max Michaelis: Okay. And there have been for a while. Makes sense. And and you do brought up AI. What percentage of your job postings on your platform and maybe I know a lot postings probably mention AI, but how many are actually related to an AI-related job? I guess, I don't know how to characterize that. But let you take it. Art Zeile: So over 50% as of October are related to an AI project. So the person is being hired specifically to tackle an AI project for the firm that's hiring them. And that's grown from 25% at the beginning of the year and 10% at the beginning of 2024. So it is a very significant trend from our perspective. Max Michaelis: Wow. That's a lot. And then the last one for me. It's a little if we look out kinda into the future, I know you guys acquired Agile ATS a few months ago. But, I mean, is there any other opportunities out in the GovTech space that you guys can go after? That's it for me. Art Zeile: Yeah. That's a great question. I would say that we are evaluating a number of them. I think that CJ is a great platform. It has a great reputation with its customer community, has high credibility. Has always been the platform of choice for anybody that is hiring cleared technology professionals. So I do think that there are adjacencies. In fact, we always show a diagram to our board that says that talent sourcing is just one part of the whole end-to-end process for hiring an individual, onboarding them, and then managing them. In the cleared context or any context. So I think that there will be more opportunities for us in the future. Max Michaelis: Alright. Thanks, guys. Art Zeile: Thank you. I appreciate it. Operator: To withdraw your questions, you may press star and 2. Our next question comes from Kevin Liu from Kevin Liu and Company. Please go ahead with your question. Kevin Liu: Hi. Good afternoon, guys. Maybe just starting with CJ, and I apologize if you had dropped in your prepared remarks. You joined a little bit late, but can you put a finer point in terms of how kind of renewal activity versus new business activity has kind of trended since the shutdown? And then your sense as to any sort of pent-up demand that could come through assuming the shutdown ends shortly? Art Zeile: I think those are the exact right questions to ask. I would say we have seen a solidification of renewal rates in the third quarter and even moving into the fourth quarter. Our bigger customers definitely feel bullish about the future. And as I kind of indicated in one of the answers, they have the balance sheets to withstand whatever kind of a government shutdown we actually endure. It's been the smaller and medium-sized customers that have been more challenged even with new business activity. But I'd say new business activity has picked up and we have seen a bigger pipeline than we have in a long time. Speaking to the second part of your question, which is I think that if once we get back to the business of running the government, I do think and we have to have a defense bill passed or actually, it's a multitude of different bills that constitute the defense budget. Then there will be more activity, more projects that will allow these smaller defense contractors to feel really good about where they stand with regard to their future success, and therefore, their willingness to purchase a platform like ClearanceJobs. Kevin Liu: Got it. And maybe switching gears to the new Dice platform. Can you talk I know it's still early days, but maybe talk a little bit about what you're seeing in terms of new customer signs and, in particular, how that kind of impacts your cost per acquired customer. And then anything notable in terms of, you know, customers that have migrated over and kind of their renewal rates or upsell potential. Art Zeile: Yeah. I think that, obviously, this is pretty new for us. And I have to say that with regard to the idea of swiping a credit card, what we found is that the customers are less willing to do that for an annual subscription even the lowest tier of package. Because it involves roughly about $6,000 to $7,000 and so that's a large charge at one point in time. Once we rolled out the monthly option, which, I mean, as you're well aware, is part of a lot of different B2B and B2C experiences. That's when we saw the number of people signing up start to escalate. So, you know, $650 for a month worth of Dice seems like it's a lot more tolerable, a lot more kind of like from a psychology perspective. More acceptable. So that's what we've seen so far. I know that Greg is working on how to essentially report that for the future because most of our reporting metrics in the past have been associated with subscription activity. We do have what we call transactional or non-subscription activity, but I think that's gonna be a part of how we essentially report progress in the future is a lot of people will be taking especially new customers, this monthly option. But, Greg, do you have any additional thoughts? Greg Schippers: Yeah. I would just point out that at this stage, we haven't advertised anything new around the platform, and that is gonna get kicked off this week. So we're very interested to see how that takes off with an advertising campaign that's coming up. But we're getting new customer relationships on there literally every day. With no advertising, kind of no focus on it. Yet. So it's only been out there a few weeks, and I think early results are pretty good in that respect. Kevin Liu: Yeah. Interesting. And just so I can clarify, it sounds like your current reporting metrics around customer recruitment packages since that on an annual basis, you're not including any of these customers. Greg Schippers: Yeah. We're working out still the kind of fine-tuning the best way to that information. If you think about a self-service versus a managed customer relationship for instance, it's gonna change a little bit on how we think about the business and how we report it through our calls and investors and analysts. So we'll be forthcoming with that probably, you know, in our Q1 call. Oh, the call in February. Kevin Liu: Alright. And just lastly for me, you know, it's good to see the buyback authorization the other day. You talk a little bit about kind of your appetite for being aggressive on that given where the stock price is currently and trying to balance that with some of the ongoing uncertainty both with the shutdown as well as the macro conditions? Greg Schippers: Yeah. There's always a balance with capital allocation, of course. And, you know, our board is comfortable with one times leverage. And so we're gonna continue to target in that neighborhood where you know, a bit under it right now. We're a bit over it last quarter, I think. And so we're comfortable with this $5 million plan. And, you know, it definitely will keep continue to evaluate it. As we move through the next couple of quarters and as we evaluate our 2026 plan. And kind of see where it takes us. But right now, I think we're pretty comfortable with that mix. Kevin Liu: Alright. Thank you for taking the questions. Nice job on the EBITDA performance this quarter. Art Zeile: Thank you. Thanks, Kevin. Appreciate it. Operator: And with that, ladies and gentlemen, we'll be concluding today's question and answer session. I'd like to turn the floor back over to Art Zeile for any closing remarks. Art Zeile: Thank you, operator, and thank you all for joining us today. And as always, if you have any questions about our company or would like to speak with management, please reach out to Todd Kehrli, and he will assist in arranging a meeting. And thank you everyone for your interest in DHI Group. Hope you have a great day and week to come. Operator: And the conference has now concluded. We do thank you for attending today's presentation. You may now disconnect your lines.
Scott Wisniewski: Good day, and thank you for standing by. Welcome to the AST SpaceMobile third quarter 2025 business update call. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your host today, Scott Wisniewski, president of AST SpaceMobile. Please go ahead. Scott Wisniewski: Thank you, and good afternoon, everyone. Today, I'm also joined by Abel Avellan, CEO, and Andy Johnson, CFO and Chief Legal Officer. Let me refer you to Slide two of the presentation, which contains our Safe Harbor disclaimer. During today's call, we may make certain forward-looking statements. These statements are based on current expectations and assumptions and, as a result, are subject to risks and uncertainties. Many factors could cause actual events to differ materially from the forward-looking statements on this call. For more information about these risks and uncertainties, please refer to the Risk Factors section of AST SpaceMobile's annual report on Form 10-K for the year that ended 12/31/2024, Form 10-Q filed with the SEC on 05/12/2025, Form 10-Q filed with the SEC on 08/11/2025, the Form 10-Q filed with the SEC today, as well as other documents filed by AST SpaceMobile from time to time. Also, after our initial remarks, we'll be starting our Q&A section with questions submitted by our shareholders. For those of you who may be new to our company and mission, there are nearly 6 billion mobile phones in use today around the world. But many of us still experience gaps in coverage as we live, work, and travel. Additionally, there are billions of people without cellular broadband and who remain unconnected from the global economy. The markets we are pursuing here are massive, the problem we are solving is important and touches nearly all of us. In this backdrop, AST SpaceMobile is building the first and only global cellular broadband network in space to operate directly with everyday unmodified mobile devices and supported by our extensive IP and patent portfolio. It is now my pleasure to pass the conversation over to Chairman and CEO, Abel Avellan, who will go through our activities since our last public update. Thank you, Scott. Abel Avellan: AST SpaceMobile delivered standout progress in the third quarter and we continued seizing the advantages of our leadership position in the space-based direct-to-device industry. We're executing against all of our key initiatives in this rapidly developing market, especially on deepening our commercial ecosystem with customers and partners over the past few months. We continue to build commercial momentum, most recently highlighted by our definitive agreements with Verizon and Saudi Telecom Group. Scott will discuss our business progress in more detail, but I want to highlight the traction we are achieving with our commercial initiatives. We signed a definitive commercial agreement with Verizon in the United States and STC in Saudi Arabia and other key markets across the Middle East and North Africa. These definitive commercial agreements demonstrate the meaningful progress in our commercial ecosystem, which includes agreements with over 50 MNO partners with nearly 3 billion subscribers globally. These agreements are the product of our trusted long-standing relationship with both partners and their confidence in our ability to deliver space-based cellular broadband connectivity to their subscribers. Our definitive commercial agreement with Verizon is an extension of our transformational partnership which has been cultivated over several years, including the $100 million commitment in May. The agreement also provides us with a formal commercial pathway to provide direct-to-device cellular broadband services to their customers starting in 2026. Our opportunity to bridge the digital divide and target 100% coverage of the Continental United States has never been stronger. Together with partner AT&T, in premium 850 megahertz low band spectrum. Our definitive agreement with STC provides us with a long-term partner in a key region with a large geographical area, significant population growth, and a strong need for broadband connectivity. More broadly, our ten-year long-term agreement is a promising look into how AST SpaceMobile can collaboratively shape the future of direct-to-device mobile connectivity and we continue to grow our mobile network operator partner ecosystem. Our direct-to-device satellite technology enables native cellular broadband capabilities directly to modified mobile devices including voice, text, data, video, and full internet access to native cellular apps. As an example of our native cellular capability, we recently completed a Blue Bird satellite-enabled technology milestone with Verizon, completing direct voice and video calls as well as two-way RCS messaging between standard and modified smartphones. This follows additional milestones with Bell Canada in anticipation of a broader commercial rollout. Specifically, we showcased Canada's first successful space-based direct-to-cell voice over LTE call, video call, and other broadband data and video streaming. We believe Canada will represent another attractive market for our direct-to-device cellular broadband service. Space-based cellular broadband connectivity is an industry that we invented. And a recent technology milestone with Verizon and Bell follows several breakthroughs using our direct-to-device technology, including the first-ever 4G and 5G voice calls, voice over LTE calls, live video calls, streaming full Internet access, and tactical non-terrestrial network connectivity for military and defense from space to modified smartphones. Our direct-to-device cellular broadband network will help our partners deliver on one of their highest priorities, which is extending connectivity for their customers. As part of our effort to deliver on those priorities, we are advancing partners and ecosystem network integration and we progress towards service activation in key partner markets. Specifically, we have already begun activation in fixed network locations and expect to continue scale deployment efforts early next year as we progress activation of an intermittent nationwide service by early 2026 and prepare for continued service later in 2026. Taking a step back, AST SpaceMobile has now built the largest and most diverse commercial partner ecosystem in the industry. Our network includes agreements and understanding with over 50 MNO partners with nearly 3 billion subscribers globally. We have access to some of the most important markets covered and exposure to billions of subscribers as well as long-term valuable spectrum. A key strategy during 2025 has been to deepen this partner ecosystem through definitive commercial agreements. Today, we're happy to disclose for the first time that we have secured over $1 billion in total contracted revenue commitment from our commercial partners. This represents an incredible snapshot into how our business is developing and not only to the commitments of our partners have AST SpaceMobile, but also the way they are starting to think about the financial impact of this massive opportunity. Turning to manufacturing and launch. Our manufacturing efforts are on track with our goal and expectations. Bluebird 8 to 19 are in various stages of production and we are on schedule to complete 40 satellites equivalent of microns by early 2026, bringing us to Blue Bird 46. Leveraging our 95% vertically integrated manufacturing, we continue to accelerate and improve our manufacturing process and expect to exit calendar 2025 at a manufacturing cadence of six satellites per month. A detailed cadence of our 2025 and 2026 deployment plan is shown in the accompanying quarterly presentation found on our IR website. These efforts are supported by our steadily expanding manufacturing footprint soon to be over 500,000 square feet of manufacturing and operations space supported by a global workforce of nearly 1,800 people. We had shipped Blue Bird 6 to its launch site in India with launch expected to occur in December. We also expect to ship Blue Bird 7 to Cape Canaveral later this month with launch anticipated shortly thereafter. Additionally, we continue to expect five Orbital launches by 2026 with launches every one to two months on average to reach our goal of 45 to 60 satellites launched by 2026. Additionally, we anticipate our novel ASIC chip will be integrated into our Block 2 Blue Bird satellite during Q1 2026, enabling peak data transmission speed of up to 120 megabits per second, which is a throughput large enough to achieve the native cellular capability the customer is used to having, even when they are in areas connected by terrestrial networks. On our comprehensive global spectrum strategy, since our last earnings call, we closed our deal to acquire global S Band Spectrum Priority Rights and our deal to acquire long-term access to premium lower mid-band L Band Spectrum in the U.S. that has been approved by the court. AST SpaceMobile owned and shared spectrum profiles including access to 1150 megahertz of low band and mid-band tunable MNO spectrum globally, 45 megahertz of AST SpaceMobile license MSS lower mid-band spectrum, 60 megahertz of AST SpaceMobile license, S band spectrum priority rights, and low band spectrum allocated by our MNO partners. Between our own and mobile network operator partner spectrum, we had the right to access over 80 megahertz of paired and high-quality spectrum in the United States alone, more than any other direct-to-device provider today and in the future. We have developed our comprehensive spectrum strategy by balancing costs and a disciplined capital allocation by making smart and cost-effective investments in spectrum, we are able to preserve the value of our spectrum assets while protecting the long-term viability of our business. This robust portfolio is expected to create a durable competitive advantage for AST SpaceMobile. Spectrum enables us to provide more lanes for direct-to-device cellular broadband services at a faster speed and a greater capacity. And lastly, we strengthened our financial footing significantly in the last few months, reaching over $3.2 billion in cash and liquidity as of quarter end. Pro forma for our recent financial transaction and available liquidity under the ATM facility. We continue to fortify our capital base in a responsible way while being in long-term shareholder value. As a result of our funding effort, we are now funded from cash on hand to enable continued service in worldwide key strategic markets. In summary, our manufacturing and launch activities are on plan, our commercial activities are accelerating. We anticipate an active manufacturing and launch cadence for the remainder of 2025 through 2026 as we progress towards our stated goal of 45 to 60 satellites for continued service coverage in key markets like the United States, Europe, Japan, Saudi Arabia, and other key strategic markets like the U.S. Government. We're advancing our commercial activities on the ground, installing gateways, integrating them into partner networks, and completing key technology demonstrations around the world as we scale our constellation. We have built moats around multiple aspects of our business, including our extensive IP portfolio, approximately 3,800 patent and patent-pending claims, satellite technology partner ecosystem, comprehensive global spectrum strategy, and a strong capital base. I could not be more excited for what's to come as we continue to run commercial activity going into 2026. Let me now turn the call over to Scott to provide more detail on our progress and initiatives. Scott Wisniewski: Thank you, Abel. We have been making rapid and continuous progress against our key business initiatives. Specifically, the third quarter was marked by milestone achievements as we develop our commercial ecosystem, delivering on our previously stated goals of definitive commercial agreements, non-dilutive service prepayments, and long-term revenue commitments. Most significantly, we are thrilled to announce today for the first time that we have now secured over $1 billion in aggregate contracted revenue commitments from our commercial partners. These revenue commitments have always been integral to our comprehensive capital-raising strategy, but also provide a powerful validation of our ecosystem partner strategy, our business model, and the massive size of the direct-to-device market we are creating. For some context, AST SpaceMobile has incredible strategic assets, including our breakthrough technology, vertically integrated manufacturing capabilities, long-term spectrum access, and an ecosystem partner strategy that has set the stage for our commercialization strategy, which is really taking shape. Since our last public update, we signed two additional definitive commercial agreements with Verizon and Saudi Telecom Group. These agreements represent years of relationship building and organizational alignment and are the business and legal frameworks through which future services and revenue will flow. These agreements represent a key step in our commercialization journey as we significantly expand our relationship with two additional incredible operators pulled from our ecosystem of over 50 leading global mobile network operator partners who collectively cover nearly 3 billion subscribers. This adds to previous definitive commercial agreements signed with AT&T and Vodafone. Our strategy is to continue to sign similar agreements with more of our top partners on a rolling basis as we prioritize initial global services on the AST SpaceMobile network. As you know, Verizon is a very important partner as we develop the US market and target full geographic coverage of the Continental United States. This agreement, of course, builds on the strategic partnership with Verizon announced last year with a $100 million commitment. Together with AT&T, we plan to deploy services next year with two of the major US mobile network operators. Moving to Saudi Telecom Group, or STC. This is an innovative leading mobile network operator partner in the Gulf region. Who we first signed an MOU with in early 2023. This agreement signed just last month provides a framework for direct-to-device services across The Middle East and North Africa. Importantly, this agreement also included a prepayment of $175 million to be made by the end of 2025 and a significant long-term commercial revenue commitment. Abel Avellan: Lastly, Scott Wisniewski: we announced our intention to further deepen our ties in Europe through the SATCO joint venture with Vodafone. Announcing a constellation of mid-band satellites dedicated for the EU. These satellites will provide a scalable, European satellite mobile broadband service for use by mobile network operators. And for the benefit of all European citizens, businesses, and public sector organizations. This step represents further accretive organic growth opportunities available to the AST SpaceMobile platform facilitated by our first-mover advantages in space-based cellular broadband, our development of the commercial ecosystem as well as our recent strong capital markets to growth capital. SATCO, based in Luxembourg, continues to scale with key leadership and employee hires accelerating our commercialization efforts in Europe, with MOU signed in 21 of 27 member states to date. Linking our strategies back to third-quarter performance, we grew to double-digit revenue with approximately $15 million of recognized revenue, on the back of milestones in our U.S. Government contracts, and delivery and installation of gateway equipment. Versus approximately $2 million in the prior quarter. This represents continued progress with our U.S. Government work, and the acceleration of gateway deliveries and installations with our mobile network operator customers in the U.S. and globally. With this progress and our expectations going into year-end, we continue to expect second-half 2025 revenue in the range of $50 million to $75 million. We also replenished the pipeline of gateway bookings with approximately $14 million in new gateway equipment sales during Q3, and we continue to believe we will book over $10 million of new gateway equipment sales per quarter on average. For a little more detail on our U.S. Government business, our breakthrough technology continues to garner interest from many U.S. defense and government entities. For both dedicated and dual-use applications. Our differentiated technology and growing list of capabilities across communications use cases fit nicely within the framework of the current administration's space and on-orbit plans. This is the most positive backdrop for US government investment in space since the space race of the 1960s. We see no change to this massive trend over the past few months, despite the government shutdown. In fact, we recently received an award as a prime contractor with the US government. Subject to final contract negotiations when the government reopens. In summary, we continue to ramp our US government efforts as we plan for large contracts going forward. Overall, we are encouraged with our commercialization progress and believe our recent achievements across both commercial and government initiatives serve as important signals of our continued positive momentum. I am now happy to pass the call over to Andy to walk through our financial update. Thanks, Scott, and good afternoon, everyone. The progress on commercial objectives, service activation, Andy Johnson: scaled manufacturing and launch of our Block 2 Blue Bird satellite described by Abel and Scott was complemented by the continued strength and flexibility of our financial position during 2025. This year has been characterized by rapid growth at AST SpaceMobile. The transition from an emerging R&D-focused startup to an operating company on the path to optimizing manufacturing and launch cadence has been hard yet invigorating and gratifying work for our now nearly 1,800-person worldwide workforce. The speed at which we are moving across all operational fronts to manufacture and launch a constellation of 45 to 60 Block 2 Bluebird satellites creates a dynamic financial backdrop that I am pleased to share with you in more detail today. We continue to balance a prudent approach to our spending while moving quickly to protect and capitalize on our first-mover advantage of bringing space-based broadband connectivity direct to unmodified smartphones in the rapidly growing direct-to-device market. This intentional focus on investing in our operational growth led to increased operating expenses in Q3 while capital expenditures decreased from the prior quarter as capital commitments ebb and flow as expected from quarter to quarter. Importantly, this quarter marked the start of our revenue ramp with revenue from commercial hardware sales, services, and contract awards from our U.S. Government milestone achievements. Moving to the operating and capital metrics slide, let's review the key operating metrics for 2025. On the first chart for the third quarter, we incurred non-GAAP adjusted operating expenses of $67.7 million versus $51.7 million in the second quarter. As a reminder, non-GAAP adjusted operating expenses exclude certain non-cash operating costs, including depreciation and amortization and stock-based compensation. This quarter-over-quarter increase of $16 million resulted from a $7.6 million increase in adjusted engineering service costs, a $5.5 million increase in the cost of goods sold, and a $3.8 million increase in adjusted general and administrative costs, which were partially offset by an approximately $900,000 reduction in R&D costs. This variance in adjusted OpEx in Q3 was above the quarterly guidance I provided after the second quarter due in part to the approximately $7.1 million of non-transaction-related expenses including our L band, and S band spectrum transactions, the non-recourse senior secured delayed draw term loan facility and now completed pre-regulatory approval bridge loan in addition to the continued work of standing up our joint venture with Vodafone we launched in the second quarter. The Q3 adjusted operating expenses guidance I gave in our last earnings call did not include any cost of goods sold related to gateway sales. If you compare our Q3 operating expenses on that same basis, by excluding the $5.5 million in cost of goods sold, our run rate operating expense would be $55.1 million which is approximately $5 million more than the run rate guidance for adjusted OpEx previously provided. Turning towards the second chart on this slide, our capital expenditures for 2025 were approximately $259 million versus $323 million for 2025. This figure was made up of approximately $231 million of capitalized direct materials, labor for our Block 2 Bluebird satellites, and payments made in connection with multiple launch contracts with the balance relating to facility, and production equipment expenditures. This amount was just below the midpoint of the quarterly guidance of $225 million to $300 million that I provided during our last earnings call. For 2025, we estimate there are adjusted operating expenses excluding the cost of goods sold will come in at a similar range in the mid $60 million as we continue to design, manufacture, launch, and operate our growing satellite constellation as well as pursue the monetization of our L and S band spectrum usage rights. We expect our capital expenditures to increase slightly in 2025 as compared to the third quarter to a range of $275 million to $325 million primarily driven by the timing of launch payments related to our near-term launches as I've previously explained, do vary from quarter to quarter. We continue to estimate that the average capital costs including direct materials and launch costs for our constellation of over 90 Block 2 Bluebird satellites will fall in the range of $21 to $23 million per satellite. This is the same range of per satellite cost that I've provided since our Q1 2025 earnings. Our cost per satellite estimates are subject to fluctuations based on dynamic geopolitical factors, which could impact our costs. Within our go-forward OpEx profile, we continue to believe that the operation of a constellation of 25 Bluebird satellites will allow us to enable non-continuous space mobile service in selected targeted geographical markets and should enable us to potentially generate cash flows from operating activities from both commercial and U.S. Government opportunities to further support the buildup of the remaining constellation. As a reminder, the timing of the changes in our adjusted operating expenses and capital expenditures, as I have just described, could be delayed or may not be realized due to a variety of factors. Our revenue ramp began in earnest during the third quarter and we expect it to continue to grow in Q4. With respect to revenue generation, we believe we can enable continuous space mobile service across key markets such as the United States, Europe, Japan, and other strategic markets with the launch and operation of approximately 45 to 60 Bluebird satellites and additional strategic worldwide markets with the launch and operation of approximately 90 Bluebird satellites. Further, as we continue to launch and deploy our constellation, we will continue to support U.S. Government applications currently ongoing and accelerating as our constellation grows. In the third quarter, we recognized GAAP revenue of $14.7 million primarily driven by gateway hardware sales and various commercial and US government service milestone achievements. Additionally, in Q3, we completed initial technical trials with an MNO partner which revenue will be accounted for as we provide future services. We are reiterating our belief that we have a revenue opportunity for 2025 in the range of $50 to $75 million and expect revenue in Q4 will continue to be driven by gateway equipment sales, achievement of U.S. Government milestones, and recognition of initial commercial service revenue. The achievement of our revenue plan remains subject to several contingencies including: one, the successful launch and deployment of Block 2 Blue Bird satellite related to US government applications, contractual milestone achievements, two, critical gateway equipment sales to our MNO partners in support of their anticipated commercialization efforts of Space Mobile service, and three, service revenues in connection with the activation of our commercial service provided by our existing and planned deployed and operational satellites. There can be no assurances that we will achieve any or all of these objectives and our actual revenue results will vary based on a multitude of factors. Finally, on the final chart on the slide, a pro forma basis inclusive of cash raised in October, via the convertible notes offering with a 2.00% ten-year coupon and effective strike price of $96.3 per share and the currently available liquidity under the at-the-market or ATM Abel Avellan: facility, Andy Johnson: our cash, cash equivalents, and restricted cash as of 09/30/2025 was approximately $3.2 billion. Primary drivers for this cash increase include execution of two convertible notes offerings in July and October for a total of approximately $1.6 billion of net proceeds, approximately $389 million net proceeds raised from the 2025 ATM facilities during Q3 and through October, and the unwinding of the cap call that we purchased earlier this year in connection with the January 2025 convertible note offering for $74.5 million of proceeds to the company. In addition to the work we did raising additional capital via the recent 2% ten-year convertible notes, we also took action since our last earnings call by further reducing our outstanding debt related to the January 2025 convertible notes due in 2032. Among three equitization transactions, including another $50 million equitized in October, we have now converted $410 million of the outstanding $460 million of the 4.25% convertible notes due in 2032 into 17.3 million Class A shares. We now have just $50 million of outstanding notes related to our January 2025 convertible notes due in 2032. I should also mention that subsequent to Q3 in October, we put in place a bridge facility to manage one-time payments related to the Ligado L Band usage rights transaction ahead of planned funding by the SPV delayed draw term loan upon receiving FCC approval. Given the current strength of our balance sheet that now includes cash, cash equivalents, and restricted cash and available liquidity under the ATM facility of over $3.2 billion on a pro forma basis as of September 30, we are fully funded to manufacture and launch a constellation of over 100 satellites to provide worldwide space mobile service. The combination of increasing commercial and government opportunities, rapidly scaling manufacturing and satellite launch operations, and a fortified balance sheet position AST SpaceMobile for an exciting end to 2025. Through 2025, we remain on target to execute against our plans to bring space mobile service to market in the coming periods as we begin to launch our Block 2 Bluebird satellites beginning in December. And with that, this completes the presentation component of our business update call and I'll pass it back to Scott. Thank you. Scott Wisniewski: Thank you, Andy. Before we go to the queue of analyst questions, we'd like to address a few of the questions submitted by our investors. Operator? Can you please start us off with the first question? Operator: Kevin from Vancouver asked, what is the difference in processing capacity between Block 2 FPGA satellites and Block 2 ASICs? Abel Avellan: Hi, Kevin. That's a great question. Listen, we have been improving on a tenfold steps our processing capacity for all the satellites. We started with Scott Wisniewski: 100 Abel Avellan: megahertz on BlueWalker 3. By the way, it is still working and functioning. Then to upgrade it to one gigahertz which is the current so a tenfold increase with the current satellite that is occurring in orbit in operations. And then the one that we're starting to launch immediately here have another increased factor of 10 GHz going up to 10 GHz from 9 GHz. Another 10-time factor. When you combine the processing capacity that we have on the satellites with AI, with AI engine that we're developing to basically manage very efficiently the spectrum allocation of both power and bandwidth. This is a very this is the way that we do the true broadband connectivity from the space. And for that, we develop our own chip we call it the AST-5000. That had a processing capacity of 10 gigahertz with enhanced features to take the most of that 10 gigahertz using our AI engines. Operator: Alvin from Massachusetts asked, as a forward-looking investor, would like to know if the company is weighing the benefits of AI for its spectrum management. Abel Avellan: Hi, Alvin. We are more than weighing the benefits. We're working on it. We are implementing our AI engine for managing and administrating the spectrum. Each satellite had a capacity of 10 gigahertz processing bandwidth, but we feel that effectively we multiply that by several factors by effectively managing the allocation of spectrum and resources dynamically across the network using AI. And that's something that we've been working on for a while. Thus, the system and the satellite have already been designed to have all the hooks and all the management capability to trade maximum benefits of AI on spectrum management. When you think about that in average terrestrial rest of the operators have, you know, per market in countries like the United States, maybe 250 megahertz to deploy spectrum between our own spectrum and provided by the operators. Just in the United States alone, we have access to around 80 megahertz. We will have access to around 80 megahertz of spectrum, 50 to be our own. And then you add our AI engine to basically multiply that spectrum and make it much more efficient, this is a very significant new leg of the telco stack. So, we see a world where you have Wi-Fi, terrestrial, and now with the amount of capacity and spectrum that we can manage with our satellites, and our AI engine to basically effectively use that spectrum, we believe that the usage of satellite becomes more and more relevant as we add satellites and now we add spectrum to the system. Operator: Kevin from Oregon Ave. With the next series of launches starting possibly next month at Cape Canaveral. I have been wondering if or how AST SpaceMobile will structure a future launch event for retail shareholders. Scott Wisniewski: Thanks, Kevin, for the question. As you can tell from the topics on this call, you know, we're very much in a commercial mindset at this point and moving towards service delivery. But nonetheless, the launch campaign is very exciting, and we're very excited as well. We just shipped Bluebird 6. We're getting ready to ship Bluebird 7. And the rest of the Bluebirds are starting to come out of the factory. So we're very excited about the launch campaign. It's going to be a fantastic stretch of launches. And just like with our last launch where we had about a thousand retail investors, we plan to invite as many as we can to the launch and it's in each of the launches. So it's going to be a great campaign. We're super thrilled. And know, five launches, before 2026, and our 45 to 60 satellites during 2026. There's going to be a lot of opportunities for retail to come see, and we hope everybody comes along to participate on this journey with us. Operator: Gruber from Zurich asked, despite confirming fully funded for a full constellation through balance sheet cash and future revenue. Why was additional capital raised? Andy Johnson: I'll take that. This is Andy. Thank you for the question. It's clear that 2025 has been a fantastic opportunity for AST to access the capital markets. It's been a great climate for that. And as you point out, we recently completed our third convertible note deal of the year, the first in January, the second in July, and the third one, just recently last month. This is an incredible transaction for us and strengthened the balance sheet. As a reminder, we were able to raise net proceeds of a little over a billion dollars at a 2% coupon with a ten-year term. A convertible note deal that hasn't been done in many, many years. So we're very happy with that result. The opportunity was there. And importantly, you point out, Rupert, that it is true, and we talked about it in the last earnings call, that we were previously fully funded for a constellation of 45 to 60 satellites. What this additional financing does is it provides us the ability to move faster with more flexibility on the balance sheet to go beyond those initial markets of the U.S., Europe, Japan, and others that we talked about at 45 to 60 and to look worldwide in our coverage at a constellation of now being fully funded at 100 plus satellites. So consistent with our STC announcement, we are looking and working hard on commercial opportunities in other strategic markets across the world and our balance sheet is now fortified to provide a runway to manufacture and launch satellites to support that worldwide constellation base. Thank you. Scott Wisniewski: And with that, I'd like to thank our shareholders for submitting those questions. Operator, let's open the call to analyst questions now. Andy Johnson: Thank you. Operator: We will now be conducting a question and answer session. If you would like to ask a question, please press 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press 2 to remove yourself from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. Our first question comes from the line of Michael Funk with Bank of America. Please proceed with your question. Andy Johnson: Yes. Hi. Good evening. Thank you for the questions tonight. Congratulations on the funding activity during the quarter and the fully funded status. Michael Funk: So wanted to tie that back to the comments on the prepayments and the $1 billion contract to date. So what is your appetite or thoughts on future pre-deals with customers, other commercial financial benefits to signing these now that you are fully funded? And then maybe part B to the question, if I could, any more broad detail around those prepayment contracts, whether they are for capacity, subscribers? Any details on the broad terms would be helpful. Scott Wisniewski: Michael, it's Scott here. So Oh, hey, Scott. How are you doing? Can you hear me okay? Michael Funk: I can. Thank you. Great. So our strategy for Scott Wisniewski: about two years now has been to pursue our very long funnel of agreements. Right? We have 50 plus agreements with operators globally and we have nearly 3 billion subscribers. So the strategy has been to start with our best partners, our most aligned, build out those relationships, build out those agreements, and bring in prepayments and long-term capital long-term revenue commitments. And so that strategy is unchanged. I think, clearly, we have demonstrated access to the capital markets, but signing up these agreements with prepayments and commitments is still very much our strategy, and we'll balance all those factors appropriately. The way to think about them is relatively simple. You know, prepayments are for commercial services in the near term. And the commitments can be near-term, medium-term, long-term. And we balance each of those on each relationship. And each situation as appropriate. But the strategy is really unchanged. We think it's playing out well, and we're going to continue it. Michael Funk: Great. Thank you guys so much. Operator: Thank you. Our next question comes from the line of Mike Crawford with B. Riley Securities. Please proceed with your question. Michael Funk: Thank you. When do you start manufacturing LBM satellites, do you Mike Crawford: intend to put L band in s band on the same satellites? And also, were you away formal FCC approval before starting to make those Abel Avellan: Hey, Mike. How are you? We plan to have a start well, first of all, when we launch the satellite, they have all the 3GPP frequencies either in the low band or the mid-band including all the MSS band, the L and the S that we had acquired. Our plan is to interleave them between the low band and the mid-band. Now we're fully funded for doing that. And our plan is to start launching mid-band satellites by the end of next year. We want that to be in line with the roadmap that we have for in the U.S., Europe, and Japan, and now Saudi Arabia. And we said we want to use this capital to basically deploy more globally. In both operator spectrum and our own spectrum. And be able to combine in the network both in order to facilitate 120 megabits per second basically everywhere. That we deploy both our bands and the operator bands. Mike Crawford: Okay. Thank you, Abel. And just a follow-up to that is your Saudi Telecom agreement you anticipate to launch commercial services in the fourth quarter of 2026. So but I don't think you specified over what spectrum and then the other part to that is if there were if I heard that there's an additional service revenue commitments on top of the 175 million prepaid? Thank you. You. I will ask Scott to explain the Abel Avellan: how the agreement with STC works, but we are always starting with operator spectrum available in every device. So we focus on using a spectrum that is 3GPP that is already on devices. And that's how we're starting with STC and all our partners here in the U.S., in Europe, in Japan, Japan, will be no different in the Middle East region. Led by Saudi Arabia. Scott Wisniewski: And Alrighty. On the commitment, so you know, we put forward this new disclosure Mike, this quarter of over a billion of commitments. And those are not soft commitments. Those are designed to be very valuable to us and very indicative of future expectations and very valuable both in the debt context and also guidance to the equity market. So when we say we have over a billion of revenue commitments, those are very hard commitments. And so we purposely put that out and we're not going to map that with individual customers or individual contracts. But I would point you to the STC press release. We did mention that there was a prepayment and then also a long-term revenue commitment. So we're not going to map that individual contracts going forward, but it is our strategy and we'll provide updates from time to time as appropriate. But very importantly, we're now over a billion in total, which is a good outcome for us in line with our strategy and we think consistent with the customer excitement about us and the customer excitement about this product into their customer hands. Mike Crawford: Great. Thank you very much. Operator: Thank you. Our next question comes from the line of Brian Kraft with Deutsche Bank. Please proceed with your question. Brian Kraft: Hi. I had a few if I could. First, I know that you reiterated your launch timing guidance in terms of the number of launches you're targeting by the end of 1Q and the end of next year. It seems like the launch timeline though has become a bit more compressed with some delays at the front end this summer and into the fall. Just with that in mind, wanted to ask you about your confidence in achieving the five launches by the end of 1Q and the 60 satellites by the end of next year. Is there any more risk now in that timeline from your perspective? And then separately, I wanted to ask you about the EU satellite constellation announcement. Are these satellites incremental to the plan? Or are they part of the existing 60 satellites by the end of next year? And if they are incremental, can you talk about the timing for launching them and what the CapEx and funding implications are? And then lastly, related to that, there's been some talk in the market about AST winning part of the Iris Squared mandate in Europe. Is that something that is happening? Is that real? Or is that just noise in the market? Thanks so much. Abel Avellan: Okay. Brian, will try to decide the question in three parts. Let me start with the launch I want to start with where are we with manufacturing. So by early 2026, Q1 first part of Q2, we will have 40 satellites built. So we are at 19 satellites at the moment. And we are at a pace of six satellites a month starting in December. And that matched very well with the launches that we had already financially committed. We are in the manifest our partners, our launch partners to take them. Starting the one in India mid-December, and then following the launches from the Cape to add up to the five launches by the end of Q1. So we feel very confident in our launch campaign. This is the culmination of our roadmap where we now have the ability to start launching by Q1 also our 10 gigahertz satellites that we would we plan to take the maximum out of them. In the way that we manage that 10 gigahertz processing bandwidth per satellite. So we feel very comfortable there. As it relates to your question in Europe, I mean, we are an American company. That operates globally. And as such, we're that market by market. Our go-to-market is exclusively through the partners and telcos that we operate with. I mean, including European markets. If you see the reception of what we're doing in Europe, jointly with Vodafone, it has been incredible. 21 of the 25 top operators in Europe have basically committed or expected to be part of the network and the constellation. That we are building as part of our constellation, but we certain features for European MNOs. And then that's really that's add up to the 50 plus agreement that we have globally. Reaching us over 3 billion subscribers that we can reach through the agreement that we have globally. Brian Kraft: So, Bill, just to clarify then. So you're saying that the satellites for this constellation are part of the existing plan. They're incremental. Is that correct? Scott Wisniewski: That's correct. Brian Kraft: Okay. And then can you comment at all on the just the talk about Iris Squared and whether ASC might be part of that? It seems like it you could be well positioned for it given this announcement today. Or over the weekend? Yes. We don't want to comment on new Scott Wisniewski: contract awards or anything like that. But given that we are already building a constellation with multiple capabilities, we think we're very well positioned for any country or any customer that's looking to get capability. Right? The incremental ability for us and the marginal economics for us to build out additional capabilities in Orbit is very high given our tech, given our manufacturing, our, you know, existing ecosystem we've created. So I think we're very well positioned for opportunities like that. But, Brian, we're not going to comment on any new contracts right now. Brian Kraft: Certainly understood. Thank you so much. Operator: Thank you. Our next question comes from the line of Colin Canfield with Cantor Fitzgerald. Please proceed with your question. Brian Kraft: Hey, thank you for the question. Appreciate the sensitivity in terms of kind of Ira's commentary, but maybe just talking about kind of your supply chain versus the European supply chain. I think when investors kind of saw the 2030 targets around IRIS and saw the recent headlines in terms of kind of antitrust and mergers? Abel Avellan: Between kind of the Brian Kraft: we'll say, existing supply chain folks for that domain. It's pretty obvious that that's sort of like back and forth is gonna limit their capability. So maybe without mentioning Iris, if you could maybe talk about kind of how you think about your aperture for additional bands and leveraging the economies of scale that you have to do more than just SL and C band. Abel Avellan: Yes. I mean, well, first of all, our platform, it is designed to basically capture over a thousand megahertz of spectrum that can be tuned across all three GPP bands in the low band and the mid-band. So we've actually designed our network where we can take any band in any country as long as 3GPP alone is in the devices, we can tune into it. So our incremental call for that is practically zero because that is all software defined. In thermal, we will manufacture on how who we We are an American company. We manufacture in the United States. We're based in Midland, Texas. And But we operate globally. So we're in the business of partnering with the MNOs, which are local, are in their local jurisdictions. We partner with them. They provide a spectrum Sometimes we bring our own spectrum and complement that. In order to deliver the best experience possible in the future for the end user device that basically no matter what phone they're using they get a 120 megabit per second. From the space. So that's really who we are. That our strategy. We're Americans. We're based here. We announced we had over 1,800 people working on our system. But yes, we obviously were going to look very aggressively all around the globe. To add spectrum that is in local jurisdictions that is managed by local regulators. And partner with local MNOs to offer the best of our service to each of the customers. But I wanted to make it clear where our focus is we're an American company that operates in America. Brian Kraft: Got it. Got it. And as we think about kind of the sizing of the war chest that ASTs Put Together, That Tracks Know, Kind Of Roughly In Terms Of Cash On Hand To Some Of The Legacy Satellite Communications Debt Levels. How Do You Think About Kind Of Going Out And Acquiring Either Future Spectrum Or Even Or Even Something That Might Kind Of Get You Closer To Free Cash Flow Positive Sooner And And How Do You Think About Kind Of That Potential Takeout Versus Investing Organically And Essentially Kind Of Taking Business Away Through Your Own Investment In IP? Yeah. I Mean, At The Core To Power Strategy Is Partnering With The MNOs. The MNOs In United States, had access to around 80 megahertz of spectrum. Abel Avellan: Call it 50 of our own and another 30 in combination of low band and mid-band spectrum available for us. So that's we believe is significant amount, especially when you start applying AI techniques to maximize it and make it more efficient. You take into consideration roughly by market and roughly each market in United States have around 250 megahertz of terrestrial deployed spectrum we had access to around 80 for satellite, you can see that that's a very significant portion. So we feel that we are very equipped to globally compete. So that's why we acquired the 50 megahertz in The United States. We have priority right for another 60 United States. We're partnering with the global MNO ecosystem in Europe for Europe. So our focus is launching satellite building satellites, we are not at a rate that we feel proud and we meet our business needs, which is around six per month. Of the largest satellites ever launched into LEO. We're doing that We're breaking a world record every time that we take a satellite out of the factory. It's the largest ever launch. So we that's our primary focus manufacturing. Second to that is launching them. And third to them is bring this service globally with a combination of local spectrum from the MNO and our own. To basically offer the broadband experience as close as possible to terrestrial by using space. Brian Kraft: Got it. Thank you for the color. Operator: Thank you. Our next question comes from the line of Chris O'Sheault with UBS. Please proceed with your question. Scott Wisniewski: Great. Thank you. I just want to follow-up on the funding progress I recognize that you were saying you're fully funded, believe, 90 satellites in your queue. But will you continue to be opportunistic? And how should we think about additional capital raises as we go 2026? And then thank you for the color on the 4Q OpEx and CapEx. Just given the ramp in Block two production into 2026, should we view 4Q as a good run rate when modeling out next year? Or will the timing of the launch payments cause spending to fluctuate? Thanks. Hey, Chris. I'll take the first part and then Andy can take the second part. So in terms of fun flows, guess, is the best way to think about it. You know, I would look to the model on the commercial side the comments we've made earlier in the call, where we're laser-focused on bringing in commercial repayments, commercial commitments, and ultimately commercial revenue as soon as We've reiterated our expectations on revenue in Q4. And going into 2026, we certainly expect continued growth. So we are very very focused on the commercial side, which is why you saw the big announcements in the last month or so and the and the new disclosure on commitments? For this call. And so that's definitely our focus. We thought the moment was right, to continue to build the cash balance and accelerate the timelines and run towards the growth opportunity. But in terms of our focus and our energy and where we're going to spend our time, it's 100% with customers, and the prepayments and commitment strategy is the right one. Andy Johnson: And on launch. Scott Wisniewski: Yeah. I would just add that, you know, as Scott said, the focus is commercial. I mean, we're always going to be opportunistic and open-minded about good capital markets, of course. But given where we are now, we have the flexibility to perhaps pull launch forward as opportunity allows and we'll be prudent about that, continue to kind of weigh opportunities on the equity side, We also look at attractive things on the debt side. We believe that that market will open up a little bit as we progress. So it's, you know, our priority is the commercial aspects of the business now and we'll continue to give good thought. But I spend my time thinking about how to prudently deploy that capital that we've now raised on the balance sheet. Scott Wisniewski: Great. Thank you. And I can just follow-up. On the 4Q OpEx and CapEx Is that a good run rate? Rate when we start thinking about next year? Or can that be a little volatile? Andy Johnson: It'll be a little volatile. I think on OpEx, it's pretty darn close. Because we've been growing. So dynamically as the years progressed, and we're at a stage now as a bell and I've said it close to 1,800 employees and workforce and so that OpEx feels pretty good, and consistent. On the CapEx side, it's going to ebb and flow. We've been roughly in that, close range the last couple quarters. But as we get closer to launch, and clearly, '26 is closer, to consistent cadence over every thirty, forty-five days, We'll have some spikes and some lulls and when launch payments are due, I think what our plan is on that though is, you know, we've told you how we feel in Q4, and we're halfway through that quarter. So we have good visibility. And then we'll come out after the year and give you an outlook on '26 holistically, both on OpEx and CapEx when we talk again toward February, early March. Scott Wisniewski: Okay, great. Thank you very much. Operator: Thank you. Our next question comes from the line of Louis De Palma with William Blair. Please proceed with your question. Brian Kraft: Bill, Scott, and Andy, Louis De Palma: congrats on the Verizon and Brian Kraft: SDC definitive contracts. Scott Wisniewski: Thanks a lot. Really appreciate it. Louis De Palma: Do you Brian Kraft: do you think that, the number that, Andy cited having Louis De Palma: 25 satellites in orbit is a good estimate for the number to support beta trials in North America in 2026? Scott Wisniewski: Yes. No, that's right Louis, you know each operator thinks about things a little bit differently, but, yeah, we think that that's a fair proxy plus or minus. Louis De Palma: Great. And also, thanks for the color on the $1 billion in contracted revenue commitments. Is that for the three definitive commercial agreements And you able to disclose the average duration of the revenue commitments? I think the FTC deal was for ten years Is it appropriate to assume that the others were of similar duration? Scott Wisniewski: So we're not going to give up, you know, an average duration, but I would say it does vary When you look at the contracts we've signed, they've been as long as five, six, ten years. Right? So each of the contracts is a little different. And the revenue commitment number that we disclosed is primarily with the definitive agreements, but there is some others and other binding agreements as well. So that's how to think about it. It's going to vary, but it's a decent mix of short-term, medium-term, and long-term. And structured well for the company. Louis De Palma: Thanks, Scott. And in the past, you've discussed how your satellite processing tech can like recombine the disparate spectrum holdings from AT&T and Verizon to create a cohesive near nationwide footprint for approximately five megahertz. How is that technology working in trials? Abel Avellan: No. It is working very well. We are planning to be ready for nationwide service early in the year on an intermittent basis. The level of intermittency will reduce drastically as we keep adding satellites. But you are correct. Our satellite has enough flexibility that we were able to take spectrum from AT&T, spectrum from Verizon. Combine it up, and make a nationwide service or near nationwide service. And that will be combined with our 50 megahertz and our technology has the ability to pick and choose the rest of the spectrum combining with satellite spectrum and offer it as a package to the end user. Louis De Palma: Excellent. So your technology can combine the mobile satellite spectrum in addition to the AT&T and Verizon spectrum? Correct. Abel Avellan: Great. Louis De Palma: Abel, and thanks, Scott and Andy. Operator: Thank you. Our next question comes from the line of Greg Pendy with Clear Street. Please proceed with your question. Brian Kraft: Hey, guys. Thanks for taking my question. Just a real quick one. Given the MNO momentum that you Louis De Palma: seen with SDC and Verizon, I guess your 50 MNOs represent roughly 3 billion subs. If I'm not mistaken, market or the TAMs, probably 5,600,000,000 Just can you talk about given your partnership model, about how many large MNO opportunities are left out there in the market? Thanks. Brian Kraft: Sure. Hey Greg. So Scott Wisniewski: So we the interesting thing about how we've approached the market and how we built the company is that we're very favorable to M and O. So we've structured our technology, our network, our go-to-market strategy, even our cap stack. Right? Even the investors. It's very favorable intentionally towards our customer, the operator. So as we've built the ecosystem over the last five to ten years, it's really been around who's most aligned, who can who's most forward-thinking. And as we get closer to service, there's less forward-thinking, and it's more that everybody feels they need this capability. So we have this fascinating dynamic where we're not really constrained by historical relationships or operators that want to work with us. We find pretty much nearly all the operators in the world, if not all, want to work with us and want to learn more and want to participate. So we're going to continue to harvest that base for good contracts for the company for the initial markets that we deploy and then grow that base into the medium tail and the long tail as we grow. So I think in terms of big MNO opportunities, it's we we've chosen not to do business in China or Russia, but and other, you know, smaller restricted countries. But other than that, you know, most operators are good candidates and have some level of dialogue with us and we're going to continue to pursue those opportunities. Brian Kraft: That's very helpful. Thanks. Operator: Thank you. Our next question comes from the line of Chris Quilty with Quilty Space. Please proceed with your question. Brian Kraft: Thanks, guys. Maybe a more nuanced question than Louis about Michael Funk: the $1 billion commitments. Is that all commercial or is that a combination of commercial Brian Kraft: government? Scott Wisniewski: That's all commercial. Michael Funk: Great. And maybe to follow on, I mean, your Brian Kraft: capitalized now for 100 satellites. Again, I'm assuming that Michael Funk: that's all for the commercial side. Obviously, Brian Kraft: Secretary of War, HEGSAS speech Friday indicating that Michael Funk: contractors are gonna have to commit their own capital to getting things done? Or is it fair to assume that most of the programs you're working on will be more in the sort of Star SpaceX Star Brian Kraft: Shield model of Michael Funk: vendor built and operated government owned. Abel Avellan: Yeah. I mean, we have been a big proponent for a long time for the government. For the dual-use concept. Basically, believe that to maintain competitiveness for the United States, the ability to combine commercial usage with government usage is paramount. And so we basically, our phone with the government, is very substantial, It calls for that model. So we don't discard. There will be occasions that we will manufacture certain assets tailor-made to the government, but we're prioritizing the dual-use. In every opportunity that we have. Michael Funk: Great. And final question just on the launch. When will you give us some visibility on specific launch vehicles as we approach the launch dates? Brian Kraft: Obviously, the heavy lift market is extremely constrained and Michael Funk: I watched in the last week both Blue Origin and ULA delay and delay. SpaceX is really the only Brian Kraft: operator out there that's launching on a regular cadence. A tight market at current time. And are you expecting other launch vehicles to become available? Abel Avellan: We're expecting launch vehicles to become available, but our current existing and immediate launch campaign it is using the regular suspects, SpaceX, New Glenn, Israel. And there are new capacities coming up from other operations like NHI that are available to us. But the media launches are around American launches here in The U.S. Michael Funk: Got you. And are you still aiming for the same sort of Brian Kraft: three to four bluebirds per Falcon nine, I think eight per New Glenn And are there things that you're doing or can do in order to increase the number of Michael Funk: satellites per launch vehicle either in mass or dispenser design or other tricks Abel Avellan: Yeah. That no. That is correct. I mean, we basically can go out of the speed in terms of the number of satellites per launch with the New Glenn platform. That we can with the SpaceX platform. But yes, it's at full capacity. Eight in New Glenn, and around three in the Falcon nine. Michael Funk: Very good. Brian Kraft: Well, looking forward to the next one. Operator: Thank you. Our next question comes from the line of Scott Searle with ROTH Capital Partners. Please proceed with your question. Brian Kraft: Hey, good afternoon. Thanks for taking the questions. Maybe just a couple of quick follow-ups and clarifications. Now that you're funded up to 100 satellites, and the initial phase of the constellation of 45 to 60 gets you Scott Searle: commercialization in the key developed markets. Should we expect that you're just going to continue to roll through to build up to the 90 to 100 plus satellites in terms of, I'll call it, Phase two of the constellation as we go into 2027. Or are there some other milestones to be thinking about in terms of customer contracts or otherwise that will be a precursor to that happening? And also as part of that, Brian Kraft: from a spectrum standpoint, you had a very astute buy of the Elgato spectrum in North America. I know you have access in international markets, but there are some other costs that come along with that. Wonder if you could just frame for us kind of how you're conceptually thinking about incremental spectrum costs going forward, particularly in international markets? Thanks. Yeah. I mean, Abel Avellan: the architecture basically designed to basically miss and match our own spectrum with operator spectrum. And tune all across the low band and mid-band spectrum. So basically, the cost of incremental spectrum is marginal. It doesn't cost us more on the platform to activate additional spec. So that will make it very attractive. We can partner with the 700 in certain jurisdictions and in another one we are in the mid-band in combination with their own spectrum. So our incremental call for additional spectrum is marginal to none. As long as 3GPP spectrum, and as long as in devices. And our strategy is always starting Broadband services with spectrum that is available in devices. Scott Searle: Great. And just a clarification in terms of your continued launch cadence, you will, once we get to 60 satellites Are the milestones that you're thinking about or any sort of call you could add in terms of the continued expansion of the global constellation? Thanks. Scott Wisniewski: Sure. So our strategy on satellite deployment hasn't really changed either. Right? You know, our strategy has been as we have capital access and as we see positive NPV growth, we're going to commit to it. And so that was the driver behind how we announced and have thought about the 45 to 60 satellite target. That we put in place a year or so ago. And with further access to capital and frankly, further traction faster and more attractively on the operator side, and potentially the government side as well. We've recalibrated those expectations, and that's part of what's behind, you know, the capital we've raised. So where do we go from here? How do we continue to build those out? We pride ourselves on being very nimble. Remember, we're vertically integrated. We can Abel Avellan: put incremental improvements into our constellation as we go Scott Wisniewski: like, with the ASIC to come in Q1. And so we're going to continue to move that way. We are not making multi-year planning decisions. You know, we're pivoting and moving quickly. And as we see things move and we see opportunities, we're going to pivot quickly. But for us, at this point, we see nothing but opportunity, and we see nothing but growth. So we're racing towards more satellites fast. And so that's how we're thinking about it, Scott, is, you know, there's no real hold-up on us for continuing to build but we're going to evaluate growth opportunities on a rolling basis, and that's what you've seen us do the last couple of years. Scott Searle: Great. Thanks so much. Operator: Thank you. And we have reached the end of the question and answer session. And I'll now turn the call back over to Scott Wisniewski for closing remarks. Scott Wisniewski: Thank you, operator. Want to thank all of our shareholders and the analysts for joining the call. We look forward to providing more updates soon, so please stay tuned. Thank you. Bye. Operator: And ladies and gentlemen, this concludes today's conference, and you may disconnect your lines at this time. We thank you for your participation.
Operator: Thank you for standing by. This is the conference operator. Welcome to the Microvast Holdings, Inc. Third Quarter 2025 Earnings Call. As a reminder, all participants are in listen-only mode and the conference is being recorded. I would now like to turn the conference over to Microvast Holdings, Inc. Investor Relations. Please go ahead. Rodney Worthen: Thank you, operator. Thank you everyone for joining our update today. This is Rodney Worthen, VP of Corporate Strategy and Interim CFO. With me on today's call is Mr. Yang Wu, Founder, Chairman, and CEO. Mr. Wu will start off with a high-level overview of the third quarter results before providing some operational and business updates. I will then discuss our financials in more detail before handing it back to Mr. Wu to wrap up with our outlook for the remainder of the year and closing remarks. Ahead of this call, Microvast Holdings, Inc. issued its third quarter earnings press release which can be found on the Investor Relations section of our website, ir.microvast.com. We have also posted a slide presentation to accompany management's prepared remarks today. As a reminder, please note that this call may include forward-looking statements. These statements are based on current expectations and assumptions and should not be relied upon as representative of views on subsequent dates. We undertake no obligation to revise or release the results of any revision to these forward-looking statements due to new information or future events. Actual results may differ materially from expectations due to a variety of risks and uncertainties. For more information on material risks and other important factors that could affect our financial results, please refer to our filings with the SEC. We may also discuss non-GAAP financial measures during this call. These measures should be considered in addition to and not as a substitute for or in isolation from GAAP results. These non-GAAP measures have been reconciled to their most comparable GAAP metrics in the tables included at the end of our press release and slide presentation. After the conclusion of this call, a webcast replay will be available on the Investor Relations section of Microvast Holdings, Inc.'s website. And now I will turn the call over to Mr. Wu to kick things off. Yang Wu: Hello, everyone, and welcome. Thank you for joining us today. As always, I want to start by reminding you of our core mission. Founded in Texas in 2006, Microvast Holdings, Inc. has grown into a global leader in advanced battery technology. With over 810 patents, granted or pending, and our electrified solutions successfully deployed worldwide, we are proud to be a driving force in global electrification, building a more sustainable future one battery at a time. Innovation is core to our operations and always on display at Microvast Holdings, Inc. Our commitment to innovation has delivered some major milestones. At Microvast Holdings, Inc., we will always strive to push the limits of what is possible. Please turn to slide four, and I will give a brief overview of the quarter. We are thrilled to announce a record third quarter revenue of $123.3 million, which is an excellent 21.6% year-over-year increase. This increase was simultaneous with improving our gross profit margin to 37.6%, a 4.4 percentage point improvement from the same period last year. This demonstrates that we are not only able to grow but also that we can achieve such growth efficiently. Our focus on efficiency and profitability is continuing to pay off. I am pleased to report that we achieved an operating profit in the third quarter of $13 million with an adjusted net profit of $11.9 million and adjusted EBITDA of $21.9 million. This quarter is not just another milestone for Microvast Holdings, Inc.; it's a testament to both the long-term commitment required in this industry and the strength of our business model. This strength is not a one-time event; it's now a trend. Our consecutive revenue growth over the last several years indicates an increase in market demand for our high-performance products. This growth, along with improvement in our gross profit, validates our ability to successfully commercialize our advanced technology and operate efficiently at scale. The rapid growth has given us invaluable experience, enabling us to successfully deploy commercialized products across our portfolio and to refine our manufacturing processes. Moving forward, we intend to maintain our strategy by focusing on three core pillars: innovation, disciplined execution of our strategic growth objectives, and expanding our production capacity to meet growing customer demand. We believe that we are well-positioned for the future. Let's move to slide five, which illustrates the core of our business and strategy. At its core, Microvast Holdings, Inc. is a vertically integrated battery technology powerhouse. Our growth isn't accidental; it's driven by relentless commitment to innovation and is our primary engine for expansion. We are actively diversifying our revenue streams with a broader portfolio of products and services, all purpose-built to accelerate electrification. A cornerstone of our strategy is a determined push to capture greater market share. We are making focused investments to rapidly commercialize both our advanced products available today and our highly anticipated technologies of the future. We are staying disciplined by maintaining product innovation and strategically expanding our global market presence. This clear path is how we intend to grow, optimize our operations, and ultimately achieve our goal of sustained profitability. Let's turn to slide six for an operational update on our Huzhou phase 3.2 line expansion. I am pleased to report that we are in the final stages of installing and commissioning the production equipment, with completion targeted for year-end. This expansion is critically important, as the phase 3.2 is anticipated to add up to two gigawatt-hours of annual production capacity. The strategic timing of this expansion is intended to directly address existing market demand and position us to capture upcoming opportunities. We anticipate this new line's initial production to begin in Q1 2026. This expansion is a major step forward in securing our foundation for continued growth in 2026 and beyond. Moving to slide seven, let's look at the progress in our all-solid-state battery development. Building directly on our Q2 update, our proprietary five-layer cell continues to demonstrate exceptional stability to date. It has now successfully completed over 404 charge-discharge cycles at 1C, maintaining high efficiency and a steady capacity retention throughout the cycling window, as illustrated in figure one on the left. Our high-voltage 12-layer prototype also continues its cycle testing. The voltage capacity profile is the same in figure two on the right and validates its current testing performance. Prototypes indicate that our approach delivers high structural integrity, with minimal losses during charge transfer, a crucial factor for both battery longevity and peak performance. As detailed on slide eight, we are integrating our proprietary separator technology into our all-solid-state battery. This has multiple benefits, such as improved electrode interfacial contact and improved flexibility, which allows for more consistent manufacturing in comparison to more fragile ceramic separators. This technology builds on the polyaramide backbone that maintains structural integrity even under elevated temperatures. The membrane's robust yet flexible architecture enables high-pressure stacking during assembly, improving both mechanical resilience and resistance to lithium dendrite penetration. Equally important are its engineered ionic pathways, which create efficient and continuous channels for lithium-ion transport. In short, this breakthrough material integrates safety, mechanical strength, and ionic efficiency into a single scalable platform, positioning Microvast Holdings, Inc. as a leader in next-generation all-solid-state battery innovation. This is an example of Microvast Holdings, Inc.'s advantage. Now if you will join me on slide nine, I'd like to give an exciting new business development update. We have established a partnership with Skoda Group, a leading European rail and public transport manufacturer. The partnership validates Microvast Holdings, Inc.'s technology in extreme duty use cases and high-safety rail applications. We anticipate the first prototype by 2026. Now I will hand the call over to Rodney Worthen to discuss our financials for the third quarter. Rodney Worthen: Thank you, Mr. Wu. Please join me on slide 11. We are happy to report a record-breaking third quarter with revenue growing at 21.6% year-over-year, to $123.3 million, up from $101.4 million last year. Our year-to-date revenue had a top-line growth of 24.3%, reaching $331 million compared to $266 million in the prior year period. This growth was driven primarily by an increase of approximately 360 megawatt-hours in sales volume year-to-date. Crucially, this growth was at a gross profit for the third quarter of $46.4 million, an impressive 38% improvement over the prior year period. This was achieved through operational execution, higher-margin end markets, increased utilization, and cost controls. As a result, our gross profit margin improved by 4.4 percentage points to 37.6%, up from 33.2% in Q3 2024. Our year-to-date gross profit was $121.2 million, which is a 55% increase compared to the prior year period, and gross margin was 36.6%, a 7.3 percentage point improvement year-over-year. Operating expenses increased to $33.5 million for the quarter, compared to $27.5 million in Q3 2024, a 22% increase year-over-year. The G&A increase was primarily due to $3.7 million of exchange loss attributed to the unfavorable euro RMB rate and $5.6 million in litigation expense, partially offset by $2.9 million of decreased non-cash share-based compensation expenses or SBC. The decrease in R&D expenses was primarily due to $1.5 million of decreased SBC expense and $1 million associated with lower employee headcount. The increase in sales-related expenses for the quarter was primarily due to $1.1 million of service fees from business development, partially offset by a $0.5 million decrease in SBC expense. OpEx decreased for the year-to-date period to $75 million, down from $195 million last year. For the nine-month period, the decrease in G&A expenses was primarily due to $17.7 million of decreased SBC expense and $7.7 million of decreased exchange loss from favorable fluctuation in the euro RMB rate. The decrease in R&D expenses was primarily due to $5.4 million of decreased expense and a $1.9 million reduction associated with a lower employee headcount. Selling and marketing expenses were largely flat for the period. There was also a substantial reduction in impairment loss compared to the prior year period, down to $1.4 million from $88 million. We reported a GAAP net loss of $1.5 million in the quarter. After adjusting for non-cash expenses such as SBC of $0.7 million and fair value changes to our warrant liability and convertible loan of $12.6 million, we achieved an adjusted net profit of $11.9 million. For the nine-month period, GAAP net loss was $45.8 million compared to a net loss of $113.1 million in the prior year period. Non-GAAP adjusted net profit year-to-date was $47.5 million, a major improvement from an adjusted net loss of $84.1 million last year. We are also displaying improved operational results as we report yet another consecutive quarter of positive adjusted EBITDA, reaching $21.9 million. Year-to-date, our positive adjusted EBITDA reached $76.3 million, a substantial improvement compared to a negative adjusted EBITDA of $53.5 million in the prior year period. The financial reconciliations of these non-GAAP metrics can be found in the tables at the end of our earnings press release and the slide presentation. On Slide 12, we show the geographic breakdown of our revenue mix compared to the prior year period. Our EMEA business accounted for 64% of quarterly revenue. This is up year-over-year from 59%. Revenue growth over the nine-month period saw an improvement of 31%, increasing to $176.8 million in the region. The US revenue share increased from 3% to 5% for the quarter when compared to the prior year period. We continue to focus on making inroads with domestic customers, and year-to-date revenue is $17.8 million in the region. Our APAC region also grew year-over-year, up 9% year-to-date, to $136.5 million, while we also successfully target higher-margin opportunities. Please turn to slide 13, and we will review our cash flow for the year-to-date. We are pleased to have generated positive operating cash flow of $59.5 million for the nine-month period. Net loss was primarily offset by a $17.4 million decrease in inventory and non-cash adjustments of $24.7 million in D&A, and $91 million from changes in fair value of warrant liability and convertible loans. This was partially decreased by a $41.2 million increase in net receivables and a $12.3 million decrease in net liabilities and accrued expenses. From investing activities, we had a net outflow of $15.5 million, primarily related to CapEx at our Huzhou facility, including our phase 3.2 production line extension. Financing cash flow resulted in a net outflow of $9.5 million. Overall, after accounting for a negative foreign exchange adjustment of $1.5 million, we had an increase in cash of $33 million. This resulted in total cash, cash equivalents, and restricted cash of $142.6 million at quarter's end. Now I will hand it back over to Mr. Wu to go over our outlook for the final quarter of the year and closing remarks. Yang Wu: Thank you, Rodney. Please turn to Slide 15, which provides a summary of our outlook for the rest of the year. We are pleased to reaffirm our initial annual revenue guidance, which positions our projected revenue in the range of $450 to $475 million. Due to our focus on stronger performing segments and successful margin expansion efforts, we are also raising our full-year gross margin target from 32% to a new range of 32% to 35%. For APAC, our focus remains on the completion of the phase 3.2 expansion at our Huzhou facility. We anticipate completing the production line by year-end and beginning initial production operations in Q1 2026. As previously stated, this critical addition of up to two gigawatt-hours annually is intended to address the robust customer demand for our cutting-edge solutions and position us to capture upcoming opportunities. We expect strong sales growth for the year, and our development teams are making significant progress on the next wave of advanced products. Our EMEA business is expected to maintain momentum. We are constantly pursuing new strategic partnerships, such as the Skoda partnership discussed earlier, to support both current and upcoming product lines in the region. In The Americas, we anticipate further revenue growth year-over-year as we continue to proactively pursue customer acquisitions while simultaneously assessing our financing needs to support additional strategic objectives. Our sights remain on achieving three primary financial objectives for the final quarter: securing sustained positive cash flow, maintaining gross margins, and expanding our market reach powered by our R&D innovation engine. We remain confident that we can continue to bolster our business by capitalizing on global electrification trends, with the ultimate goal to deliver long-term value to our shareholders. Thank you very much, everyone, for joining us today to review another historical quarter for Microvast Holdings, Inc. We look forward to updating you again with our full-year 2025 results and additional news in the coming months. This concludes today's conference call. Thank you for participating, and you may now disconnect.
Operator: Good afternoon, and welcome to the CVD Equipment Corporation Third Quarter 2025 Earnings Conference Call. As a reminder, today's call is being recorded. We will begin with prepared remarks followed by a question and answer session. Presenting on today's call are Emmanuel N. Lakios, President and Chief Executive Officer, and Richard A. Catalano, Executive Vice President and Chief Financial Officer. Our earnings press release and call replay information are available in the Relations section of our website at www.cvdequipment.com. Before we begin, please note that comments made during this call may include forward-looking statements, including those related to our future financial performance, market growth, demand for our products, and overall business outlook. These statements are based on current expectations and are subject to risks and uncertainties that could cause actual results to differ materially. For a detailed discussion of these risks, please refer to our filings with the SEC, including the risk factors section of our Form 10-K for the year ended 12/31/2024. We assume no obligation to update any forward-looking statements except as required by law. With that, I'll now turn the call over to Emmanuel Lakios, President and CEO. Emmanuel N. Lakios: Thank you, Paul. And good afternoon, everyone. We appreciate you joining us today to review our third quarter 2025 financial results and provide an update on our business and strategic initiatives. After our prepared remarks, we look forward to taking your questions. For the third quarter 2025, revenue was $7.4 million, a 9.6% decrease from the prior year quarter, but a 44.9% increase compared to the second quarter of this year. Revenue to date was $20.8 million, which was 7.1% higher than the same period in 2024. Orders for the third quarter totaled $2.2 million, primarily driven by continued demand in our SDC segment for gas delivery systems. For the nine months of 2025, total orders were $9.5 million compared to $21 million in the same period last year. As of 09/30/2025, backlog stood at $8 million compared to $13.2 million at 06/30/2025, as we converted backlog to revenue in the quarter. Our third quarter and year-to-date bookings were influenced by several external factors, including uncertainties related to tariffs, reduced US government funding for university research, US government shutdowns, and timing in the product adoption within our growth markets. In response to the ongoing fluctuations in our order rate and the recent decline in bookings within the CVD Equipment division, our board of directors has approved a comprehensive transformation strategy aimed at significantly reducing fixed operating costs and creating a more agile organization. Key elements of this plan include transitioning the CVD Equipment business from vertically integrated fabrication to outsourced fabrication of certain components, enabling us to reduce our fixed costs and improve scalability. A workforce reduction in the CVD Equipment division, to be completed by year-end 2025, is expected to reduce the annual operating cost by approximately $2 million beginning in 2026. To note, the SDC division will not be impacted by these actions. Revising our sales approach by leveraging distributors and external representatives to complement our internal sales force and broadening our market reach. Exploring strategic alternatives for certain businesses and product lines, which could include asset sales and divestitures. Together, these initiatives will allow us to focus on our core strengths, which are engineering design, assembly, test installation, and customer service, all while driving greater efficiency and long-term profitability. We remain encouraged by the opportunities ahead in our target markets, aerospace and defense, industrial applications, which include silicon carbide and graphite, silicon carbide high power electronics, and electric vehicle battery materials. As an update on opportunities in the silicon carbide bull market, in October 2025, we announced a new order from Stony Brook University for two PVT-150 physical vapor transport systems to support their center established by Onsemi Silicon Carbide Crystal Growth Center. We are proud to play a role in advancing semiconductor materials research and supporting critical technologies in artificial intelligence and electric vehicles. We are continuing the development of our 200-millimeter silicon carbide crystal growth process using our PBT-200 system, targeted at the high power electronics market. The same platform is being evaluated for other wide bandgap materials such as aluminum nitride. Our reactive design and control architecture deliver the precision and repeatability needed for next-generation material production. CVD remains well-positioned across multiple growth markets. We believe that our transformation initiatives will strengthen our foundation and will better support our goal of achieving profitability and positive cash flow. With that, I'll now turn over the call to our CFO, Richard Catalano, to review our financial results in more detail. Richard A. Catalano: Thank you, Manny, and good afternoon, everyone. Third quarter 2025 revenue was $7.4 million compared to $8.2 million in 2024. The quarter-over-quarter decrease was primarily due to the absence of revenue from our MesoScribe segment, which ceased operation in 2024. Revenue from our CVD Equipment segment was driven by three key customers, representing approximately 55% of total revenue for the quarter. A contract modification during the third quarter allowed us to recognize revenue in Q3, contributing approximately $1 million. This was a change only in the timing of the revenue record. Our SDC segment reported $1.7 million in revenue, down slightly from $1.9 million in Q3 2024 due to fewer contracts in progress, but they continue to have a strong backlog. The company gross profit for the quarter was $2.4 million with a gross margin of 32.7%, compared to $1.8 million or 21.5% in the prior year quarter. This improvement was primarily due to a more profitable contract mix in our CVD Equipment segment, offset by the loss of MesoScribe's contribution, and we also had a $100,000 charge for a one-time certification cost within the SDC segment. Operating income was $308,000 as compared to operating income of $77,000 in Q3 2024. After other income, primarily interest, net income was $384,000 or 6¢ per diluted share, versus $203,000 or 3¢ per diluted share in the prior year quarter. As for our balance sheet, at 09/30/2025, we held $8.4 million in cash and cash equivalents as compared to $12.6 million at 12/31/2024. Net cash used in operating activities for the first nine months of 2025 was $4.1 million, largely due to changes in working capital as well as contract timing. Our working capital improved to $14.6 million as compared to $13.8 million at year-end 2024. As part of our transformation plan discussed earlier, we do expect to incur approximately $100,000 in severance-related charges in 2025. In addition, we may recognize non-cash impairment charges in future periods if certain long-lived assets are sold below their book value. Looking ahead, our return to consistent profitability depends on new equipment orders, cost management, successful implementation of our transformation plan, and continued control over capital expenditures. Although order timing can cause quarterly fluctuations, we believe our current cash position and projected operating cash flows will be sufficient to meet working capital and capital expenditure needs for at least the next twelve months. With that, I'll turn the call back to Manny. Emmanuel N. Lakios: Thank you, Rich. Our focus remains clear: serving our customers, supporting our employees, creating value for our shareholders, and achieving a return to sustained profitability. Our goal continues to be enabling tomorrow's technology today. Operator, we're now ready to open the line for questions. Operator: Thank you. We'll now be conducting a question and answer session. One moment please while we poll for questions. Thank you. Our first question is from Paul Chaeka with MSE Resources. Good afternoon, everybody. Paul Chaeka: I'm a long-time buy and hold fan of CVV. Also, I'm a materials engineer that's done a lot of work mainly in CVD coatings for engine high-temperature engines and semiconductor applications. So I've got a lot of hope for the company in those markets, especially. My question's about applications for composite applications for combustion turbines for power generations, meaning stationary turbine engines. For example, GE Vernova is showing a growing backlog for stationary combustion engines. I was wondering if you can speak to orders or applications of the CVV systems for stationary combustion engines. Also, second question about just a little bit of insight on the general locations of the materials outsourcing you'll be doing? Is it quite regional? Is it across the country or abroad? Thank you. Emmanuel N. Lakios: Paul, thank you for being a loyal shareholder. Let me address your two questions. First, the question on the ground-based gas turbine engines. As you're likely aware, many of the listeners are as well, the primary use of ceramic matrix composites is in the hot section of the engine. There are several engines out there that already are utilizing silicon carbide-based composite materials for shrouds and for nozzles. Those, to my knowledge, have not yet been brought into the ground station gas turbine engines, and they don't burn in the hot section turbine. Where we anticipate use in the future for silicon carbide-based composite materials CMCs in the energy field would be more so in replacement of some specific materials for nuclear reactors and for pellet encapsulation. Those are future emerging opportunities. Paul Chaeka: Oh, excellent. Had not thought of those. Thank you. Emmanuel N. Lakios: On your second question, which is more on the supplier base, CVD has historically had a mix of both external and in-house components. We've had a focus on our sheet metal shop and also on the smaller machine components, both turned and milled machined elements. The larger chambers have typically been outsourced. So we've always had a mix of suppliers. Over the last several years, we have combed through those suppliers and we've evaluated our cost structure closely over the last twelve months to a little over a year. And we've determined that the vertical integrated model has really become less efficient, given both our order volumes and also from the sheer fact that when you're vertically integrated, it is very difficult to be best of breed in sheet metal cutting, bending, welding, painting, and those are things that our merchant suppliers do. I would say, as well and in some cases better than we do and are more cost-effective. So the outsourcing was inevitable, and this is the right time to implement that strategy. Now to answer your question, is it regional? It's in the US. Our focus is to outsource our machining to the US. We will extend to North America, specifically Canada in some cases. Paul Chaeka: Okay. That's really great detail. Thank you. Just aside on that, the vertical integration, I think, was hugely valuable to the company fifteen, twenty years ago. I think it allowed you to really refine the quality and the control that you had over your systems. But I totally understand the change in the dynamics of the economies and economies of scale. I assume that your quartz, will that remain interior? Emmanuel N. Lakios: It will be a mix, but we will retain our IP and Black Card in the area of quartz fabrication. We'll also retain certain elements of capability in our machine shop, but the lion's share of the components will be outsourced. Paul Chaeka: I see. Alright. Thank you. Well done, everybody. Emmanuel N. Lakios: Thank you. Operator: There are no further questions at this time. I'd like to hand the floor back over to Emmanuel Lakios for any closing comments. Emmanuel N. Lakios: Thank you, operator, and thanks to everyone for joining us today. We appreciate your continued support and confidence in CVD Equipment Corporation. If you have any additional questions, please feel free to reach out to me directly. This concludes today's call. Thank you. Operator: We thank you again for your participation. You may now disconnect your lines.
Operator: To all locations on hold, we are still checking in participants for today's program. Thank you for your patience and please continue to stand by. Please standby, your program is about to begin. If you need assistance on today's program, welcome to the Health Catalyst Third Quarter 2025 Earnings Conference Call. At this time, all participants have been placed on a listen-only mode. The floor will be open for your questions following the presentation. To get to as many questions as time permits, we kindly ask that you limit yourself to one question. If you have any follow-up, we ask that you pick up your handset for best sound quality. Lastly, if you should require operator assistance, I would now like to turn the call over to Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. Matt Hopper: Good afternoon, and welcome to Health Catalyst's earnings 2025, which ended on 09/30/2025. My name is Matt Hopper, Senior Vice President of Finance and Head of Investor Relations. With me today are Dan Burton, our Chief Executive Officer, Ben Albert, our President and Chief Operating Officer, and Jason Alliger, our Chief Financial Officer. A complete disclosure of our results can be found in our press release issued today as well as in our related Form 8-Ks furnished to the SEC, both of which are available on the Investor Relations section of our website at ir.healthcatalyst.com. As a reminder, today's call is being recorded, and a replay will be available following the conclusion of the call. During today's call, we will make forward-looking statements pursuant to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995 regarding our future growth and our financial outlook for Q4 and fiscal year 2025. Growth trends, targets, and expectations beyond 2025, our public market value, our CEO transition, our ability to attract new clients and retain and expand our relationships with existing clients, our growth strategies, the impact of macroeconomic challenges including the impact of inflation, tariff and the interest rate environment, changes to government funding and payment programs that have and could further negatively impact our end market and the business of our clients, bookings, our pipeline conversion rates, the demand for deployment and development of our Ignite data and analytics platform and our applications, timing and status of Ignite migrations, acquisition, integration and strategy, the impact of restructuring and the general anticipated performance of our business, including the ability to improve profitability. These forward-looking statements are based on management's current views and expectations as of today and should not be relied upon as representing our views as of any subsequent date. We disclaim any obligation to update any forward-looking statements or outlook. Actual results may materially differ. Please refer to the risk factors in our Form 10-Ks for the full year 2024 filed with the SEC on 02/26/2025, and our Form 10-Q for the third quarter 2025 that will be filed with the SEC. We will also refer to certain non-GAAP financial measures to provide additional information to investors. Non-GAAP financial information is presented for supplemental information purposes only, has limitations as an analytical tool, and should not be considered in isolation or as a substitute for financial information presented in accordance with GAAP. A reconciliation of non-GAAP financial measures for the 2025 and 2024 to their most comparable GAAP measures is provided in our press release. With that, I will turn the call over to Dan Burton. Dan? Dan Burton: Thank you, Matt. And thank you to everyone who has joined us this afternoon. We are pleased to share our Q3 2025 financial results, including total revenue of $76.3 million and adjusted EBITDA of $12 million, exceeding our guidance on each metric. Additionally, we are encouraged with the results of our Technology segment, which recorded revenue of $52.1 million, representing 7% year-over-year growth. Adjusted gross margin was 53%, an increase of approximately 50 basis points year-over-year. I will now share some perspectives on our anticipated 2025 bookings levels, which align with what we shared a few months ago. We continue to expect approximately 30 net new platform client additions for 2025. As a reminder, Q4 is often a very active quarter in terms of bookings and contract renewals. We also continue to expect our average booking size for net new platform clients in 2025 to be towards the lower end of the $300,000 to $700,000 range previously provided. Also, as we communicated last quarter, we reaffirm our expectation that dollar-based retention for 2025 will be in the low 90s. We are also reaffirming our previous full-year guidance for revenue of $310 million and for adjusted EBITDA of $41 million. The market continues to be dynamic, but by focusing on solutions with proven ROI and by consistently meeting client needs, we have maintained a strong pipeline. We remain focused and disciplined in our operations and are committed to delivering meaningful results. Next, we'll hear an operational update from Ben Albert, our recently appointed President and Chief Operating Officer. Ben joined Health Catalyst through the acquisition of Upfront Healthcare Services earlier this year. With over 25 years of experience in building and leading healthcare organizations, Ben has consistently delivered compelling value propositions, successfully activating patients while enhancing clinical, financial, and operational outcomes. Since September 10, Ben has provided crucial day-to-day leadership at Health Catalyst, overseeing operations and product engineering, technology delivery and support, growth operations, finance, and corporate strategy. I have partnered closely with Ben over these last few months and have found his experience, insights, operational focus, commitment, and mission-driven leadership to be effective in energizing. I look forward to our continued work together in support of Health Catalyst's mission and strategy. Ben? Ben Albert: Thank you, Dan. I appreciate the opportunity to share updates on several areas that are central to our strategy and operational progress. Over the past quarter, we have continued to strengthen our leadership team to support our long-term vision and improve performance. Recent appointments include Robbie Hughes as Chief Product Officer, Chris Tyne as Chief Engineering Officer, Brian Barry as Chief Client Services Officer, and Shonak Lahiri as SVP of Global Solutions. These changes reflect our commitment to building an agile, high-performing team that is well-positioned to execute on our 2026 strategy and deliver value to our clients and shareholders. Our solutions are delivering measurable results where health systems need the most: cost control and operational efficiency. With ongoing financial and workforce pressures, our solutions help organizations streamline operations, reduce spend, and sustain performance. Temple University Health System used power costing and POP analyzer to achieve $7.5 million in savings through better charge capture, faster collections, and lower medications costs. Entegris Health leveraged our power labor offering to save $30 million in labor by reducing contingent staff, improving cost per discharge, all while maintaining high standards of care. These results highlight how we're directly addressing the market's most urgent needs and delivering real, quantifiable value. We've tailored our solutions to align with today's environment, positioning us as a strong partner for clients navigating this period of change. We're making progress on our Ignite migration initiatives, remaining on track for approximately two-thirds of our DOS clients to migrate by the end of 2025. As Dan mentioned, we're experiencing dollar-based retention pressure in 2025 due to the ongoing migration efforts. We expect to go into 2026 with similar pressure. While we anticipate making meaningful progress in our Ignite migrations by the end of 2026, we have adjusted our timeline and approach to be more client-centric, recognizing that some organizations prefer to remain on DOS for the near and medium term. We are committed to providing more flexibility and meeting clients where they are, and we expect this approach will improve client experience and dollar-based retention. Dan? Dan Burton: Thank you for that update, Ben. I want to take a moment to reflect on our recent experience at the Health Catalyst Analytics Summit, which continues to be a valuable opportunity for us to engage with hundreds of attendees, including our clients, partners, investors, analysts, and thought leaders. The energy and insights from HAS reinforced our commitment to client-focused innovation and measurable improvement as we move forward. Turning to our outlook for 2026, we are currently in the early stages of our annual planning process, and we look forward to sharing more specific details and updated expectations during our next earnings call. Based on current trends, we anticipate revenue performance to be a few points lower in 2026 relative to 2025, driven by factors in 2025 such as dollar-based retention rate in the low 90s, a lower net new client count, Ignite migration headwinds, and exiting a restructuring of a few less profitable TEMS relationships. At the same time, we expect to see improvement in adjusted EBITDA, reflecting our ongoing efforts to strategically focus the organization, manage costs, make targeted investments, and optimize our migrations. We will be balancing growth, revenue mix, and free cash flow progression. We are taking a measured approach to setting expectations, and we will continue to provide updates as we navigate the evolving market landscape. Next, as we continue to focus on disciplined capital allocation, we reiterate our commitment to realizing a strong return on our acquisition investments. We feel confident in our current differentiated applications portfolio, and we do not anticipate pursuing additional acquisitions in the near to medium term. Our priority is driving growth, profitability, and shareholder return from our existing capabilities and recently acquired assets. With that, I'll turn the call over to Jason to provide a detailed review of financial results and guidance. Jason? Jason Alliger: Thank you, Dan. For 2025, we generated $76.3 million in total revenue. This total represents an outperformance relative to our quarterly guidance and represents flat results year over year. Technology revenue for 2025 was $52.1 million, representing a 7% increase year over year. This year-over-year growth was primarily driven by recurring revenue from new and acquired clients. Professional services revenue for Q3 2025 was $24.3 million, a 12% decline compared to Q3 2024, primarily driven by the exit of our less profitable pilot ambulatory operations, PEMS contracts. I'd also note that Q3 2025 Technology and Professional Services revenue did include nonrecurring items that are not anticipated in Q4 2025. For 2025, total adjusted gross margin was 53%, representing an increase of approximately 50 basis points year over year and up approximately 30 basis points compared to Q2 2025. In the Technology segment, our Q3 2025 adjusted Technology gross margin was 68%, an increase of approximately 330 basis points compared to the same period last year and generally in line with previously shared expectations of one to two points of margin improvement quarter over quarter. In the Professional Services segment, our Q3 2025 adjusted Professional gross margin was 19%, representing an increase of approximately 210 basis points year over year and an increase of approximately 70 basis points relative to Q2 2025. This quarterly performance was ahead of previously shared expectations and was mainly driven by a reduction in force that occurred in mid-Q3 2025 as well as some project-based revenue that was recognized in Q3 2025. In Q3 2025, adjusted total operating expenses were $28.1 million. As a percentage of revenue, adjusted total operating expenses were 37% of revenue, which compares favorably to 38% in Q3 2024. Adjusted EBITDA for Q3 2025 was $12 million, exceeding our Q3 guidance of approximately $10.5 million and up 64% compared to Q3 2024. Our adjusted net income per share in Q3 2025 was $0.06. The weighted average number of shares used in calculating adjusted basic net income per share in Q3 was approximately 70.4 million shares. Turning to the balance sheet, we ended Q3 2025 with $92 million of cash, cash equivalents, and short-term investments, compared to $392 million as of year-end 2024. In terms of liabilities, the face value of our term loan is $161 million. As we shared on our May call, on 04/14/2025, we paid off the $230 million convertible notes in full at maturity with cash from the balance sheet. As it relates to our financial guidance, we would highlight that the following outlook is based on current market conditions and expectations. What we know today. For 2025, we expect total revenue of approximately $73.5 million and adjusted EBITDA of approximately $13.4 million. For the full year 2025, we continue to expect total revenue of approximately $310 million, representing 1% year-over-year growth, and adjusted EBITDA of approximately $41 million, representing 57% year-over-year growth. For Q4 2025, technology revenue is projected to slightly decline compared to Q3 2025, driven primarily due to migration-related down-sell and churn, partially offset by application-related growth. Q4 2025 professional services revenue is expected to be down compared to Q3 2025 due to project-based revenue in Q3 and reduced revenue due to our contractual restructuring. Our Q4 2025 revenue mix is expected to shift further toward technology, reflecting the ongoing strength of our applications portfolio. Next, in terms of our adjusted gross margin, we expect positive revenue mix improvements along with our cost restructuring and our renegotiation of contracts to continue to manifest in favorable gross margins compared to 2024. Our overall adjusted gross margin is expected to slightly decline quarter over quarter, with adjusted professional services gross margin holding roughly constant and adjusted technology gross margin slightly declining due primarily to duplicate hosting charges associated with the migration to Ignite and timing of certain vendor charges. We anticipate that our adjusted operating expenses will be down approximately $2 million to $3 million in Q4 2025 relative to Q3 2025, as we continue to see the positive impact of the restructuring initiatives we discussed earlier. Looking ahead to 2026, we are focused on our plan to strategically deploy resources in a way that continues to make progress on operating leverage. The actions we're taking now, such as restructuring our professional services contracts, strategically leveraging our growing India operations, and integrating AI more broadly across our organization, are laying the groundwork for continued margin improvement. As we weigh our allocation of resources under our 2026 budget planning process, we are prioritizing areas that will both sustain momentum in technology gross margin expansion and further enhance the efficiency of our R&D efforts. We expect to realize incremental operating leverage in 2026, which will be primarily driven by our previously announced August restructuring and our ongoing optimization initiatives. We anticipate that this will provide us with greater flexibility to allocate capital towards high-impact opportunities, including further technology development and targeted market expansion for our existing offerings and new internally developed offerings. With that, I will conclude my prepared remarks. Dan? Dan Burton: Thanks, Jason. In conclusion, I would like to recognize and thank our committed and mission-aligned clients and our highly engaged team members for their continued engagement, commitment, and dedication. And with that, I will turn the call back to the operator for questions. Operator: The floor is now open for questions. To one question and that you pick up your handset. Thank you. Our first question is coming from Jared Haas of William Blair. Your line is open. Please go ahead. Jared Haas: Hey, guys. Afternoon. Thanks for taking the questions. Just wanted to ask on the updated commentary around the Ignite migration. I guess I'm curious, number one, just what's driving the longer timeline? Should we think of that as sort of a reflection of maybe some bandwidth issues within the client base? And then I'm also curious why some clients would maybe be okay sticking with the legacy solution just given what seems like a pretty big upgrade in terms of new technology capabilities with Ignite. And then I think you also said some clients may stay on DOS for the medium term. So I'm curious what percentage of clients you're thinking should convert over by 2026? Thanks. Dan Burton: Yes. Thank you, Jared. Great questions. And I would invite Ben to maybe share a few comments and then Jason and I might add some color commentary as well. Ben? Ben Albert: Great. Thanks, Dan. Hi, Jared. As we've assessed and worked with our clients, we really see their desire to standoff in some cases for a little bit longer and for us to meet them where they are and provide them that level of flexibility, giving all the competing priorities and the fact that DOS is providing with tremendous value today. And as we continue to move towards Ignite, we'll be there to support them as they're ready to make that transition, and we continue to enhance what Ignite provides. So as we go forward, we see this as a huge opportunity for our business, and also an opportunity for our clients. Dan Burton: Yes, totally agree. And Jared, to a couple of your specific questions, I think we still anticipate a large majority of our clients to be migrated by 2026. As Ben mentioned in our prepared remarks, there are a number who, as they're facing lots of dynamics, lots of pressures from the big beautiful bill and other dynamics, have come to us. And appreciate Ben's leadership in recognizing the value of meeting clients where they are. And there is a small subset that would prefer to get through some other items and stay on DOS for a period of time. And I think the introduction of more flexibility on our side is really designed to meet clients where they are. More flexibility as it relates to how clients want to migrate and even that timeline for those that do want to migrate just providing them more flexibility. We do believe will lead to some improvement in our dollar-based retention. The response so far from clients has been really positive. Jason Alliger: And the only thing I would add, Jared, is we are still expecting to make progress on gross margin even with this change to our migration approach. We are able to dial down our DOS infrastructure and support footprint as clients do migrate over to Ignite. So we'd only expect to really a slight slowing our progress with this change of approach. Operator: We'll take our next question from Jessica Tassan of Piper Sandler. Please go ahead. Your line is open. Jessica Tassan: Hi, guys. Thanks for taking the question. I appreciate it. So we know that tech revenue was in line with your forecast, but how do we think about just the sequential decline in dollars of tech revenue as representing kind of the combination between your like low 90s dollar-based retention and then extensively the implementation of whatever portion of the new deals that you all booked during 2Q 2025? So I guess just if you could break out like the 3Q tech revenue between the dollar-based retention and then like the implementation of the new clients booked in 2025. Then just any comments on fourth-quarter tech revenue, and expectations for sequential growth in tech revenue as we look to 2026 would be really helpful just as we are trying to refine our models into the end of the year. Thanks so much. Dan Burton: Yes, absolutely. Thanks for the questions, Jess. I'll share a few thoughts and then Jason, please also add. So I think as we have discussed in our last earnings call, within the tech segment, there are a couple of moving parts going in different directions. The platform part of our business is experiencing those DOS to Ignite headwinds that we've discussed previously where Ignite is lower priced than DOS. And as we work through that process, that's a natural consequence. At the same time, at the Apps layer, we're grateful to continue to see growth in that segment. And that manifests itself both as it relates to our existing clients growing their technology revenue in the apps space with those existing clients as well as new client wins in the apps space. In addition to what you referenced to as it relates to adding new platform clients. So there is a mix of a few different moving parts. We're encouraged to see those new client additions adding to the tech revenue. We see the negative impact of some of the headwinds related to the DOS to Ignite migration process with existing clients but then another positive as it relates to app layer growth both with existing and new clients. So there's quite a few moving pieces that all kind of net out to the guidance that Jason provided. Jason Alliger: I think that's well said, Dan. The only thing I would add is, as mentioned in the prepared remarks, we did have a level of nonrecurring revenue in both the technology revenue line and professional services revenue lines. So that's also contributing to that decline that we're expecting in Q4. Operator: Thank you. We'll take our next question from Elizabeth Anderson of Evercore ISI. Line is open. Please go ahead. Elizabeth Anderson: Hi, guys. Thank you so much for the question. Really appreciate it. Can you talk a little bit, maybe just to make sure that we're all level set up, help us understand sort of more specifically the value of the one-timers that you are calling out? And then two, how do we think about like given some of the concerns that some of your end market customers are having as we're going into 2026, how do you kind of see as far as you can tell right now on the pipeline and whatnot when the company sort of returns to positive rather than growth? Are we thinking sort of mid-2026 or you think maybe potentially a little for '27? I just want to kind of get a better sense of that as we move through the opportunities and the challenges that your customers are facing? Thank you. Dan Burton: Yes. Thanks, Elizabeth. Jason, do you want to take that first question then I'll comment on the second question? Jason Alliger: Yes. On that first question, the value of the one-timers, I mean, is becoming more common in our professional services revenue line to have one-time revenue, especially as we see the shift from FTE-based arrangements to more project-based arrangements. Less common on the technology side. In the technology, one-time revenue is roughly in the range of $500,000 to $1 million that we saw in that Q3 technology revenue line that we're not expecting to reoccur in Q4. Dan Burton: Jason. And as it relates to your questions about the pipeline and the reacceleration of our growth, our pipeline remains robust and we're encouraged to see meaningful additions to our pipeline. I think there are some dynamics that we are watching and managing through. One of the dynamics that we've spoken to in recent discussions as well is that the deal sizes are a little bit smaller. I do think that is the result of some pressure from the big beautiful bill and some of the Medicaid cuts that our clients and our end market are absorbing. But that also has some positive impacts in that sometimes smaller deals move a little bit more quickly through the pipeline. At the same time, we've also seen some dynamics where it's harder to predict exactly what the sales cycle might look like in terms of when deals will close just because of some of the uncertainty as folks are working through their budgeting process. But fundamentally, as we think about the strategy of reacceleration of growth, we're definitely focused on our core differentiation which has always been our deep healthcare expertise, and our passion for enabling clients to realize measurable improvement. I think as 2026's strategy and plan is coming into focus, I really like where Ben and the leadership team are focusing. And Ben, maybe you could give some specific examples. Ben Albert: Sure. Happy to. As we look towards next year, there's a big emphasis on our unique capabilities around helping health systems manage their costs through our cost management capabilities and solutions. As well as the need for ambulatory performance solutions as you think about where the market might be heading. And we have proven ROI in those areas. We see growth opportunities in those areas, and we expect to spend more time focused in 2026 on that. What the yield will be, we're still working our way through as we look at 2026, but we have a lot of optimism towards those areas where we're seeing already pipeline indications of interest. Dan Burton: Thanks, Ben. And we expect Elizabeth to be in a position at the next earnings call to share more specifics as it relates to how we see bookings unfolding in 2026. Elizabeth Anderson: Great. Thank you very much. Dan Burton: Thanks, Elizabeth. Our next question is from Richard Close of Canaccord Genuity. Your line is open. Richard Close: Yes. Thanks for the questions. Maybe just a follow-up on Jeff's and Elizabeth's questions. Just with respect to the '26, I guess, I think you said likely a couple of points lower growth than '25. I guess the 1% to 2% you're looking at in '25. So as we think about professional services and tech, is that the 26,000,000 mainly being driven by the tech? And or is there more professional services contracts that you're pruning? And then I have a follow-up. Dan Burton: Yes. Great questions, Richard. So I'll share a few thoughts and then please others. Share as well. I think when we think about the dynamics that it will play into 2026, on the professional services side, we've mentioned and specifically highlighted that we made a decision to exit a couple of pilot ambulatory operations, TEMS contracts, and you're already seeing some of that result in 2025. That will, of course, be a full year of results in 2026. We've also looked at, and we mentioned in our prepared remarks, a few other less profitable TIMs relationships. And we are very focused on profitability. So on the services side, I do expect that we'll see some trimming in some of those specific relationships that will have a slightly negative impact on revenue. Also a positive impact on margins. And that's one of the contributors that led us to positive margins in Q3 that we think will be a general trend line moving forward. On the technology side, we do expect to see those headwinds that we've referenced and pressures as it relates to dollar-based retention as we work through the Ignite migration. Partially offset by continued growth that we've been encouraged to see at the apps layer. And then there's always some other factors that lead to the 2026 kind of growth equation, the building blocks around new clients. We've shared some specific data there that can help hopefully with modeling. We've shared our dollar-based retention expectation for this year. That helps model what next year's revenue might look like. And of course, there's always some in-year revenue growth as well. Jason Alliger: Yes. The only thing I would add, Richard, is we will provide additional related to this as part of JPM and especially in our Q4 earnings call. But as we close out the year, we'll have full visibility on deals that are signed in Q4. It's a busy period for us. But one clarifier is that we did mention in the transcript that we'd be a few points lower in 2026 compared to 2025. Richard Close: Yes. Okay. And then just thinking about the pause or people on the migration and just as we think about it, is I'm curious whether you can comment on any competing priorities maybe for hospitals and sort of relates to the one thing we hear a lot is that hospitals want to go ahead and move forward with AI, but you really need to make sure that your data is good and, you know, the garbage, you know, garbage in garbage out type of thing. So I would think that you know, Health Catalyst would be a high priority since you know, you're so so focused on data. And harmonizing and whatnot. So just thoughts there on competing priorities and maybe where you guys rank in rank in that? Dan Burton: Yes, it's an insightful question, Richard. I think one of the reasons that we as a leadership team have felt to give more clients flexibility, meet them where they are, is that reality that DOS does a good job of making sure that the data is clean and organized. And for many of our clients, that's what they need. And they would prefer in a budget-constrained environment to leverage that existing capability and build some AI capabilities on top of that. Rather than taking investment dollars that would be required to manage a migration right now. And meeting them where they are, giving them that flexibility to decide what is most important for us to achieve in 2026, knowing that they can achieve some meaningful things leveraging DOS, giving them that option I think has been something that has been warmly received. Other clients want all of the capabilities, all of the modern capabilities of Ignite, they fit into more of an early adopter or an early mover as it relates to wanting both the infrastructure and the use case layer to be cutting edge and we want to meet them where they are. And that's where we've seen many of our clients already migrate to Ignite. But we recognize different clients will have different priorities, different budget realities, and so providing them with flexibility, that both DOS and Ignite do a really nice job at that fundamental data cleansing and organization layer. And as such, both can be utilized for AI use cases is one of the reasons why we're providing a little bit more flexibility and more options. Anything you'd add, Ben? Ben Albert: Only that Richard, you bring up a good point and that obviously there's a lot of focus on AI and we have been investing there in some pretty excellent solutions. We've got a couple of things in beta around costing intelligence and ambulatory intelligence off of data that we amassed. And then we've also enabled some of the advanced statistical methods that have been integrated into the core platform as well that are generally available today. So you're right in that there is a tremendous interest there, but it's all about how do you drive the value from the AI. That's where we're leaning in as opposed to just providing data in order for AI use cases to deleverage. Our expertise is differentiated and we have the ability to not only create the data environment but also to deliver the AI that drives value for our clients. Dan Burton: And to Ben's point, Richard, most of the solutions that he just described, those AI-specific use case solutions can be leveraged whether DOS is the infrastructure or Ignite the infrastructure. And so again, we want to meet clients where they are. We want to enable them to prioritize their budget in the way that's most useful for them. Richard Close: Okay. Thank you. Operator: Our next question is from Daniel Grosslight of Citi. Your line is open. Please go ahead. Daniel Grosslight: Hi, guys. Thanks for taking the question. Ben, you mentioned that you guys have a strong pipeline for product wraps that help systems manage costs and inventory performance solutions. I'm curious, does your revenue model need to change at all on the tech side? That is, do you need to build in some specific ROI guarantees where you have some sort of skin in the game if your clients aren't able to realize expected savings or you think the current revenue model on the tech side is just doesn't need to change? Thanks. Ben Albert: Thanks, Daniel. I think that's on the table. We provide ROI and we've got hundreds and hundreds of use cases where we deliver tangible ROI and if that's what the market needs and we can deliver to that assuming the data is there and we have the type of partnership that leads to that shared data and ROI. Then we're absolutely open to those conversations going forward. It's a very astute question as it relates to where the market is going overall. Dan, did you want to add? Dan Burton: Yes, I agree with that. And just to that point, Daniel, I think one of the dynamics that we like longer term as we shift away from DOS and towards Ignite is Ignite isn't as expensive or heavy as DOS was. And as you know, most of the ROI of our solutions exist above the platform layer at the use case layer. And as we have more to offer the apps layer, and clients are able to spend more of their wallet with us at the apps layer, there's just more of an opportunity to demonstrate that tangible ROI. And frankly, more flexibility to do what Ben described where because the AppSlayer is the highest gross margin segment of our business, we can take some risk. We can meet clients where they are and we have a lot of confidence in the ability to drive those measurable improvements. So it is on the table. Daniel Grosslight: Makes sense. Thank you. Operator: We'll take our next question from David of BTIG. Your line is open. Please go ahead. David Larsen: Hi. Can you talk a little bit about the growth rate in Ignite customers versus DOS customers? I mean, at your Summit, what I was hearing from hospital systems was, hey, if they're on DOS, they got to do the conversion before they buy more stuff. So I'm thinking to myself, maybe your Ignite base is perhaps growing a bit faster than DOS? And then just any thoughts on when we're going to get past this TEMS ambulatory services comp? Thanks very much. Dan Burton: Thanks, David. Great questions, and it was good to see you. At HAS as well. Thank you for your attendance. So as it relates to that first question, I think one of the important learnings that we wanted to highlight in this earnings call and a shift in our approach is really addressing that first item that you brought up that I think in the past, had been a little too inflexible as it relates to kind of requiring our client to move from DOS to Ignite. And requiring that to be the next step before we talk about other things. And there are some cases where certain apps are only built to work on top of Ignite. So there are some use cases. That can't be done, but most use cases can be done on DOS. And I think the shift that I hope we're conveying is that recognition that it's really important to meet clients where they are. It's important to give them flexibility. And if they want to stay on DOS for a little bit longer, and that can open up conversations where we can grow with app layer, use case layer opportunities on top of DOS, we should pursue those. And in particular, as it relates to what we were talking about just a few minutes ago, that's where the client gets the greatest ROI. That apps layer. And so we're providing a lot more flexibility and we do expect that that will strengthen our growth within that part of our client base moving forward. And we expect that that should enable all of our clients to pursue growth opportunities, especially the Apps layer with us moving forward. Before we address the Tim's question, anything Ben that you'd add on that migration dynamic? Ben Albert: I would only add that Ignite is, as we've said all along, a more efficient platform. So we anticipate that to continue to be more of a catalyst for us. And as we invest more in the applications that sit on top of that, the value proposition is just getting more and more compelling every day, and we would that's where most of the movement comes in the future. Dan Burton: Yes. And as it relates, David, to your question about what's the timing of some of those TEMS transitions and dynamics, we're through the change as it relates to our decision to exit the couple of ambulatory operations pilot TEMS contracts that occurred that change occurred as of June 30. As we mentioned in the prepared remarks as well as a couple of answers to questions, we're looking across a few other TEMS contracts to make sure that we feel comfortable with the profitability progress and the profitability profile. And where we see some opportunities to trim or change restructure, we are taking those opportunities as our first focus is on improving profitability. And you're starting to see some of the evidence of that as you see our gross profits and our EBITDA margins improving. We want to keep that trend going. So we will continue to be evaluating those through the end of this year. I think as we get into 2026, we should have a portfolio that we feel really good about. And kind of get to the next chapter of growth on the TAMs and the services side as well. Anything, Jason, that you would add? Jason Alliger: Yes, I think you covered it well, Dan. Like Dan mentioned, David, like as we hit June, that's when we will lap. The ambulatory temps exit. And so that's when we will see that difference in growth rate related to those relationships, but we'll continue to monitor any of those less profitable TAMs relationships that make sense for restructure. David Larsen: Great. And just one more quick follow-up. Ben, from your perspective, one year from now, three years from now, five years from now, what would you like to see manifest? I mean, Dan and his team have built a fantastic asset with respect to technology over the past call it, five or ten years. What do you think needs to get done to unleash this value here from your perspective? Thanks, Ben. Ben Albert: Thank you. There is tremendous opportunity for this business as I look, and I want to just echo the sentiment that what has been built here is an excellent foundation. The healthcare expertise that this company has, the technology underpinnings, the applications that are a very diverse set of applications that deliver tangible ROI. I think it's largely about execution, how we bring these things together as efficiently and effectively to meet today's market need. Is a critical element as we head into 2026. Don't see why at some point in the future we can't to growth as an organization and actually go more on offense. As we head in through the strategic part of 2026 and we evaluate what we're going to do next year. We have to overcome some of the dollar-based retention issues that we've talked about understanding and more flexible meet your clients where you are, in the market and then enable ourselves to efficiently drive growth throughout the organization. So I can't see why in the next few years we don't achieve that given all that we have as assets today and how we bring it all together. David Larsen: Thanks very much. Operator: We'll take a question from Stan Berenstain of Wells Fargo. Your line is open. Stan Berenstain: Yes, hi. Thanks for taking my questions. First, a quick clarification regarding the Ignite migration being a bit more drawn out than you expected initially. So for the clients that are staying on DOS, are they also maintaining their contractual agreements? Or are those being renegotiated even though they are staying on the DOS platform? For now? Dan Burton: Yes. In the vast majority of cases, we're just continuing the existing contractual relationship that we have with them and extending giving them the time that they would like to be able to just remain on DOS, continue to utilize DOS really under the same terms. That's the vast majority of cases is what clients are asking for and where we can meet them where they are with what they need. Stan Berenstain: Got it. And then maybe a quick one on margins. So if we think about the puts and takes related to revenue, cost cuts, efficiencies, migration issues, how comfortable are you in the 4Q EBITDA acting as a glide path as we think about 2026? Thanks. Dan Burton: Yes, it's a great question, Stan. I'll share a few thoughts and then Jason, add anything as well. So we are encouraged Stan to see meaningful progress as it relates to our EBITDA growth or adjusted EBITDA growth. We're excited to have reaffirmed our full-year guidance of $41 million of EBITDA for 2025, which represents 57% year-over-year growth. As we shared in the prepared remarks, we do expect further growth in EBITDA. And in some ways, Q4 can be a very useful guide as it relates to what we might be looking like moving into 2026. In other ways, there are always puts and takes as well. So there are some one-time items that contribute to Q4 that are specific to one quarter and there are also some costs that will incur. In 2026. As we move into that process in that calendar year. And we are just in the early stages of the planning process right now. So we'll have a lot more to share at the next earnings call. Jason, what would you add? Jason Alliger: I think Dan covered it well. Stan Berenstain: Great. Thank you. Operator: Our next question is from Jeff Garro of Stephens. Your line is open. Please go ahead. Jeff Garro: Yes, good afternoon. Thanks for taking my question. I want to follow-up on EBITDA growth in 2026 and first, clearly a strong effort to manage costs over the last year. Then you had a call out of some areas of strategic focus and investments. So I wanted to see if there's anything else you want to add there. And in particular, we heard the mention of potential targeted market expansion. So would love some more color on areas where you're considering expanding. Thanks. Dan Burton: Yes, I'll share a thought or two and then Ben and Jason please add as well. So we are early in the planning process for 2026. But as Ben alluded to a couple of minutes ago, we see some specific use case areas where clients really need those solutions. And he mentioned a couple in the cost management space, power costing, power labor, rev cycle space with and some specific ambulatory offerings where we're seeing a lot of client demand and a lot of opportunity to leverage new capabilities, new technologies, AI capabilities to accelerate the ROI that a client can achieve. So we want to make sure as we go through the planning process that we're investing in those areas to maintain that differentiation and really strengthen and accelerate that ROI. At the same time, we continue to see leverage opportunities and Jason mentioned a few of these in his prepared remarks. Where we see meaningful efficiencies coming through the increased adoption inside of Health Catalyst of AI. The increased utilization of our growing India operations, and a few other leverage opportunities that we believe will continue to manifest in 2026 that can allow us to do both. Allow us to make some targeted investments to help us be differentiated and as Ben described that return to growth I think product leadership and differentiation is a core part of that. While also continuing a really positive trajectory as it relates to profitability. We know how important that is. As it relates to providing a shareholder return. Anything Jason or Ben you would add? Jason Alliger: Yes. The only thing I would add is we will provide additional precision related to those areas of investment as part of our Q4 earnings call in early 2026. Operator: Thank you. We'll move next to Sarah James of Cantor Fitzgerald. Your line is open. Gabrielle Alexa Ingoglia: Hi, everyone. This is Gabby on for Sarah. I wanted to double click again on the EBITDA growth for '26. Last quarter, we had a discussion around $60 million being an appropriate run rate and the commentary today is up year over year. Can you talk about what new costs you've baked in to maybe change the tone on commentary? And then also if you could just highlight what apps products are the most sought after in your 4Q conversations, that would be very helpful. Thank you. Dan Burton: Thanks, Gabby. Yes, I'll share a few thoughts and then Jay and Ben please add. As it relates to the way we think about EBITDA growth, one of the updates from last quarter is our Q3 actual EBITDA came in well ahead of what we're projecting. And there were some items that we were able to accelerate into Q3 that we thought might take till Q4 to really realize. And so we did maintain the same guidance that we had shared last quarter as it relates to the full year. But we did outperform in Q3 by $1.5 million. And so there is some rebalancing. Embedded in that Q4 guide that we shared. And I think we are still confident and excited about the EBITDA progression that we believe is doable and possible in 2026. We also recognize we're early in the planning process. This is a dynamic environment. We see some real opportunity to invest and enable a reacceleration in growth. And so we want to go through a robust planning process. And we're still absolutely committed to that meaningful goal of significant EBITDA progress and we're pleased to have been on that journey for some time now really meaningful EBITDA progress every year. For several years. And we think that will continue. We just want the benefit of the planning process to really inform where we should make some targeted investments so that we can see a reacceleration of growth and then where we can realize further leverage and allow that to drop to the bottom line with regards to EBITDA progression. Anything you'd all would add? Ben Albert: Just to add that as you mentioned in terms of the where we see opportunities within applications in the cost-constrained environment, I think as we indicated earlier that we have real ambulatory intelligence solutions. And as organizations are looking for site of care optimization, they're looking to figure out how to best leverage their assets that they have. We can really help them drive that where looking to contain their costs. We have solutions to support cost management. We've got this great Ignite clinical intelligence solution that can drive real reduction in clinical variance. So lots of areas and pockets of value. And back to the earlier question, that's where we just have to focus and prioritize our efforts in 2026, which we'll be excited to come back once we've done that work to explain how we're going to do that next. Operator: We have a follow-up from Richard Close of Canaccord Genuity. Your line is open. Richard Close: Yes. Just two quick ones. The one-timers, the 500k to a million in tech, what specifically was that? And then the second question is, are you guys seeing any business come through the Microsoft relationship for those lower level I guess, $100,000 deals and any success there to point to? Jason Alliger: Great. Jason, you want to take the first one? Jason Alliger: Yes. On those one-timers, Richard, those can be either related to pharma, Dil, where it's a quick delivery or it can occasionally be related to timing of like a renewal being signed where we're providing the service over time, but need the contractual paper to be signed. So there's a bit of a catch-up. In certain situations like that that can impact technology revenue. Regarding the Microsoft related revenue, I'd say we're still early in that relationship. It's something that we continue to monitor how those online sales go. Dan, anything you'd add? Dan Burton: Yes. Just that we're encouraged to have another venue, another opportunity through partnerships like the one with Microsoft. We also have a robust partnership with Databricks that enables us to reach different audiences at a different price point to your point Richard. And Ben had mentioned some of the mid-market opportunities that we're starting to see where we can meet clients where they need to be from a budget perspective. And we can often do that through a partnership with Microsoft or a partnership with Databricks and Microsoft and provide real value to them at a price point that they can afford. And so we're encouraged, but to Jason's point, we're early there. Richard Close: Okay. Thanks. Operator: And there are no further questions at this time. I'd like to turn the call back over to Dan Burton for closing remarks. Dan Burton: Thank you all for your continued interest in Health Catalyst and we look forward to staying in touch. Thank you. Operator: This concludes today's Health Catalyst third quarter 2025 earnings conference call. Please disconnect your line at this time. Have a wonderful day.
Operator: And good afternoon. Thank you for attending Hallador Energy Company's Third Quarter 2025 earnings conference call. At this time, all participants are in a listen-only mode. Following our prepared remarks, we will conduct a question and answer session, and instructions will follow at that time. As a reminder, this call will be recorded. I would now like to turn the conference over to Sean Mansouri, the company's NIR. Please go ahead, Sean. Sean Mansouri: Thank you, and good afternoon, everyone. We appreciate you joining us to discuss our third quarter 2025 results. With me today are President and CEO, Brent Bilsland, and CFO, Todd Telesz. This afternoon, we released our third quarter 2025 financial and operating results in a press release that is now on the Hallador Investor Relations website. Today, we will discuss those results as well as our perspective on current market conditions and our outlook. Following prepared remarks, we will open the call to answer your questions. Before we begin, a reminder that some of our remarks today may include forward-looking statements subject to a variety of risks, uncertainties, and assumptions contained in our filings from time to time with the SEC and are also reflected in today's press release. While these forward-looking statements are based on information currently available to us, if one or more of these risks or uncertainties materialize, or if our underlying assumptions prove incorrect, actual results may vary materially from those we projected or expected. In providing these remarks, Hallador has no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise, unless required by law to do so. And with the preliminaries out of the way, I'll turn the call over to President and CEO, Brent Bilsland. Brent Bilsland: Thanks, Sean. And thank you, everyone, for joining us this afternoon. We are very pleased with our strong third quarter results, which reflect the continued momentum of our strategy and the operational resilience of our vertically integrated platform. During the quarter, we delivered significant third quarter year-over-year gains across key financial metrics, including revenue, which increased 40%, net income increased 14 times, and adjusted EBITDA, a non-GAAP measure, increased 1.6 times. The current market signals for our product offerings are strong, and we believe that the robust interest in the types of long-term arrangements that we are currently evaluating justifies attempting to increase generation at our Meramec site. In connection with these strong signals, on November 3, we took a meaningful step in our strategy to grow our generation portfolio by submitting an application to the MISO expedited resource addition study, or ERAS program, seeking to add an additional 525 megawatts of gas generation at our Meramec site. While the application is only a first step in our growth process and does not guarantee that we will be able to add the full load or any additional generation as part of ERAS, we're excited to participate in the opportunity and for what it could mean to the future of Hallador. Favorable summer weather patterns, coupled with higher energy demand and elevated natural gas prices, created a supportive energy pricing environment that drove strong revenue, more than a 29% year-over-year increase, for our Hallador Power subsidiary. Following the completion of Unit Two's annual maintenance outage in early July, both units operated very well through the quarter, resulting in higher dispatch levels and improved reliability across the system. These conditions also provided a tailwind for our coal operations, where solid production, up 18%, increased shipments, and consistent operating costs contributed to our strong results, which demonstrated the operating leverage inherent in our coal operation. The favorable power markets led to higher dispatch at both Meramec and our customer plants, which boosted coal shipments and helped reduce fuel inventories at both our power plant and coal mine. During the quarter, we also executed a $20 million prepaid forward power sales contract with delivery scheduled through 2027. As we have stated in the past, these types of sales are a key component of our commercial strategy, providing immediate liquidity while monetizing forward pricing. The prepaid proceeds are being used to support ongoing operations and capital investment across the company. As the quarter progressed, we saw accelerating interest in our capacity and energy offerings from both data center developers and load-serving entities seeking access to the limited inventory of large-scale dispatchable energy available in the coming decade. We are in advanced discussions on multiple fronts and remain encouraged about achieving positive progress towards an agreement by early 2026. Each potential counterparty brings unique value creation opportunities and challenges, but all share a recognition of the importance of securing reliable, accredited capacity. Many of the opportunities that we are evaluating are long-duration, meaning a decade or more in length, and would likely consume the majority of the plant's energy output and accredited capacity at favorable prices. The evolving energy landscape, driven by rapid data center growth, rising demand from load-serving entities, and a more supportive regulatory environment, is creating opportunities that simply did not exist when we began our RFP process last year. Todd Telesz: We recognize that these opportunities are time-sensitive, and our team remains focused on securing an agreement that maximizes value for Hallador and our shareholders. While we continue to view an agreement with a load-serving entity as the more straightforward and faster path to execution, we're also seeing meaningful progress on the data center side, particularly with developers that have proactively secured critical infrastructure such as step-down transformers, switchgear, and other site-level equipment. From a broader market perspective, we continue to see the structural imbalance created by the ongoing retirement of dispatchable generators like coal in favor of intermittent renewables such as wind and solar. This shift has increased the scarcity and value of reliable baseload generation. We believe this environment enhances the long-term value of our Meramec power plant, its leverageable infrastructure, and the critical role that the site plays in supporting grid stability. As a result, in addition to our efforts to participate in the ERAS program, we continue to evaluate strategic opportunities to acquire additional dispatchable generation assets and infrastructure that could help diversify our portfolio, add scale, and enhance our growth trajectory. We also continue to assess the potential to add natural gas co-firing capabilities to our existing generation facilities at Meramec. A dual-fuel configuration could enhance resiliency during periods of limited gas availability while allowing us to continue leveraging the competitive advantage of our own fuel supply through Sunrise Coal. We are proceeding given the regulatory and consumer considerations that will determine the ultimate structure and timing of this type of opportunity. Operationally, Hallador Power delivered 1,600,000 megawatt hours during 2025 at an average sales price of $49.29 per megawatt hour, compared to 1,200,000 megawatt hours at $47.55 per megawatt hour during the same period in 2024. As indicated in our forward sales position, we are transitioning into a period of higher energy and capacity pricing above our historical rates as demand for reliable baseload power continues to grow. On the coal side of our business, operational consistency and increased shipments helped reduce inventories while maintaining adequate fuel supply to support higher potential dispatch levels during the upcoming winter season. As of now, we expect to produce 3,800,000 tons of coal in 2025, having produced 3,100,000 tons through the first nine months from our Oaktown mining complex. We also continue to strategically supplement our internal coal production with low-cost third-party purchases, providing flexibility to respond quickly to shifts in demand and pricing. This balanced approach enables us to optimize fuel costs at Meramec while maintaining optionality to capture upside in coal markets. The transformation of Hallador from a commodity-focused coal producer to a vertically integrated independent power producer is evident in our results. We are leveraging the energy transition to capture the expanding margins of the power markets and the growing demand for reliable electricity. If we are able to successfully navigate the associated challenges with building new generation, we believe that the ERAS program provides an opportunity for meaningful organic growth in a relatively accelerated time frame as compared with traditional builds. With the potential to add roughly 50% of additional generation capacity to the Hallador fleet, we are excited by the unique opportunity this presents. The continued influx of interest from data centers and load-serving entities underscores the value of our platform, and we believe Hallador is well-positioned to take advantage of these opportunities for step-function growth and cash flow generation in the years to come. I will now pass the call over to our Chief Financial Officer, Todd Telesz, to take you through our financial results. Todd? Todd Telesz: Thank you, Brent. Good afternoon, everyone. Jumping right into our third quarter results. On a segment basis, electric sales for the third quarter increased 29% to $93.2 million compared to $72.1 million in the prior year period, while coal sales increased 42% to $68.8 million for the third quarter compared to $48.3 million in the prior year period. Electric sales in Q3 benefited from traditional summer weather patterns, increased energy demand, and higher natural gas prices, which together create a supportive energy pricing environment. The increase in coal sales during the third quarter was driven by increased shipments to customers, supported by favorable power markets that led to higher dispatch levels at both Meramec and our customers' power plants. On a consolidated basis, total operating revenue increased 40% to $146.8 million for the third quarter compared to $105.2 million in the prior year period. Net income for the third quarter increased substantially to $23.9 million compared to $1.6 million in the prior year period. Operating cash flow for the third quarter increased to $23.2 million compared to cash used of $12.9 million in the prior year period, with the increase primarily driven by the aforementioned favorable energy pricing environment, improved coal production efficiencies, and the $20 million prepaid forward power sales contract executed in Q3 2025. Adjusted EBITDA, a non-GAAP measure, which is reconciled in our earnings press release issued earlier today, increased 1.6 times to $24.9 million for the third quarter compared to $9.6 million in the prior year period. We invested $19.6 million in capital expenditures during 2025, compared to $11.6 million in the year-ago period, bringing our total 2025 year-to-date CapEx to $44.3 million. As of 09/30/2025, our forward energy and capacity sales position was $571.7 million, compared to $619.7 million at the end of Q2 and $685.7 million at 12/31/2024. When combined with our third-party forward coal sales of $350 million, as well as intercompany sales to Meramec, our total forward sales book as of 09/30/2025, was approximately $1.3 billion. Our total bank debt remains relatively unchanged and was $44 million at 09/30/2025, compared to $45 million at 06/30/2025 and $44 million at 12/31/2024. Total liquidity at 09/30/2025 was $40.4 million, compared to $42 million at 06/30/2025 and $37.8 million at 12/31/2024. We are currently in discussions with members of our existing bank group and other potential lenders to refinance our credit agreement. Our revolving credit facility matures in August 2026, and our term loan matures in March 2026, with the remaining balances scheduled for repayment in the first quarter of that year using restricted cash. While we have not yet finalized terms, we are making progress towards refinancing on market-based terms and conditions consistent with our existing facility. Of course, as with any financing, there can be no assurance of timing or final terms and conditions, but we remain confident in our ability to secure an arrangement that supports our ongoing liquidity and growth initiatives. This concludes our prepared remarks. We'll now open up for questions from those participating on the call. Operator, back to you. Operator: Thank you. As a reminder, to ask a question, you will need to press 11 on your telephone. To remove yourself from the queue, you may press 11 again. First question comes from the line of Jeff Gramp of Northland Capital Markets. Your line is open, Jeff. Jeff Gramp: Afternoon, guys. Hey. This is Brent on the potential capacity expansion you guys are looking at now. What are the main milestones or key long lead items we should think about to track over the next, I don't know, couple quarters, six to twelve months, to kind of assess the progression there, the potential? Brent Bilsland: Thanks. Yes. So MISO created this expedited process to help generation that meets the requirements, which basically has the potential or likelihood to actually be built, get through the queue process in a timely fashion versus the traditional process. And so we found an application that we feel complies with those timelines. They will come back later this month and tell us if our application is complete in their eyes and give us the time to cure anything that needs further clarification. Then they are at various times of the year announcing which applications they're picking up to review. The ERAS program only allowed for 50 total applications. And I think back in August, they came out and said they were reviewing, like, nine of those applications. I think here in November, they've come out and said they're doing another 15 or so. And so it could be six months or so before they actually pick ours up. So that's something that we'll keep an eye on and certainly update the market at our quarterly filings. And then in the meantime, we're working on securing the equipment that we filed to build. And so that's what we're working on for now. Jeff Gramp: Perfect. That's really helpful. And for my follow-up, you guys obviously had a super strong quarter in Q3. Can you touch on what you've seen in the first forty-ish days of Q4? Just trying to get a sense of if some of these dynamics have continued or how we should think about Q4 expectations as we look to wrap up the year? Brent Bilsland: Yes. No. Q3 was an exceptional quarter for us. A lot of things went right. We had units coming out of outage. We had really warm weather providing strong cooling demand in September. And coal shipments were just quite frankly exceptional. We do not expect that here in Q4. We expect Q4 to look very much like Q4 of 2024. Unless we just see some extreme cold weather show up in December or something like that. We don't see much of a catalyst to really drive a performance like Q3. Jeff Gramp: Got it. That's helpful. I'll hop back in the queue. Thanks. Brent Bilsland: Thank you, Jeff. Operator: Thank you. Our next question comes from the line of Matthew Key of Texas Capital. Please go ahead, Matthew. Matthew Key: Hey. Good afternoon, everyone, and thanks for taking my questions. I was wondering if you could provide any initial color on the economics of the 525 megawatt expansion, just like an initial read on CapEx and any potential impact it could have on operating costs long term. Brent Bilsland: Yeah. So we are still negotiating the equipment for that. And so until we have those economics secure, we're not really releasing any information as far as the overall economics. But you know, we are encouraged by what we see through our long-term negotiations on PPAs about the robustness of volume and pricing and number of bidders. The market is just sending strong signals that it needs more capacity. And so that's ultimately what led us to the decision to file. And so as we progress through this process over the next three years, we'll continue to update all of our investors on what that project's gonna look like. But we're excited about the opportunities. We've told investors it's when you're a smaller company like ourselves as far as being able to grow your production relatively quickly. And we think this project potentially does that with the potential to increase our generation by 50%. Matthew Key: Got it. That's helpful. And just a quick macro question for me. In late September, the Trump administration announced I think it was $625 million in funding directed at coal-fired power in the US. What impact, if any, do you think they'll have on the industry? And could Hallador potentially be a recipient of any of that funding? Brent Bilsland: Yeah. I mean, look. I think anytime the government is handing out money, that's helpful to the industry. And I think that Hallador could have some projects that qualify for grants out of that basket of money. So we'll just have to see. It's, you know, they made an announcement, then we figure the rules out as we go. So we're still trying to navigate that process and see how much of that we can secure for Hallador. Matthew Key: Great. Appreciate the time, and best of luck moving forward. Brent Bilsland: Thank you, Matt. Operator: Thank you. Our next question comes from the line of Jacob G. Sekelsky of AGP. Please go ahead, Jacob. Jacob G. Sekelsky: Hey, guys. Thanks for taking the question. Just on the M&A front, you mentioned you're always looking. I'm just curious if you're seeing, you know, plug-and-play type capacity additions out there. Are you more still looking at assets that have been started with capital and in need of investment? And I guess any color if you have a preference between the two. Brent Bilsland: Well, I think, you know, typically, you're probably gonna find us play in the coal space. That seems to be our niche, our expertise. And traditionally, there's been less competition there. So that's typically where we like to focus our attention. That said, those types of transactions are very bespoke. And so they take more time. And I come back to the Meramec purchase. I mean, that took us NDA to closing. Signing the NDA to closing was thirty-three months. So it wasn't a small amount of work, but that said, it ended up being a tremendous value to the company. So those are the type of circumstances that we're looking for. I don't think we'll find a purchase price that low again, but the revenue to offset that has increased. And so we just have to take the opportunities as they come. But we are encouraged by some of the conversations that we're having. We'll see if they develop. Jacob G. Sekelsky: Got it. Okay. That's helpful. That's all for me. Congrats on the quarter. Brent Bilsland: Thank you, Jacob. Operator: Our next question comes from the line of Nick Giles of B. Riley Securities. Your line is open, Nick. Nick Giles: Hey. Thanks, operator. Good evening, everyone. Guys, congrats on a really nice quarter here. Brent, in your prepared remarks, you noted advanced discussions with multiple parties. Would you look to reenter into exclusivity? Would you really be focused on just announcing a definitive agreement at this point? And then, you know, last quarter, spoke to utilities entering the mix. So curious for any updated commentary around that if a utility might be your preference or if you're still, you know, kinda in the mix with hyperscalers as well. Thanks. Brent Bilsland: Well, we're talking to both parties. What's changed is the utility interest has increased. Quite frankly, everybody's interest has increased. And I think that's due in large part, particularly on the developer side, as their projects start to get through permitting. And, you know, once they can get the land permitted and project zoned for data center build-outs, then they start focusing their attention on the next step, which is energy. And so we're seeing several of those projects kinda make it through those stages and now turn their attentions on Hallador because, again, as we've said before, we think we're one of the few places to get accredited capacity in the state of Indiana or MISO Zone 6 in another way. So that's what's transpired, and so it's definitely piqued the interest here in the last several months. And it's far more than interest. I mean, we are negotiating with several parties, and we're trying to get to a definitive agreement with all of those. And they're on probably more of a time constraint than we are. So, you know, they're trying to get to a project to the point where it can be developed as quickly as possible. So I think we're in a good spot. We're very encouraged by the process and how it's going and what we see, so much so that that led us ultimately to the decision to try to grow our generation by 50% through the ERAS process. Nick Giles: Right. That's helpful. Maybe switching gears. You executed a five-month prepaid forward for $20 million in the quarter. How much more room do you have in your forward book until you feel like you need to preserve the remaining capacity for a long-term agreement? Just curious on that in the course that had. Brent Bilsland: Well, that was energy. Right? Primarily with the market, it is really strong, sending the strongest signal for the credit capacity. You see a lot of articles about the world's running out of energy. I disagree with that. The world has run out of accredited capacity. So and the sale we really made was for the 2027 time frame, which we hadn't done much out there, and it was really for a relatively small volume. Nick Giles: Got it. Maybe just one more if I could. Is it fair to assume that this 525 megawatt expansion could be a part of any long-term agreement, or maybe if not initially, could you see that potential customer having a rover on the capacity? Or where does this ultimately fit in, if at all? Brent Bilsland: Well, it'd be interesting to see. I mean, we just went public about the project an hour ago. So it's not something we've discussed with other parties. I mean, we just made the filing a week ago. So this is all relatively new, and, you know, we want to—that's part of the reason we wanted to publicly announce. But when you make a filing like that, you're never really quite sure when that will become public. So we wanted to tell the market at the same time. And then so I think it will be part of our conversations going forward. And we'll see where that leads. Nick Giles: Got it. Well, Brent and team, appreciate the update, and continue the best of luck. Brent Bilsland: Thank you, Nick. Operator: I would now like to turn the conference back to Brent Bilsland for closing remarks. Sir? Brent Bilsland: Yes. I want to thank everybody for joining us today and your continued interest in Hallador, and just hope that we've been able to articulate and express our high level of excitement as we've had a great quarter, and we're excited about the opportunities that are in front of us. Thank you. Operator: Ladies and gentlemen, this concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Good afternoon, ladies and gentlemen, and welcome to the DocGo Third Quarter 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 the operator. This call is being recorded on Monday, November 10, 2025. I would now like to turn the conference call over to Mr. Mike Cole, Vice President, Investor Relations. Please go ahead. Mike Cole: Thank you, operator. Before turning the call over to management, I would like to make the following remarks concerning forward-looking statements. All statements made in this conference call other than statements of historical fact are forward-looking statements. The words may, will, plan, potential, could, goal, outlook, design, anticipate, aim, believe, estimate, expect, intend, guidance, confidence, target, project, and other similar expressions may be used to identify such forward-looking statements. These forward-looking statements are not guarantees of future performance and we cannot assure you that we will achieve or realize our plans, intentions, outcomes, results, or expectations. Forward-looking statements are inherently subject to substantial risks, uncertainties, and assumptions many of which are beyond our control and which may cause our actual results or outcomes or the timing of results or outcomes to differ materially from those contained in our forward-looking statements. These risks, uncertainties, and assumptions include, but are not limited to those discussed in its risk factors and elsewhere in DocGo's annual report on Form 10-K, quarterly reports on Form 10-Q, our earnings release for this quarter, and other reports and statements filed by DocGo with the SEC to which your attention is directed. Actual outcomes and results or timing of results or outcomes may differ materially from what is expressed or implied by these forward-looking statements. In addition, today's call contains references to non-GAAP financial measures. Reconciliations of these non-GAAP financial measures to the most directly comparable GAAP financial measures are included in our earnings release on the current report on Form 8-Ks includes our earnings release, which is posted on our website, docgo.com, as well as filed with the SEC. The information contained in this call is accurate as of only the date discussed. Investors should not assume that statements will remain relevant and operative at a later time. We undertake no obligation to update any information discussed in this call to reflect events or circumstances after the date of this call or to reflect new information or the occurrence of unanticipated events, except as to the extent required by law. At this time, it is now my pleasure to turn the call over to Mr. Lee Bienstock, CEO of DocGo. Lee, please go ahead. Lee Bienstock: Thank you, Mike. Thank you all for joining us today. 2025 has been an important year of transition for DocGo. And I would like to start our call by sharing four key headlines from the quarter before sharing more specifics about our performance. First, we experienced record volumes across all of our base business offerings in the quarter. Our strategy to build a robust evergreen healthcare business is coming to fruition. Second, we continue to have a strong balance sheet with cash we intend to use to fund our growth and capitalize on the opportunities in front of us. Third, we are extremely excited about our acquisition of SteadyMD and how their 50-state virtual care network and over 500 advanced practice providers will allow us to scale more efficiently. And fourth, today we announced 2026 guidance of $280 million to $300 million in revenue and a full year 2026 adjusted EBITDA loss of $15 million to $25 million with the majority of this adjusted EBITDA loss expected to be realized in the first half of the year. Our 2026 revenue guidance represents 12% to 20% year-over-year base business growth. Any potential acquisitions or new contract wins would be incremental to that amount, and we would provide updates on 2026 guidance as needed. At the top end of our revenue guidance range for 2026, we would expect to exit the year on an adjusted EBITDA positive run rate. We have a bold vision building a company that brings the capabilities of a doctor's office into a patient's living room. I am excited about our investment to build these capabilities, which I believe is a small price to pay for the promise of something that has transformational potential both for our company and our industry. Before I cover the individual business verticals, I want to emphasize that each of our service lines, with the exception of our Caregap closure and primary care offerings, is adjusted EBITDA positive on a contribution basis. I think it's important to highlight this because their value can be masked by the impact of corporate overhead costs at our current scale and the investment we are making in the capabilities I just referenced. Now I'll touch on our medical transportation and payer provider mobile health verticals. Our flagship medical transportation business achieved record volumes in Q3, driven by numerous long-term contracts with strong visibility and an enviable roster of customers including Jefferson Health, Mount Sinai, New York City Health and Hospitals, HCA TriStar, the NHS in the UK, and others. We expect this business will generate more than $200 million of revenue in 2025 making this a strong foundational asset. As we add additional scale and ramp staffing in this segment, over the next two to three years, we anticipate that we can further improve the adjusted EBITDA contribution margin to approximately 12%. We continue to see incredibly strong demand for our service with opportunities to grow revenue within our existing customer base. Several of our large health system customers use our total transportation solution, which includes our proprietary software, dedicated ambulances, EMS crews, and staff to manage their transfer center operations. Our EPIC integrated technology platform creates efficiency, transparency, and provides a single source of truth for transportation management across vendors. In this capacity, we often have the ability to select whether to assign a trip to one of our ambulances or select a different transportation vendor if we don't have an available unit staffed to run the trip. We estimate that over the last twelve months, we have assigned over 26,000 trips to other companies, many of which could have been run by our fleet if we had available service level capacity. We have accelerated our talent acquisition efforts and are looking to hire hundreds of additional EMS staff as soon as it is practical to create the capacity and better capitalize on this embedded demand from our current customers. We expect that these targeted additional hires will enable us to capture millions of dollars of additional top-line revenue on our existing contracts in 2026. In summary, our transportation business serves a vital market need, is profitable on a stand-alone basis, and is a valuable foundational asset. Moving on, I would like to cover our payer and provider vertical, which is expected to generate approximately $50 million of revenue in 2025, which includes a contribution of approximately $5 million from the SteadyMD acquisition in mid-October, and is expected to grow to $85 million next year. This vertical includes services such as care gap closure, primary and preventative care, telehealth, remote patient monitoring, mobile phlebotomy, and other payer and provider services. One of our core offerings in this vertical is our remote patient business, which has made considerable progress over the last year. Remote patient monitoring is operating at an annual run rate of approximately $15 million with a greater than 10% adjusted EBITDA contribution, which is expected to continue trending higher in 2026. We've signed 13 new contracts or expansions this year on the back of strong demand, and have eight additional proposals submitted or in contracting. We are excited to keep developing this capability in a space that typically commands high multiples. An area of our payer and provider vertical that is taking longer than anticipated to ramp but still holds great promise for us is our primary care services. We had originally budgeted approximately $5 million to $10 million of revenue from primary care in 2025. We are seeing progress here and just received a substantial list from a major health plan to offer these services to 10,000 members, which will launch in Q4 and ramp early 2026. Also within our payer and provider vertical, our care gap closure and transitions of care business more than quadrupled when we compare Q3 2025 to Q3 2024. While our investment in product development, training, and technology to build our capabilities was substantial in 2025, we expect that rate of investment to decline considerably in 2026, which will help contribute to our goal of achieving profitability. As we work to drive our Caregap and primary care business to profitability as soon as possible, I want to underscore why we are making this strategic investment to build these capabilities. DocGo's ability to leverage a tech-enabled clinical workforce to reach difficult populations with chronic conditions delivers meaningful value to our payer and provider customers. Our solutions help keep people healthier and in their homes and have the potential to significantly lower health systems costs. Considering the convergence of increasing costs, flat reimbursement levels, facility overcrowding, and ongoing operational challenges facing healthcare today, we believe DocGo's offering is positioned to drive substantial value and represents a significant opportunity for our company. While this payer provider business takes considerable time to develop, we have made significant inroads over the last two years and we believe it has high growth potential. As I shared on our last earnings call, we are already working with two of the top 10 national payers and are in active discussions with both of these customers to expand those contracts. Additionally, we are in the process of contracting with two more of the top 10 national payers and have an additional 10 pending proposals in our business development pipeline. I wanted to illustrate the potential of these by highlighting the growth trajectory of one of our major payer customers over time. In 2023, our first year working with a major California health plan, we performed 789 total patient visits. In 2024, that number grew by nearly 65% to 1,293. In 2025, it is expected to grow another 250% and reach 4,500, and in 2026, it's expected to grow another 280% and reach over 17,000 visits based on existing plans. This same customer started with a single transition to care program, added care gap closure, and has recently added longitudinal care services as well. In summary, it takes time for these relationships to ramp, but they can accelerate quickly as our customers appreciate the value we can deliver. As I mentioned, we also considerably expanded our capabilities with our acquisition of virtual care provider SteadyMD last month. We believe we got a very attractive deal for our shareholders with the way we structure this transaction and the value it brings. For those of you who didn't have the opportunity to dial into our webcast last month, which is posted on our Investor Relations website, SteadyMD offers a 50-state virtual clinician workforce, clinical operations, and world-class technology that powers real-time matching between patient needs and clinical expertise. The company provides virtual care for top consumer health and digital wellness brands, including two Fortune 10 customers. SteadyMD maintains a roster of over 500 clinicians, is expected to service over 3 million patients in 2025, and is projected to generate approximately $25 million in revenue this year. SteadyMD's scaled network of virtual providers is expected to enable DocGo to achieve more efficient delivery of patient care by pairing DocGo's mobile health clinicians in the field with SteadyMD's clinical network over time. We are enthusiastic about this acquisition for numerous reasons. First, it provides us with a 50-state virtual care footprint, which significantly expands our clinical capacity and positions us to extend our offering to both payers and providers. Second, we have long believed that pairing our last-mile clinical delivery capabilities with virtual care has the potential to unlock the power and potential of telehealth and creates an optimal end-to-end solution. We look forward to the potential synergies this creates and will look to both amplify our existing offerings and potentially launch new services year. Lastly, we see strong opportunities for cross-pollinization between the two exceptional customer bases that both DocGo and SteadyMD have built, and we look forward to exploring those as well. We continue to believe that DocGo has a unique ability to acquire traditional healthcare assets where we can overlay our technology, mobile health capabilities, and extensive customer base to drive additional value. There are a wide variety of healthcare companies out there that see DocGo's last-mile healthcare delivery capabilities as a missing piece, making us a very attractive partner, and we plan to remain active on the M&A front. In sum, 2025 has been a transitional year as we move beyond emergency response contracts and increasingly focus on executing DocGo's evolution to a provider of long-term, integrated technology-driven healthcare solutions that meet the needs of our customer today and tomorrow. I couldn't be more proud of the progress we are making as we are positioned for strong growth in each of our key verticals. We expect the investments in our early-stage business lines to gradually abate over the course of 2026. We have made a strategic acquisition in SteadyMD that expands our footprint, adds accretive capabilities, and a roster of blue-chip customers that we can continue building upon. Additionally, we continue to grow our pipeline of new business and look for potential acquisition opportunities, both of which can help us gain critical mass, achieve profitability, and create additional shareholder value in the coming years. Our future is bright and valuable. We have the right products and services to address critical needs in our healthcare industry, have built differentiated technology and capabilities, and have business lines such as medical transportation and remote patient monitoring that are already firmly EBITDA positive, and we have the balance sheet to see our vision of bringing the doctor's office to the living room a reality. At this time, I will hand it over to Norm to cover the financials. Norm, please go ahead. Norman Rosenberg: Thank you, Lee, and good afternoon. Total revenue for 2025 was $70.8 million compared to $138.7 million in 2024. The year-over-year revenue decline was entirely due to the sunset of migrant-related projects. Excluding revenue from migrant-related programs, revenue increased by 8% to $62.4 million in 2025 from $58 million in 2024. Medical transportation services revenue increased to $50.1 million in 2025, from $48 million in transport revenues that we recorded in 2024. Revenues were driven higher by gains in nearly all of our U.S. markets, with some of the strongest growth in Texas and Tennessee. Mobile health revenue for 2025 was $20.7 million, down from $90.7 million in the third quarter of last year, driven by the wind-down of migrant services. Included in this year's amount was approximately $8 million in migrant-related revenues. Non-migrant mobile health revenues increased by more than 20% year-over-year, driven by increases in care gap closures, remote patient monitoring, and mobile phlebotomy. Adjusted EBITDA for 2025 was a loss of $7.1 million compared to adjusted EBITDA of $17.9 million in 2024. The adjusted gross margin, which removes the impact of depreciation and amortization, and several one-off items, and is the measure of margins that we track most closely, was 33% in 2025 compared to 36% in 2024. During 2025, adjusted gross margins for the medical transportation segment were 31.7% compared to 30.7% in 2024 and the highest gross margins we've seen in this segment since 2024. During the third quarter, our transportation business ran at the highest utilization rates that we've seen. Given these utilization rates, it will be critical for us to expand our field labor team, which we would expect to lead to higher revenues and improved gross margins for transport in 2026. Mobile Health segment adjusted gross margin was 36.2% versus 38.8% in 2024 but up from adjusted gross margins of 32.5% in 2025. We expect to continue replacing migrant-related revenues with relatively higher margin service lines such as remote patient monitoring and mobile phlebotomy. On both the cost of goods sold and an operating cost basis, we continue to make significant investments in our Caregap closure business. We estimate that the adjusted gross margin for mobile health would have been above 40% in 2025 excluding the Caregap closure business. There were also some non-recurring items that had a large impact on our GAAP results this quarter, so I'd like to briefly review them. Within the cost of goods sold area, we incurred increased insurance costs in the amount of approximately $5.2 million. These largely consisted of additional premium owed for workers' compensation coverage back in 2022 and 2023 driven largely by an increased migrant program-related employee base, and the settlement of a large auto insurance claim for an incident in 2022 in the since-discontinued California transport market. Also, within the operating expense category, we incurred noncash charges due to the write-down of various intangible assets and goodwill. These charges totaled $16.7 million in the quarter. During the third quarter, we made further progress on strengthening our balance sheet by paying off the outstanding amounts under our line of credit, removing $30 million in debt from our balance sheet. We continue to collect our older, larger invoices, which allowed us to generate $1.7 million operating cash flow for the quarter despite our operating losses. Through the first nine months of 2025, we have generated nearly $45 million in cash flow from operations. As of September 30, 2025, our total cash and cash equivalents, including restricted cash and investments, was $95.2 million, down from $170.1 million at the beginning of the year. However, having paid down the entire outstanding balance on our credit line during Q3, our cash position net of debt is well above our net position as of the beginning of this year. Our balance sheet is now debt-free for the first time since late 2023. Our accounts receivable continue to decrease, particularly for migrant-related receivables. At quarter end, we had approximately $37 million in accounts receivable from the various migrant programs, which represented a little more than a third of our total company AR. This compares to $54 million in migrant program-related AR at Q2, $120 million at Q1, and $150 million at the end of 2024, which at the time represented approximately 71% of the company total. We've now collected about 96% of all of our migrant-related receivables from the inception of those programs until today, and we remain confident that we will collect all remaining outstanding amounts. Now that we've improved our cash balance and paid off our credit line debt, we are well-positioned to carry the company through this ongoing transitionary period. Over these final seven weeks or so of 2025, we will focus intently on collecting the remainder of the migrant-related receivables. Assuming that these amounts are collected during the fourth quarter, we would expect our cash balances at year-end to be higher than they were at the end of Q3 after adjusting for the SteadyMD acquisition. We expect to exit 2026 at about $65 million of cash, which we expect will be the low point subject, of course, to buybacks or any additional acquisitions. Finally, as we head here into the home stretch of 2025, we'd like to discuss our outlook for the full year and offer a preliminary view on 2026. For full year 2025, we now expect revenues in the range of $315 million to $320 million. Of that amount, about $68 million to $70 million relates to migrant projects, so the base revenue should come in at about $250 million. For adjusted EBITDA, we see the full year 2025 loss in the range of $25 million to $28 million. For 2026, we see revenues in the range of $280 million to $300 million, which would represent a 12% to 20% growth over 2025's base revenues. We anticipate a full year adjusted EBITDA loss of somewhere between $15 million and $5 million. However, at the top end of this revenue guidance range for 2026, we would expect to exit the year on an adjusted EBITDA positive run rate. On a sequential basis, looking at 2026, we expect revenues to increase and for the EBITDA performance to improve over each of the four quarters of the year. At this point, I'd like to turn the call back over to the operator for questions and answers. Operator, please proceed. Operator: Thank you. Ladies and gentlemen, we'll now begin the question and answer session. Should you have a question, please press the star followed by the one on your touchtone phone. You will hear a prompt that your hand has been raised. Should you wish to decline from the polling process, please press the star followed by the two. If you are using a speakerphone, please lift the handset before pressing any keys. One moment, please, for your first question. And your first question comes from Pito Chickering from Scotiabank. Please go ahead. Pito Chickering: Hey, good afternoon guys and thanks for taking my question. Looking at the implied margins for the fourth quarter, I think it looks like negative 13%. Can you just help bridge us versus margins we saw in the third quarter of down 10%? How much came from the SteadyMD acquisition services core ops just bridging 3Q to 4Q margins. Norman Rosenberg: So there wasn't anything in Q3 on SteadyMD. SteadyMD showed up in October, so you're gonna get most of the quarter of SteadyMD. You know, we think that number should be somewhere around $5 million in a little bit, you know, right a little bit more than $5 million in revenue for the quarter. And I would say slightly EBITDA negative for that period. So it really shouldn't have a material impact. It's gonna have an impact on the margin percentage but otherwise, it's not gonna have much of an impact. We will have lower we will have basically no revenue from or very small revenue number from the migrant-related revenue. So that's also gonna have an impact on the margin a little bit. Pito Chickering: Okay. And then for 2026 EBITDA guidance, you know, the implied margins there for next year are negative 7% yet reciting quarter at sort of negative 13% margin. Can you just walk us through kind of how that improves throughout the year? And what should we be modeling in the first half of your EBITDA versus the back half of your EBITDA? Norman Rosenberg: Yeah. Sure. So there are a couple of areas where we think we'll do a little bit better in terms of our model. First of the gross margin percentage. So it's interesting to note that the Q3 adjusted gross margin as we walk through, worked out to about 33%. That's higher than what we did in Q1 or Q2 of this year, and we think that it's something of a proxy for where we go in the next few quarters going forward. There are some projects that we have, especially on the transport side, that we think will raise the gross margin a little bit. But realistically, those will probably have more of an impact in the second, third, and fourth quarter of next year than here in 2025. Or 2026. So there's a little bit of room over there as well. And then on the operating expense side, so we continue to work hard at trying to reduce our SG&A. And as we were able to take a couple of million dollars out per quarter in SG&A, that should also have an impact towards the back half of next year. And then there's a scale. So our expectation, Pito, is that whatever we see in terms of revenue in Q1, will be the low point of 2026. It'll go up then. And consequently, the EBITDA loss or profitability, the way we model it out into Q2, into Q3, into Q4, will improve every quarter as we go, Q1, two, three, and four. So we think that that's gonna have the impact. So going to your second question as far as the breakdown, I would say the bulk of the expectation for a negative EBITDA number is going to come in that in the first half of the year. It's clearly going to be skewed towards the first half of the year in terms of those losses. And then you get a much smaller loss in the third quarter and, you know, maybe even perhaps we think, positive number in the fourth quarter. Pito Chickering: Okay. And then last question for me. Looking at for 2026 revenue guidance, how much do you assume, from migrants, for next year? How should we be modeling, transport versus mobile health? Next year? Thanks. Lee Bienstock: Absolutely, Pito. This is Lee. So in terms of migrant-related revenues for 2026, we don't expect any migrant-related revenues for 2026. So that number will be zero for next year. In terms of the breakdown for the guide, it's important to note that the guide really is a current guidance is based on the baseline of the business as we see it today. Any new contract wins, or M&A would be in addition to the number we're sharing tonight. The breakdown is about two-thirds transport, one-third mobile health. That's essentially the way to look at it. Pito Chickering: Great. Thanks so much. Lee Bienstock: Of course. Operator: Thank you. And your next question comes from Sarah James from Cantor. Please go ahead. Sarah James: Thank you. Wanted to dig a little bit more into the payer provider revenue growth. So you guys obviously have a very strong pipeline there. Sounds like when you step up from $50 million in '25 to $85 million in '26, am I right in annualizing the SteadyMD impact to be $15 million of that, and then you'd have $20 million from organic growth? Then what kind of deal closure assumptions does that for the pipeline that you talked about with possibly expanding your existing two national payers or adding in two others? Lee Bienstock: Absolutely, Sarah. Thanks for the question. So first off, the $85 million per payer and provider for next year includes about $25 million from the SteadyMD acquisition. That's the run rate the business is on. Of course, we announced that acquisition a few weeks ago, so we're in the process of integrating it. So we have a $25 million of the $85 million as a SteadyMD contribution for next year, and the remaining would be the $60 million from our current payer and provider baseline business. To answer your question, specifically, I'm glad you asked it, it does not include any deal closures or additional M&A or contribution from our pipeline. We're looking at the contracts we currently have today. We're looking at the geographies we currently operate in today, the list of patients that have been provided to us so far, and our current customer set, and basing our guidance for next year off of that. Both for payer and provider and the transportation portions of the business. Sarah James: Great. And can you help us understand what does it look like when you expand the payer provider contract going from transition of care to care gap closure to longitudinal, what are the orders of magnitude of revenue that that could impact or the way it could change your margin profile for that segment? Lee Bienstock: Absolutely. So as you mentioned, Sarah, mostly our payer and provider contracts typically start with either care gap closure services where the payers provide us with a list of patients that have open care gaps. They have been seen. This could be diabetic retinal exams, bone density scans, annual wellness visits, vaccinations. And then we go engage those patients. We meet them where they are. And we help close out those care gaps. And these are chronically ill patients. They're typically patients that are costing the health plans a lot of money. And so the health plans are heavily incentivized to make sure that they're reaching these patients. And if they don't, their quality scores for their plan are negatively impacted, and then, of course, patients end up landing in the hospital. That costs the payers lots of money. So they're providing us with lists of patients. These are the patients that have open gaps in care. And we're going to see them. So they either start with care gap closure or transitional management. And so as a patient is being discharged from the hospital, they've already been hospitalized or they visited the emergency room, they're leaving the hospital we work with them to make sure that their transition of care to the next setting could be their home, could be another facility, we make sure that their discharge plan is well taken care of and that we're redressing the incision site, titrating meds, making sure we're checking their vitals so that their transition of care is well taken care of. And they don't end up back in the hospital. That's where our services typically start with the payers. What we're also finding is a lot of these patients need primary care services and preventative care. And so as I mentioned, we're in the process of expanding the relationships we have into primary care and preventative care, more longitudinal care. So instead of going to serve a care gap closure visit or transitional care, we're providing the long-term care and the preventative care and the primary care for that patient. And that's typically step two in that process. And then you can see scenarios where we enroll those patients in remote patient monitoring, as I mentioned. So really enveloping the patient in the care they need, meeting them where they are, closing care gaps to start, and then making sure they have the proper primary and preventative care. That's how the progression of those contracts typically takes. And then the lists get larger, the patient needs get bigger, and more varied, and then we're there to sort of expand into those payers as they see, really the impact of our work and how better off their patients are with our services. I know we shared one more piece here, which is with a lot of the health plans we work with, one example we gave, which we gave in the prepared remarks, we've helped reduce their ED readmission rate by over 50% for the patients in that transitional care management program. So the payers are seeing real benefit and they're continuing to give us more and more work. And so that's what we're basing our guidance on is these contracts we currently have. And the ability to expand with our current customer set. Any new additions from the pipeline or M&A or any significant contract wins would be in addition to the guidance we're giving tonight. Sarah James: Thank you very much. Lee Bienstock: Absolutely. Operator: Thank you. And your next question comes from Ryan McDonald from Needham. Please go ahead. Ryan McDonald: Hi. Thanks for taking my questions. Maybe to start on the transportation side. So it's great to hear about the heightened levels of utilization and sort of that being a signal for incremental investment scale the team. But how do you balance sort of supply demand in terms of what you're seeing so that as you continue to scale the team that, you have enough demands to sort of utilize those teams in an optimal way so we're, you know, it's not becoming margin dilutive? Thanks. Lee Bienstock: Absolutely, Ryan. Thanks for the question. So I thought it was important for us to mention how many trips we're currently outsourcing or handing off to other vendors. And so we looked at that number over the last twelve months. It's added up to about 26,000 trips. So that's really the number we're using as sort of the embedded demand we have and the contracts we have. And how much staff and supply we need in order to meet that demand. And that's really the number we're working off of. Of course, new contract wins, we'd have to hire more. But that's the number we're working off of. And we've been able to quantify those trips in all of our markets, and then the corresponding level of staff that we would need in order to satisfy those trips and not outsource them. And so that's where we're basing our entire hiring plan around. If you add those up, those 26,000 trips across all of our markets, it looks like we have to hire about another seven to 800 staff. Now I'll tell you we've made progress on that over the past number of weeks here, but we're continuing to ramp that up pretty intensively right now. We have big work streams going within the company to make sure that we're both retaining the great staff we have, and attracting new team members to join so that we can scale those efforts. But it's really based off of the number of trips that we're already outsourcing from the embedded demand we have from our contracts. Ryan McDonald: Helpful color there. Thanks, Lee. And then maybe as a follow-up, you know, obviously, great to hear about the continued scaling and growth in the remote patient monitoring business. You have 13 contracts this year, eight more proposals. Can you just talk about what some of the core areas and point sort of care areas that you're focused in with remote and really genesis of the question is a bit is, obviously, the recent news about United rolling back, you know, RPM except for any chronic heart failure and hyper during pregnancy. Just kind of curious what you're hearing in the market of does that sort of create a knock-on effect at all for other payers in the market? Lee Bienstock: Yeah. Ryan, I'm so glad you mentioned that. It's actually our core offering on remote patient monitoring is really in the cardiology space. So you mentioned, you know, chronic heart failure and other insurance companies rolling back coverage to address cardiology and heart disease. That actually would bode well for us. We have a deep expertise in cardiology and implantable cardiac devices like loop recorders, pacemakers, and so forth. So that's really our specialty. And that's the area where we're investing in. So that's the focus of our remote patient monitoring efforts is these devices that are transmitting data, particularly for heart failure and other cardiology-related chronic conditions. We have been expanding since from that into other specialties like diabetes and others, but the core focus of our group right now is in cardiology. Ryan McDonald: Awesome. Appreciate all the color, Lee. Lee Bienstock: Of course. Operator: Thank you. Your next question comes from David Larsen from BTIG. Please go ahead. Jenny Shen: Hi. This is Jenny Shen on for David. Thanks for taking my question. First, I just wanted to ask about your current view of the hospital and hospital spending environment as a whole. We've spoken to some hospital executives who've said some of the uncertainty in the market, including around things like ACA and Medicaid have caused them to be more cautious with their budget. And they're expecting there could be pressure on volumes and spending. Have you had or heard any of that sentiment with your customers so far? But it looks like volumes are strong. Just any thoughts on hospital customer sentiment on spending? Thank you. Lee Bienstock: Oh, absolutely, Jenny. It's great to hear from you, and it's a great question. So yeah. Look. I think it's still early to tell what really the impacts will be from any new legislation, but you can certainly see an area where perhaps there's more Americans that are underinsured or uninsured, and they end up in hospitals' emergency rooms, and really straining capacity. And then, of course, perhaps those hospitals won't be able to recoup reimbursement from underinsured or uninsured patients. So it's definitely a concern. We spend a lot of time with hospital executives, and I speak to hospital system CEOs very regularly. And I think our core focus is on how we can save them money and be more efficient. That's really always been our focus. We feel like we can help them manage their patient flow, make sure patients are not staying an extra night in the hospital if they don't need to because they couldn't get the medical transportation coordinated. We help with that. Our platform specifically is designed for that. And so we feel like we've gotten receptivity from hospital systems very recently to that. And then, of course, on the payer and provider side, our whole goal again whether it be with hospital systems or payers, is we want to help lower their costs and their utilization. And so that transitional care management program I described, when a patient is getting discharged, that is a critical moment in patient engagement. They're leaving the hospital. And so we're there bedside often scheduling follow-up appointments, making sure that we're gonna go and see them perhaps in their home to make sure their discharge planning is being taken care of. That is very valuable, and that will help patients stay out of the hospital. And that helps hospitals because hospitals get penalized if patients bounce back within a thirty-day window. And so we're helping keep patients from doing that. And it helps the payers because, again, patients are most costly when they're in the hospital. So again, we really are excited by what we're building here. We think it is very timely. We think it's incredibly strategic to the healthcare ecosystem. And, really, it's all designed on trying to save the system money, the hospital's money, and the payers' money, and that what we think will be successful with that. Norman Rosenberg: Yeah. Jenny, what I would add to that is that I can say anecdotally that in the last six months or a year, we've had conversations with hospital systems that, you know, we've been in the ambulance business for quite some time. But there are some big hospital systems we've spoken to that we had not really spoken to prior to, let's say, the last six or twelve months who are now thinking about precisely that. Outsourcing the management of the flow of patients into and out of their facilities. Something that they had always done on their own. It's always been a pain point to them, and now they really have to think about being more efficient and getting it off their plate. So we're having we have opportunities that I don't think even existed a couple of years ago. Jenny Shen: That sounds great. And then, for a quick follow-up, have you seen any impact from the government shutdown? Has that impacted any municipal decision-making at all? Thank you. Lee Bienstock: Yeah. Absolutely. So we've shared over the past several earnings calls. We've actually emphasized less our work in the population government space. So we've really been focused on the hospital systems, the payers, the providers, you know, SteadyMD's now customer set. It's gonna get more and more of our attention, time, and resources. And so, you know, that's really where our big focus is. And again, I think, honestly, it's very early to tell any impact from some of this legislation or policy changes. We don't see it yet. And frankly, a lot of the policy changes kick in later on down the road, next year, the year after. So we're really heads down. We think our value prop speaks to whatever environment the healthcare system or policy may be. Whatever situation the healthcare system may be in or whatever policy that there may be in effect because again, we're there to help save the system money. Help save hospital systems money, help CMS save money, help our insurance partners save money. And that's really our goal, and we think that'll be germane and relevant no matter what going forward here. Jenny Shen: That's great. Thank you. Operator: Thank you. And your last question comes from Mike Latimore from Northland Capital. Please go ahead. Aditi Dagaonkar: Hi. This is Aditi on behalf of Mike Latimore. Could you give some color on how are the bookings in the third quarter and how much did they grow sequentially? Norman Rosenberg: For which business? Aditi Dagaonkar: Like, overall. Yeah. Norman Rosenberg: Well, I mean, we saw sequential growth in almost all of our businesses. In transport, we would see, let's say, the US, and, you know, we look at it in terms of the number of trips that we carried. So we saw, like, a mid-single-digit sequential growth in trip count which, you know, for a quarter-over-quarter number, that's very, very good. We're happy with that. Obviously, our payer and provider business lines all show some growth during the quarter. I think every one of those business lines showed a higher revenue number for Q3 than for Q4. So in fact, when we look towards 2026, if we would simply take the Q3 results and annualize them, that would already put us in pretty good shape as far as the guidance that we gave. So we definitely saw a pickup in volumes. I think we mentioned in the release or elsewhere that we did see record volumes. Now granted, it wasn't, you know, blowing away our previous records, but we did see higher volumes across all of those business lines in Q3 than we had ever seen. Aditi Dagaonkar: Got it. And how much cash do you expect to have at the end of the year? Norman Rosenberg: So just using the end of Q3 as a baseline, we had $95 million when you take cash and the restricted cash as well. Or $73 million if you just look at the unrestricted cash. We would expect that number to go up net by a few million dollars assuming that as we expect, we will collect on the remainder of the large migrant-related invoices that are out there. That would be enough to cover any kind of operating loss. And we should be able to squeeze out some operating cash flow on that basis. So we would expect that the number will go up a little bit by the end of Q4. As we've shared, we think that that number from there starts to go down at Q1, at Q2 before picking up in the back half of the year. But we feel that we would exit 2026 at a number that's about $65 million or higher. Aditi Dagaonkar: Alright. Got it. Thank you. Norman Rosenberg: Of course. Operator: Thank you. And there are no further questions at this time. I would now like to turn the call back over to Mr. Lee Bienstock. Please continue. Lee Bienstock: Thank you, and thank you all for joining us today. Be well. Operator: Ladies and gentlemen, this concludes your conference call for today. We thank you very much for your participation. You may now disconnect. Have a great day.
Operator: Thank you for standing by, and welcome to the OFX Group Limited FY '26 Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Skander Malcolm, CEO and Managing Director. Please go ahead. John Malcolm: Thank you, Kaley, and thank you, everyone, for joining the call. As Kaley mentioned, I'm joined by Selena Verth, our Chief Financial Officer; and Matt Gregorowski from Sodali & Co., who leads our Investor Relations program. Selena and I will take you through the pages, and then there will be time for Q&A. The presentation will cover 6 sections: our mission, performance update, the 2.0 transition, our financials, the strategy execution and our outlook. And then we'll have time for Q&A. So let's move to Slide 4 in the pack. And I want to start the presentation by being focused on our mission, which is simpler financial operations, helping businesses thrive globally. I start here because we must be very clear with our investors, our employees and our clients about what we're trying to do. It may sound obvious, but it matters a great deal as we navigate the transition from a company that did one job very well for both corporate and consumer clients, which was making cross-border payments to becoming a company that does several jobs very well for our corporate clients to make their lives simpler and in turn, help them thrive. We've laid out this strategy before, and I'll revisit it today to ensure we are aligned on what guides our investments, our decisions and our pacing. So why this mission? Moving to Slide 5. This mission is built on a huge opportunity around USD 66 billion of revenue and the fact that we are well prepared to capture it. Firstly, by expanding the number of jobs we can do for clients, we nearly doubled our TAM from USD 34 billion to USD 66 billion. Secondly, we often get questions from investors about competition, but the research we conducted and the evidence we see is that most of the opportunity sits with SMEs who work with banks. Depending on the market, the research suggested between 77% and 80% of clients who need the products and services we provide are trying to get them to banks. Yes, there are non-bank competitors, but the real prize is still largely with the banks who are less nimble and less customer-centric. And we believe we can be sufficiently differentiated from the non-bank competitors to take a reasonable share. Thirdly, the research showed that just over 3 in 4 of these clients are willing to switch away from banks for the right combination of products and services. That hugely encourages us to invest and compete. And finally, if we do our job well and we win these clients, the extra revenue available per client is material, which is over 40% versus our existing model, which makes the return significantly more attractive. So in summary, whilst our mission and strategy have evolved, our target of strong and sustainable growth has not, and we have found a faster and more effective way to deliver it. Turning to Slide 6; we have a very clear path to unlocking this opportunity as well as a very clear goal, which is 15% net operating income growth fiscal year '28 at around 30% underlying EBITDA margins, and we are executing to achieve that. Part of what will drive that NOI growth is non-FX revenue, which we expect to be at least 10% of all fiscal year '28. We know who we're targeting. We know which products and services we can provide to them to make their lives simpler. We have the platform in place in all our major markets and soon in all our markets to make it happen. And we have the infrastructure beneath the platform, our licenses, our banking support and our teams to make this work at scale and globally. We are investing and executing this way based on considerable research, our client experience, our knowledge of the industry and over 25 years of being in this space, and that is what underpins our conviction. Moving to Slide 8, I'll now share the performance of the first half. We delivered NOI of $105 million and underlying EBITDA of $14.5 million. This was a disappointing outcome and certainly below our expectations, and I'll walk through some of the reasons on the next slide. Our NOI margin was 55 basis points, around 4 basis points lower than first half '25, primarily driven by lower margins in North American corporate clients, where we took pricing actions to retain at-risk clients. Our business continues to generate healthy levels of cash with net cash held for on use of $47.1 million, up 2.6% versus the prior corresponding period. Selena will cover cash and cash generation later. We're pleased with the average revenue per client at $4,100 remaining steady through the first half and the non-FX revenue of $0.6 million. Although this was down on PCP, the cause of that a vendor switch was addressed, and we saw revenue grow just under 24% from the first quarter to the second quarter. Moving to Slide 9; we've seen a difficult macro environment affect the confidence of our corporate clients, which has seen them reduce their ATV by 9% from the first quarter to the second quarter, and that largely drove the drop in NOI. Business confidence indicators in all our major markets are below their long-term mean and they are generally not improving. We did see some strength in ATVs in the U.K. and Europe, but this was driven by a few large transactions rather than persistent strength. Encouragingly, our clients remain engaged with us with transactions up 5.7% on prior corresponding period, as you'll see on the next slide, and transactions per active client growing for the third quarter in a row and a healthy CAGR of 11% since the beginning of fiscal year '24. Moving to Slide 10; this is a view of our three main segments: corporate, enterprise and high-value consumer. Corporate revenue was disappointing, down 5.7% versus prior corresponding period, however, up 2.3% versus the second half '25. Within that, the U.K. was the bright spot, growing at 4.6% versus prior corresponding period of some healthy large client wins. Enterprise continues to grow strongly, up 47.7% versus PCP and up 27.5% versus second half '25. The momentum here is largely a function of the excellent support we're providing our clients, the growth in their own businesses and the increasing revenue we're earning from clients we've onboarded in the last three years. In High-Value Consumer, revenue fell 11.3% versus PCP and 8.7% versus second half '25. This is a substantial decline and was driven by unusually quiet market conditions. With volatility, which is typically a key driver of our clients' behavior being very low. In the first half, we only saw 15 days of volatility. And within that, the second quarter, we only saw 1 day where the U.S. dollar AUD moved outside our normal range compared to the 15 to 20 days that we would normally see in a quarter. Later, I will share how we will stabilize and grow this segment. Moving to Slide 11; we've been working very hard to stabilize and grow our corporate active clients. So it's encouraging to see progress. Overall, corporate active clients, including OLS, fell by around 700 in the first half, the lowest rate of decline in several years. We exclude OLS, given we are no longer originating OLS, we actually grew active clients in roughly half the number of weeks in the second quarter. The improvement in corporate, excluding OLS, has been driven mainly by NTCs or New Trading Clients as lapse rates have been slightly higher, but offset by an increase in reactivation. Importantly, of those that have lapsed, more than 2/3 have been low-value corporate clients. As I mentioned earlier, the corporate ARPC was steady in the first half, but the growth in non-FX revenue is encouraging, and this will support growth in ARPC over the medium term. Moving to Slide 13; we're very encouraged by the progress we're making in transitioning to 2.0 and the growth in non-FX revenue we're seeing. We've seen strong client uptake of our new products and services. Card revenue, subscriptions and the Payback card feature all grew in the first half, up 23.8% quarter-on-quarter. Overall revenue was down versus prior corresponding period as we had to switch off the Pay by Card feature during the first quarter, but it rebounded in the second. We're confident this non-FX revenue will continue to grow at a healthy rate as we complete our corporate migration and continue to grow NTCs. This quarterly growth rate has us well on track to achieve our goals of non-FX contributing 10% of NOI in fiscal year '28. As we mentioned in our trading update last month, we migrated just over 39% of our existing corporate clients during the first half. October and early November have been very busy, and we're now just under 60% complete. The migrations have gone well, both technically and from a client experience perspective. Card spend is healthy and cards continue to get issued and activated. Subscriptions are strong and clients are growing balances faster than expected. As at the end of October, we have $138 million in balances, and it continues to grow. And note that the interest from balances is not included in the non-FX revenue. Turning to Slide 14; when we embarked on the transition, a good migration was and is absolutely key to retaining clients and growing our NOI over the short- and medium-term. So it's very encouraging to share some of the key trends that we track. As a first goal, we must retain clients through migration and grow their ARPC post migration. Progress in migrating clients is good with almost 50% of clients from our major markets migrated by the end of the first half, and that figure will be close to 80% by the end of the third quarter. Given we're offering these clients the simplest version of the new platform, i.e., Free with Wallets, it's very encouraging to see them use wallets and do FX transactions as a first step. Wallet balances are growing very well, as I mentioned, and FX transactions are also healthy, but clients activating they are ahead of their pre-migration levels. In terms of ARPC, pre-migration, we were seeing ARPCs of around $4,100. And whilst it's still early for many migrated clients, given that, for example, of the 39% of corporate clients that were migrated, only 7% were migrated to the full first half. And in Canada, migrated clients only had between 1 or 2 months on the platform. But we're already seeing healthy ARPCs across migrated clients in both Australia and Canada. Moving to new product adoption. In Australia, nearly 4% of migrated clients have taken up a second product despite our primary focus being on successful migration and FX usage. Whilst that may seem low, it's largely because we deliberately focused on just wallets and FX for these clients thus far. One cohort of Australian clients who self-identified as wanting to see the additional features and products have been very active with over 50% of them already taking up additional products. In terms of new clients, ARPC is below what we saw in the 1.0 model as we've not been targeting FX in our marketing, but uptake of additional products is very encouraging with just under 16% of all new clients in Australia taking up additional products. We're confident that the ARPC from these clients will grow over time as the experience in cards tend to suggest usage builds gradually. Interestingly, in the U.K., we've already seen some very large FX transactions with new clients and clients are already self-serving with our new digital forwards. So we know we can grow FX and non-FX as well as secure large ATV transactions on 2.0. Turning to Slide 15; our solid progress and results on 2.0 have been underpinned by good execution. Alongside migration, our product and technology teams delivered 80 new products, features or services in the second quarter alone. That is incredibly encouraging for us as a team as we know we can bring better client experiences to life quickly and cost effectively. Put that in perspective, two years ago, we had 8 large teams doing one deployment every two weeks, which was about 26 releases a year. Today, we have 18 small- to medium-sized squads delivering over 200 deployments a week. On the right is our timeline to complete the migration. We expect to have around 80% completion in our major markets by the end of Q3. In terms of new launches, all major markets are now live, including most recently the U.S. So a lot of execution and a very promising future. Now let me hand over to Selena to walk us through the financials. Selena Verth: Thank you, Skander. Moving to Slide 17, our financial results reflect a period of softer trading, coupled with a deliberate increase in investment to accelerate our transition to OFX 2.0. Fee and trading income was down 4.7% to $109.1 million, reflecting the ongoing macroeconomic uncertainty that continues to dampen business confidence. This softness was seen across most regions with APAC down 6.2%, North America down 7.5%, while EMEA saw a modest increase of 1.9%. Our net operating income or NOI was $105 million, which is down 5.6% versus PCP, but represents a 1.2% increase on the second half of fiscal year '25. The NOI margin contracted by 4 basis points, 3 basis points was due to the lower pricing in North America, which Skander mentioned and 1 basis point on the higher value consumer transfers. The NOI margin is up 1 basis point on the second half '25 as we build back up margins in North America. As we invest for growth, underlying operating expenses increased by 10.2% to $90.5 million, which I will detail on the next slide. This planned investment, combined with the soft trading environment resulted in an underlying EBITDA of $14.5 million. Depreciation and amortization continued in line with our ongoing investment in client experience in our platform, leading to an underlying EBT of $1.5 million. We have an effective tax gain as our R&D credits accumulated in the period and can be carried forward for future use in future. Our balance sheet remains solid with net cash held at $75.4 million at the end of the half. Moving to Slide 18, you will see the composition of our increased operating expenses. We are making targeted investments to deliver our 2.0 strategy to accelerate growth while also identifying productivity savings through the organization. Employment expenses, our largest cost category, was up 8.9% versus the prior corresponding period. This was driven by an addition of 19 full-time employees, primarily in product, marketing and frontline roles to execute our growth strategy. Promotional expenses increased by 5.3% as we supported the accelerated launch of our NCP in Canada and EMEA, which helped drive the 11.8% growth in corporate NTCs. We have invested in account-based marketing and our new websites are live for our major regions with the U.S. site going live last week. Bad and doubtful debts were $3.2 million for the half. While this is an increase on prior periods, it relates to a very small number of incidents. We're actively pursuing recoveries and have strengthened our risk settings and controls to manage this closely. We've not seen any material bad debts in the current quarter, and we do not expect the bad debts to repeat at this level in the second half. Longer term, as more clients migrate to NCP, these risk controls will improve further as the platform provides us with better technology and more optionality for setting client specific [indiscernible]. Turning to Slide 19; this investment is creating a path to growth and a better longer-term return. We committed to accelerating investment in fiscal year '26 of between $16 million and $24 million in OpEx and approximately $5 million in CapEx. As you will see, we are about halfway through this investment. Our delivery is executing better than ever. And as a result, we have lowered our full year CapEx guidance to be between $20 million to $21 million. Productivity initiatives are delivering the same road map with less resources. The investment in driving promising returns with an 11.8% growth in our corporate ex-OLS NTCs and our non-FX revenue is building momentum with $600,000 generated in the first half and quarterly growth of 23.8%. This progress gives us confidence that these investments will generate superior returns. We are targeting an underlying return on invested capital of 30% in fiscal year '28. Moving to Slide 20. Our balance sheet remains strong with healthy levels of cash to support our growth ambitions. The business continues to demonstrate excellent cash generation with an operating cash conversion rate of over 100%. Our underlying EBITDA of $14.5 million converted to a net cash flow from operating activities of $16.5 million, supported by the timing of expenses. Our net cash held position is strong at $75.4 million. After deducting our collateral and bank guarantees, the net available cash position is $47.1 million. This is up $1.2 million on last year and down $3.9 million from the March full year '25 results. We have self-funded our accelerated growth. The reduction in net available cash is due to repayment of debt, which now stands at $18.5 million and the buyback of 2.3 million shares for $1.9 million during the half. Our strong balance sheet and cash flow provide the foundation for us to invest in our accelerated growth strategy by continuing to look for productivity wherever possible. I will now hand back to Skander to take you through our strategy, execution and outlook. John Malcolm: Thank you, Selena. Now let's move to Slide 22 to walk through what we're doing to bring the next phase to life. Alongside strong execution, we've been working very hard to bring to life the three elements that will create growth in our model, our value proposition, our go-to-market and our operating model. Firstly, as previously mentioned, our value proposition is now much broader and more compelling. We've evolved from being a focused FX provider to supporting businesses with a wider range of needs, helping them simplify their financial operations. Our marketing and product teams have done a huge job in completely reorienting what success looks like for our clients. And our platform has been configured and launched in every major market to accelerate our transition. Secondly, our new go-to-market model is up and live in every major market. Roles and pipelines have been redefined and new software deployed. We're already seeing great progress with double-digit growth in corporate NTCs. Finally, we also reorganized our corporate structure to more closely resemble the new company that we are becoming. Commercial teams now focus on a single segment with a global leader for B2B and a separate leader for B2C. We also combined product and marketing into one growth organization to drive speed and consistency. And we moved the payments team out of operations and into finance and refocused the remaining operations teams who are all customer-facing into a single customer function. These changes took effect on October 1 and are already working well. For clients, our teams are more focused and provide better products and services. For employees, they get faster decision-making. And for shareholders, it's cost neutral and positions us for faster growth. Moving to Slide 23; during the half, we completed a strategy review of the high-value consumer segment and identified a clear path to stabilize and grow it. Our focus will be on clients and prospects who make larger value consumer transactions, clients we know well and consistently rate us highly. We will acquire them through partnerships, primarily targeting the wealth and professional services use cases. Our competitive differentiation will remain our digital plus human service delivery and partnership referral model, which is unusual in our industry where most consumer firms go direct. We will leverage the new client platform's product and platform capabilities so our clients benefit from the same programs, and we will use the same go-to-market approach to find new partners, and this will drive synergies across the platform. We plan to execute this migration in fiscal year '27 with no incremental CapEx to what we have previously guided. We are already working hard on the value proposition, the launch and the migration plan, and we will provide more detail on that when it is finalized for our fiscal year '27 outlook. Moving to Slide 24; like most companies, we have been busy building and executing our AI capabilities, and we've made good progress. Firstly, we're very excited by AI's potential and know it will be transformational for OFX. We have started with the foundations, good governance, well-organized data, modern architecture and security and much of that is now complete. Concurrently, we've been deploying it across a range of internal use cases, largely to drive productivity so far. Over time, the real value driver will be making AI central to the client experience and the product road map. The team already has a very exciting plan, but they insisted, I do not share it yet. What I can say is our clients are already seeing the benefits of the simple things like AI-driven expense allocation, but what we have planned will be significantly more value accretive. Moving to our outlook on Slide 26; we remain committed to our medium-term outlook, which is to generate at least 15% NOI growth in fiscal year '28 with underlying EBITDA margins of around 30%. In second half of '26, we're targeting NOI growth to be higher than second half '25. We will continue to execute the plan that we shared back in May, which is to invest to accelerate our transition. As we stated in our trading update, we're managing OpEx and expecting it to be between $173.7 million and $181.2 million for fiscal year '26. Because our execution is strong, and as Selena mentioned, CapEx will be in the range of $20 million to $21 million in fiscal year '26, not just under $24 million as we originally forecast. We have not yet completed planning in detail for fiscal year '27, but we can say that the consumer migration and launches will happen [ within our ] incremental CapEx to what we previously guided. And as we previously stated, OpEx and CapEx will be similar to what we are seeing in fiscal year '26. But before I hand back to Kaley, I want to reiterate that both management and the Board are very confident in the strategy. The execution remains good, and we are determined to combine these into a great outcome for investors. Thank you, and I'll now pass back to Kaley to handle Q&A. Operator: [Operator Instructions] Your first question comes from Michael Trott with MST Financial. Michael Trott: Consider that you guys are going hard at the investment over the next 12 to 24 months. But just with the short-term weakness, in NOI also flagged and then also your current underlying EBITDA margin of roughly 13%. Can you just provide some color on when you're expecting a step change in this margin, especially with the, I guess, realization of the FY '28 30% target? John Malcolm: Yeah. So what I'd say, Michael, is in the short-term, we're very, very focused on driving up NOI, and that will be the thing that underpins margin expansion. But at the moment, we're not guiding to that. We are working exceptionally hard to create it. And as we've said in the second half, we're just targeting growth in NOI second half '26 over second half '25. But in the short term, any margin expansion will be driven by top line growth. Operator: Your next question comes from [ Scott Nelson with Nelson Capital ]. We might just move along to the next questioner in the queue, Cameron Halkett with Canaccord Genuity. Cameron Halkett: Just two, please. Around the incremental OpEx guidance you've further reiterated there. Selena, can you just remind us, please? I think there was a bit of confusion back at the last half. Is that swing between the incremental $16 million to $24 million effective in bonuses relative to how the business performed in the second half, please? Selena Verth: Yeah. So the range on OpEx is largely due to the range on what the STI outcomes could be because STI is 60% financial, 40% nonfinancial -- financial metrics do assume growth. So obviously, depending on how the financials play out, that can range on your OpEx. Now that being said, if you look at the first half, the bad debt was higher than we wanted it to be. We've done a lot of changes and controls. We don't expect that to repeat in the second half, and we'll be looking at any productivity savings that we can get to make sure we offset those costs as well. Cameron Halkett: Yeah. I guess just turning to the comments and some of the disclosures just around sort of funds that have been loaded on to the cards and references to cash balances. How is that tracking relative to your initial expectations that sort of get the feeling that that's higher than perhaps what you were expecting? Selena Verth: Look, the cash balances are relatively hard to predict. We really like what we see. Obviously, we're seeing balances in all regions as customers come on board. We do make some interest out of that. You would have seen our interest revenue for the half was flat half-over-half this half versus last half, but that's given also that there's been two rate cuts in the last half. So we're actually outgrowing the rate cuts at the moment, slightly outgrowing the rate cuts at the moment with those building cash balances. So we like what we see. We're seeing in all regions, and we are encouraged by the growth. John Malcolm: And maybe just to add to that, Cam. As we look at the cards themselves, a couple of encouraging statistics or trends relative to our own expectations. First of all, the proportion of cross-border usage is a bit higher than we were expecting, and that's good because generally, they attract higher levels of interchange. And I'd say the second thing is we're also seeing clients using cards for a range of different use cases, which, again, is really helpful. And there is a somewhat kind of symbiotic effect there with the balances that Selena mentioned because typically, for example, here in Australia, people are putting balances on to -- in their wallet because they want to use the cards for domestic transactions as well as international transactions, and that would suggest a more engaged client. So it's certainly encouraging. Selena Verth: Yeah. And just last one. When I look at Slide 13, the sort of composition of sort of what you're seeing there around card, Pay by Card and subscription and other. When you look at the sort of second quarter '26 breakdown, let's just for simplicity call [ it a third ] equal. Any comments you can make around more of an early adopter of the card selection where that mix of revenue composition might be, say, more weighted to card and Pay by Card than subscription, just to help people understand the expected contribution and mix over time? John Malcolm: Yeah. I'd say, Cam, our general view is it's still very early days. What's actually happening is -- if we look at new clients, we're seeing a pretty good uptake of cards. We're seeing a pretty good uptake of subscriptions, particularly, I would say, in Canada relative to our expectations. And so that's pretty good. From an existing client perspective, we've been very, very careful in making sure that the first thing that migrated clients do is reactivate their accounts with FX. So it's still, I would say, quite early to say, okay, we're seeing some pretty clear trends in terms of that non-FX revenue. But at an overall level, the growth rate is encouraging in each of the categories. And what's also coming online really, I would say, scaling in the third quarter and beyond is really our product marketing efforts. To-date, we've been, as Selena mentioned, recruiting for those roles, putting in place some pretty basic product and marketing programs to get ourselves ready for that, and then we will start to increase our efforts in this area, which should then drive more of the non-FX revenue over time. Operator: Your next question comes from David Kingston with K Capital Group. Your next question is from Olivier Coulon with E&P Financial Group. Olivier Coulon: Can you hear me okay? So you mentioned on the intro that you were seeing growth in -- the revenue per transacting client on a same cohort basis. And I think you mentioned that there were 7% that were there for the full half that had migrated. I don't think you actually mentioned a specific growth number. Is it possible to share that on that same cohort basis? John Malcolm: Yeah. We've talked in the past around kind of FX growth for those pre and post at around 5%, and that's kind of what we're seeing. We just wanted to point out that a lot of the migration happened candidly in the second quarter. So if you look at, for example, Canada, I think something like 20-odd-percent had even 60 days on the platform. But they've been migrating across well. It's really mostly Australia, where they've had, as you mentioned, the 7% for the full half and those FX -- that FX growth is around the 5% range. Olivier Coulon: Yeah. And that's absolutely not kind of relative to the rest of the clients because I guess Australia had a pretty tough half, right, in terms of corporate revenue per client. John Malcolm: Yes. Olivier Coulon: Yeah. So is there any reason to think that Australia should -- like that those clients wouldn't have had the same sort of underlying trend maybe during their revenue growth? John Malcolm: I'd say on that one, Olivier, is that what we're seeing is they're picking up the fact that they can use a wallet, and they're using the wallet for cross-border for some smaller value transactions, some larger value transactions. They appear to be feeling like the wallet is a step up relative to the prior value proposition. But again, I would say it's still -- which is very encouraging. Let me make that plain. But I would still say the bigger job to do for that cohort and for the corporate active clients more generally is getting them comfortable also to see the opportunity on non-FX, and that's really where the third quarter and beyond will take us. Olivier Coulon: Yeah, okay. But it's fair to say that, that uplift that you saw from those -- from that small cohort who is kind of directly comparable, that was primarily from actual increased transaction activity. Yeah, as opposed to ATV or anything like that? John Malcolm: That's right. Operator: [Operator Instruction] Your next question comes from [ David Kingston with K Capital Group ]. Unknown Analyst: Anyway, thorough presentation, so thanks for that. Look, I've just got a few macro comments, Skander. Look, sadly, at the moment, OFX has lost the confidence of the stock market. The market capitalization is $130 million, which is an enterprise value of $100 million when you adjust for the net available cash of $47 million and deduct the debt of $18 million. So enterprise value of $100 million. In the past 14 months, OFX has burned 75% of shareholder value, $2.30 down to $0.57, down $400 million. Look, on the positive, OFX still has substantial NOI of $105 million for the first half albeit with the increased OpEx for OFX 2.0. Obviously, the NPAT has been smashed at around about 80%. Look, I'd also note, Skander, that as well as the past 14 months being ugly, OFX floated in 2013 at $2. And it's pretty concerning that 12 years later, when some of the competitors have shot the lights out, OFX is less than 1/3 of the IPO price. So really, I've just got a few macro questions, Skander. Playing Russian Roulette with the substantial increase in OpEx of OFX 2.0 or can you reverse the huge $400 million loss of shareholder value in the past 14 months? Secondly, is OFX too small and is the Board and management to corporate and lacking the corporate savvy to compete with the more dynamic and entrepreneurial Airwallex and Wise? And finally, just be grateful if you could provide some insights into is the Board proactively considering a sale to another corporate with synergies or to private equity? Like I think it's fair to say that at the moment the fair value of OFX should be way, way above the current $100 million enterprise value. But certainly, shareholders at the moment Skander are concerned that the ongoing loss of shareholder value as represented by the share price anyway. John Malcolm: Alright. So I think there were three questions. Look, in terms of the EV and the OpEx -- one analyst said to me once, which I think is absolutely right is the market can't value no growth. And so the EV is really a function of the no growth. If you look at, as you pointed out, underlying NOI, it hasn't changed that much, certainly not as much as the EV has declined. The OpEx has really been invested with a lot of research. I mean, effectively over two years' worth of research, market experience, customer signaling all over the world. So it's not Russian Roulette, which would suggest a random allocation. It's been very, very carefully studied before that investment. And the Board and management are working exceptionally hard on all of the factors within that OpEx, as Selena mentioned, whether it's product, software, commercial people to drive growth because ultimately, that's what the market and investors will rate in OFX, and we're very clear that the best way to generate growth is through the investments that we've made. On your second question, look, I can't comment on some of the private companies. All I can do is to say to public company investors, what you get with this management team and this Board is a very mature risk management and governance framework. You have global experience, which in a somewhat uncertain and risky world, and we've seen a lot of examples in the last few years, which I talked about a lot just in one space, for example, is around the rise of fines, AML fines that investors can rely on in terms of our oversight and management of those. And certainly, if you look at the kind of corporate experience inside the company, there's a blend of certainly some corporate skills, but there's also a group of folks who've done a whole range of entrepreneurial activities as well. And the answer to the third question is no, we're not actively engaged or strategic on a sale of the [indiscernible]. Unknown Analyst: But just one follow-up there, Skander. In the context of in the last 14 months, your 3,000 shareholders, Skander, have lost $400 million of shareholder value. It's got to be telegraphing some flashing yellow or maybe red lights. You're going out here competing with some whales. NOI is declining, margin is collapsing because of the extra expenditure. I hope that you and the Board are properly considering the value of your shareholders who have been absolutely punished in the past 14 months. It's already [indiscernible] to get reports from outside people and to -- as I said, your presentation is very thorough and professional. But at the moment you're losing the battle on behalf of the people that you're representing who are the shareholders who have been punished in the past 14 months. But anyway, I'll leave that as it is. Thanks Skander. Thank you. Operator: There are no further questions at this time. I'll now hand back to Mr. Malcolm for closing remarks. John Malcolm: Well, I'll just wrap it up by saying thank you for joining the call. We are working exceptionally hard to turn the growth in the top line around. And I can assure you that management and Board are very, very busy on every single detail to make sure that we can create a more valuable company. Thank you very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Hello, and thank you for standing by. Welcome to FibroGen Third Quarter 2025 Earnings Conference Call. [Operator Instructions]. I would now like to hand the conference over to Gaia Shamis. You may begin. Gaia Vasiliver-Shamis: Thank you, [ Twanda ]. Good afternoon, everyone, and thank you for joining us today to discuss FibroGen's First Quarter 2025 Financial and Business Results. I'm Gaia Shamis from LifeSci Advisors. Joining me on today's call are Thane Wettig, Chief Executive Officer; and David DeLucia, Chief Financial Officer. Following the prepared remarks, we will open the call to your questions. I would like to remind you that remarks made on today's call include forward-looking statements about FibroGen. Such statements may include, but are not limited to, collaborations with AstraZeneca and Astellas, financial guidance, the initiation, enrollment, design, conduct and results of clinical trials, regulatory strategies and potential regulatory results, research and development activities, commercial results and results of operations, risks related to our business and certain other business matters. Each forward-looking statement is subject to risks and uncertainties that could cause actual results and events to differ materially from those projected in that statement. A more complete description of these and other material risks can be found in FibroGen's filings with the SEC, including our most recent Form 10-K and Form 10-Q. FibroGen does not undertake any obligation to update publicly any forward-looking statements, whether as a result of new information, future events or otherwise. The press release reporting the company's financial results and business update and a webcast of today's conference call can be found on the Investors section of FibroGen's website at www.fibrogen.com. With that, I would like to turn the call over to CEO, Thane Wettig. The? Thane Wettig: Thank you, Gaia. Good afternoon, everyone, and welcome to our third quarter 2025 earnings call. On today's call, I will provide an update on our ongoing efforts with a focus on our 3 main priorities: the completion of the sale of FibroGen China, the continued progress with our lead asset, FG-3246, a potential first-in-class antibody drug conjugate targeting CD46 and its companion PET imaging agent in metastatic castration-resistant prostate cancer and the path forward for roxadustat as a potential treatment for anemia due to lower-risk myelodysplastic syndromes. Then David DeLucia, our CFO, will review the financials, after which we will open the call for your questions. On Slide 3, I would like to start with the sale of FibroGen China to AstraZeneca that we recently completed for approximately $220 million. This was a truly transformative transaction that provided us with the most efficient means to access the company's cash held in China, extending our cash runway into 2028. Following the transaction, we successfully paid off the term loan facility with Morgan Stanley Tactical value. Second, we continue to progress FG-3246 and FG-3180 in metastatic castration-resistant prostate cancer, or mCRPC, and initiated the Phase II monotherapy trial of FG-3246 and FG-3180 earlier this quarter. Additionally, we expect the top line results from the investigator-sponsored trial of FG-3246 in combination with enzalutamide in mCRPC to be presented at a medical conference in the first quarter of 2026. Third, as we have previously stated, we had a successful Type C meeting with the FDA in July, providing us with a clear regulatory path forward for roxadustat. We remain on track to submit the Phase III trial protocol for roxadustat for the treatment of lower-risk myelodysplastic syndromes in patients with high transfusion burden later this quarter. We are confident that with our mid- and late-stage assets, simplified capital structure and upcoming near-term catalysts across both clinical programs, we are well positioned to advance meaningful therapeutic options for patients and significant value for shareholders. I will now provide a brief overview of our FG-3246 and FG-3180 programs in mCRPC. Slide 5 summarizes the high unmet need in late-stage prostate cancer. Approximately 290,000 men are diagnosed with prostate cancer each year in the U.S. with about 65,000 drug-treatable patients where the cancer has metastasized and become castrate resistant. This group of patients has a grim 5-year survival rate of approximately 30%, underscoring the significant opportunity for new life-extending treatments. We believe that FG-3246 could be this new treatment option and estimate the total addressable market to be well over $5 billion annually. On Slide 6, we highlight the novelty of CD46, a tumor-selective target that has several distinguishing features. First, CD46 is upregulated during tumor genesis and helps tumors evade complement-dependent cytotoxicity. Second, its expression is also upregulated in the progression from localized castration-sensitive prostate cancer to metastatic castration-resistant prostate cancer and further overexpressed following treatment with androgen signaling inhibitors. Notably, CD46 is highly expressed in mCRPC tissues with lower interpatient variability and higher median expression compared with PSMA, making it an attractive therapeutic target. Turning to Slide 7. FG-3246 is our potential first-in-class ADC in development for mCRPC. The ADC combines the YS5 antibody with an MMAE payload to specifically target the tumor selective epitope of CD46. YS5 is a fully human IgG1 monoclonal antibody that was engineered to specifically target the tumor selective epitope of CD46 whose expression is limited in normal tissue. FG-3246 represents an androgen receptor agnostic approach, clinically differentiating it from other prostate cancer treatments currently in development, many of which target PSMA. The companion PET imaging agent, FG-3180, utilizes the same YS5 targeting antibody as FG-3246 and is also under clinical development. We believe that having a patient selection biomarker would not only allow us to better enrich the patient population in a future Phase III trial, it could also enable differentiation of FG-3246 in the prostate cancer treatment paradigm. In addition, FG-3180 could represent an important commercial opportunity as a companion diagnostic to FG-3246, similar to the existing PSMA PET agents. Slide 8 recaps the top line results from the 2 FG-3246 clinical trials to date. On the left side, we highlight the Phase I monotherapy study, where a median radiographic progression-free survival of 8.7 months was observed in patients with mCRPC that were heavily pretreated and were not biomarker selected. PSA reductions of greater than 50% were achieved in 36% of these patients. On the right, we highlight the previously reported preliminary efficacy data from the Phase Ib portion of the investigator-sponsored combination study with enzalutamide which demonstrated a preliminary estimate of 10.2 months of radiographic progression-free survival with PSA declines observed in 71% of evaluable patients. The top line results from the IST are expected to be presented at a medical conference in the first quarter of 2026. Together, these results highlight what we believe is compelling clinical activity with FG-3246 with competitive rPFS results compared to other approved and investigational treatments in both the monotherapy and combination settings. Moving to Slide 9. Based on the Phase I monotherapy results, we initiated the FG-3246 Phase II monotherapy dose optimization trial in September. We plan to enroll 75 patients in the post-ARPI pre-chemo setting across 3 dose levels to determine the optimal dose for Phase III based on efficacy, safety and PK parameters. It is important to note that FG-3180 will be an integral part of the study as we seek to demonstrate the correlation between CD46 expression and response to the ADC in this all-comers population. One other important design element is the use of G-CSF as primary prophylaxis to mitigate grade 3 or greater neutropenia commonly seen with MMAE payloads and also experienced in the Phase I monotherapy trial. The addition of G-CSF is designed to reduce dose interruptions and downward adjustments and may enable a better tolerated and more consistent treatment with the ADC. An interim analysis of the Phase II trial is planned for the second half of 2026 and will include efficacy, safety, PK and exposure response data that will be reported as they become available given the open-label design of the trial. On Slide 10, I'd like to highlight 3 important steps we have taken with the design of the Phase II monotherapy trial with the aim of building on the 8.7 months of rPFS demonstrated in the Phase I monotherapy trial. First, leveraging the preliminary evidence of an exposure response relationship, the Phase II study will use 3 of the highest doses from the Phase I dose escalation and expansion study. Second, primary prophylaxis with G-CSF will be utilized to potentially mitigate neutropenia, which could enable more consistent exposure to the ADC with fewer dose interruptions or adjustments early in the course of treatment. This could consequently extend the duration of therapy and potentially enhance the efficacy of the ADC. Third, enrolling healthier patients in earlier lines of therapy versus the 5 median lines of therapy in the Phase I trial. Together, we believe that these design elements have the potential to improve upon the Phase I results and achieve an rPFS of 10 months or greater, which we believe is the benchmark for commercial competitiveness. Slide 11 shows our long-term development strategy for FG-3246 and FG-3180, which provides us with important optionality in prostate cancer. We have a well-designed Phase II monotherapy trial in the post-ARPI pre-chemo setting in mCRPC to attempt to further build upon the 8.7 months of rPFS demonstrated in the Phase I monotherapy study. In addition, the Phase II study will explore the correlation between CD46 expression and response to the ADC, potentially validating FG-3180 as a predictive patient selection biomarker in future studies. We are confident that our development pathway for FG-3246 unlocks sequential or parallel registrational pathways as FG-3246 will be evaluated in multiple lines of therapy in monotherapy and/or in combination with an ARPI and in an all-comers population or patients with high expression of CD46. Slide 12 highlights the recent and upcoming catalysts for the FG-3246 and the FG-3180 program. Looking ahead, we expect the top line results from the IST of FG-3246 in combination with enzalutamide to be presented at a medical conference in the first quarter of 2026. With the recent initiation of the Phase II monotherapy trial, we expect to report the interim results in the second half of 2026. To summarize, on Slide 13, FG-3246 targets a novel epitope on prostate cancer cells with first-in-class potential, given there are no other CD46 targeted projects in clinical development. Targeting CD46 with FG-3246 has already demonstrated promising early efficacy signals with an acceptable safety profile, both in monotherapy and combination settings. We are excited for the upcoming milestones and look forward to updating you as the program progresses. Turning now to roxadustat. Slide 15 highlights the unmet need and the potential for roxadustat in the approximately 49,000 patients with anemia associated with lower-risk MDS in the U.S. alone. Current treatments are effective in less than 50% of patients. With no oral options currently on the market or in late-stage development, a significant opportunity exists to offer a potential new treatment that is durable with convenient oral administration to patients in the second line and beyond setting. Moving to Slide 16. I would like to briefly highlight the data from a post-hoc analysis in a subgroup of patients with anemia of lower-risk MDS who entered Phase III MATTERHORN study of roxadustat with a high transfusion burden. In this analysis, using the international working group definition for high transfusion burden of 4 or more RBC units in 2 consecutive 8-week periods, roxadustat showed a meaningful treatment effect with 36% of patients achieving transfusion independence for greater than or equal to 8 weeks versus only 7% in the placebo group with a nominal p-value of 0.04. These results are highly similar to the pivotal trial results for the 2 most recently approved therapies for anemia associated with lower-risk MDS. Based on these results, as we turn to Slide 17, our target indication for roxadustat is in patients with lower MDS and high transfusion burden who are refractory to or ineligible for prior ESA treatment, where we believe roxadustat has the potential to elevate the standard of care in the second line and beyond treatment settings. In July, we had a positive Type C meeting with the FDA where we aligned on key design elements and the regulatory path forward for roxadustat. The potential pivotal Phase III trial summarized on Slide 18, will include patients requiring 4 or more RBC units in 2 consecutive 8-week periods prior to randomization -- who, as I alluded to on the previous slide, are refractory to, intolerant to or ineligible for prior ESAs. We also agreed with the FDA on important dosing elements, including the starting dose of 2.5 milligrams per kilogram and on the management of potential thrombotic risk, which could include trial eligibility, dose modification and discontinuation criteria. We are currently evaluating 8-week and 16-week RBC transfusion independence as the primary endpoint for the trial. The team continues to work diligently on finalizing the Phase III protocol, and we remain on course for submission in the fourth quarter of this year. We are currently exploring our clinical development options, which include maintaining roxadustat as a wholly owned asset and running the Phase III trial on our own or partnering the program. We are actively engaged in this process, and we'll ultimately choose the path that we believe is in the best interest of shareholders. To summarize on Slide 19, there is significant opportunity for roxadustat in anemia associated with lower-risk MDS with no other oral treatments currently available or in late-stage development. Furthermore, we believe our target indication would support an orphan drug designation, which, if granted, would provide us with 7 years of data exclusivity in the U.S. This potential exclusivity, combined with an attractive market opportunity and an efficient commercial model represents a substantial economic opportunity for roxadustat in anemia associated with lower-risk MDS. With that, I will now turn the call over to Dave to discuss the company's financials. Dave? David DeLucia: Thank you, Thane. I will first review the updated FibroGen China transaction details and then provide the company's financial performance for the third quarter of 2025. As a reminder, our China operations are reflected as discontinued operations throughout our financials. On Slide 21, we highlight the summary of the key financial terms of the transaction. Upon the close of the transaction in August 2025, FibroGen received an enterprise value of $85 million plus FibroGen net cash held in China at closing of approximately $135 million, with a total consideration of approximately $220 million. This is a $60 million increase from our initial net cash guidance in February. Upon close of the China transaction, we paid off our senior secured term loan with Morgan Stanley Tactical Value, resulting in a cash outflow of approximately $80.9 million. This includes the $75 million principal balance, accrued and unpaid interest and an applicable prepayment penalty. The net cash payable at closing is subject to holdbacks of $10 million, which is comprised of a $6 million holdback to offset final net cash adjustments and a $4 million holdback to satisfy any indemnity claims. I am happy to announce that we have received $6.4 million associated with the first holdback last week. We expect to receive the second holdback of $4 million in the second quarter of 2026. This truly transformative transaction allowed us to pay down our senior term loan facility with MSTV, provided full access to our cash in China and extended the company's runway into 2028 to support U.S. development initiatives. Given the company's current market capitalization of approximately $45 million, we believe these increases in expected net cash received upon the close of the transaction represent a meaningful outcome for shareholders. Now on to the company's financials for the third quarter. For the third quarter of 2025, total revenue was $1.1 million compared to $0.1 million for the same period in 2024. For full year 2025, we reiterate total revenues to be between $6 million and $8 million. Now moving down the income statement. Total operating costs and expenses for the third quarter of 2025 were $6.5 million compared to $47.8 million for the third quarter of 2024, a decrease of $41.3 million or 86% year-over-year. R&D expenses for the third quarter of 2025 were $1.2 million compared to $20 million in the third quarter of 2024, a decrease of $18.8 million or 94% year-over-year. SG&A expenses for the third quarter of 2025 were $5.3 million compared to $9.4 million in the third quarter of 2024, a decrease of $4.1 million or 43% year-over-year. During the third quarter of 2025, we recorded a net loss from continuing operations of $13.1 million or $3.25 net loss per basic and diluted share as compared to a net loss of $48.3 million or $12.01 per basic and diluted share for the third quarter of 2024. For full year 2025, we are updating our guidance for our total operating costs and expenses, including stock-based compensation, to be between $50 million and $60 million. At the midpoint, this represents a 70% reduction from full year 2024. Now shifting towards cash. As of September 30, we reported $121.1 million in cash, cash equivalents, accounts receivable and investments in the U.S. We expect the company to now have cash runway into 2028. In summary, we believe we have taken important steps to reduce our fixed cost infrastructure across both project and FTE spend to maximize our cash runway and enable investment in our U.S. pipeline opportunities. Thank you, and I will now turn the call back over to Thane. Thane Wettig: Thank you, Dave. To conclude today's remarks, -- with a substantially strengthened financial position and an extended cash runway through multiple clinical milestones into 2028, we are well positioned to advance our mid- and late-stage clinical development programs for FG-3246 and roxadustat, respectively. We look forward to reporting the top line results from the investigator-sponsored study of FG-3246 in combination with enzalutamide at a medical conference in the first quarter of 2026. The recently initiated Phase II monotherapy trial of FG-3246 is progressing as planned, and we expect to report the interim results in the second half of 2026. Finally, with the positive feedback received from the FDA, we now have a regulatory path forward to advance roxadustat for the treatment of anemia associated with lower-risk MDS, and we'll submit the pivotal Phase III protocol before the end of this year. We have made substantial progress this year, transforming FibroGen into a lean and laser-focused organization, firmly positioning us to finish this year on a high note with an exciting future ahead. We look forward to providing further updates to our stakeholders over the coming months. I would now like to turn the call over to the operator for Q&A. Operator: [Operator Instructions]. Our first question comes from the line of Andy Hsieh with William Blair. Andy Hsieh: Congratulations on closing that $220 million deal with AstraZeneca, just really transformative for the company. We have 3 questions across the pipeline program. So one is on the roxadustat MDS pivotal trial. You mentioned about the potential thrombotic risk. They're a very prudent thing to incorporate into the trial. But I'm just curious maybe from an epidemiology perspective in that second line or later setting, refractory intolerable to ESAs, what proportion of patients do you think might be screened out because of the thrombotic risk? And maybe related to that, basically, I'm just curious about the cost of running that Phase III trial and whether or how would that impact the 2028 cash guidance that you provided? And I have a quick follow-up. Thane Wettig: Yes. Thanks, Andy. Nice to hear from you, and I appreciate the questions. As it relates to the thrombotic risk and what that can potentially do to the size of the patient population, I think it will be dependent really upon 2 things. One is what is the ultimate kind of exclusion criteria that we align on with the FDA? And then second, ultimately, what does the data report from the Phase III trial. I think it's too early for us to even kind of estimate, is it a really small proportion of the total population of Phase II and beyond patients in lower-risk MDS or is it more of a moderate portion of the population. Our hypothesis is it's a pretty small amount of the patient potential, but we won't know that until we really align on the inclusion and exclusion criteria with the agency, ultimately run the trial, see the data and then figure out exactly what the label says should we have a positive trial and a positive registration. In terms of the cost of the trial, we're estimating it that it will cost in the neighborhood of $50 million to $60 million. And that's assuming about 200 patients, an enrollment period of 18 to 24 months. But I'll let Dave comment on how we're thinking about that in terms of our cash runway and our guidance. Dave? David DeLucia: Yes, sure. Thank you, Thane. So right now, our current guidance reflects a cash runway into 2028, and that does not contemplate taking on the Phase III study on our own. So to your point, Andy, obviously, it would impact our cash guidance. We think that it could bring -- if we decide to take it on our own without raising incremental capital, it could take the cash guidance into the second half of 2027, give or take. But we do expect that we'll be looking to bring on incremental capital to help support the cost of running the Phase III study if we were to take it on our own. Thane Wettig: And Andy, maybe, yes. So one final comment on that, Andy. As we said in our prepared remarks, as we are evaluating the potential to run the trial on our own versus the partnering process, which we have commenced, ultimately, it's going to come down to kind of a combination of what we would call strategic and economic considerations. On the economic front, we would have to bring in additional capital per Dave's point. We've started to have those conversations just to see what the potential or the likelihood for us to be able to do that. And then we'll compare that as we advance the partnering process. We'll be able to compare that kind of side by side and ultimately do what we think is in the best interest of shareholders. Andy Hsieh: I see. Okay. Great. And then maybe kind of a big picture question on prostate cancer landscape. There's a lot of targets out there, PSMA, C1, DLL3, CD46, obviously, and then I guess, most interestingly, [indiscernible] , which has a negative expression correlation profile versus PSMA. So I guess, do we have additional maybe academic work that look at some of the overlapping expression profile that could actually be advanced stages for CD47 to kind of position based on the expression levels? Just kind of curious about your thinking on that front. Thane Wettig: Thanks, Andy. It's a really good question and one that we talk about on a pretty regular basis, and we've got a great group of KOLs who are beginning to help us think through this as well. If we think about expression levels of CD46, we probably can best characterize it as it relates to expression levels of PSMA. And we know that there is a great degree of concordance patients who express the CD46 epitope and those that express PSMA. We do know that as patients are treated with androgen receptor inhibitors and are treated with a taxane or potentially even Pluvicto that we see some resistance to PSMA development. We actually see PSMA expression levels go down. We're going to be able to tell a lot more, we believe, from our Phase II monotherapy trial, where we're going to treat all patients with the CD46 PET imaging agent to be able to characterize the very expression levels. We do think we'll have some data on many of those patients in terms of their previous PSMA expression levels as well. We'll be able to then do a correlation assessment based upon those expression levels in response to the ADC. And then we'll also be able to look at the data, albeit in probably a smaller number of patients of how our ADC performs in patients who were previously on Pluvicto and those that weren't, again, given this kind of the signal that we've seen where it seems that as patients progress and are treated with the taxanes and potentially with Pluvicto that their PSMA levels are altered to some degree. We're not probably going to have much data from our Phase II as it relates to any of the other targets. There is -- as you stated, there is some academic work that's been done that looks at expression levels of STIP1, TROP2, CD46, PSMA, et cetera. And so it's probably premature for us to comment on this point in time as it relates to how CD46 might overlap with the expression of some of those other targets. Andy Hsieh: Look forward to the second half [indiscernible] . Operator: Our next question comes from the line of Matthew Keller with H.C. Wainwright. Matthew Keller: So just one from us. On FG-3246, I was wondering if you could provide a little bit more color on what your thoughts are and what we can expect specifically from the top line data out of the IST study. And really what I'm trying to get at is more specifically, what are you considering a success from this data readout? Thane Wettig: Yes. Thanks, Matt. I'll go ahead and start, and Dave, feel free to add comments afterwards as well. In the preliminary efficacy data from the Ib portion of the combination trial, there was a preliminary efficacy estimate of 10.2 months. So if we would see something consistent with that, I think that, that would be pretty encouraging for us. I think it's going to be important to look at the data on the roughly 44 patients or so and how that data shakes out based upon the number of prior ARPIs that a particular patient has been on. We think that, that will be a part of the disclosure given the IST nature of that particular trial. Clearly, we're hands off on the disclosure and what that disclosure, that information will say. But I think that, that will be also an important part of the learning. We do know that the more -- the higher the number of ARPIs that patients are treated with, obviously, regardless of what comes next, you see a declining rPFS. And so I think that, that will be an important part of the disclosure. Dave, anything to add to that? David DeLucia: No, I think you hit the nail on the head, saying. Thank you. Operator: Our next question comes from the line of Chen Lin with Lin Asset Management. Chen Lin: Many of my questions have been answered. Just curious, there's a line of liability of $63 million on your report. Is that related to the milestone payment for the ADC asset? David DeLucia: I'll take that. So no, that liability is actually related to the royalties associated with our royalty financing with NovaQuest Capital Management, and that is associated with our royalty stream from roxadustat sales in CKD in the European and Japanese territories where we are partnered with Astellas. Chen Lin: Okay. Okay. Great. So that's a royalty stream. And you own royalty, right? So -- and then you sold some royalty, that's for that. Okay. Is there a minimum payment for that royalty? Or what's the liability looks like? Or just -- it will just -- your future revenue will be covered? David DeLucia: Yes. Currently, the way the deal is structured is that we own NovaQuest 22.5% of any of the royalties received in those territories. So FibroGen Inc. owns 77.5% and then the 22.5% are paid out to NovaQuest Capital Management on an annual basis. Chen Lin: Okay. Okay. Great. So it's a line item and not actual the royalty that you own going forward. Great. Thank you. So do you have any other line item for the potential future milestone you need to pay for the ADC going forward in the financial report? Thane Wettig: Yes, Dave, I'll take that one. So China, the only future milestone that we would have in the relatively near term related to the agreement that we struck with Fortis in May of 2023 would be if we decide based upon the Phase II data, if we decide to move the program into Phase III, we would then exercise the option to acquire Fortis Therapeutics for $80 million. We would then run the Phase III trial. And if the data supports then a filing and the product were ultimately to get approved in either the U.S. or Europe, we would then owe them an additional milestone based on approval of $75 million. And then there will be no royalty obligation on net sales to Fortis after that. There would be a very small single-digit royalty obligation to UCSF, but not to Fortis. David DeLucia: And just to add to that, the reason why we don't carry the liability on the balance sheet is because it is fully at our discretion. So as Thane pointed out, if the Phase II trial is successful and we like what we see, we can exercise that option. If we do not like what we see, then we can return the asset back to Fortis Therapeutics. So it is fully in FibroGen's discretion based upon the outcome of the Phase II study of FG-3246. Chen Lin: Okay. Great. That's clarifying a lot. When do you decide to -- expect to decide which path will you go with LRMDS, this new Phase III trial? Or do you need to -- do you want to wait for the Phase II interim results? Or you plan to move it forward before that? Thane Wettig: Yes. Thanks, Chen. Now these are completely independent of one another. And so we're looking at the low-risk MDS opportunity for roxadustat by itself as a stand-alone. I would think that we'd be able to have some clarity on the path forward, whether we do it on our own versus whether we partner it probably in the second quarter of next year, we'll have better clarity on that. Operator: Ladies and gentlemen, I'm showing no further questions in the queue. I would now like to turn the call back over to Thane for closing remarks. Thane Wettig: Yes. Thank you, and thanks, everybody, for joining us for today's third quarter earnings call, and we appreciate your continued interest in FibroGen. Have a great rest of your day. Thank you. Operator: Ladies and gentlemen, that concludes today's conference call. Thank you for your participation. You may now disconnect.
Operator: Thank you for standing by, and welcome to the OFX Group Limited FY '26 Half Year Results. [Operator Instructions] I would now like to hand the conference over to Mr. Skander Malcolm, CEO and Managing Director. Please go ahead. John Malcolm: Thank you, Kaley, and thank you, everyone, for joining the call. As Kaley mentioned, I'm joined by Selena Verth, our Chief Financial Officer; and Matt Gregorowski from Sodali & Co., who leads our Investor Relations program. Selena and I will take you through the pages, and then there will be time for Q&A. The presentation will cover 6 sections: our mission, performance update, the 2.0 transition, our financials, the strategy execution and our outlook. And then we'll have time for Q&A. So let's move to Slide 4 in the pack. And I want to start the presentation by being focused on our mission, which is simpler financial operations, helping businesses thrive globally. I start here because we must be very clear with our investors, our employees and our clients about what we're trying to do. It may sound obvious, but it matters a great deal as we navigate the transition from a company that did one job very well for both corporate and consumer clients, which was making cross-border payments to becoming a company that does several jobs very well for our corporate clients to make their lives simpler and in turn, help them thrive. We've laid out this strategy before, and I'll revisit it today to ensure we are aligned on what guides our investments, our decisions and our pacing. So why this mission? Moving to Slide 5. This mission is built on a huge opportunity around USD 66 billion of revenue and the fact that we are well prepared to capture it. Firstly, by expanding the number of jobs we can do for clients, we nearly doubled our TAM from USD 34 billion to USD 66 billion. Secondly, we often get questions from investors about competition, but the research we conducted and the evidence we see is that most of the opportunity sits with SMEs who work with banks. Depending on the market, the research suggested between 77% and 80% of clients who need the products and services we provide are trying to get them to banks. Yes, there are non-bank competitors, but the real prize is still largely with the banks who are less nimble and less customer-centric. And we believe we can be sufficiently differentiated from the non-bank competitors to take a reasonable share. Thirdly, the research showed that just over 3 in 4 of these clients are willing to switch away from banks for the right combination of products and services. That hugely encourages us to invest and compete. And finally, if we do our job well and we win these clients, the extra revenue available per client is material, which is over 40% versus our existing model, which makes the return significantly more attractive. So in summary, whilst our mission and strategy have evolved, our target of strong and sustainable growth has not, and we have found a faster and more effective way to deliver it. Turning to Slide 6; we have a very clear path to unlocking this opportunity as well as a very clear goal, which is 15% net operating income growth fiscal year '28 at around 30% underlying EBITDA margins, and we are executing to achieve that. Part of what will drive that NOI growth is non-FX revenue, which we expect to be at least 10% of all fiscal year '28. We know who we're targeting. We know which products and services we can provide to them to make their lives simpler. We have the platform in place in all our major markets and soon in all our markets to make it happen. And we have the infrastructure beneath the platform, our licenses, our banking support and our teams to make this work at scale and globally. We are investing and executing this way based on considerable research, our client experience, our knowledge of the industry and over 25 years of being in this space, and that is what underpins our conviction. Moving to Slide 8, I'll now share the performance of the first half. We delivered NOI of $105 million and underlying EBITDA of $14.5 million. This was a disappointing outcome and certainly below our expectations, and I'll walk through some of the reasons on the next slide. Our NOI margin was 55 basis points, around 4 basis points lower than first half '25, primarily driven by lower margins in North American corporate clients, where we took pricing actions to retain at-risk clients. Our business continues to generate healthy levels of cash with net cash held for on use of $47.1 million, up 2.6% versus the prior corresponding period. Selena will cover cash and cash generation later. We're pleased with the average revenue per client at $4,100 remaining steady through the first half and the non-FX revenue of $0.6 million. Although this was down on PCP, the cause of that a vendor switch was addressed, and we saw revenue grow just under 24% from the first quarter to the second quarter. Moving to Slide 9; we've seen a difficult macro environment affect the confidence of our corporate clients, which has seen them reduce their ATV by 9% from the first quarter to the second quarter, and that largely drove the drop in NOI. Business confidence indicators in all our major markets are below their long-term mean and they are generally not improving. We did see some strength in ATVs in the U.K. and Europe, but this was driven by a few large transactions rather than persistent strength. Encouragingly, our clients remain engaged with us with transactions up 5.7% on prior corresponding period, as you'll see on the next slide, and transactions per active client growing for the third quarter in a row and a healthy CAGR of 11% since the beginning of fiscal year '24. Moving to Slide 10; this is a view of our three main segments: corporate, enterprise and high-value consumer. Corporate revenue was disappointing, down 5.7% versus prior corresponding period, however, up 2.3% versus the second half '25. Within that, the U.K. was the bright spot, growing at 4.6% versus prior corresponding period of some healthy large client wins. Enterprise continues to grow strongly, up 47.7% versus PCP and up 27.5% versus second half '25. The momentum here is largely a function of the excellent support we're providing our clients, the growth in their own businesses and the increasing revenue we're earning from clients we've onboarded in the last three years. In High-Value Consumer, revenue fell 11.3% versus PCP and 8.7% versus second half '25. This is a substantial decline and was driven by unusually quiet market conditions. With volatility, which is typically a key driver of our clients' behavior being very low. In the first half, we only saw 15 days of volatility. And within that, the second quarter, we only saw 1 day where the U.S. dollar AUD moved outside our normal range compared to the 15 to 20 days that we would normally see in a quarter. Later, I will share how we will stabilize and grow this segment. Moving to Slide 11; we've been working very hard to stabilize and grow our corporate active clients. So it's encouraging to see progress. Overall, corporate active clients, including OLS, fell by around 700 in the first half, the lowest rate of decline in several years. We exclude OLS, given we are no longer originating OLS, we actually grew active clients in roughly half the number of weeks in the second quarter. The improvement in corporate, excluding OLS, has been driven mainly by NTCs or New Trading Clients as lapse rates have been slightly higher, but offset by an increase in reactivation. Importantly, of those that have lapsed, more than 2/3 have been low-value corporate clients. As I mentioned earlier, the corporate ARPC was steady in the first half, but the growth in non-FX revenue is encouraging, and this will support growth in ARPC over the medium term. Moving to Slide 13; we're very encouraged by the progress we're making in transitioning to 2.0 and the growth in non-FX revenue we're seeing. We've seen strong client uptake of our new products and services. Card revenue, subscriptions and the Payback card feature all grew in the first half, up 23.8% quarter-on-quarter. Overall revenue was down versus prior corresponding period as we had to switch off the Pay by Card feature during the first quarter, but it rebounded in the second. We're confident this non-FX revenue will continue to grow at a healthy rate as we complete our corporate migration and continue to grow NTCs. This quarterly growth rate has us well on track to achieve our goals of non-FX contributing 10% of NOI in fiscal year '28. As we mentioned in our trading update last month, we migrated just over 39% of our existing corporate clients during the first half. October and early November have been very busy, and we're now just under 60% complete. The migrations have gone well, both technically and from a client experience perspective. Card spend is healthy and cards continue to get issued and activated. Subscriptions are strong and clients are growing balances faster than expected. As at the end of October, we have $138 million in balances, and it continues to grow. And note that the interest from balances is not included in the non-FX revenue. Turning to Slide 14; when we embarked on the transition, a good migration was and is absolutely key to retaining clients and growing our NOI over the short- and medium-term. So it's very encouraging to share some of the key trends that we track. As a first goal, we must retain clients through migration and grow their ARPC post migration. Progress in migrating clients is good with almost 50% of clients from our major markets migrated by the end of the first half, and that figure will be close to 80% by the end of the third quarter. Given we're offering these clients the simplest version of the new platform, i.e., Free with Wallets, it's very encouraging to see them use wallets and do FX transactions as a first step. Wallet balances are growing very well, as I mentioned, and FX transactions are also healthy, but clients activating they are ahead of their pre-migration levels. In terms of ARPC, pre-migration, we were seeing ARPCs of around $4,100. And whilst it's still early for many migrated clients, given that, for example, of the 39% of corporate clients that were migrated, only 7% were migrated to the full first half. And in Canada, migrated clients only had between 1 or 2 months on the platform. But we're already seeing healthy ARPCs across migrated clients in both Australia and Canada. Moving to new product adoption. In Australia, nearly 4% of migrated clients have taken up a second product despite our primary focus being on successful migration and FX usage. Whilst that may seem low, it's largely because we deliberately focused on just wallets and FX for these clients thus far. One cohort of Australian clients who self-identified as wanting to see the additional features and products have been very active with over 50% of them already taking up additional products. In terms of new clients, ARPC is below what we saw in the 1.0 model as we've not been targeting FX in our marketing, but uptake of additional products is very encouraging with just under 16% of all new clients in Australia taking up additional products. We're confident that the ARPC from these clients will grow over time as the experience in cards tend to suggest usage builds gradually. Interestingly, in the U.K., we've already seen some very large FX transactions with new clients and clients are already self-serving with our new digital forwards. So we know we can grow FX and non-FX as well as secure large ATV transactions on 2.0. Turning to Slide 15; our solid progress and results on 2.0 have been underpinned by good execution. Alongside migration, our product and technology teams delivered 80 new products, features or services in the second quarter alone. That is incredibly encouraging for us as a team as we know we can bring better client experiences to life quickly and cost effectively. Put that in perspective, two years ago, we had 8 large teams doing one deployment every two weeks, which was about 26 releases a year. Today, we have 18 small- to medium-sized squads delivering over 200 deployments a week. On the right is our timeline to complete the migration. We expect to have around 80% completion in our major markets by the end of Q3. In terms of new launches, all major markets are now live, including most recently the U.S. So a lot of execution and a very promising future. Now let me hand over to Selena to walk us through the financials. Selena Verth: Thank you, Skander. Moving to Slide 17, our financial results reflect a period of softer trading, coupled with a deliberate increase in investment to accelerate our transition to OFX 2.0. Fee and trading income was down 4.7% to $109.1 million, reflecting the ongoing macroeconomic uncertainty that continues to dampen business confidence. This softness was seen across most regions with APAC down 6.2%, North America down 7.5%, while EMEA saw a modest increase of 1.9%. Our net operating income or NOI was $105 million, which is down 5.6% versus PCP, but represents a 1.2% increase on the second half of fiscal year '25. The NOI margin contracted by 4 basis points, 3 basis points was due to the lower pricing in North America, which Skander mentioned and 1 basis point on the higher value consumer transfers. The NOI margin is up 1 basis point on the second half '25 as we build back up margins in North America. As we invest for growth, underlying operating expenses increased by 10.2% to $90.5 million, which I will detail on the next slide. This planned investment, combined with the soft trading environment resulted in an underlying EBITDA of $14.5 million. Depreciation and amortization continued in line with our ongoing investment in client experience in our platform, leading to an underlying EBT of $1.5 million. We have an effective tax gain as our R&D credits accumulated in the period and can be carried forward for future use in future. Our balance sheet remains solid with net cash held at $75.4 million at the end of the half. Moving to Slide 18, you will see the composition of our increased operating expenses. We are making targeted investments to deliver our 2.0 strategy to accelerate growth while also identifying productivity savings through the organization. Employment expenses, our largest cost category, was up 8.9% versus the prior corresponding period. This was driven by an addition of 19 full-time employees, primarily in product, marketing and frontline roles to execute our growth strategy. Promotional expenses increased by 5.3% as we supported the accelerated launch of our NCP in Canada and EMEA, which helped drive the 11.8% growth in corporate NTCs. We have invested in account-based marketing and our new websites are live for our major regions with the U.S. site going live last week. Bad and doubtful debts were $3.2 million for the half. While this is an increase on prior periods, it relates to a very small number of incidents. We're actively pursuing recoveries and have strengthened our risk settings and controls to manage this closely. We've not seen any material bad debts in the current quarter, and we do not expect the bad debts to repeat at this level in the second half. Longer term, as more clients migrate to NCP, these risk controls will improve further as the platform provides us with better technology and more optionality for setting client specific [indiscernible]. Turning to Slide 19; this investment is creating a path to growth and a better longer-term return. We committed to accelerating investment in fiscal year '26 of between $16 million and $24 million in OpEx and approximately $5 million in CapEx. As you will see, we are about halfway through this investment. Our delivery is executing better than ever. And as a result, we have lowered our full year CapEx guidance to be between $20 million to $21 million. Productivity initiatives are delivering the same road map with less resources. The investment in driving promising returns with an 11.8% growth in our corporate ex-OLS NTCs and our non-FX revenue is building momentum with $600,000 generated in the first half and quarterly growth of 23.8%. This progress gives us confidence that these investments will generate superior returns. We are targeting an underlying return on invested capital of 30% in fiscal year '28. Moving to Slide 20. Our balance sheet remains strong with healthy levels of cash to support our growth ambitions. The business continues to demonstrate excellent cash generation with an operating cash conversion rate of over 100%. Our underlying EBITDA of $14.5 million converted to a net cash flow from operating activities of $16.5 million, supported by the timing of expenses. Our net cash held position is strong at $75.4 million. After deducting our collateral and bank guarantees, the net available cash position is $47.1 million. This is up $1.2 million on last year and down $3.9 million from the March full year '25 results. We have self-funded our accelerated growth. The reduction in net available cash is due to repayment of debt, which now stands at $18.5 million and the buyback of 2.3 million shares for $1.9 million during the half. Our strong balance sheet and cash flow provide the foundation for us to invest in our accelerated growth strategy by continuing to look for productivity wherever possible. I will now hand back to Skander to take you through our strategy, execution and outlook. John Malcolm: Thank you, Selena. Now let's move to Slide 22 to walk through what we're doing to bring the next phase to life. Alongside strong execution, we've been working very hard to bring to life the three elements that will create growth in our model, our value proposition, our go-to-market and our operating model. Firstly, as previously mentioned, our value proposition is now much broader and more compelling. We've evolved from being a focused FX provider to supporting businesses with a wider range of needs, helping them simplify their financial operations. Our marketing and product teams have done a huge job in completely reorienting what success looks like for our clients. And our platform has been configured and launched in every major market to accelerate our transition. Secondly, our new go-to-market model is up and live in every major market. Roles and pipelines have been redefined and new software deployed. We're already seeing great progress with double-digit growth in corporate NTCs. Finally, we also reorganized our corporate structure to more closely resemble the new company that we are becoming. Commercial teams now focus on a single segment with a global leader for B2B and a separate leader for B2C. We also combined product and marketing into one growth organization to drive speed and consistency. And we moved the payments team out of operations and into finance and refocused the remaining operations teams who are all customer-facing into a single customer function. These changes took effect on October 1 and are already working well. For clients, our teams are more focused and provide better products and services. For employees, they get faster decision-making. And for shareholders, it's cost neutral and positions us for faster growth. Moving to Slide 23; during the half, we completed a strategy review of the high-value consumer segment and identified a clear path to stabilize and grow it. Our focus will be on clients and prospects who make larger value consumer transactions, clients we know well and consistently rate us highly. We will acquire them through partnerships, primarily targeting the wealth and professional services use cases. Our competitive differentiation will remain our digital plus human service delivery and partnership referral model, which is unusual in our industry where most consumer firms go direct. We will leverage the new client platform's product and platform capabilities so our clients benefit from the same programs, and we will use the same go-to-market approach to find new partners, and this will drive synergies across the platform. We plan to execute this migration in fiscal year '27 with no incremental CapEx to what we have previously guided. We are already working hard on the value proposition, the launch and the migration plan, and we will provide more detail on that when it is finalized for our fiscal year '27 outlook. Moving to Slide 24; like most companies, we have been busy building and executing our AI capabilities, and we've made good progress. Firstly, we're very excited by AI's potential and know it will be transformational for OFX. We have started with the foundations, good governance, well-organized data, modern architecture and security and much of that is now complete. Concurrently, we've been deploying it across a range of internal use cases, largely to drive productivity so far. Over time, the real value driver will be making AI central to the client experience and the product road map. The team already has a very exciting plan, but they insisted, I do not share it yet. What I can say is our clients are already seeing the benefits of the simple things like AI-driven expense allocation, but what we have planned will be significantly more value accretive. Moving to our outlook on Slide 26; we remain committed to our medium-term outlook, which is to generate at least 15% NOI growth in fiscal year '28 with underlying EBITDA margins of around 30%. In second half of '26, we're targeting NOI growth to be higher than second half '25. We will continue to execute the plan that we shared back in May, which is to invest to accelerate our transition. As we stated in our trading update, we're managing OpEx and expecting it to be between $173.7 million and $181.2 million for fiscal year '26. Because our execution is strong, and as Selena mentioned, CapEx will be in the range of $20 million to $21 million in fiscal year '26, not just under $24 million as we originally forecast. We have not yet completed planning in detail for fiscal year '27, but we can say that the consumer migration and launches will happen [ within our ] incremental CapEx to what we previously guided. And as we previously stated, OpEx and CapEx will be similar to what we are seeing in fiscal year '26. But before I hand back to Kaley, I want to reiterate that both management and the Board are very confident in the strategy. The execution remains good, and we are determined to combine these into a great outcome for investors. Thank you, and I'll now pass back to Kaley to handle Q&A. Operator: [Operator Instructions] Your first question comes from Michael Trott with MST Financial. Michael Trott: Consider that you guys are going hard at the investment over the next 12 to 24 months. But just with the short-term weakness, in NOI also flagged and then also your current underlying EBITDA margin of roughly 13%. Can you just provide some color on when you're expecting a step change in this margin, especially with the, I guess, realization of the FY '28 30% target? John Malcolm: Yeah. So what I'd say, Michael, is in the short-term, we're very, very focused on driving up NOI, and that will be the thing that underpins margin expansion. But at the moment, we're not guiding to that. We are working exceptionally hard to create it. And as we've said in the second half, we're just targeting growth in NOI second half '26 over second half '25. But in the short term, any margin expansion will be driven by top line growth. Operator: Your next question comes from [ Scott Nelson with Nelson Capital ]. We might just move along to the next questioner in the queue, Cameron Halkett with Canaccord Genuity. Cameron Halkett: Just two, please. Around the incremental OpEx guidance you've further reiterated there. Selena, can you just remind us, please? I think there was a bit of confusion back at the last half. Is that swing between the incremental $16 million to $24 million effective in bonuses relative to how the business performed in the second half, please? Selena Verth: Yeah. So the range on OpEx is largely due to the range on what the STI outcomes could be because STI is 60% financial, 40% nonfinancial -- financial metrics do assume growth. So obviously, depending on how the financials play out, that can range on your OpEx. Now that being said, if you look at the first half, the bad debt was higher than we wanted it to be. We've done a lot of changes and controls. We don't expect that to repeat in the second half, and we'll be looking at any productivity savings that we can get to make sure we offset those costs as well. Cameron Halkett: Yeah. I guess just turning to the comments and some of the disclosures just around sort of funds that have been loaded on to the cards and references to cash balances. How is that tracking relative to your initial expectations that sort of get the feeling that that's higher than perhaps what you were expecting? Selena Verth: Look, the cash balances are relatively hard to predict. We really like what we see. Obviously, we're seeing balances in all regions as customers come on board. We do make some interest out of that. You would have seen our interest revenue for the half was flat half-over-half this half versus last half, but that's given also that there's been two rate cuts in the last half. So we're actually outgrowing the rate cuts at the moment, slightly outgrowing the rate cuts at the moment with those building cash balances. So we like what we see. We're seeing in all regions, and we are encouraged by the growth. John Malcolm: And maybe just to add to that, Cam. As we look at the cards themselves, a couple of encouraging statistics or trends relative to our own expectations. First of all, the proportion of cross-border usage is a bit higher than we were expecting, and that's good because generally, they attract higher levels of interchange. And I'd say the second thing is we're also seeing clients using cards for a range of different use cases, which, again, is really helpful. And there is a somewhat kind of symbiotic effect there with the balances that Selena mentioned because typically, for example, here in Australia, people are putting balances on to -- in their wallet because they want to use the cards for domestic transactions as well as international transactions, and that would suggest a more engaged client. So it's certainly encouraging. Selena Verth: Yeah. And just last one. When I look at Slide 13, the sort of composition of sort of what you're seeing there around card, Pay by Card and subscription and other. When you look at the sort of second quarter '26 breakdown, let's just for simplicity call [ it a third ] equal. Any comments you can make around more of an early adopter of the card selection where that mix of revenue composition might be, say, more weighted to card and Pay by Card than subscription, just to help people understand the expected contribution and mix over time? John Malcolm: Yeah. I'd say, Cam, our general view is it's still very early days. What's actually happening is -- if we look at new clients, we're seeing a pretty good uptake of cards. We're seeing a pretty good uptake of subscriptions, particularly, I would say, in Canada relative to our expectations. And so that's pretty good. From an existing client perspective, we've been very, very careful in making sure that the first thing that migrated clients do is reactivate their accounts with FX. So it's still, I would say, quite early to say, okay, we're seeing some pretty clear trends in terms of that non-FX revenue. But at an overall level, the growth rate is encouraging in each of the categories. And what's also coming online really, I would say, scaling in the third quarter and beyond is really our product marketing efforts. To-date, we've been, as Selena mentioned, recruiting for those roles, putting in place some pretty basic product and marketing programs to get ourselves ready for that, and then we will start to increase our efforts in this area, which should then drive more of the non-FX revenue over time. Operator: Your next question comes from David Kingston with K Capital Group. Your next question is from Olivier Coulon with E&P Financial Group. Olivier Coulon: Can you hear me okay? So you mentioned on the intro that you were seeing growth in -- the revenue per transacting client on a same cohort basis. And I think you mentioned that there were 7% that were there for the full half that had migrated. I don't think you actually mentioned a specific growth number. Is it possible to share that on that same cohort basis? John Malcolm: Yeah. We've talked in the past around kind of FX growth for those pre and post at around 5%, and that's kind of what we're seeing. We just wanted to point out that a lot of the migration happened candidly in the second quarter. So if you look at, for example, Canada, I think something like 20-odd-percent had even 60 days on the platform. But they've been migrating across well. It's really mostly Australia, where they've had, as you mentioned, the 7% for the full half and those FX -- that FX growth is around the 5% range. Olivier Coulon: Yeah. And that's absolutely not kind of relative to the rest of the clients because I guess Australia had a pretty tough half, right, in terms of corporate revenue per client. John Malcolm: Yes. Olivier Coulon: Yeah. So is there any reason to think that Australia should -- like that those clients wouldn't have had the same sort of underlying trend maybe during their revenue growth? John Malcolm: I'd say on that one, Olivier, is that what we're seeing is they're picking up the fact that they can use a wallet, and they're using the wallet for cross-border for some smaller value transactions, some larger value transactions. They appear to be feeling like the wallet is a step up relative to the prior value proposition. But again, I would say it's still -- which is very encouraging. Let me make that plain. But I would still say the bigger job to do for that cohort and for the corporate active clients more generally is getting them comfortable also to see the opportunity on non-FX, and that's really where the third quarter and beyond will take us. Olivier Coulon: Yeah, okay. But it's fair to say that, that uplift that you saw from those -- from that small cohort who is kind of directly comparable, that was primarily from actual increased transaction activity. Yeah, as opposed to ATV or anything like that? John Malcolm: That's right. Operator: [Operator Instruction] Your next question comes from [ David Kingston with K Capital Group ]. Unknown Analyst: Anyway, thorough presentation, so thanks for that. Look, I've just got a few macro comments, Skander. Look, sadly, at the moment, OFX has lost the confidence of the stock market. The market capitalization is $130 million, which is an enterprise value of $100 million when you adjust for the net available cash of $47 million and deduct the debt of $18 million. So enterprise value of $100 million. In the past 14 months, OFX has burned 75% of shareholder value, $2.30 down to $0.57, down $400 million. Look, on the positive, OFX still has substantial NOI of $105 million for the first half albeit with the increased OpEx for OFX 2.0. Obviously, the NPAT has been smashed at around about 80%. Look, I'd also note, Skander, that as well as the past 14 months being ugly, OFX floated in 2013 at $2. And it's pretty concerning that 12 years later, when some of the competitors have shot the lights out, OFX is less than 1/3 of the IPO price. So really, I've just got a few macro questions, Skander. Playing Russian Roulette with the substantial increase in OpEx of OFX 2.0 or can you reverse the huge $400 million loss of shareholder value in the past 14 months? Secondly, is OFX too small and is the Board and management to corporate and lacking the corporate savvy to compete with the more dynamic and entrepreneurial Airwallex and Wise? And finally, just be grateful if you could provide some insights into is the Board proactively considering a sale to another corporate with synergies or to private equity? Like I think it's fair to say that at the moment the fair value of OFX should be way, way above the current $100 million enterprise value. But certainly, shareholders at the moment Skander are concerned that the ongoing loss of shareholder value as represented by the share price anyway. John Malcolm: Alright. So I think there were three questions. Look, in terms of the EV and the OpEx -- one analyst said to me once, which I think is absolutely right is the market can't value no growth. And so the EV is really a function of the no growth. If you look at, as you pointed out, underlying NOI, it hasn't changed that much, certainly not as much as the EV has declined. The OpEx has really been invested with a lot of research. I mean, effectively over two years' worth of research, market experience, customer signaling all over the world. So it's not Russian Roulette, which would suggest a random allocation. It's been very, very carefully studied before that investment. And the Board and management are working exceptionally hard on all of the factors within that OpEx, as Selena mentioned, whether it's product, software, commercial people to drive growth because ultimately, that's what the market and investors will rate in OFX, and we're very clear that the best way to generate growth is through the investments that we've made. On your second question, look, I can't comment on some of the private companies. All I can do is to say to public company investors, what you get with this management team and this Board is a very mature risk management and governance framework. You have global experience, which in a somewhat uncertain and risky world, and we've seen a lot of examples in the last few years, which I talked about a lot just in one space, for example, is around the rise of fines, AML fines that investors can rely on in terms of our oversight and management of those. And certainly, if you look at the kind of corporate experience inside the company, there's a blend of certainly some corporate skills, but there's also a group of folks who've done a whole range of entrepreneurial activities as well. And the answer to the third question is no, we're not actively engaged or strategic on a sale of the [indiscernible]. Unknown Analyst: But just one follow-up there, Skander. In the context of in the last 14 months, your 3,000 shareholders, Skander, have lost $400 million of shareholder value. It's got to be telegraphing some flashing yellow or maybe red lights. You're going out here competing with some whales. NOI is declining, margin is collapsing because of the extra expenditure. I hope that you and the Board are properly considering the value of your shareholders who have been absolutely punished in the past 14 months. It's already [indiscernible] to get reports from outside people and to -- as I said, your presentation is very thorough and professional. But at the moment you're losing the battle on behalf of the people that you're representing who are the shareholders who have been punished in the past 14 months. But anyway, I'll leave that as it is. Thanks Skander. Thank you. Operator: There are no further questions at this time. I'll now hand back to Mr. Malcolm for closing remarks. John Malcolm: Well, I'll just wrap it up by saying thank you for joining the call. We are working exceptionally hard to turn the growth in the top line around. And I can assure you that management and Board are very, very busy on every single detail to make sure that we can create a more valuable company. Thank you very much. Operator: That does conclude our conference for today. Thank you for participating. You may now disconnect.
Operator: Good day, and thank you for standing by. Welcome to Gemini's Third Quarter 2025 Earnings Conference Call. [Operator Instructions] Please be advised that today's conference is being recorded. I would now like to hand the conference over to Kate Freedman, Secretary. Please go ahead. Kate Freedman: Good afternoon, and welcome to Gemini's Third Quarter 2025 Earnings Conference Call. I'm Kate Freedman, Gemini's Secretary. Joining me on the call today are Gemini's founders, Cameron and Tyler Winklevoss; Chief Operating Officer, Marshall Beard; and Chief Financial Officer, Dan Chen. We announced third quarter financial results today after the market closed. Please note that during the course of this call, the Gemini team will make forward-looking statements, including statements relating to the future performance of Gemini, its business outlook and anticipated trends in our industry and their anticipated impact on our business, which are based on management's current expectations, forecasts and assumptions. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from our expectations. For identification and discussion of these material assumptions, risks and uncertainties, please refer to our public filings with the SEC as well as the Investor Relations section on our website. We undertake no obligation to update these forward-looking statements unless expressly required to do so by law. In addition, during this call, the Gemini team will be referring to certain non-GAAP financial measures during today's discussion. Important disclosures about this information and a reconciliation of the non-GAAP information to comparable GAAP information is included in our Shareholder Letter and is available on our Investor Relations website. And with that, let me turn the call over to Cameron and Tyler. Cameron Winklevoss: Good afternoon, and thank you all for joining us on our inaugural earnings call as a public company. I'm Cameron Winklevoss, President and Co-Founder of Gemini. Tyler and I are equal parts thrilled and humbled to reach this milestone in Gemini's journey. The end of Q3 marked our first quarter as a publicly traded company. And while that milestone is an important one, it represents only the beginning of our next journey When we founded Gemini over a decade ago, our goal was to build the trusted bridge to the future of money, connecting the world to the crypto frontier and helping grow that frontier into the crypto mainland. Before Tyler and I outline our growth and business strategy, we want to take a moment to applaud the Gemini team. The hard work, creativity and determination of our people have brought us to this point. We are deeply grateful for the passion and grit you bring to our mission every day. This quarter marked a significant step forward in our mission. We scaled our ecosystem, broadened our reach and continue to demonstrate the strength of the model we are building, one grounded in trust, engagement and liquidity. Across the business, we achieved some of our strongest growth milestones in recent years. Trading volumes reached $16.4 billion, a multiyear quarterly high, primarily driven by expanding institutional activity and deeper engagement across the platform. The Gemini Credit Card delivered record performance, surpassing 100,000 open accounts and more than $350 million in quarterly transaction volume, more than doubling quarter-over-quarter. Together, these results reflected our strongest quarter of user acquisition in over 3 years and underscored the growing reach of our ecosystem. We also built momentum for our next stage of growth by launching new Gemini credit card features and introducing the Gemini Wallet, a self-custody smart wallet designed for both crypto users and developers. At the same time, we broadened our global footprint by launching in Australia and securing our MiCA license in Europe, enabling us to offer staking, derivatives and tokenized stocks to customers across the European Union under a regulated framework. We believe this performance reinforces the strength of our model and the foundation that will continue to power Gemini's long-term growth. Tyler Winklevoss: Thanks, Cameron. When we founded Gemini, our goal was to make crypto simple, secure and accessible for everyone. That purpose underpins the trust, engagement and liquidity flywheel that fuels our business. From the very beginning, we chose to take the regulation forward path, asking for permission, not forgiveness. And we built Gemini with the goal of meeting the highest standards of security, licensing and compliance. We believed, and still believe, that long-term value in crypto will flow to the companies that earn it the right way. This focus on trust has allowed us to create a durable model that we believe will compound over time. We believe this foundation of trust and transparency is what draws users of Gemini and what keeps them here. This regulation forward approach has allowed us to build a durable, powerful flywheel built on trust, engagement and liquidity that drives Gemini's business forward. This flywheel starts with our exchange, a regulated crypto-native platform that combines the depth and sophistication institutions expect with the simplicity retail customers need. That foundation of trust and transparency is what draws users to Gemini in the first place and what keeps them here. From there, the Gemini Credit Card expands our reach. It's often the first step for customers who are new to crypto, a no annual fee card that earns Bitcoin or one of the 50-plus tokens available on our platform on everyday purchases. This brings them into the Gemini ecosystem in a simple rewarding way. Over time, that relationship creates opportunities for customers to explore more of what Gemini offers from trading and saving to engaging with on-chain products as comfort and familiarity grow. As overall activity builds, it attracts institutional liquidity, market makers, asset managers and corporate treasuries that value Gemini's regulated framework. Their participation strengthens pricing and execution for everyone, creating a healthier, more efficient marketplace. The final piece and really the backbone of the entire system is regulatory trust. Operating in a sound, compliant and transparent way doesn't just protect our users. It opens doors in new markets and makes Gemini a partner of choice for institutions and regulators alike. Each turn of this flywheel reinforces the next. Trust drives engagement, engagement builds liquidity and liquidity strengthens trust. It is an integrated model that compounds over time, expanding our reach, deepening relationships and strengthening the resilience of our business. That's the power of Gemini's flywheel, and it's why we believe we're positioned to lead as traditional finance and crypto continue to converge. In Q3, we advanced our mission across 5 key areas that demonstrate the strength of this model: one, expanding our regulated global footprint; two, scaling crypto adoption through everyday spending; three, deepening trading activity and diversifying our revenue mix; four, enabling secure onchain access; and five, enhancing capital efficiency and balance sheet strength. Our Chief Operating Officer, Marshall Beard, will discuss each of these areas in more detail. Back over to Cameron. Cameron Winklevoss: As we look ahead, the opportunity before us is enormous. Financial markets are moving on chain, and crypto is reshaping how we transact, store value and interact with money itself. Gemini is purpose-built for this transition, regulated, trusted and focused on building a globally integrated super app that connects traditional finance and crypto in one seamless experience. Our mission has always been global. You should not have to live in any one country to access a stable currency, invest in great companies or participate in a modern financial system that works 24/7, just like the Internet and your e-mail. We pursue this mission by bringing dollars on chain through stablecoins, enabling trading and secure custody of tokenized assets and making it simple to buy Bitcoin and other crypto. Gemini is positioned to help shape this future and ensure that everyone has access to it while maintaining the trust and security standards our customers have come to expect. We are proud of what we've accomplished in our first quarter as a public company and even more excited about what lies ahead. Thank you for joining us on this journey. With that said, I'd like to hand it over to Marshall Beard, our Chief Operating Officer, to discuss Gemini's Q3 operating performance. Marshall Beard: Thanks, Cameron. It's been an exciting first quarter as a public company as we made several improvements to the business to further advance our mission and improve our operations. The results we delivered in Q3 reflect the depth of execution across our teams and the continued momentum of our platform. Let me start with our expanding global footprint, where we made important progress in strengthening Gemini's goal of being a trusted regulated partner around the world. We advanced licensing and registrations in key markets when we received our MiCA license from the Malta Financial Services Authority, enabling us to offer certain secure, reliable crypto services across all 30 European countries and jurisdictions. Following the close of Q3, we launched in Australia after obtaining AUSTRAC registration in August and completed key payments integrations to streamline onboarding in the region. In Singapore, we continue to engage with the Monetary Authority of Singapore to convert the in-principle approval through which we operate to a full MPI license. Together, these milestones expand Gemini's license footprint across major global markets and strengthen our ability to operate under clear regulated frameworks. They also demonstrate how our commitment to compliance continues to open new opportunities for both retail and institutional customers. As we strengthened our global reach, we also continue to scale one of the most important drivers of customer engagement and growth, the Gemini Credit Card. The Gemini Credit Card has quickly become our most powerful engine for customer acquisition and daily engagement. In Q3, we released an XRP edition of the Gemini Credit Card. And in October 2025, we released the Solana edition, introducing auto-staking rewards across all cards and unlocking the power of each network's community to drive growth. These new additions helped us cross more than 100,000 total card accounts with 64,000 new card sign-ups in the third quarter and over $350 million in card transaction volume, up more than 100% quarter-over-quarter. This momentum drove our strongest quarterly card revenue performance to date with card revenue of $8.5 million in the quarter. We believe that the Gemini Credit Card continues to serve as a leading acquisition wedge for Gemini in the United States. More than 55% of newly acquired U.S. transacting users across our products in Q3 first originated through card onboarding and 75% of open card accounts were active at quarter end. This steady flow of engaged transacting customers is helping drive higher lifetime value, deeper engagement and cross-product adoption across the platform. As card adoption accelerates, it continues to deepen engagement across the Gemini platform. Every cardholder also opens a Gemini exchange account as part of the same integrated experience, giving customers a single unified platform to spend, earn and trade. On our exchange, trading momentum accelerated in Q3 as participation broadened across customer segments, reflecting a healthier, more liquid marketplace. Spot volumes reached $16.4 billion, up 45% quarter-over-quarter, including $14.6 billion from institutional customers, up 49% quarter-over-quarter and $1.8 billion from retail, up 20% quarter-over-quarter. Liquidity improved across order types, which we believe highlights the continued strength of our core exchange. Our OTC business also expanded its client base and product range, contributing to greater market depth and scalability. At the same time, our revenue mix became more balanced and durable with services revenue, including credit card, custody and staking, accounting for nearly 40% of total revenue in Q3, up from less than 30% a year prior. Custody and staking assets benefited from both price appreciation and new regional launches with staking balances reaching $741 million at quarter end. These results illustrate how our card-led acquisition strategy and expanding exchange activity reinforce each other, creating a compounding flywheel of engagement, liquidity and trust that can help drive sustainable growth. As liquidity and engagement on our exchange continue to grow, we also expanded access to the broader onchain economy, delivering new products and capabilities that make it easier, safer and more seamless for customers to engage directly with onchain opportunities. We continue to expand our onchain capabilities and invest in our native staking infrastructure during the quarter. In August, we introduced Gemini Wallet, a self-custody smart wallet designed for both crypto users and developers. The wallet allows customers to manage assets seamlessly across onchain applications while maintaining control and security, bridging the gap between embedded and portable onchain experiences. We also launched Solana staking from custody for institutions and our own in-house Solana validator, providing clients with a secure and compliant way to participate in network validation directly through Gemini. In parallel, we expanded multi-network support across both EVM chains and emerging Layer-1 networks, enabling broader access to stablecoins on our platform. Under our MiFID license in Europe, we rolled out tokenized stocks to EU customers, offering EU customers a regulated path to gain exposure to traditional financial assets onchain. We're also continuing to work on new products, including an expected upcoming prediction markets offering, which we expect to share more about in the future. Together, these initiatives strengthen Gemini's role as a trusted bridge to the onchain economy, reinforcing our vision to make crypto accessible to everyone through a single integrated experience. Finally, as we continue to scale our platform and expand our product capabilities, we also strengthened our balance sheet and improved our capital efficiency. Following our IPO, we paid down debt and improved capital efficiency through new funding structures, including establishing a $150 million credit facility to finance credit card receivables. These actions strengthen liquidity, and we believe that it positions Gemini for scalable, sustainable growth. Looking ahead, we remain focused on maintaining balance sheet strength while retaining the flexibility to fund strategic initiatives that drive scale and growth. We also plan to continue to thoughtfully utilize share-based compensation as a tool to align employee incentives with the long-term success of Gemini. Together, these priorities reinforce our commitment to disciplined capital management and the alignment of our people and financial resources around sustainable value creation. Overall, we believe that Q3 demonstrated the breadth and resilience of Gemini's model in action. We executed across every part of our platform, expanding our global footprint, scaling card engagement, deepening trading activity, advancing our onchain strategy and improving capital efficiency. Each of these initiatives strengthens the flywheel of trust, engagement and liquidity that we expect to continue to power our growth. With that, I'll turn the call over to Dan Chen, our Chief Financial Officer, to take you through our financial results for the quarter in more detail. Dan? Daniel Chen: Thank you, Marshall, and good to speak to you all. It's great to be here today to discuss our third quarter results, our first quarter as a public company. I'll start with an overview of our financial performance and then provide a bit of color on trends across revenue and expenses before wrapping with adjusted EBITDA and outlook. Net revenue for the third quarter was $49.8 million, up 52% quarter-over-quarter. This marks another strong step forward for Gemini as we continue to expand both the reach and resilience of our platform. Growth this quarter was broad-based, driven by stronger trading activity, increased user engagement across our credit card product and exchange, including increased traction in staking and custody. Taken together, we believe that these results highlight the expanding utility of the Gemini ecosystem and the growing diversification of our revenue streams. Transaction revenue was $26.3 million, up 26% from last quarter. Spot trading volumes reached $16.4 billion, up 45% quarter-over-quarter, reflecting both higher user engagement and improving market conditions. Retail volumes grew 20% to $1.8 billion, while institutional volumes rose 49% to $14.6 billion. The increase in exchange activity came from both existing customers becoming more active and new clients onboarding to the platform. As a reminder, transaction revenue is earned from fees charged to both retail and institutional users. These fees vary by transaction size, volume and order type with instant orders having the highest fee. This quarter's increase was partially offset by a lower average retail fee rate, reflecting a higher mix of lower fee order types. Overall, the growth in volume more than offset the mix effect, demonstrating the underlying health of our marketplace and the scalability of our exchange. Turning to services revenue. The total for the quarter was $19.9 million, which includes credit card, staking and custody revenue as well as other activities related to the exchange business. Credit card revenue was $8.5 million, up $3.7 million from the prior quarter, driven by continued user growth and higher spend per active cardholder. We saw 64,000 new card sign-ups in Q3 compared to 17,000 in Q2, bringing receivable balances to $150.6 million, up 61% quarter-over-quarter. The Gemini Credit Card continues to be a powerful customer on-ramp, helping new users enter the ecosystem and strengthening engagement among existing ones. Staking revenue also performed well, increasing $3.2 million to $5.9 million. This reflects our first full quarter of Solana staking in the U.S. and was further supported by an increase in staked assets and underlying price appreciation. We also recognized $2.1 million in advisory fee revenue from a onetime warrant arrangement, reflecting the value of our advisory capabilities. We expect services to continue to be a major growth driver going forward, particularly with the continued adoption of the Gemini Card and our staking products expand globally. These are high utility recurring revenue streams that we believe can strengthen the long-term stability of our business model. On to expenses. Total operating expenses for the quarter were $171.4 million, up about $72.7 million sequentially. That step-up was primarily driven by IPO-related stock-based compensation, increased marketing spend and other nonrecurring items rather than a structural change in our cost base and underlying operating system expenses otherwise moved in line with recent quarterly trends. Breaking that down, compensation and headcount expenses were $82.5 million, up $45.7 million from Q2. Roughly $44 million of that increase came from stock-based compensation tied to IPO equity awards, including a $15.1 million bonus accrual recognized and settled in equity at the same time. Compensation and headcount expenses otherwise tracked an increase to employee headcount, which was 677 employees at quarter end. We continue to invest selectively in engineering and compliance while keeping overall hiring disciplined. We expect compensation to normalize at this new post-IPO level as stock-based compensation becomes a recurring part of our expense base. Turning to sales and marketing. Expenses were $32.9 million, up $16.8 million from last quarter. The majority of that increase reflects deliberate investments. About 2/3 of the increase was higher marketing and brand spend, while the remainder came from higher rewards and promotions consistent with elevated card activity. We believe that we've seen a clear payoff from that investment in terms of new account growth and card engagement. That said, we continue to view marketing as a flexible lever. We expect spend levels in upcoming quarters to depend on the performance opportunities we see in the market. Transaction-related costs rose in the third quarter as well, reflecting both higher activity levels and a few isolated losses. Transaction processing expenses were $8.6 million, up $3.4 million from the prior quarter on stronger staking balances, while transaction losses totaled $7.7 million, up about $4 million sequentially. Those losses were generally in line with the continued scaling of the business. The provision for credit losses on the card program, which is included in transaction losses increased by $1.5 million to $2.8 million, consistent with the continued growth in active accounts. We continue to see improvement in credit performance. Technology and infrastructure expenses were $20.3 million, up about $2.5 million, driven by higher software licensing and ongoing security and scalability investments. G&A expenses were $19.3 million, essentially flat, though that figure includes some nonrecurring IPO-related costs. Turning to debt and liquidity. During the third quarter, third-party corporate debt increased by $75 million, reflecting a new borrowing facility. To execute that facility, we entered into a related party loan of 1,275 Bitcoin. At quarter end, that loan totaled $145 million. We also saw an increase in other related party crypto loans, up roughly $13 million, reflecting in part higher Bitcoin and Ethereum prices, partially offset by repayments of 133 Bitcoin and 13,070 Ether. At quarter end, we held 5,824 Bitcoin and 26,629 Ether received through these arrangements. After the quarter closed, we returned $116.5 million of proceeds from the Galaxy loan and received the full Bitcoin and Ethereum collateral back. That loan remains outstanding for the 90-day notice period under the terms of the agreement. Finally, we executed a warehouse financing facility to fund our Gemini Credit Card receivables. At quarter end, we had $49 million of debt outstanding and $68 million of pledged receivables sufficient to support borrowings of $59 million. This is an important step for the business. By financing the card portfolio through a warehouse structure rather than funding it entirely on the balance sheet, we believe that we're making the program more scalable and capital efficient. In our view, this approach mirrors established practices in traditional consumer finance and provides flexibility to grow the card program responsibly while maintaining strong liquidity and risk management discipline. Overall, we believe that our balance sheet remains healthy with ample liquidity and diversified funding to support growth across our key products. Looking ahead, our focus remains on driving disciplined growth, improving capital efficiency and maintaining flexibility to invest behind our highest conviction opportunities. Starting with our medium-term framework, we continue to expect monthly transacting users to grow at a 20% to 25% compound rate over the medium term and that growth to be supported by a mix of new retail customers coming through our credit card on exchange and expanding engagement from existing customers across trading, staking and onchain activity. On the top line, we expect services revenue and interest income, which includes staking, custody and the Gemini Credit Card as well as interest income to reach $60 million to $70 million in fiscal 2025. We expect that growth to reflect continued momentum in our credit card program and increased engagement in non-trading activities, both of which we expect to contribute to deeper and more diversified customer relationships. Turning to expenses. We expect technology and G&A expenses to total between $140 million and $155 million for fiscal 2025. We expect this to reflect ongoing investment in scalability, reliability and compliance infrastructure, balanced by expected efficiency gains across our core operations as we continue to scale the platform. On marketing, we expect a more meaningful step-up for full year 2025 with expenses of $45 million to $60 million. That increase reflects our decision to lean into growth following the IPO and build on momentum. We plan to continue to evaluate performance data closely and direct spend to the channels and products where we expect to see the strongest returns. In other words, this isn't broad-based expansion. It's a targeted acceleration designed to drive durable user growth and strengthen brand equity. As we move forward, stock-based compensation will remain a structural component of our expense base, reflecting our transition to a market-based equity program aligned with long-term shareholder value creation. So while total operating expenses will remain elevated relative to pre-IPO periods, we believe that this reflects our intentional investment in both people and growth. Stepping back, the key takeaway is that we believe that our expense growth is strategic and controlled. We believe that we are investing from a position of strength. We see a clear line of sight to scalable revenue streams, and we expect to continue generating operating leverage as those investments begin to mature. Q3 was another step forward for Gemini. We delivered strong top line growth. We deepened engagement across both retail and institutional users, and we continue to diversify revenue toward higher-quality recurring streams like card and staking. We believe we are operating from a strong foundation, investing in growth, scaling responsibly and maintaining the discipline that underpins our long-term margin expansion goals. We're building a business that is larger, more durable and better balanced than ever before, one that can scale through market cycles and capture the long-term opportunity in onchain finance. With that, we will now open the call for analyst Q&A. Thanks, everyone. Operator: [Operator Instructions] Our first question is from Dan Dolev of Mizuho. Dan Dolev: Really nice results here. Congrats on the first quarter. So 3Q really proves that Gemini is increasingly becoming a global financial super app with we're seeing higher engagement, massive card adoption and products like the Gemini Wallet and then you talk about the future of prediction markets, which makes it very exciting. So maybe for you, Tyler and Cameron, can you maybe shed some light on the new product road map and the super app that you're planning? That would be very helpful. Cameron Winklevoss: Thanks for the question. This is Cameron. So with respect to our product road map, we're really excited about building towards the super app, which we started. We launched our self-custodial smart wallet this summer. And our view is that markets are all going on chain. And so pretty soon, you will be able to hold a tokenized dollar via stablecoins, tokenized equity and digital commodities all within one app. Traditionally, that's been maybe multiple apps or a siloed experience, and we're working to bring that all together within one app, and we're making very good progress there. We launched tokenized equities in Europe. We support many different stablecoins, and we support digital commodities like Bitcoin and the like. The other part of our road map that we're very excited about is the credit card. We had a very exciting quarter, but we feel that it is still very early. When we look at the size of the potential market, we're just really getting started. We're excited to have broken 100,000-plus cards. but it's really just the beginning when you think of the size of the market. And we think that consumers are really understanding the power of earning crypto every time they swipe as opposed to points that expire and it's hard to determine the value. And what we're finding is that people are coming for the credit card and they're staying for everything else. And they're curious and they navigate through the app and go on to take other revenue-generating actions. We also have an upcoming small business card that we plan to launch soon. And we're also planning other co-branded card opportunities with other major projects. And then lastly, we are working on prediction markets. We're very excited about these markets. We think it's very early days. It reminds us a lot of what Bitcoin felt like in 2012 when we first discovered it. And this idea that you can essentially build a market on anything, any kind of event is fascinating and really a boundless opportunity. So we have -- we're working to bring those live globally. We have an application with the CFTC to build a DCM, Designated Contract Market. And once the government opens back up, we hope to continue pursuing that application and hopefully bring these products to market soon thereafter. Operator: Our next question comes from the line of Michael Cyprys with Morgan Stanley. Michael Cyprys: I echo the congratulations on the first quarter out of the gate here. I wanted to dig in on the card business, some very strong growth in terms of accounts you guys are putting up. I was hoping maybe you could unpack what you see is driving some of the strength. I know you also launched in October, the Solana addition of the Gemini card. I was hoping maybe you could help provide a little bit of color on what you're seeing so far as well as the XRP card, how that engagement is continuing here into October and November compared to the 64,000 card sign-ups that you had in the third quarter? Marshall Beard: Yes. This is Marshall Beard, and I can take part of this question, and thank you for that question. It's a great one because credit card is one of the most exciting products that we have right now. We had tremendous growth in Q3. It's been one of the most exciting levers. I mean we're a market leader here. We're continuing to press and acquire new customers. One of the really interesting things is 55% of our U.S. new transacting users are actually coming through the credit card onboarding funnel, and it's one seamless experience, so they become exchange users as well. With the Solana Card launch, there's also like a really great example here of how we're using product in UX to get these card customers to engage in other products and services on the platform. So when we launched the Solana card, we also launched a feature that you can auto stake your rewards if you choose Solana or any other stakable asset as your rewards. So what happens is we've seen a big increase in users that are now staking on Gemini, and these are all folks from the credit card that are auto staking their Solana rewards. So they're learning more about our products and services. They're engaging with other products and services, and it's one of the most exciting levers that we have right now. Daniel Chen: Mike, that's a great question. This is Dan. I really appreciate the thoughtfulness of that. I think Marshall expressed it super well. And I think you heard earlier, Cameron and Tyler mentioned the work around the small business card. And I want to highlight that because the credit card is just this incredible acquisition vector for us, but we're not content to just have the product to be a prime consumer card. like we understand that the opportunity here is to take that vector because we manage the program ourselves, we can expand and land from there and add on other vectors. So small businesses are an underbanked, underappreciated part of this economy that's so important to America thriving, and we really believe that this is part of our opportunity as well. Like we want to take this product, expand it to a group that's underserved and grow from there. Michael Cyprys: Great. If I could just ask a follow-up question on the card losses as you guys are leaning into the growth in terms of accounts. I was hoping maybe you could speak to the outlook for losses as well as on the fraud side. Maybe remind us what leads to those fraud losses? And what are some of the steps you can take to drive that lower over time? Daniel Chen: Sure, Mike. This is Dan. I'm happy to take a first run of those questions. As far as losses go, transparently, losses in this quarter were really low. They showed meaningful improvement versus what we had in prior periods. We do believe that, that is a reflection of 2 things. The first and foremost, we think it's a reflection of the credit discipline we bring in making sure we underwrite the right customers where we provide credit to people who can afford it. The second is there is a denominator effect to be transparent, like as we grow that program, losses will initially be a little bit lower as new customers onboard and use the product. And over time, there's a leveling off of charge-offs. So it's a great level. We believe we'll continue to keep losses strongly mitigated. We have a great team that manages the credit. They are really focused on deploying the best technology available to keep losses, whether it's credit or fraud tightly mitigated. So from our perspective, that's a central hypothesis. Like we can't get third-party financing. We can't scale the business if we extend credit to those who aren't able to afford it. Operator: Our next question comes from the line of Matt Coad with Truist. Matt Coad: I really appreciate all the color on the new business wins that really impressive like you guys talked about. I was hoping that you could touch on some of the guardrails that you have in place, though, just to make sure that your unit economics remain strong while you look to regain and grow market share here. Marshall Beard: Yes. This is Marshall Beard. I can take a stab at that. I mean, this year, and especially Q3 was one of our highest new user acquisition quarters that we've had in many years, as you can see with our lifetime transacting users and our MTU growth. And so we feel very confident in our ability to deploy capital now well below our CAC targets and well within our payback period still. So earlier this summer, we saw massive growth, and we saw great user acquisition tools, things like the XRP credit card brought user cost very low. We're still seeing that right now. We feel very confident in our ability to deploy capital with the plan that we've had all year through at least the end of the year. But as our shareholder letter mentioned, we do view marketing spend as a lever, right? We're going to continue to press into heightened moments where we can capture users at as cheap a cost as we can, and we can pull back as quickly as we want as well. So we feel really good still about our ability to acquire users well within our range, well within our CAC and payback period. So we'll continue to do that as long as the market kind of shows us those numbers, and we feel good about it. Matt Coad: Super helpful there. And then, guys, just one other follow-up on the super app that you're looking to build here. Makes total sense to us. There's a clear market need for this kind of offering. I was just hoping you could touch on how you think about buy versus build versus partner as you look to build out that super app and kind of like round out all of your offerings? Just a little bit of color there would be helpful. Cameron Winklevoss: Sure. This is Cameron speaking. So we are building that super app in that future. It's an onchain feature. We're an onchain company, and this is our wheelhouse. So this is something that we will build as opposed to partner or buy. Operator: Our next question comes from the line of James Yaro with Goldman Sachs. James Yaro: I'd love to touch on the drivers of the medium-term 20% to 25% monthly transacting user guidance. Could you expand a little bit on the key building blocks of this guidance? Daniel Chen: Yes. Sure, James. This is Dan. Great to hear from you. The drivers of that continued growth, I think, are really a continued focus on what we've been doing for the past 90-plus days, right? I think it's a continued motion of acquiring new customers, whether through the exchange directly or via that linkage, that really close linkage to the credit card product. There's also, as you can tell from Marshall's earlier comments about auto staking and the activities we're doing there, like there's also just the increased engagement of customers already on the platform. So when you become a Gemini customer, we're not quite content with necessarily your activities in the exchange just being what you start out with. If you come in as a card customer, our real objective is to make sure that we make staking easier. we help introduce staking to you. We're really focused on building platform capabilities. We're focused on adding products and increasing engagement. So the building blocks remain the same. The building blocks are that we will spend money to acquire customers within that CAC target that we have to make sure that we're acquiring targets in a unit economic way that makes sense. And from there, as we bring them into Gemini, getting them more and more engaged to choose us as their financial super app location of choice. James Yaro: Excellent. Very clear. Just as a quick follow-up, I wanted to touch on something that happened during the IPO that I think was important to the story. But specifically around the Nasdaq partnership, anything that you could lay out for us in terms of the opportunity time frame and perhaps just the broader revenue possibility there? Marshall Beard: Sure. Yes, James, this is Marshall. I can give a brief update. I don't have any material updates to share on that partnership other than the discussions are ongoing. We've been talking to some clients of Nasdaq as well already that they've introduced. We're working around 2 different businesses with a bunch of different clients and new products that we're building for them. So it's very positive. It's moving forward. It's still just very early in that journey. Operator: Our next question comes from the line of Pete Christiansen with Citi. Peter Christiansen: Also, congrats on the IPO, guys. I was wondering if you could talk about or at least some of the attribution in the exchange side, particularly on the institutional volume. Was some of that growth there, which was really interesting there. Was that attributable to like MTU growth or just like deeper engagement with existing clients? Any other trends that you can tease out there would be helpful. Then I have a follow-up. Marshall Beard: Yes. Pete, this is Marshall Beard. I could speak to that. We've put 10 years of work into our infrastructure to support institutions on the Gemini platform. And so with the mix of recent talent that we brought in and all of the capabilities that we have, we've seen an uptick in new trading firms coming on to Gemini, and we've been strategic with our fee rates for these institutions as well. So the majority of what you're seeing in the institutional volume uptick is our sales and business development team is doing great work, engaging with the community and getting firms back on and trading on Gemini and also being very competitive with our fees right now. Peter Christiansen: That's helpful. And should that read-through be the same for retail? I was going to ask that question. I mean you did discuss spreads down sequentially. If you could just attribute that. It sounds like it's really deliberate there in an effort to grab more share. Daniel Chen: Yes. Sorry, this is Dan. Great to hear that question. I mean I think at the end of the day, the retail take rate did not move from our perspective materially from the prior quarter. It's still higher than where it was in the 2 quarters before that as well. So 3 quarters before that as well. So we think that the retail take rate changes were really the result more of the mix shift between active trader and instant trading and not really about any programmatic reduction in fees in order to gain volume. Operator: Our next question comes from the line of John Todaro with Needham. John Todaro: On the quarter. I guess the first one, just as it relates to cards, obviously, a lot of success there, but we are seeing a fair bit of competition now heating up in that segment. fintech I cover is now launching one. Just kind of do you think it starts to get crowded? How do you keep staying innovative there? And then I'll ask my follow-up. Tyler Winklevoss: Thanks for the question. This is Tyler. We think that other people entering into the card space is validating for what we're doing. We're a leader here. We've been here for years. And there's a lot of ways we can continue to expand our offering, both with front when we have with more co-branded cards. as well as, as we mentioned, going into small business and other verticals. And we think that just the sheer size of the market is quite large for credit cards, both for individuals and businesses in America and especially when you have the novelty of earning crypto rewards back and all of the possible different rewards you can earn because of all the cryptos we support on Gemini. So we find the competition to be validating. And in many ways, we feel like we're just getting started with this product. Cameron Winklevoss: And this is Cameron. Just to build on that, our card has no annual fee. So it really is a ramp and an acquisition tool. We're trying to make the barriers as low as possible for people to sign up and start earning crypto. We don't require a subscription fee or any kind of membership. Anyone can apply, no annual fee, and we're just trying to create a very simple intuitive product for anybody to try. John Todaro: Great. And then as my follow-up, and apologies if it was already asked, there's a couple of other ones going on right now. Eve trading volume on the platform looked like it shot up relative to Bitcoin. Just wondering if that was due to staking market dynamics or if there's like a customer profile changing on the platform. Marshall Beard: Yes. This is Marshall Beard. I can answer this one. Nothing really too much to dig into here. No customer profile or anything that would have caused that. I think what you'll see is sometimes basically due to price appreciation or depreciation, you'll see some assets kind of overtake Bitcoin or some of the top trading assets over time. But most of that is just around price appreciation, not about customer segments or anything. Operator: Our next question comes from the line of Chris Brendler with Rosenblatt Securities. Chris Brendler: Congrats on the opening quarter out of the gate here. I wanted to ask about the credit card business a follow-up here. I saw that the 56% of the sort of new users came on the card first this quarter. That was, I think, closer to 40% in the first half of the year. Can you talk about how that should trend from here as you ramp up marketing? Do you still see card being the lead growth engine for the exchange? Or should that start to trend down here? Marshall Beard: Yes, this is Marshall, and I can answer this quickly. I think for the near future, we're going to see similar growth rates for the credit card compared to the exchange. It's one of these products that has really caught on since we started marketing it, and it's found incredible product market fit. I think to an earlier question, the rise of other products that are potentially similar in nature has also brought more eyes to this space. I mean we're not necessarily competing against other crypto rewards, but more of the broader credit card and the points game as a whole. And so even right now, though, we're seeing similar acquisition trends in Q4 around the card. So I think for the near term, we're going to see that. We're going to keep pressing into this product. And we're seeing incredible results so far of all these new cardholders going on to use the exchange products as well. Chris Brendler: Awesome. Great. And then my follow-up question is on pricing. IPO roadshow, there was some discussion of taking some pricing opportunities in both staking and the card business. Has that happened already? Or is that still on the come? Marshall Beard: Yes. We have adjusted our staking take rates. I think we've increased them from 15% to 25%, which is still lower than our competitors, but still near. So that has taken place. I don't think we've made any changes necessarily or material changes to our credit card take rates. Operator: And I'm currently showing no further questions at this time. I'd now like to turn the conference back to Tyler and Cameron Winklevoss for closing remarks. Cameron Winklevoss: Great. Thank you. This is Cameron. We really appreciate the questions and engagement and interest. We're very excited to have this first earnings call. It's a great milestone for our company, our journey and our mission. And we feel like we're just getting started, and we're very excited to continue this journey, and we feel there's a lot of great things to come. Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.
Operator: Greetings, and welcome to the TeraWulf 2025 Third Quarter Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I will now turn the conference over to John Larkin, Senior Vice President, Director of Investor Relations. Thank you, Mr. Larkin. You may begin. John Larkin: Good afternoon, and welcome to TeraWulf's 2025 Third Quarter Earnings Call. Joining me today are Chairman and CEO, Paul Prager; and CFO, Patrick Fleury. Before we get started, please note that our remarks today may include forward-looking statements. These statements are subject to risks and uncertainties, and actual results may differ materially. During this call, we may use words like anticipate, could, enable, estimate, intend, expect, believe, potential, will, should, project and similar expressions, which indicate forward-looking statements. For a more comprehensive discussion of these and other risks, please refer to our filings with the SEC available at sec.gov and in the Investors section of our website at terawulf.com. We will also reference certain non-GAAP financial measures today. Please refer to our 10-K and 10-Q filings on our website for a full reconciliation of these non-GAAP measures to the most comparable GAAP measures. We will start today's call with prepared remarks from Paul and Patrick, followed by a Q&A session. Now I'd like to turn the call over to our CEO, Paul Prager. Paul Prager: Good afternoon, and thank you for joining us today. The third quarter was truly transformational for TeraWulf, both operationally and financially. During the quarter, we executed one of the most significant steps in our company's evolution, signing approximately 360 megawatts of critical IT load with Fluidstack backstopped by Google at our Lake Mariner campus in Upstate New York. This 10-year agreement representing average annual revenue of approximately $670 million and average annual net operating income of more than $565 million before extensions, firmly validates our high-performance computing hosting strategy and establishes TeraWulf as a leader in designing, building and operating low-carbon enterprise scale compute infrastructure. In October, we reinforced that leadership by closing $3.2 billion in senior secured financing backed by the Google credit enhancement to fully fund the Lake Mariner high-power compute build-out. This transaction is a milestone for the broader industry, demonstrating a repeatable end-to-end development model that begins with design and site control, extends through customer contracting and construction and culminates in long-term credit-enhanced lease revenue. The third quarter also marked an operational inflection point for TeraWulf as we recorded our first HPC revenues with lease commencement at WULF Den and CB-1. We remain on track to deliver CB-2 near year-end, subject, of course, to tenant fit-out requests, which will complete our delivery of 60 megawatts of critical IT for Core42. Across our platform, these early deployments are proof points that our strategy is working and our execution is disciplined. At Lake Mariner, our team continues to perform exceptionally well. In terms of executing for Fluidstack in Google, the majority of long lead items have been contracted through CB-5 and construction progress is both visible and measurable. CB-3 is more than 50% directed. The final concrete pour is scheduled within two weeks, and the structure will be fully enclosed before year-end. CB-4 and CB-5 are already well underway with underground work beginning next week, field deliveries arriving in early December and building erection expected to begin before Christmas. The progress our construction and operations teams have achieved and with rigorous quality standards reflects TeraWulf's deep experience in developing and delivering large-scale energy and data infrastructure. We also continue to expand our geographic footprint and customer base. Just two weeks ago, we expanded our partnership with Fluidstack and Google, announcing our joint venture to develop and operate the Abernathy HPC campus in Texas within the Southwest Power Pool market. This project adds 168 megawatts of new HPC capacity with expansion potential up to 600 megawatts and replicates the same credit-enhanced structure proven at Lake Mariner. This joint venture with Fluidstack and Google leverages our collective expertise, incorporates Hypertech as EPC partner and includes two additional options to expand the joint venture, one for future phases at Abernathy and another for a separate site elsewhere in the United States. This partnership represents the next evolution of our growth model, scalable, capital efficient and backed by world-class partners. And while we've made tremendous progress executing the business we have, what's equally important is how we're positioning TeraWulf for the next wave of growth. Our approach remains disciplined, expanding only where we have clear structural advantages in power, permitting and partnership and our opportunity set continues to broaden. In August, we signed an 80-year lease at the Cayuga site in New York, laying the groundwork for large-scale high-power compute deployment beginning in 2027. As just mentioned, the Abernathy joint venture offers meaningful embedded expansion potential, both on campus and across future projects with Fluidstack and Google. Meanwhile, our in-house development pipeline continues to mature with several high-quality opportunities now approaching realization. Together, these initiatives form the very foundation for TeraWulf's next phase of growth, executing today while methodically building the platform for tomorrow, scalable, low carbon and designed to meet the accelerating demand for high-performance compute. Reflecting that confidence, we recently increased our annual target for new HPC signings from 100 to 150 megawatts per year to 250 to 500 megawatts per year. We did not make this decision lightly. It reflects the tangible progress we've made in advancing our development pipeline and the strength of customer demand. Over the past year, we've evaluated over 150 potential sites, narrowing that list to a select group that meets our strict criteria, grid redundancy, minimum power thresholds, attractive geographies for end customers and time to power. To support this next phase, we've expanded our site acquisition and development teams, strengthening what is already the most capable organization in the sector. Our deep understanding of what hyperscale and AI customers need, combined with our access to scalable, low-cost power, positions TeraWulf at the forefront of the infrastructure transformation now underway. We are proud of what our team accomplished this quarter, but we are even more excited about what lies ahead. With that, I'll turn the call over to our CFO, Patrick Fleury, to discuss our financial results in more detail. Patrick Fleury: Thank you, Paul. The 3Q 2025 results reflect a strong contribution from our legacy Bitcoin mining operations and more importantly, the start of HPC Leasing segment revenues. On our 2Q 2025 earnings call, we discussed a series of capital markets initiatives in the second half of 2025. I'm proud to report that with the benefit of our new financial support from Google and help of our partners, including Morgan Stanley and Paul, Weiss, we've executed beyond our expectations, raising over $5.2 billion at incredibly attractive rates, creating durable equity value for our shareholders. Now let me turn to the results. In the third quarter of 2025, GAAP revenues increased 6% quarter-over-quarter to $50.6 million from $47.6 million in 2Q '25. We recognized $7.2 million of HPC lease revenue at WULF Den and CB-1 with intra-quarter lease commencement resulting in 22.5 megawatts of energized hosting capacity. Continuing with our long-term commitment to financial transparency, we've added a page in our investor presentation detailing lease accounting nuances, which we hope you find helpful. We self-mined 377 Bitcoin at Lake Mariner or approximately four Bitcoin per day, a 22% decrease compared to the 485 Bitcoin mined in 2Q '25. Our GAAP cost of revenue, exclusive of depreciation, decreased by 22%, $22.1 million in 2Q '25 to $17.1 million in 3Q '25. Power prices in Upstate New York normalized in 2Q '25 and continued to decline in 3Q '25 to $0.047 per kilowatt hour, in line with historical levels and our previous guidance of $0.05 per kilowatt hour for the second half of 2025. Proceeds from participation in demand response programs, which are recorded as a reduction in cost of revenue during the period in which the underlying program occurs, increased to $7.4 million in 3Q '25 from $3.1 million in 2Q '25. Operating expenses increased 28% quarter-over-quarter to $4.5 million in 3Q '25 from $3.5 million in 2Q '25. This trend higher throughout 2025 is primarily the result of increased staffing levels at Lake Mariner necessary to support our entry into HPC leasing. SG&A expense for 3Q '25 was $16.7 million, a 17% increase from $14.3 million in 2Q '25. After adjusting for stock-based compensation, SG&A increased quarter-over-quarter from $10.6 million in 2Q '25 to $12.3 million in 3Q '25. Depreciation increased quarter-over-quarter from $18.8 million in 2Q '25 to $26.5 million in 3Q '25. The company recorded accelerated depreciation expense of $7.8 million related to a certain minor building and related miners, of which the company shortened its useful life based on expected shutdown of operations for purposes of supporting the HPC operations. Change in fair value of contingent consideration was $8.8 million in 3Q '25 related to fair value remeasurement of contingent consideration liabilities based on milestones achieved during the quarter related to the acquisition of Beowulf E&D. Loss on disposals of property, plant and equipment net was $2 million in 3Q '25, down from $3.8 million in 2Q '25. These losses related to the sale of 8,900 and 2,900 miners, which were sold or otherwise disposed of for proceeds of $6.9 million and $1.9 million in 3Q '25 and 2Q '25, respectively. GAAP interest expense in 3Q '25 was $9.8 million compared to $4.0 million in 2Q '25, and we recognized interest income of $4.1 million in 3Q '25 compared to $1.2 million in 2Q '25. Cash interest paid during 3Q '25 was negligible compared to $7.1 million in 2Q '25 as the 2.75% interest on our $500 million convertible notes is accrued and payable in 2Q and 4Q of each year. Change in fair value of warrant and derivative liabilities in 3Q '25 was a loss of $424.6 million related to the Google warrants and the conversion feature of the 2031 convertible notes, which was originally accounted for separately as a derivative liability. Our GAAP net loss in 3Q '25 was $455 million compared to a net loss of $18.4 million in 2Q '25. Our non-GAAP adjusted EBITDA improved 25% quarter-over-quarter, totaling $18.1 million from $14.5 million in 2Q. As a reminder, these results are inclusive of significant increases in operating expenses and SG&A over the past 12 months as we invested heavily in our HPC business. These incremental costs have been entirely borne by our legacy mining business until now. Turning our attention to the balance sheet. As of September 30, we held $712.8 million in cash and restricted cash with total assets amounting to $2.5 billion and total liabilities of $2.2 billion. In October, we closed over $4.2 billion in capital markets transactions, including $3.2 billion of 7.75% BB-rated senior secured notes due 2030 and $1.025 billion of 0% convertible notes due 2032. As seen on Page 14 of our 3Q '25 investor presentation, with these financings complete and the La Lupa and Akela data center construction projects at Lake Mariner fully funded, our pro forma liquidity totals over $1 billion, which provides cash for three important initiatives: one, TeraWulf's cash equity contribution to the Abernathy JV with Fluidstack; two, the acquisition of key sites in our pipeline that have advanced to the final stages of diligence and negotiation; and three, excess cash to create a fortress balance sheet to weather any storm. With regard to the Abernathy JV, we anticipate coming to market before year-end with a senior secured notes financing similar in all respects to the offering we recently completed at WULF Compute. As a reminder, the Abernathy JV benefits from $1.3 billion of Google credit support over a 10-year period. The second half of 2025 has been nothing less than extraordinary for TeraWulf and its stakeholders. We have secured over $16 billion of HPC lease agreements and executed over $5.2 billion of financings at incredibly attractive rates, added significant liquidity to the balance sheet and shown we have a deep multifaceted pipeline to grow the business at 250 to 500 megawatts annually in the future. With that, I'll turn it back over to the operator, and we look forward to answering your questions. Operator: [Operator Instructions] Our first question comes from Mike Grondahl with Northland Securities. Mike Grondahl: First question for Paul. Paul, it was noted that there's some key sites that you're close to closing on. Can you talk a little bit about those sites? Paul Prager: No. Good question, Mike. There are at least two sites that we're very, very close to sorting out. We're going for some regional diversity where we think our customers are inclined to enter into long-term agreements. We've built out our team on the front end here to focus. We've looked at over 150 opportunities. I would not be surprised if by year-end, we announced at least one, possibly two additional sites. Mike Grondahl: That's great. And then a question for Patrick. Patrick, I noticed in the slides you're breaking out segments now with BTC and HPC. And I also noticed on the HPC side, the margins look like they were about 72%. And I think in the past, you've talked about roughly 85% margins. Can you kind of reconcile that? Patrick Fleury: Yes. Yes, sure. Thanks, Mike. Yes, I think you'll see when we file the Q, full detail on the segments, obviously, which we're really proud of given the start of HPC leasing revenue. But yes, if you -- the actual margin was about 72%. There -- in the operating expenses, there's about $700,000 of expense development expense at Cayuga. So if you back that out, you'll see that gets you to about an 82% margin for the quarter. So obviously, much closer to that 85%. And then the quarter is a little off just because we didn't have full revenue. It was a stub period for CB-1 in particular. So I think you'll see that normalize here very quickly in the fourth quarter to right around that 85% that we've guided to. Mike Grondahl: Great. And congrats guys on all you've accomplished the last 90 days or so. Operator: Our next question comes from Nick Giles with B. Riley Securities. Nick Giles: Congrats on all the progress. Obviously, your agreements to date involve top-tier credits. Just was curious to hear how you're thinking about customer diversity from here. Is there a desire to expand the customer base? Appreciate any comments. Paul Prager: Sure. As you know, we have two/other world-class credits as our customers, Core42 backed by G42 and then the Fluidstack Google deal and those that may be associated in that deal, if you've taken a look at the recognition agreements, you're aware of that. And so I could not be happier with the credit quality of our customers, which is the critical element here and something Patrick pounds the table on because, obviously, we want to be able to get ideal credit terms for our transactions and the result in financing. So the answer is I would expect we'll continue to grow with the customers that we have. And certainly, we're continuing to have dialogue with a couple of others. But again, the key for us is credit quality. And so it's a little bit of a smaller universe as we move forward. But yes, the sites that we have and the sites that we are anticipating bringing home, all would be very compelling to a great quality credit in addition to, of course, the ones that we already currently have on the books. Nick Giles: Thanks, Paul. That's helpful. My next question was just on the JV. Can you just talk about how that opportunity came about? And then just to clarify, should we consider these type of deals as part of your new updated kind of megawatt per annum guidance? And should we think about that on an attributable basis? Just appreciate any clarity there. Paul Prager: I'll start, maybe Naz or Patrick can take it from there. We have built a great working relationship with the Fluidstack Google team. And if you think about it, there's no sort of reference models for what we're building. These are design build opportunities so that the teams -- listen, you're either going to succeed because you work together or it's going to be a disaster. So we like succeeding. So we work hard with the Fluidstack Google teams. They're on site. We meet constantly. I would tell you that they're part of our team now as we look to how we want to consider financing Abernathy. So it is in the course of that dialogue that they indicated that they had the site, they had the credit quality and that they were thinking about using an EPC, but that they recognized given our experience in energy infrastructure and financing energy infrastructure that it would be additive to the endeavor. And so everybody decided this made a lot of sense. Our primary strategy as we move ahead is to continue to do what we've done, which is have great sites and look for the right customer. But certainly, we're delighted to partner again with Fluidstack Google. And like I tell everybody, when Google says, "Hey, we'd like you to come into this project with us, you say, yes. You find a way to say yes, so that it makes sense for them and that it is a rewarding experience as well for your shareholders. That's what we did here in Abernathy. And I -- in the Abernathy deal, there's room to grow at Abernathy itself. But separately, as you are aware, we have a going-forward relationship on the next project of similar credit quality. So yes, that will be a project that we continue to evolve into, but our primary focus is additional sites and additional high-quality credit customers for those sites. I think Naz or Patrick, you may want to respond to how do we think about it from a financial perspective? Patrick Fleury: Yes. Nick, it's Patrick. I don't really have much to add. I think as I said in my prepared remarks, we intend to finance this, be in the market, financing it before year-end, and it's substantially similar to the deal that we just printed at WULF Compute. Nick Giles: Got it. And just to clarify, we should think about this on an attributable basis. If we see another one of these announced and we're trying to pair that against your 250 to 500, it would make sense to look at it that way. Patrick Fleury: Yes, we own 51% of the JV. So, yes. Nick Giles: Again congrats on the transformational quarter. Keep it up. Operator: Our next question comes from Dillon Heslin with ROTH Capital Partners. Dillon Heslin: Just a follow-up on sort of how you're talking about your power strategy. The non-JV sites you're looking at, are you procuring those sort of in absolute for marketing? Or do you already have customers in mind that you could basically go to right away? Paul Prager: So we have an active dialogue with our customer base. And this is a very competitive market. So we sort of -- we're constantly discussing with them what their needs are, what it is they're seeking at the same time that we're trying to complete our diligence and negotiation over some additional sites. If you remember, we've just got one quarter of a century in energy infrastructure development and operation. It's been very helpful in identifying sites that we think will be in the next wave of data center development for these hyperscalers and high-quality credits. I think in the case of Abernathy in the Fluidstack Google relationship, I think as we look at sites with them, we're obligated, obviously, to work with the customer. In the case of TeraWulf identifying and determining that another site makes a lot of sense for us. We're going to want to make sure that it's a competitive process that we end up with a great quality credit, but that we also get rewarded for the unique and wonderful qualities of that site and that we get the most return we can for the shareholders. So it's a little bit of both. Dillon Heslin: Great. And as a follow-up, how are you guys seeing the market in terms of build costs of -- like the sites you've been building so far have been at existing sites where you've had redundant power and then the Fluidstack Abernathy site, you're not building a substation, so the CapEx per megawatt is a little bit cheaper. And then you're talking about you've got long lead items procured for -- through CB-5. But how do you see sort of the market in general maybe beyond Lake Mariner? Paul Prager: Naz? Nazar Khan: Dillon, this is Nazar. Generally, what we try to do is be able to deliver capacity or the bulk of the capacity within 12 months of signing the customer. And so that often requires engaging with folks kind of on the electrical gear and the coolers and chillers in advance of that. And we've developed relationships with a number of different vendors where we have a rolling 12-month projected schedule with them, which gives us positions in queues. And then we can -- depending upon which -- how many megawatts of capacity we sign up, then we take those down. So we've tried to be ahead in being able to procure the equipment, which allows certainty to our customer when we engage with them on discussions. So that's been going well. And given the capacity that we've signed up and procured, we've been good partners for the vendors and vendors have been good partners for us as well on that equipment procurement side. So that's generally how we're approaching things. And as we look forward, I think the forecast and guidance we provided for that $250 million to $500 million, that general procurement strategy covers that capacity as well. Operator: Our next question comes from Chris Brendler with Rosenblatt. Christopher Brendler: Thanks and also congratulations, amazing amount of progress and looking forward to more. I wanted to ask on the -- actually a Bitcoin question. I noticed the operating hash rate was sort of 70%, I guess, of the nameplate hash rate this quarter and expect it to go down even further next quarter. Can you just give us a little color on what's going on there? Patrick Fleury: Yes. Chris, it's Patrick. So we're running our sites for our HPC clients now. And as we get closer to bringing all of Core42's capacity online, there are some things electrically that we have to do at the site. So you noticed in my remarks, I talked about accelerated depreciation on one of our minor buildings of $7.8 million this quarter and sales of miners. So as we sort of reposition the site, particularly for two lines of power and redundancy for the HPC buildings, we're making some changes on the Bitcoin mining side. And that's reflected in those numbers. It's a combination of kind of calling our fleet to be more efficient. And then again, just operating the site really for HPC. So you'll see -- I mean, obviously, site is still very profitable. We had a great quarter from a Bitcoin mining perspective. But I think going forward, that's our approach. Hence, the sales of miners, calling the fleet and then the accelerated depreciation on the minor building. Christopher Brendler: Makes sense. And I guess from that comment, it sounds like that continues in 2026. Patrick Fleury: Yes, I think so. I think like we said we kind of gave you some guidance in the deck for what we thought we'd have here in the fourth quarter. And then, look, I think beyond that depends on market conditions. But yes, I think our intent is to keep mining Bitcoin through certainly the end of 2026 and then dependent upon when the next 250 megawatts that we've requested from the New York ISO comes, I think we could -- you could see us operate beyond there until the next halving. But again, I think that will be a function of additional megawatts at the site as well as just Bitcoin profitability itself. Christopher Brendler: Excellent. Great. Speaking of additional megawatts, I like the slide that broke out how you think about the pipeline on the power side on Slide 8 and some great details there and helpful to think about where that comes together. The gigawatt plus of development pipeline, is that in the Phase 4 or the Phase 2? I wasn't quite clear where that comment on the following page fits relative to Slide 8 on the phases. Patrick Fleury: I think, Chris, that's really just going to Paul's comments, which, again, when you think about our funnel, which is really what Page 8 is meant to kind of show you, just the amount of time and effort that goes into cultivating that pipeline. And again, I think unlike some of our peers, we're not telling you a fictitious pipeline of thousands of megawatts all in the same region. We're telling you about stuff when it's literally imminent and ready to go. So I think as Paul mentioned, we're getting very close on a handful of sites that hit on Page 9, the development pipeline of a gigawatt. Operator: Our next question comes from Stephen Glagola with Jones. Stephen Glagola: On the raised AI capacity growth targets to 250 to 500 megawatts net annually, are there any structural or operational constraints, like whether, I guess, like EPC capacity, financing availability or like internal bandwidth that could just limit the number of projects you can execute simultaneously? Paul Prager: This is Paul. I'll start. The answer is yes. I mean, I think we've always tried to emphasize here a focus on our ability to execute. And I think that we're more than capable of meeting that goal of 250 to 500 megs. But it takes a lot of time to really get to the bottom of these sites. it's a very competitive market. You need to sort of look near and far afield. You have to make determinations on site suitability for the customer, but also what's power like at the node, what are the environmental and regulatory considerations. It's just a lot. So we're very confident we could do what we now say, which is an increase from where we're at. I'm not terribly worried about the EPC side. I feel pretty good about that and procurement capability and supply lines aren't what they were. I feel very good about that. I think that the key is going to be our ability to meet schedule and price. That's what the Street is looking for. That's what our customer wants. That's what we promised to our shareholders. So I'm very comfortable at 250 to 500. And as we grow, listen, we're building, as Patrick used to say, serial model # 6. As we get down to 10 or 11 and we find more efficacious ways to do this and needer ways to scale, then we could grow from there. But I think 250 to 500 is the right way to think about us for the coming year. Stephen Glagola: And if I can just ask one more. Are you seeing any meaningful demand from tenants for the AI capacity with ready for service dates beyond 12 months? And how is that shaping your pipeline site acquisition priorities? Paul Prager: Yes. Yes. Demand is real, and it's a constant. And I think that -- listen, I think there was a site out in Ohio the other day. They got a letter from AEP saying they were in the queue and they were in the queue for '26. And now you should probably not think about that power in '26, but you should think about it for like '29 and '30. And that is a way of saying that you've got to pick your sites really carefully. You have to understand what the grid is capable of. Are you in an area where the whole grid is only X and the demand is 3x that. So it goes to the notion that you've got to have a very good handle where you cite these things. But that then -- when you go back to the customer and you say, hey, how do you want to think about it if you want to be in this region, you're okay moving from '26 to '27. The answer has been yes, universally. The answer from '27 to '28 is yes. I don't think you get the power problem solved by then. You've got hyperscalers now looking at island generation, which means they're going to bring their own power to the table, and that's at least four to five years away. If you look at the deal that was signed with NextEra for bringing back the nuc, they looked at a 30-year transaction, which doesn't come online until '29, and I don't think there's any way that nuc is back online in '29. So the demand, I think, is just increasing. And it took a little while to get here. I think everyone was waiting to see who was going to make that first move. But now that we hear, the demand from the hyperscalers and the cloud companies is very, very significant. Operator: Our next question comes from Justin Pan with Clear Street. Justin Pan: This is Justin on for Brian. Obviously, the increase in incremental HPC guidance underscores a lot of optimism in demand over the next two to three years. You guys have had a great couple of months. Some of your peers have had a great couple of months. But could you dig in a little bit deeper into what gives you the confidence in the heightened demand outlook over the medium term? It seems like a pretty interesting dichotomy in the market at the moment, right? We're seeing some talk over AI valuation frothiness. But at the same time, there's been a ton of material success momentum in your space. So... Paul Prager: I'm happy to start, maybe you could follow up. But as I just said, we're looking -- we've been asked by customers to look at opportunities where we have to bring our own generation to the table. And you have to assume that if you're bringing your own generation to the table, you're at least four years out. And so when you have those kinds of questions coming in from world-class credits, that just speaks to just massive amounts of demand. I think the shortfall in energy is real. It's greater than I think originally forecast and the demand for energy by users like these high load data centers is more significant than was originally forecast. So we we've been getting calls since -- certainly since May, and they haven't abated. Every time we come up with a site, we have at least 5 phone calls that we could go to ask, would this kind of be something that is of interest to you. So I think if you just look at the hyperscalers and two or three of the big leading cloud players, they're being very, very aggressive in how they're looking at further locations and sites. And again, a lot of these sites wouldn't have any availability for electrification for two, three years out. So I don't know what to say other than to tell you the phones ringing, they show massive demand. And -- we don't see that abating anytime in the near future. Operator: Our next question comes from John Todaro with Needham & Co. John Todaro: First one here, as we kind of move from a phase of signing some of these leases to executing on them, can you just give us kind of any color as it relates to penalties if you missed time line of delivery and then just kind of frame up your confidence in hitting delivery dates? And then I have a follow-up question. Patrick Fleury: Yes, this is Patrick. Sorry, Nazar, go ahead? Nazar Khan: No, go ahead, Patrick. Patrick Fleury: Yes. So, John, just with regard to penalties, I'm not going to tell you the specific ones because that's confidential to the lease. But I would tell you, given the accelerated build time lines and all the work we've done with our customers here, there are pretty significant grace periods. So the leases cannot be terminated until we're over 180 days late. Obviously, as Paul said, we're meeting weekly, daily, monthly, like both in person and via teleconference with our customers. So there's no surprises. So folks are well aware of budgets, time lines, et cetera. In general, we have very minimal penalties for the first 30 to 90 days. Generally, there's a penalty for the 30 days, then there's another one for 60, another one for 90, and then the penalties start to accelerate from day 90 to 180. But those are relatively de minimis for us through 90 days and then scaled from 90 to 180. John Todaro: Great. That's super helpful. And then second question, if we do just take a step back, I guess, how are you guys able to add more of the power pipeline? Like some of the stuff was procured pretty quickly like Abernathy. I would just have to think major hyperscalers, Neo cloud, maybe private equity, everyone is competing now. Just, I guess, give us -- frame it up a little bit more for how you guys are able to win that. Paul Prager: Yes. I'm not sure I understand the question. I mean -- Abernathy didn't -- I wouldn't look at that as came on real quickly. I would -- again, we've had a long-term relationship now with Google and Fluidstack. And so we are aware of the strategy here, and they decided that bringing us alongside would be additive to the overall effort. But I'm not sure I understand the balance of your question. John Todaro: I guess just the main crux of it is if we take a step back and there's such a power constrained environment, one of the biggest questions we get from investors is just how these guys are able to continue to procure capacity like that 250 to 500 megawatts you talked about when we are in still a constrained environment, and there's just likely so many bidders for these assets. Paul Prager: Yes. I think the answer is -- so some of them are looking at island generation where they bring their own power. Some of them are looking at high electrification sites that had former industrial uses and they're looking at repositioning them into data centers. And some of them are talking to utilities about figuring out if there's a way that they could work out a deal like the NextEra transaction. I think they're following multiple strategies to get to the answer of they have long-term demand, and it's near term in terms of its immediate urgency, but they're looking at the 25- and 30-year deals. If you take a look at the Abernathy deal, it's 25 years. So I'm -- I can't tell you or opine to what the long-term answer is other than United States needs to build more generation. But I think everyone's figured that one out. The question is, are there sites that one can discover in the right regulatory frame set and from an environmental perspective, not too injurious to a customer that could enable a high-quality credit to come along and be a customer. And I think the answer is yes, but you got to know where to look. I guess I should emphasize TeraWulf where to look, which is why I think prior to year-end, we'll be bringing on at least one, maybe two other sites. Operator: Our next question comes from Tim Horan with Oppenheimer. Timothy Horan: Was there a specific trigger that caused you to kind of basically guide to more than doubling your incremental capacity per year or your customers? I mean it seems like demand is much stronger than maybe you were thinking about we were six, nine months ago. Yes, anything that really drove that? Paul Prager: Is that you Naz? Nazar Khan: Maybe I can start, Paul, you can jump in. Yes, I think there's a few things, right? So one is if you go back a year ago, we hadn't gone through the full cycle, right? As we have laid out in the deck, there's not just the site, there's not the design, there's the engineering, there's a financing and then there's a construction. So we've been through that full cycle now. And so sitting 18 months ago, looking forward, there was pieces of that process that we had not completed. Pending this quarter, through this quarter, we've completed all of those cycles. And so now we have a much better nuanced understanding of what's required for each one of those phases, what we can get done. There was a question earlier on capacity. So all of that is factored into that 250 to 500-megawatt forecast, which, again, 1.5 years ago, we didn't have that visibility. So I think that is a reflection both of our capacity capability to get each of those phases done as well as the size of the demand that's coming from the customers. Paul Prager: Yes. I would just want to add two more things. One is, obviously, after we had 42 online, that enabled us to sort of do show and tell to other customers. So I think the level of credible incomings to us just -- it was multiples of what it was prior to that. Secondly, Patrick, who was the architect of our financing strategy from day one, we didn't want to sort of have an arrangement where our customer was also financing our CapEx. He wanted to go about it in the way which we have, which was to say we would do it, and we would require credit support to enable good financing. In our case, Patrick has been able to get absolutely great financing. So once we went through that, that also opened up the doors to our ability to sort of get the capital we needed to build these things out and also showed customers, hey, this is how we do this. And Patrick led the way. I mean everyone's followed suit since then, but we were the first through that door and it was on the back of Patrick's original vision for that. So, I think, both what Nazar and Patrick sort of were prescient in thinking about once we were able to execute on both those visions, I think that just led to increased demand that we -- you're correct, we hadn't quite anticipated. Timothy Horan: And just two quick questions. Abernathy, do you have a sense how much equity you're going to have to put up to finish that project? And are we talking like $8 million per megawatt for the build-out? And then Lake Mariner, can you talk about what items or item is on the critical path on the construction schedule, please? Patrick Fleury: Yes, I'll answer the first question. So, on Abernathy, we've given you guidance of $8 million to $10 million per critical megawatt. If you do that quick math and again, take the wide end of the range, it's roughly $1.7 billion, and there's a $1.3 billion Google backstop. So, again, you can kind of do that quick math. And I would, again, just say stay tuned. We're kind of sorting out the details with Morgan Stanley and our partners right now, and we'll be in the market as soon as we can be. Timothy Horan: And then the construction item critical path. Patrick Fleury: Nazar, do you want to take that? Nazar Khan: Sure. On the second question on critical path, there are -- from an equipment perspective, we are on schedule or ahead of schedule for all of the long lead time pieces. So those -- mostly on site, CB-4 and CB-5 are on schedule for construction. We are currently ramping up labor at the site. We're going to peak probably sometime in the month of March. And so ramping that labor up is probably the near term, the biggest item that we're focused on. And so that's, again, we've got a number of different things ongoing to accomplish that, but that's the big driver, I think, over the next couple of months is getting that ramp up as CB-4 and CB-5 get through civil and get into kind of full swing on mechanical and electrical. Operator: We have reached the end of our question-and-answer session. I would now like to turn the floor back over to Paul Prager for closing comments. Paul Prager: Listen, everybody. I really appreciate you joining us today. I think if there's one takeaway from the quarter is that TeraWulf is executing. We're methodical, we're consistent, and we're doing this at scale. We are building a differentiated platform at the very intersection of AI, power and infrastructure, supported by long-term contracts, strong partners and a proven ability to deliver. I'm convinced we have the right strategy, the right team and the right assets to continue this momentum well into '26 and beyond. My focus and our focus remains disciplined execution, thoughtful expansion and creating sustainable long-term value for both our shareholders and partners. I want to thank you for your continued support and confidence in TeraWulf. Thank you again. Operator: This concludes today's call. You may now disconnect your lines.